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<DIV style="font-family: 'Times New Roman',Times,serif">




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<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 20-F</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(Mark One)

</DIV>
<DIV align="center">
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<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)&nbsp;OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the fiscal year ended December&nbsp;31, 2005
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
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<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Date of event requiring this shell company report <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Commission file number: 001-32689</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">SUNTECH POWER HOLDINGS CO., LTD.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">N/A</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Translation of Registrant&#146;s name into English)</FONT></DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Cayman Islands<BR>
<DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Jurisdiction of incorporation or organization)</FONT></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">17-6 Changjiang South Road<BR>
New District, Wuxi<BR>
Jiangsu Province 214028<BR>
People&#146;s Republic of China<BR>
<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV><BR>
(Address of principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">American Depositary Shares, each representing one ordinary share, par value $0.01 per share,<BR>
New York Stock Exchange</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Name of each exchange and Title of each class on which registered:<BR>
None<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV><BR>
(Title of Class)<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV><BR>
Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d)<BR>
of the Act.<BR>
None<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV><BR>
(Title of Class)</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common
stock as of the close of the period covered by the annual report. 147,487,707
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT> Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT> Large accelerated filer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT> Accelerated filer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#254;</FONT> Non-accelerated filer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Item&nbsp;17 <FONT face="Wingdings">&#254;</FONT> Item&nbsp;18
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule&nbsp;12b-2 of the Exchange Act)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>









<P align="center" style="font-size: 10pt">&nbsp;
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<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
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<TR><TD colspan="9"><A HREF="#000">INTRODUCTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item 1. Identity of Directors, Senior Management and Advisers</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item 2. Offer Statistics and Expected Timetable</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item 3. Key Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item 4. Information on the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item 5. Operating and Financial Review and Prospects</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item 6. Directors, Senior Management and Employees</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item 7. Major Shareholders and Related Party Transactions</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item 8. Financial Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item 9. The Offer and Listing</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item 10. Additional Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item 11. Quantitative and Qualitative Disclosures About Market Risk</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item 12. Description of Securities Other than Equity Securities</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Item 13. Defaults, Dividend Arrearages and Delinquencies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Item 15. Controls and Procedures</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Item 16A. Audit Committee Financial Expert</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Item 16B. Code of Ethics</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Item 16C. Principal Accountant Fees and Services</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Item 16D. Exemptions from the Listing Standards for Audit Committees</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#024">Item 17. Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#025">Item 18. Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#026">Item 19. Exhibits</A></TD></TR>
<TR><TD colspan="9"><A HREF="h00483exv12w1.htm">EX-12.1 CEO CERTIFICATION PURSUANT TO SECTION 302</A></TD></TR>
<TR><TD colspan="9"><A HREF="h00483exv12w2.htm">EX-12.2 CFO CERTIFICATION PURSUANT TO SECTION 302</A></TD></TR>
<TR><TD colspan="9"><A HREF="h00483exv13w1.htm">EX-13.1 CEO CERTIFICATION PURSUANT TO SECTION 906</A></TD></TR>
<TR><TD colspan="9"><A HREF="h00483exv13w2.htm">EX-13.2 CFO CERTIFICATION PURSUANT TO SECTION 906</A></TD></TR>
<TR><TD colspan="9"><A HREF="h00483exv15w1.htm">EX-15.1 CONSENT OF MAPLES AND CALDER</A></TD></TR>
</TABLE>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">INTRODUCTION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PART I

</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">Item&nbsp;1. Identity of Directors, Senior Management and Advisers<BR>
Item&nbsp;2. Offer Statistics and Expected Timetable<BR>
Item&nbsp;3. Key Information<BR>
Item&nbsp;4. Information on the Company<BR>
Item&nbsp;5. Operating and Financial Review and Prospects<BR>
Item&nbsp;6. Directors, Senior Management and Employees<BR>
Item&nbsp;7. Major Shareholder and Related Party Transactions<BR>
Item&nbsp;8. Financial Information<BR>
Item&nbsp;9. The Offer and Listing<BR>
Item&nbsp;10. Additional Information<BR>
Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk<BR>
Item&nbsp;12. Description of Securities Other than Equity Securities
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">PART II
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies<BR>
Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds<BR>
Item&nbsp;15. Controls and Procedures<BR>
Item&nbsp;16A. Audit Committee Financial Expert<BR>
Item&nbsp;16B. Code of Ethics<BR>
Item&nbsp;16C. Principal Accountant Fees and Services<BR>
Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees<BR>
Item&nbsp;16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">PART III
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">Item&nbsp;17. Financial Statements<BR>
Item&nbsp;18. Financial Statements<BR>
Item&nbsp;19. Exhibits
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>
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<!-- link1 "INTRODUCTION" -->
<DIV align="left"><A NAME="000"></A></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INTRODUCTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unless otherwise indicated, references in this annual report on Form 20-F to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;$&#148; and &#147;U.S. dollars&#148; are to the legal currency of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;ADSs&#148; are to our American depositary shares, each of which represents one ordinary
share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;ADRs&#148; are to the American depositary receipts, which, if issued, evidence our ADSs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;China&#148; and the &#147;PRC&#148; are to the People&#146;s Republic of China, excluding, for the
purposes of this annual report on Form 20-F only, Taiwan and the special administrative
regions of Hong Kong and Macau;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;conversion efficiency&#148; are to the ability of PV products to convert sunlight into
electricity; &#147;conversion efficiency rate&#148; is commonly used in the PV industry to
measure the percentage of light energy from the sun that is actually converted into
electricity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;cost per watt&#148; and &#147;price per watt&#148; 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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;off-grid system&#148; are to the PV system that operates on a stand-alone basis to
provide electricity independent of an electricity transmission grid;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;on-grid system&#148; are to the PV system that is connected to an electricity
transmission grid and feeds electricity generated into the electricity transmission
grid;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;ordinary shares&#148; are to our ordinary shares, par value $0.01 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;PV&#148; are to photovoltaic. The photovoltaic effect is a process by which sunlight is
converted into electricity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;PV cell&#148; are to a device made from a silicon wafer that converts sunlight into
electricity through a process known as the photovoltaic effect;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;PV module&#148; are to an assembly of PV cells that have been electrically
interconnected and laminated in a durable and weather-proof package;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;PV system&#148; are to a package of one or more PV modules that are physically mounted
and electrically interconnected, with system components such as batteries and power
electronics, to produce and reserve electricity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;RMB&#148; and &#147;Renminbi&#148; are to the legal currency of China;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">3
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;Series&nbsp;A preferred shares&#148; are to our Series&nbsp;A preferred shares par value $0.01 per
share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;Suntech,&#148; &#147;we,&#148; &#147;us,&#148; &#147;our company&#148; and &#147;our&#148; are to Suntech Power Holdings Co.,
Ltd., its predecessor entities and its consolidated subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;Suntech BVI&#148; are to &#147;Power Solar System Co., Ltd.,&#148; our directly wholly-owned
subsidiary in the British Virgin Islands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;Suntech China&#148; are to &#147;Wuxi Suntech Power Co., Ltd.,&#148; our predecessor and
wholly-owned subsidiary in China; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;thin film technology&#148; are to the PV technology that involves depositing several
thin layers of silicon or more complex materials on a substrate such as glass to make a
PV cell.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 20-F includes our audited consolidated financial statements for the
years ended December&nbsp;31, 2003, 2004 and 2005 and as of December&nbsp;31, 2004 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All translations from Renminbi to U.S. dollars were made at the noon buying rate in The City
of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by
the Federal Reserve Bank of New York. Unless otherwise stated, the translation of Renminbi into
U.S. dollar has been made at the noon buying rate in effect on December&nbsp;30, 2005, which was
RMB8.0702 to $1.00. We make no representation that the Renminbi or dollar amounts referred to in
this annual report on Form 20-F could have been or could be converted into dollars or Renminbi, as
the case may be, at any particular rate or at all. See &#147;Item&nbsp;3. Key Information&#151;D. Risk
Factors&#151;Risk Related to Doing Business in China&#151;Fluctuation in the value of the Renminbi may have a
material adverse effect on your investment.&#148; On April&nbsp;25, 2006, the noon buying rate was RMB8.0100
to $1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and certain selling shareholders of our company completed the initial public offering of
30,337,000 ADSs, each representing one ordinary share on December&nbsp;19, 2005. On December&nbsp;14, 2005,
we listed our ADSs on the New York Stock Exchange under the symbol &#147;STP.&#148;
</DIV>


<!-- link1 "PART I" -->
<DIV align="left"><A NAME="001"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>


<!-- link2 "Item 1. Identity of Directors, Senior Management and Advisers" -->
<DIV align="left"><A NAME="002"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;1.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Identity of Directors, Senior Management and Advisers</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<!-- link2 "Item 2. Offer Statistics and Expected Timetable" -->
<DIV align="left"><A NAME="003"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;2.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Offer Statistics and Expected Timetable</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<!-- link2 "Item 3. Key Information" -->
<DIV align="left"><A NAME="004"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;3.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Key Information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A. <U>Selected Financial Data</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following selected consolidated statement of operations data for the three years ended
December&nbsp;31, 2003, 2004 and 2005 and the consolidated balance sheet data as of
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">December&nbsp;31, 2003, 2004 and 2005 have been derived from our audited consolidated financial
statements, which have been audited by Deloitte Touche Tohmatsu CPA, Ltd., an independent
registered public accounting firm. The report of Deloitte Touche Tohmatsu CPA, Ltd. on our
consolidated financial statements as of December&nbsp;31, 2004 and 2005 and for each of the three years
in the period ended December&nbsp;31, 2005 is included elsewhere in this annual report on Form 20-F.
Our selected consolidated statement of operations data for the year ended December&nbsp;31, 2002 and our
consolidated balance sheets as of December&nbsp;31, 2002 have been derived from our audited consolidated
financial statements, which are not included in this annual report on Form 20-F. You should read
the selected consolidated financial data in conjunction with those financial statements and the
related notes and &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; included elsewhere in
this annual report on Form 20-F. Our consolidated financial statements are prepared and presented
in accordance with U.S. GAAP. Although we were incorporated in January&nbsp;2001, we only commenced our
business operation in May&nbsp;2002. In 2001, we incurred general and administrative expenses of
$438,429 and generated other income of $33,830. As a result, our net loss for the year amounted to
$404,599. Our financial data for the year ended December&nbsp;31, 2001 are not meaningful, and thus have
not been included in this section or elsewhere in this annual report on Form 20-F. Our historical
results do not necessarily indicate our results expected for any future periods.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Statement of
Operations Data </B>(in thousands, except
share, per share and per ADS data)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integrations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integrations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,874</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,899</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,042</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expenses, net(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(221</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(979</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,611</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit (expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,753</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income after taxes
before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(897</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in (loss)&nbsp;earnings of
affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(897</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Deemed dividend on Series&nbsp;A
redeemable convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income attributable to
holders of
ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(897</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income per share and ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.01</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.01</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used in computation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,047,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,825,138</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Include &#147;interest expenses&#148; and &#147;interest income&#148; contained in our consolidated financial
statements included elsewhere in this annual report on Form 20-F.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Consolidated Financial Data </B>(in
percentages)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">30.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29.7</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Selected Operating Data</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Products sold (in MW)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average selling price (in $&nbsp;&nbsp;per watt)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.05</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(in thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Balance Sheet Data</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">359,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued warranty costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,619</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total shareholders&#146; equity (deficit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities and shareholders&#146;
equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">68,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">481,664</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange Rate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 20-F contains translations of certain RMB amounts into U.S. dollar
amounts at specified rates. All translations from RMB to U.S. dollars were made at the noon buying
rate in The City of New York for cable transfers of RMB as certified for customs purposes by the
Federal Reserve Bank of New York. Unless otherwise stated, the translations of RMB into U.S.
dollars have been made at the noon buying rate in effect on December&nbsp;30, 2005, which was RMB8.0702
to $1.00. We make no representation that the RMB or U.S. dollar amounts referred to in this annual
report on Form 20-F could have been or could be converted into U.S. dollars or RMB, as the case may
be, at any particular rate or at all. See &#147;Item&nbsp;3. Key Information&#151;D. Risk Factors&#151;Risks Related to
Doing Business in China&#151;Fluctuations in exchange rates may have a material adverse effect on your
investment&#148; and &#147;&#151;Restrictions on currency exchange may limit our ability to receive and use our
revenue effectively&#148; for discussions of the effects of fluctuating exchange rates and currency
control on the value of our ADSs. On April&nbsp;25, 2006, the noon buying rate was RMB8.0100 to $1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning exchange rates between the RMB and the
U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are
not necessarily the exchange rates that we used in this annual report or will use in the
preparation of our periodic reports or any other information to be provided to you. The source of
these rates is the Federal Reserve Bank of New York.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Noon Buying Rate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Period End</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Average</B><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(RMB per $1.00)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.1826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">October</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">November</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0415</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April (through April&nbsp;25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0040</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Capitalization and Indebtedness</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Reasons for the Offer and Use of Proceeds</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Risk Factors</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Risks Related to Our Company and Our Industry</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our limited operating history may not serve as an adequate basis to judge our future prospects
and results of operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a limited operating history. We completed our first PV cell manufacturing line in
August&nbsp;2002 and began commercial shipment of PV cells in September&nbsp;2002. With the rapid growth of
the PV industry, we have experienced a high growth rate since 2002. As such, our historical
operating results may not provide a meaningful basis for evaluating our business, financial
performance and prospects. We may not be able to achieve a similar growth rate in future periods.
Accordingly, you should not rely on our results of operations for any prior periods as an
indication of our future performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have incurred losses in prior periods and may incur losses in the future.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incurred a net loss of $0.9&nbsp;million in 2002, and we may incur losses in the future. We
expect our operating expenses to increase as we expand our operations. Our ability to maintain
profitability depends on the growth rate of the PV market, the continued market acceptance of PV
products, the competitiveness of our products and services as well as our ability to provide new
products and services to meet the demands of our customers. Even though we have been profitable in
recent periods, we may not be able to sustain or increase profitability in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Failure to obtain sufficient quantities of silicon and silicon wafers could decrease our
revenues and limit our ability to expand as planned.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Silicon wafers are the most important raw materials for making PV products. To maintain
competitive manufacturing operations, we depend on our suppliers&#146; timely delivery of quality
silicon wafers in sufficient quantities and at acceptable prices. Our silicon wafer suppliers, in
turn, depend on silicon manufacturers to supply silicon required for the production of silicon
wafers. The significant growth of the PV industry has resulted in a significant increase in demand
for silicon and silicon wafers, and we have, from time to time, experienced late delivery and
supply shortages. In particular, some suppliers of silicon also supply to silicon wafer
manufacturers for the semiconductor industry, which typically have greater buying power and market
influence than manufacturers for the PV industry. As a result, increases in the demand for silicon
from the semiconductor industry may in the future result in late deliveries or supply shortages
with respect to the specialized silicon that our silicon wafer suppliers need as raw materials.
This could result in our reduced manufacturing
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">output, delayed or missed shipments, damaged customer relationships and decreased revenues. In
the past, we have addressed shortages of silicon wafer supplies by entering into original equipment
manufacturer, or OEM, manufacturing arrangements, under which we obtain silicon wafer supplies from
certain of our customers and are obligated to sell a substantial portion of the PV modules
manufactured with these wafers to such customers. However, we cannot assure you that such OEM
manufacturing arrangements will be available to us in the future. We have also attempted to ease
our supply shortages through prepaying for raw materials and establishing strategic relationships
with certain suppliers, but we cannot assure you that we will be able to obtain supplies from them
or any other suppliers in sufficient quantity and at acceptable prices. We acquire silicon wafers
from our suppliers mostly through short-term supply arrangements. This subjects us to the risks
that our suppliers may stop supplying silicon wafers to us for any reason, including the financial
viability of such suppliers. If this occurs, our ability to manufacture our PV products may be
limited, which would cause our revenues to decline.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may not be able to manage our expansion of operations effectively.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced business operations in May&nbsp;2002 and have grown rapidly. We anticipate significant
continued expansion of our business to address growth in demand for our PV products and services,
as well as to capture new market opportunities. To manage the potential growth of our operations,
we will be required to improve our operational and financial systems, procedures and controls,
increase manufacturing capacity and output, and expand, train and manage our growing employee base.
Furthermore, our management will be required to maintain and expand our relationships with our
customers, suppliers and other third parties. We cannot assure you that our current and planned
operations, personnel, systems, internal procedures and controls will be adequate to support our
future growth. If we are unable to manage our growth effectively, we may not be able to take
advantage of market opportunities, execute our business strategies or respond to competitive
pressures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The reduction or elimination of government subsidies and economic incentives for on-grid solar
energy applications could cause a reduction in demand for our products and lead to decreases in our
revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the growth of many of our target markets, including our largest market,
Germany, which accounted for 45.0% of our total net revenues in 2005, as well as Spain and the
United States, depends in part on the availability and amounts of government subsidies and economic
incentives. At present, the cost of solar energy substantially exceeds the retail price of
electricity in most markets in the world. As a result, federal, state and local governmental bodies
in many countries, most notably Germany, Spain and the United States, have provided subsidies in
the form of cost reductions, tax write-offs and other incentives to end users, distributors,
systems integrators and manufacturers of PV products. Reduction or elimination of these government
subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may
result in the diminished competitiveness of solar energy, and materially and adversely affect the
growth of these markets and our revenues. Electricity utility companies that have significant
political lobbying powers may push for a change in the relevant legislation in their markets. The
reduction or elimination of government subsidies and economic incentives for on-grid solar energy
applications, especially those in our target markets, could cause our revenues to decline and
materially and adversely affect our business, financial condition and results of operations.
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>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 we may be unable to sustain profitability.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PV market is at a relatively early stage of development and the extent to which PV
products will be widely adopted is uncertain. Market data in the PV industry are not as readily
available as those in other more established industries where trends can be assessed more reliably
from data gathered over a longer period of time. If PV technology proves unsuitable for widespread
adoption or if demand for PV products fails to develop sufficiently, we may not be able to grow our
business or generate sufficient revenues to sustain our profitability. In addition, demand for PV
products in our targeted markets, including China, may not develop or may develop to a lesser
extent than we anticipated. Many factors may affect the viability of widespread adoption of PV
technology and demand for PV products, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost-effectiveness of PV products compared to conventional and other non-solar
energy sources and products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>performance and reliability of PV products compared to conventional and other
non-solar energy sources and products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of government subsidies and incentives to support the development of
the PV industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>success of other alternative energy generation technologies, such as fuel cells,
wind power and biomass;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital expenditures by end users of PV products, which tend to decrease when
economy slows down; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>deregulation of the electric power industry and broader energy industry.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We face intense competition from other companies producing solar energy and other renewable
energy products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PV market is intensely competitive and rapidly evolving. According to Photon
International&#146;s survey in March&nbsp;2006, as of the end of 2005, 94 companies in the world produced PV
cells and 153 companies produced PV modules. Many of our competitors have established more
prominent market positions, and if we fail to attract and retain customers and establish successful
distribution networks in our target markets for our products, we will be unable to increase our
sales. Our competitors include PV divisions of large conglomerates such as BP, Sanyo Group and
Sharp Corporation, specialized cell and module manufacturers such as Q-Cells, as well as integrated
manufacturers of PV products such as SolarWorld AG. Some of our competitors have also become
vertically integrated, from upstream silicon wafer manufacturing to PV system integration. We
expect to compete with future entrants to the PV market that offer new technological solutions. We
may also face competition from semiconductor manufacturers, a few of which have already announced
their intention to start
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">production of PV cells. Many of our competitors are developing or currently producing products
based on new PV technologies, including amorphous silicon, ribbon, sheet and nano technologies,
which they believe will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from conventional and
non-solar renewable energy technologies. Due to the relatively high manufacturing costs compared to
most other energy sources, solar energy is generally not competitive without government incentive
programs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our existing and potential competitors have substantially greater financial,
technical, manufacturing and other resources than we do. Our competitors&#146; greater size in some
cases provides them with a competitive advantage with respect to manufacturing costs because of
their economies of scale and their ability to purchase raw materials at lower prices. For example,
those of our competitors that also manufacture semiconductors may source both semiconductor grade
silicon wafers and solar grade silicon wafers from the same supplier. As a result, those
competitors may have stronger bargaining power with the supplier and have an advantage over us in
negotiating favorable pricing, as well as securing silicon wafer supplies at times of shortages.
Many of our competitors also have greater brand name recognition, more established distribution
networks and larger customer bases. In addition, many of our competitors have well-established
relationships with our current and potential distributors and have extensive knowledge of our
target markets. As a result, they may be able to devote greater resources to the research,
development, promotion and sale of their products or respond more quickly to evolving industry
standards and changes in market conditions than we can. Our failure to adapt to changing market
conditions and to compete successfully with existing or new competitors may materially and
adversely affect our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our failure to further refine our technology and develop and introduce new PV products could
render our products uncompetitive or obsolete, and reduce our sales and market share.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PV industry is rapidly evolving and competitive. We will need to invest significant
financial resources in research and development to keep pace with technological advances in the PV
industry and to effectively compete in the future. However, research and development activities are
inherently uncertain, and we might encounter practical difficulties in commercializing our research
results. Our significant expenditures on research and development may not reap corresponding
benefits. A variety of competing PV technologies that other companies may develop could prove to be
more cost-effective and have better performance than our PV products. Therefore, our development
efforts may be rendered obsolete by the technological advances of others. Breakthroughs in PV
technologies that do not use crystalline silicon could mean that companies such as us that rely
entirely on crystalline silicon would encounter a sudden, sharp drop in sales. Our failure to
further refine our technology and develop and introduce new PV products could render our products
uncompetitive or obsolete, and result in a decline in our market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our future success substantially depends on our ability to significantly increase both our
manufacturing capacity and output. Our ability to achieve our expansion goals is subject to a
number of risks and uncertainties.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends on our ability to significantly increase both our manufacturing
capacity and output. If we are unable to do so, we may be unable to expand our business, decrease
our costs per watt, maintain our competitive position and improve our
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">profitability. Our ability to establish additional manufacturing capacity and increase output
is subject to significant risks and uncertainties, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the need to raise significant additional funds to purchase and prepay for raw
materials or to build additional manufacturing facilities, which we may be unable to
obtain on reasonable terms or at all;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays and cost overruns as a result of a number of factors, many of which may be
beyond our control, such as increases in raw materials prices and problems with
equipment vendors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays or denial of required approvals by relevant government authorities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>diversion of significant management attention and other resources; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to execute our expansion plan effectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to establish or successfully operate additional manufacturing capacity or to
increase manufacturing output, or if we encounter any of the risks described above, we may be
unable to expand our business as planned. Moreover, we cannot assure you that if we do expand our
manufacturing capacity and output we will be able to generate sufficient customer demand for our PV
products to support our increased production levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our costs and expenses may increase as a result of entering into fixed price, prepaid
arrangements with our suppliers.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to secure our supply of silicon and silicon wafers increasingly through fixed-price,
prepaid supply arrangements with both overseas and domestic suppliers. In 2005, we entered into
long-term supply contracts with three of our suppliers, under which the suppliers agreed to provide
us with specified quantities of silicon wafers at agreed prices, and several short-term
fixed-price, prepaid arrangements with our suppliers. If the prices of silicon or silicon wafers
were to decrease in the future and we were locked into fixed price, prepaid arrangements, we may
not be able to adjust our materials costs and thus, our cost of revenues will be negatively
affected. Additionally, if demand for our PV products decreases, we may incur costs associated with
carrying excess materials, which may have a material adverse effect on our operating expenses. To
the extent we are not able to pass these increased costs and expenses to our customers, our
business, results of operations and financial condition may be materially and adversely affected.
Moreover, since some of our supply contracts may require pre-payment of a substantial portion of
the contract price, we may not be able to recover such pre-payments and would suffer losses should
such suppliers fail to fulfill their delivery obligations under the contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our dependence on a limited number of third-party suppliers for key raw materials and
customized manufacturing equipment could prevent us from timely delivering our products to our
customers in the required quantities, which could result in order cancellations and decreased
revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase raw materials from a limited number of third-party suppliers. Our major suppliers
include Deutsche Solar AG, a wholly-owned subsidiary of SolarWorld AG, Hebei Jinglong Industry and
Commerce Group Go., Ltd., Jiangsu Huantai Group, Jiangyin Hairun Science &#038; Technology Co., Ltd.,
Podolsky Chemical &#038; Metallurgical Plant and Swiss
Wafers AG. If we fail to develop or maintain our relationships with these or our other
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">suppliers, we may be unable to manufacture our products or our products may be available at a
higher cost or after a long delay, and we could be prevented from delivering our products to our
customers in the required quantities and at prices that are profitable. Problems of this kind could
cause us to experience order cancellations and loss of market share. The failure of a supplier to
supply materials and components that meet our quality, quantity and cost requirements in a timely
manner could impair our ability to manufacture our products or increase our costs, particularly if
we are unable to obtain these materials and components from alternative sources on a timely basis
or on commercially reasonable terms. In addition, certain of our manufacturing equipment has been
designed and made specifically for us. As a result, such equipment is not readily available from
multiple vendors and would be difficult to repair or replace. Any significant damage to, or break
down of, our customized manufacturing equipment could cause material interruptions to our
operations and consequentially, could have a material adverse effect on our business and results of
operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our dependence on a limited number of customers may cause significant fluctuations or declines
in our revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently sell a substantial portion of our PV products to a limited number of customers,
including distributors, engineering design firms, system integrators, other value-added resellers,
as well as integrated manufacturers of PV products. In 2005, we had one customer accounting for 10%
or more of our total net sales, and such customer accounted for approximately 32.1% of our total
net revenues. We have entered into a distribution agreement by which we granted our largest
customer in 2005 the exclusive right to distribute our products in Germany for 2005. Sales to our
other customers are typically made through non-exclusive, short-term arrangements. We anticipate
that our dependence on a limited number of customers will continue for the foreseeable future.
Consequently, any one of the following events may cause material fluctuations or declines in our
revenues and have a material adverse effect on our results of operations:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduction, delay or cancellation of orders from one or more of our significant
customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>selection by one or more of our significant distributor customers of products
competitive with ours;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>loss of one or more of our significant customers and our failure to identify
additional or replacement customers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure of any of our significant customers to make timely payment for our products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We face risks associated with the marketing, distribution and sale of our PV products
internationally, and if we are unable to effectively manage these risks, they could impair our
ability to expand our business abroad.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, we sold 75.0% of our products to customers outside of China. The marketing,
international distribution and sale of our PV products expose us to a number of risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in currency exchange rates;</TD>
</TR>


</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty in engaging and retaining distributors who are knowledgeable about and,
can function effectively in, overseas markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased costs associated with maintaining marketing efforts in various countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty and cost relating to compliance with the different commercial and legal
requirements of the overseas markets in which we offer our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability to obtain, maintain or enforce intellectual property rights; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Problems with product quality or product performance may cause us to incur warranty expenses
and may damage our market reputation and prevent us from achieving increased sales and market
share.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0% of initial power
generation capacity, respectively. As a result, we bear the risk of extensive warranty claims long
after we have sold our products and recognized revenues. We have sold PV modules since September
2002, and accordingly none of our PV modules has been in use for more than three years. As of
December&nbsp;31, 2005, our accrued warranty costs amounted to $2.6&nbsp;million. Because our products have
been in use for only a relatively short period, we cannot assure you that our assumptions regarding
the durability and reliability of our products are reasonable. Our warranty provisions may be
inadequate, and we may have to incur substantial expense to repair or replace defective products in
the future. Furthermore, widespread product failures may damage our market reputation and cause our
sales to decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our future success depends in part on our ability to make strategic acquisitions and
investments and to establish and maintain strategic alliances, and failure to do so could have a
material adverse effect on our market penetration and revenue growth.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our plan to secure silicon wafers and to expand our manufacturing capacity, we have
established a 87.0%-owned subsidiary for the manufacture of PV cells and modules in Luoyang, China.
We have also, through Suntech China, acquired a 51.0% equity interest in one of our customers, a
renewable energy company in China. We intend to continue to make strategic acquisitions and
investments and to establish and maintain strategic alliances with third parties in the PV
industry, particularly with silicon suppliers. We cannot assure you, however, that we will be able
to successfully make such strategic acquisitions and investments or to establish strategic
alliances with third parties that will prove to be effective for our business. Our inability in
this regard could have a material adverse effect on our market penetration, our revenue growth and
our profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strategic acquisitions, investments and alliances with third parties could subject us to a
number of risks, including risks associated with sharing proprietary information and loss of
control of operations that are material to our business. Moreover, strategic acquisitions,
investments and alliances may be expensive to implement and subject us to the risk of
non-
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">performance by a counterparty, which may in turn lead to monetary losses that materially and
adversely affect our business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our business depends substantially on the continuing efforts of our executive officers and our
ability to maintain a skilled labor force, and our business may be severely disrupted if we lose
their services.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends substantially on the continued services of our executive officers,
especially Dr.&nbsp;Zhengrong Shi, our chief executive officer and the chairman of our board of
directors, and Mr.&nbsp;Graham Artes, our chief operating officer. We do not maintain key man life
insurance on any of our executive officers. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace them readily, if at
all. Therefore, our business may be severely disrupted, and we may incur additional expenses to
recruit and retain new officers. In addition, if any of our executives joins a competitor or forms
a competing company, we may lose some of our customers. Each of our executive officers has entered
into an employment agreement with us, which contains confidentiality and non-competition
provisions. However, if any disputes arise between our executive officers and us, we cannot assure
you, in light of uncertainties associated with the PRC legal system, the extent to which any of
these agreements could be enforced in China, where some of our executive officers reside and hold
some of their assets. See &#147;&#151;Risks Related to Doing Business in China&#151;Uncertainties with respect to
the PRC legal system could have a material adverse effect on us.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are unable to attract, train and retain technical personnel, our business may be
materially and adversely affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends, to a significant extent, on our ability to attract, train and
retain technical personnel. In particular, we depend on the services of Dr.&nbsp;Stuart R. Wenham, our
chief technical officer and Dr.&nbsp;Jingjia Ji, a member of our board of directors and one of our
senior research scientists. Recruiting and retaining capable personnel, particularly those with
expertise in the PV industry, are vital to our success. There is substantial competition for
qualified technical personnel, and there can be no assurance that we will be able to attract or
retain our technical personnel. If we are unable to attract and retain qualified employees, our
business may be materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our failure to protect our intellectual property rights may undermine our competitive
position, and litigation to protect our intellectual property rights or defend against third-party
allegations of infringement may be costly.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely primarily on patent, trademark, trade secret, copyright law and other contractual
restrictions to protect our intellectual property. Nevertheless, these afford only limited
protection and the actions we take to protect our intellectual property rights may not be adequate.
Third parties may infringe or misappropriate our proprietary technologies or other intellectual
property rights, which could have a material adverse effect on our business, financial condition or
operating results. Policing unauthorized use of proprietary technology can be difficult and
expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect
our trade secrets or determine the validity and scope of the proprietary rights of others. We
cannot assure you that the outcome of such potential litigation will be in our favor. Such
litigation may be costly and may divert management attention as well as
expend our other resources away from our business. An adverse determination in any such
litigation will impair our intellectual property rights and may harm our business, prospects
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and
reputation. In addition, we have no insurance coverage against litigation costs and would have to
bear all costs arising from such litigation to the extent we are unable to recover them from other
parties. The occurrence of any of the foregoing could have a material adverse effect on our
business, results of operations and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Implementation of PRC intellectual property-related laws has historically been lacking,
primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly,
intellectual property rights and confidentiality protections in China may not be as effective as in
the United States or other countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may be exposed to infringement or misappropriation claims by third parties, which, if
determined adversely to us, could cause us to pay significant damage awards.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success also depends largely on our ability to use and develop our technology and know-how
without infringing the intellectual property rights of third parties. The validity and scope of
claims relating to PV technology patents involve complex scientific, legal and factual questions
and analysis and, therefore, may be highly uncertain. We may be subject to litigation involving
claims of patent infringement or violation of intellectual property rights of third parties. The
defense and prosecution of intellectual property suits, patent opposition proceedings and related
legal and administrative proceedings can be both costly and time consuming and may significantly
divert the efforts and resources of our technical and management personnel. An adverse
determination in any such litigation or proceedings to which we may become a party could subject us
to significant liability to third parties, require us to seek licenses from third parties, to pay
ongoing royalties, or to redesign our products or subject us to injunctions prohibiting the
manufacture and sale of our products or the use of our technologies. Protracted litigation could
also result in our customers or potential customers deferring or limiting their purchase or use of
our products until resolution of such litigation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Although we sell a substantial portion of our products outside of China, we currently only
hold patents issued in China. Our business, results of operations and financial condition would be
materially and adversely affected if our sales outside China were to be restricted by intellectual
property claims by third parties.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;25, 2006, we had a total of seven issued patents and 16 pending patent
applications in China. We do not have, and have not applied for, any patent for our proprietary
technologies outside China although we have sold, and expect to continue to sell, a substantial
portion of our products outside China. Since the protection afforded by our patents is effective
only in China, others may independently develop substantially equivalent technologies, or otherwise
gain access to our proprietary technologies, and obtain patents for such intellectual properties in
other jurisdictions, including the countries to which we sell our products. If any third parties
are successful in obtaining patents for technologies that are substantially equivalent or the same
as the technologies we use in our products in any of our markets before we do and enforce their
intellectual property rights against us, our ability to sell products containing the allegedly
infringing intellectual property in those markets will be materially and adversely affected. If we
are required to stop selling such allegedly infringing products, seek license and pay royalties for
the relevant intellectual properties, or redesign such products with non-infringing technologies,
our business, results of operations and financial condition may be materially and adversely
affected.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The lack or inaccessibility of financing for off-grid solar energy applications could cause
our sales to decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are used for off-grid solar energy applications in developed and developing
countries. In some developing countries, government agencies and the private sector have, from time
to time, provided subsidies or financing on preferred terms for rural electrification programs. We
believe that the availability of financing could have a significant effect on the level of sales of
off-grid solar energy applications, particularly in developing countries where users may not have
sufficient resources or credit to otherwise acquire PV systems. If existing financing programs for
off-grid solar energy applications are eliminated or if financing is inaccessible, the growth of
the market for off-grid solar energy applications may be materially and adversely affected, which
could cause our sales to decline. In addition, a rise in interest rates could render existing
financings more expensive and be an obstacle for potential financings that would otherwise spur the
growth of the PV industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Changes to existing regulations over the utility sector and the PV industry may present
technical, regulatory and economic barriers to the purchase and use of PV products, which may
significantly reduce demand for our products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for power generation products is heavily influenced by government regulations and
policies concerning the electric utility industry, as well as the internal policies of electric
utilities companies. These regulations and policies often relate to electricity pricing and
technical interconnection of end user-owned power generation. In a number of countries, these
regulations and policies are being modified and may continue to be modified. End users&#146; purchases
of alternative energy sources, including PV products, could be deterred by these regulations and
policies, which could result in a significant reduction in the potential demand for our PV
products. For example, utility companies commonly charge fees to larger, industrial customers for
disconnecting from the electricity transmission grid or for having the capacity to use power from
the electricity transmission grid for back-up purposes. These fees could increase end users&#146; costs
of using our PV products and make our PV products less desirable, thereby having an adverse effect
on our business, prospects, results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that our PV products and their installation will be subject to oversight and
regulation in accordance with national and local ordinances relating to building codes, safety,
environmental protection, utility interconnection and metering and related matters in various
countries. It is also burdensome to track the requirements of individual localities and design
equipment to comply with the varying standards. Any new government regulations or utility policies
pertaining to our PV products may result in significant additional expenses to us, our distributors
and end users and, as a result, could cause a significant reduction in demand for our PV products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fluctuations in exchange rates could adversely affect our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial portion of our sales is currently denominated in U.S. dollars, with the
remainder in Renminbi and Euros, while a substantial portion of our costs and expenses is
denominated in U.S. dollars and Renminbi, with the remainder in Euros. Therefore, fluctuations in
currency exchange rates could have a material adverse effect on our financial condition and results
of operations. Fluctuations in exchange rates, particularly among the U.S. dollar, Renminbi and
Euro, affect our gross and net profit margins and could result in foreign exchange and operating
losses.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generated net foreign currency gains of $3,961 and $24,678 in 2003 and 2004, respectively,
but recorded net foreign currency loss of $883,541 in 2005. We cannot predict the impact of future
exchange rate fluctuations on our results of operations and may incur net foreign currency losses
in the future. We plan to reduce the effect of such exposure through hedging arrangements, such as
entering into forward exchange contracts and foreign currency option contracts, but we cannot
assure you that such hedging activities will be effective in managing our foreign exchange risk
exposure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are expressed in U.S. dollars but our functional currency is
Renminbi. The value of your investment in our ADSs will be affected by the foreign exchange rate
between U.S. dollars and Renminbi. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from our initial public offering in December&nbsp;2005, any
appreciation of the Renminbi against the U.S. dollar could result in a change to our income
statement and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a
decline in the value of Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent
amounts of our financial results, the value of your investment in our company and the dividends we
may pay in the future, if any, all of which may have a material adverse effect on the prices of our
ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compliance with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary damages and fines.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As our manufacturing processes generate noise, waste water, gaseous and other industrial
wastes, we are required to comply with all national and local regulations regarding protection of
the environment. We are in compliance with present environmental protection requirements and have
all necessary environmental permits to conduct our business. However, if more stringent regulations
are adopted in the future, the costs of compliance with these new regulations could be substantial.
We believe that we have all necessary permits to conduct our business as it is presently conducted.
If we fail to comply with present or future environmental regulations, however, we may be required
to pay substantial fines, suspend production or cease operations. We use, generate and discharge
toxic, volatile and otherwise hazardous chemicals and wastes in our research and development and
manufacturing activities. Any failure by us to control the use of, or to restrict adequately the
discharge of, hazardous substances could subject us to potentially significant monetary damages and
fines or suspensions in our business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have limited insurance coverage and may incur losses resulting from product liability
claims or business interruptions.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As with other PV product manufacturers, we are exposed to risks associated with product
liability claims in the event that the use of the PV products we sell results in injury. Since our
products are electricity producing devices, it is possible that users could be injured or killed by
our products, whether by product malfunctions, defects, improper installation or other causes. We
only commenced commercial shipment of our products in September&nbsp;2002 and, due to limited historical
experience, we are unable to predict whether product liability claims will be brought against us in
the future or the effect of any resulting adverse publicity on our business. Moreover, we do not
have any product liability insurance and may not have adequate resources to satisfy a judgment in
the event of a successful claim against us. The successful assertion of product liability claims
against us could result in potentially significant monetary damages and require us to make
significant payments. In addition, as the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">insurance industry in China is still in an early stage of development, business interruption
insurance available in China offers limited coverage compared to that offered in many other
countries. We do not have any business interruption insurance. Any business disruption or natural
disaster could result in substantial costs and diversion of resources.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our existing shareholders have substantial influence over our company and their interests may
not be aligned with the interests of our other shareholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;Zhengrong Shi, our founder, chief executive officer and chairman of our board of
directors, beneficially owned 44.75% of our outstanding share capital as of April&nbsp;25, 2006. As
such, Dr.&nbsp;Shi has substantial influence over our business, including decisions regarding mergers,
consolidations and the sale of all or substantially all of our assets, election of directors and
other significant corporate actions. This concentration of ownership may discourage, delay or
prevent a change in control of our company, which could deprive our shareholders of an opportunity
to receive a premium for their shares as part of a sale of our company and might reduce the price
of our ADSs. These actions may be taken even if they are opposed by our other shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we grant employee share options and other share-based compensation in the future, our net
income could be adversely affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;5, 2005, we adopted our 2005 equity incentive plan, which amended and restated
the stock option plan adopted by Suntech BVI on April&nbsp;29, 2005. We assumed options to purchase
4,699,383 ordinary shares granted by Suntech BVI and granted additional options to purchase
6,110,000 of our ordinary shares to certain of our directors, employees and consultants. For the
balance of 2005, we will account for options granted to our directors and employees in accordance
with Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees,&#148; or APB
25, and its related interpretations, which require us to recognize compensation expenses for share
options we grant where the exercise price is less than the deemed fair value of our ordinary shares
on the date of the grant. However, the Financial Accounting Standards Board, or the FASB, has
issued Statement No.&nbsp;123 (Revised 2004), &#147;Share-Based Payments,&#148; or SFAS 123R, which requires all
companies to recognize, as an expense, the fair value of share options and other share-based
compensation to employees at the beginning of the first annual or interim period after June&nbsp;15,
2005. As a result, beginning on January&nbsp;1, 2006, we will have to account for compensation costs for
all share options including share options granted to our directors and employees using a fair-value
based method and recognize expenses in our consolidated statement of operations in accordance with
the relevant rules under U.S. GAAP, which may have a material and adverse effect on our reported
earnings. Moreover, the additional expenses associated with share-based compensation may reduce the
attractiveness of such incentive plan to us. However, if we reduce the scope of our 2005 equity
incentive plan, we may not be able to attract and retain key personnel, as share option is an
important employee recruitment and retention tool. If we grant employee share options or other
share-based compensation in the future, our net income could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If a poll is not demanded at our shareholder meetings, voting will be by show of hands and
shares will not be proportionately represented. Shareholder resolutions may be passed without the
presence of the majority of our shareholders in person or by proxy.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting at any of our shareholder meetings is by show of hands unless a poll is demanded. A
poll may be demanded by the chairman of our board of directors or by any
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shareholder present in person or by proxy. If a poll is demanded, each shareholder present in
person or by proxy will have one vote for each ordinary share registered in his name. If a poll is
not demanded, voting will be by show of hands and each shareholder present in person or by proxy
will have one vote regardless of the number of shares registered in his name. In the absence of a
poll, shares will therefore not be proportionately represented. In addition, the quorum required
for our shareholder meetings consists of shareholders who hold at least one-third of our ordinary
shares being present at a meeting in person or by proxy. Therefore, subject to the requisite
majorities, shareholder resolutions may be passed at our shareholder meetings without the presence
of the majority of our shareholders in person or by proxy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Doing Business in China</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>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.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our business operations are conducted in China and some of our sales are made in China.
Accordingly, our business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The Chinese economy differs
from the economies of most developed countries in many respects, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount of government involvement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the growth rate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the control of foreign exchange; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the allocation of resources.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the Chinese economy has grown significantly in the past 20&nbsp;years, the growth has been
uneven, both geographically and among various sectors of the economy. The PRC government has
implemented various measures to encourage economic growth and guide the allocation of resources.
Some of these measures benefit the overall Chinese economy, but may also have a negative effect on
us. For example, our financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations that are applicable to
us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the PRC government has implemented measures emphasizing the
utilization of market forces for economic reform, the reduction of state ownership of productive
assets and the establishment of sound corporate governance in business enterprises, a substantial
portion of the productive assets in China is still owned by the PRC government. The continued
control of these assets and other aspects of the national economy by the PRC government could
materially and adversely affect our business. The PRC government also exercises significant control
over Chinese economic growth through the allocation of resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy and providing preferential treatment to
particular industries or
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">companies. Efforts by the PRC government to slow the pace of growth of the Chinese economy
could result in decreased capital expenditure by solar energy users, which in turn could reduce
demand for our products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any adverse change in the economic conditions or government policies in China could have a
material adverse effect on the overall economic growth and the level of renewable energy
investments and expenditures in China, which in turn could lead to a reduction in demand for our
products and consequently have a material adverse effect on our businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Uncertainties with respect to the Chinese legal system could have a material adverse effect on
us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct substantially all of our business through our subsidiary, Suntech China,
established in China. Suntech China is generally subject to laws and regulations applicable to
foreign investment in China and, in particular, laws applicable to wholly foreign-owned
enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited
for reference but have limited precedential value. Since 1979, PRC legislation and regulations have
significantly enhanced the protections afforded to various forms of foreign investments in China.
However, since these laws and regulations are relatively new and the PRC legal system continues to
rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involve uncertainties, which may limit legal
protections available to us. In addition, any litigation in China may be protracted and result in
substantial costs and diversion of resources and management attention.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We rely on dividends paid by our subsidiaries for our cash needs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct substantially all of our operations through our subsidiary, Suntech China, which is
a limited liability company established in China. We rely on dividends paid by Suntech China for
our cash needs, including the funds necessary to pay dividends and other cash distributions to our
shareholders, to service any debt we may incur and to pay our operating expenses. The payment of
dividends by entities organized in China is subject to limitations. Regulations in the PRC
currently permit payment of dividends only out of accumulated profits as determined in accordance
with accounting standards and regulations in China. Suntech China is also required to set aside at
least 10.0% of its after-tax profit based on PRC accounting standards each year to its general
reserves until the accumulative amount of such reserves reach 50.0% of its registered capital.
These reserves are not distributable as cash dividends. Suntech China is also required to allocate
a portion of its after-tax profits to its staff welfare and bonus funds, which may not be
distributed to equity owners except in the event of liquidation. In addition, if Suntech China
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other distributions to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fluctuation in the value of the Renminbi may have a material adverse effect on your
investment.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The change in value of the Renminbi against the U.S. dollar, Euro and other currencies is
affected by, among other things, changes in China&#146;s political and economic conditions. On July&nbsp;21,
2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the
U.S. dollar. Under the new policy, the Renminbi is permitted
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to fluctuate within a narrow and managed band against a basket of certain foreign currencies.
This change in policy has resulted in approximately 2.1% appreciation of Renminbi against U.S.
dollar. While the international reaction to the Renminbi revaluation has generally been positive,
there remains significant international pressure on the PRC government to adopt an even more
flexible currency policy, which could result in a further and more significant appreciation of the
Renminbi against the U.S. dollar. As a portion of our costs and expenses is denominated in
Renminbi, the revaluation in July&nbsp;2005 and potential future revaluation has and could further
increase our costs. In addition, as we rely entirely on dividends paid to us by our operating
subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on our
revenues and financial condition, and the value of, and any dividends payable on, our ADSs in
foreign currency terms. For example, to the extent that we need to convert U.S. dollars we receive
from our initial public offering into Renminbi for our operations, appreciation of the Renminbi
against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the
conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of
making payments for dividends on our ordinary shares or ADSs or for other business purposes,
appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amount available to us.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Restrictions on currency exchange may limit our ability to receive and use our revenues
effectively.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain portions of our revenues and expenses are denominated in Renminbi. If our revenues
denominated in Renminbi increase or expenses denominated in Renminbi decrease in the future, we may
need to convert a portion of our revenues into other currencies to meet our foreign currency
obligations, including, among others, payment of dividends declared, if any, in respect of our
ordinary shares. Under China&#146;s existing foreign exchange regulations, our PRC subsidiary, Suntech
China, is able to pay dividends in foreign currencies, without prior approval from the State
Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements.
However, we cannot assure you that the PRC government will not take further measures in the future
to restrict access to foreign currencies for current account transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange transactions by Suntech China under the capital account continue to be
subject to significant foreign exchange controls and require the approval of PRC governmental
authorities, including the SAFE. In particular, if Suntech China borrows foreign currency loans
from us or other foreign lenders, these loans must be registered with the SAFE, and if we finance
Suntech China by means of additional capital contributions, these capital contributions must be
approved by certain government authorities including the Ministry of Commerce or its local
counterparts. These limitations could affect the ability of Suntech China to obtain foreign
exchange through debt or equity financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our business benefits from certain PRC government incentives. Expiration of, or changes to,
these incentives could have a material adverse effect on our operating results.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PRC government has provided various incentives to high-technology companies, including
Suntech China, our operating subsidiary, in order to encourage development of the high-technology
industry. Such incentives include reduced tax rates and other measures. For example, Suntech China,
which is registered and operating in a high-tech zone in Wuxi, has been qualified as a &#147;high or new
technology enterprise.&#148; As a result, it is entitled to a preferential enterprise income tax rate of
15.0% so long as it continues to operate in the high-tech zone and maintains its &#147;high or new
technology enterprise&#148; status. Suntech China is
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">entitled to a two-year exemption from the enterprise income tax for its first two profitable
years of operation, which were 2003 and 2004. Suntech China is thereafter entitled to a
preferential enterprise income tax rate of 7.5% for the succeeding three years, which will expire
on December&nbsp;31, 2007. As these tax benefits expire, the effective tax rate of Suntech China will
increase significantly, and any increase of Suntech China&#146;s enterprise income tax rate in the
future could have a material adverse effect on our financial condition and results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face risks related to health epidemics and other outbreaks.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business could be adversely affected by the effects of avian flu, SARS or another epidemic
or outbreak. China reported a number of cases of SARS in April&nbsp;2004. In 2005, there have been
reports on the occurrences of avian flu in various parts of China, including a few confirmed human
cases. Any prolonged recurrence of avian flu, SARS or other adverse public health developments in
China may have a material adverse effect on our business operations. These could include our
ability to travel or ship our products outside of China, as well as temporary closure of our
manufacturing facilities. Such closures or travel or shipment restrictions would severely disrupt
our business operations and adversely affect our results of operations. We have not adopted any
written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS
or any other epidemic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Our Ordinary Shares and ADSs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The market price for our ADSs may be volatile.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations
in response to factors including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements of technological or competitive developments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory developments in our target markets affecting us, our customers or our
competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements regarding patent litigation or the issuance of patents to us or our
competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements of studies and reports relating to the conversion efficiencies of our
products or those of our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>actual or anticipated fluctuations in our quarterly operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial estimates by securities research analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the economic performance or market valuations of other PV technology
companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>addition or departure of our executive officers and key research personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>release or expiry of lock-up or other transfer restrictions on our outstanding
ordinary shares or ADSs; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sales or perceived sales of additional ordinary shares or ADSs.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the securities market has from time to time experienced significant price and
volume fluctuations that are not related to the operating performance of particular companies.
These market fluctuations may also have a material adverse effect on the market price of our ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Substantial future sales or perceived sales of our ADSs in the public market could cause the
price of our ADSs to decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of our ADSs or ordinary shares in the public market, or the perception that these sales
could occur, could cause the market price of our ADSs to decline. As of April&nbsp;25, 2006, we had
147,487,707 ordinary shares outstanding, including 30,337,000 ordinary shares represented by
30,337,000 ADSs. All ADSs are freely transferable without restriction or additional registration
under the Securities Act of 1933, as amended, or the Securities Act. The remaining ordinary shares
outstanding will be available for sale, upon the expiration of the 180-day lock-up period beginning
from the date of the effectiveness of the registration statement from our initial public offering
and, in the case of the ordinary shares that certain option holders will receive when they exercise
their share options, until the later of (i)&nbsp;September&nbsp;5, 2006, the first anniversary of the grant
date, and (ii)&nbsp;the expiration of the aforementioned 180-day lock-up period, subject to volume and
other restrictions as applicable under Rule&nbsp;144 and Rule&nbsp;701 under the Securities Act. Any or all
of these shares (other than those held by certain option holders) may be released prior to
expiration of the lock-up period at the discretion of the joint lead underwriters. To the extent
shares are released before the expiration of the lock-up period and these shares are sold into the
market, the market price of our ADSs could decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>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.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our second amended and restated articles of association limit the ability of others to acquire
control of our company or cause us to engage in change-of-control transactions. These provisions
could have the effect of depriving our shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging third parties from seeking to obtain control
of our company in a tender offer or similar transaction. For example, our board of directors has
the authority, without further action by our shareholders, to issue preferred shares in one or more
series and to fix their designations, powers, preferences, privileges, and relative participating,
optional or special rights and the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights associated with our ordinary shares, in the form of ADS
or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a
change in control of our company or make removal of management more difficult. If our board of
directors decides to issue preferred shares, the price of our ADSs may fall and the voting and
other rights of the holders of our ordinary shares and ADSs may be materially and adversely
affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Holders of ADSs have fewer rights than shareholders and must act through the depositary to
exercise those rights.</I></B>
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of ADSs do not have the same rights of our shareholders and may only exercise the
voting rights with respect to the underlying ordinary shares in accordance with the provisions of
the deposit agreement. Under our second amended and restated articles of association, the minimum
notice period required to convene a general meeting is seven days. When a general meeting is
convened, you may not receive sufficient notice of a shareholders&#146; meeting to permit you to
withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter.
In addition, the depositary and its agents may not be able to send voting instructions to you or
carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause
the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you
will receive the voting materials in time to ensure that you can instruct the depositary to vote
your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to
carry out any instructions to vote, for the manner in which any vote is cast or for the effect of
any such vote. As a result, you may not be able to exercise your right to vote and you may lack
recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS
holder, you will not be able to call a shareholder meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>You may be subject to limitations on transfers of your ADSs.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your ADSs are transferable on the books of the depositary. However, the depositary may close
its transfer books at any time or from time to time when it deems expedient in connection with the
performance of its duties. In addition, the depositary may refuse to deliver, transfer or register
transfers of ADSs generally when our books or the books of the depositary are closed, or at any
time if we or the depositary deem it advisable to do so because of any requirement of law or of any
government or governmental body, or under any provision of the deposit agreement, or for any other
reason.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>ADS holders&#146; right to participate in any future rights offerings may be limited, which may
cause dilution to your holdings and you may not receive cash dividends if it is impractical to make
them available to you.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may from time to time distribute rights to our shareholders, including rights to acquire
our securities. However, we cannot make rights available to our ADS holders in the United States
unless we register the rights and the securities to which the rights relate under the Securities
Act or an exemption from the registration requirements is available. Also, under the deposit
agreement, the depositary bank will not make rights available to you unless the distribution to ADS
holders of both the rights and any related securities are either registered under the Securities
Act, or exempted from registration under the Securities Act. We are under no obligation to file a
registration statement with respect to any such rights or securities or to endeavor to cause such a
registration statement to be declared effective. Moreover, we may not be able to establish an
exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to
participate in our rights offerings and may experience dilution in their holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the depositary of our ADSs has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on our ordinary shares or other deposited securities
after deducting its fees and expenses. You will receive these distributions in proportion to the
number of ordinary shares your ADSs represent. However, the depositary may, at its discretion,
decide that it is inequitable or impractical to make a distribution available to any holders of
ADSs. For example, the depositary may determine that it is not practicable to distribute certain
property through the mail, or that the value of certain
</DIV>

<P align="center" style="font-size: 10pt">25
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">distributions may be less than the cost of mailing them. In these cases, the depositary may
decide not to distribute such property and you will not receive such distribution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than that under U.S. law, you may have less
protection for your shareholder rights than you would under U.S. law.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate affairs are governed by our second amended and restated memorandum and articles
of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The
rights of shareholders to take action against the directors, actions by minority shareholders and
the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large
extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is
derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that
from English common law, which has persuasive, but not binding, authority on a court in the Cayman
Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under
Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less
developed body of securities laws than the United States. In addition, some U.S. states, such as
Delaware, have more fully developed and judicially interpreted bodies of corporate law than the
Cayman Islands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of all of the above, public shareholders may have more difficulty in protecting
their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as shareholders of a U.S. public company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>You may have difficulty enforcing judgments obtained against us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a Cayman Islands company and substantially all of our assets are located outside of the
United States. Substantially all of our current operations are conducted in the PRC. In addition,
most of our directors and officers are nationals and residents of countries other than the United
States. A substantial portion of the assets of these persons are located outside the United States.
As a result, it may be difficult for you to effect service of process within the United States upon
these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in
U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us
and our officers and directors, most of whom are not residents in the United States and the
substantial majority of whose assets are located outside of the United States. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce
judgments of U.S. courts against us or such persons predicated upon the civil liability provisions
of the securities laws of the United States or any state. In addition, it is uncertain whether such
Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman
Islands or the PRC against us or such persons predicated upon the securities laws of the United
States or any state.
</DIV>

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<DIV align="left"><A NAME="005"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;4.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Information on the Company</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;<U>History and Development of the Company</U>
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our predecessor company, Wuxi Suntech Power Co., Ltd., or Suntech China, was incorporated in
January&nbsp;2001 and commenced business operations in May&nbsp;2002. To enable us to raise equity capital
from investors outside of China, we established a holding company structure by incorporating Power
Solar System Co., Ltd., or Suntech BVI, in the British Virgin Islands on January&nbsp;11, 2005. Suntech
BVI acquired all of the equity interests in Suntech China through a series of transactions that
have been accounted for as a recapitalization. In anticipation of our initial public offering, we
incorporated Suntech Power Holdings Co., Ltd., or Suntech, in the Cayman Islands as a listing
vehicle on August&nbsp;8, 2005. Suntech became our ultimate holding company when it issued shares to the
existing shareholders of Suntech BVI on August&nbsp;29, 2005 in exchange for all of the shares that
these shareholders held in Suntech BVI. We conduct substantially all of our operations through
Suntech China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices are located at 17-6 Changjiang South Road, New District, Wuxi,
Jiangsu Province 214028, People&#146;s Republic of China. Our telephone number at this address is (86)
510 534 5000 and our fax number is (86)&nbsp;510 534 3049.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investor inquiries should be directed to us at the address and telephone number of our
principal executive offices set forth above. Our website is <I>www.suntech-power.com. </I>The information
contained on our website is not part of this annual report on Form 20-F. Our agent for service of
process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New
York 10011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;<U>Business Overview</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are one of the leading solar energy companies in the world as measured by production output
in 2005. Since we commenced business operations in May&nbsp;2002, we have grown rapidly to become the
world&#146;s eighth largest manufacturer of PV cells in 2005, based on production output, according to
the March&nbsp;2006 issue of Photon International. We design, develop, manufacture and market a variety
of PV cells and modules. We also provide PV system integration services in China. Our products are
used to provide reliable and environmentally friendly electric power for residential, commercial,
industrial and public utility applications in various markets worldwide, including a number of
European countries such as Germany and Spain, as well as China and the United States. We sell our
products outside of China primarily through distributors and in China primarily to module
manufacturers and end users directly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we have been able to grow rapidly because of our ability to capitalize on the
PV market&#146;s demand for high efficiency products at the lowest possible cost per watt. Our strong
research and development capabilities have enabled us to develop advanced process technologies and
manufacture, cost-effectively and on a large scale, PV cells and modules with high conversion
efficiencies. As of December&nbsp;31, 2005, the average conversion efficiency rates of our
monocrystalline and multicrystalline silicon PV cells reached 17.0% and 15.3%, respectively. In
comparison, according to a report published by the International Energy Agency in September&nbsp;2005,
the conversion efficiency rate of monocrystalline PV cells generally ranges between 15.0% and
18.0%, and the average conversion efficiency rate of multicrystalline PV cells is approximately
14.0%.
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our China-based design, development and manufacturing facilities provide us with
several competitive advantages, including access to low-cost technical expertise, labor and
facilities. We leverage our cost advantages by optimizing the balance between automation and manual
operations in our manufacturing processes, which we believe lowers our operating costs and capital
expenditures and enables us to expand our manufacturing capacity in a cost-effective manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We increased our manufacturing capacity by 15 times in less than four years. In August&nbsp;2002,
we completed our first PV cell manufacturing line with an annual manufacturing capacity of 10 MW.
Through continuous innovation and capacity expansion, we have established six PV cell manufacturing
lines with an aggregate annual capacity of 150 MW as of December&nbsp;31, 2005. We plan to further
increase our aggregate capacity of PV cells to 240 MW by the end of 2006. We sold 6.4 MW, 29.5 MW
and 67.7 MW of our products in 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues increased from $3.0&nbsp;million in 2002 to $226.0&nbsp;million in 2005, representing a
compound annual growth rate, or CAGR, of 322.3% from 2002 to 2005. We have been profitable since
2003. Our net income amounted to $0.9&nbsp;million in 2003, $19.8&nbsp;million in 2004 and $30.6&nbsp;million in
2005, representing net margin of 6.7%, 23.2% and 13.5%, respectively. In 2005, our net revenues and
net income amounted to $226.0&nbsp;million and $30.6&nbsp;million, respectively, representing increases of
165.0% and 55.0%, respectively, over 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Competitive Strengths</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the following competitive strengths enable us to take advantage of the rapid
growth in the PV industry and compete effectively in the global PV market:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Large-Scale Manufacturing of High-Efficiency PV Cells</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing technologies enable us to produce high-efficiency PV cells on a large scale
with efficient use of raw materials. Our manufacturing capacity and output have increased rapidly
in the past three years. In August&nbsp;2002, we completed our first PV cell manufacturing line with an
annual manufacturing capacity of 10 MW. As of December&nbsp;31, 2005, our PV cell manufacturing capacity
has grown to 150 MW per year. We plan to further increase our annual manufacturing capacity of PV
cells to 240 MW by the end of 2006. The average conversion efficiency rates of our monocrystalline
and multicrystalline silicon PV cells have reached 16.3% and 14.8% as of December&nbsp;31, 2004,
respectively, and 17.0% and 15.3% as of December&nbsp;31, 2005, respectively. In comparison, according
to a report published by the International Energy Agency in September&nbsp;2005, the conversion
efficiency rate of monocrystalline PV cells generally ranges between 15.0% and 18.0%, and the
average conversion efficiency rate of multicrystalline PV cells is approximately 14.0%,
respectively. Our process technologies have significantly improved our productivity and increased
the efficiency of our raw material usage, both of which have lowered the cost per watt of our
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strong Research and Development Capabilities in PV technology</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have superior research and development capabilities in conducting basic research, improving
manufacturing process and commercializing new PV technologies. Dr.&nbsp;Zhengrong Shi, our founder,
chairman of our board of directors and our chief executive officer, Dr.
</DIV>

<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stuart R. Wenham, our chief technical officer and Dr.&nbsp;Jingjia Ji, a member of our board of
directors and one of our senior research scientists, are all prominent experts in the PV industry,
each with over 10&nbsp;years of experience with PV technologies. As of December&nbsp;31, 2005, our PV
technology research and development center had 76 personnel, including 28 PV technology experts
from China and abroad. We have accumulated significant expertise, knowledge, know-how and
experience in silicon materials, solar cell device physics, theoretical simulation and
characterization, process technologies and the design of advanced PV manufacturing equipment. We
made significant progress in developing innovative silicon purification technologies to
substantially reduce silicon cost, and commercializing thin film technology to reduce the
consumption of silicon materials and manufacturing costs. We have established cooperative
relationships with a number of universities in China and abroad, including the University of New
South Wales in Australia and Zhongshan University in China. Our collaborative efforts with these
institutions not only give us access to advanced testing facilities and equipment, but also enable
us to keep abreast of the latest industry developments and trends. The government authorities in
China have recognized our research and development capabilities by giving us research grants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Flexible China-based, Low-cost Manufacturing Model</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our China-based, semi-automated manufacturing model lowers our operating costs and
capital expenditure. We optimize automation and manual operations in our manufacturing processes to
take advantage of our location in China, where the costs of skilled labor, engineering and
technical resources, as well as land, production equipment, facilities and utilities, tend to be
lower than those in developed countries. We are one of the few companies in the world capable of
producing PV cells with both monocrystalline and multicrystalline silicon wafers, giving us
flexibility in raw material procurement and a competitive advantage during periods of silicon wafer
supply shortages. We have developed process technologies that enable us to manufacture
high-efficiency PV cells using off-specification silicon wafers, which further reduces our raw
material costs. Our flexible manufacturing model enables us to reduce breakage and improve
manufacturing yields. Our design capabilities enable us to substitute certain costly imported
equipment with self-designed domestic alternatives. In addition, we believe that our semi-automated
manufacturing model enables us to expand capacity at a lower cost, compared to the fully-automated
processes often utilized in developed countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Established Relationships with Key Customers and Suppliers</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To grow our business and market share, we have established various types of supply and sales
arrangements with some of the key players in the PV industry. Our major international customers
include Aleo Solar GmbH, Bihler GmbH, Conergy AG, IBC Solar AG and SolarWorld AG. We purchase
silicon wafers from some of our customers, including SolarWorld AG (through its wholly-owned
subsidiary Deutsche Solar AG) and Sunlynx Anstalt, and sell all or a substantial portion of the PV
modules manufactured with these wafers to these customers. These arrangements ensure that at least
a portion of our raw material requirement is met, and enable us to leverage the local distribution
networks of these partners. In October&nbsp;2005, we entered into a 10-year supply agreement with
Deutsche Solar AG, under which Deutsche Solar AG agreed to supply us with specified quantities of
silicon wafers from January&nbsp;1, 2006 to December&nbsp;31, 2015. We have also built a silicon wafer supply
chain in China. We are one of the few China-based companies to have access to silicon produced
domestically. In addition, we provide technical support to two silicon slicing companies in China,
which have been supplying silicon wafers to us on an exclusive basis.
</DIV>

<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have also invested in a silicon ingot company which supplies us with silicon ingots. We
leverage our relationships with companies outside of China to source silicon materials for three
Chinese silicon ingot manufacturers, who, in return, have been supplying us with silicon ingots.
Through a variety of arrangements, we believe we will be able to secure silicon raw materials for
the estimated production output in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leading Pure Play Solar Energy Company with High Growth and Profitability</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading independent developer and manufacturer of PV cells and modules. According to
Photon International, we were the eight largest PV cell producers worldwide and the largest PV cell
producer in China in 2005, based on production output. Unlike several of our large competitors,
which operate as PV divisions of large industrial, utility and oil conglomerates, we dedicate all
of our management efforts and financial, technical, research and human resources to the design,
development, manufacturing and marketing of PV products. Our focus on the PV industry enables our
management to set corporate direction, make strategic and operational decisions based solely on our
commitment to the PV industry and our customer requirements. We believe that our focused efforts
have contributed to our rapid growth and high operating efficiency in the past three years. We have
increased our annual manufacturing capacity of PV cells from 10 MW in August&nbsp;2002 to 150 MW as of
December&nbsp;31, 2005. We achieved profitability in December&nbsp;2002, within one year of commencing our
operations, and achieved gross margin of 19.4%, 29.5% and 30.3% and net margin of 6.7%, 23.2% and
13.5% in 2003, 2004 and 2005, respectively, which we believe were among the highest compared to
current public solar energy companies. We believe that our dedication to the PV industry will
enable us to better capitalize on the rapidly growing demand for PV products, expand our
manufacturing capacity and respond quickly to industry, technology and market changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Experienced Management Team with Proven Technology and Operational Record</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have an experienced management team that has successfully led our operations and increased
our capacity, revenues and profits through rapid organic growth. Dr.&nbsp;Zhengrong Shi, our founder,
the chairman of our board of directors and our chief executive officer, has over 20&nbsp;years of
experience in the PV industry. With his expertise, entrepreneurial spirit and strong leadership,
Dr.&nbsp;Shi has been instrumental in helping us achieve our current leading market position. He is the
inventor of 11 patents in PV technology and received his doctorate degree under the guidance of
Professor Martin Green, one of the world&#146;s foremost researchers and inventors in the field of PV
technology. Prior to founding our company, Dr.&nbsp;Shi was the research director and an executive
director of Pacific Solar Pty. in Australia and a research fellow of the Australian Research
Committee. Our chief operating officer, Mr.&nbsp;Graham Artes, has over 30&nbsp;years of experience in
managing production, services and sales. We believe that the technical and industry knowledge and
the operating experiences of our senior executives provide us with significant competitive
advantages in the fast growing PV industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Products and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer a wide range of PV cells and modules. We also provide PV system integration services
in China. Our products are used in a variety of residential, commercial, industrial and public
utility applications, for both on-grid electricity generation and off-grid use, such as stand-alone
lighting for street lamps, garden lamps, telecommunications relay stations, and mobile phone
networks.
</DIV>

<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solar energy generation systems use interconnected PV cells to generate electricity from
sunlight, a phenomenon commonly known as the photovoltaic effect. Most PV cells are constructed
using specially processed silicon, which, when exposed to sunlight, generates electric current.
Interconnected PV cells are packaged into PV modules, which protect the PV cells and collect the
electricity generated. PV systems comprise of multiple PV modules, related power electronics and
other components. PV systems are used for both on-grid generation, in which electricity generated
is fed into an electricity transmission grid for sale, and off-grid generation for locations where
access to the electricity transmission grid is not physically available or economically feasible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PV Cells</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A PV cell is a device made from a silicon wafer that converts sunlight into electricity by a
process known as the photovoltaic effect. We produce a variety of monocrystalline and
multicrystalline silicon PV cells. The following table sets forth a sample of the types of PV cells
we offer with the specifications indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Optimum</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dimensions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Conversion</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Operating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>PV Cell Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(mm&#215;mm)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Efficiency (%)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Power (W)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Voltage (V)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Monocrystalline silicon PV cell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103&#215;103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">15.4-17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">1.62-1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">505-527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125&#215;125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">15.4-17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">2.29-2.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">505-527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150&#215;150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">15.4-17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.44-3.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">505-527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156&#215;156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">15.4-17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.67-4.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">505-527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Multicrystalline silicon PV cell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103&#215;103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">14.0-16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">1.48-1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">487-515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125&#215;125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">14.0-16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">2.19-2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">487-515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150&#215;150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">14.0-16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.15-3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">487-515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156&#215;156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">14.0-16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.41-3.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">487-515</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>PV Modules</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A PV module is an assembly of PV cells that have been electrically interconnected and
laminated in a durable and weather-proof package. We produce a variety of PV modules ranging from
two to 240 watts in power, with higher output modules under development. The following table sets
forth a sample of the types of PV modules we manufacture with the specifications indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Optimum</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dimensions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weight</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Operating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>PV Module Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(mm&#215;mm)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Kg)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Power (W)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Voltage (V)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufactured with monocrystalline silicon PV Cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1195&#215;541&#215;30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1482&#215;676&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1580&#215;808&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1482&#215;992&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1956&#215;992&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufactured with multicrystalline silicon PV Cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">995&#215;453&#215;30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1195&#215;541&#215;30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1580&#215;808&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1956&#215;992&#215;50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>PV System Integration</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A PV system consists of one or more PV modules that are physically mounted and electrically
interconnected, with system components such as batteries and power electronics, to produce and
reserve electricity. Typical residential on-grid systems contain between 10 and 60 PV modules and
produce one to six kilowatt hours, or KWh, of electricity. PV system integration involves the
design, installation and testing of PV systems. We have designed and installed PV systems used in
lighting for outdoor urban public facilities, in farms and villages, as well as in
telecommunications and transportation systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Manufacturing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that one of our competitive strengths is our ability to manufacture high-conversion
efficiency products on a large scale and at low cost. As such, we continue to expand our
manufacturing capacity, streamline and optimize our manufacturing processes as well as enhance our
process technologies. We also seek to design and implement manufacturing processes that produce
consistently high-efficiency products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Manufacturing Processes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PV cell manufacturing begins with ultrasonic cleaning of silicon wafers followed by chemical
treatment of the wafer surface, which reduces the PV cell&#146;s reflection of sunlight. Through a
thermal process, or a diffusion process, we then introduce certain impurity into the silicon wafer
and form an electrical field within the PV cell. We achieve the electrical isolation between the
front and back surfaces of the silicon wafer by edge isolation, or removing a very thin layer of
silicon around the edge. We then apply an anti-reflection coating to the front surface of the PV
cell to enhance its absorption of sunlight. We screen print negative and positive metal contacts,
or electrodes, on the front and back surfaces of the PV cell, respectively, with the front contact
in a grid pattern to allow sunlight to be absorbed. Silicon and metal electrodes are then connected
through an electrode firing process in a conveyor belt furnace at high temperature. We complete the
manufacturing of PV cells by testing and sorting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The differences between manufacturing processes for monocrystalline and multicrystalline
silicon PV cells are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The chemical treatment process for monocrystalline silicon PV cell manufacturing
produces a &#147;pyramid-textured surface,&#148; which traps sunlight into the silicon. For
multicrystalline silicon PV cell manufacturing, a similar type of surface structure
cannot be readily formed, causing surface reflection levels higher than those of
monocrystalline silicon PV cells. We have developed a patented process that allows the
formation of a similar surface structure to that of monocrystalline silicon PV cells.
We believe that this technology helps us in achieving high conversion efficiencies for
multicrystalline silicon PV cells.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An anti-reflection coating on a PV cell enhances its ability to absorb incoming
sunlight. For monocrystalline silicon PV cells, many types of materials can serve as
anti-reflection coatings. For multicrystalline silicon PV cells, only materials that
contain atomic hydrogen, such as hydrogenated silicon nitride, can be used. We have
developed technology that enables hydrogen to be absorbed within the silicon structure
to improve silicon quality. We believe</TD>
</TR>




</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that this technology also helps us in achieving
high conversion efficiencies for multicrystalline silicon PV cells.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The diagram below illustrates the PV cell manufacturing process:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h00483h0048301.gif" alt="(DIAGRAM)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our PV modules are formed by interconnecting multiple PV cells in the desired electrical
configuration through taping and stringing. The interconnected cells are laid out and laminated in
the vacuum and then go through a curing process, or a heating process. Through these processes, our
PV modules are sealed and become weatherproof and are able to withstand high levels of ultraviolet
radiation and moisture. Assembled PV modules are packaged in a protective aluminum frame prior to
testing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The diagram below illustrates the PV module manufacturing process:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h00483h0048302.gif" alt="(DIAGRAM)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Manufacturing Capacity Expansion</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since commencing our business operations in May&nbsp;2002, we have significantly expanded our
manufacturing capacity to meet the rapidly increasing demand for PV products. In August&nbsp;2002, we
completed our first commercial PV cell manufacturing line with an annual manufacturing capacity of
10 MW, which was later improved to 15 MW, and began the commercial sales of our PV cells in
September&nbsp;2002. Through continual expansion, as of December&nbsp;31, 2005, we had six PV cell
manufacturing lines with an aggregate manufacturing capacity of 150 MW per year. We have also
proportionately expanded our manufacturing capacity of PV modules. In addition, we entered into
agreements to purchase manufacturing equipment for three additional manufacturing lines for PV
cells in order to add 120 MW manufacturing capacity to our existing capacity. Two of these
manufacturing lines are expected to become operational by the second quarter of 2006 and the last
one is expected to become operational by the third quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth certain information regarding our current manufacturing lines as of
December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>PV Cell</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Commencement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Annualized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Manufacturing Line</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date of Manufacturing</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Manufacturing Capacity(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Capacity Utilization Rate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(in MW)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">August 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">96.63%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.61</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">August 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">96.46</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">98.66</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">98.06</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line 6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">N/A</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">150</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Based on and calculated by the maximum manufacturing capacity of each manufacturing
line and calculated by using annualized maximum wafer throughput by multiplying the blended
average conversion efficiency rates of monocrystalline and multicrystalline silicon PV cells.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to capacity expansion in our facilities in Wuxi, we intend to acquire
controlling interests in Chinese manufacturers of PV products in order to secure silicon wafer
supplies and to gain access to end users. In October&nbsp;2005, we established a 87.0%-owned subsidiary
for the manufacturing of PV cells and modules in Luoyang, China. A major shareholder of Luoyang
China Silicon High-Tech Co., Ltd., one of the largest silicon raw material suppliers and silicon
purification companies in China with 450 tonnes of annual capacity, has agreed to provide silicon
wafers to this subsidiary of our company with priority to ensure that sufficient amount of silicon
wafers will be provided for a PV cell manufacturing line with an initial capacity of 30 MW per
year. We will initially invest approximately $5.0&nbsp;million, and production is expected to begin in
the second half of 2006. We have also, through Suntech China, acquired a 51.0% equity interest in
one of our customers, Qinghai Gofly, a renewable energy company in Qinghai province, China, for a
consideration equivalent to $0.5&nbsp;million and plan to build a PV module manufacturing facility with
an annual capacity of 3.0 MW in Qinghai.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Raw Materials</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raw materials required in our manufacturing process include silicon wafers, ethylene vinyl
acetate, metallic paste, tempered glass, tedlar-polyester-tedlar material, connecting system and
aluminum frame. Our raw material procurement policy is to (i)&nbsp;use only vendors who have
demonstrated quality control and reliability, and (ii)&nbsp;maintain multiple supply sources for each of
our key raw materials so that supply problems with any one vendor will not materially disrupt our
operations. We evaluate the quality and delivery performance of each vendor periodically and adjust
quantity allocations accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain one or two days&#146; supply of silicon wafers and one month&#146;s supply of stock of other
raw materials based upon regular estimates of customer orders. Our principal suppliers usually
dedicate portions of their inventories as reserves to meet our manufacturing requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal suppliers for our silicon wafers are Deutsche Solar AG, a wholly-owned
subsidiary of SolarWorld AG, Emei Semi Conductor Material Factory, Jiangsu Shunda Semiconductor
Development Co., Ltd, Jiangsu Huantai Group, Baoding Yingli New Energy Resources Co., Ltd, and
Swiss Wafers AG. In 2005, we purchased 49.3% of our raw materials from overseas.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our suppliers for tempered glass include Asahi Glass Co., Ltd., Pilkington (Australia) Ltd.
and Hong Glass Factory Co., Ltd. Our suppliers for ethylene vinyl acetate include Mitsui &#038; Co. Ltd
and NPC Incorporated. We purchase some of our raw materials, such as tedlar-polyester-tedlar
material and metallic paste, from suppliers based in China.
</DIV>


<P align="center" style="font-size: 10pt">34
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Silicon Wafers</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Silicon wafers are the most important raw materials for making PV products, with
monocrystalline and multicrystalline silicon wafers as the most commonly used materials. We are one
of the few companies in the world capable of producing PV cells with either type of silicon wafers.
This dual capability provides us with flexibility in raw material procurement and is an advantage
during periods of silicon supply shortages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to meet a portion of our raw material requirement, we have also established OEM
manufacturing arrangements with some of our customers including SolarWorld AG and Sunlynx Anstalt.
We obtain silicon wafer supplies from these customers, and are obligated to sell to these customers
all or a substantial portion of the PV modules manufactured with these wafers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We acquire silicon wafers from our suppliers mainly through annual or bi-annual supply
arrangements and also secure a portion of our silicon wafers through long-term supply contracts,
strategic alliances with silicon suppliers and developing new silicon technologies. Specifically,
we have taken the following measures:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Long-term Supply Contracts. </I>We are in active discussions with many silicon and
silicon wafer suppliers both overseas and in China to secure fixed price, fixed amount
and long-term supply contracts with prepayment. For example, on October&nbsp;14, 2005, we
entered into a 10-year supply agreement with Deutsche Solar AG. Under this agreement,
Deutsche Solar AG has agreed to provide us with fixed quantities of silicon wafer on a
monthly basis from January&nbsp;1, 2006 to December&nbsp;31, 2015. The purchase price will be
fixed in 2006 subject to adjustment for each following year based on a predetermined
formula. We estimate that over the ten-year period, we will likely purchase silicon
wafers in the amount of approximately $80.0&nbsp;million. In October&nbsp;2005, we established a
87.0%-owned subsidiary in Luoyang, China. Luoyang Silicon, a major shareholder of one
of the largest silicon raw material manufacturers and silicon purification companies in
China has agreed to provide silicon wafers to this subsidiary with priority to ensure
sufficient amount of silicon wafers will be provided for a PV cell manufacturing line
with an initial capacity of 30 MW per year. In October&nbsp;2005, Luoyang Silicon commenced
production of silicon at approximately 10 tonnes per month and its monthly production
capacity is expected to be gradually increased to 40 tonnes in 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Strategic Alliances. </I>We have entered into various forms of strategic alliances with
silicon suppliers in China to reduce our exposure to the risk of supply shortages. We
have invested in a silicon ingot company that supplies us with silicon ingots. We also
leverage our relationships with companies outside China to source silicon materials for
three Chinese silicon ingot manufacturers, which in return supply us with silicon
ingots. We have contracts with silicon slicing companies to slice the ingots into
silicon wafers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Developing New Silicon Technologies. </I>We are also developing new silicon
purification technologies, which we believe will substantially reduce silicon cost
while maintaining and enhancing our conversion efficiencies. We believe these
technologies will increase our raw material supplies and further reduce</TD>
</TR>



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">35
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our raw
material costs. We also provide technical support to two silicon slicing companies in
China, which have been supplying silicon wafers to us on exclusive basis.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Quality Assurance and Certifications</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We employ quality assurance procedures at key manufacturing stages to identify and solve
quality issues early on in the manufacturing process. Our quality assurance procedures include raw
material quality assurance, process monitoring and PV cell quality and reliability assurance. If a
problem is detected, a failure analysis will be performed to determine the cause. To ensure that
our quality assurance procedures are effectively applied, manufacturing line employees are provided
with ongoing training. Our senior management team is actively involved in setting quality assurance
policies and managing quality assurance performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have received many types of international certifications for our quality assurance
programs, which we believe demonstrate our technological capabilities and instill customer
confidence. The following table sets forth the major certifications we have received and major test
standards our products have met as of December&nbsp;31, 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Certification Test Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Certification or Test Standard</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Relevant Products</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;2002, and
renewed in June&nbsp;2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ISO 9001:2000 quality system
certification, established by
the International
Organization for
Standardization, an
organization formed by
delegates from member
countries to establish
international quality
assurance standards for
products and manufacturing
processes.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The design and
manufacture of
crystalline silicon
PV cells, modules
and application
systems</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">March&nbsp;2003
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CE certification, issued by
Electronic Technology Systems
Dr.&nbsp;Genz GmbH, an
international operating test
and certification center. An
indication that our products
have reached &#147;European
Conformity.&#148;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain models of
our PV Modules and
charge controller
for our PV System</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;2003&#151; January&nbsp;2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IEC61215:1993 test standard,
administered by Arizona State
University Photovoltaic
Testing Laboratory.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain models of
our PV modules</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">An international test
standard recognized by the
United States for crystalline
silicon modules, providing
assurance that the product is
reliable and durable.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">January&nbsp;2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">T&#220;V certification, conducted
by T&#220;V Immissionsschutz und
Energiesysteme GmbH, an
independent approval agency
in Germany, against the
requirements of Safety Class
II Test on PV modules.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain models of
our PV modules</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">March&nbsp;2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">UL certification
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain models of
our PV modules</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Markets and Customers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our products outside of China primarily to distributors and in China primary to module
manufacturers and end users directly. Our distributors include companies that are exclusive solar
distributors, engineering and design firms and other energy product
distributors. Some of our distributors are also installers, system integrators, property
developers and other value-added resellers, who often add value to the system design by
incorporating our PV cells or PV modules with batteries, power electronics, mounting
</DIV>

<P align="center" style="font-size: 10pt">36
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">structures and
wiring systems. In 2005, SolarWorld AG was the only customer whose purchases accounted for 10.0% or
more of our total net revenues for the year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information relating to our total net revenues by
geography for the period indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Total Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Region</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22"><B>(in thousands, except percentages)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">72.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe sub-total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">South Africa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rest of the world</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">226,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our products primarily under two types of arrangements, supply contracts and OEM
manufacturing arrangements, which are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Supply contracts. </I>We enter into short-term supply contracts with most of our
customers and are obligated to deliver PV modules according to a pre-agreed price and
schedule, generally for a few months at a time in exchange for payment by the customer
in the form of a letter of credit or payment upon delivery; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>OEM manufacturing arrangements. </I>We obtain silicon wafers supplies from our
customers, and are obligated to sell to those customers all or a substantial portion of
the PV modules manufactured with these wafers. Our customers then sell the PV modules
under their own brands. The payment we make for the wafers and the payment our customer
makes for the PV modules are generally settled separately, but any change in the price
of the wafers would lead to corresponding adjustment in the price of PV modules. These
arrangements secure a portion of the silicon we require.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales and Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales and marketing strategy is to develop a diversified customer mix in terms of
end-market application, customer type and geographic coverage in order to manage our exposure to
each market segment. To this end, we engage in various marketing activities to promote our products
and services. Each year, we organize a Suntech product technology exchange seminar to introduce
industry developments, our technologies, new products and
services. We also participate in a variety of regional and international technology seminars,
trade shows and sales conferences to promote our products and services.
</DIV>

<P align="center" style="font-size: 10pt">37
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our PV products outside of China primarily through distributors. We currently work
with a relatively small number of distributors that have particular experience in a given
geographic or applications market segment. We are actively working to expand our distribution
channels by selectively adding distributors. We believe that our relationships with our
distributors enable us to (i)&nbsp;leverage the marketing and distribution and after-sales service
capabilities of other companies, (ii)&nbsp;explore opportunities for additional product development,
(iii)&nbsp;more easily, quickly and cost-effectively enter new geographic markets, and (iv)&nbsp;attract new
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our PV products to module manufacturers and end users in China primarily through a
team of 36 sales and marketing personnel. To date, we have primarily pursued off-grid sales in
China. We target our sales and marketing efforts at companies in selected industry sectors,
including telecommunications, public utilities and transportation. We have actively participated in
the &#147;Brightness Program&#148; launched by the National Development and Reform Commission in 2002, which
was aimed at providing electricity to townships and villages in remote areas. We believe that
growth of the PV market in China will likely outpace the global rate due to the recent adoption of
China&#146;s Renewable Energy Law and the PRC government&#146;s commitment to develop renewable energy
sources. We plan to leverage our location and our existing relationships with end users to increase
our sales in China, especially our sales of PV system integration services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Customer Support and Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide customer support and service for our customers in China through a dedicated team.
This customer support and service team provides on-site and off-site customer service and
applications engineering support to our distributors and end users of our products and services, as
well as gathers information on our product performance and future product requirements. Our
customer support and service team coordinates its function and activities with our marketing,
technology, quality and manufacturing departments. We coordinate among our overseas customers and
assist them in providing customer support and service to overseas end users.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0%, respectively, of
the initial power generation capacity at the time the product is sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely primarily on a combination of patent, trademark and trade secret protections, as well
as employee and third party confidentiality agreements to safeguard our intellectual property. As
of April&nbsp;25, 2006, we held a total of seven patents issued in China and had 16 pending patent
applications in China. Our issued and pending patent applications relate primarily to process
technologies for the manufacturing of PV cells and PV modules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain five trademark registrations in China, including the names Suntech, SuntechPower
and Powerful Care and our logo. We have also registered Suntech and our logo in Germany and
Thailand, as well as SuntechPower in Thailand. We are in the process of registering Suntech and our
logo in Australia, Finland, Greece, Japan, Norway, Singapore,
Sweden, Turkey, the United Kingdom and the United States. As our brand name is becoming more
recognized in the PV market, we are working to increase, maintain and enforce our
</DIV>

<P align="center" style="font-size: 10pt">38
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">rights in our
trademark portfolio, the protection of which is important to our reputation and branding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to, among other things, proprietary know-how that is not patentable and processes
for which patents are difficult to enforce, we rely on trade secret protection and confidentiality
agreements to safeguard our interests. We believe that many elements of our PV products and
manufacturing processes involve proprietary know-how, technology or data that are not covered by
patents or patent applications, including technical processes, equipment designs, algorithms and
procedures. We have taken security measures to protect these elements. Substantially all of our
research and development personnel have entered into confidentiality, non-competition and
proprietary information agreements with us. These agreements address intellectual property
protection issues and require our employees to assign to us all of their inventions, designs and
technologies they develop during their terms of employment with us. We also take other precautions,
such as internal document and network assurance and using a separate dedicated server for technical
data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not had any material intellectual property claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PV market is intensely competitive and rapidly evolving. According to Photon
International&#146;s survey in March&nbsp;2006, as of the end of 2005, 94 manufacturers in the world produced
PV cells and 153 companies produced PV modules. Our competitors include PV divisions of large
conglomerates, such as BP Solar, Sanyo Group and Sharp Corporation, specialized cell and module
manufacturers such as Q-Cells, as well as integrated manufacturers of PV products such as
SolarWorld AG. Some of our competitors have also become vertically integrated, from upstream
silicon wafer manufacturing to PV system integration. We expect to compete with future entrants to
the PV market that offer new technological solutions. We may also face competition from
semiconductor manufacturers, several of which have already announced their intention to start
production of PV cells. Many of our competitors are developing or currently producing products
based on new PV technologies, including amorphous silicon, ribbon, sheet and nano technologies,
which they believe will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from conventional and
non-solar renewable energy technologies. Due to the relatively high manufacturing costs compared to
most other energy sources, solar energy is generally not competitive without government incentive
programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our existing and potential competitors have substantially greater financial,
technical, manufacturing and other resources than we do. Our competitors&#146; greater size in some
cases provides them with a competitive advantage with respect to manufacturing costs because of
their economies of scale and their ability to purchase raw materials at lower prices. For example,
those of our competitors that also manufacture semiconductors may source both semiconductor grade
silicon wafers and solar grade silicon wafers from the same supplier. As a result, such competitors
may have stronger bargaining power with the supplier and have an advantage over us in pricing as
well as securing silicon wafer supplies at times of shortages. Many of our competitors also have
greater brand name recognition, more established distribution networks and larger customer bases.
In addition, many of our competitors have well-established relationships with our current and
potential distributors and
have extensive knowledge of our target markets. As a result, they may be able to devote
greater resources to the research, development, promotion and sale of their products and
</DIV>

<P align="center" style="font-size: 10pt">39
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">respond
more quickly to evolving industry standards and changes in market conditions than we can.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Environmental Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing processes generate noise, waste water, gaseous wastes and other industrial
wastes. We have installed various types of anti-pollution equipment in our facilities to reduce,
treat, and where feasible, recycle the wastes generated in our manufacturing process. We outsource
the treatment of some of our waste water and other liquid wastes to third-party contractors. Our
operations are subject to regulation and periodic monitoring by local environmental protection
authorities in Wuxi. We expect to obtain ISO 14001 certification for our manufacturing facilities
in Wuxi in May&nbsp;2006. ISO 14001 prescribes standards for management of organizations to achieve an
effective environmental management system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Insurance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain property insurance policies with reputable insurance companies covering our
equipment and facilities. These insurance policies cover losses due to fire, earthquake, flood and
a wide range of other natural disasters. Insurance coverage for our fixed assets other than land
amounted to approximately $21.2&nbsp;million as of December&nbsp;31, 2005. We also maintain insurance
policies in respect of marine, air and inland transit risks for the exports of our products. In
addition, we currently maintain product quality insurance against warranty claims with an aggregate
coverage amount of approximately $125&nbsp;million, which covers both technical defects and declines of
initial power generation capacity of our PV modules. We do not maintain business interruption
insurance or key-man life insurance on our executive officers. We consider our insurance coverage
to be adequate. However, significant damage to any of our manufacturing facilities and buildings,
whether as a result of fire or other causes, could have a material adverse effect on our results of
operations. We paid an aggregate of approximately $30,264 in insurance premiums in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section sets forth a summary of the most significant regulations or requirements that
affect our business activities in China or our shareholders&#146; right to receive dividends and other
distributions from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Renewable Energy Law and Other Government Directives</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2005, China enacted its Renewable Energy Law, which became effective on January&nbsp;1,
2006. The Renewable Energy Law sets forth policies to encourage the development and use of solar
energy and other non-fossil energy. The renewable energy law sets forth the national policy to
encourage and support the use of solar and other renewable energy and the use of on-grid
generation. It also authorizes the relevant pricing authorities to set favorable prices for the
purchase of surplus electricity generated by solar and other renewable power generation systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The law also sets forth the national policy to encourage the installation and use of solar
energy water-heating system, solar energy heating and cooling system, solar
photovoltaic system and other solar energy utilization systems. It also provides financial
</DIV>

<P align="center" style="font-size: 10pt">40
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">incentives, such as national funding, preferential loans and tax preferences for the development of
renewable energy projects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China&#146;s Ministry of Construction also issued a directive in June of 2005, which seeks to
expand the use of solar energy in residential and commercial buildings and encourages the increased
application of solar energy in different townships. In addition, China&#146;s State Council promulgated
a directive in July of 2005, which sets forth specific measures to conserve energy resources and
encourages exploration, development and use of solar energy in China&#146;s western areas, which have
not been covered by electricity transmission grids and rural areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Environmental Regulations</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use, generate and discharge toxic, volatile or otherwise hazardous chemicals and wastes in
our research and development and manufacturing activities. We are subject to a variety of
governmental regulations related to the storage, use and disposal of hazardous materials. The major
environmental regulations applicable to us include the Environmental Protection Law of the PRC, the
Law of PRC on the Prevention and Control of Water Pollution, Implementation Rules of the Law of PRC
on the Prevention and Control of Water Pollution, the Law of PRC on the Prevention and Control of
Air Pollution, Implementation Rules of the Law of PRC on the Prevention and Control of Air
Pollution, the Law of PRC on the Prevention and Control of Solid Waste Pollution, and the Law of
PRC on the Prevention and Control of Noise Pollution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Restriction on Foreign Businesses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal regulation governing foreign ownership of solar photovoltaic businesses in the
PRC is the Foreign Investment Industrial Guidance Catalogue (effective as of January&nbsp;1, 2005).
Under the regulation, the solar photovoltaic business belongs to permitted foreign investment
industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Tax</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PRC enterprise income tax is calculated based on taxable income determined under PRC
accounting principles. In accordance with &#147;Income Tax of China for Enterprises with Foreign
Investment and Foreign Enterprises,&#148; or the Income Tax Law, and the related implementing rules,
foreign invested enterprises incorporated in the PRC are generally subject to an enterprise income
tax rate of 33.0% (30.0% of state income tax plus 3.0% local income tax). The Income Tax Law and
the related implementing rules provide certain favorable tax treatments to foreign invested
enterprises which qualify as &#147;high and new technology enterprises&#148; and are registered and operate
in specified high-tech zones in the PRC. PRC domestic companies are governed by the Enterprise
Income Tax Laws of the PRC and are generally subject to an enterprise income tax rate of 33.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech China, a foreign invested enterprise registered and operates in a high-tech zone in
Wuxi, has been qualified as a &#147;high and new technology enterprise.&#148; As a result, it is entitled to
a preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its &#147;high and new technology enterprise&#148; status. It was entitled to a
two-year exemption from the enterprise income tax for its first two profitable years of operation,
which were 2003 and 2004. Suntech was thereafter entitled to a
preferential enterprise income tax rate of 7.5% for the succeeding three years, which will
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">expire on December&nbsp;31, 2007. After December&nbsp;31, 2007, Suntech China will be subject to a
preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its &#147;high or new technology enterprise&#148; status.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech China&#146;s status as a &#147;high and new technology enterprise&#148; is re-assessed every two
years. Currently, Suntech has obtained the approval for a preferential enterprise income tax rate
of 7.5% in 2005 and 2006. The PRC central or provincial government could at any time determine to
immediately eliminate or reduce such preferential tax treatment, and our effective tax rate would
increase as a result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Provisional Regulation of China on Value Added Tax and their implementing
rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs
and replacement services and the importation of goods in China are generally required to pay VAT at
a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne
by the taxpayer. Further, when exporting goods, the exporter is entitled to a portion of or all the
refund of VAT that it has already paid or borne. Our imported raw materials that are used for
manufacturing export products and are deposited in bonded warehouses are exempt from import VAT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Dividend Distribution</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal regulations governing distribution of dividends paid by wholly foreign owned
enterprises include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Wholly Foreign Owned Enterprise Law (1986), as amended; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Wholly Foreign Owned Enterprise Law Implementation Rules (1990), as amended.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under these regulations, foreign-invested enterprises in China may pay dividends only out of
their accumulated profits, if any, determined in accordance with PRC accounting standards and
regulations. In addition, a foreign-invested enterprise in China are required to set aside at least
10.0% of their after-tax profit based on PRC accounting standards each year to its general reserves
until the accumulative amount of such reserves reach 50.0% of its registered capital. These
reserves are not distributable as cash dividends. The board of directors of a foreign-invested
enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and
bonus funds, which may not be distributed to equity owners except in the event of liquidation.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Organizational Structure</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following diagram illustrates our company&#146;s organizational structure, and the place of
formation, ownership interest and affiliation of each of our subsidiaries.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h00483h0048303.gif" alt="(ORGANIZATIONAL CHART)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Property, Plant and Equipment</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are headquartered in the New District in Wuxi, Jiangsu province, where we lease a building
with an aggregate of approximately 5,600 square meters of office, research and development and
manufacturing space. We own the right to use a parcel of land of approximately 66,600 square meters
near our leased facilities in the New District in Wuxi, where we have constructed manufacturing
facilities for the installation of certain of our PV cell manufacturing lines. We are in the
process of constructing additional new facilities including new office, research and development
center and additional manufacturing space on this land, the first phase of which was completed in
June&nbsp;2005. The entire facilities are scheduled to be completed by the first half of 2007. We also
own the right to use a parcel of land of approximately 4,000 square meters in Liyuan, Wuxi for the
display of demonstration
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">models of our PV systems. See &#147;Item&nbsp;4. Information of the Company&#151;D. Property, Plant and
Equipment&#151;Manufacturing&#151;Manufacturing Capacity Expansion.&#148; We believe that our existing facilities,
together with the facilities under construction, are adequate for our current and foreseeable
future requirements.
</DIV>

<!-- link2 "Item 5. Operating and Financial Review and Prospects" -->
<DIV align="left"><A NAME="006"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;5.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Operating and Financial Review and Prospects</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with our consolidated financial statements and the related notes
included elsewhere in this annual report on </I><I>Form 20-F</I><I>. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under &#147;Item&nbsp;3. Key Information&#151;D. Risk Factors&#148; or in
other parts of this annual report on </I><I>Form 20-F</I><I>.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A. <U>Operating Results </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Overview</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have grown significantly since we completed our first PV cell manufacturing line in August
2002. We sold 6.4 MW, 29.5 MW and 67.7 MW of our products in 2003, 2004 and 2005, respectively. Our
net revenues increased from $13.9&nbsp;million in 2003 to
$85.3&nbsp;million in 2004 and to $226.0&nbsp;million in
2005. Our net income amounted to $0.9&nbsp;million in 2003, $19.8&nbsp;million in 2004 and $30.6&nbsp;million in
2005, representing net margin of 6.7%, 23.2% and 13.5%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a limited operating history that can serve as the basis to evaluate our business. You
should consider the risks and difficulties frequently encountered by early-stage companies, such as
us, in new and rapidly evolving markets, such as the PV market. Our recent revenue growth should
not be taken as indicative of the rate of revenue growth, if any, that can be expected in the
future. In addition, our limited operating history provides a limited historical basis to assess
the impact that critical accounting policies may have on our business and our financial
performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate and manage our business as a single segment. We do not account for the results of
our operations on a geographic or other basis, and we do not allocate expenses among our various
products and services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most significant factors that directly or indirectly affect our financial performance and
results of operations are:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>industry demand;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capacity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability and price of silicon wafers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pricing of our PV products; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>process technologies.</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Industry Demand</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business and revenue growth depends on PV industry demand. The PV market has grown
significantly in the past decade. According to Solarbuzz, the PV market, as measured by annual PV
system installations, increased from 254 MW in 2000 to 1,460 MW in 2005, representing a CAGR of
41.9%, while PV industry revenues grew from approximately $2.0&nbsp;billion in 2000 to approximately
$9.8&nbsp;billion in 2005, representing a CAGR of 37.4%. Despite the rapid growth, solar energy
constitutes only a small fraction of the world&#146;s energy output and still has significant growth
potential. Solarbuzz projects that PV industry revenues will reach $11.0&nbsp;billion by 2006 and will
be up to $23.1&nbsp;billion by 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Capacity</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to accommodate the rapidly increasing demand of our products, we have expanded, and
plan to continue to expand, our manufacturing capacity. An increase in capacity has a significant
effect on our results of operations, both in allowing us to produce and sell more PV products and
achieve higher revenues, and in lowering our manufacturing costs resulting from economies of scale.
We have expanded rapidly since we completed our first PV cell manufacturing line with an annual
manufacturing capacity of 10 MW in August&nbsp;2002. We sold 6.4 MW, 29.5 MW and 67.7 MW of our products
in 2003, 2004 and 2005, respectively. As of December&nbsp;31, 2005, we had established six PV cell
manufacturing lines with an annualized aggregate capacity of 150 MW. We have also expanded our
manufacturing capacity of PV modules in proportion to our manufacturing capacity of PV cells. Our
capacity expansion allowed us to significantly increase our net revenues from $13.9&nbsp;million in 2003
to $85.3&nbsp;million in 2004 and to $226.0&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to increase our annual manufacturing capacity of PV cells to 240MW by the end of 2006.
In addition, in October&nbsp;2005, we established a 87.0%-owned subsidiary for the manufacturing of PV
cells and modules in Luoyang, China. Luoyang Silicon, a major shareholder of Luoyang China Silicon
High-Tech Co., Ltd., one of the largest silicon raw material suppliers and silicon purification
companies in China with 450 tonnes of annual capacity, has agreed to provide silicon wafers to this
subsidiary with priority to ensure that sufficient amount of silicon wafers will be provided for a
PV cell manufacturing line with an initial capacity of 30 MW per year. We will initially invest
$5.0&nbsp;million, and production is expected to begin in the second half of 2006. We have also,
through Suntech China, acquired a 51.0% equity interest in one of our customers, Qinghai Gofly, a
renewable energy company in Qinghai province, China, for a consideration equivalent to $0.5&nbsp;million
and plan to build a PV module manufacturing facility with an annual capacity of 3.0 MW in Qinghai.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capacity utilization is a key factor in growing our revenues and profits. Our manufacturing
lines have operated at utilization rates consistently exceeding their design capacity in the past
three years due to our ability to effectively manage our manufacturing lines and flow process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Availability and Price of Silicon Wafers</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Silicon wafers are the most important raw material for making PV products. Silicon wafers are
made from either solar grade silicon, which tends to be less pure and less expensive, or
semiconductor grade silicon, which is slightly purer, more expensive and capable of producing PV
products with higher conversion efficiencies. Prior to 2003, the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">availability and price of silicon wafers were driven primarily by the cyclicality of the
semiconductor industry, whose basic raw materials are electronics-grade silicon wafers. Starting
from 2003, due to the rapid growth of the PV industry, the availability and price of silicon wafers
have increasingly been affected by the demand of the PV industry. Silicon suppliers have been
raising their prices and adding manufacturing capacity in response to the growing demand in recent
years. However, building silicon manufacturing lines generally requires significant upfront capital
commitment and it typically takes an average of 18 to 24&nbsp;months to construct a manufacturing line
and ramp up production. As a result, silicon suppliers are generally willing to expand only if they
are certain of sufficient customer demands to justify such capital commitment. Increasingly,
silicon and silicon wafer suppliers are requiring customers to make prepayments for raw materials
well in advance of their shipment, which, in turn, leads to significant working capital commitment
from PV product manufacturers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rapidly growing demand of the PV industry, the limited increase in silicon manufacturing
capacities, coupled with a rebound in the semiconductor industry in 2003, have caused the PV
industry to experience shortages of silicon and silicon wafer supplies since 2003, and we have,
from time to time, experienced late delivery and supply shortages, although we have not encountered
material difficulties in securing raw material supplies to utilize our existing manufacturing
capacity since we commenced our business operations in May&nbsp;2002. As the PV industry continues to
grow, the availability of silicon wafers will, to a large extent, determine the output of PV
product manufacturers. Failure to obtain sufficient quantities of silicon and silicon wafers could
decrease our revenues and limit our ability to expand our manufacturing capacity as planned. We
expect the availability of silicon wafers to continue to be constrained in the near future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to secure adequate and timely supply of silicon wafers, we have entered into various
short-term and long-term supply agreements with local and foreign suppliers. We have entered into
or renewed several supply agreements to secure silicon wafer supplies in 2006, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>renewal of our supply agreement with SolarWorld AG, our largest customer. Under the
renewed agreement, SolarWorld AG has agreed to supply us with 25 MW of silicon wafers
in exchange for 24 MW of PV modules in 2006;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entering into a 10-year supply agreement with Deutsche Solar AG, a subsidiary of
SolarWord AG. Under this agreement, Deutsche Solar AG has agreed to supply us with
fixed quantities of silicon wafers on a monthly basis starting from January&nbsp;1, 2006;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entering into a 10-year cooperation agreement with LDK Hi-tech Co., Ltd., or LDK, a
wafer manufacturer located in Jiangxi Province, China. Under this agreement, LDK has
agreed to supply us with 30 MW and 100 MW of silicon wafers in 2006 and 2007,
respectively;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entering into a cooperation agreement with Baoding Yingli New Energy Company, under
which it has agreed to supply us with no less than 20 MW of silicon wafers in 2006; and</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entering into a supply agreement with Zhejiang Yuhui Yangguang Energy Company
Limited, under which it has agreed to supply us with 3.7 MW of silicon wafers from May
2006 to July&nbsp;2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, we cannot assure you that we will be able to secure sufficient quantities of silicon
and silicon wafers to expand our manufacturing capacity as we planned. See &#147;Item&nbsp;3. Key
Information&#151;D. Risk Factors&#151;Risks Related to Our Company and Our Industry&#151;Failure to obtain
sufficient quantities of silicon and silicon wafers could decrease our revenues and limit our
ability to expand as planned.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, increases in prices of silicon wafers have negatively affected, and could in the
future continue to negatively affect our manufacturing costs and gross margin. Historically, we
were generally able to absorb such increases in silicon wafer costs by improving our process
technologies and increasing our manufacturing efficiencies. As a result, our gross margin has
increased from 19.4% in 2003, to 29.5% in 2004 and 30.3% in 2005. However, we cannot assure you
that we will be able to continue to increase our gross margin in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Pricing of our PV Products</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PV products are priced based on the number of watts of electricity they can generate. Pricing
of PV products is principally affected by the manufacturing costs of PV manufacturers, including
the cost of silicon wafers, as well as the overall demand in the PV industry. Increased economies
of scale and advancement of process technologies over the past decade have led to a steady
reduction in manufacturing costs and the prices of PV products. Prices of PV products decreased
steadily in 2002 and 2003 as a result of over-supply of PV products, but rose gradually as a result
of the rapid growth of the PV market worldwide and shortages of silicon wafers in 2004 and 2005.
Fluctuations in the prevailing market prices have historically affected the prices of our PV
products and may continue to have a material effect on the prices of our PV products in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generally enter into sales contracts with our customers under which we are obligated to
sell our products at fixed prices during the term of the contract. This has helped reduce our
exposure to risks from decreases in the PV cell prices generally, but has, on the other hand, also
prevented us from benefiting from price increases. We price our products based on the prevailing
market price at the time we enter into sales contracts with our customers, taking into account the
size of the contract, the strength and history of our relationship with each customer and our
capacity utilization. We price our PV cells consistent with the prevailing market price. The
average selling price of our PV cells was $1.99, $2.02 and $3.05 per watt in 2003, 2004 and 2005,
respectively. The average selling price of our PV modules was $2.77, $3.01 and $3.42 per watt in
2003, 2004 and 2005. In 2004, the price of our PV modules started at a low point because we were
committed to fixed prices under sales contracts we had entered into with various major overseas
customers at the end of 2003 and the beginning of 2004, prior to the increase of the market price
for PV products. Even after some subsequent price renegotiations, the overall average selling price
of our PV modules in 2004 was still below the prevailing market price. The average selling price of
our PV modules increased by 13.6% in 2005 compared to that in 2004 as part of the prevailing market
trend. However, we expect the prices of PV products, including our own products, to decline over
time due to reduced manufacturing costs.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the high conversion efficiencies of our PV products and our low-cost
manufacturing capabilities have enabled us to price our products competitively and will further
provide us with flexibility in adjusting our price while maintaining our profit margin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Process Technologies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The advancement of process technologies is important in increasing conversion efficiencies of
PV products. High conversion efficiencies reduce the manufacturing cost per watt of PV products and
increase the gross profit margin of the manufacturer. As a result, solar energy companies,
including us, are continuously developing advanced process technologies for large-scale
manufacturing while reducing cost to maintain and improve profit margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The average conversion efficiency rates of our monocrystalline and multicrystalline silicon PV
cells have improved from 14.5% and 14.0% in 2002, respectively, to 17.0% and 15.3% in 2005,
respectively. Since October&nbsp;2005, using our pilot manufacturing line equipped with our latest
technology, we have been able to produce PV cells with an average conversion efficiency rate of
over 18.0%. Our advanced process technologies have also significantly improved our productivity and
increased the efficiency of our raw material usage, both of which have led to the lowering of the
cost per watt of our products and improved our profit margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenues</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently derive revenues from three sources:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sales of PV cells, which accounted for approximately 70.1%, 8.6% and 24.2% of our
total net revenues in 2003, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sales of PV modules, which accounted for approximately 29.6%, 91.3% and 75.3% of our
total net revenues in 2003, 2004 and 2005, respectively. We manufactured all the PV
cells used for our manufacturing of PV modules.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sales of PV system integration services, which accounted for approximately 0.3%,
0.1% and 0.5% of our total net revenues in 2003, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues are net of value-added tax. See &#147;&#151;Taxation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been dependent on a limited number of customers for a significant portion of our
revenues. In 2005, we had one customer accounting for 10% or more of our total net sales, and such
customer accounted for approximately 32.1% of our total net revenues. Our sales have historically
been made on the basis of short-term arrangements and our largest customers have changed from year
to year. Our largest customer in 2005 was different from those in 2004 because we granted a German
company the exclusive right to distribute our products in Germany for 2005 and this company became
our largest customer in 2005. Our largest customers in 2004 were different from those in 2003,
because we sold more PV modules outside of China in 2004, and our target customers for PV modules
are different from those for PV cells. We believe that by focusing on PV module sales, we are not
only able to capture the incremental profit opportunities, but are also able to build our brand
recognition and reputation. As we continue to diversify our geographic presence, customer
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">base and product mix, we expect that our largest customers will continue to change from year
to year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Costs of Revenues and Operating Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our cost of revenues and operating expenses as percentages of
our total net revenues for the periods indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cost of revenues and operating expenses have each declined as a percentage of our total
net revenues from 2003 to 2005 as a result of our increased economies of scale, higher operating
efficiencies and the advancement of our process technologies. Our operating expenses consist of
selling expenses, general and administrative expenses and research and development expenses, each
of which include share-based compensation expenses. Our operating expenses as a percentage of our
total net revenues increased in 2005 as a result of the share compensation charges we incurred and
fees paid to our outside consultants who provided advisory services to us in connection with our
restructuring. We conduct our development, design and manufacturing operations in China, where the
costs of skilled labor, engineering and technical resources, as well as land, facilities and
utilities, tend to be lower than those in more developed countries. We balance automation and
manual operations in our manufacturing processes, and have been able to increase operating
efficiencies and expand our manufacturing capacity cost-effectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cost of Revenues</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cost of revenues primarily consists of:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>silicon wafers, </I>which constitute the most important raw material from which PV
products are made. We expect the cost of silicon wafers will continue to constitute a
significant portion of our cost of revenues in the near future;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>other direct raw materials, </I>including ethylene vinyl acetate, metallic pastes,
tempered glass, tedlar- polyester-tedlar material, connecting system and aluminum
frame;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>direct labor, </I>including salaries and benefits for personnel directly involved in
manufacturing activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>depreciation and amortization of manufacturing equipment and facilities</I>. Due to our
capacity expansion, depreciation and amortization in absolute terms have increased
significantly. We expect depreciation and amortization to</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increase in absolute terms in the future as we continue to expand our manufacturing
capacity and build new facilities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>overhead, </I>including utility, maintenance of production equipment, share-based
compensation expenses for options granted to employees in our manufacturing department
and other support expenses associated with the manufacturing of our PV products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Selling Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling expenses primarily consist of provisions of warranties, advertising, promotional and
other sales and marketing expenses, salaries, commissions and benefits for our sales and marketing
personnel, as well as product quality insurance against warranty claims. We expect that our selling
expenses will increase in absolute terms in the near term as we increase our sales efforts, hire
additional sales personnel and initiate additional marketing programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0% of initial power
generation capacity, respectively. We believe our warranty policies are consistent with industry
practice. We currently maintain product quality insurance with a maximum coverage amount of
approximately $125&nbsp;million, which covers both technical defects and declines of initial power
generation capacity. We have not experienced significant warranty claims since we commenced our
business operation in August&nbsp;2002. We accrue 1.0% of our net revenues as warranty costs at the time
revenue is recognized. As of December&nbsp;31, 2005 our accrued warranty costs amounted to $2.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>General and Administrative Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses consist primarily of salaries and benefits for our
administrative, finance and human resources personnel, depreciation of equipment used for
administrative purposes and amortization of rental facilities used for administrative purposes,
provision for doubtful debts, fees and expenses of legal, accounting and other professional
services, expenses associated with our administrative offices. General and administrative expenses
in 2005 also included $5.6&nbsp;million share option expenses for options granted to our administrative
personnel and directors, $2.2&nbsp;million fees paid to our outside consultants, $0.2&nbsp;million share
option expenses for options granted to these consultants for the advisory services they provided to
us in connection with our restructuring and $1.4&nbsp;million share option expenses for options granted
to our other consultants for services they provided. General and administrative expenses will also
include depreciation of our new office, which is under construction and is expected to be completed
by the end of 2006. As a result, we expect our depreciation to increase significantly in 2007. In
addition, we also expect general and administrative expenses to increase as we add personnel and
incur additional costs related to the growth of our business. Furthermore, we expect to incur
additional general and administrative expenses as a result of being a listed public company in the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Research and Development Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses primarily consist of costs of raw materials used in our
research and development activities, share-based compensation expenses for options granted to our
research and development personnel, compensation and benefits for research
</DIV>

<P align="center" style="font-size: 10pt">50
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and development personnel, prototype and equipment costs related to the design, development,
testing and enhancement of our products and process technologies. We expense our research and
development costs as incurred. We believe that research and development are critical to our
strategic objectives of enhancing our technologies, reducing manufacturing costs and meeting the
changing requirements of our customers. As a result, we expect that our total research and
development expenses will increase in absolute terms in the future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Share-based Compensation Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We adopted our 2005 equity incentive plan on September&nbsp;5, 2005, which amended and restated the
stock option plan adopted by Suntech BVI on April&nbsp;29, 2005. We also assumed the share options to
purchase 4,699,383 ordinary shares granted by Suntech BVI, of which options to purchase 455,000
ordinary shares were granted to our outside consultants who provided advisory services to us, and
options to purchase 4,244,383 ordinary shares were granted to certain individuals, or contributors,
who contributed capital to one of Suntech BVI&#146;s shareholders in connection with our restructuring.
The exercise price of these options is at $2.3077. The share options granted to our outside
consultants vested immediately while the options granted to the contributors will vest over a
three-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;5, 2005, we granted additional share options to purchase 5,910,000 of our
ordinary shares to certain of our directors and employees and 200,000 ordinary shares to our
consultants. For options granted to employees, we have recorded a compensation charge for the
excess of the fair value of the shares at the grant date over the amount an employee must pay to
acquire the shares. We then amortize share-based compensation expense over the vesting periods of
the related options. For options granted to consultants, we have recorded share-based compensation
expense based on the fair value at the measurement date and amortize the expense over the
consultants&#146; service periods. We have granted options to our employees at an exercise price of
$6.922, which is less than the value of the underlying shares on the date of grant, which is
$10.67. One-third of these options have vested on December&nbsp;31, 2005 and one-third of these options
will vest on September&nbsp;5, 2007 and 2008, respectively. The ordinary shares underlying the options
that have vested on December&nbsp;31, 2005 are subject to a lock-up until the later of (i)&nbsp;September&nbsp;5,
2006, the first anniversary of the date of grant, and (ii)&nbsp;180&nbsp;days after completion of our initial
public offering. The 180-day restricted period will be extended in certain circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded share-based compensation expenses attributable to directors and employees of
approximately $9.4&nbsp;million and to non-employees of approximately $7.2&nbsp;million in 2005,
respectively. The total option expenses attributable to non-employee share options represent the
fair value of the non-employee share options calculated using the Black-Scholes option pricing
model. These share option expenses attributable to non-employee share options were recorded
immediately and will not be amortized over the vesting period of the options. Of the total option
expenses attributable to non-employee share options, $5.6&nbsp;million was recorded as finance costs
paid to the contributors, $0.2&nbsp;million was recorded as professional charges related to our
restructuring, and $1.4&nbsp;million was recorded as consulting service expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the current laws of the Cayman Islands and the British Virgin Islands, we and Suntech
BVI are not subject to income or capital gains tax. Additionally, dividend payments made by us and
Suntech BVI are not subject to withholding tax in those jurisdictions.
</DIV>


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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of Suntech BVI&#146;s subsidiaries, Power Solar System Pty Limited, or PSS, is an
Australian tax resident company and is generally subject to Australian corporate tax, which is
currently at 30.0%, on any income and capital gains derived by PSS. PSS is not an operating company
and currently holds a 31.389% equity interest in Suntech China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any dividends received by PSS from Suntech China should be exempt for Australian tax purposes
to the extent that PSS holds a direct voting interest of at least 10% in Suntech China at the time
the dividends are paid. The payment of such dividends to non-Australian resident shareholders of
PSS should not be subject to withholding tax in Australia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly, a capital gain made by PSS on the disposal of Suntech China may be exempt from
Australian tax provided that PSS holds a direct voting interest of at least 10% in Suntech China
for a period of 12&nbsp;months prior to the disposal. However, the capital gains tax exemption is only
available to the extent that Suntech China has underlying offshore active business assets (which
generally exclude cash, financial instruments and assets the
main purposes of which are to derive
interest, rent annuities and royalties). Dividends that are sourced from such exempted capital
gains will not generally be subject to withholding tax pursuant to recent legislative measures which,
although still awaiting enactment, have been passed by the Australian Parliament.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, we cannot assure you that the Australian government will not take measures in the
future to impose taxes or other charges on such dividends or capital gains, which would have a
material adverse effect on our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>PRC Enterprise Income Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PRC enterprise income tax is calculated based on taxable income determined under PRC
accounting principles. In accordance with &#147;Income Tax Law of China for Enterprises with Foreign
Investment and Foreign Enterprises,&#148; or the Income Tax Law, and the related implementing rules,
foreign invested enterprises incorporated in the PRC are generally subject to an enterprise income
tax rate of 33.0% (representing 30.0% of state income tax plus 3.0% local income tax). The Income
Tax Law and the related implementing rules provide certain favorable tax treatments to foreign
invested enterprises which qualify as &#147;high or new technology enterprises&#148; and are registered and
operate in specified high-tech zones in the PRC. PRC domestic companies are governed by the
Enterprise Income Tax Laws of the PRC and are generally subject to an enterprise income tax rate of
33.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech China, a wholly foreign-owned enterprise registered and operating in a high-tech zone
in Wuxi, has been qualified as a &#147;high and new technology enterprise.&#148; As a result, it is entitled
to a preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its &#147;high and new technology enterprise&#148; status. Suntech China is
entitled to a two-year exemption from the enterprise income tax for its first two profitable years
of operation, which were 2003 and 2004. Suntech China is thereafter entitled to a preferential
enterprise income tax rate of 7.5% for the succeeding three years, which will expire on December
31, 2007. After December&nbsp;31, 2007, Suntech China will be subject to a preferential enterprise
income tax rate of 15.0% so long as it continues to operate in the high-tech zone and maintains its
&#147;high or new technology enterprise&#148; status.
</DIV>

<P align="center" style="font-size: 10pt">52
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To qualify as a &#147;high and new technology enterprise&#148; for enterprise income tax purposes, a
business entity generally must meet certain financial and non-financial criteria, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a minimum level of revenues generated from high-technology related sales or services
as a percentage of total revenues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a minimum number of employees engaged in research and development; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a minimum research and development expense as a percentage of total revenues.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech China&#146;s status as a &#147;high and new technology enterprise&#148; is re-assessed every two
years. Currently, Suntech China has obtained the approval for a preferential enterprise income tax
rate of 7.5% in 2005 and 2006. The PRC central or provincial government could at any time determine
to immediately eliminate or reduce such preferential tax treatment, and our effective tax rate
would increase as a result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Suntech China no longer qualifies for the preferential enterprise income tax rate, we will
consider available options under applicable law that would enable us to qualify for alternative
preferential tax treatment. To the extent we are unable to offset the expiration of this
preferential tax treatment with other tax benefits, the expiration of this preferential tax
treatment will cause our effective tax rate to increase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare financial statements in accordance with U.S. GAAP, which requires us to make
judgments, estimates and assumptions that affect (i)&nbsp;the reported amounts of our assets and
liabilities, (ii)&nbsp;the disclosure of our contingent assets and liabilities at the end of each fiscal
period and (iii)&nbsp;the reported amounts of revenues and expenses during each fiscal period. We
continually evaluate these estimates based on our own historical experience, knowledge and
assessment of current business and other conditions, our expectations regarding the future based on
available information and reasonable assumptions, which together form our basis for making
judgments about matters that are not readily apparent from other sources. Since the use of
estimates is an integral component of the financial reporting process, our actual results could
differ from those estimates. Some of our accounting policies require a higher degree of judgment
than others in their application.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When reviewing our financial statements, you should consider (i)&nbsp;our selection of critical
accounting policies, (ii)&nbsp;the judgment and other uncertainties affecting the application of such
policies, (iii)&nbsp;the sensitivity of reported results to changes in conditions and assumptions. We
believe the following accounting policies involve the most significant judgment and estimates used
in the preparation of our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenue Recognition</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize revenue from sales of PV cells and modules when products are delivered and title
has passed to our customers. A majority of our contracts provide that products are shipped &#147;CIF
destination,&#148; or cost-insurance-freight destination. Accordingly, we must receive written evidence
that the products have been delivered to and accepted by the customer prior to recognizing revenue.
Additionally, certain of our agreements provide
</DIV>

<P align="center" style="font-size: 10pt">53
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for settlement through document-against-payment, or D/P method, whereby we present shipping
documents to our bank and our bank forwards the shipping documents along with a collection notice
to the customer&#146;s bank, which then sends a collection notice to the customer. The customer makes
payment upon receiving the notice and takes possession of the products only after payment. A
majority of our sales to domestic customers require customers to prepay before delivery is made.
Such prepayments are recorded in our financial statements, as advances from customers, until
delivery has occurred.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have arrangements with certain distributors for sales on their own account or, through
arrangements with us, to direct shipments to specified customers. Under either arrangement, the
distributor pays us for products based on pre-arranged price lists which are subject to periodic
updates. Our payment arrangements with distributors provide for either down payment upon delivery
to the warehouse or payment terms of up to two months if collateralized by bank letters of credit.
We also offer a 1.0% discount to certain distributors if payment is made upon delivery to the
warehouse. The agreements with distributors contain our customary product warranties and contain no
other post-shipment obligations or any return or credit provisions. We recognize revenues for PV
systems integration services upon completion of the integration project (where contracts are
typically one to two weeks in duration) primarily because we do not have vendor specific and
objective evidence to allow for separating various components of the PV systems integration
contracts into separate units for accounting. We only recognize revenues when our prices are fixed
or determinable, and collectibility is reasonably assured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Warranty</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide for the estimated cost of product warranties at the time revenue is recognized. As
we have not experienced significant warranty claims to date, we accrue the estimated costs of such
warranties based on our assessment of competitor&#146;s accrual history while incorporating some
estimates of failure rates through our quality review staff. Actual warranty costs are accumulated
and charged against accrued warranty liability. If our actual product failure rates, material usage
or service delivery costs differ from our estimates, we will need to revise our estimated warranty
liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Impairment of Long-lived Assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We evaluate our long-lived assets and finite life intangibles for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
When these events occur, we measure impairment by comparing the carrying amount of the assets to
future undiscounted net cash flows expected to result from the use of the assets and their eventual
disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of
the assets, we recognize an impairment loss based on the fair value of the assets. We have
continued to construct, acquire and expand our manufacturing facilities since our inception and, to
date, have not experienced any factors that would indicate potential impairment of our long-lived
assets. As we continue to review impairment factors, impairment charges may be necessary in the
future as circumstances change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Allowance for Doubtful Accounts</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain allowances for doubtful accounts primarily based on the age of receivables and
factors surrounding the credit risk of specific customers. If there is a
</DIV>

<P align="center" style="font-size: 10pt">54
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">deterioration of a major customer&#146;s creditworthiness or actual defaults are higher than our
historical experience, we may need to maintain additional allowances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Share-based Compensation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently account for share options granted pursuant to our equity incentive plan in
accordance with APB 25 and related interpretations. We amortize deferred share-based compensation
expenses over the vesting periods of the related options, which are generally three years. We have
recorded deferred share-based compensation representing the difference between the deemed fair
value of our ordinary shares for accounting purposes and the option exercise price. We determined
the fair value of the options granted in September&nbsp;2005 using a contemporaneous valuation conducted
by an independent valuation firm. Changes to the assumptions used in the valuation model could
materially affect the deemed fair value of the options. On January&nbsp;1, 2006, we adopted SFAS 123R,
which requires that we recognize compensation expense based on the fair value of share-based awards
as opposed to the intrinsic value method prescribed by APB 25. See &#147;&#151;Cost of Revenues and Operating
Expenses&#151;Share-based Compensation Expenses.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth a summary, for the periods indicated, our consolidated results
of operations and each item expressed as a percentage of our total net revenues. Our historical
results presented below are not necessarily indicative of the results that may be expected for any
future period.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% of net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% of net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% of net</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>revenues</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Statement of
Operations Data</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integrations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integrations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expenses, net<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(221</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(979</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,611</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit (expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,753</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income after taxes before
minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in (loss)&nbsp;gain of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deemed
dividend on Series&nbsp;A
redeemable convertible preferred
shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income attributable to holders
of ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Include &#147;interest expenses&#148; and &#147;interest income&#148; contained in our consolidated financial
statements included elsewhere in this annual report on Form 20-F.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Year Ended December&nbsp;31, 2005 Compared to Year Ended December&nbsp;31, 2004</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Revenues. </I>Our total net revenues increased significantly from $85.3&nbsp;million in 2004 to
$226.0&nbsp;million in 2005. The increase was due primarily to a significant increase in our capacity
and the volume of our products sold from 29.5 MW in 2004 to 67.7 MW in 2005. The significant
increase in our capacity and the volume of our products sold was driven primarily by a significant
increase in market demand for our products, especially in the European and China markets. Our total
net revenues from sales in Europe increased significantly from $76.2&nbsp;million in 2004 to $161.3
million in 2005 as a result of an increased recognition of our brand and acceptance of our products
in Europe. Our total net revenues from sales in China increased significantly from $6.7&nbsp;million in
2004 to $56.4&nbsp;million in 2005 as we sold more of our PV cells to PV module manufacturers in China.
The increase in our total net revenues was also attributable to an increase in the average selling
price of our PV modules and cells from $3.01 and $2.02 per watt in 2004, respectively, to $3.42 and
$3.05 per watt in 2005, respectively, as a result of increased demand in the PV market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of Revenues. </I>Our cost of revenues increased significantly from $60.2&nbsp;million in 2004 to
$157.4&nbsp;million in 2005. However, cost of revenues as a percentage of our total net revenues
decreased from 70.6% in 2004 to 69.7% in 2005. The increase in our cost of revenues was due
primarily to a significant increase in our expenditures on raw materials, which was caused by a
significant increase in the quantity of silicon wafers needed as a result of the significant
increase in the volume of PV products we sold and, by a lesser extent, increases of unit costs of
silicon wafers. Our average cost of silicon wafers increased in 2005 over 2004 due to supply
shortages and the rising market price of silicon wafers. The effect of unit cost increase was
partially offset by decreases in silicon wafer usage per watt because we were able to manufacture
PV products with higher conversion efficiencies in 2005.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>As a result of the foregoing, our gross profit increased significantly from
$25.1&nbsp;million in 2004 to $68.6&nbsp;million in 2005. Our gross margin increased from 29.5% in 2004 to
30.3% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>Our operating expenses increased significantly from $5.1&nbsp;million in 2004
to $25.9&nbsp;million in 2005. Operating expenses as a percentage of our total net revenues increased
from 6.0% in 2004 to 11.5% in 2005. The increase in our operating expenses was due primarily to
significant increases in our general and administrative expenses and selling expenses and, to a
lesser extent, an increase in our and research and development expenses.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Selling Expenses. Our selling expenses increased significantly from $1.7&nbsp;million in
2004 to $3.7&nbsp;million in 2005. However, selling expenses as a percentage of our total
net revenues remained stable in 2005 compared to 2004. The increase in our selling
expenses was due primarily to a significant increase in provision for warranties as a
result of our increased sales. We accrued 1.0% of our module revenues as warranty costs
at the time revenue is recognized. The increase was also attributable to increases in
advertising and other selling expenses, premiums for our product quality insurance
against warranty claims, and salary and benefits paid to our sales and marketing
personnel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General and Administrative Expenses. Our general and administrative expenses
increased significantly from $2.9&nbsp;million in 2004 to $18.9&nbsp;million in 2005. General and
administrative expenses as a percentage of our total net revenues increased from 3.4%
in 2004 to 8.4% in 2005. The increase in our general and administrative expenses was
due primarily to $2.2&nbsp;million fees paid to our outside consultants who provided
advisory services to us in connection with our restructuring. The increase was also
attributable to $1.6&nbsp;million and $5.6&nbsp;million share-based compensation expenses for
share options granted to certain of our consultants and administrative employees in
September&nbsp;2005, respectively, as well as foreign exchange losses resulting from our
trade accounts receivable and increases in salary and benefit expenses for our
administrative personnel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Research and Development Expenses. Our research and development expenses increased
significantly from $465,332 in 2004 to $3.4&nbsp;million in 2005. The increase was due
primarily to increases in raw material costs related to research and development
activities, salary and benefit expenses for our research and development personnel.
The increase was also attributable to
$2.2&nbsp;million share-based compensation expenses for share options granted to certain
of our research and development personnel. Research and development expenses as a
percentage of our total net revenues increased from 0.5% in 2004 to 1.5% in 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Expenses, net</I>. Our net interest expenses increased significantly from $1.0&nbsp;million
in 2004 to $7.6&nbsp;million in 2005 due primarily to $5.7&nbsp;million share option expenses for options
granted to certain individuals who contributed capital to one of our shareholders to effect our
restructuring, as well as our increased bank borrowings.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Income (Expenses)</I>. We incurred other expenses of $758,245 in 2005, while generating
other income of $166,972 in 2004. Our other expenses in 2005 mainly consisted of net foreign
currency exchange loss from sales of our products. Other income in 2004 consisted mainly of
government grants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Benefit (Expenses). </I>We incurred tax expenses of $3.8&nbsp;million in 2005, while generating
tax benefit of $611,447 in 2004. We incurred tax expenses in 2005 because our two-year
exemption from enterprise income tax for our first two profitable years of operation expired on
January&nbsp;1, 2005. We generated tax benefit in 2004 primarily because of increases in accrued
warranty and government grants, which were recorded as deferred tax assets under U.S. GAAP and
generated tax benefit. The tax benefit was also attributable to an increase in our manufacturing
equipment, the depreciation of which was recorded over 10&nbsp;years in accordance with PRC tax law.
However, such depreciation is recorded over the estimated useful life of the asset in accordance
with U.S. GAAP, and the estimated useful life for our manufacturing equipment is five years. The
amount that was not recorded as depreciation in accordance with PRC tax law was recorded as
deferred tax assets under U.S. GAAP and generated tax benefit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income. </I>As a result of the cumulative effect of the above factors, net income increased
by 54.5% from $19.8&nbsp;million in 2004 to $30.6&nbsp;million in 2005. Our net margin decreased from 23.2%
in 2004 to 13.5% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year Ended December&nbsp;31, 2004 Compared to Year Ended December&nbsp;31, 2003</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Revenues. </I>Our total net revenues increased significantly from $13.9&nbsp;million in 2003 to
$85.3&nbsp;million in 2004. The increase was due primarily to a significant increase in our capacity and
the volume of our products sold from 6.4 MW in 2003 to 29.5 MW in 2004, especially changes in
product mix toward PV modules. The significant increase in our capacity and the volume of our
products sold was due primarily to a significant increase in market demand for our products,
especially in Germany as well as other countries in Europe, which became our largest market in
2004. Our total net revenues from sales in Europe increased significantly from $3.4&nbsp;million in 2003
to $76.2&nbsp;million in 2004 as a result of an increased recognition of our brand and acceptance of our
products in Europe. The increase in our total net revenues was also due to changes in our product
mix in 2004 compared to 2003, as a significantly greater percentage of our sales in 2004 came from
the sales of PV modules, which had a higher average selling price compared to that of PV cells. We
changed our product mix to increase the sales of PV modules in order to capture the incremental
profit opportunities and build brand recognition. The increase in our total net revenues was also
attributable to an increase in the average selling price of our PV modules from $2.77 per watt in
2003 to $3.01 per watt in 2004 as a result of increased demand in the PV market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Revenues. </I>Our cost of revenues increased significantly from $11.2&nbsp;million in 2003 to
$60.2&nbsp;million in 2004. However, cost of revenues as a percentage of our total net revenues
decreased from 80.6% in 2003 to 70.6% in 2004. The increase in our cost of revenues was due
primarily to a significant increase in our expenditures on raw materials, which was caused by a
significant increase in the quantity of silicon wafers needed as a result of the significant
increase in the volume of PV products we sold and, by a lesser extent, increases of unit costs of
silicon wafers. Our average cost of silicon wafers increased in 2004 compared to 2003 due to supply
shortages and the rising market prices of silicon wafers. The effect of unit cost increase was
partially offset by decreases in silicon wafer usage per watt because we were able to manufacture
PV products with higher conversion efficiencies in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2004. Among different categories of cost of
revenues, direct labor cost as a percentage of cost of revenues increased in 2004 compared to 2003
because we produced in 2004 a significantly greater percentage of PV modules, the manufacturing of
which was more labor-intensive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>As a result of the foregoing, our gross profit increased significantly from
$2.7&nbsp;million in 2003 to $25.1&nbsp;million in 2004. Our gross margin increased from 19.4% in 2003 to
29.5% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>Our operating expenses increased significantly from $1.9&nbsp;million in 2003
to $5.1&nbsp;million in 2004. However, operating expenses as a percentage of our total net revenues
decreased from 14.0% in 2003 to 6.0% in 2004. The increase in our operating expenses was due
primarily to significant increases in our general and administrative expenses and selling expenses
and, to a lesser extent, an increase in our research and development expenses.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Selling Expenses. </I>Our selling expenses increased significantly from $0.6&nbsp;million in
2003 to $1.8&nbsp;million in 2004. However, selling expenses as a percentage of our total
net revenues declined from 4.0% in 2003 to 2.1% in 2004. The increase in our selling
expenses was due primarily to a significant increase in provision for warranties from
$39,319 in 2003 to $0.8&nbsp;million in 2004 as a result of our increased sales. We accrued
1.0% of our module revenues as warranty costs at the time revenue is recognized. The
increase was also attributable to increases in advertising and other selling expenses,
premiums for our product quality insurance against warranty claims, and salary and
benefits paid to our sales and marketing personnel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>General and Administrative Expenses. </I>Our general and administrative expenses
increased significantly from $1.2&nbsp;million in 2003 to $2.9&nbsp;million in 2004. However,
general and administrative expenses as a percentage of our total net revenues declined
from 8.9% in 2003 to 3.4% in 2004. The increase in our general and administrative
expenses was primarily due to increases in bank and other fees in connection with our
increased export sales, amortization expenses for improvement of our rented offices,
foreign exchange losses resulting from our trade accounts receivable, and provision for
bad debts.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Research and Development Expenses. </I>Our research and development increased
significantly from $0.1&nbsp;million in 2003 to $0.5&nbsp;million in 2004. The increase was due
primarily to increases in raw material costs related to research and development
activities, salary and benefit expenses for our research and development personnel, and
testing expenses paid to our research
and development partners and other independent third parties. Research and
development expenses as a percentage of our total net revenues declined from 1.1% in
2003 to 0.5% in 2004.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Expenses, net. </I>Our net interest expenses increased significantly from $0.2&nbsp;million
in 2003 to $1.0&nbsp;million in 2004 due primarily to our increased short-term borrowings in 2004, which
was partially offset by a decrease in our average interest rate in 2004 because we were able to
obtain a portion of our short-term borrowings in 2004 at below-market rate.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Income. </I>Other income increased by 79.4% from $93,094 in 2003 to $166,972 in 2004 due
mainly to an increase in the portion of the government grants we received that we recognized as
revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Benefit. </I>Our tax benefit increased significantly from $300,730 in 2003 to $611,447 in
2004 due primarily to an increase in deferred tax assets. The increase in deferred tax assets was
due primarily to an increase in our manufacturing equipment, the depreciation of which was recorded
over 10&nbsp;years in accordance with PRC tax law. However, such depreciation is recorded over the
estimated useful life of the asset in accordance with U.S. GAAP, and the estimated useful life for
our manufacturing equipment is five years. The amount that was not recorded as depreciation in
accordance with PRC tax law was recorded as deferred tax assets under U.S. GAAP and generated tax
benefit. The increase was also attributable to increases in accrued warranty and government grants,
which were recorded as deferred tax assets under U.S. GAAP and generated tax benefit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income. </I>As a result of the cumulative effect of the above factors, net income increased
significantly from $0.9&nbsp;million in 2003 to $19.8&nbsp;million in 2004. Our net margin increased from
6.7% in 2003 to 23.2% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Liquidity and Capital Resources </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cash Flows and Working Capital</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, we have financed our operations primarily through cash flows from operations,
short-term and long-term bank borrowings, as well as equity contributions by our shareholders. As
of December&nbsp;31, 2005, we had $359.3&nbsp;million in cash and cash equivalents, $52.2&nbsp;million in
short-term borrowings and $3.7&nbsp;million in long-term borrowings. Our short-term bank borrowings
outstanding as of December&nbsp;31, 2005 bore average interest rates of 5.9%. Each of these borrowings
has a term of one year, and expires at various times throughout the year. These facilities contain
no specific renewal terms but we have historically been able to obtain extensions of some of the
facilities shortly before they mature. We plan to repay these short-term bank borrowings with cash
generated by our operating activities in the event we are unable to obtain extensions of these
facilities or alternative fundings in the future. As of December&nbsp;31, 2005, we had a single
long-term credit facility with a maximum borrowing amount of $6.2&nbsp;million, of which $2.5&nbsp;million
was drawn on March&nbsp;31, 2005 and $3.7&nbsp;million was drawn on September&nbsp;26, 2005. This facility has a
three-year term expiring on March&nbsp;28, 2008 and requires no collateral or guarantee. The facility
bears an interest rate of 5.76% for the first drawing made on March&nbsp;31, 2005, and 6.34% for the
second drawing made on September&nbsp;26, 2005. Our cash and cash equivalents primarily
consist of cash on hand, demand deposits and liquid investments with original maturities of
three months or less that are placed with banks and other financial institutions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;25, 2005 and November&nbsp;7, 2005, we obtained approximately $3.7&nbsp;million and $0.7
million short-term bank borrowings, respectively, to make advance payments to our suppliers for raw
materials. The first facility bears interest at a rate of 5.86%, contains no guarantee and is
unsecured. The second facility bears interest at a rate of 5.48% and is unsecured but contains a
guarantee provided by a third party vendor. We paid a nominal fee to the third party vendor to
secure such guarantee.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth a summary of our cash flows for the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>For the Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,026</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of
period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">359,324</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities increased significantly from $2.6&nbsp;million in 2004 to
$22.6&nbsp;million in 2005, due primarily to a significant increase in the amount of cash provided by
sales of our products. The increase was also attributable to share based compensation incurred in
2005, increases in depreciation and amortization, accounts payable, other payables and advances
from customers. The increase was partially offset by increases in advances to suppliers and
inventories. Net cash provided by operating activities in 2005 was mainly a result of net income
of $30.6&nbsp;million, as well as non-cash share-based compensation, which were partially offset by
increases in inventories and advances to suppliers. Net cash provided by operating activities in
2004 was primarily because of net income of $19.8&nbsp;million, which was partially offset by increases
in inventories, advances to suppliers and accounts receivable at the end of the period exceeded
those at the beginning of the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities increased significantly from $0.7&nbsp;million in 2003 to
$2.6&nbsp;million in 2004, due primarily to a significant increase in the amount of cash provided by
sales of our products. The increase was also attributable to increases in accrued payroll,
depreciation and amortization and accounts payable. The increase was partially offset by increases
in inventories and accounts receivables. Net cash provided by operating activities in 2003 was a
result of net income of $0.9&nbsp;million, as well as non-cash depreciation and amortization of $1.2
million. Operating assets and liabilities also increased in line with overall trends and largely
offset each other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investing Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities increased significantly from $13.1&nbsp;million in 2004 to
$31.1&nbsp;million in 2005, due primarily to a significant increase in our purchase of property, plant
and equipment to expand our manufacturing lines for the production of PV cells and modules, offset
in part by a smaller increase in restricted cash. Increase in restricted cash was due to our
increased use of letters of credit, which requires us to make restricted deposits with banks that
issue such letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities increased significantly from $3.0&nbsp;million in 2003 to
$13.1&nbsp;million in 2004, due primarily to (i)&nbsp;a significant increase in our purchase of property,
plant and equipment to expand our manufacturing lines for the production of PV cells and modules
(ii)&nbsp;a significant increase in restricted cash as a result of our increased use
</DIV>

<P align="center" style="font-size: 10pt">61
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of letters of
credit. Our increased use of letters of credit was attributable to our increased purchases of raw
materials in amounts from overseas suppliers in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Financing Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities increased significantly from $28.1&nbsp;million in 2004
to $348.1&nbsp;million in 2005, due primarily to the net proceeds from our initial public offering. In
2005, we received $320.0&nbsp;million from our initial public offering and $80.0&nbsp;million from the
issuance of Series&nbsp;A preferred shares and paid $83.1&nbsp;million for the return of capital upon our
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities increased significantly from $3.6&nbsp;million in 2003 to
$28.1&nbsp;million in 2004, due primarily to a significant increase in short-term bank borrowings. Net
cash provided by financing activities, which consists of net proceeds from short-term borrowing
remained stable at approximately $3.6&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our current cash and cash equivalents and anticipated cash flow from
operations will be sufficient to meet our anticipated cash needs, including our cash needs for
working capital and capital expenditures for at least the next 12&nbsp;months. We may, however, require
additional cash due to changing business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet
our requirements, we may seek to sell additional equity securities, debt securities or borrow from
lending institutions. We cannot assure you that financing will be available in the amounts we need
or on terms acceptable to us, if at all. The sale of additional equity securities, including
convertible debt securities, would dilute our shareholders. The incurrence of debt would divert
cash for working capital and capital expenditures to service debt obligations and could result in
operating and financial covenants that restrict our operations and our ability to pay dividends to
our shareholders. If we are unable to obtain additional equity or debt financing as required, our
business operations and prospects may suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Expenditures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We made capital expenditures of $2.5&nbsp;million, $8.2&nbsp;million and $29.7&nbsp;million in 2003, 2004 and
2005, respectively. In the past, our capital expenditures were used primarily to purchase
manufacturing equipment to expand our manufacturing lines for the production of PV cells and
modules. We estimate that our capital expenditures in 2006 will also be used primarily to purchase
manufacturing equipment for the expansion of our PV cell and module
manufacturing lines and the construction of an administrative office building. We are in the
process of upgrading our enterprise resource planning system, or ERP and expect that our new ERP
system will become operational in June&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Research and Development</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Research and Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus our research and development activities principally on the development and
implementation of more advanced and lower cost process technologies, as well as next-generation PV
cells. Our research and development efforts enable us to lower the cost of raw materials, increase
the conversion efficiency of our products, streamline manufacturing processes and increase
economies of scale.
</DIV>

<P align="center" style="font-size: 10pt">62
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the continual improvement of our technology is vital to maintaining our long
term competitiveness. Therefore, we intend to continue to devote our management and financial
resources in research and development. Our senior management team spearheads our research and
development efforts and sets strategic directions for the advancement of our products and
manufacturing processes. Dr.&nbsp;Zhengrong Shi, our founder, chairman of our board of directors and our
chief executive officer, Dr.&nbsp;Stuart R. Wenham, our chief technical officer, and Dr.&nbsp;Jingjia Ji, a
member of our board of directors and one of our senior research scientists, are all prominent
experts in the PV industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development center employs 76 personnel, including 28 PV technology experts
from China and abroad. We have established technological cooperative relationships with a number of
universities in China and abroad, including the Center of Excellence for Photovoltaic Engineering
at the University of New South Wales in Australia, the research and application institute of solar
energy at Zhongshan University in China, the research institute of solar energy at Shanghai
Jiaotong University in China, as well as Zhengzhou University, Nanjing Aeronautic University and
Jiangnan University in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have focused, and will continue to focus our research and development efforts in the following
areas:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Increase Conversion Efficiencies. </I>We are developing new technologies and
designing more advanced equipment to manufacture, on a large scale and cost-effectively, PV
cells with high conversion efficiencies. We are enhancing the conversion efficiencies of PV
cells through the &#147;selective emitter&#148; process, by which we improve the surface properties
of PV cells so that the infrared and ultraviolet rays captured are more fully utilized. We
are also working on reducing light shading by narrowing the metal grid in the front of a PV
cell. We have eliminated certain manufacturing steps in our pilot manufacturing line, and
are building a new manufacturing line capable of manufacturing monocrystalline silicon PV
cells with a target conversion efficiency rate of 18.0% by the end of 2006 and of 20.0% by
2008. Since October&nbsp;2005, by using our pilot manufacturing line equipped with our latest
technology, we have been able to produce PV cells with an average conversion efficiency
rate of over 18.0%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Reduce Silicon Usage by Using Thinner Silicon Wafers. </I>We have reduced our
silicon wafer thickness to the current 240 micron and are working towards thinning it
further. Since thinning the wafers typically causes an increase in the breakage rate and
cell warpage, for the short-term, we are working on a new metallization technology,
which focuses on the application of metal electrodes to shade in order to improve light
absorption and to reduce breakage rate. To this end, we are also redesigning tools and
procedures used in our manufacturing process and working with suppliers to improve the
quality of metallic pastes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Utilize Low Cost Solar Grade Silicon. </I>We are developing innovative silicon
purification technologies, which we believe will substantially reduce silicon cost while
maintaining and enhancing the conversion efficiencies of our products. We have produced PV
cells with an 11.0% conversion efficiency rate using multicrystalline silicon wafers made
from low-cost solar grade refined silicon materials. We are improving the refining process
to produce higher quality silicon for the manufacturing of PV cells with higher conversion
efficiencies. We are also designing the refining equipment and expect to have the pilot
manufacturing line ready for operations in the second quarter of 2006.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">63
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Developing Thin Film Silicon PV Cell Technologies. </I>We are developing
manufacturing technologies for next generation thin film PV cells on glass, which will
significantly reduce the consumption of silicon materials and manufacturing costs.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development expenditures were $147,759, $465,332 and $3,357,828 in 2003, 2004
and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Trend Information</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than as disclosed elsewhere in this annual report, we are not aware of any trends,
uncertainties, demands, commitments or events for the period from January&nbsp;1, 2003 to December&nbsp;31,
2005 that are reasonably likely to have a material adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that caused the disclosed financial information
to be not necessarily indicative of future operating results or financial conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">E. <U>Off-Balance Sheet Arrangements </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we were contingently liable as guarantor with respect to borrowings
by an ex-shareholder, Wuxi Shanhe Group, in an aggregate amount of $988,631. The underlying loan
was matured and repaid on January&nbsp;23, 2006. Since January&nbsp;2004, we have provided guarantees for the
entire principal amount, and any penalties to be incurred by the borrower in the event of any
default. We had no recourse for recovery from third parties as a result of any payments by us under
the guarantees. As of December&nbsp;31, 2005, the carrying value of the guarantees was nil as the fair
value of the guarantees was immaterial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the above, we have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of third parties. We have not entered into any
derivative contracts that are indexed to our shares and classified as shareholder&#146;s equity, or that
are not reflected in our consolidated financial statements. Furthermore, we do not have any
retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or credit support to us
or that engages in leasing, hedging or research and development services with us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">F. <U>Tabular Disclosure of Contractual Obligations </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our contractual obligations and commercial commitments as of
December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Payment Due by Period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Less than</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>More than 5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1 Year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1-3 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>3-5 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Years</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital (finance)&nbsp;lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities
reflected on the company&#146;s balance
sheet</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,619</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">106,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Include commitments to purchase production equipment in the amount of $15.9&nbsp;million and
commitments to purchase raw materials in the amount of
$4.0&nbsp;million as well as future minimum obligation in the amount
of $79.5 million under a 10-year supply agreement.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">64
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the contractual obligations and commercial commitments set forth above, we do
not have any other long-term debt obligations, operating lease obligations, purchase obligations or
other long-term liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">G. <U>Safe Harbor</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 20-F contains forward-looking statements that relate to future
events, including our future operating results and conditions, our prospects and our future
financial performance and condition, all of which are largely based on our current expectations and
projections. The forward-looking statements are contained principally in the sections entitled
&#147;Item&nbsp;3. Key Information&#151;D. Risk Factors,&#148; &#147;Item&nbsp;4. Information on the Company&#148; and &#147;Item&nbsp;5.
Operating and Financial Review and Prospects.&#148; These statements are made under the &#147;safe harbor&#148;
provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these
forward-looking statements by terminology such as &#147;may,&#148; &#147;will,&#148; &#147;expect,&#148; &#147;anticipate,&#148; &#147;future,&#148;
&#147;intend,&#148; &#147;plan,&#148; &#147;believe,&#148; &#147;estimate,&#148; &#147;is/are likely to&#148; or other and similar expressions.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could
cause actual results to differ materially from those contained in any forward-looking statement,
including but not limited to the following: expectations regarding the worldwide demand for
electricity and the market for solar energy; the company&#146;s beliefs regarding the effects of
environmental regulation, the lack of infrastructure reliability and long-term fossil fuel supply
constraints; the importance of environmentally friendly power generation; expectations regarding
governmental support for the deployment of solar energy; expectations regarding the scaling of the
company&#146;s manufacturing capacity; expectations with respect to the company&#146;s ability to secure raw
materials in the future; future business development, results of operations and financial
condition; and competition from other manufacturers of PV products and conventional energy
suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 20-F also contains data related to the PV market worldwide and in
China taken from third party reports. The PV market may not grow at the rates projected by the
market data, or at all. The failure of the market to grow at the projected rates may have a
material adverse effect on our business and the market price of our ADSs. In addition, the rapidly
changing nature of the PV market subjects any projections or estimates relating to the growth
prospects or future condition of our market to significant uncertainties. If any one or more of the
assumptions underlying the market data turns out to be incorrect, actual results may differ from
the projections based on these assumptions. You should not place undue reliance on these
forward-looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The forward-looking statements made in this annual report on Form 20-F relate only to events
or information as of the date on which the statements are made in this annual report on Form 20-F.
Except as required by law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise,
after the date on which the statements are made or to reflect the occurrence of unanticipated
events. You should read this annual report on Form&nbsp;20-F
</DIV>

<P align="center" style="font-size: 10pt">65
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">completely and with the understanding that
our actual future results may be materially different from what we expect.
</DIV>


<!-- link2 "Item 6. Directors, Senior Management and Employees" -->
<DIV align="left"><A NAME="007"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;6. </B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Directors, Senior Management and Employees</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A. <U>Directors and Senior Management</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Directors and Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding our directors and executive officers as
of April&nbsp;25, 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position/ Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zhengrong Shi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the board of directors, chief executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chengyu Fu
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jingjia Ji
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jason E. Maynard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zhi Zhong Qiu
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Songyi Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Weiguo Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, vice general manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amy Yi Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief financial officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Graham Artes
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief operating officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stuart R. Wenham
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief technical officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Guangchun Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deputy research director of research and development</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tihu Wang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice general manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yichuan Wang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager of PV cell research and development department</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Zhengrong Shi </I>is our founder, chairman of our board of directors and our chief
executive officer. Prior to founding our company in 2001, he was a research director and executive
director of Pacific Solar Pty., Ltd., an Australian PV company engaged in the commercialization of
next-generation thin film technology, from 1995 to 2001. From 1992 to 1995, he was a senior
research scientist and the leader of the Thin Film Solar Cells Research Group in the Centre of
Excellence for Photovoltaic Engineering at the University of New South Wales in Australia, the only
government-sponsored PV industry research center in
Australia. Dr.&nbsp;Shi is the inventor for 11 patents in PV technologies and has published or
presented a number of articles and papers in PV-related scientific magazines and at conferences.
Dr.&nbsp;Shi received a bachelor&#146;s degree in optical science from Jilin University in China in 1983, a
master&#146;s degree in laser physics from the Shanghai Institute of Optics and Fine Mechanics, the
Chinese Academy of Sciences in 1986, and a Ph.D degree in electrical engineering from the
University of New South Wales in Australia in 1992.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Chengyu Fu </I>is a director of our company. Since October&nbsp;2003, Mr.&nbsp;Fu has served as the
president of China National Offshore Oil Corporation, a PRC state-owned enterprise, as well as the
chairman of the board of directors and the chief executive officer of CNOOC Limited, a Hong Kong
limited liability company. Mr.&nbsp;Fu has over 30&nbsp;years of experience in the oil industry in the PRC.
Mr.&nbsp;Fu received his bachelor&#146;s degree in geology from Northeast Petroleum Institute in China, and a
master&#146;s degree in petroleum engineering from the University of Southern California in the United
States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Jingjia Ji </I>is a director and senior research scientist of our company and has been with
our company since 2003. From 1995 to 2002, Dr.&nbsp;Ji worked as a senior research scientist
</DIV>

<P align="center" style="font-size: 10pt">66
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in Pacific
Solar Pty., Ltd.. From 1991 to 1994, he worked at the University of New South Wales as a senior
research assistant. From 1985 to 1990, he worked in the Shanghai Institute of Organo-Fluorine
Materials in China as the head of the department of chemical engineering. Dr.&nbsp;Ji received his
bachelor&#146;s degree in chemical engineering from the East China Institute of Chemical Technology in
China in 1983, and a Ph.D degree in industrial chemistry from the University of New South Wales in
Australia in 1994.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Jason E. Maynard </I>is a director of our company. He is the managing director of the Asian
Special Situations Group at Goldman Sachs (Asia) LLC. Mr.&nbsp;Maynard has over 13&nbsp;years of experience
with distressed and high-yield investments and corporate restructurings, with a recent focus on
Asian industrial companies (excluding Japan). Mr.&nbsp;Maynard joined Goldman Sachs (Asia) LLC as an
executive director in 1999. Previously, he held positions at Merrill Lynch Asia Pacific in 1998,
Chase Manhattan Asia from 1996 to 1998 and Citicorp International from 1992 to 1996. Mr.&nbsp;Maynard
received his bachelor&#146;s degree in East Asia political economy from Hamilton College in the United
States in 1992.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Zhi Zhong Qiu </I>is a director of our board of directors. He is the founder and chairman of
Dragon Advisors Limited, and the chairman of the board of directors of the DragonTech Ventures
Management Company, the management company for DragonTech Ventures Fund. Mr.&nbsp;Qiu is also the
founder and chairman of Quartz Capital Companies, a group of companies engaged in direct investment
and business and strategic consulting in China. From 1998 to 2002, Mr.&nbsp;Qiu was the chairman of the
Greater China Region of Credit Suisse First Boston, or CSFB. From 1995 to 1998, Mr.&nbsp;Qiu was a
managing director of CSFB and was responsible for all derivatives activities for Credit Suisse
Financial Products, the CSFB&#146;s financial derivatives affiliate. Mr.&nbsp;Qiu received his bachelor of
science degree <I>magna cum laude </I>in computer science from New York University in the United States,
his bachelor of engineering degree <I>summa cum laude </I>in electrical engineering from Cooper Union, his
master of science degree in electrical power engineering from Ohio State University, and his MBA
degree from Harvard Business School.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Songyi Zhang </I>is a director of our company. He is an advisory director of Morgan Stanley,
Hong Kong and a director of SINA Corporation, a China-based Internet media company quoted on the
Nasdaq. Through his investment vehicle, Mandra Capital, he is the controlling shareholder of Mandra
Forestry Finance Limited, a joint venture that Mr.&nbsp;Zhang
set up with Morgan Stanley and the Toronto Stock Exchange-listed Sino-Forest Corporation to
acquire and manage commercial forestry plantations in China. Previously, he was a managing director
of Morgan Stanley in its Asia Mergers, Acquisitions, Restructuring and Divestiture Group, and
co-head of its Asia Power and Utilities/Infrastructure Group. Prior to that, he was an attorney at
Milbank, Tweed, Hadley &#038; McCloy LLP in its Banking/Project Finance Group. Mr.&nbsp;Zhang received his
J.D. degree from Yale Law School in 1985.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Weiguo Zhang </I>is a director and the vice general manager of our company. From 2000 to 2001,
he worked in Wuxi Trust Investment Co., Ltd. and was in charge of operations for its high-tech risk
investment fund. From 1985 to 2002, he worked as the manager of Jiangsu International Trust and
Investment Company, Wuxi Branch, and was responsible for various departments including operation,
chartering, comprehensive planning and investment. Mr.&nbsp;Zhang received his bachelor&#146;s degree in
finance from People&#146;s University of China in 1966.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ms.&nbsp;Amy Yi Zhang </I>has been our chief financial officer since August&nbsp;2005. From 2004 to 2005,
she was a director and the chief financial officer of Deloitte Consulting China, and
</DIV>

<P align="center" style="font-size: 10pt">67
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">was
responsible for the management of various departments, including finance, accounting, human
resources and IT, as well as back office management and general office administration. From 1999 to
2004, Ms.&nbsp;Zhang was the chief financial officer of Atos Origin China. From 1997 to 1999, she worked
as the financial controller of Atos Origin China. Ms.&nbsp;Zhang received her bachelor&#146;s degree in
Nanjing University in China in 1989 and her master&#146;s degree in business administration from the
joint MBA program of Webster University and Shanghai University of Finance &#038; Economics in 1998.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Graham Artes </I>has been our chief operations officer since September&nbsp;2005. Mr.&nbsp;Artes has
over 30&nbsp;years of experience in service, production and sales management in the United Kingdom as
well as in other international operations. From 2001 to August&nbsp;2004, he served as the technical
plant manager of Kuttler Automation Systems (Suzhou) Co, Ltd., a manufacturer of handling and
chemical processing equipment for the printed circuit board industry. From 1998 to 2001, Mr.&nbsp;Artes
served as the vice president and technical director of manufacturing for GTY PCB machine
manufacturer. Mr.&nbsp;Artes studied mechanical engineering in Abbey Road Technical and Engineering
College in the United Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Stuart Wenham </I>has been our chief technical officer since July&nbsp;2005. He is also currently a
Scientia Professor and the Director of the Centre of Excellence for Advanced Silicon Photovoltaics
and Photonics, at the University of New South Wales in Australia. From 1995 to 2004, he was the
co-director of Research at Pacific Solar Pty. Ltd. From 1999 to 2003, he was the head of School for
Photovoltaic Engineering and the director of the Key Centre for Photovoltaic Engineering at the
University of New South Wales. From 1996 to 1998, he was the head of the Electronics Department and
from 1991 to 1998, the associate director of the Photovoltaics Special Research Centre, also at the
University of New South Wales. In 1999, Dr.&nbsp;Wenham received The Australia Prize for Energy Science
and Technology and in 1998, the Chairman&#146;s Award at the Australian Technology Awards, in both cases
jointly with Martin A. Green. Dr.&nbsp;Wenham received his Ph.D. degree in electrical engineering and
computer science from the University of New South Wales in Australia in 1986.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr. Guangchun Zhang </I>is our deputy research director of research and development and has been with our
company since November 2005. Prior to joining us, from January 2003 to October 2005, Mr. Zhang had been a professional officer at the Centre for Photovoltaic Engineering and the School for Photovoltaic
Engineering at the University of New South Wales. From 1997 to 2002, Mr. Zhang had been a research engineer at Technology Development Group and was seconded to Pacific Solar Pty. Limited from the University
of New South Wales. From 1994 to 1996, he worked at the Photovoltaics Special Research Centre and the Centre for Photovoltaic Devices and System, also at the University of New South Wales. From 1982 to 1994,
Mr. Zhang taught and researched in the School of Electronic Engineering at Shandong Polytechnic University in China, first as an assistant lecturer, then as a lecturer and finally as an associate
professor. Mr. Zhang received his bachelor degree and his master
degree in 1982 and 1988, respectively, from the School of Electronic Engineering at Shandong Polytechnic University.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Tihu Wang </I>is a vice general manager of our research and development department and has
been with our company since April&nbsp;2006. From 1991 to March&nbsp;2006, he worked as a project leader in
National Renewable Energy Laboratory, the United States and was
responsible for silicon material research. From 1988 to 1991, Dr.&nbsp;Wang worked in the General
Research Institute for Non-Ferrous Metals in China, and was mainly responsible for silicon crystal
growth project. Dr.&nbsp;Wang received a bachelor&#146;s degree in physics from Xiamen University in China in
1982, a master&#146;s degree in materials sciences from the General Research Institute for non-Ferrous
Metals in China in 1991, and a Ph.D degree in applied physics from Colorado School of Mines in the
United States in 1992.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mr.&nbsp;Yichuan Wang </I>is a manager of our PV cell research and development department and has been
with our company since 2001. From 1979 to 2001, he worked at Yunnan Semiconductor Co., Ltd. on the
research, development and manufacturing of PV products. From 1996 to 2000, he worked on sci-tech
planning projects organized by the PRC Ministry of Science and Technology. In 1984, he participated
in the introduction of PV cells manufacturing line with an annual production of 500 KWh. Mr.&nbsp;Wang
received his bachelor&#146;s degree in physics from Yunnan University in China in 1968.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The address of our directors and executive officers is c/o Suntech Power Holdings Co., Ltd.,
17-6 Changjiang South Road, New District, Wuxi, Jiangsu Province 214028, People&#146;s Republic of
China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Compensation of Directors and Executive Officers</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Compensation of Directors and Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, the aggregate cash compensation to our executive officers, including all the
directors, was
$303,014. For options granted to officers and directors, see &#147;&#151;2005 Equity
Incentive Plan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2005 Equity Incentive Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We adopted our 2005 equity incentive plan on September&nbsp;5, 2005, which amended and restated the
stock option plan adopted by Suntech BVI on April&nbsp;29, 2005. Our equity incentive plan provides for
the grant of options as well as restricted shares, referred to as &#147;awards.&#148; The purpose of the plan
is to attract and retain the best available personnel for positions of substantial responsibility,
provide additional incentive to employees, directors and consultants and promote the success of our
business. Our board of directors believes that our company&#146;s long-term success is dependent upon
our ability to attract and retain superior individuals who, by virtue of their ability, experience
and qualifications, make important contributions to our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Termination of Awards. </I>Options and restricted shares shall have specified terms set forth in
an award agreement. Options will be exercisable following the recipient&#146;s termination of services
with us, or the recipient&#146;s disability or death, if the options are not exercised or purchased on
the last day of the specified period or the last day of the original term of the options, whichever
occurs first they will terminate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administration. </I>Our 2005 equity incentive plan is administered by the compensation committee
of our board of directors. The committee will determine the provisions, terms and conditions of
each option grant, including, but not limited to, the exercise price for the options, vesting
schedule, forfeiture provisions, form of payment of exercise price and other applicable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Option Exercise. </I>The term of options granted under the 2005 equity incentive plan may not
exceed five years from the date of grant. The consideration to be paid for our ordinary shares upon
exercise of an option or purchase of shares underlying the option will be determined by the 2005
equity incentive plan administrator and may include cash, check, ordinary shares, a promissory
note, consideration received by us under a cashless exercise program implemented by us in
connection with our 2005 equity incentive plan, or any combination of the foregoing methods of
payment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Third-party Acquisition. </I>If a third-party acquires us through the purchase of all or
substantially all of our assets, a merger or other business combination, all outstanding share
options or restricted shares will be assumed or equivalent share options or restricted shares will
be substituted by the successor corporation or parent or subsidiary of successor corporation. In
the event that the successor corporation refuses to assume or substitute for the share options or
restricted shares, all share options or restricted shares will become fully vested and exercisable
immediately prior to such transaction and all unexercised options will
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">terminate unless, in either
case, the options are assumed by the successor corporation or its parent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Amendment and Termination of Plan. </I>Our board of directors may at any time amend, suspend or
terminate our 2005 equity incentive plan. Amendments to our 2005 equity incentive plan are subject
to shareholder approval, to the extent required by law, or by stock exchange rules or regulations.
Any amendment, suspension or termination of our 2005 equity incentive plan must not adversely
affect awards already granted without written consent of the recipient of such awards. Unless
terminated earlier, our 2005 equity incentive plan shall continue in effect for a term of five
years from the date of adoption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors authorized the issuance of up to 13,503,991 ordinary shares upon
exercise of awards granted under our 2005 equity incentive plan. The 13,503,991 ordinary shares
include the 4,699,383 ordinary shares issuable upon the exercise of options granted by Suntech BVI
and assumed by us. The following table summarizes, as of April&nbsp;25, 2006, our outstanding options.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ordinary Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($/Share)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Grant Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Expiration Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Certain of our consultants
and capital
contributors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,699,383</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.3077</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 6, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 6, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhengrong Shi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,500,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weiguo Zhang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jingjia Ji</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">500,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amy Yi Zhang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">240,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Graham Artes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stuart R. Wenham</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yichuan Wang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">150,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jason E. Maynard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhi Zhong Qiu(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other employees as a
group(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,020,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other consultants as a
group(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">6.922</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 5, 2010</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,809,383</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Qiu was granted options to purchase 50,000 ordinary shares in his capacity as a
consultant prior to his joining our board of directors upon the completion of our initial
public offering.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>None of these employees is a director or an officer of our company.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Excludes options to purchase 50,000 ordinary shares granted to Mr.&nbsp;Qiu, but includes options
to purchase 50,000 ordinary shares granted to a consultant of our company who was a director
of our company at the date of the grant.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Board Practices</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Committees of the Board of Directors</B>
</DIV>


<P align="center" style="font-size: 10pt">70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our audit committee consists of Mr.&nbsp;Zhi Zhong Qiu, Dr.&nbsp;Zhengrong Shi and Mr.&nbsp;Songyi Zhang and
is chaired by Mr.&nbsp;Songyi Zhang, a director with accounting and financial management expertise as
required by the New York Stock Exchange corporate governance rules, or the NYSE Rules. Messrs.&nbsp;Zhi
Zhong Qiu and Songyi Zhang satisfy the &#147;independence&#148; requirements of the NYSE Rules. Our audit
committee will consist solely of independent directors within one year of our initial public
offering. The audit committee will oversee our accounting and financial reporting processes and the
audits of the financial statements of our company. The audit committee will be responsible for,
among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>selecting our independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by our independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing with our independent auditors any audit problems or difficulties and
management&#146;s response;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and approving all proposed related-party transactions, as defined in Item
404 of Regulation&nbsp;S-K under the Securities Act;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discussing the annual audited financial statements with management and our
independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>annually reviewing and reassessing the adequacy of our audit committee charter;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>such other matters that are specifically delegated to our audit committee by our
board of directors from time to time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>meeting separately and periodically with management and our internal and independent
auditors; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reporting regularly to the full board of directors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our audit committee was formed upon the completion of our initial public offering on December
19, 2005 and did not hold any meeting in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee will consist of Messrs.&nbsp;Chengyu Fu and Zhi Zhong Qiu, both of whom
satisfy the &#147;independence&#148; requirements of the NYSE Rules. Our compensation committee assists the
board in reviewing and approving the compensation structure of our directors and executive
officers, including all forms of compensation to be provided to our directors and executive
officers. Members of the compensation committee are not prohibited from direct involvement in
determining their own compensation. Our chief executive officer may not be present at any committee
meeting during which his compensation is deliberated. The compensation committee will be
responsible for, among other things:
</DIV>

<P align="center" style="font-size: 10pt">71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving and overseeing the compensation package for our executive officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and making recommendations to the board with respect to the compensation
of our directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing periodically and making recommendations to the board regarding any
long-term incentive compensation or equity plans, programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee was formed upon the completion of our intial public offering on
December&nbsp;19, 2005 and did not hold any meeting in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Corporate Governance and Nominating Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate governance and nominating committee will consist of Messrs.&nbsp;Jason E. Maynard and
Zhi Zhong Qiu, both of whom satisfy the &#147;independence&#148; requirements of the NYSE Rules. The
corporate governance and nominating committee will assist the board of directors in identifying
individuals qualified to become our directors and in determining the composition of the board and
its committees. The corporate governance and nominating committee will be responsible for, among
other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>identifying and recommending to the board nominees for election or re-election to
the board, or for appointment to fill any vacancy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing annually with the board the current composition of the board in light of
the characteristics of independence, age, skills, experience and availability of
service to us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>identifying and recommending to the board the directors to serve as members of the
board&#146;s committees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>advising the board periodically with respect to significant developments in the law
and practice of corporate governance as well as our compliance with applicable laws and
regulations, and making recommendations to the board on all matters of corporate
governance and on any corrective action to be taken; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>monitoring compliance with our code of business conduct and ethics, including
reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate governance and nominating committee was formed upon the completion of our intial
public offering on December&nbsp;19, 2005 and did not hold any meeting in 2005.
</DIV>

<P align="center" style="font-size: 10pt">72
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Duties of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Cayman Islands law, our directors have a duty of loyalty to act honestly, in good faith
and with a view to our best interests. Our directors also have a duty to exercise the skill they
actually possess and such care and diligence that a reasonably prudent person would exercise in
comparable circumstances. In fulfilling their duty of care to us, our directors must ensure
compliance with our memorandum and articles of association, as amended and re-stated from time to
time. A shareholder has the right to seek damages if a duty owed by our directors is breached.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The functions and powers of our board of directors include, among others:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>convening shareholders&#146; annual general meetings and reporting its work to
shareholders at such meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>declaring dividends and distributions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>appointing officers and determining the term of office of officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>exercising the borrowing powers of our company and mortgaging the property of our
company; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving the transfer of shares of our company, including
the registering of such shares in our share register.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Terms of Directors and Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our officers are elected by and serve at the discretion of the board of directors. Our
directors are not subject to a term of office and hold office until such time as they are removed
from office by special resolution or the unanimous written resolution of all shareholders. A
director will be removed from office automatically if, among other things, the director (i)&nbsp;becomes
bankrupt or makes any arrangement or composition with his creditors; or (ii)&nbsp;dies or is found by
our company to be or becomes of unsound mind.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employment Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into employment agreements with all of our executive officers. Under these
agreements, each of our executive officers is employed for a specified time period. We may
terminate his or her employment for cause at any time, with prior written notice, for certain acts
of the employee, including but not limited to a conviction to a felony, or willful gross misconduct
by the employee in connection with his employment, and in each case if such acts have resulted in
material and demonstrable financial harm to us. An executive officer may, with prior written
notice, terminate his or her employment at any time for any material breach of the employment
agreement by us that is not remedied promptly after receiving the remedy request from the employee.
Furthermore, either party may terminate the employment agreement at any time without cause upon
advance written notice to the other party. Upon termination, the employee is generally entitled to
a severance pay of at least one month&#146;s salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each executive officer has agreed to hold, both during and subsequent to the terms of his or
her agreement, in confidence and not to use, except in pursuance of his or her duties in
</DIV>

<P align="center" style="font-size: 10pt">73
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">connection
with the employment, any of our confidential information, technological secrets, commercial secrets
and know-how. Our executive officers have also agreed to disclose to us all inventions, designs and
techniques resulted from work performed by them, and to assign us all right, title and interest of
such inventions, designs and techniques.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Employees</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had 205, 852 and 1,374 employees as of December&nbsp;31, 2003, 2004 and 2005, respectively. The
following table sets forth the number of our employees categorized by our areas of operations and
as a percentage of our workforce as of December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Number of Employees</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Percentage of Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and engineering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quality assurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchasing and logistics</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketing and sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we also employ part-time employees and independent contractors to support
our research and development, manufacturing and sales and marketing activities. We plan to hire
additional employees as we expand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends to a significant extent upon, among other factors, our ability to attract,
retain and motivate qualified personnel. As of December&nbsp;31, 2005, 141 of our employees held
bachelor&#146;s or higher degrees, and all of our manufacturing line employees have post-high school
technical degrees or high school diplomas. Many of these employees have overseas education and
industry experience and we periodically send our technical
personnel overseas for study and training. Our employees receive periodical training every
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer our employees additional annual merit-based bonuses based on the overall performance
of our company, his or her department and the individual. We are required by applicable PRC
regulations to contribute amounts equal to 22%, 8%, 8%, 2%, 0.6% and 0.9%, of our employees&#146;
aggregate salary to a pension contribution plan, a medical insurance plan, a housing fund, an
unemployment insurance plan, a personal injury insurance plan and a maternity insurance plan,
respectively, for our employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our employees are not covered by any collective bargaining agreement. We believe that we have
a good relationship with our employees.
</DIV>

<P align="center" style="font-size: 10pt">74
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">E. <U>Share Ownership</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to the beneficial ownership of our
ordinary shares as of April&nbsp;25, 2006, the latest practicable date, by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our directors and executive officers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each person known to us to own beneficially more than 5.0% of our ordinary shares.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="81%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares Beneficially Owned(1)(2)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>%</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Directors and Executive Officers:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhengrong Shi(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">66,500,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">44.97</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jason E. Maynard(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,806,787</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7.33</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhi Zhong Qiu(5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,476,728</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.71</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weiguo Zhang(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">333,333</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.71</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jingjia Ji(7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">166,667</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.11</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amy Yi Zhang(8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">80,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.05</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Graham Artes(9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">66,667</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.05</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stuart R. Wenham(10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">66,667</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.05</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yichuan Wang(11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">50,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.03</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and executive officers as a group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">83,546,849</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">56.15</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Principal Shareholders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D&#038;M Technologies Limited(12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">66,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">44.75</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goldman Sachs (Asia) Finance(13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,790,120</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7.32</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Beneficial ownership is determined in accordance with Rule&nbsp;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.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The number of ordinary shares outstanding in calculating the percentages for each listed
person includes the ordinary shares underlying options held by such person. Percentage of
beneficial ownership of each listed person prior to the offering is based on 147,487,707
ordinary shares outstanding as of April&nbsp;25, 2006, as well as the ordinary shares underlying
share options exercisable by such person within 60&nbsp;days of the date
of this annual report on Form 20-F.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 67,500,000 ordinary shares held by D&#038;M Technologies Limited and 500,000 ordinary
shares issuable upon exercise of options within 60&nbsp;days of the date of this annual report on
Form 20-F held by Dr.&nbsp;Shi. D&#038;M Technologies Limited, a British Virgin Islands company, is
ultimately owned by Dr.&nbsp;Shi&#146;s family trust. Dr.&nbsp;Shi is the sole director of D&#038;M Technologies
Limited on all matters of Suntech requiring shareholder approval. Dr.&nbsp;Shi&#146;s business address
is 17-6 Changjiang South Road, New District, Wuxi, Jiangsu Province 214028, People&#146;s Republic
of China.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 10,790,120 ordinary shares held by Goldman Sachs (Asia) Finance and 16,667 ordinary
shares issuable upon exercise of options within 60&nbsp;days of the date of this annual report on
Form 20-F held by Mr.&nbsp;Jason E. Maynard. Mr.&nbsp;Maynard, a managing director of Goldman Sachs
(Asia) Finance, disclaims beneficial ownership of shares held by Goldman Sachs (Asia) Finance
except to the extent of his pecuniary interest in these shares. Mr.&nbsp;Maynard&#146;s business address
is c/o Goldman Sachs (Asia) Finance, 68th Floor, Cheung Kong Center, 2 Queens Road Central,
Hong Kong.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 5,460,061 ordinary shares held by DragonTech Energy Investment Limited and 16,667
ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of this annual
report on Form 20-F held by Mr.&nbsp;Zhi Zhong Qiu. Mr.&nbsp;Qiu, a director of DragonTech Energy
Investment Limited, disclaims beneficial ownership of shares held by DragonTech Energy
Investment Limited except to the extent of his pecuniary interest in these shares. Mr.&nbsp;Qiu&#146;s
business address is c/o DragonTech Energy Investment Limited, Room&nbsp;2503, Alexandra House, 18
Chater Road, Central, Hong Kong.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Mr.&nbsp;Zhang.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Mr.&nbsp;Ji.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">75
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Ms.&nbsp;Zhang.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Mr.&nbsp;Artes.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Mr.&nbsp;Wenham.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents ordinary shares issuable upon exercise of options within 60&nbsp;days of the date of
this annual report on Form 20-F held by Mr.&nbsp;Wang.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>D&#038;M Technologies Limited, a British Virgin Islands company, is ultimately owned by Dr.&nbsp;Shi&#146;s
family trust. Dr.&nbsp;Shi is the sole director of D&#038;M Technologies Limited on all matters of
Suntech requiring shareholder approval. The address of D&#038;M Technologies Limited is Akara
Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents 10,790,120 ordinary shares held by Goldman Sachs (Asia) Finance. Goldman Sachs
(Asia) Finance is a wholly-owned subsidiary of Goldman Sachs Group, Inc., which is a public
company listed on the New York Stock Exchange. The address of Goldman Sachs (Asia) Finance is
Suite&nbsp;802, St James Court, St Denis Street, Port Louis, Mauritius.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;25, 2006, approximately 20.6% of our outstanding ordinary shares are held by
one record holder in the United States.
</DIV>

<!-- link2 "Item 7. Major Shareholders and Related Party Transactions" -->
<DIV align="left"><A NAME="008"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;7.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Major Shareholders and Related Party Transactions</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A. <U>Major Shareholders</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please refer to &#147;Item&nbsp;6. Directors, Senior Management and Employees <FONT style="font-family: Symbol">&#190;</FONT> Share Ownership.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Related Party Transactions</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the completion of our initial public offering on December&nbsp;19, 2005, we adopted an audit
committee charter, which requires that the audit committee review all related party
transactions on an ongoing basis and all such transactions be approved by the committee. Set
forth below is a description of all of our related party transactions since January&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Transactions with Dr.&nbsp;Zhengrong Shi</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;Zhengrong Shi is our founder, chairman of our board of directors and our chief executive
officer. Our predecessor company, Suntech China, was established in January&nbsp;2001 by certain PRC
companies and Power Solar System Pty. Ltd., or PSS, a company wholly-owned by Dr.&nbsp;Shi, with PSS
owning 25% of its equity interests. In October&nbsp;2004, PSS&#146; ownership in Suntech China increased to
31.389% after it purchased an additional 6.389% of the equity interests in Suntech China from
another shareholder. In January&nbsp;2005, Suntech BVI was founded by Dr.&nbsp;Shi and Million Power Finance
Ltd., or Million Power, with Dr.&nbsp;Shi and Million Power owning 60% and 40% of the equity interests
in Suntech BVI, respectively. Suntech BVI acquired 100.0% of the equity interests in Suntech China
through a series of transactions between April&nbsp;2005 and May&nbsp;2005. These transactions, including
Suntech BVI&#146;s acquisition of the entire ownership interest in PSS from Dr.&nbsp;Shi for $1,000 and
13,500,000 ordinary shares of Suntech BVI, have been accounted for as a reorganization of entities
in a manner similar to pooling-of-interest. This is because no single shareholder or group of
shareholders acting in concert controlled Suntech China either prior to and after Suntech BVI&#146;s
acquisition of all equity interest of Suntech China.
</DIV>

<P align="center" style="font-size: 10pt">76
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Transactions with Certain Directors, Shareholders and Affiliates</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have historically made cash advances to certain directors and shareholders and have
purchased raw materials from certain affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004 and 2005, amounts due from related parties were $265,199 and $nil,
respectively. Amounts due from related parties as of December&nbsp;31 2004 included (i)&nbsp;cash advances to
Mr.&nbsp;Yanren Li, who used to be a member of our board of directors, and Dr.&nbsp;Shi, and (ii)&nbsp;trade and
other receivables from our affiliate, Wuxi Shangneng, in which we had owned 50% of its equity
interests until August&nbsp;2005, when it became our wholly-owned subsidiary. Amounts due from related
parties as of December&nbsp;31, 2004 also included other receivables from one of Wuxi Shangneng&#146;s
shareholders, Wuxi Jinwei Solar Energy Technical Co. All cash advances to Dr.&nbsp;Shi were repaid by
Dr.&nbsp;Shi in full in October&nbsp;2005. These amounts were unsecured, interest free and had no fixed
repayment terms. All cash advances to Mr.&nbsp;Li had been repaid as of July&nbsp;31, 2005. We will not make
such cash advances to any of our directors or shareholders in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004 and 2005, amounts due to related parties were $149,341 and $468,220,
respectively. Amounts due to related parties as of December&nbsp;31, 2004 and 2005 included (i)&nbsp;payroll
payable to Mr.&nbsp;Li and Dr.&nbsp;Shi, and (ii)&nbsp;trade payables to Wuxi Shangneng and Jiangsu Huariyuan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, 2004 and 2005 (up to the date when Wuxi Shangneng became our wholly-owned
subsidiary), we purchased raw materials from Wuxi Shangneng in amounts of $nil, $27,085 and
$38,311, respectively. In April&nbsp;2005, we acquired 25.0% of the equity interest in Jiangsu Huariyuan
Electronics Technology Co., Ltd., or Jiangsu Huariyuan, a silicon ingot manufacturer located in
Jiangsu province, China. From April&nbsp;2005 to December&nbsp;31, 2005, we purchased silicon ingots from
Jiangsu Huariyuan in the amount of $1,142,692.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we were contingently liable as guarantor with respect to three
separate borrowings by an ex-shareholder, Wuxi Shanhe Group, in an aggregate amount of $1.0
million. As of December&nbsp;31, 2003, 2004 and 2005, $2.9&nbsp;million, $1.9&nbsp;million and $1.0&nbsp;million,
respectively, of our short-term bank borrowings were guaranteed by Wuxi Shanhe Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;25, 2005, we, through Suntech China, acquired an additional 50% of the equity
interests in Wuxi Shangneng for $123,449. We merged Wuxi Shangneng into Suntech China and
liquidated Wuxi Shangneng in early 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Issuance and Sale of Series&nbsp;A Preferred Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, Suntech BVI sold a total of 34,667,052 Series&nbsp;A preferred shares in a private
placement at a price of $2.3077 per share for an aggregate of $80.0&nbsp;million. The investors in our
Series&nbsp;A preferred share private placement consisted of Goldman Sachs (Asia) Finance, which
purchased 10,790,120 shares, DragonTech Energy Investment Limited, which purchased 5,460,061
shares, Actis China Investment Holdings No.&nbsp;4 Ltd., which purchased 5,416,727 shares, Financiere
Natexis Singapore 3 Pte., Ltd., which purchased 4,766,720 shares, Bestmanage Consultants Ltd. which
purchased 4,333,381 shares, and Prax Capital Fund 1, LP, which purchased 3,900,043 shares. Two
members of our board of directors were appointed by Series&nbsp;A preferred shareholders. The $80.0
million proceeds from our Series&nbsp;A preferred financing were used primarily to purchase equity
interests in
</DIV>

<P align="center" style="font-size: 10pt">77
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Suntech China from certain previous equity holders. The purchases occurred
concurrently with the Series&nbsp;A private placement. Series&nbsp;A preferred shares were converted into
our ordinary shares on the completion of our initial public offering. Each of our Series&nbsp;A
preferred shares was converted into one ordinary share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of former Series&nbsp;A preferred shares are also entitled to certain registration rights,
including demand registration, piggyback registration and Form F-3 or Form S-3 registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity Incentive Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;6.B., &#147;&#151;2005 Equity Incentive Plan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Interests of Experts and Counsel</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<!-- link2 "Item 8. Financial Information" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;8.</B></FONT>
<FONT style="font-variant: SMALL-CAPS"><B>Financial Information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A. <U>Consolidated Statements and Other Financial Information</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have appended consolidated financial statements filed as part of this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legal and Administrative Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently not a party to any material legal or administrative proceedings, and we are
not aware of threatened material legal or administrative proceedings against us. We may from time
to time become a party to various legal or administrative proceedings arising in the ordinary
course of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividend Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any dividends, nor do we have any present plan to pay any cash
dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if
not all, of our available funds and any future earnings to operate and expand our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has complete discretion on whether to pay dividends, subject to the
approval of our shareholders. Even if our board of directors decides to pay dividends, the form,
frequency and amount will depend upon our future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and other factors that the board of
directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including
the fees and expenses payable thereunder. See &#147;Description of American Depositary Shares.&#148; Cash
dividends on our ordinary shares, if any, will be paid in U.S. dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Significant Changes</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not experienced any significant changes since the date of our audited consolidated
financial statements included in this annual report.
</DIV>

<P align="center" style="font-size: 10pt">78
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link2 "Item 9. The Offer and Listing" -->
<DIV align="left"><A NAME="010"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;9.</B></FONT> <FONT style="font-variant: SMALL-CAPS">
<B>The Offer and Listing</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A. <U>Offering and Listing Details.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ADSs, each representing four of our ordinary shares, have been listed on the New York
Stock Exchange since December&nbsp;14, 2005 under the symbol &#147;STP.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005 (December&nbsp;14, 2005 through December&nbsp;31, 2005), the trading price of our ADSs on New
York Stock Exchange ranged from $19.00 to $28.30 per ADS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides the high and low trading prices for our ADSs on the New York
Stock Exchange for (1)&nbsp;the first quarter in 2006 and each quarter in 2005, and (2)&nbsp;each of the past
six months.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Sales Price</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Quarterly High and Low</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2005 (From December&nbsp;14, 2005)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Monthly Highs and Lows</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;2005 (from December&nbsp;14, 2005)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;2006 (through April&nbsp;25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Plan of Distribution</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Markets</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ADSs, each representing four of our ordinary shares, have been listed on the New York
Stock Exchange since December&nbsp;14, 2005 under the symbol &#147;STP.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Selling Shareholders</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">E. <U>Dilution </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">F. <U>Expenses of the Issue</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<!-- link2 "Item 10. Additional Information" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;10.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Additional Information</B></FONT>
</DIV>


<P align="center" style="font-size: 10pt">79
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A. <U>Share Capital</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">B. <U>Memorandum and Articles of Association</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incorporate by reference into this annual report the description of our amended and
restated memorandum of association contained in our F-1 registration statement (File No.
333-129367), as amended, initially filed with the Commission on November&nbsp;1, 2005. Our shareholders
adopted our amended and restated memorandum and articles of association by unanimous resolutions on
November&nbsp;7, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">C. <U>Material Contracts</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not entered into any material contracts other than in the ordinary course of business
and other than those described in &#147;Item&nbsp;4. Information on the Company&#148; or elsewhere in this annual
report on Form 20-F.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">D. <U>Exchange Controls</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Foreign Currency Exchange</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency exchange regulation in China is primarily governed by the following rules:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Foreign Currency Administration Rules (1996), as amended, or the Exchange Rules; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996),
or the Administration Rules;</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Exchange Rules, the Renminbi is convertible for current account items, including the
distribution of dividends, interest payments, trade and service-related foreign exchange
transactions. Conversion of Renminbi for capital account items, such as direct investment, loan,
security investment and repatriation of investment, however, is still subject to the approval of
the PRC State Administration of Foreign Exchange, or SAFE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Administration Rules, foreign-invested enterprises may only buy, sell and/or remit
foreign currencies at those banks authorized to conduct foreign exchange business after providing
valid commercial documents and, in the case of capital account item transactions, obtaining
approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are
also subject to limitations, which include approvals by the Ministry of Commerce, the SAFE and the
State Reform and Development Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">E. <U>Taxation</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cayman Islands Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Cayman Islands currently levies no taxes on individuals or corporations based upon
profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or
estate duty. There are no other taxes likely to be material to us levied by the Government of the
Cayman Islands except for stamp duties which may be applicable on
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">instruments executed in, or
brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any
double tax treaties. There are no exchange control regulations or currency restrictions in the
Cayman Islands.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United States Federal Income Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion describes certain material U.S. federal income tax consequences to
U.S. Holders (defined below) under present law of an investment in the ADSs or ordinary shares.
This summary applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets
and that have the U.S. dollar as their functional currency. This discussion is based on the tax
laws of the United States as in effect on the date of this annual report on Form 20-F and on U.S.
Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report on
Form 20-F, as well as judicial and administrative interpretations thereof available on or before
such date. All of the foregoing authorities are subject to change, which change could apply
retroactively and could affect the tax consequences described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion does not address the tax consequences to any particular investor or
to persons in special tax situations such as:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>banks;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain financial institutions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>insurance companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>broker dealers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. expatriates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>traders that elect to mark to market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>tax-exempt entities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons liable for alternative minimum tax;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or
integrated transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons that actually or constructively own 10.0% or more of our voting stock; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons holding ADSs or ordinary shares through partnerships or other pass-through
entities.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion below of the U.S. federal income tax consequences to &#147;U.S. Holders&#148; will apply
if you are a beneficial owner of ADSs or ordinary shares and you are, for U.S. federal income tax
purposes,
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 thereof or the District
of Columbia;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an estate whose income is subject to U.S. federal income taxation regardless of its
source; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trust that (1)&nbsp;is subject to the supervision of a court within the United States and
the control of one or more U.S. persons or (2)&nbsp;has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">81
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you are a partner in a partnership or other entity taxable as a partnership that holds
ADSs or ordinary shares, your tax treatment generally will depend on your status and the activities
of the partnership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion below assumes that the representations contained in the deposit agreement are
true and that the obligations in the deposit agreement and any related agreement will be complied
with in accordance with their terms. If you hold ADSs, you should be treated as the holder of the
underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. Treasury has expressed concerns that parties to whom ADSs are pre-released may be
taking actions that are inconsistent with the claiming, by U.S. Holders of ADSs, of foreign tax
credits for U.S. federal income tax purposes. Such actions would also be inconsistent with the
claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S.
Holders, as described below. Accordingly, the availability of the reduced tax rate for dividends
received by certain non-corporate U.S. Holders could be affected by future actions that may be
taken by the U.S. Treasury or parties to whom ADSs are pre-released.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the passive foreign investment company rules discussed below, the gross amount of
all our distributions to you with respect to the ADSs or ordinary shares generally will be included
in your gross income as foreign source dividend income on the date of receipt by the depositary, in
the case of ADSs, or by you, in the case of ordinary shares, but only to the extent that the
distribution is paid out of our current or accumulated earnings and profits (as determined under
U.S. federal income tax principles). The dividends will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends received from other U.S. corporations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to non-corporate U.S. Holders including individual U.S. Holders, for taxable
years beginning before January&nbsp;1, 2009, dividends may be taxed at the lower applicable capital
gains rate, and thus may constitute &#147;qualified dividend income&#148; provided that (1)&nbsp;the ADSs or
ordinary shares are readily tradable on an established securities market in the United States, (2)
we are not a passive foreign investment company (as discussed below) for either our taxable year in
which the dividend was paid or the preceding taxable year, and (3)&nbsp;certain holding period
requirements are met. Under Internal Revenue Service authority, common or ordinary shares, or ADSs
representing such shares, are considered for the purpose of clause (1)&nbsp;above to be readily tradable
on an established securities market in the United States if they are listed on the New York Stock
Exchange, as our ADSs are. You should consult your tax advisors regarding the availability of the
lower rate for dividends paid with respect to our ADSs or ordinary shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the amount of the distribution exceeds our current and accumulated earnings
and profits, it will be treated first as a tax-free return of your tax basis in your ADSs or
ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the
excess will be taxed as capital gain. We do not intend to calculate our earnings and profits
under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a
distribution will generally be treated as a dividend.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Disposition of Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the passive foreign investment company rules discussed below, you will recognize
taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or ordinary share
equal to the difference between the amount realized for the ADS or ordinary share and your tax
basis in the ADS or ordinary share. The gain or loss generally will be capital gain or loss. If you
are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADS or
ordinary share for more than one year, you will be eligible for reduced tax rates. The
deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize
will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Passive Foreign Investment Company</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A Non-U.S. corporation is considered a passive foreign investment company (&#147;PFIC&#148;) for any taxable
year if either
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at least 75% of its gross income is passive income, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will be treated as owning our proportionate share of the assets and earning our
proportionate share of the income of any other corporation in which we own, directly or indirectly,
25% or more (by value) of the stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we were not a PFIC for our taxable year ended December&nbsp;31, 2005, and we do not
expect to be a PFIC for our current taxable year for U.S. federal income tax purposes. We must
make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status
may change. In particular, our PFIC status may be determined in large part based on the market
price of our ADSs and ordinary shares, which is likely to fluctuate (and may fluctuate considerably
given that market prices of technology companies have been especially volatile). Accordingly,
fluctuations in the market price of the ADSs and ordinary shares may result in our being a PFIC for
any year. Thus, there can be no assurance that we will not be considered a PFIC for our current
taxable year or any future taxable year. If we are a PFIC for any year during which you hold ADSs
or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years
during which you hold ADSs or ordinary shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, you will
be subject to special tax rules with respect to any &#147;excess distribution&#148; that you receive and any
gain you realize from a sale or other disposition (including a pledge) of the ADSs or ordinary
shares, unless you make a &#147;mark-to-market&#148; election as discussed below. Distributions you receive
in a taxable year that are greater than 125% of the average annual distributions you received
during the shorter of the three preceding taxable years or your holding period for the ADSs or
ordinary shares will be treated as an excess distribution. Under these special tax rules: 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

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax liability for amounts allocated to years prior to the year of disposition or &#147;excess
distribution&#148; cannot be offset by any net operating losses for such years, and gains (but not
losses) realized on the sale of the ADSs or ordinary shares cannot be treated as capital, even if
you hold the ADSs or ordinary shares as capital assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively, a U.S. Holder of &#147;marketable stock&#148; (as defined below) in a PFIC may make a
mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed in the
two preceding paragraphs. If you make a mark-to-market election for the ADSs or ordinary shares,
you will include in income each year an amount equal to the excess, if any, of the fair market
value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis
in such ADSs or ordinary shares. You are allowed a deduction for the excess, if any, of the
adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the
taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains
on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in
your income under a mark-to-market election, as well as gain on the actual sale or other
disposition of the ADSs or ordinary shares, are treated as ordinary income. Ordinary loss treatment
also applies to the deductible portion of any mark-to-market loss on the ADSs or ordinary shares,
as well as to any loss realized on the actual sale or disposition of the ADSs or ordinary shares,
to the extent that the amount of such loss does not exceed the net mark-to-market gains previously
included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be
adjusted to reflect any such income or loss amounts. The tax rules that apply to distributions by
corporations that are not PFICs would apply to distributions by us, except that the preferential
dividend rates with respect to &#147;qualified dividend income&#148; would not apply.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The mark-to-market election is available only for &#147;marketable stock,&#148; which is stock that is
traded in other than de minimus quantities on at least 15&nbsp;days during each calendar quarter on a
qualified exchange, including the New York Stock Exchange, or other market, as defined in
applicable U.S. Treasury regulations. The ADSs are listed on the New York Stock Exchange and,
consequently, if you are a holder of ADSs the mark-to-market election would be available to you
were we to be or become a PFIC, provided the ADSs were traded in sufficient quantities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you hold ADSs or ordinary shares in any year in which we are a PFIC, you will be required
to file Internal Revenue Service Form&nbsp;8621 regarding distributions received on the ADSs or ordinary
shares and any gain realized on the disposition of the ADSs or ordinary shares. You are urged to
consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or
ordinary shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Information Reporting and Backup Withholding</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange
or redemption of ADSs or ordinary shares may be subject to information
reporting to the Internal Revenue Service and possible U.S. backup withholding at a current rate of
28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer
identification number and makes any other required certification or who is

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">otherwise exempt from
backup withholding. U.S. Holders who are required to establish their exempt status generally must
provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their
tax advisors regarding the application of the U.S. information reporting and backup withholding
rules.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backup withholding is not an additional tax. Amounts withheld as backup withholding may be
credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with
the Internal Revenue Service and furnishing any required information.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">F.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Dividends and Paying Agents</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">G.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Statement by Experts</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">H.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Documents on Display</U></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have previously filed with the Commission our registration statement on Form F-1, as
amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the periodic reporting and other informational requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange Act, we are
required to file reports and other information with the Securities and Exchange Commission.
Specifically, we are required to file annually a Form 20-F no later than six months after the close
of each fiscal year, which is December&nbsp;31. Copies of reports and other information, when so filed,
may be inspected without charge and may be obtained at prescribed rates at the public reference
facilities maintained by the Securities and Exchange Commission at 100 F. Street, N.E., Washington,
D.C. 20549, and at the regional office of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite&nbsp;1400, Chicago, Illinois 60661. The public may
obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission
at 1-800-SEC-0330. The SEC also maintains a Web site at www.sec.gov that contains reports, proxy
and information statements, and other information regarding registrants that make electronic
filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section&nbsp;16 of the Exchange Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements have been prepared in accordance with U.S. GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will furnish our shareholders with annual reports, which will include a review of
operations and annual audited consolidated financial statements prepared in conformity with U.S.
GAAP.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">I.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Subsidiary Information</U></TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">85
</DIV>

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</DIV>

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a listing of our subsidiaries, see Item&nbsp;4. C. of this annual report, &#147;Information on the
Company &#150; Organizational Structure&#148;.
</DIV>

<!-- link2 "Item 11. Quantitative and Qualitative Disclosures About Market Risk" -->
<DIV align="left"><A NAME="012"></A></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;11.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Quantitative and Qualitative Disclosures About Market Risk</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Foreign Exchange Risk</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial portion of our sales is currently denominated in U.S. dollars, with the
remainder in Renminbi and Euros, while a substantial portion of our costs and expenses is
denominated in U.S. dollars and Renminbi, with the remainder in Euros. Therefore, fluctuations in
currency exchange rates could have a significant impact on our financial stability due to a
mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange
rates, particularly among the U.S. dollar, Renminbi and Euro, affect our gross and net profit
margins and could result in foreign exchange and operating losses. Our exposure to foreign exchange
risk primarily relates to currency gains or losses resulting from timing differences between
signing of sales contracts and settling of these contracts. As of December&nbsp;31, 2005, we held $1.7
million in accounts receivable, of which $735,733 was denominated in U.S. dollars. Assuming we had
converted the U.S. dollar denominated accounts receivable of $735,733 as of December&nbsp;30, 2005 into
Renminbi at the exchange rate of $1.00 for RMB8.0702 as of December&nbsp;30, 2005, the accounts
receivable would have been RMB5.9&nbsp;million. Assuming a 10% appreciation of the Renminbi against the
U.S. dollar, our accounts receivable denominated in U.S. dollars would have decreased by $73,573 to
$809,306&nbsp;million as of December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net foreign currency gain of $3,961 and $24,678 in 2003 and 2004, respectively,
but recorded net foreign exchange loss of $883,541 in 2005 due to the appreciation of the U.S.
dollar against Euro. We cannot predict the impact of future exchange rate fluctuations on our
results of operations and may incur net foreign currency losses in the future. We anticipate that
the effect of our exposure to foreign exchange risk will be reduced through hedging arrangements we
adopted in February&nbsp;2006; such arrangements include forward exchange contracts and foreign currency
option contracts. However, we cannot assure you that such hedging activities will be effective in
managing our foreign exchange risk exposure.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are expressed in U.S. dollars but our functional currency is
Renminbi. The value of your investment in our ADSs will be affected by the foreign exchange rate
between U.S. dollars and Renminbi. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from our initial public offering, any appreciation of the Renminbi
against the U.S. dollar could result in a change to our statement of operations and a reduction in
the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of
Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial
results, the value of your investment in our company and the dividends we may pay in the future, if
any, all of which may have a material adverse effect on the prices of our ADSs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Interest Rate Risk</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to interest rate risk primarily relates to interest expenses incurred by our
short-term and long-term bank borrowings, as well as interest income generated by excess cash
invested in demand deposits and liquid investments with original maturities of three months or
less. Such interest-earning instruments carry a degree of interest rate risk. We have

<P align="center" style="font-size: 10pt">86
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">not used any
derivative financial instruments to manage our interest risk exposure. We have not been exposed nor
do we anticipate being exposed to material risks due to changes in interest rates. However, our
future interest expense may increase due to changes in market interest rates.
</DIV>

<!-- link2 "Item 12. Description of Securities Other than Equity Securities" -->
<DIV align="left"><A NAME="013"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;12.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Description of Securities Other than Equity Securities</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>


<!-- link1 "PART II" -->
<DIV align="left"><A NAME="014"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "Item 13. Defaults, Dividend Arrearages and Delinquencies" -->
<DIV align="left"><A NAME="015"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;13.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Defaults, Dividend Arrearages and Delinquencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of these events occurred in any of the years ended December&nbsp;31, 2003, 2004 and 2005.
</DIV>


<!-- link2 "Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds" -->
<DIV align="left"><A NAME="016"></A></DIV>

<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;14.</B>
</FONT> <FONT style="font-variant: SMALL-CAPS"><B>Material Modifications to the Rights of Security Holders and Use of
Proceeds</B></FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;10. Additional Information&#148; for a description of the rights of securities holders,
which remain unchanged.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed our initial public offering of 30,377,000 ordinary shares, in the form of ADSs,
at $15.00 per ADS on December&nbsp;19, 2005, after our ordinary shares and American Depositary Receipts
were registered under the Securities Act. The aggregate price of the offering amount registered
and sold was $342.3&nbsp;million, of which we received net proceeds of $321.8&nbsp;million. The effective
date of our registration statement on Form F-1 (File number: 333-129367) was December&nbsp;13, 2005.
Credit Suisse and Morgan Stanley were the joint global coordinators and book runners for the global
offering of our ADSs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net proceeds from our initial public offering have been allocated as follows:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approximately $100.0&nbsp;million to purchase or prepay for raw materials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approximately $40.0&nbsp;million to expand our manufacturing lines for the production
of PV cells and modules; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approximately $20.0&nbsp;million to enhance our research and development efforts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remaining of the net proceeds will be used for general corporate purposes, including
funding our working capital needs. As of December&nbsp;31, 2005, our cash resources amounted to $359.3
million, comprising of cash on hand and demand deposits.
</DIV>

<!-- link2 "Item 15. Controls and Procedures" -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;15.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Controls and Procedures</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Evaluation of Disclosure Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Chief Executive Officer and our Chief Financial Officer have performed an evaluation of
our disclosure controls and procedures, as that term is defined in Rules&nbsp;13a-14(c) and 15d-14(c) of
the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), within 90&nbsp;days prior to the
date of this report, and each has concluded that such disclosure controls and procedures are
effective to ensure that information required to be
</DIV>


<P align="center" style="font-size: 10pt">87


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">disclosed in our periodic reports filed under
the Exchange Act is recorded, processed, summarized and reported, within the time period specified
by the Securities and Exchange Commission&#146;s rules and regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No significant changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses, were made as a result of the
evaluation.
</DIV>

<!-- link2 "Item 16A. Audit Committee Financial Expert" -->
<DIV align="left"><A NAME="018"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16A.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Audit Committee Financial Expert</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has determined that Songyi Zhang qualify as &#147;audit committee financial
expert&#148; as defined in Item&nbsp;16A of Form 20-F. Each of the members of the Audit Committee except for
Dr.&nbsp;Zhengrong Shi is an &#147;independent director&#148; as defined in the Nasdaq Marketplace Rules. We
intend to have an independent audit committee before the first anniversary of our initial public
offering.
</DIV>

<!-- link2 "Item 16B. Code of Ethics" -->
<DIV align="left"><A NAME="019"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16B.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Code of Ethics</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has adopted a code of ethics that applies to our directors, officers,
employees and agents, including certain provisions that specifically apply to our chief executive
officer, chief financial officer, chief operating officer, chief technology officer, vice
presidents and any other persons who perform similar functions for us. We have filed our code of
business conduct and ethics as an exhibit to this annual report on Form 20-F, and posted the code
on our website www.suntech-power.com. We hereby undertake to provide to any person without charge,
a copy of our code of business conduct and ethics within ten working days after we receive such
person&#146;s written request.
</DIV>


<!-- link2 "Item 16C. Principal Accountant Fees and Services" -->
<DIV align="left"><A NAME="020"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16C.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>
Principal Accountant Fees and Services</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees by categories specified below in connection
with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our principal
external auditors, for the periods indicated. We did not pay any other fees to our
auditors during the periods indicated below.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>For the Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit fees<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,434,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax
Fees<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&#147;Audit fees&#148; means the aggregate fees billed for professional services rendered by our principal
auditors for the audit of our annual financial statements, review of the comparative interim financial statements
for the nine months ended September 30, 2005 and audit of our historical financial statements for each of the three
years ended December 31, 2004 in connection with our initial public
offering in 2005.</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">88
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&#147;Tax fees&#148; include fees billed for tax consultations.</TD>
</TR>
</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The policy of our audit committee is to pre-approve all audit and non-audit services
provided by Deloitte Touche Tohmatsu CPA Ltd., including audit services, audit-related services,
tax services and other services as described above, other than those for de minimus services which
are approved by the Audit Committee prior to the completion of the audit.
</DIV>


<!-- link2 "Item 16D. Exemptions from the Listing Standards for Audit Committees" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16D.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Exemptions from the Listing Standards for Audit Committees</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<!-- link2 "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers." -->
<DIV align="left"><A NAME="022"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16E.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Purchases of Equity Securities by the Issuer and Affiliated Purchasers.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<!-- link1 "PART III" -->
<DIV align="left"><A NAME="023"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>


<!-- link2 "Item 17. Financial Statements" -->
<DIV align="left"><A NAME="024"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;17.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Financial Statements</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have elected to provide financial statements pursuant to Item&nbsp;18.
</DIV>

<!-- link2 "Item 18. Financial Statements" -->
<DIV align="left"><A NAME="025"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;18.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Financial Statements</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following financial statements are filed as part of this Annual Report on Form 20-F,
together with the report of the independent auditors:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Independent Auditors&#146; Report</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Balance Sheets as of December&nbsp;31, 2004 and 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Operations and Comprehensive Income for the years ended
December&nbsp;31, 2003, 2004 and 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Shareholders&#146; Equity for the years ended December&nbsp;31,
2003, 2004 and 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2003, 2004
and 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notes to the Consolidated Financial Statements</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">89
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link2 "Item 19. Exhibits" -->
<DIV align="left"><A NAME="026"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;19.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Exhibits</B></FONT>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description of Document</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Memorandum and Articles of Association of Suntech
Power Holdings
Co., Ltd. (incorporated by
reference to Exhibit&nbsp;3.1 from our F-1 registration
statement (File No.&nbsp;333-129367), as amended,
initially filed with the Commission on November&nbsp;1,
2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Second Amended and Restated Memorandum and
Articles of Association of Suntech Power Holdings
Co., Ltd. (incorporated by reference to Exhibit
3.2 from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Specimen Certificate for Ordinary Shares of
Suntech Power Holdings Co., Ltd. (incorporated by
reference to Exhibit&nbsp;4.2 from our F-1 registration
statement (File No.&nbsp;333-129367), as amended,
initially filed with the Commission on November&nbsp;1,
2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of American Depositary Receipt of Suntech
Power Holdings Co., Ltd. (incorporated by
reference to Exhibit&nbsp;4.1 from our F-1 registration
statement (File No.&nbsp;333-129367), as amended,
initially filed with the Commission on November&nbsp;1,
2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Deposit Agreement among Suntech Power
Holdings Co., Ltd., the depositary and owners and
beneficial owners of the American Depositary
Receipts (incorporated by reference to Exhibit&nbsp;4.3
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Share Purchase Agreement, dated as of April&nbsp;29,
2005, among the Power Solar System Co., Ltd. and
other parties therein (incorporated by reference
to Exhibit&nbsp;4.4 from our F-1 registration statement
(File No.&nbsp;333-129367), as amended, initially filed
with the Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sale and Purchase Agreement in relation to the
entire issued share capital of Power Solar System
Co., Ltd. dated as of August&nbsp;29, 2005 among
Suntech Power Holdings Co., Ltd. and other parties
therein (incorporated by reference to Exhibit&nbsp;4.5
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement for the Transfer and Assumption of
Obligations under the Share Purchase Agreement and
the Right of First Refusal and Co-Sale Agreement
dated as of August&nbsp;29, 2005 among Suntech Power
Holdings Co., Ltd. and other parties therein
(incorporated by reference to Exhibit&nbsp;4.6 from our
F-1 registration statement (File No.&nbsp;333-129367),
as amended, initially filed with the Commission on
November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Long-term Loan Agreement between Wuxi Suntech
Solar Power Company Limited and Industrial and
Commercial Bank of China, Wuxi Branch dated March
31, 2005 (incorporated by reference to Exhibit&nbsp;4.7
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">RMB Loan Agreement (Short-term) between Wuxi
Suntech Solar Power Company Limited and Bank of
China, New &#038; Hi-tech Industrial Development Zone
Wuxi Branch dated April&nbsp;30, 2005</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">90
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(incorporated by
reference to Exhibit&nbsp;4.8 from our F-1 registration
statement (File No.&nbsp;333-129367), as amended,
initially filed with the Commission on November&nbsp;1,
2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Foreign Currency Loan Agreement between Wuxi
Suntech Solar Power Company Limited and Bank of
China, New &#038; Hi-tech Industrial Development Zone
Wuxi Branch dated January&nbsp;31, 2005 (incorporated
by reference to Exhibit&nbsp;4.9 from our F-1
registration statement (File No.&nbsp;333-129367), as
amended, initially filed with the Commission on
November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amended and Restated 2005 Share Incentive Plan
(incorporated by reference to Exhibit&nbsp;10.1 from
our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Indemnification Agreement with the
Registrant&#146;s directors (incorporated by reference
to Exhibit&nbsp;10.2 from our F-1 registration
statement (File No.&nbsp;333-129367), as amended,
initially filed with the Commission on November&nbsp;1,
2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Employment and Confidentiality Agreement
between Suntech Power Holdings Co., Ltd. and
senior executive officers of Suntech Power
Holdings Co., Ltd. (incorporated by reference to
Exhibit&nbsp;10.3 from our F-1 registration statement
(File No.&nbsp;333-129367), as amended, initially filed
with the Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Non-Disclosure, Non-Competition and
Proprietary Information Agreement (incorporated by
reference to Exhibit&nbsp;10.4 from our F-1
registration statement (File No.&nbsp;333-129367), as
amended, initially filed with the Commission on
November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">List of Subsidiaries (incorporated by reference to
Exhibit&nbsp;21.1 from our F-1 registration statement
(File No.&nbsp;333-129367), as amended, initially filed
with the Commission on November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Code of Business Conduct and Ethics (incorporated
by reference to Exhibit&nbsp;99.1 from our F-1
registration statement (File No.&nbsp;333-129367), as
amended, initially filed with the Commission on
November&nbsp;1, 2005)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1*
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CEO Certification Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2*
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CFO Certification Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1*
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CEO Certification Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2*
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CFO Certification Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1*
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consent of Maples and Calder</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with this Annual Report on Form&nbsp;20-F</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">91
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all of the requirements for filing its annual
report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">SUNTECH POWER HOLDINGS CO., LTD.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By
</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" style="border-bottom: 1px solid #000000">/S/ Zhengrong Shi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">Name: Dr.&nbsp;Zhengrong Shi
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">Title:
Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: April&nbsp;27, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheets as of December&nbsp;31, 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Income Statements for the Years Ended December&nbsp;31, 2003, 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statements of Shareholders&#146; Equity and Comprehensive Income for the Years
ended December&nbsp;31, 2003, 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statements of Cash Flows for the Years Ended December&nbsp;31, 2003, 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes to the Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-8</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Shareholders of<BR>
Suntech Power Holdings Co., Ltd.:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited the accompanying consolidated balance sheets of Suntech Power Holdings Co.,
Ltd. and its subsidiaries (the &#147;Company&#148;) as of December&nbsp;31, 2004 and 2005, and the related
consolidated statements of income, shareholders&#146; equity and comprehensive income, and cash flows
for the three years in the period ended December&nbsp;31, 2005. These financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the
Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December&nbsp;31, 2004 and 2005 and the results of
their operations and their cash flows for the three years in the period ended December&nbsp;31, 2005 in
conformity with accounting principles generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ <FONT style="font-variant: SMALL-CAPS">Deloitte Touche Tohmatsu </FONT>CPA <FONT style="font-variant: SMALL-CAPS">Ltd</FONT>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shanghai, China

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">April&nbsp;11, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED BALANCE SHEETS<BR>
(In U.S. dollars)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,122,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359,324,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,995,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,997,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,472,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,427,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net of allowance for doubtful accounts of $159,318 and $243,013 in 2004
and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,252,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,659,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other receivable, net of allowance for doubtful accounts of $14,064 and $12,434 in 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,407,875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Value-added tax recoverable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,222,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,195,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,001,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amounts due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,913,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">436,479,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,211,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,717,333</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,412,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,922,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments in affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,059,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,468,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,664,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings, including current portion of long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,441,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,193,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,864,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,522,221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,769,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payables in respect of purchase of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,093</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,059,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued payroll and welfare</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,060,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,106,444</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amounts due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,898,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,224,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,975,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,717,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued warranty costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">847,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,619,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,072,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,312,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies (Note 18)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">
Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,429,102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary share of par value $0.01: authorized 465,332,947 shares; 90,000,000 shares issued and
outstanding as of December&nbsp;31, 2004; 147,487,707 shares issued and outstanding as of December
31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,474,877</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,108,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364,043,762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,716,132</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,380,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,602,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,517,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,395,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,923,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,468,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,664,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED INCOME STATEMENTS<BR>
(In U.S. dollars, except share data)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,741,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,331,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,653,423</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,104,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,898,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,128,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218,267</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,888,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,287,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,000,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV cells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,695,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,269,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,440,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV modules</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,467,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,861,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,183,426</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PV system integration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,195,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,174,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,438,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,692,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,113,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,561,992</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,749,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,667,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,233,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,889,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,874,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,357,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,940,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,104,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,899,366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,008,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,662,626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(226,592</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,036,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,907,323</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,612</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758,245</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,196,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,293,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit (expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,752,679</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income after taxes before minority interest and equity in
(loss)&nbsp;earnings of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,808,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,540,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,915</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in (loss)&nbsp;earnings of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,421</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deemed dividend on Series&nbsp;A redeemable convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,406,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income attributable to holders of ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,222,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used in computation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,047,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,825,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY AND COMPREHENSIVE INCOME<BR>
(In U.S. dollars, except share data)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Ordinary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Subscription</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>receivable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,108,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(876,165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,301,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,833,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 6pt"><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,108,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(876,165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(376,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,759,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Collection of subscription capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876,165</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,929</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,108,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,380,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,395,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return of
capital upon <BR>re-organization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,459,423</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,459,423</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deemed dividend on Series&nbsp;A redeemable
convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,406,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,406,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of ordinary shares pursuant to
initial public offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,820,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319,943,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,172,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of preferred shares into
ordinary shares upon the completion of
initial public offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,667,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,059,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,406,099</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,391,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,150,680</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,240,386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,434,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,434,548</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,511,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,511,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,487,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,474,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364,043,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,716,132</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,602,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,517,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,923,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(In U.S. dollars)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income attributable to holders of ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,222,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deemed dividend on Series&nbsp;A redeemable convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,406,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net income to net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Share based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,674,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,182,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,873,053</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(300,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(611,465</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(680,959</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity in loss (earnings)&nbsp;of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,408</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,137,869</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,125,206</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,722,600</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(858,075</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,846,672</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,146,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(174,466</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,535</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,166,103</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Value-added tax recoverable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,464</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,088,922</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883,636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(102,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,006,768</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,582,465</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Amounts due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">677,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75,689</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,325,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Advances from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,681,899</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued payroll and welfare</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,346,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,898,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Amounts due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,879</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued warranty costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,771,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Non-current receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,417</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">716,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,576,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,621,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisitions of subsidiaries, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(587,655</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,546,544</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,232,571</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,058,708</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(241,642</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,144,346</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(639,988</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,060,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,046,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,823</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(905,837</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase in restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(237,915</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,700,966</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,001,748</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,026,101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,129,052</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,120,405</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(In U.S. dollars)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from issuance of ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,172,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from short-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,581,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,236,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,273,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,195,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from subscription receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Return of capital upon reorganization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(83,056,473</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from shareholder loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,597,050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from issuance of preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000,099</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Contribution from minority shareholder of a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">914,952</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,581,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,112,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,096,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">604,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,271,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,563,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340,202,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,558,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,122,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,558,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,122,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359,324,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of cash flow information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,254,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,499,623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental schedule of non-cash investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of property, plant and equipment included in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,093</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUNTECH POWER HOLDINGS CO., LTD.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005<BR>
(In U.S. dollars, except share data)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. ORGANIZATION AND PRINCIPAL ACTIVITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech Power Holdings Co., Ltd. (&#147;Suntech Power&#148;) was incorporated in the Cayman Islands
under the laws of the Cayman Islands on August&nbsp;8, 2005. On December&nbsp;14, 2005, the Company became
listed on the New York Stock Exchange (&#147;NYSE&#148;) in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech Power and it subsidiaries (collectively the &#147;Company&#148;) are principally engaged in the
design, development, manufacturing and marketing of photovoltaic (&#147;PV&#148;) products in the People&#146;s
Republic of China (the &#147;PRC&#148;) and overseas markets. During the years covered by the consolidated
financial statements, substantially all of the Company&#146;s business was conducted through an
operating subsidiary established in the PRC, Wuxi Suntech Power Co., Ltd. (&#147;Wuxi Suntech&#148;), in
which Suntech Power indirectly holds a 100% interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech Power, through its subsidiary, Power Solar System Co., Ltd. (&#147;Power Solar BVI&#148;),
acquired 100% of the voting interests in Wuxi Suntech through a series of planned transactions that
were completed on May&nbsp;19, 2005. These transactions have been accounted for as a recapitalization
because there was no control or collaborative group established.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;8, 2005, the Company issued 1 share for par value of $0.01 on incorporation. On
August&nbsp;29, 2005, in connection with a legal reorganization, the Company issued 89,999,999 fully
paid up shares of $0.01 each on a pro-rata basis to the shareholders of Power Solar BVI that owned
100% of Wuxi Suntech in exchange for those interests. The Company has accounted for the issuance
of shares in connection with this reorganization as a legal reorganization of entities under common
control in a manner similar to a pooling-of-interests, and accordingly all share and per share data
have been restated to give retroactive effect to this transaction. Accordingly, the share capital
represents the capital amount of the Company as if the reorganization had been completed as of the
earliest period presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the Suntech Power&#146;s subsidiaries include the following entities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Date of</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Place of</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percentage</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Subsidiary</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Date of acquisition</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">incorporation</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">incorporation</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">of ownership</TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Power Solar BVI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">N/A</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">June 23, 2000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Power Solar System Pty. Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">N/A</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">June 23, 2000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">Australia</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eucken Capital Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">N/A</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" valign="top" align="right">February 9, 2005</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wuxi Suntech</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">N/A</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">January 22, 2001</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luoyang Suntech Power Co., Ltd.
(&#147;Luoyang Suntech&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">N/A</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right" nowrap>October 16, 2005</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">87</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Qinghai Suntech Nima Power Co., Ltd.
(&#147;Qinghai Suntech&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">July 18, 2005</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">July 24, 2000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wuxi Shangneng Photovoltaic Sciences
System Co., Ltd. (&#147;Wuxi Shangneng&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right" nowrap>August 25, 2005</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">June 9, 2004</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right">PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(a)&nbsp;Basis of presentation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of the Company have been prepared in accordance with the
accounting principles generally accepted in the United States of America (&#147;US GAAP&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(b)&nbsp;Basis of Consolidation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the financial statements of Suntech Power and
its majority-owned subsidiaries. All significant intercompany transactions and balances are
eliminated on consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(c)&nbsp;Use of estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could differ from those
estimates. The Company bases its estimates on historical experience and various other factors
believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Significant accounting estimates reflected in the Company&#146;s consolidated financial
statements include reserve for obsolete inventory and allowance for doubtful receivables, the
useful lives of and impairment for property, plant and equipment and intangible assets, accruals
for warranty costs, valuation allowance of deferred tax assets and impairment of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(d)&nbsp;Cash and cash equivalents and restricted cash</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted
as to withdrawal and use, and which have maturities of three months or less when purchased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash represents bank deposits for securing letter of credit facilities granted to
the Company. The Company has classified as restricted certain cash and cash equivalents that are
not available for use in its operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(e)&nbsp;Inventories</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market. Cost is determined by the weighted
average method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(f)&nbsp;Property, plant and equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment are recorded at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on a straight-line basis over the
following estimated useful lives:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">20 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">over the shorter of the lease term or their estimated useful lives</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plant and machinery </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5-10 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, fixtures and equipment </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Motor vehicles </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Costs incurred in constructing new facilities, including progress payments and other costs
relating to the construction, are capitalized and transferred to property, plant and equipment on
completion and depreciated from that time.
</DIV>

<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(g)&nbsp;Intangible assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technical know-how is carried at cost less accumulated amortization. The technical know-how
comprises the design of the PV manufacturing line, selection of facility and manufacturing
equipment, provision of manufacturing technologies and process for high efficiency silicon Solar
cells based on screen printing method, provision of innovations for continuous improvement of cell
efficiencies, and manufacturing cost reduction. Amortization is calculated on a straight-line
basis over the expected useful life of the assets of 10&nbsp;years. The technical know-how would be
amortized over its useful life following the pattern in which the expected benefits will be
consumed or otherwise used up.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land use rights are recorded at cost less accumulated amortization. Amortization is provided
on a straight-line basis over the term of the land use right agreement, which ranges from 46.3 to
49.4&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization expenses for the years ended December&nbsp;31, 2003, 2004 and 2005 were $159,911,
$159,986 and $206,110, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(h)&nbsp;Goodwill</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill represents the excess of the cost of acquisition over the fair value of the
identifiable assets and liabilities acquired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired. The Group completes a two-step goodwill
impairment test. The first step compares the fair values of each reporting unit to its carrying
amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount,
goodwill is not considered to be impaired and the second step will not be required. If the carrying
amount of a reporting unit exceeds its fair value, the second step compares the implied fair value
of goodwill to the carrying value of a reporting unit&#146;s goodwill. The implied fair value of
goodwill is determined in a manner similar to accounting for a business combination with the
allocation of the assessed fair value determined in the first step to the assets and liabilities of
the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to
the assets and liabilities is the implied fair value of goodwill. This allocation process is only
performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust
the value of any assets or liabilities. An impairment loss is recognized for any excess in the
carrying value of goodwill over the implied fair value of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(i)&nbsp;Investments in affiliates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affiliated companies in which the Company owns more than 20% and less than 51% of the
investment are accounted for using the equity method of accounting. The Company&#146;s share of earnings
of the equity investments are included in the accompanying consolidated income statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(j)&nbsp;Impairment of long-lived assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company evaluates its long-lived assets and finite lived intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. When these events occur, the Company measures impairment by comparing the carrying
amount of the assets to future undiscounted net cash flows expected to result from the use of the
assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less
than the carrying amount of the assets, the Company would recognize an impairment loss based on the
fair value of the assets.
</DIV>

<P align="center" style="font-size: 10pt">F-10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(k)&nbsp;Income taxes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes are recognized for temporary differences between the tax basis of assets
and liabilities and their reported amounts in the financial statements, net operating loss
carryforwards and credits by applying enacted statutory tax rates applicable to future years.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets will not be realized.
Current income taxes are provided for in accordance with the laws of the relevant taxing
authorities. The components of the deferred tax assets and liabilities are individually classified
as current and non-current based on the characteristics of the underlying assets and liabilities,
or the expected timing of their use when they do not relate to a specific asset or liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(l)&nbsp;Revenue recognition</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of PV cells and modules are recorded when the products are delivered and title has
passed to the customers. A majority of the Company&#146;s contracts are written such that products are
shipped CIF destination. Accordingly, the Company must receive written evidence that the products
have been delivered to and accepted by the customer prior to recognizing revenue. Additionally,
certain of the Company&#146;s agreements provide for settlement through document-against-payment (D/P
method), whereby the Company presents shipping documents to its bank and the Company&#146;s bank
forwards the shipping documents along with a collection notice to the customer&#146;s bank, which then
sends the collection notice to the customer. The customer makes payment upon receiving the notice
and only after payment does the customer take possession of the products. A majority of the
Company&#146;s sales to domestic customers require the customers to prepay before delivery has occurred.
Such prepayments are recorded as advances from customers, in the Company&#146;s consolidated balance
sheet, until delivery has occurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has distributor arrangements with certain parties for sales on their own account
or, through arrangements with the Company, to direct ship to specified customers. In either
arrangement the distributor pays the Company for products based on pre-arranged price lists which
are subject to periodic update. The payment terms with the distributors are either down payment
upon delivery to the warehouse or payment terms of up to 2&nbsp;months if collateralized by bank letters
of credit. The Company also offers a one percent discount to certain distributors if payment is
made upon delivery to the warehouse. The agreements with the distributors contain the Company&#146;s
customary product warranties and contain no post shipment obligations nor any return or credit
provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognizes revenues for systems integration at the time the integration project is
completed (contracts are typically one to two weeks in duration), primarily because the Company
does not have vendor specific objective evidence to allow for separating the various components of
the systems integration contracts into separate units of accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to evidence of contractual arrangements and delivery of products or services, as
discussed above, the Company only recognizes revenues when prices to the seller are fixed or
determinable, and collectibility is reasonably assured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues also include reimbursements of shipping and handling costs of products sold to
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(m)&nbsp;Buy/sell arrangements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has buy/sell arrangements with certain raw materials vendors wherein the Company
sells finished goods, comprised of either solar cells or solar modules, in exchange for the
acquisition of raw materials in the form of silicon wafers. These arrangements are with
counterparties in the same line of business as the Company and are executed as a means of securing
a consistent supply of silicon wafer raw materials. The exchanges of its finished goods inventory
items for raw material silicon wafers are recorded at fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December&nbsp;31, 2005, the Company purchased $60,564,462 of raw materials
and sold $129,358,026 of finished goods under these buy/sell arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(n)&nbsp;Cost of revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue includes production and indirect costs, as well as shipping and handling costs
for products sold.
</DIV>

<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(o)&nbsp;Research and development</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs are expensed when incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(p)&nbsp;Advertising expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising expenses are charged to the income statements in the period incurred. The Company
incurred advertising expenses amounting to $48,514, $129,660 and $456,586 for the years ended
December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(q)&nbsp;Warranty cost</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company warrants its products for up to 25&nbsp;years after sales have taken place. Due to
limited warranty claims to date, the Company accrues the estimated costs of warranties based on an
assessment of its competitors&#146; accrual history while incorporating some estimates of failure rates
through its quality review staff. Actual warranty costs are accumulated and charged against the
accrued warranty liability. To the extent that actual warranty costs differ from the estimates,
the Company will prospectively revise its accrual rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(r)&nbsp;Government grants</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government grants are recognized when received and all the conditions for their receipt have
been met. Government grants are recognized as income in the period in which the related
expenditures are recorded. Capital grants for the acquisition of equipment are recorded as a
liability until earned and then offset against the related capital assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(s)&nbsp;Start-up costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Statement of Position No.&nbsp;98-5, &#147;Reporting on the costs of start-up
activities,&#148; the Company expenses all costs incurred in connection with start-up activities,
including preproduction costs associated with new manufacturing facilities and costs incurred with
the formation of the Company such as organization costs. Preproduction costs including the design,
formulation and testing of new products or process alternatives are included in research and
development expenses. Preproduction costs including facility and employee costs incurred in
connection with constructing new manufacturing plants are included in general and administrative
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(t)&nbsp;Foreign currency translation and comprehensive income</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The functional currency of the Company is Renminbi (&#147;RMB&#148;). Transactions dominated in other
currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur.
Monetary assets and liabilities denominated in other currencies are translated into RMB at rates of
exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the income
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has chosen the U.S. dollar as its reporting currency. Accordingly assets and
liabilities are translated using exchange rates in effect at each year end and average exchange
rates are used for the income statements. Translation adjustments resulting from translation of
these financial statements are reflected as accumulated translation reserve in the shareholders&#146;
equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive income is comprised of net income and foreign currency translation
adjustments and amounted to $925,818, $19,760,604 and $32,139,684 for the years ended December&nbsp;31,
2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(u)&nbsp;Foreign currency risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The RMB is not a freely convertible currency. The PRC State Administration for Foreign
Exchange, under the authority of the People&#146;s Bank of China, controls the conversion of RMB into
foreign currencies. The value of the RMB is subject to changes in central government policies and
to international economic and political developments affecting supply and demand in the China
foreign exchange trading system market. The Company&#146;s aggregate amount of cash and cash equivalents
and restricted cash dominated in RMB amounted to $21,015,109 and $22,740,651 at December&nbsp;31, 2004
and 2005, respectively.
</DIV>

<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(v)&nbsp;Concentration of credit risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist of principally of cash and cash equivalent and advances to suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company places its net proceeds from public offering in one high quality financial
institution in Hong Kong. With respects to advance to suppliers, such suppliers are primarily
suppliers of silicon wafers raw materials in the PRC. The Company performs ongoing credit
evaluations of its suppliers&#146; financial conditions. The Company generally does not require
collateral or other security against advance to suppliers; however, it maintains reserve for
potential credit losses and such losses have historically been within management&#146;s expectations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(w)&nbsp;Fair value of financial instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amounts of trade receivables, accounts payable and short-term borrowings
approximate their fair values due to the short-term maturity of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The long-term bank borrowings approximate their fair value since the contract was recently
entered into and market interest rates have not fluctuated significantly since that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(x)&nbsp;Share-based compensation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for share-based awards to non-employees by recording a charge for the
services rendered by the non-employees using the Black-Scholes option pricing model. The Company
records a compensation charge for the excess of the fair value of the shares at the grant date or
any other measurement date over the amount an employee must pay to acquire the shares. The
compensation expense is recognized over the applicable service period, which is usually the vesting
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purpose of the foregoing pro forma calculation, had compensation costs for options granted
to employees under the Company&#146;s share option plan been determined based on fair value of the
options at the grant dates, the Company&#146;s pro forma income would have been:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Employee stock compensation expense included in earnings </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,434,548</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Employee stock compensation expense determined
using the fair value method not included in earnings </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,306,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,756,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deemed dividend on Series&nbsp;A redeemable convertible preferred shares </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,406,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income available to ordinary shareholders </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,350,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used in computation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,047,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,825,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic, as reported </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic &#151; pro forma </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted, as reported </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted &#151; pro forma </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-13
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>(y)&nbsp;Income per share</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic income per share is computed by dividing income attributable to holders of ordinary
shares by the weighted average number of ordinary shares outstanding during the year. Diluted
income per ordinary share reflects the potential dilution that could occur if securities or other
contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share
equivalents are excluded from the computation in loss periods as their effects would be
anti-dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the computation of basic and diluted income per share for the
periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income available to ordinary shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,222,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Deemed dividend on Series&nbsp;A redeemable convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,406,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings assuming dilution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">925,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,756,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,628,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ordinary shares for the calculation of basic income
per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,047,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive potential ordinary shares:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Series&nbsp;A redeemable convertible preferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,465,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,312,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ordinary shares for the calculation of diluted income
per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,825,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>(z)&nbsp;Recently issued accounting pronouncements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of
Financial Accounting Standard (&#147;SFAS&#148;) No.&nbsp;123 (revised 2004) (&#147;SFAS No.&nbsp;123-R&#148;). &#147;Share-Based
Payment&#148;, which is a revision of SFAS No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148;. SFAS No.
123-R supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148;. Generally, the
approach in SFAS No.&nbsp;123-R is similar to the approach described in SFAS No.&nbsp;123. However, SFAS No.
123-R requires all share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on the grant-date fair values. Pro forma disclosure
previously permitted under SFAS No.&nbsp;123 is no longer an alternative. The new standard, as recently
amended, will be effective for the Company in the annual reporting period beginning after January
1, 2006. Under SFAS No.&nbsp;123-R, the Company could elect the modified prospective or modified
retroactive option for transition on the adoption of this new standard. Under the modified
retroactive option, prior periods are adjusted on a basis consistent with the pro forma disclosures
previously required for those periods by SFAS No.&nbsp;123. Under the modified prospective option,
compensation expense for all unvested stock options must be recognized on or after the required
effective date based on the grant-date fair value of those stock options. The unrecognized fair
value of share options issued prior to January&nbsp;1, 2006 approximates $23,326,659 which will be
incurred by the Company through fiscal 2008. Prior to the adoption of SFAS No.&nbsp;123-R, the Company
utilized the accounting method prescribed by APB Opinion No.&nbsp;25 and adopted the disclosure
requirements of SFAS No.&nbsp;148 as allowed by SFAS No.&nbsp;123.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;Inventory Costs &#151; an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4&#148; (&#147;SFAS No.&nbsp;151&#148;). SFAS No.&nbsp;151 clarifies the accounting that requires abnormal amounts
of idle facility expenses, freight, handling costs, and spoilage costs to be recognized as
current-period charges. It also requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS No.&nbsp;151 has been
effective for inventory costs incurred on or after July&nbsp;1, 2005. The adoption of this standard did
not have a material effect on the Company&#146;s financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets &#151; an
amendment of APB Opinion No.&nbsp;29&#148; (&#147;SFAS No.&nbsp;153&#148;), which amends Accounting Principles Board Opinion
No.&nbsp;29, &#147;Accounting for Nonmonetary Transactions&#148; to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. SFAS No.&nbsp;153 is effective for nonmonetary
assets exchanges occurring in fiscal periods beginning after June&nbsp;15, 2005. The Company does not
anticipate that the adoption of this statement will have a material effect on the Company&#146;s
financial position or results of operations.
</DIV>

<P align="center" style="font-size: 10pt">F-14
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>(z)&nbsp;Recently issued accounting pronouncements &#151; continued</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154, &#147;Accounting Changes and Error Corrections&#148; (&#147;SFAS
No.&nbsp;154&#148;) which replaces Accounting Principles Board Opinions No.&nbsp;20 &#147;Accounting Changes&#148; and SFAS
No.&nbsp;3, &#147;Reporting Accounting Changes in Interim Financial Statements &#151; An Amendment of APB Opinion
No.&nbsp;28.&#148; SFAS No.&nbsp;154 provides guidance on the accounting for and reporting of accounting changes
and error corrections. It establishes retrospective application, or the latest practicable date, as
the required method for reporting a change in accounting principle and the reporting of a
correction of an error. SFAS No.&nbsp;154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December&nbsp;15, 2005. The Company does not anticipate that the
adoption of this statement will have a material effect on the Company&#146;s financial position or
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2005 the Emerging Issues Task Force (EITF)&nbsp;published Issue 04-13, <I>Accounting for
Purchases and Sales of Inventory with the Same Counterparty. </I>The Issue addresses the accounting and
disclosure requirements of accounting for purchases and sales of inventory with the same
counterparty. In certain situations, as discussed further in the Issue, generally accepted
accounting principles may require these types of transactions be carried at historical cost of
inventory as opposed to the inventory&#146;s fair value, and potentially to defer revenue recognition
primarily in situations wherein the transactions may not represent a completed revenue earnings
cycle. Although the Issue is applicable for arrangements entered into by entities for interim or
annual periods beginning after March&nbsp;15, 2006, the Company has elected to early adopt the
disclosure provisions of the Issue which the Company believes are the only provisions currently
applicable to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2005, the FASB issued FASB Interpretation No. (&#147;FIN&#148;) 47, &#147;Accounting for Conditional
Assets Retirement Obligations, an interpretation of SFAS No.&nbsp;143&#148;. FIN 47 clarifies that an entity
is required to recognize a liability for legal obligation to perform an asset retirement activity
if the fair value can be reasonably estimated even though the timing and/or method of settlement
are conditional on a future event. FIN 47 is required to be adopted for annual reporting periods
ending after December&nbsp;15, 2005. The adoption of this interpretation is not expected to have a
material impact on the Company&#146;s financial position, results of operations or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. ACQUISITIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the year ended December&nbsp;31, 2005, the Company made the following acquisitions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>(a)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2005, the Company increased its existing ownership of Wuxi Shangneng, a
company engaged in the manufacture of PV products, from 50% to 100% by acquiring an
additional 50% equity interest for a cash consideration of $123,449; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>(b)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2005, the Company entered into an equity interest transfer agreement to acquire
51% equity interest in Qinghai Suntech, a company engaged in the manufacture of PV
products, for a cash consideration of $538,145.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The acquisitions were recorded using the purchase method of accounting and, accordingly, the
acquired assets and liabilities were recorded at their fair values at the date of acquisition. The
purchase prices were allocated as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net tangible assets assumed </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total consideration </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow information</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash consideration paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: cash acquired </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73,939</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Business acquisitions, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587,655</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results of these acquired entities have been included in the Company&#146;s consolidated
results from their respective acquisition dates. Pro forma results from these acquisitions would
not have been materially different from the amounts reported.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only movement of goodwill was the goodwill arising from the acquisitions incurred during
the year ended December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt">F-15
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,627,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,784,394</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work-in-process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,831,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,187,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,812,033</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,472,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,427,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004 and 2005, accounts receivable of $3,760,185 and $Nil, respectively,
were pledged to certain banks as collateral for the letter of credit facilities granted to the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company made provisions for doubtful debts of in the aggregate amount of $32,593, $85,415
and $82,065 during the years ended December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. PROPERTY, PLANT AND EQUIPMENT, NET</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment, net consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,668,498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,227,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,498,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plant and machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,959,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,252,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, fixtures and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Motor vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,853,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,215,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,694,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,892,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less: Accumulated depreciation</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,483,455</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,175,449</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property, plant and equipment, net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,211,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,717,333</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense was $1,022,479, $1,810,489 and $3,666,943 for the years ended December
31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The construction in process primarily represents the construction of a new plant that includes
several new production lines.
</DIV>

<P align="center" style="font-size: 10pt">F-16
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. INTANGIBLE ASSETS, NET</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortized intangible assets, net consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technical know-how</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,641,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land use rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,385,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,061,398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,986,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,702,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less: Accumulated amortization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technical know-how</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(573,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(751,921</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land use rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,539</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(573,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(779,460</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Intangible assets, net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,412,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,922,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At inception, certain shareholders agreed to contribute approximately $6.4&nbsp;million for an 80%
interest in Wuxi Suntech and the other shareholder agreed to contributed unpatented technical
know-how for a 20% interest. The implied fair value of the unpatented technical know-how was
approximately $1.6&nbsp;million. The unpatented technical know-how was a contractual provision between
Dr.&nbsp;Shi and the remaining equity interest holders at the formation of Wuxi Suntech.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For each of the next five years, annual amortization expenses of the above technical know-how
and land use rights will be approximately $164,106 and $38,372, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. INVESTMENTS IN AFFILIATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During June&nbsp;2004, the Company and four other parties formed a joint venture, Wuxi Shangneng.
The Company contributed $120,823 in cash to fund the initial investment in the venture. Due to its
50% voting interest in Wuxi Shangneng, the Company accounts for this investment using the equity
method of accounting. In 2004, the Company&#146;s equity in earnings/losses of this affiliate are
recognized in the income statements from the period Wuxi Shangneng began operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;25, 2005, Wuxi Suntech acquired the additional 50% interest in Wuxi Shangneng for
total consideration of $123,449. The Company has merged its business into Wuxi Suntech and is in
the process of liquidating Wuxi Shangneng.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During April&nbsp;2005, the Company acquired a 25% equity interest in Jiangsu Huariyuan Electronics
Technology Co., Ltd. (&#147;Jiangsu Huariyuan&#148;) for a purchase price of $905,837. Due to its 25% voting
interests in Huariyuan, the Company accounts for this investment using the equity method of
accounting. The Company&#146;s equity in earnings/losses of this affiliate are recognized in the income
statement.
</DIV>

<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. BANK BORROWINGS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,441,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,910,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Analysis as:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,441,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,714,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,478,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,441,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,193,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term, non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,717,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,441,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,910,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The short-term bank borrowings outstanding as of December&nbsp;31, 2004 and 2005 bore an average
interest rate of 4.47% and 5.90% per annum, respectively. These loans are borrowed from various
financial institutions and represent the maximum amount of each facility. These loans does not
contain any financial covenants or restrictions. The borrowings have one year terms and expire at
various times throughout the year. These facilities contain no specific renewal terms but the
Company has traditionally negotiated renewal of certain of the facilities shortly before they
mature. The short-term bank borrowings of $1,933,184 and $991,301 as of December&nbsp;31, 2004 and 2005
were guaranteed by an ex-shareholder. The remaining amounts were guaranteed by certain independent
financial institutions, in return for which the Company paid them service charges of $3,262,
$241,150 and $299,472, for the years ended December&nbsp;31, 2003, 2004 and 2005, respectively, for the
provision of the guarantee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a long-term credit facility (&#147;Credit Facility&#148;) with Industrial and Commercial
Bank of China. The Credit Facility does not contain any financial covenants or restrictions. The
maximum borrowing amount under the Credit Facility is $6,178,950 (RMB50,000,000), of which
$2,471,587 (RMB20,000,000) was borrowed on March&nbsp;31, 2005; and an additional $3,707,370
(RMB30,000,000) was borrowed on September&nbsp;26, 2005. The debt does not require any collateral or
guarantee. The Credit Facility provides for a three-year term expiring on March&nbsp;28, 2008 at an
interest rate of 5.76% per annum for the first drawing of $2,471,587 (RMB20,000,000) and 6.336% per
annum for the second drawing of $3,707,370 (RMB30,000,000) in the first year, and at market rate
for the subsequent years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. ACCRUED WARRANTY COSTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s accrued warranty costs are based on the Company&#146;s best estimates of product
failure rates and costs to repair. The movement of Company&#146;s accrued warranty costs is summarized
below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">847,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,813,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty costs incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,934</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">847,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,619,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. REDEEMABLE CONVERTIBLE PREFERRED SHARES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the Company issued 34,667,052 Series&nbsp;A redeemable convertible preferred shares,
par value $0.01 per share (the &#147;Series&nbsp;A Shares&#148;), to a group of third party investors for gross
cash proceeds of $80,001,156, net of issuance costs of $1,057. The cash proceeds were used
primarily to purchase the equity interests of the previous shareholders with the remainder for
general corporate purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the completion of the Company&#146;s listing on NYSE (the &#147;IPO&#148;), all of the issued and
outstanding Series&nbsp;A redeemable convertible preferred Shares converted into ordinary shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holder of Series&nbsp;A Shares could have redeemed, at any time after the earlier of (i)&nbsp;the
date that was thirty-seven months from the date of the issuance of the Series&nbsp;A shares and (ii)
such time as the holders of no less than two-thirds of the then outstanding preferred shares
required, upon fulfillment of certain conditions, that the Company redeemed all of the preferred
shares outstanding. In connection with the redemption of any Series&nbsp;A Shares, the Company would
have had to pay a redemption price equal to 115% of the original purchase price of the preferred
shares. The Company accrued the premium over the redemption period as a deemed dividend with a
debit to the retained earnings of $2,406,000 until the IPO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. ORDINARY SHARE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;On August&nbsp;8, 2005, the Company issued 1 ordinary share for par value of $0.01 on
incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;On August&nbsp;29, 2005, in connection with a legal reorganization, the Company issued
89,999,999 fully paid up shares of $0.01 each on a pro-rata basis to the shareholders of Power
Solar BVI that owned 100% of Wuxi Suntech in exchange for those interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;In December&nbsp;2005, the Company offered 22,820,655 American Depositary Shares (&#147;ADSs&#148;),
representing 22,820,655 ordinary shares, at $15 each to the public, raising proceeds of
$320,172,029, net of issuance costs of $22,137,796 . The Company&#146;s ADSs are quoted on
the NYSE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Issued and outstanding Series&nbsp;A redeemable convertible preferred Shares converted into
34,667,052 ordinary shares on a one to one basis upon the completion of the Company&#146;s IPO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;China Contribution Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full time employees of the Company in the PRC participate in a government-mandated
multi-employer defined contribution plan pursuant to which certain pension benefits, medical
care, unemployment insurance, employee housing fund and other welfare benefits are provided to
employees. PRC labor regulations require the Company to accrue for these benefits based on
certain percentage of the employees&#146; salaries. The total contribution for such employee benefits
were $110,737, $204,866 and $492,053 for the years ended December&nbsp;31, 2003, 2004 and 2005,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Statutory Reserves</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the
Company in the PRC must make appropriations from after-tax profit to non-distributable reserve
funds. These reserve funds include one or more of the following: (1)&nbsp;a general reserve, (ii)&nbsp;an
enterprise expansion fund and (iii)&nbsp;a staff bonus and welfare fund. Subject to certain cumulative
limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as
determined under accounting principles generally accepted in the PRC at each year-end); the other
fund appropriations are at the subsidiaries&#146; discretion. These reserve funds can only be used for
specific purposes of enterprise expansion and staff bonus and welfare and are not distributable
as cash dividends. No appropriation was made by the subsidiaries in 2003, 2004, and 2005.
</DIV>

<P align="center" style="font-size: 10pt">F-19
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c)&nbsp;Other</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the board resolution in August&nbsp;2005, retained earnings of $4,999,998 was
transferred and declared as the registered capital of a subsidiary of the Company. The
transferred retained earnings are therefore unavailable for distribution as a normal dividend to
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. SHARE OPTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2005, the Company adopted a stock option scheme (the &#147;Option Plan&#148;) which allows the
Company to offer a variety of incentive awards to employees, directors and consultants of the
Company. As of December&nbsp;31, 2005, options to purchase not more than 13,503,991 ordinary shares are
authorized under the Option Plan. Under the terms of the Option Plan, options are generally granted
at prices not less than 100% of the fair market value of ordinary shares on the date of grant and
not less than $2.3077 per share. Each option granted should expire within 5&nbsp;years from the date of
grant and generally vest over 3&nbsp;years while certain options granted vest immediately. As of
December&nbsp;31, 2005, options to purchase 10,809,383 ordinary shares were granted and outstanding. No
option was exercised during the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Options to Employees</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;5, 2005, the Company granted options to acquire 5,910,000 ordinary shares to
certain directors and employees. One-third of these options vested on December&nbsp;31, 2005, one-third
of the options will vest on September&nbsp;5, 2007 and 2008, respectively. These options were granted in
anticipation of services to be provided during the respective vesting periods. The exercise price
of these options is $6.922 per option. The ordinary shares that underlie the options that vest on
December&nbsp;31, 2005 are restricted as to the later of (i)&nbsp;one year from the date of grant, or (ii)
180&nbsp;days after the Company successfully completes an initial public offering. The difference
between the exercise price of the options and the fair market value of the Company&#146;s ordinary share
at the date of grant had been recorded as deferred compensation of approximately $22.2&nbsp;million.
The compensation expense was to be amortized over the three year vesting period. During the year
ended December&nbsp;31, 2005, compensation expense of approximately $9,434,548 was amortized as
compensation expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Options to Non-employees</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;6, 2005, the Company granted 455,000 share options to its external consultants in
exchange for reorganization advisory services, and 4,244,383 share options to certain individuals
(the &#147;Contributors&#148;) who contributed capital to one of the Company&#146;s shareholders, Million Power, a
portion of which proceeds were ultimately loaned to the Company in order to effect the
reorganization (see note 17). The exercise price of these options is $2.3077 per option. The
options granted to the external consultants vest immediately while the options granted to the
contributors vest over a three year period. On September&nbsp;5, 2005, the Company granted 200,000
options to certain consultants for services previously provided. One-third of these options vested
on December&nbsp;31, 2005, one-third of the options will vest on September&nbsp;5, 2007 and 2008,
respectively. These options were granted with an exercise price of $6.922 per option. The Company
recorded expense of approximately $7,240,386 for the year ended December&nbsp;31, 2005 estimated using
the Black-Scholes option pricing model. Included in total compensation expenses, $5,652,952 is
recorded as finance cost for the fund provided by the contributors in order to effect the
shareholder loan; $212,357 is regarded as professional charges related to the reorganization, and
$1,375,077 for other consulting services provided to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following assumptions were used in the Black-Scholes option pricing model:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31, 2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options to</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>employees</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>consultants</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>contributors</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average risk-free rate of return</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.460</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.264</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.160</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average expected option life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">3.35 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">1.47 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">3.50 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">80</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">80</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. SHARE OPTIONS &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of the option activity is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Weighted average</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Number of options</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>exercise price</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options outstanding at January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted on May&nbsp;6, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,699,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.3077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted on September&nbsp;5, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.9220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options outstanding on December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,809,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.9159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighted average fair value of options granted during the year ended December&nbsp;31,
2005 was $4.4289.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information with respect to share options outstanding on
December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B><I>Options Outstanding</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B><I>Options Exercisable</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>contractual life</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>exercise price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>exercise price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary shares:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;6, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,699,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3.22 years</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.3077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.3077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;5, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3.35 years</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.9220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,809,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information regarding options issued within 12-months
prior to December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair value of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Grant Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options Issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>ordinary shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Intrinsic value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Type of valuation</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;6, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,699,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.3077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.3077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;5, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.6700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.9220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Type of Valuation
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The fair value was determined based on a contemporaneous valuation by a third party
valuation specialist.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15. OTHER INCOME (EXPENSES)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency exchange gain (loss), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(883,541</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,028</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758,245</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. TAXES BENEFIT (EXPENSES)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax benefit (expenses)&nbsp;comprises:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,398,058</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred Tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">645,379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,752,679</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. TAXES BENEFIT (EXPENSES) &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suntech Power is a tax exempted company incorporated in the Cayman Islands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The major operating subsidiary, Wuxi Suntech, is governed by the Income Tax Law of PRC
Concerning Foreign Investment and Foreign Enterprises and various local income tax laws (the
&#147;Income Tax Laws&#148;). Pursuant to the PRC Income Tax Laws, foreign-invested manufacturing enterprises
are subject to income tax at a statutory rate of 33% (30% of state income tax plus 3% local income
tax) on PRC taxable income. Foreign-invested manufacturing enterprises are entitled to tax
exemption from the income tax for its first two profitable years of operation, after taking into
account any tax losses brought forward from prior years, and a 50% tax deduction for the succeeding
three years thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, preferential tax treatment of Wuxi Suntech as &#147;High or New Technology&#148; company has
been agreed with the relevant tax authorities. On this basis, Wuxi Suntech is entitled to a
preferential tax rate of 15% for the two years ending December&nbsp;31, 2006. Pursuant to the PRC Income
Tax Laws, the high or new technology company status needs to be reviewed and approved every two
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, Wuxi Suntech was exempt from income tax for the two years ended December&nbsp;31, 2004
and its applicable income tax rate is 7.5% for the two years ending December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal components of the deferred income tax assets are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>At December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued warranty costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">787,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pre-operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax credit on acquisition of domestic equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity in loss of an affiliate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,672,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Analysis as:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,672,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reconciliation between the provision for income tax computed by applying the PRC enterprise
income rate of 33% to income before income taxes and the actual provision for income taxes is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PRC Enterprise Income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Losses with no tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses not deductible for tax purpose</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax exemption and tax relief granted to the Company (note)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>%)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax credit on acquisition of domestic equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Note:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 3pt">The aggregate amount and per share effect of the tax holiday are as follows:

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The aggregate dollar effect (in thousands)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,089</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share
effect &#151; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share
effect &#151; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17. RELATED PARTY TRANSACTIONS AND BALANCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Related party balances</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts due to related parties as of December&nbsp;31, 2004 included trade payable to Wuxi
Shangneng and payroll payable to Dr.&nbsp;Shi, director, who has beneficial interest in the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts due to related parties as of December&nbsp;31, 2005 included trade payable to Jiangsu
Huariyuan and other payable to Dr.&nbsp;Shi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts are unsecured, interest free and have no fixed repayment terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Related party transactions:</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than as disclosed in notes 9 and 18 c), the Company has the following related party
transactions:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the period from April&nbsp;15, 2005, (the date on which Jiangsu Huariyuan became an
affiliate of the Company), to December&nbsp;31, 2005, the Company purchased raw materials from Jiangsu
Huariyuan in the amount of $1,142,692.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the years ended December&nbsp;31, 2004 and 2005 (up to the date Wuxi Shangneng became a
subsidiary of the Company), the Company purchased raw materials from Wuxi Shangneng in amounts of
$27,085 and $38,311, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing was provided by a shareholder of Power Solar BVI who provided approximately $8.6
million that Power Solar BVI used as down payments to initiate its purchase of all of the equity
interests of the previous equity interest holders of Wuxi Suntech. The financing agreement was
entered into on January&nbsp;6, 2005 among Power Solar BVI and its two shareholders at the time, Dr.
Shi, who owned 31.389% of Wuxi Suntech, and Million Power. Pursuant to the financing agreement,
unless Power Solar BVI was able, within 180&nbsp;days of the financing agreement, to complete its
purchases of the 68.611% equity interests of Wuxi Suntech that were not held by Dr.&nbsp;Shi, the $8.6
million loan would be repayable to Million Power by July&nbsp;5, 2005, 180&nbsp;days from the date of the
financial agreement, and the loan would have borne the then-applicable interest rate during its
term. If by July&nbsp;5, 2005, Power Solar BVI was able to complete its purchases of 68.611% equity
interests of Wuxi Suntech that was not held by Dr.&nbsp;Shi, the loan would be forgiven. The loan
agreement also required Power Solar BVI to obtain the remaining financing necessary to consummate
the acquisition of the remaining equity interests of Wuxi Suntech. Such requirement was fulfilled
through Power Solar BVI&#146;s issuance of $80&nbsp;million Series&nbsp;A redeemable convertible preferred shares
on May&nbsp;6, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18. COMMITMENTS AND CONTINGENCIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>a) Operating lease commitments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has operating lease agreements principally for its office properties in the PRC.
Such leases have remaining terms ranging from 12 to 24&nbsp;months and are renewable upon negotiation.
Rental expense was $69,726, $101,273 and $170,323 for the years ended December&nbsp;31, 2003, 2004 and
2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future minimum lease payments under non-cancellable operating lease agreements at December&nbsp;31,
2005 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year ending December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,288</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18. COMMITMENTS AND CONTINGENCIES &#151; continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>b) Commitments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004 and 2005, commitments outstanding for the purchase of property, plant
and equipment approximated $11,077,842 and $15,869,310, respectively. The Company has entered into
several purchase agreements with certain suppliers whereby the Company is committed to purchase a
minimum amount of raw materials to be used in the manufacture of its products. As of December&nbsp;31,
2004 and 2005, future minimum purchases remaining under the agreements approximated $3,863,627 and
$4,022,930, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>c) Contingencies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the Company was contingently liable as guarantor with respect to
$988,631 borrowing of an ex-shareholder, Wuxi Shanhe Group. The underlying loan was matured and
repaid in January&nbsp;2006. The Company guarantees the entire principal amount, any accrued interest,
and any penalties to be incurred by the borrower in the event of any default. The Company has no
recourse for recovery from third parties as a result of any payments under the guarantees. The
Company has provided guarantees to Wuxi Shanhe Group since January&nbsp;2004. The carrying value of the
guarantees is Nil, as the fair value of the guarantees was immaterial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>d) Long-term obligation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;14, 2005, the Company entered into a 10-year supply agreement with a supplier,
under which the Company was absolutely and irrevocably required to accept and pay for the
contracted volume each year over a 10-year period starting from January&nbsp;1, 2006 at agreed price
adjusted for cost structure changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this transaction, the Company is obligated to advance $3.64&nbsp;million to the
supplier which will be applied to the purchase commitment pro rata over the term of the contract.
The advance payment is included in advance to suppliers until utilized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a schedule, by year, of future minimum obligation under this 10-year supply
agreement as of December&nbsp;31, 2005 (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year ending December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,236</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,236</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,236</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19. SEGMENT INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates in a single business segment that includes the design, development, and
manufacture of PV products. The following table summarizes the Company&#146;s net revenues generated
from different geographic locations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,527,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,590,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">819,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,691,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,696,784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,436,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,219,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,287,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,449,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,704,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,399,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">South Africa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,018,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,824,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,888,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,287,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,000,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All the identifiable assets of the Company are located in the PRC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20. MAJOR CUSTOMERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Details of the customers accounting for 10% or more of total net sales are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company B</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,529,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company C</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,465,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company D</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,083,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company E</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,969,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Company F</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,443,049</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 10%</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accounts receivable from the 2 customers with the largest receivable balances represents
62% and 24% of the balance of the account at December&nbsp;31, 2004 and 2005, respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-25
</DIV>


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SUNTECH POWER HOLDINGS CO., LTD.
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
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, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
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
Commission file number: 001-32689
SUNTECH POWER HOLDINGS CO., LTD.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant's name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
17-6 Changjiang South Road
New District, Wuxi
Jiangsu Province 214028
People's Republic of China
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act
American Depositary Shares, each representing one ordinary share, par value $0.01 per share,
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act
Name of each exchange and Title of each class on which registered:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None
(Title of Class)
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. 147,487,707
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
o
Yes
þ
No
If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
o
Yes
þ
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
þ
Yes
o
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in
Rule 12b-2 of the Exchange Act. (Check one):
o
Large accelerated filer
o
Accelerated filer
þ
Non-accelerated filer
Indicate by check mark which financial statement item the registrant has elected to follow:
o
Item 17
þ
Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)
o
Yes
þ
No
TABLE OF CONTENTS
INTRODUCTION
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on the Company
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other than Equity Securities
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
PART III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
EX-12.1 CEO CERTIFICATION PURSUANT TO SECTION 302
EX-12.2 CFO CERTIFICATION PURSUANT TO SECTION 302
EX-13.1 CEO CERTIFICATION PURSUANT TO SECTION 906
EX-13.2 CFO CERTIFICATION PURSUANT TO SECTION 906
EX-15.1 CONSENT OF MAPLES AND CALDER
Table of Contents
TABLE OF CONTENTS
INTRODUCTION
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on the Company
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholder and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other than Equity Securities
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
PART III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
2
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INTRODUCTION
Unless otherwise indicated, references in this annual report on Form 20-F to:
•
"$" and "U.S. dollars" are to the legal currency of the United States;
•
"ADSs" are to our American depositary shares, each of which represents one ordinary
share;
•
"ADRs" are to the American depositary receipts, which, if issued, evidence our ADSs;
•
"China" and the "PRC" are to the People's Republic of China, excluding, for the
purposes of this annual report on Form 20-F only, Taiwan and the special administrative
regions of Hong Kong and Macau;
•
"conversion efficiency" are to the ability of PV products to convert sunlight into
electricity; "conversion efficiency rate" is 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;
•
"off-grid system" are to the PV system that operates on a stand-alone basis to
provide electricity independent of an electricity transmission grid;
•
"on-grid system" are to the PV system that is connected to an electricity
transmission grid and feeds electricity generated into the electricity transmission
grid;
•
"ordinary shares" are to our ordinary shares, par value $0.01 per share;
•
"PV" are to photovoltaic. The photovoltaic effect is a process by which sunlight is
converted into electricity;
•
"PV cell" are to a device made from a silicon wafer that converts sunlight into
electricity through a process known as the photovoltaic effect;
•
"PV module" are to an assembly of PV cells that have been electrically
interconnected and laminated in a durable and weather-proof package;
•
"PV system" are to a package of one or more PV modules that are physically mounted
and electrically interconnected, with system components such as batteries and power
electronics, to produce and reserve electricity;
•
"RMB" and "Renminbi" are to the legal currency of China;
3
Table of Contents
•
"Series A preferred shares" are to our Series A preferred shares par value $0.01 per
share;
•
"Suntech," "we," "us," "our company" and "our" are to Suntech Power Holdings Co.,
Ltd., its predecessor entities and its consolidated subsidiaries;
•
"Suntech BVI" are to "Power Solar System Co., Ltd.," our directly wholly-owned
subsidiary in the British Virgin Islands;
•
"Suntech China" are to "Wuxi Suntech Power Co., Ltd.," our predecessor and
wholly-owned subsidiary in China; and
•
"thin film technology" are to the PV technology that involves depositing several
thin layers of silicon or more complex materials on a substrate such as glass to make a
PV cell.
This annual report on Form 20-F includes our audited consolidated financial statements for the
years ended December 31, 2003, 2004 and 2005 and as of December 31, 2004 and 2005.
All translations from Renminbi to U.S. dollars were made at the noon buying rate in The City
of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by
the Federal Reserve Bank of New York. Unless otherwise stated, the translation of Renminbi into
U.S. dollar has been made at the noon buying rate in effect on December 30, 2005, which was
RMB8.0702 to $1.00. We make no representation that the Renminbi or dollar amounts referred to in
this annual report on Form 20-F could have been or could be converted into dollars or Renminbi, as
the case may be, at any particular rate or at all. See "Item 3. Key Information—D. Risk
Factors—Risk Related to Doing Business in China—Fluctuation in the value of the Renminbi may have a
material adverse effect on your investment." On April 25, 2006, the noon buying rate was RMB8.0100
to $1.00.
We and certain selling shareholders of our company completed the initial public offering of
30,337,000 ADSs, each representing one ordinary share on December 19, 2005. On December 14, 2005,
we listed our ADSs on the New York Stock Exchange under the symbol "STP."
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2.
Offer Statistics and Expected Timetable
Not Applicable.
Item 3.
Key Information
A.
Selected Financial Data
The following selected consolidated statement of operations data for the three years ended
December 31, 2003, 2004 and 2005 and the consolidated balance sheet data as of
4
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December 31, 2003, 2004 and 2005 have been derived from our audited consolidated financial
statements, which have been audited by Deloitte Touche Tohmatsu CPA, Ltd., an independent
registered public accounting firm. The report of Deloitte Touche Tohmatsu CPA, Ltd. on our
consolidated financial statements as of December 31, 2004 and 2005 and for each of the three years
in the period ended December 31, 2005 is included elsewhere in this annual report on Form 20-F.
Our selected consolidated statement of operations data for the year ended December 31, 2002 and our
consolidated balance sheets as of December 31, 2002 have been derived from our audited consolidated
financial statements, which are not included in this annual report on Form 20-F. You should read
the selected consolidated financial data in conjunction with those financial statements and the
related notes and "Item 5. Operating and Financial Review and Prospects" included elsewhere in
this annual report on Form 20-F. Our consolidated financial statements are prepared and presented
in accordance with U.S. GAAP. Although we were incorporated in January 2001, we only commenced our
business operation in May 2002. In 2001, we incurred general and administrative expenses of
$438,429 and generated other income of $33,830. As a result, our net loss for the year amounted to
$404,599. Our financial data for the year ended December 31, 2001 are not meaningful, and thus have
not been included in this section or elsewhere in this annual report on Form 20-F. Our historical
results do not necessarily indicate our results expected for any future periods.
Year Ended December 31,
2002
2003
2004
2005
Consolidated Statement of
Operations Data
(in thousands, except
share, per share and per ADS data)
Net revenues
PV cells
$
174
$
9,741
$
7,331
$
54,653
PV modules
2,851
4,104
77,898
170,129
PV system integrations
—
43
58
1,218
Total net revenues
3,025
13,888
85,287
226,000
Cost of revenues
PV cells
139
7,695
5,269
35,440
PV modules
2,729
3,467
54,862
121,184
PV system integrations
—
33
43
814
Total cost of revenues
2,868
11,195
60,174
157,438
Gross profit
157
2,693
25,113
68,562
Operating expenses
Selling expenses
157
559
1,750
3,667
General and administrative
expenses
980
1,234
2,889
18,874
Research and development
expenses
62
148
465
3,358
Total operating expenses
1,199
1,941
5,104
25,899
(Loss) income from operations
(1,042
)
752
20,009
42,663
Interest expenses, net(1)
(84
)
(221
)
(979
)
(7,611
)
Other income (expenses)
168
93
167
(758
)
Tax benefit (expenses)
61
301
611
(3,753
)
Net (loss) income after taxes
before minority interest
(897
)
925
19,808
30,541
Minority interest
—
—
—
34
Equity in (loss) earnings of
affiliates
—
—
(51
)
121
Net (loss) income
$
(897
)
$
925
$
19,757
$
30,628
Deemed dividend on Series A
redeemable convertible preferred shares
—
—
—
2,406
Net (loss) income attributable to
holders of
ordinary shares
(897
)
925
19,757
28,222
Net (loss) income per share and ADS
— Basic
$
(0.01
)
$
0.01
$
0.22
$
0.31
— Diluted
$
(0.01
)
$
0.01
$
0.22
$
0.26
Shares used in computation
— Basic
90,000,000
90,000,000
90,000,000
92,047,507
— Diluted
90,000,000
90,000,000
90,000,000
116,825,138
(1)
Include "interest expenses" and "interest income" contained in our consolidated financial
statements included elsewhere in this annual report on Form 20-F.
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Year Ended December 31,
2002
2003
2004
2005
Other Consolidated Financial Data
(in
percentages)
Gross margin
5.2
%
19.4
%
29.5
%
30.3
%
Operating margin
(34.4
)
5.4
23.5
18.9
Net margin
(29.7
%)
6.7
%
23.2
%
13.5
%
Selected Operating Data
Products sold (in MW)
PV cells
0.1
4.9
3.6
17.9
PV modules
0.8
1.5
25.9
49.8
Total
0.9
6.4
29.5
67.7
Average selling price (in $  per watt)
PV cells
$
1.78
$
1.99
$
2.02
$
3.05
PV modules
$
3.48
$
2.77
$
3.01
$
3.42
As of December 31,
2002
2003
2004
2005
(in thousands)
Consolidated Balance Sheet Data
Cash and cash equivalents
$
287
$
1,559
$
19,122
$
359,324
Inventories
1,209
3,347
17,472
40,428
Accounts receivable
1,656
2,488
5,253
1,659
Property, plant and equipment, net
5,367
6,912
13,211
39,717
Total assets
10,251
17,031
68,468
481,664
Short-term borrowings
3,624
7,206
34,442
52,193
Total current liabilities
4,389
10,203
40,225
71,976
Long-term borrowings
—
—
—
3,717
Accrued warranty costs
29
68
848
2,619
Total shareholders' equity (deficit)
5,833
6,759
27,396
401,923
Total liabilities and shareholders'
equity
$
10,251
$
17,031
$
68,468
$
481,664
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Exchange Rate Information
This annual report on Form 20-F contains translations of certain RMB amounts into U.S. dollar
amounts at specified rates. All translations from RMB to U.S. dollars were made at the noon buying
rate in The City of New York for cable transfers of RMB as certified for customs purposes by the
Federal Reserve Bank of New York. Unless otherwise stated, the translations of RMB into U.S.
dollars have been made at the noon buying rate in effect on December 30, 2005, which was RMB8.0702
to $1.00. We make no representation that the RMB or U.S. dollar amounts referred to in this annual
report on Form 20-F could have been or could be converted into U.S. dollars or RMB, as the case may
be, at any particular rate or at all. See "Item 3. Key Information—D. Risk Factors—Risks Related to
Doing Business in China—Fluctuations in exchange rates may have a material adverse effect on your
investment" and "—Restrictions on currency exchange may limit our ability to receive and use our
revenue effectively" for discussions of the effects of fluctuating exchange rates and currency
control on the value of our ADSs. On April 25, 2006, the noon buying rate was RMB8.0100 to $1.00.
The following table sets forth information concerning exchange rates between the RMB and the
U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are
not necessarily the exchange rates that we used in this annual report or will use in the
preparation of our periodic reports or any other information to be provided to you. The source of
these rates is the Federal Reserve Bank of New York.
Noon Buying Rate
Period
Period End
Average
(1)
Low
High
(RMB per $1.00)
2001
8.2766
8.2770
8.2786
8.2676
2002
8.2800
8.2770
8.2800
8.2669
2003
8.2767
8.2772
8.2800
8.2765
2004
8.2765
8.2768
8.2771
8.2765
2005
8.0702
8.1826
8.2765
8.0702
October
8.0845
8.0895
8.0924
8.0840
November
8.0804
8.0840
8.0877
8.0796
December
8.0702
8.0755
8.0808
8.0702
2006
January
8.0608
8.0654
8.0702
8.0596
February
8.0415
8.0512
8.0616
8.0415
March
8.0167
8.0350
8.0505
8.0167
April (through April 25)
8.0100
8.0137
8.0248
8.0040
(1)
Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period.
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B.
Capitalization and Indebtedness
Not Applicable.
C.
Reasons for the Offer and Use of Proceeds
Not Applicable.
D.
Risk Factors
Risks Related to Our Company and Our Industry
Our limited operating history may not serve as an adequate basis to judge our future prospects
and results of operations.
We have a limited operating history. We completed our first PV cell manufacturing line in
August 2002 and began commercial shipment of PV cells in September 2002. With the rapid growth of
the PV industry, we have experienced a high growth rate since 2002. As such, our historical
operating results may not provide a meaningful basis for evaluating our business, financial
performance and prospects. We may not be able to achieve a similar growth rate in future periods.
Accordingly, you should not rely on our results of operations for any prior periods as an
indication of our future performance.
We have incurred losses in prior periods and may incur losses in the future.
We incurred a net loss of $0.9 million in 2002, and we may incur losses in the future. We
expect our operating expenses to increase as we expand our operations. Our ability to maintain
profitability depends on the growth rate of the PV market, the continued market acceptance of PV
products, the competitiveness of our products and services as well as our ability to provide new
products and services to meet the demands of our customers. Even though we have been profitable in
recent periods, we may not be able to sustain or increase profitability in the future.
Failure to obtain sufficient quantities of silicon and silicon wafers could decrease our
revenues and limit our ability to expand as planned.
Silicon wafers are the most important raw materials for making PV products. To maintain
competitive manufacturing operations, we depend on our suppliers' timely delivery of quality
silicon wafers in sufficient quantities and at acceptable prices. Our silicon wafer suppliers, in
turn, depend on silicon manufacturers to supply silicon required for the production of silicon
wafers. The significant growth of the PV industry has resulted in a significant increase in demand
for silicon and silicon wafers, and we have, from time to time, experienced late delivery and
supply shortages. In particular, some suppliers of silicon also supply to silicon wafer
manufacturers for the semiconductor industry, which typically have greater buying power and market
influence than manufacturers for the PV industry. As a result, increases in the demand for silicon
from the semiconductor industry may in the future result in late deliveries or supply shortages
with respect to the specialized silicon that our silicon wafer suppliers need as raw materials.
This could result in our reduced manufacturing
8
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output, delayed or missed shipments, damaged customer relationships and decreased revenues. In
the past, we have addressed shortages of silicon wafer supplies by entering into original equipment
manufacturer, or OEM, manufacturing arrangements, under which we obtain silicon wafer supplies from
certain of our customers and are obligated to sell a substantial portion of the PV modules
manufactured with these wafers to such customers. However, we cannot assure you that such OEM
manufacturing arrangements will be available to us in the future. We have also attempted to ease
our supply shortages through prepaying for raw materials and establishing strategic relationships
with certain suppliers, but we cannot assure you that we will be able to obtain supplies from them
or any other suppliers in sufficient quantity and at acceptable prices. We acquire silicon wafers
from our suppliers mostly through short-term supply arrangements. This subjects us to the risks
that our suppliers may stop supplying silicon wafers to us for any reason, including the financial
viability of such suppliers. If this occurs, our ability to manufacture our PV products may be
limited, which would cause our revenues to decline.
We may not be able to manage our expansion of operations effectively.
We commenced business operations in May 2002 and have grown rapidly. We anticipate significant
continued expansion of our business to address growth in demand for our PV products and services,
as well as to capture new market opportunities. To manage the potential growth of our operations,
we will be required to improve our operational and financial systems, procedures and controls,
increase manufacturing capacity and output, and expand, train and manage our growing employee base.
Furthermore, our management will be required to maintain and expand our relationships with our
customers, suppliers and other third parties. We cannot assure you that our current and planned
operations, personnel, systems, internal procedures and controls will be adequate to support our
future growth. If we are unable to manage our growth effectively, we may not be able to take
advantage of market opportunities, execute our business strategies or respond to competitive
pressures.
The reduction or elimination of government subsidies and economic incentives for on-grid solar
energy applications could cause a reduction in demand for our products and lead to decreases in our
revenues.
We believe that the growth of many of our target markets, including our largest market,
Germany, which accounted for 45.0% of our total net revenues in 2005, as well as Spain and the
United States, depends in part on the availability and amounts of government subsidies and economic
incentives. At present, the cost of solar energy substantially exceeds the retail price of
electricity in most markets in the world. As a result, federal, state and local governmental bodies
in many countries, most notably Germany, Spain and the United States, have provided subsidies in
the form of cost reductions, tax write-offs and other incentives to end users, distributors,
systems integrators and manufacturers of PV products. Reduction or elimination of these government
subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may
result in the diminished competitiveness of solar energy, and materially and adversely affect the
growth of these markets and our revenues. Electricity utility companies that have significant
political lobbying powers may push for a change in the relevant legislation in their markets. The
reduction or elimination of government subsidies and economic incentives for on-grid solar energy
applications, especially those in our target markets, could cause our revenues to decline and
materially and adversely affect our business, financial condition and results of operations.
9
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If PV technology is not suitable for widespread adoption, or sufficient demand for PV products
does not develop or takes longer to develop than we anticipated, our sales may not continue to
increase or may even decline, and we may be unable to sustain profitability.
The PV market is at a relatively early stage of development and the extent to which PV
products will be widely adopted is uncertain. Market data in the PV industry are not as readily
available as those in other more established industries where trends can be assessed more reliably
from data gathered over a longer period of time. If PV technology proves unsuitable for widespread
adoption or if demand for PV products fails to develop sufficiently, we may not be able to grow our
business or generate sufficient revenues to sustain our profitability. In addition, demand for PV
products in our targeted markets, including China, may not develop or may develop to a lesser
extent than we anticipated. Many factors may affect the viability of widespread adoption of PV
technology and demand for PV products, including:
•
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;
•
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
economy slows down; and
•
deregulation of the electric power industry and broader energy industry.
We face intense competition from other companies producing solar energy and other renewable
energy products.
The PV market is intensely competitive and rapidly evolving. According to Photon
International's survey in March 2006, as of the end of 2005, 94 companies in the world produced PV
cells and 153 companies produced PV modules. Many of our competitors have established more
prominent market positions, and if we fail to attract and retain customers and establish successful
distribution networks in our target markets for our products, we will be unable to increase our
sales. Our competitors include PV divisions of large conglomerates such as BP, Sanyo Group and
Sharp Corporation, specialized cell and module manufacturers such as Q-Cells, as well as integrated
manufacturers of PV products such as SolarWorld AG. Some of our competitors have also become
vertically integrated, from upstream silicon wafer manufacturing to PV system integration. We
expect to compete with future entrants to the PV market that offer new technological solutions. We
may also face competition from semiconductor manufacturers, a few of which have already announced
their intention to start
10
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production of PV cells. Many of our competitors are developing or currently producing products
based on new PV technologies, including amorphous silicon, ribbon, sheet and nano technologies,
which they believe will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from conventional and
non-solar renewable energy technologies. Due to the relatively high manufacturing costs compared to
most other energy sources, solar energy is generally not competitive without government incentive
programs.
Many of our existing and potential competitors have substantially greater financial,
technical, manufacturing and other resources than we do. Our competitors' greater size in some
cases provides them with a competitive advantage with respect to manufacturing costs because of
their economies of scale and their ability to purchase raw materials at lower prices. For example,
those of our competitors that also manufacture semiconductors may source both semiconductor grade
silicon wafers and solar grade silicon wafers from the same supplier. As a result, those
competitors may have stronger bargaining power with the supplier and have an advantage over us in
negotiating favorable pricing, as well as securing silicon wafer supplies at times of shortages.
Many of our competitors also have greater brand name recognition, more established distribution
networks and larger customer bases. In addition, many of our competitors have well-established
relationships with our current and potential distributors and have extensive knowledge of our
target markets. As a result, they may be able to devote greater resources to the research,
development, promotion and sale of their products or respond more quickly to evolving industry
standards and changes in market conditions than we can. Our failure to adapt to changing market
conditions and to compete successfully with existing or new competitors may materially and
adversely affect our financial condition and results of operations.
Our failure to further refine our technology and develop and introduce new PV products could
render our products uncompetitive or obsolete, and reduce our sales and market share.
The PV industry is rapidly evolving and competitive. We will need to invest significant
financial resources in research and development to keep pace with technological advances in the PV
industry and to effectively compete in the future. However, research and development activities are
inherently uncertain, and we might encounter practical difficulties in commercializing our research
results. Our significant expenditures on research and development may not reap corresponding
benefits. A variety of competing PV technologies that other companies may develop could prove to be
more cost-effective and have better performance than our PV products. Therefore, our development
efforts may be rendered obsolete by the technological advances of others. Breakthroughs in PV
technologies that do not use crystalline silicon could mean that companies such as us that rely
entirely on crystalline silicon would encounter a sudden, sharp drop in sales. Our failure to
further refine our technology and develop and introduce new PV products could render our products
uncompetitive or obsolete, and result in a decline in our market share.
Our future success substantially depends on our ability to significantly increase both our
manufacturing capacity and output. Our ability to achieve our expansion goals is subject to a
number of risks and uncertainties.
Our future success depends on our ability to significantly increase both our manufacturing
capacity and output. If we are unable to do so, we may be unable to expand our business, decrease
our costs per watt, maintain our competitive position and improve our
11
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profitability. Our ability to establish additional manufacturing capacity and increase output
is subject to significant risks and uncertainties, including:
•
the need to raise significant additional funds to purchase and prepay for raw
materials or to build additional manufacturing facilities, which we may be unable to
obtain on reasonable terms or at all;
•
delays and cost overruns as a result of a number of factors, many of which may be
beyond our control, such as increases in raw materials prices and problems with
equipment vendors;
•
delays or denial of required approvals by relevant government authorities;
•
diversion of significant management attention and other resources; and
•
failure to execute our expansion plan effectively.
If we are unable to establish or successfully operate additional manufacturing capacity or to
increase manufacturing output, or if we encounter any of the risks described above, we may be
unable to expand our business as planned. Moreover, we cannot assure you that if we do expand our
manufacturing capacity and output we will be able to generate sufficient customer demand for our PV
products to support our increased production levels.
Our costs and expenses may increase as a result of entering into fixed price, prepaid
arrangements with our suppliers.
We plan to secure our supply of silicon and silicon wafers increasingly through fixed-price,
prepaid supply arrangements with both overseas and domestic suppliers. In 2005, we entered into
long-term supply contracts with three of our suppliers, under which the suppliers agreed to provide
us with specified quantities of silicon wafers at agreed prices, and several short-term
fixed-price, prepaid arrangements with our suppliers. If the prices of silicon or silicon wafers
were to decrease in the future and we were locked into fixed price, prepaid arrangements, we may
not be able to adjust our materials costs and thus, our cost of revenues will be negatively
affected. Additionally, if demand for our PV products decreases, we may incur costs associated with
carrying excess materials, which may have a material adverse effect on our operating expenses. To
the extent we are not able to pass these increased costs and expenses to our customers, our
business, results of operations and financial condition may be materially and adversely affected.
Moreover, since some of our supply contracts may require pre-payment of a substantial portion of
the contract price, we may not be able to recover such pre-payments and would suffer losses should
such suppliers fail to fulfill their delivery obligations under the contracts.
Our dependence on a limited number of third-party suppliers for key raw materials and
customized manufacturing equipment could prevent us from timely delivering our products to our
customers in the required quantities, which could result in order cancellations and decreased
revenues.
We purchase raw materials from a limited number of third-party suppliers. Our major suppliers
include Deutsche Solar AG, a wholly-owned subsidiary of SolarWorld AG, Hebei Jinglong Industry and
Commerce Group Go., Ltd., Jiangsu Huantai Group, Jiangyin Hairun Science & Technology Co., Ltd.,
Podolsky Chemical & Metallurgical Plant and Swiss
Wafers AG. If we fail to develop or maintain our relationships with these or our other
12
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suppliers, we may be unable to manufacture our products or our products may be available at a
higher cost or after a long delay, and we could be prevented from delivering our products to our
customers in the required quantities and at prices that are profitable. Problems of this kind could
cause us to experience order cancellations and loss of market share. The failure of a supplier to
supply materials and components that meet our quality, quantity and cost requirements in a timely
manner could impair our ability to manufacture our products or increase our costs, particularly if
we are unable to obtain these materials and components from alternative sources on a timely basis
or on commercially reasonable terms. In addition, certain of our manufacturing equipment has been
designed and made specifically for us. As a result, such equipment is not readily available from
multiple vendors and would be difficult to repair or replace. Any significant damage to, or break
down of, our customized manufacturing equipment could cause material interruptions to our
operations and consequentially, could have a material adverse effect on our business and results of
operations.
Our dependence on a limited number of customers may cause significant fluctuations or declines
in our revenues.
We currently sell a substantial portion of our PV products to a limited number of customers,
including distributors, engineering design firms, system integrators, other value-added resellers,
as well as integrated manufacturers of PV products. In 2005, we had one customer accounting for 10%
or more of our total net sales, and such customer accounted for approximately 32.1% of our total
net revenues. We have entered into a distribution agreement by which we granted our largest
customer in 2005 the exclusive right to distribute our products in Germany for 2005. Sales to our
other customers are typically made through non-exclusive, short-term arrangements. We anticipate
that our dependence on a limited number of customers will continue for the foreseeable future.
Consequently, any one of the following events may cause material fluctuations or declines in our
revenues and have a material adverse effect on our results of operations:
•
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 products
competitive with ours;
•
loss of one or more of our significant customers and our failure to identify
additional or replacement customers; and
•
failure of any of our significant customers to make timely payment for our products.
We face risks associated with the marketing, distribution and sale of our PV products
internationally, and if we are unable to effectively manage these risks, they could impair our
ability to expand our business abroad.
In 2005, we sold 75.0% of our products to customers outside of China. The marketing,
international distribution and sale of our PV products expose us to a number of risks, including:
•
fluctuations in currency exchange rates;
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•
difficulty in engaging and retaining distributors who are knowledgeable about and,
can function effectively in, overseas markets;
•
increased costs associated with maintaining marketing efforts in various countries;
•
difficulty and cost relating to compliance with the different commercial and legal
requirements of the overseas markets 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.
Problems with product quality or product performance may cause us to incur warranty expenses
and may damage our market reputation and prevent us from achieving increased sales and market
share.
Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0% of initial power
generation capacity, respectively. As a result, we bear the risk of extensive warranty claims long
after we have sold our products and recognized revenues. We have sold PV modules since September
2002, and accordingly none of our PV modules has been in use for more than three years. As of
December 31, 2005, our accrued warranty costs amounted to $2.6 million. Because our products have
been in use for only a relatively short period, we cannot assure you that our assumptions regarding
the durability and reliability of our products are reasonable. Our warranty provisions may be
inadequate, and we may have to incur substantial expense to repair or replace defective products in
the future. Furthermore, widespread product failures may damage our market reputation and cause our
sales to decline.
Our future success depends in part on our ability to make strategic acquisitions and
investments and to establish and maintain strategic alliances, and failure to do so could have a
material adverse effect on our market penetration and revenue growth.
As part of our plan to secure silicon wafers and to expand our manufacturing capacity, we have
established a 87.0%-owned subsidiary for the manufacture of PV cells and modules in Luoyang, China.
We have also, through Suntech China, acquired a 51.0% equity interest in one of our customers, a
renewable energy company in China. We intend to continue to make strategic acquisitions and
investments and to establish and maintain strategic alliances with third parties in the PV
industry, particularly with silicon suppliers. We cannot assure you, however, that we will be able
to successfully make such strategic acquisitions and investments or to establish strategic
alliances with third parties that will prove to be effective for our business. Our inability in
this regard could have a material adverse effect on our market penetration, our revenue growth and
our profitability.
Strategic acquisitions, investments and alliances with third parties could subject us to a
number of risks, including risks associated with sharing proprietary information and loss of
control of operations that are material to our business. Moreover, strategic acquisitions,
investments and alliances may be expensive to implement and subject us to the risk of
non-
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performance by a counterparty, which may in turn lead to monetary losses that materially and
adversely affect our business.
Our business depends substantially on the continuing efforts of our executive officers and our
ability to maintain a skilled labor force, and our business may be severely disrupted if we lose
their services.
Our future success depends substantially on the continued services of our executive officers,
especially Dr. Zhengrong Shi, our chief executive officer and the chairman of our board of
directors, and Mr. Graham Artes, our chief operating officer. We do not maintain key man life
insurance on any of our executive officers. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace them readily, if at
all. Therefore, our business may be severely disrupted, and we may incur additional expenses to
recruit and retain new officers. In addition, if any of our executives joins a competitor or forms
a competing company, we may lose some of our customers. Each of our executive officers has entered
into an employment agreement with us, which contains confidentiality and non-competition
provisions. However, if any disputes arise between our executive officers and us, we cannot assure
you, in light of uncertainties associated with the PRC legal system, the extent to which any of
these agreements could be enforced in China, where some of our executive officers reside and hold
some of their assets. See "—Risks Related to Doing Business in China—Uncertainties with respect to
the PRC legal system could have a material adverse effect on us."
If we are unable to attract, train and retain technical personnel, our business may be
materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train and
retain technical personnel. In particular, we depend on the services of Dr. Stuart R. Wenham, our
chief technical officer and Dr. Jingjia Ji, a member of our board of directors and one of our
senior research scientists. Recruiting and retaining capable personnel, particularly those with
expertise in the PV industry, are vital to our success. There is substantial competition for
qualified technical personnel, and there can be no assurance that we will be able to attract or
retain our technical personnel. If we are unable to attract and retain qualified employees, our
business may be materially and adversely affected.
Our failure to protect our intellectual property rights may undermine our competitive
position, and litigation to protect our intellectual property rights or defend against third-party
allegations of infringement may be costly.
We rely primarily on patent, trademark, trade secret, copyright law and other contractual
restrictions to protect our intellectual property. Nevertheless, these afford only limited
protection and the actions we take to protect our intellectual property rights may not be adequate.
Third parties may infringe or misappropriate our proprietary technologies or other intellectual
property rights, which could have a material adverse effect on our business, financial condition or
operating results. Policing unauthorized use of proprietary technology can be difficult and
expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect
our trade secrets or determine the validity and scope of the proprietary rights of others. We
cannot assure you that the outcome of such potential litigation will be in our favor. Such
litigation may be costly and may divert management attention as well as
expend our other resources away from our business. An adverse determination in any such
litigation will impair our intellectual property rights and may harm our business, prospects
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and
reputation. In addition, we have no insurance coverage against litigation costs and would have to
bear all costs arising from such litigation to the extent we are unable to recover them from other
parties. The occurrence of any of the foregoing could have a material adverse effect on our
business, results of operations and financial condition.
Implementation of PRC intellectual property-related laws has historically been lacking,
primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly,
intellectual property rights and confidentiality protections in China may not be as effective as in
the United States or other countries.
We may be exposed to infringement or misappropriation claims by third parties, which, if
determined adversely to us, could cause us to pay significant damage awards.
Our success also depends largely on our ability to use and develop our technology and know-how
without infringing the intellectual property rights of third parties. The validity and scope of
claims relating to PV technology patents involve complex scientific, legal and factual questions
and analysis and, therefore, may be highly uncertain. We may be subject to litigation involving
claims of patent infringement or violation of intellectual property rights of third parties. The
defense and prosecution of intellectual property suits, patent opposition proceedings and related
legal and administrative proceedings can be both costly and time consuming and may significantly
divert the efforts and resources of our technical and management personnel. An adverse
determination in any such litigation or proceedings to which we may become a party could subject us
to significant liability to third parties, require us to seek licenses from third parties, to pay
ongoing royalties, or to redesign our products or subject us to injunctions prohibiting the
manufacture and sale of our products or the use of our technologies. Protracted litigation could
also result in our customers or potential customers deferring or limiting their purchase or use of
our products until resolution of such litigation.
Although we sell a substantial portion of our products outside of China, we currently only
hold patents issued in China. Our business, results of operations and financial condition would be
materially and adversely affected if our sales outside China were to be restricted by intellectual
property claims by third parties.
As of April 25, 2006, we had a total of seven issued patents and 16 pending patent
applications in China. We do not have, and have not applied for, any patent for our proprietary
technologies outside China although we have sold, and expect to continue to sell, a substantial
portion of our products outside China. Since the protection afforded by our patents is effective
only in China, others may independently develop substantially equivalent technologies, or otherwise
gain access to our proprietary technologies, and obtain patents for such intellectual properties in
other jurisdictions, including the countries to which we sell our products. If any third parties
are successful in obtaining patents for technologies that are substantially equivalent or the same
as the technologies we use in our products in any of our markets before we do and enforce their
intellectual property rights against us, our ability to sell products containing the allegedly
infringing intellectual property in those markets will be materially and adversely affected. If we
are required to stop selling such allegedly infringing products, seek license and pay royalties for
the relevant intellectual properties, or redesign such products with non-infringing technologies,
our business, results of operations and financial condition may be materially and adversely
affected.
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The lack or inaccessibility of financing for off-grid solar energy applications could cause
our sales to decline.
Our products are used for off-grid solar energy applications in developed and developing
countries. In some developing countries, government agencies and the private sector have, from time
to time, provided subsidies or financing on preferred terms for rural electrification programs. We
believe that the availability of financing could have a significant effect on the level of sales of
off-grid solar energy applications, particularly in developing countries where users may not have
sufficient resources or credit to otherwise acquire PV systems. If existing financing programs for
off-grid solar energy applications are eliminated or if financing is inaccessible, the growth of
the market for off-grid solar energy applications may be materially and adversely affected, which
could cause our sales to decline. In addition, a rise in interest rates could render existing
financings more expensive and be an obstacle for potential financings that would otherwise spur the
growth of the PV industry.
Changes to existing regulations over the utility sector and the PV industry may present
technical, regulatory and economic barriers to the purchase and use of PV products, which may
significantly reduce demand for our products.
The market for power generation products is heavily influenced by government regulations and
policies concerning the electric utility industry, as well as the internal policies of electric
utilities companies. These regulations and policies often relate to electricity pricing and
technical interconnection of end user-owned power generation. In a number of countries, these
regulations and policies are being modified and may continue to be modified. End users' purchases
of alternative energy sources, including PV products, could be deterred by these regulations and
policies, which could result in a significant reduction in the potential demand for our PV
products. For example, utility companies commonly charge fees to larger, industrial customers for
disconnecting from the electricity transmission grid or for having the capacity to use power from
the electricity transmission grid for back-up purposes. These fees could increase end users' costs
of using our PV products and make our PV products less desirable, thereby having an adverse effect
on our business, prospects, results of operations and financial condition.
We anticipate that our PV products and their installation will be subject to oversight and
regulation in accordance with national and local ordinances relating to building codes, safety,
environmental protection, utility interconnection and metering and related matters in various
countries. It is also burdensome to track the requirements of individual localities and design
equipment to comply with the varying standards. Any new government regulations or utility policies
pertaining to our PV products may result in significant additional expenses to us, our distributors
and end users and, as a result, could cause a significant reduction in demand for our PV products.
Fluctuations in exchange rates could adversely affect our business.
A substantial portion of our sales is currently denominated in U.S. dollars, with the
remainder in Renminbi and Euros, while a substantial portion of our costs and expenses is
denominated in U.S. dollars and Renminbi, with the remainder in Euros. Therefore, fluctuations in
currency exchange rates could have a material adverse effect on our financial condition and results
of operations. Fluctuations in exchange rates, particularly among the U.S. dollar, Renminbi and
Euro, affect our gross and net profit margins and could result in foreign exchange and operating
losses.
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We generated net foreign currency gains of $3,961 and $24,678 in 2003 and 2004, respectively,
but recorded net foreign currency loss of $883,541 in 2005. We cannot predict the impact of future
exchange rate fluctuations on our results of operations and may incur net foreign currency losses
in the future. We plan to reduce the effect of such exposure through hedging arrangements, such as
entering into forward exchange contracts and foreign currency option contracts, but we cannot
assure you that such hedging activities will be effective in managing our foreign exchange risk
exposure.
Our financial statements are expressed in U.S. dollars but our functional currency is
Renminbi. The value of your investment in our ADSs will be affected by the foreign exchange rate
between U.S. dollars and Renminbi. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from our initial public offering in December 2005, any
appreciation of the Renminbi against the U.S. dollar could result in a change to our income
statement and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a
decline in the value of Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent
amounts of our financial results, the value of your investment in our company and the dividends we
may pay in the future, if any, all of which may have a material adverse effect on the prices of our
ADSs.
Compliance with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary damages and fines.
As our manufacturing processes generate noise, waste water, gaseous and other industrial
wastes, we are required to comply with all national and local regulations regarding protection of
the environment. We are in compliance with present environmental protection requirements and have
all necessary environmental permits to conduct our business. However, if more stringent regulations
are adopted in the future, the costs of compliance with these new regulations could be substantial.
We believe that we have all necessary permits to conduct our business as it is presently conducted.
If we fail to comply with present or future environmental regulations, however, we may be required
to pay substantial fines, suspend production or cease operations. We use, generate and discharge
toxic, volatile and otherwise hazardous chemicals and wastes in our research and development and
manufacturing activities. Any failure by us to control the use of, or to restrict adequately the
discharge of, hazardous substances could subject us to potentially significant monetary damages and
fines or suspensions in our business operations.
We have limited insurance coverage and may incur losses resulting from product liability
claims or business interruptions.
As with other PV product manufacturers, we are exposed to risks associated with product
liability claims in the event that the use of the PV products we sell results in injury. Since our
products are electricity producing devices, it is possible that users could be injured or killed by
our products, whether by product malfunctions, defects, improper installation or other causes. We
only commenced commercial shipment of our products in September 2002 and, due to limited historical
experience, we are unable to predict whether product liability claims will be brought against us in
the future or the effect of any resulting adverse publicity on our business. Moreover, we do not
have any product liability insurance and may not have adequate resources to satisfy a judgment in
the event of a successful claim against us. The successful assertion of product liability claims
against us could result in potentially significant monetary damages and require us to make
significant payments. In addition, as the
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insurance industry in China is still in an early stage of development, business interruption
insurance available in China offers limited coverage compared to that offered in many other
countries. We do not have any business interruption insurance. Any business disruption or natural
disaster could result in substantial costs and diversion of resources.
Our existing shareholders have substantial influence over our company and their interests may
not be aligned with the interests of our other shareholders.
Dr. Zhengrong Shi, our founder, chief executive officer and chairman of our board of
directors, beneficially owned 44.75% of our outstanding share capital as of April 25, 2006. As
such, Dr. Shi has substantial influence over our business, including decisions regarding mergers,
consolidations and the sale of all or substantially all of our assets, election of directors and
other significant corporate actions. This concentration of ownership may discourage, delay or
prevent a change in control of our company, which could deprive our shareholders of an opportunity
to receive a premium for their shares as part of a sale of our company and might reduce the price
of our ADSs. These actions may be taken even if they are opposed by our other shareholders.
If we grant employee share options and other share-based compensation in the future, our net
income could be adversely affected.
On September 5, 2005, we adopted our 2005 equity incentive plan, which amended and restated
the stock option plan adopted by Suntech BVI on April 29, 2005. We assumed options to purchase
4,699,383 ordinary shares granted by Suntech BVI and granted additional options to purchase
6,110,000 of our ordinary shares to certain of our directors, employees and consultants. For the
balance of 2005, we will account for options granted to our directors and employees in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," or APB
25, and its related interpretations, which require us to recognize compensation expenses for share
options we grant where the exercise price is less than the deemed fair value of our ordinary shares
on the date of the grant. However, the Financial Accounting Standards Board, or the FASB, has
issued Statement No. 123 (Revised 2004), "Share-Based Payments," or SFAS 123R, which requires all
companies to recognize, as an expense, the fair value of share options and other share-based
compensation to employees at the beginning of the first annual or interim period after June 15,
2005. As a result, beginning on January 1, 2006, we will have to account for compensation costs for
all share options including share options granted to our directors and employees using a fair-value
based method and recognize expenses in our consolidated statement of operations in accordance with
the relevant rules under U.S. GAAP, which may have a material and adverse effect on our reported
earnings. Moreover, the additional expenses associated with share-based compensation may reduce the
attractiveness of such incentive plan to us. However, if we reduce the scope of our 2005 equity
incentive plan, we may not be able to attract and retain key personnel, as share option is an
important employee recruitment and retention tool. If we grant employee share options or other
share-based compensation in the future, our net income could be adversely affected.
If a poll is not demanded at our shareholder meetings, voting will be by show of hands and
shares will not be proportionately represented. Shareholder resolutions may be passed without the
presence of the majority of our shareholders in person or by proxy.
Voting at any of our shareholder meetings is by show of hands unless a poll is demanded. A
poll may be demanded by the chairman of our board of directors or by any
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shareholder present in person or by proxy. If a poll is demanded, each shareholder present in
person or by proxy will have one vote for each ordinary share registered in his name. If a poll is
not demanded, voting will be by show of hands and each shareholder present in person or by proxy
will have one vote regardless of the number of shares registered in his name. In the absence of a
poll, shares will therefore not be proportionately represented. In addition, the quorum required
for our shareholder meetings consists of shareholders who hold at least one-third of our ordinary
shares being present at a meeting in person or by proxy. Therefore, subject to the requisite
majorities, shareholder resolutions may be passed at our shareholder meetings without the presence
of the majority of our shareholders in person or by proxy.
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.
All of our business operations are conducted in China and some of our sales are made in China.
Accordingly, our business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The Chinese economy differs
from the economies of most developed countries in many respects, including:
•
the amount of government involvement;
•
the level of development;
•
the growth rate;
•
the control of foreign exchange; and
•
the allocation of resources.
While the Chinese economy has grown significantly in the past 20 years, the growth has been
uneven, both geographically and among various sectors of the economy. The PRC government has
implemented various measures to encourage economic growth and guide the allocation of resources.
Some of these measures benefit the overall Chinese economy, but may also have a negative effect on
us. For example, our financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations that are applicable to
us.
The Chinese economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the PRC government has implemented measures emphasizing the
utilization of market forces for economic reform, the reduction of state ownership of productive
assets and the establishment of sound corporate governance in business enterprises, a substantial
portion of the productive assets in China is still owned by the PRC government. The continued
control of these assets and other aspects of the national economy by the PRC government could
materially and adversely affect our business. The PRC government also exercises significant control
over Chinese economic growth through the allocation of resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy and providing preferential treatment to
particular industries or
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companies. Efforts by the PRC government to slow the pace of growth of the Chinese economy
could result in decreased capital expenditure by solar energy users, which in turn could reduce
demand for our products.
Any adverse change in the economic conditions or government policies in China could have a
material adverse effect on the overall economic growth and the level of renewable energy
investments and expenditures in China, which in turn could lead to a reduction in demand for our
products and consequently have a material adverse effect on our businesses.
Uncertainties with respect to the Chinese legal system could have a material adverse effect on
us.
We conduct substantially all of our business through our subsidiary, Suntech China,
established in China. Suntech China is generally subject to laws and regulations applicable to
foreign investment in China and, in particular, laws applicable to wholly foreign-owned
enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited
for reference but have limited precedential value. Since 1979, PRC legislation and regulations have
significantly enhanced the protections afforded to various forms of foreign investments in China.
However, since these laws and regulations are relatively new and the PRC legal system continues to
rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involve uncertainties, which may limit legal
protections available to us. In addition, any litigation in China may be protracted and result in
substantial costs and diversion of resources and management attention.
We rely on dividends paid by our subsidiaries for our cash needs
We conduct substantially all of our operations through our subsidiary, Suntech China, which is
a limited liability company established in China. We rely on dividends paid by Suntech China for
our cash needs, including the funds necessary to pay dividends and other cash distributions to our
shareholders, to service any debt we may incur and to pay our operating expenses. The payment of
dividends by entities organized in China is subject to limitations. Regulations in the PRC
currently permit payment of dividends only out of accumulated profits as determined in accordance
with accounting standards and regulations in China. Suntech China is also required to set aside at
least 10.0% of its after-tax profit based on PRC accounting standards each year to its general
reserves until the accumulative amount of such reserves reach 50.0% of its registered capital.
These reserves are not distributable as cash dividends. Suntech China is also required to allocate
a portion of its after-tax profits to its staff welfare and bonus funds, which may not be
distributed to equity owners except in the event of liquidation. In addition, if Suntech China
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other distributions to us.
Fluctuation in the value of the Renminbi may have a material adverse effect on your
investment.
The change in value of the Renminbi against the U.S. dollar, Euro and other currencies is
affected by, among other things, changes in China's political and economic conditions. On July 21,
2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the
U.S. dollar. Under the new policy, the Renminbi is permitted
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to fluctuate within a narrow and managed band against a basket of certain foreign currencies.
This change in policy has resulted in approximately 2.1% appreciation of Renminbi against U.S.
dollar. While the international reaction to the Renminbi revaluation has generally been positive,
there remains significant international pressure on the PRC government to adopt an even more
flexible currency policy, which could result in a further and more significant appreciation of the
Renminbi against the U.S. dollar. As a portion of our costs and expenses is denominated in
Renminbi, the revaluation in July 2005 and potential future revaluation has and could further
increase our costs. In addition, as we rely entirely on dividends paid to us by our operating
subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on our
revenues and financial condition, and the value of, and any dividends payable on, our ADSs in
foreign currency terms. For example, to the extent that we need to convert U.S. dollars we receive
from our initial public offering into Renminbi for our operations, appreciation of the Renminbi
against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the
conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of
making payments for dividends on our ordinary shares or ADSs or for other business purposes,
appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amount available to us.
Restrictions on currency exchange may limit our ability to receive and use our revenues
effectively.
Certain portions of our revenues and expenses are denominated in Renminbi. If our revenues
denominated in Renminbi increase or expenses denominated in Renminbi decrease in the future, we may
need to convert a portion of our revenues into other currencies to meet our foreign currency
obligations, including, among others, payment of dividends declared, if any, in respect of our
ordinary shares. Under China's existing foreign exchange regulations, our PRC subsidiary, Suntech
China, is able to pay dividends in foreign currencies, without prior approval from the State
Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements.
However, we cannot assure you that the PRC government will not take further measures in the future
to restrict access to foreign currencies for current account transactions.
Foreign exchange transactions by Suntech China under the capital account continue to be
subject to significant foreign exchange controls and require the approval of PRC governmental
authorities, including the SAFE. In particular, if Suntech China borrows foreign currency loans
from us or other foreign lenders, these loans must be registered with the SAFE, and if we finance
Suntech China by means of additional capital contributions, these capital contributions must be
approved by certain government authorities including the Ministry of Commerce or its local
counterparts. These limitations could affect the ability of Suntech China to obtain foreign
exchange through debt or equity financing.
Our business benefits from certain PRC government incentives. Expiration of, or changes to,
these incentives could have a material adverse effect on our operating results.
The PRC government has provided various incentives to high-technology companies, including
Suntech China, our operating subsidiary, in order to encourage development of the high-technology
industry. Such incentives include reduced tax rates and other measures. For example, Suntech China,
which is registered and operating in a high-tech zone in Wuxi, has been qualified as a "high or new
technology enterprise." As a result, it is entitled to a preferential enterprise income tax rate of
15.0% so long as it continues to operate in the high-tech zone and maintains its "high or new
technology enterprise" status. Suntech China is
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entitled to a two-year exemption from the enterprise income tax for its first two profitable
years of operation, which were 2003 and 2004. Suntech China is thereafter entitled to a
preferential enterprise income tax rate of 7.5% for the succeeding three years, which will expire
on December 31, 2007. As these tax benefits expire, the effective tax rate of Suntech China will
increase significantly, and any increase of Suntech China's enterprise income tax rate in the
future could have a material adverse effect on our financial condition and results of operations.
We face risks related to health epidemics and other outbreaks.
Our business could be adversely affected by the effects of avian flu, SARS or another epidemic
or outbreak. China reported a number of cases of SARS in April 2004. In 2005, there have been
reports on the occurrences of avian flu in various parts of China, including a few confirmed human
cases. Any prolonged recurrence of avian flu, SARS or other adverse public health developments in
China may have a material adverse effect on our business operations. These could include our
ability to travel or ship our products outside of China, as well as temporary closure of our
manufacturing facilities. Such closures or travel or shipment restrictions would severely disrupt
our business operations and adversely affect our results of operations. We have not adopted any
written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS
or any other epidemic.
Risks Related to Our Ordinary Shares and ADSs
The market price for our ADSs may be volatile.
The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations
in response to factors including the following:
•
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 by securities research analysts;
•
changes in the economic performance or market valuations of other PV technology
companies;
•
addition or departure of our executive officers and key research personnel;
•
release or expiry of lock-up or other transfer restrictions on our outstanding
ordinary shares or ADSs; and
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•
sales or perceived sales of additional ordinary shares or ADSs.
In addition, the securities market has from time to time experienced significant price and
volume fluctuations that are not related to the operating performance of particular companies.
These market fluctuations may also have a material adverse effect on the market price of our ADSs.
Substantial future sales or perceived sales of our ADSs in the public market could cause the
price of our ADSs to decline.
Sales of our ADSs or ordinary shares in the public market, or the perception that these sales
could occur, could cause the market price of our ADSs to decline. As of April 25, 2006, we had
147,487,707 ordinary shares outstanding, including 30,337,000 ordinary shares represented by
30,337,000 ADSs. All ADSs are freely transferable without restriction or additional registration
under the Securities Act of 1933, as amended, or the Securities Act. The remaining ordinary shares
outstanding will be available for sale, upon the expiration of the 180-day lock-up period beginning
from the date of the effectiveness of the registration statement from our initial public offering
and, in the case of the ordinary shares that certain option holders will receive when they exercise
their share options, until the later of (i) September 5, 2006, the first anniversary of the grant
date, and (ii) the expiration of the aforementioned 180-day lock-up period, subject to volume and
other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act. Any or all
of these shares (other than those held by certain option holders) may be released prior to
expiration of the lock-up period at the discretion of the joint lead underwriters. To the extent
shares are released before the expiration of the lock-up period and these shares are sold into the
market, the market price of our ADSs could decline.
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.
Our second amended and restated articles of association limit the ability of others to acquire
control of our company or cause us to engage in change-of-control transactions. These provisions
could have the effect of depriving our shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging third parties from seeking to obtain control
of our company in a tender offer or similar transaction. For example, our board of directors has
the authority, without further action by our shareholders, to issue preferred shares in one or more
series and to fix their designations, powers, preferences, privileges, and relative participating,
optional or special rights and the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights associated with our ordinary shares, in the form of ADS
or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a
change in control of our company or make removal of management more difficult. If our board of
directors decides to issue preferred shares, the price of our ADSs may fall and the voting and
other rights of the holders of our ordinary shares and ADSs may be materially and adversely
affected.
Holders of ADSs have fewer rights than shareholders and must act through the depositary to
exercise those rights.
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Holders of ADSs do not have the same rights of our shareholders and may only exercise the
voting rights with respect to the underlying ordinary shares in accordance with the provisions of
the deposit agreement. Under our second amended and restated articles of association, the minimum
notice period required to convene a general meeting is seven days. When a general meeting is
convened, you may not receive sufficient notice of a shareholders' meeting to permit you to
withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter.
In addition, the depositary and its agents may not be able to send voting instructions to you or
carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause
the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you
will receive the voting materials in time to ensure that you can instruct the depositary to vote
your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to
carry out any instructions to vote, for the manner in which any vote is cast or for the effect of
any such vote. As a result, you may not be able to exercise your right to vote and you may lack
recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS
holder, you will not be able to call a shareholder meeting.
You may be subject to limitations on transfers of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close
its transfer books at any time or from time to time when it deems expedient in connection with the
performance of its duties. In addition, the depositary may refuse to deliver, transfer or register
transfers of ADSs generally when our books or the books of the depositary are closed, or at any
time if we or the depositary deem it advisable to do so because of any requirement of law or of any
government or governmental body, or under any provision of the deposit agreement, or for any other
reason.
ADS holders' right to participate in any future rights offerings may be limited, which may
cause dilution to your holdings and you may not receive cash dividends if it is impractical to make
them available to you.
We may from time to time distribute rights to our shareholders, including rights to acquire
our securities. However, we cannot make rights available to our ADS holders in the United States
unless we register the rights and the securities to which the rights relate under the Securities
Act or an exemption from the registration requirements is available. Also, under the deposit
agreement, the depositary bank will not make rights available to you unless the distribution to ADS
holders of both the rights and any related securities are either registered under the Securities
Act, or exempted from registration under the Securities Act. We are under no obligation to file a
registration statement with respect to any such rights or securities or to endeavor to cause such a
registration statement to be declared effective. Moreover, we may not be able to establish an
exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to
participate in our rights offerings and may experience dilution in their holdings.
In addition, the depositary of our ADSs has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on our ordinary shares or other deposited securities
after deducting its fees and expenses. You will receive these distributions in proportion to the
number of ordinary shares your ADSs represent. However, the depositary may, at its discretion,
decide that it is inequitable or impractical to make a distribution available to any holders of
ADSs. For example, the depositary may determine that it is not practicable to distribute certain
property through the mail, or that the value of certain
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distributions may be less than the cost of mailing them. In these cases, the depositary may
decide not to distribute such property and you will not receive such distribution.
We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than that under U.S. law, you may have less
protection for your shareholder rights than you would under U.S. law.
Our corporate affairs are governed by our second amended and restated memorandum and articles
of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The
rights of shareholders to take action against the directors, actions by minority shareholders and
the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large
extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is
derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that
from English common law, which has persuasive, but not binding, authority on a court in the Cayman
Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under
Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less
developed body of securities laws than the United States. In addition, some U.S. states, such as
Delaware, have more fully developed and judicially interpreted bodies of corporate law than the
Cayman Islands.
As a result of all of the above, public shareholders may have more difficulty in protecting
their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as shareholders of a U.S. public company.
You may have difficulty enforcing judgments obtained against us.
We are a Cayman Islands company and substantially all of our assets are located outside of the
United States. Substantially all of our current operations are conducted in the PRC. In addition,
most of our directors and officers are nationals and residents of countries other than the United
States. A substantial portion of the assets of these persons are located outside the United States.
As a result, it may be difficult for you to effect service of process within the United States upon
these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in
U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us
and our officers and directors, most of whom are not residents in the United States and the
substantial majority of whose assets are located outside of the United States. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce
judgments of U.S. courts against us or such persons predicated upon the civil liability provisions
of the securities laws of the United States or any state. In addition, it is uncertain whether such
Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman
Islands or the PRC against us or such persons predicated upon the securities laws of the United
States or any state.
Item 4.
Information on the Company
A.
History and Development of the Company
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Our predecessor company, Wuxi Suntech Power Co., Ltd., or Suntech China, was incorporated in
January 2001 and commenced business operations in May 2002. To enable us to raise equity capital
from investors outside of China, we established a holding company structure by incorporating Power
Solar System Co., Ltd., or Suntech BVI, in the British Virgin Islands on January 11, 2005. Suntech
BVI acquired all of the equity interests in Suntech China through a series of transactions that
have been accounted for as a recapitalization. In anticipation of our initial public offering, we
incorporated Suntech Power Holdings Co., Ltd., or Suntech, in the Cayman Islands as a listing
vehicle on August 8, 2005. Suntech became our ultimate holding company when it issued shares to the
existing shareholders of Suntech BVI on August 29, 2005 in exchange for all of the shares that
these shareholders held in Suntech BVI. We conduct substantially all of our operations through
Suntech China.
Our principal executive offices are located at 17-6 Changjiang South Road, New District, Wuxi,
Jiangsu Province 214028, People's Republic of China. Our telephone number at this address is (86)
510 534 5000 and our fax number is (86) 510 534 3049.
Investor inquiries should be directed to us at the address and telephone number of our
principal executive offices set forth above. Our website is
www.suntech-power.com.
The information
contained on our website is not part of this annual report on Form 20-F. Our agent for service of
process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New
York 10011.
B.
Business Overview
Overview
We are one of the leading solar energy companies in the world as measured by production output
in 2005. Since we commenced business operations in May 2002, we have grown rapidly to become the
world's eighth largest manufacturer of PV cells in 2005, based on production output, according to
the March 2006 issue of Photon International. We design, develop, manufacture and market a variety
of PV cells and modules. We also provide PV system integration services in China. Our products are
used to provide reliable and environmentally friendly electric power for residential, commercial,
industrial and public utility applications in various markets worldwide, including a number of
European countries such as Germany and Spain, as well as China and the United States. We sell our
products outside of China primarily through distributors and in China primarily to module
manufacturers and end users directly.
We believe that we have been able to grow rapidly because of our ability to capitalize on the
PV market's demand for high efficiency products at the lowest possible cost per watt. Our strong
research and development capabilities have enabled us to develop advanced process technologies and
manufacture, cost-effectively and on a large scale, PV cells and modules with high conversion
efficiencies. As of December 31, 2005, the average conversion efficiency rates of our
monocrystalline and multicrystalline silicon PV cells reached 17.0% and 15.3%, respectively. In
comparison, according to a report published by the International Energy Agency in September 2005,
the conversion efficiency rate of monocrystalline PV cells generally ranges between 15.0% and
18.0%, and the average conversion efficiency rate of multicrystalline PV cells is approximately
14.0%.
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We believe our China-based design, development and manufacturing facilities provide us with
several competitive advantages, including access to low-cost technical expertise, labor and
facilities. We leverage our cost advantages by optimizing the balance between automation and manual
operations in our manufacturing processes, which we believe lowers our operating costs and capital
expenditures and enables us to expand our manufacturing capacity in a cost-effective manner.
We increased our manufacturing capacity by 15 times in less than four years. In August 2002,
we completed our first PV cell manufacturing line with an annual manufacturing capacity of 10 MW.
Through continuous innovation and capacity expansion, we have established six PV cell manufacturing
lines with an aggregate annual capacity of 150 MW as of December 31, 2005. We plan to further
increase our aggregate capacity of PV cells to 240 MW by the end of 2006. We sold 6.4 MW, 29.5 MW
and 67.7 MW of our products in 2003, 2004 and 2005, respectively.
Our net revenues increased from $3.0 million in 2002 to $226.0 million in 2005, representing a
compound annual growth rate, or CAGR, of 322.3% from 2002 to 2005. We have been profitable since
2003. Our net income amounted to $0.9 million in 2003, $19.8 million in 2004 and $30.6 million in
2005, representing net margin of 6.7%, 23.2% and 13.5%, respectively. In 2005, our net revenues and
net income amounted to $226.0 million and $30.6 million, respectively, representing increases of
165.0% and 55.0%, respectively, over 2004.
Our Competitive Strengths
We believe that the following competitive strengths enable us to take advantage of the rapid
growth in the PV industry and compete effectively in the global PV market:
Large-Scale Manufacturing of High-Efficiency PV Cells
Our manufacturing technologies enable us to produce high-efficiency PV cells on a large scale
with efficient use of raw materials. Our manufacturing capacity and output have increased rapidly
in the past three years. In August 2002, we completed our first PV cell manufacturing line with an
annual manufacturing capacity of 10 MW. As of December 31, 2005, our PV cell manufacturing capacity
has grown to 150 MW per year. We plan to further increase our annual manufacturing capacity of PV
cells to 240 MW by the end of 2006. The average conversion efficiency rates of our monocrystalline
and multicrystalline silicon PV cells have reached 16.3% and 14.8% as of December 31, 2004,
respectively, and 17.0% and 15.3% as of December 31, 2005, respectively. In comparison, according
to a report published by the International Energy Agency in September 2005, the conversion
efficiency rate of monocrystalline PV cells generally ranges between 15.0% and 18.0%, and the
average conversion efficiency rate of multicrystalline PV cells is approximately 14.0%,
respectively. Our process technologies have significantly improved our productivity and increased
the efficiency of our raw material usage, both of which have lowered the cost per watt of our
products.
Strong Research and Development Capabilities in PV technology
We have superior research and development capabilities in conducting basic research, improving
manufacturing process and commercializing new PV technologies. Dr. Zhengrong Shi, our founder,
chairman of our board of directors and our chief executive officer, Dr.
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Stuart R. Wenham, our chief technical officer and Dr. Jingjia Ji, a member of our board of
directors and one of our senior research scientists, are all prominent experts in the PV industry,
each with over 10 years of experience with PV technologies. As of December 31, 2005, our PV
technology research and development center had 76 personnel, including 28 PV technology experts
from China and abroad. We have accumulated significant expertise, knowledge, know-how and
experience in silicon materials, solar cell device physics, theoretical simulation and
characterization, process technologies and the design of advanced PV manufacturing equipment. We
made significant progress in developing innovative silicon purification technologies to
substantially reduce silicon cost, and commercializing thin film technology to reduce the
consumption of silicon materials and manufacturing costs. We have established cooperative
relationships with a number of universities in China and abroad, including the University of New
South Wales in Australia and Zhongshan University in China. Our collaborative efforts with these
institutions not only give us access to advanced testing facilities and equipment, but also enable
us to keep abreast of the latest industry developments and trends. The government authorities in
China have recognized our research and development capabilities by giving us research grants.
Flexible China-based, Low-cost Manufacturing Model
We believe our China-based, semi-automated manufacturing model lowers our operating costs and
capital expenditure. We optimize automation and manual operations in our manufacturing processes to
take advantage of our location in China, where the costs of skilled labor, engineering and
technical resources, as well as land, production equipment, facilities and utilities, tend to be
lower than those in developed countries. We are one of the few companies in the world capable of
producing PV cells with both monocrystalline and multicrystalline silicon wafers, giving us
flexibility in raw material procurement and a competitive advantage during periods of silicon wafer
supply shortages. We have developed process technologies that enable us to manufacture
high-efficiency PV cells using off-specification silicon wafers, which further reduces our raw
material costs. Our flexible manufacturing model enables us to reduce breakage and improve
manufacturing yields. Our design capabilities enable us to substitute certain costly imported
equipment with self-designed domestic alternatives. In addition, we believe that our semi-automated
manufacturing model enables us to expand capacity at a lower cost, compared to the fully-automated
processes often utilized in developed countries.
Established Relationships with Key Customers and Suppliers
To grow our business and market share, we have established various types of supply and sales
arrangements with some of the key players in the PV industry. Our major international customers
include Aleo Solar GmbH, Bihler GmbH, Conergy AG, IBC Solar AG and SolarWorld AG. We purchase
silicon wafers from some of our customers, including SolarWorld AG (through its wholly-owned
subsidiary Deutsche Solar AG) and Sunlynx Anstalt, and sell all or a substantial portion of the PV
modules manufactured with these wafers to these customers. These arrangements ensure that at least
a portion of our raw material requirement is met, and enable us to leverage the local distribution
networks of these partners. In October 2005, we entered into a 10-year supply agreement with
Deutsche Solar AG, under which Deutsche Solar AG agreed to supply us with specified quantities of
silicon wafers from January 1, 2006 to December 31, 2015. We have also built a silicon wafer supply
chain in China. We are one of the few China-based companies to have access to silicon produced
domestically. In addition, we provide technical support to two silicon slicing companies in China,
which have been supplying silicon wafers to us on an exclusive basis.
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We have also invested in a silicon ingot company which supplies us with silicon ingots. We
leverage our relationships with companies outside of China to source silicon materials for three
Chinese silicon ingot manufacturers, who, in return, have been supplying us with silicon ingots.
Through a variety of arrangements, we believe we will be able to secure silicon raw materials for
the estimated production output in 2006.
Leading Pure Play Solar Energy Company with High Growth and Profitability
We are a leading independent developer and manufacturer of PV cells and modules. According to
Photon International, we were the eight largest PV cell producers worldwide and the largest PV cell
producer in China in 2005, based on production output. Unlike several of our large competitors,
which operate as PV divisions of large industrial, utility and oil conglomerates, we dedicate all
of our management efforts and financial, technical, research and human resources to the design,
development, manufacturing and marketing of PV products. Our focus on the PV industry enables our
management to set corporate direction, make strategic and operational decisions based solely on our
commitment to the PV industry and our customer requirements. We believe that our focused efforts
have contributed to our rapid growth and high operating efficiency in the past three years. We have
increased our annual manufacturing capacity of PV cells from 10 MW in August 2002 to 150 MW as of
December 31, 2005. We achieved profitability in December 2002, within one year of commencing our
operations, and achieved gross margin of 19.4%, 29.5% and 30.3% and net margin of 6.7%, 23.2% and
13.5% in 2003, 2004 and 2005, respectively, which we believe were among the highest compared to
current public solar energy companies. We believe that our dedication to the PV industry will
enable us to better capitalize on the rapidly growing demand for PV products, expand our
manufacturing capacity and respond quickly to industry, technology and market changes.
Experienced Management Team with Proven Technology and Operational Record
We have an experienced management team that has successfully led our operations and increased
our capacity, revenues and profits through rapid organic growth. Dr. Zhengrong Shi, our founder,
the chairman of our board of directors and our chief executive officer, has over 20 years of
experience in the PV industry. With his expertise, entrepreneurial spirit and strong leadership,
Dr. Shi has been instrumental in helping us achieve our current leading market position. He is the
inventor of 11 patents in PV technology and received his doctorate degree under the guidance of
Professor Martin Green, one of the world's foremost researchers and inventors in the field of PV
technology. Prior to founding our company, Dr. Shi was the research director and an executive
director of Pacific Solar Pty. in Australia and a research fellow of the Australian Research
Committee. Our chief operating officer, Mr. Graham Artes, has over 30 years of experience in
managing production, services and sales. We believe that the technical and industry knowledge and
the operating experiences of our senior executives provide us with significant competitive
advantages in the fast growing PV industry.
Our Products and Services
We offer a wide range of PV cells and modules. We also provide PV system integration services
in China. Our products are used in a variety of residential, commercial, industrial and public
utility applications, for both on-grid electricity generation and off-grid use, such as stand-alone
lighting for street lamps, garden lamps, telecommunications relay stations, and mobile phone
networks.
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Solar energy generation systems use interconnected PV cells to generate electricity from
sunlight, a phenomenon commonly known as the photovoltaic effect. Most PV cells are constructed
using specially processed silicon, which, when exposed to sunlight, generates electric current.
Interconnected PV cells are packaged into PV modules, which protect the PV cells and collect the
electricity generated. PV systems comprise of multiple PV modules, related power electronics and
other components. PV systems are used for both on-grid generation, in which electricity generated
is fed into an electricity transmission grid for sale, and off-grid generation for locations where
access to the electricity transmission grid is not physically available or economically feasible.
PV Cells
A PV cell is a device made from a silicon wafer that converts sunlight into electricity by a
process known as the photovoltaic effect. We produce a variety of monocrystalline and
multicrystalline silicon PV cells. The following table sets forth a sample of the types of PV cells
we offer with the specifications indicated.
Optimum
Dimensions
Conversion
Maximum
Operating
PV Cell Type
(mm×mm)
Efficiency (%)
Power (W)
Voltage (V)
Monocrystalline silicon PV cell
103×103
15.4-17.6
1.62-1.85
505-527
125×125
15.4-17.6
2.29-2.62
505-527
150×150
15.4-17.6
3.44-3.93
505-527
156×156
15.4-17.6
3.67-4.20
505-527
Multicrystalline silicon PV cell
103×103
14.0-16.0
1.48-1.70
487-515
125×125
14.0-16.0
2.19-2.50
487-515
150×150
14.0-16.0
3.15-3.60
487-515
156×156
14.0-16.0
3.41-3.89
487-515
PV Modules
A PV module is an assembly of PV cells that have been electrically interconnected and
laminated in a durable and weather-proof package. We produce a variety of PV modules ranging from
two to 240 watts in power, with higher output modules under development. The following table sets
forth a sample of the types of PV modules we manufacture with the specifications indicated.
Optimum
Dimensions
Weight
Maximum
Operating
PV Module Type
(mm×mm)
(Kg)
Power (W)
Voltage (V)
Manufactured with monocrystalline silicon PV Cells
1195×541×30
8.0
75
17.2
1482×676×50
11.5
115
17.2
1580×808×50
15.0
160
34.4
1482×992×50
17.5
170
25.8
1956×992×50
23.0
230
34.4
Manufactured with multicrystalline silicon PV Cells
995×453×30
5.8
50
17.2
1195×541×30
8.0
75
17.2
1580×808×50
15.0
165
34.8
1956×992×50
23.0
230
34.4
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PV System Integration
A PV system consists of one or more PV modules that are physically mounted and electrically
interconnected, with system components such as batteries and power electronics, to produce and
reserve electricity. Typical residential on-grid systems contain between 10 and 60 PV modules and
produce one to six kilowatt hours, or KWh, of electricity. PV system integration involves the
design, installation and testing of PV systems. We have designed and installed PV systems used in
lighting for outdoor urban public facilities, in farms and villages, as well as in
telecommunications and transportation systems.
Manufacturing
We believe that one of our competitive strengths is our ability to manufacture high-conversion
efficiency products on a large scale and at low cost. As such, we continue to expand our
manufacturing capacity, streamline and optimize our manufacturing processes as well as enhance our
process technologies. We also seek to design and implement manufacturing processes that produce
consistently high-efficiency products.
Manufacturing Processes
PV cell manufacturing begins with ultrasonic cleaning of silicon wafers followed by chemical
treatment of the wafer surface, which reduces the PV cell's reflection of sunlight. Through a
thermal process, or a diffusion process, we then introduce certain impurity into the silicon wafer
and form an electrical field within the PV cell. We achieve the electrical isolation between the
front and back surfaces of the silicon wafer by edge isolation, or removing a very thin layer of
silicon around the edge. We then apply an anti-reflection coating to the front surface of the PV
cell to enhance its absorption of sunlight. We screen print negative and positive metal contacts,
or electrodes, on the front and back surfaces of the PV cell, respectively, with the front contact
in a grid pattern to allow sunlight to be absorbed. Silicon and metal electrodes are then connected
through an electrode firing process in a conveyor belt furnace at high temperature. We complete the
manufacturing of PV cells by testing and sorting.
The differences between manufacturing processes for monocrystalline and multicrystalline
silicon PV cells are as follows:
•
The chemical treatment process for monocrystalline silicon PV cell manufacturing
produces a "pyramid-textured surface," which traps sunlight into the silicon. For
multicrystalline silicon PV cell manufacturing, a similar type of surface structure
cannot be readily formed, causing surface reflection levels higher than those of
monocrystalline silicon PV cells. We have developed a patented process that allows the
formation of a similar surface structure to that of monocrystalline silicon PV cells.
We believe that this technology helps us in achieving high conversion efficiencies for
multicrystalline silicon PV cells.
•
An anti-reflection coating on a PV cell enhances its ability to absorb incoming
sunlight. For monocrystalline silicon PV cells, many types of materials can serve as
anti-reflection coatings. For multicrystalline silicon PV cells, only materials that
contain atomic hydrogen, such as hydrogenated silicon nitride, can be used. We have
developed technology that enables hydrogen to be absorbed within the silicon structure
to improve silicon quality. We believe
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that this technology also helps us in achieving
high conversion efficiencies for multicrystalline silicon PV cells.
The diagram below illustrates the PV cell manufacturing process:
Our PV modules are formed by interconnecting multiple PV cells in the desired electrical
configuration through taping and stringing. The interconnected cells are laid out and laminated in
the vacuum and then go through a curing process, or a heating process. Through these processes, our
PV modules are sealed and become weatherproof and are able to withstand high levels of ultraviolet
radiation and moisture. Assembled PV modules are packaged in a protective aluminum frame prior to
testing.
The diagram below illustrates the PV module manufacturing process:
Manufacturing Capacity Expansion
Since commencing our business operations in May 2002, we have significantly expanded our
manufacturing capacity to meet the rapidly increasing demand for PV products. In August 2002, we
completed our first commercial PV cell manufacturing line with an annual manufacturing capacity of
10 MW, which was later improved to 15 MW, and began the commercial sales of our PV cells in
September 2002. Through continual expansion, as of December 31, 2005, we had six PV cell
manufacturing lines with an aggregate manufacturing capacity of 150 MW per year. We have also
proportionately expanded our manufacturing capacity of PV modules. In addition, we entered into
agreements to purchase manufacturing equipment for three additional manufacturing lines for PV
cells in order to add 120 MW manufacturing capacity to our existing capacity. Two of these
manufacturing lines are expected to become operational by the second quarter of 2006 and the last
one is expected to become operational by the third quarter of 2006.
The table below sets forth certain information regarding our current manufacturing lines as of
December 31, 2005:
PV Cell
Commencement
Annualized
Manufacturing Line
Date of Manufacturing
Manufacturing Capacity(1)
Capacity Utilization Rate
(in MW)
Line 1
August 2002
15
96.63%
Line 2
December 2003
15
97.61
Line 3
August 2004
30
96.46
Line 4
June 2005
30
98.66
Line 5
June 2005
30
98.06
Line 6
December 2005
30
N/A
Total
150
(1)
Based on and calculated by the maximum manufacturing capacity of each manufacturing
line and calculated by using annualized maximum wafer throughput by multiplying the blended
average conversion efficiency rates of monocrystalline and multicrystalline silicon PV cells.
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In addition to capacity expansion in our facilities in Wuxi, we intend to acquire
controlling interests in Chinese manufacturers of PV products in order to secure silicon wafer
supplies and to gain access to end users. In October 2005, we established a 87.0%-owned subsidiary
for the manufacturing of PV cells and modules in Luoyang, China. A major shareholder of Luoyang
China Silicon High-Tech Co., Ltd., one of the largest silicon raw material suppliers and silicon
purification companies in China with 450 tonnes of annual capacity, has agreed to provide silicon
wafers to this subsidiary of our company with priority to ensure that sufficient amount of silicon
wafers will be provided for a PV cell manufacturing line with an initial capacity of 30 MW per
year. We will initially invest approximately $5.0 million, and production is expected to begin in
the second half of 2006. We have also, through Suntech China, acquired a 51.0% equity interest in
one of our customers, Qinghai Gofly, a renewable energy company in Qinghai province, China, for a
consideration equivalent to $0.5 million and plan to build a PV module manufacturing facility with
an annual capacity of 3.0 MW in Qinghai.
Raw Materials
Raw materials required in our manufacturing process include silicon wafers, ethylene vinyl
acetate, metallic paste, tempered glass, tedlar-polyester-tedlar material, connecting system and
aluminum frame. Our raw material procurement policy is to (i) use only vendors who have
demonstrated quality control and reliability, and (ii) maintain multiple supply sources for each of
our key raw materials so that supply problems with any one vendor will not materially disrupt our
operations. We evaluate the quality and delivery performance of each vendor periodically and adjust
quantity allocations accordingly.
We maintain one or two days' supply of silicon wafers and one month's supply of stock of other
raw materials based upon regular estimates of customer orders. Our principal suppliers usually
dedicate portions of their inventories as reserves to meet our manufacturing requirements.
The principal suppliers for our silicon wafers are Deutsche Solar AG, a wholly-owned
subsidiary of SolarWorld AG, Emei Semi Conductor Material Factory, Jiangsu Shunda Semiconductor
Development Co., Ltd, Jiangsu Huantai Group, Baoding Yingli New Energy Resources Co., Ltd, and
Swiss Wafers AG. In 2005, we purchased 49.3% of our raw materials from overseas.
Our suppliers for tempered glass include Asahi Glass Co., Ltd., Pilkington (Australia) Ltd.
and Hong Glass Factory Co., Ltd. Our suppliers for ethylene vinyl acetate include Mitsui & Co. Ltd
and NPC Incorporated. We purchase some of our raw materials, such as tedlar-polyester-tedlar
material and metallic paste, from suppliers based in China.
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Silicon Wafers
Silicon wafers are the most important raw materials for making PV products, with
monocrystalline and multicrystalline silicon wafers as the most commonly used materials. We are one
of the few companies in the world capable of producing PV cells with either type of silicon wafers.
This dual capability provides us with flexibility in raw material procurement and is an advantage
during periods of silicon supply shortages.
In order to meet a portion of our raw material requirement, we have also established OEM
manufacturing arrangements with some of our customers including SolarWorld AG and Sunlynx Anstalt.
We obtain silicon wafer supplies from these customers, and are obligated to sell to these customers
all or a substantial portion of the PV modules manufactured with these wafers.
We acquire silicon wafers from our suppliers mainly through annual or bi-annual supply
arrangements and also secure a portion of our silicon wafers through long-term supply contracts,
strategic alliances with silicon suppliers and developing new silicon technologies. Specifically,
we have taken the following measures:
•
Long-term Supply Contracts.
We are in active discussions with many silicon and
silicon wafer suppliers both overseas and in China to secure fixed price, fixed amount
and long-term supply contracts with prepayment. For example, on October 14, 2005, we
entered into a 10-year supply agreement with Deutsche Solar AG. Under this agreement,
Deutsche Solar AG has agreed to provide us with fixed quantities of silicon wafer on a
monthly basis from January 1, 2006 to December 31, 2015. The purchase price will be
fixed in 2006 subject to adjustment for each following year based on a predetermined
formula. We estimate that over the ten-year period, we will likely purchase silicon
wafers in the amount of approximately $80.0 million. In October 2005, we established a
87.0%-owned subsidiary in Luoyang, China. Luoyang Silicon, a major shareholder of one
of the largest silicon raw material manufacturers and silicon purification companies in
China has agreed to provide silicon wafers to this subsidiary with priority to ensure
sufficient amount of silicon wafers will be provided for a PV cell manufacturing line
with an initial capacity of 30 MW per year. In October 2005, Luoyang Silicon commenced
production of silicon at approximately 10 tonnes per month and its monthly production
capacity is expected to be gradually increased to 40 tonnes in 2006.
•
Strategic Alliances.
We have entered into various forms of strategic alliances with
silicon suppliers in China to reduce our exposure to the risk of supply shortages. We
have invested in a silicon ingot company that supplies us with silicon ingots. We also
leverage our relationships with companies outside China to source silicon materials for
three Chinese silicon ingot manufacturers, which in return supply us with silicon
ingots. We have contracts with silicon slicing companies to slice the ingots into
silicon wafers.
•
Developing New Silicon Technologies.
We are also developing new silicon
purification technologies, which we believe will substantially reduce silicon cost
while maintaining and enhancing our conversion efficiencies. We believe these
technologies will increase our raw material supplies and further reduce
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our raw
material costs. We also provide technical support to two silicon slicing companies in
China, which have been supplying silicon wafers to us on exclusive basis.
Quality Assurance and Certifications
We employ quality assurance procedures at key manufacturing stages to identify and solve
quality issues early on in the manufacturing process. Our quality assurance procedures include raw
material quality assurance, process monitoring and PV cell quality and reliability assurance. If a
problem is detected, a failure analysis will be performed to determine the cause. To ensure that
our quality assurance procedures are effectively applied, manufacturing line employees are provided
with ongoing training. Our senior management team is actively involved in setting quality assurance
policies and managing quality assurance performance.
We have received many types of international certifications for our quality assurance
programs, which we believe demonstrate our technological capabilities and instill customer
confidence. The following table sets forth the major certifications we have received and major test
standards our products have met as of December 31, 2005.
Certification Test Date
Certification or Test Standard
Relevant Products
June 2002, and
renewed in June 2005
ISO 9001:2000 quality system
certification, established by
the International
Organization for
Standardization, an
organization formed by
delegates from member
countries to establish
international quality
assurance standards for
products and manufacturing
processes.
The design and
manufacture of
crystalline silicon
PV cells, modules
and application
systems
March 2003
CE certification, issued by
Electronic Technology Systems
Dr. Genz GmbH, an
international operating test
and certification center. An
indication that our products
have reached "European
Conformity."
Certain models of
our PV Modules and
charge controller
for our PV System
June 2003— January 2004
IEC61215:1993 test standard,
administered by Arizona State
University Photovoltaic
Testing Laboratory.
Certain models of
our PV modules
An international test
standard recognized by the
United States for crystalline
silicon modules, providing
assurance that the product is
reliable and durable.
January 2005
TÜV certification, conducted
by TÜV Immissionsschutz und
Energiesysteme GmbH, an
independent approval agency
in Germany, against the
requirements of Safety Class
II Test on PV modules.
Certain models of
our PV modules
March 2006
UL certification
Certain models of
our PV modules
Markets and Customers
We sell our products outside of China primarily to distributors and in China primary to module
manufacturers and end users directly. Our distributors include companies that are exclusive solar
distributors, engineering and design firms and other energy product
distributors. Some of our distributors are also installers, system integrators, property
developers and other value-added resellers, who often add value to the system design by
incorporating our PV cells or PV modules with batteries, power electronics, mounting
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structures and
wiring systems. In 2005, SolarWorld AG was the only customer whose purchases accounted for 10.0% or
more of our total net revenues for the year.
The following table sets forth certain information relating to our total net revenues by
geography for the period indicated:
Year Ended December 31,
2003
2004
2005
Total Net
Total Net
Total Net
Region
Revenues
%
Revenues
%
Revenues
%
(in thousands, except percentages)
Europe
Germany
$
2,616
18.8
%
$
61,528
72.1
%
$
101,590
45.0
%
Spain
11
—
1,659
2.0
18,160
8.0
Others
809
5.9
13,033
15.3
41,537
18.4
Europe sub-total
3,436
24.7
76,220
89.4
161,287
71.4
China
6,449
46.4
6,705
7.8
56,400
25.0
South Africa
3,453
24.9
1,345
1.6
488
0.2
Rest of the world
550
4.0
1,018
1.2
7,825
3.5
Total
$
13,888
100.0
%
$
85,288
100.0
%
$
226,000
100.0
%
We sell our products primarily under two types of arrangements, supply contracts and OEM
manufacturing arrangements, which are as follows:
•
Supply contracts.
We enter into short-term supply contracts with most of our
customers and are obligated to deliver PV modules according to a pre-agreed price and
schedule, generally for a few months at a time in exchange for payment by the customer
in the form of a letter of credit or payment upon delivery; and
•
OEM manufacturing arrangements.
We obtain silicon wafers supplies from our
customers, and are obligated to sell to those customers all or a substantial portion of
the PV modules manufactured with these wafers. Our customers then sell the PV modules
under their own brands. The payment we make for the wafers and the payment our customer
makes for the PV modules are generally settled separately, but any change in the price
of the wafers would lead to corresponding adjustment in the price of PV modules. These
arrangements secure a portion of the silicon we require.
Sales and Marketing
Our sales and marketing strategy is to develop a diversified customer mix in terms of
end-market application, customer type and geographic coverage in order to manage our exposure to
each market segment. To this end, we engage in various marketing activities to promote our products
and services. Each year, we organize a Suntech product technology exchange seminar to introduce
industry developments, our technologies, new products and
services. We also participate in a variety of regional and international technology seminars,
trade shows and sales conferences to promote our products and services.
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We sell our PV products outside of China primarily through distributors. We currently work
with a relatively small number of distributors that have particular experience in a given
geographic or applications market segment. We are actively working to expand our distribution
channels by selectively adding distributors. We believe that our relationships with our
distributors enable us to (i) leverage the marketing and distribution and after-sales service
capabilities of other companies, (ii) explore opportunities for additional product development,
(iii) more easily, quickly and cost-effectively enter new geographic markets, and (iv) attract new
customers.
We sell our PV products to module manufacturers and end users in China primarily through a
team of 36 sales and marketing personnel. To date, we have primarily pursued off-grid sales in
China. We target our sales and marketing efforts at companies in selected industry sectors,
including telecommunications, public utilities and transportation. We have actively participated in
the "Brightness Program" launched by the National Development and Reform Commission in 2002, which
was aimed at providing electricity to townships and villages in remote areas. We believe that
growth of the PV market in China will likely outpace the global rate due to the recent adoption of
China's Renewable Energy Law and the PRC government's commitment to develop renewable energy
sources. We plan to leverage our location and our existing relationships with end users to increase
our sales in China, especially our sales of PV system integration services.
Customer Support and Service
We provide customer support and service for our customers in China through a dedicated team.
This customer support and service team provides on-site and off-site customer service and
applications engineering support to our distributors and end users of our products and services, as
well as gathers information on our product performance and future product requirements. Our
customer support and service team coordinates its function and activities with our marketing,
technology, quality and manufacturing departments. We coordinate among our overseas customers and
assist them in providing customer support and service to overseas end users.
Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0%, respectively, of
the initial power generation capacity at the time the product is sold.
Intellectual Property
We rely primarily on a combination of patent, trademark and trade secret protections, as well
as employee and third party confidentiality agreements to safeguard our intellectual property. As
of April 25, 2006, we held a total of seven patents issued in China and had 16 pending patent
applications in China. Our issued and pending patent applications relate primarily to process
technologies for the manufacturing of PV cells and PV modules.
We maintain five trademark registrations in China, including the names Suntech, SuntechPower
and Powerful Care and our logo. We have also registered Suntech and our logo in Germany and
Thailand, as well as SuntechPower in Thailand. We are in the process of registering Suntech and our
logo in Australia, Finland, Greece, Japan, Norway, Singapore,
Sweden, Turkey, the United Kingdom and the United States. As our brand name is becoming more
recognized in the PV market, we are working to increase, maintain and enforce our
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rights in our
trademark portfolio, the protection of which is important to our reputation and branding.
With respect to, among other things, proprietary know-how that is not patentable and processes
for which patents are difficult to enforce, we rely on trade secret protection and confidentiality
agreements to safeguard our interests. We believe that many elements of our PV products and
manufacturing processes involve proprietary know-how, technology or data that are not covered by
patents or patent applications, including technical processes, equipment designs, algorithms and
procedures. We have taken security measures to protect these elements. Substantially all of our
research and development personnel have entered into confidentiality, non-competition and
proprietary information agreements with us. These agreements address intellectual property
protection issues and require our employees to assign to us all of their inventions, designs and
technologies they develop during their terms of employment with us. We also take other precautions,
such as internal document and network assurance and using a separate dedicated server for technical
data.
We have not had any material intellectual property claims.
Competition
The PV market is intensely competitive and rapidly evolving. According to Photon
International's survey in March 2006, as of the end of 2005, 94 manufacturers in the world produced
PV cells and 153 companies produced PV modules. Our competitors include PV divisions of large
conglomerates, such as BP Solar, Sanyo Group and Sharp Corporation, specialized cell and module
manufacturers such as Q-Cells, as well as integrated manufacturers of PV products such as
SolarWorld AG. Some of our competitors have also become vertically integrated, from upstream
silicon wafer manufacturing to PV system integration. We expect to compete with future entrants to
the PV market that offer new technological solutions. We may also face competition from
semiconductor manufacturers, several of which have already announced their intention to start
production of PV cells. Many of our competitors are developing or currently producing products
based on new PV technologies, including amorphous silicon, ribbon, sheet and nano technologies,
which they believe will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from conventional and
non-solar renewable energy technologies. Due to the relatively high manufacturing costs compared to
most other energy sources, solar energy is generally not competitive without government incentive
programs.
Many of our existing and potential competitors have substantially greater financial,
technical, manufacturing and other resources than we do. Our competitors' greater size in some
cases provides them with a competitive advantage with respect to manufacturing costs because of
their economies of scale and their ability to purchase raw materials at lower prices. For example,
those of our competitors that also manufacture semiconductors may source both semiconductor grade
silicon wafers and solar grade silicon wafers from the same supplier. As a result, such competitors
may have stronger bargaining power with the supplier and have an advantage over us in pricing as
well as securing silicon wafer supplies at times of shortages. Many of our competitors also have
greater brand name recognition, more established distribution networks and larger customer bases.
In addition, many of our competitors have well-established relationships with our current and
potential distributors and
have extensive knowledge of our target markets. As a result, they may be able to devote
greater resources to the research, development, promotion and sale of their products and
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respond
more quickly to evolving industry standards and changes in market conditions than we can.
Environmental Matters
Our manufacturing processes generate noise, waste water, gaseous wastes and other industrial
wastes. We have installed various types of anti-pollution equipment in our facilities to reduce,
treat, and where feasible, recycle the wastes generated in our manufacturing process. We outsource
the treatment of some of our waste water and other liquid wastes to third-party contractors. Our
operations are subject to regulation and periodic monitoring by local environmental protection
authorities in Wuxi. We expect to obtain ISO 14001 certification for our manufacturing facilities
in Wuxi in May 2006. ISO 14001 prescribes standards for management of organizations to achieve an
effective environmental management system.
Insurance
We maintain property insurance policies with reputable insurance companies covering our
equipment and facilities. These insurance policies cover losses due to fire, earthquake, flood and
a wide range of other natural disasters. Insurance coverage for our fixed assets other than land
amounted to approximately $21.2 million as of December 31, 2005. We also maintain insurance
policies in respect of marine, air and inland transit risks for the exports of our products. In
addition, we currently maintain product quality insurance against warranty claims with an aggregate
coverage amount of approximately $125 million, which covers both technical defects and declines of
initial power generation capacity of our PV modules. We do not maintain business interruption
insurance or key-man life insurance on our executive officers. We consider our insurance coverage
to be adequate. However, significant damage to any of our manufacturing facilities and buildings,
whether as a result of fire or other causes, could have a material adverse effect on our results of
operations. We paid an aggregate of approximately $30,264 in insurance premiums in 2005.
Regulation
This section sets forth a summary of the most significant regulations or requirements that
affect our business activities in China or our shareholders' right to receive dividends and other
distributions from us.
Renewable Energy Law and Other Government Directives
In February 2005, China enacted its Renewable Energy Law, which became effective on January 1,
2006. The Renewable Energy Law sets forth policies to encourage the development and use of solar
energy and other non-fossil energy. The renewable energy law sets forth the national policy to
encourage and support the use of solar and other renewable energy and the use of on-grid
generation. It also authorizes the relevant pricing authorities to set favorable prices for the
purchase of surplus electricity generated by solar and other renewable power generation systems.
The law also sets forth the national policy to encourage the installation and use of solar
energy water-heating system, solar energy heating and cooling system, solar
photovoltaic system and other solar energy utilization systems. It also provides financial
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incentives, such as national funding, preferential loans and tax preferences for the development of
renewable energy projects.
China's Ministry of Construction also issued a directive in June of 2005, which seeks to
expand the use of solar energy in residential and commercial buildings and encourages the increased
application of solar energy in different townships. In addition, China's State Council promulgated
a directive in July of 2005, which sets forth specific measures to conserve energy resources and
encourages exploration, development and use of solar energy in China's western areas, which have
not been covered by electricity transmission grids and rural areas.
Environmental Regulations
We use, generate and discharge toxic, volatile or otherwise hazardous chemicals and wastes in
our research and development and manufacturing activities. We are subject to a variety of
governmental regulations related to the storage, use and disposal of hazardous materials. The major
environmental regulations applicable to us include the Environmental Protection Law of the PRC, the
Law of PRC on the Prevention and Control of Water Pollution, Implementation Rules of the Law of PRC
on the Prevention and Control of Water Pollution, the Law of PRC on the Prevention and Control of
Air Pollution, Implementation Rules of the Law of PRC on the Prevention and Control of Air
Pollution, the Law of PRC on the Prevention and Control of Solid Waste Pollution, and the Law of
PRC on the Prevention and Control of Noise Pollution.
Restriction on Foreign Businesses
The principal regulation governing foreign ownership of solar photovoltaic businesses in the
PRC is the Foreign Investment Industrial Guidance Catalogue (effective as of January 1, 2005).
Under the regulation, the solar photovoltaic business belongs to permitted foreign investment
industry.
Tax
PRC enterprise income tax is calculated based on taxable income determined under PRC
accounting principles. In accordance with "Income Tax of China for Enterprises with Foreign
Investment and Foreign Enterprises," or the Income Tax Law, and the related implementing rules,
foreign invested enterprises incorporated in the PRC are generally subject to an enterprise income
tax rate of 33.0% (30.0% of state income tax plus 3.0% local income tax). The Income Tax Law and
the related implementing rules provide certain favorable tax treatments to foreign invested
enterprises which qualify as "high and new technology enterprises" and are registered and operate
in specified high-tech zones in the PRC. PRC domestic companies are governed by the Enterprise
Income Tax Laws of the PRC and are generally subject to an enterprise income tax rate of 33.0%.
Suntech China, a foreign invested enterprise registered and operates in a high-tech zone in
Wuxi, has been qualified as a "high and new technology enterprise." As a result, it is entitled to
a preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its "high and new technology enterprise" status. It was entitled to a
two-year exemption from the enterprise income tax for its first two profitable years of operation,
which were 2003 and 2004. Suntech was thereafter entitled to a
preferential enterprise income tax rate of 7.5% for the succeeding three years, which will
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expire on December 31, 2007. After December 31, 2007, Suntech China will be subject to a
preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its "high or new technology enterprise" status.
Suntech China's status as a "high and new technology enterprise" is re-assessed every two
years. Currently, Suntech has obtained the approval for a preferential enterprise income tax rate
of 7.5% in 2005 and 2006. The PRC central or provincial government could at any time determine to
immediately eliminate or reduce such preferential tax treatment, and our effective tax rate would
increase as a result.
Pursuant to the Provisional Regulation of China on Value Added Tax and their implementing
rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs
and replacement services and the importation of goods in China are generally required to pay VAT at
a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne
by the taxpayer. Further, when exporting goods, the exporter is entitled to a portion of or all the
refund of VAT that it has already paid or borne. Our imported raw materials that are used for
manufacturing export products and are deposited in bonded warehouses are exempt from import VAT.
Dividend Distribution
The principal regulations governing distribution of dividends paid by wholly foreign owned
enterprises include:
•
Wholly Foreign Owned Enterprise Law (1986), as amended; and
•
Wholly Foreign Owned Enterprise Law Implementation Rules (1990), as amended.
Under these regulations, foreign-invested enterprises in China may pay dividends only out of
their accumulated profits, if any, determined in accordance with PRC accounting standards and
regulations. In addition, a foreign-invested enterprise in China are required to set aside at least
10.0% of their after-tax profit based on PRC accounting standards each year to its general reserves
until the accumulative amount of such reserves reach 50.0% of its registered capital. These
reserves are not distributable as cash dividends. The board of directors of a foreign-invested
enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and
bonus funds, which may not be distributed to equity owners except in the event of liquidation.
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C.
Organizational Structure
The following diagram illustrates our company's organizational structure, and the place of
formation, ownership interest and affiliation of each of our subsidiaries.
D.
Property, Plant and Equipment
We are headquartered in the New District in Wuxi, Jiangsu province, where we lease a building
with an aggregate of approximately 5,600 square meters of office, research and development and
manufacturing space. We own the right to use a parcel of land of approximately 66,600 square meters
near our leased facilities in the New District in Wuxi, where we have constructed manufacturing
facilities for the installation of certain of our PV cell manufacturing lines. We are in the
process of constructing additional new facilities including new office, research and development
center and additional manufacturing space on this land, the first phase of which was completed in
June 2005. The entire facilities are scheduled to be completed by the first half of 2007. We also
own the right to use a parcel of land of approximately 4,000 square meters in Liyuan, Wuxi for the
display of demonstration
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models of our PV systems. See "Item 4. Information of the Company—D. Property, Plant and
Equipment—Manufacturing—Manufacturing Capacity Expansion." We believe that our existing facilities,
together with the facilities under construction, are adequate for our current and foreseeable
future requirements.
Item 5.
Operating and Financial Review and Prospects
You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with our consolidated financial statements and the related notes
included elsewhere in this annual report on
Form 20-F
. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under "Item 3. Key Information—D. Risk Factors" or in
other parts of this annual report on
Form 20-F
.
A.
Operating Results
Overview
We have grown significantly since we completed our first PV cell manufacturing line in August
2002. We sold 6.4 MW, 29.5 MW and 67.7 MW of our products in 2003, 2004 and 2005, respectively. Our
net revenues increased from $13.9 million in 2003 to
$85.3 million in 2004 and to $226.0 million in
2005. Our net income amounted to $0.9 million in 2003, $19.8 million in 2004 and $30.6 million in
2005, representing net margin of 6.7%, 23.2% and 13.5%, respectively.
We have a limited operating history that can serve as the basis to evaluate our business. You
should consider the risks and difficulties frequently encountered by early-stage companies, such as
us, in new and rapidly evolving markets, such as the PV market. Our recent revenue growth should
not be taken as indicative of the rate of revenue growth, if any, that can be expected in the
future. In addition, our limited operating history provides a limited historical basis to assess
the impact that critical accounting policies may have on our business and our financial
performance.
We operate and manage our business as a single segment. We do not account for the results of
our operations on a geographic or other basis, and we do not allocate expenses among our various
products and services.
The most significant factors that directly or indirectly affect our financial performance and
results of operations are:
•
industry demand;
•
capacity;
•
availability and price of silicon wafers;
•
pricing of our PV products; and
•
process technologies.
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Industry Demand
Our business and revenue growth depends on PV industry demand. The PV market has grown
significantly in the past decade. According to Solarbuzz, the PV market, as measured by annual PV
system installations, increased from 254 MW in 2000 to 1,460 MW in 2005, representing a CAGR of
41.9%, while PV industry revenues grew from approximately $2.0 billion in 2000 to approximately
$9.8 billion in 2005, representing a CAGR of 37.4%. Despite the rapid growth, solar energy
constitutes only a small fraction of the world's energy output and still has significant growth
potential. Solarbuzz projects that PV industry revenues will reach $11.0 billion by 2006 and will
be up to $23.1 billion by 2010.
Capacity
In order to accommodate the rapidly increasing demand of our products, we have expanded, and
plan to continue to expand, our manufacturing capacity. An increase in capacity has a significant
effect on our results of operations, both in allowing us to produce and sell more PV products and
achieve higher revenues, and in lowering our manufacturing costs resulting from economies of scale.
We have expanded rapidly since we completed our first PV cell manufacturing line with an annual
manufacturing capacity of 10 MW in August 2002. We sold 6.4 MW, 29.5 MW and 67.7 MW of our products
in 2003, 2004 and 2005, respectively. As of December 31, 2005, we had established six PV cell
manufacturing lines with an annualized aggregate capacity of 150 MW. We have also expanded our
manufacturing capacity of PV modules in proportion to our manufacturing capacity of PV cells. Our
capacity expansion allowed us to significantly increase our net revenues from $13.9 million in 2003
to $85.3 million in 2004 and to $226.0 million in 2005.
We plan to increase our annual manufacturing capacity of PV cells to 240MW by the end of 2006.
In addition, in October 2005, we established a 87.0%-owned subsidiary for the manufacturing of PV
cells and modules in Luoyang, China. Luoyang Silicon, a major shareholder of Luoyang China Silicon
High-Tech Co., Ltd., one of the largest silicon raw material suppliers and silicon purification
companies in China with 450 tonnes of annual capacity, has agreed to provide silicon wafers to this
subsidiary with priority to ensure that sufficient amount of silicon wafers will be provided for a
PV cell manufacturing line with an initial capacity of 30 MW per year. We will initially invest
$5.0 million, and production is expected to begin in the second half of 2006. We have also,
through Suntech China, acquired a 51.0% equity interest in one of our customers, Qinghai Gofly, a
renewable energy company in Qinghai province, China, for a consideration equivalent to $0.5 million
and plan to build a PV module manufacturing facility with an annual capacity of 3.0 MW in Qinghai.
Capacity utilization is a key factor in growing our revenues and profits. Our manufacturing
lines have operated at utilization rates consistently exceeding their design capacity in the past
three years due to our ability to effectively manage our manufacturing lines and flow process.
Availability and Price of Silicon Wafers
Silicon wafers are the most important raw material for making PV products. Silicon wafers are
made from either solar grade silicon, which tends to be less pure and less expensive, or
semiconductor grade silicon, which is slightly purer, more expensive and capable of producing PV
products with higher conversion efficiencies. Prior to 2003, the
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availability and price of silicon wafers were driven primarily by the cyclicality of the
semiconductor industry, whose basic raw materials are electronics-grade silicon wafers. Starting
from 2003, due to the rapid growth of the PV industry, the availability and price of silicon wafers
have increasingly been affected by the demand of the PV industry. Silicon suppliers have been
raising their prices and adding manufacturing capacity in response to the growing demand in recent
years. However, building silicon manufacturing lines generally requires significant upfront capital
commitment and it typically takes an average of 18 to 24 months to construct a manufacturing line
and ramp up production. As a result, silicon suppliers are generally willing to expand only if they
are certain of sufficient customer demands to justify such capital commitment. Increasingly,
silicon and silicon wafer suppliers are requiring customers to make prepayments for raw materials
well in advance of their shipment, which, in turn, leads to significant working capital commitment
from PV product manufacturers.
The rapidly growing demand of the PV industry, the limited increase in silicon manufacturing
capacities, coupled with a rebound in the semiconductor industry in 2003, have caused the PV
industry to experience shortages of silicon and silicon wafer supplies since 2003, and we have,
from time to time, experienced late delivery and supply shortages, although we have not encountered
material difficulties in securing raw material supplies to utilize our existing manufacturing
capacity since we commenced our business operations in May 2002. As the PV industry continues to
grow, the availability of silicon wafers will, to a large extent, determine the output of PV
product manufacturers. Failure to obtain sufficient quantities of silicon and silicon wafers could
decrease our revenues and limit our ability to expand our manufacturing capacity as planned. We
expect the availability of silicon wafers to continue to be constrained in the near future.
In order to secure adequate and timely supply of silicon wafers, we have entered into various
short-term and long-term supply agreements with local and foreign suppliers. We have entered into
or renewed several supply agreements to secure silicon wafer supplies in 2006, including:
•
renewal of our supply agreement with SolarWorld AG, our largest customer. Under the
renewed agreement, SolarWorld AG has agreed to supply us with 25 MW of silicon wafers
in exchange for 24 MW of PV modules in 2006;
•
entering into a 10-year supply agreement with Deutsche Solar AG, a subsidiary of
SolarWord AG. Under this agreement, Deutsche Solar AG has agreed to supply us with
fixed quantities of silicon wafers on a monthly basis starting from January 1, 2006;
•
entering into a 10-year cooperation agreement with LDK Hi-tech Co., Ltd., or LDK, a
wafer manufacturer located in Jiangxi Province, China. Under this agreement, LDK has
agreed to supply us with 30 MW and 100 MW of silicon wafers in 2006 and 2007,
respectively;
•
entering into a cooperation agreement with Baoding Yingli New Energy Company, under
which it has agreed to supply us with no less than 20 MW of silicon wafers in 2006; and
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•
entering into a supply agreement with Zhejiang Yuhui Yangguang Energy Company
Limited, under which it has agreed to supply us with 3.7 MW of silicon wafers from May
2006 to July 2006.
However, we cannot assure you that we will be able to secure sufficient quantities of silicon
and silicon wafers to expand our manufacturing capacity as we planned. See "Item 3. Key
Information—D. Risk Factors—Risks Related to Our Company and Our Industry—Failure to obtain
sufficient quantities of silicon and silicon wafers could decrease our revenues and limit our
ability to expand as planned."
In addition, increases in prices of silicon wafers have negatively affected, and could in the
future continue to negatively affect our manufacturing costs and gross margin. Historically, we
were generally able to absorb such increases in silicon wafer costs by improving our process
technologies and increasing our manufacturing efficiencies. As a result, our gross margin has
increased from 19.4% in 2003, to 29.5% in 2004 and 30.3% in 2005. However, we cannot assure you
that we will be able to continue to increase our gross margin in the future.
Pricing of our PV Products
PV products are priced based on the number of watts of electricity they can generate. Pricing
of PV products is principally affected by the manufacturing costs of PV manufacturers, including
the cost of silicon wafers, as well as the overall demand in the PV industry. Increased economies
of scale and advancement of process technologies over the past decade have led to a steady
reduction in manufacturing costs and the prices of PV products. Prices of PV products decreased
steadily in 2002 and 2003 as a result of over-supply of PV products, but rose gradually as a result
of the rapid growth of the PV market worldwide and shortages of silicon wafers in 2004 and 2005.
Fluctuations in the prevailing market prices have historically affected the prices of our PV
products and may continue to have a material effect on the prices of our PV products in the future.
We generally enter into sales contracts with our customers under which we are obligated to
sell our products at fixed prices during the term of the contract. This has helped reduce our
exposure to risks from decreases in the PV cell prices generally, but has, on the other hand, also
prevented us from benefiting from price increases. We price our products based on the prevailing
market price at the time we enter into sales contracts with our customers, taking into account the
size of the contract, the strength and history of our relationship with each customer and our
capacity utilization. We price our PV cells consistent with the prevailing market price. The
average selling price of our PV cells was $1.99, $2.02 and $3.05 per watt in 2003, 2004 and 2005,
respectively. The average selling price of our PV modules was $2.77, $3.01 and $3.42 per watt in
2003, 2004 and 2005. In 2004, the price of our PV modules started at a low point because we were
committed to fixed prices under sales contracts we had entered into with various major overseas
customers at the end of 2003 and the beginning of 2004, prior to the increase of the market price
for PV products. Even after some subsequent price renegotiations, the overall average selling price
of our PV modules in 2004 was still below the prevailing market price. The average selling price of
our PV modules increased by 13.6% in 2005 compared to that in 2004 as part of the prevailing market
trend. However, we expect the prices of PV products, including our own products, to decline over
time due to reduced manufacturing costs.
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We believe that the high conversion efficiencies of our PV products and our low-cost
manufacturing capabilities have enabled us to price our products competitively and will further
provide us with flexibility in adjusting our price while maintaining our profit margin.
Process Technologies
The advancement of process technologies is important in increasing conversion efficiencies of
PV products. High conversion efficiencies reduce the manufacturing cost per watt of PV products and
increase the gross profit margin of the manufacturer. As a result, solar energy companies,
including us, are continuously developing advanced process technologies for large-scale
manufacturing while reducing cost to maintain and improve profit margins.
The average conversion efficiency rates of our monocrystalline and multicrystalline silicon PV
cells have improved from 14.5% and 14.0% in 2002, respectively, to 17.0% and 15.3% in 2005,
respectively. Since October 2005, using our pilot manufacturing line equipped with our latest
technology, we have been able to produce PV cells with an average conversion efficiency rate of
over 18.0%. Our advanced process technologies have also significantly improved our productivity and
increased the efficiency of our raw material usage, both of which have led to the lowering of the
cost per watt of our products and improved our profit margins.
Revenues
We currently derive revenues from three sources:
•
Sales of PV cells, which accounted for approximately 70.1%, 8.6% and 24.2% of our
total net revenues in 2003, 2004 and 2005, respectively.
•
Sales of PV modules, which accounted for approximately 29.6%, 91.3% and 75.3% of our
total net revenues in 2003, 2004 and 2005, respectively. We manufactured all the PV
cells used for our manufacturing of PV modules.
•
Sales of PV system integration services, which accounted for approximately 0.3%,
0.1% and 0.5% of our total net revenues in 2003, 2004 and 2005, respectively.
Our net revenues are net of value-added tax. See "—Taxation."
We have been dependent on a limited number of customers for a significant portion of our
revenues. In 2005, we had one customer accounting for 10% or more of our total net sales, and such
customer accounted for approximately 32.1% of our total net revenues. Our sales have historically
been made on the basis of short-term arrangements and our largest customers have changed from year
to year. Our largest customer in 2005 was different from those in 2004 because we granted a German
company the exclusive right to distribute our products in Germany for 2005 and this company became
our largest customer in 2005. Our largest customers in 2004 were different from those in 2003,
because we sold more PV modules outside of China in 2004, and our target customers for PV modules
are different from those for PV cells. We believe that by focusing on PV module sales, we are not
only able to capture the incremental profit opportunities, but are also able to build our brand
recognition and reputation. As we continue to diversify our geographic presence, customer
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base and product mix, we expect that our largest customers will continue to change from year
to year.
Costs of Revenues and Operating Expenses
The following table sets forth our cost of revenues and operating expenses as percentages of
our total net revenues for the periods indicated.
Year Ended December 31,
2003
2004
2005
Cost of revenues
80.6
%
70.6
%
69.7
%
Operating expenses
Selling expenses
4.0
2.1
1.6
General and administrative expenses
8.9
3.4
8.4
Research and development expenses
1.1
0.5
1.5
Total operating expenses
14.0
%
6.0
%
11.5
%
Our cost of revenues and operating expenses have each declined as a percentage of our total
net revenues from 2003 to 2005 as a result of our increased economies of scale, higher operating
efficiencies and the advancement of our process technologies. Our operating expenses consist of
selling expenses, general and administrative expenses and research and development expenses, each
of which include share-based compensation expenses. Our operating expenses as a percentage of our
total net revenues increased in 2005 as a result of the share compensation charges we incurred and
fees paid to our outside consultants who provided advisory services to us in connection with our
restructuring. We conduct our development, design and manufacturing operations in China, where the
costs of skilled labor, engineering and technical resources, as well as land, facilities and
utilities, tend to be lower than those in more developed countries. We balance automation and
manual operations in our manufacturing processes, and have been able to increase operating
efficiencies and expand our manufacturing capacity cost-effectively.
Cost of Revenues
Our cost of revenues primarily consists of:
•
silicon wafers,
which constitute the most important raw material from which PV
products are made. We expect the cost of silicon wafers will continue to constitute a
significant portion of our cost of revenues in the near future;
•
other direct raw materials,
including ethylene vinyl acetate, metallic pastes,
tempered glass, tedlar- polyester-tedlar material, connecting system and aluminum
frame;
•
direct labor,
including salaries and benefits for personnel directly involved in
manufacturing activities;
•
depreciation and amortization of manufacturing equipment and facilities
. Due to our
capacity expansion, depreciation and amortization in absolute terms have increased
significantly. We expect depreciation and amortization to
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increase in absolute terms in the future as we continue to expand our manufacturing
capacity and build new facilities; and
•
overhead,
including utility, maintenance of production equipment, share-based
compensation expenses for options granted to employees in our manufacturing department
and other support expenses associated with the manufacturing of our PV products.
Selling Expenses
Selling expenses primarily consist of provisions of warranties, advertising, promotional and
other sales and marketing expenses, salaries, commissions and benefits for our sales and marketing
personnel, as well as product quality insurance against warranty claims. We expect that our selling
expenses will increase in absolute terms in the near term as we increase our sales efforts, hire
additional sales personnel and initiate additional marketing programs.
Our PV modules are typically sold with a two-year unlimited warranty for technical defects,
and a 12-year and 25-year warranty against declines of more than 10.0% and 20.0% of initial power
generation capacity, respectively. We believe our warranty policies are consistent with industry
practice. We currently maintain product quality insurance with a maximum coverage amount of
approximately $125 million, which covers both technical defects and declines of initial power
generation capacity. We have not experienced significant warranty claims since we commenced our
business operation in August 2002. We accrue 1.0% of our net revenues as warranty costs at the time
revenue is recognized. As of December 31, 2005 our accrued warranty costs amounted to $2.6 million.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and benefits for our
administrative, finance and human resources personnel, depreciation of equipment used for
administrative purposes and amortization of rental facilities used for administrative purposes,
provision for doubtful debts, fees and expenses of legal, accounting and other professional
services, expenses associated with our administrative offices. General and administrative expenses
in 2005 also included $5.6 million share option expenses for options granted to our administrative
personnel and directors, $2.2 million fees paid to our outside consultants, $0.2 million share
option expenses for options granted to these consultants for the advisory services they provided to
us in connection with our restructuring and $1.4 million share option expenses for options granted
to our other consultants for services they provided. General and administrative expenses will also
include depreciation of our new office, which is under construction and is expected to be completed
by the end of 2006. As a result, we expect our depreciation to increase significantly in 2007. In
addition, we also expect general and administrative expenses to increase as we add personnel and
incur additional costs related to the growth of our business. Furthermore, we expect to incur
additional general and administrative expenses as a result of being a listed public company in the
United States.
Research and Development Expenses
Research and development expenses primarily consist of costs of raw materials used in our
research and development activities, share-based compensation expenses for options granted to our
research and development personnel, compensation and benefits for research
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and development personnel, prototype and equipment costs related to the design, development,
testing and enhancement of our products and process technologies. We expense our research and
development costs as incurred. We believe that research and development are critical to our
strategic objectives of enhancing our technologies, reducing manufacturing costs and meeting the
changing requirements of our customers. As a result, we expect that our total research and
development expenses will increase in absolute terms in the future.
Share-based Compensation Expenses
We adopted our 2005 equity incentive plan on September 5, 2005, which amended and restated the
stock option plan adopted by Suntech BVI on April 29, 2005. We also assumed the share options to
purchase 4,699,383 ordinary shares granted by Suntech BVI, of which options to purchase 455,000
ordinary shares were granted to our outside consultants who provided advisory services to us, and
options to purchase 4,244,383 ordinary shares were granted to certain individuals, or contributors,
who contributed capital to one of Suntech BVI's shareholders in connection with our restructuring.
The exercise price of these options is at $2.3077. The share options granted to our outside
consultants vested immediately while the options granted to the contributors will vest over a
three-year period.
On September 5, 2005, we granted additional share options to purchase 5,910,000 of our
ordinary shares to certain of our directors and employees and 200,000 ordinary shares to our
consultants. For options granted to employees, we have recorded a compensation charge for the
excess of the fair value of the shares at the grant date over the amount an employee must pay to
acquire the shares. We then amortize share-based compensation expense over the vesting periods of
the related options. For options granted to consultants, we have recorded share-based compensation
expense based on the fair value at the measurement date and amortize the expense over the
consultants' service periods. We have granted options to our employees at an exercise price of
$6.922, which is less than the value of the underlying shares on the date of grant, which is
$10.67. One-third of these options have vested on December 31, 2005 and one-third of these options
will vest on September 5, 2007 and 2008, respectively. The ordinary shares underlying the options
that have vested on December 31, 2005 are subject to a lock-up until the later of (i) September 5,
2006, the first anniversary of the date of grant, and (ii) 180 days after completion of our initial
public offering. The 180-day restricted period will be extended in certain circumstances.
We recorded share-based compensation expenses attributable to directors and employees of
approximately $9.4 million and to non-employees of approximately $7.2 million in 2005,
respectively. The total option expenses attributable to non-employee share options represent the
fair value of the non-employee share options calculated using the Black-Scholes option pricing
model. These share option expenses attributable to non-employee share options were recorded
immediately and will not be amortized over the vesting period of the options. Of the total option
expenses attributable to non-employee share options, $5.6 million was recorded as finance costs
paid to the contributors, $0.2 million was recorded as professional charges related to our
restructuring, and $1.4 million was recorded as consulting service expenses.
Taxation
Under the current laws of the Cayman Islands and the British Virgin Islands, we and Suntech
BVI are not subject to income or capital gains tax. Additionally, dividend payments made by us and
Suntech BVI are not subject to withholding tax in those jurisdictions.
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One of Suntech BVI's subsidiaries, Power Solar System Pty Limited, or PSS, is an
Australian tax resident company and is generally subject to Australian corporate tax, which is
currently at 30.0%, on any income and capital gains derived by PSS. PSS is not an operating company
and currently holds a 31.389% equity interest in Suntech China.
Any dividends received by PSS from Suntech China should be exempt for Australian tax purposes
to the extent that PSS holds a direct voting interest of at least 10% in Suntech China at the time
the dividends are paid. The payment of such dividends to non-Australian resident shareholders of
PSS should not be subject to withholding tax in Australia.
Similarly, a capital gain made by PSS on the disposal of Suntech China may be exempt from
Australian tax provided that PSS holds a direct voting interest of at least 10% in Suntech China
for a period of 12 months prior to the disposal. However, the capital gains tax exemption is only
available to the extent that Suntech China has underlying offshore active business assets (which
generally exclude cash, financial instruments and assets the
main purposes of which are to derive
interest, rent annuities and royalties). Dividends that are sourced from such exempted capital
gains will not generally be subject to withholding tax pursuant to recent legislative measures which,
although still awaiting enactment, have been passed by the Australian Parliament.
However, we cannot assure you that the Australian government will not take measures in the
future to impose taxes or other charges on such dividends or capital gains, which would have a
material adverse effect on our financial condition and results of operations.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under PRC
accounting principles. In accordance with "Income Tax Law of China for Enterprises with Foreign
Investment and Foreign Enterprises," or the Income Tax Law, and the related implementing rules,
foreign invested enterprises incorporated in the PRC are generally subject to an enterprise income
tax rate of 33.0% (representing 30.0% of state income tax plus 3.0% local income tax). The Income
Tax Law and the related implementing rules provide certain favorable tax treatments to foreign
invested enterprises which qualify as "high or new technology enterprises" and are registered and
operate in specified high-tech zones in the PRC. PRC domestic companies are governed by the
Enterprise Income Tax Laws of the PRC and are generally subject to an enterprise income tax rate of
33.0%.
Suntech China, a wholly foreign-owned enterprise registered and operating in a high-tech zone
in Wuxi, has been qualified as a "high and new technology enterprise." As a result, it is entitled
to a preferential enterprise income tax rate of 15.0% so long as it continues to operate in the
high-tech zone and maintains its "high and new technology enterprise" status. Suntech China is
entitled to a two-year exemption from the enterprise income tax for its first two profitable years
of operation, which were 2003 and 2004. Suntech China is thereafter entitled to a preferential
enterprise income tax rate of 7.5% for the succeeding three years, which will expire on December
31, 2007. After December 31, 2007, Suntech China will be subject to a preferential enterprise
income tax rate of 15.0% so long as it continues to operate in the high-tech zone and maintains its
"high or new technology enterprise" status.
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To qualify as a "high and new technology enterprise" for enterprise income tax purposes, a
business entity generally must meet certain financial and non-financial criteria, including:
•
a minimum level of revenues generated from high-technology related sales or services
as a percentage of total revenues;
•
a minimum number of employees engaged in research and development; and
•
a minimum research and development expense as a percentage of total revenues.
Suntech China's status as a "high and new technology enterprise" is re-assessed every two
years. Currently, Suntech China has obtained the approval for a preferential enterprise income tax
rate of 7.5% in 2005 and 2006. The PRC central or provincial government could at any time determine
to immediately eliminate or reduce such preferential tax treatment, and our effective tax rate
would increase as a result.
If Suntech China no longer qualifies for the preferential enterprise income tax rate, we will
consider available options under applicable law that would enable us to qualify for alternative
preferential tax treatment. To the extent we are unable to offset the expiration of this
preferential tax treatment with other tax benefits, the expiration of this preferential tax
treatment will cause our effective tax rate to increase.
Critical Accounting Policies
We prepare financial statements in accordance with U.S. GAAP, which requires us to make
judgments, estimates and assumptions that affect (i) the reported amounts of our assets and
liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each fiscal
period and (iii) the reported amounts of revenues and expenses during each fiscal period. We
continually evaluate these estimates based on our own historical experience, knowledge and
assessment of current business and other conditions, our expectations regarding the future based on
available information and reasonable assumptions, which together form our basis for making
judgments about matters that are not readily apparent from other sources. Since the use of
estimates is an integral component of the financial reporting process, our actual results could
differ from those estimates. Some of our accounting policies require a higher degree of judgment
than others in their application.
When reviewing our financial statements, you should consider (i) our selection of critical
accounting policies, (ii) the judgment and other uncertainties affecting the application of such
policies, (iii) the sensitivity of reported results to changes in conditions and assumptions. We
believe the following accounting policies involve the most significant judgment and estimates used
in the preparation of our financial statements.
Revenue Recognition
We recognize revenue from sales of PV cells and modules when products are delivered and title
has passed to our customers. A majority of our contracts provide that products are shipped "CIF
destination," or cost-insurance-freight destination. Accordingly, we must receive written evidence
that the products have been delivered to and accepted by the customer prior to recognizing revenue.
Additionally, certain of our agreements provide
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for settlement through document-against-payment, or D/P method, whereby we present shipping
documents to our bank and our bank forwards the shipping documents along with a collection notice
to the customer's bank, which then sends a collection notice to the customer. The customer makes
payment upon receiving the notice and takes possession of the products only after payment. A
majority of our sales to domestic customers require customers to prepay before delivery is made.
Such prepayments are recorded in our financial statements, as advances from customers, until
delivery has occurred.
We have arrangements with certain distributors for sales on their own account or, through
arrangements with us, to direct shipments to specified customers. Under either arrangement, the
distributor pays us for products based on pre-arranged price lists which are subject to periodic
updates. Our payment arrangements with distributors provide for either down payment upon delivery
to the warehouse or payment terms of up to two months if collateralized by bank letters of credit.
We also offer a 1.0% discount to certain distributors if payment is made upon delivery to the
warehouse. The agreements with distributors contain our customary product warranties and contain no
other post-shipment obligations or any return or credit provisions. We recognize revenues for PV
systems integration services upon completion of the integration project (where contracts are
typically one to two weeks in duration) primarily because we do not have vendor specific and
objective evidence to allow for separating various components of the PV systems integration
contracts into separate units for accounting. We only recognize revenues when our prices are fixed
or determinable, and collectibility is reasonably assured.
Warranty
We provide for the estimated cost of product warranties at the time revenue is recognized. As
we have not experienced significant warranty claims to date, we accrue the estimated costs of such
warranties based on our assessment of competitor's accrual history while incorporating some
estimates of failure rates through our quality review staff. Actual warranty costs are accumulated
and charged against accrued warranty liability. If our actual product failure rates, material usage
or service delivery costs differ from our estimates, we will need to revise our estimated warranty
liability.
Impairment of Long-lived Assets
We evaluate our long-lived assets and finite life intangibles for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
When these events occur, we measure impairment by comparing the carrying amount of the assets to
future undiscounted net cash flows expected to result from the use of the assets and their eventual
disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of
the assets, we recognize an impairment loss based on the fair value of the assets. We have
continued to construct, acquire and expand our manufacturing facilities since our inception and, to
date, have not experienced any factors that would indicate potential impairment of our long-lived
assets. As we continue to review impairment factors, impairment charges may be necessary in the
future as circumstances change.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts primarily based on the age of receivables and
factors surrounding the credit risk of specific customers. If there is a
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deterioration of a major customer's creditworthiness or actual defaults are higher than our
historical experience, we may need to maintain additional allowances.
Share-based Compensation
We currently account for share options granted pursuant to our equity incentive plan in
accordance with APB 25 and related interpretations. We amortize deferred share-based compensation
expenses over the vesting periods of the related options, which are generally three years. We have
recorded deferred share-based compensation representing the difference between the deemed fair
value of our ordinary shares for accounting purposes and the option exercise price. We determined
the fair value of the options granted in September 2005 using a contemporaneous valuation conducted
by an independent valuation firm. Changes to the assumptions used in the valuation model could
materially affect the deemed fair value of the options. On January 1, 2006, we adopted SFAS 123R,
which requires that we recognize compensation expense based on the fair value of share-based awards
as opposed to the intrinsic value method prescribed by APB 25. See "—Cost of Revenues and Operating
Expenses—Share-based Compensation Expenses."
Results of Operations
The following table sets forth a summary, for the periods indicated, our consolidated results
of operations and each item expressed as a percentage of our total net revenues. Our historical
results presented below are not necessarily indicative of the results that may be expected for any
future period.
Year Ended December 31,
2003
2004
2005
(in
% of net
(in
% of net
(in
% of net
thousands)
revenues
thousands)
revenues
thousands)
revenues
Consolidated Statement of
Operations Data
Net revenues
PV cells
$
9,741
70.1
%
$
7,331
8.6
%
$
54,653
24.2
%
PV modules
4,104
29.6
77,898
91.3
170,129
75.3
PV system integrations
43
0.3
58
0.1
1,218
0.5
Total net revenues
13,888
100.0
85,287
100.0
226,000
100.0
Cost of revenues
PV cells
7,695
55.4
5,269
6.2
35,440
15.7
PV modules
3,467
25.0
54,862
64.3
121,184
53.6
PV system integrations
33
0.2
43
0.1
814
0.4
Total cost of revenues
11,195
80.6
60,174
70.6
157,438
69.7
Gross profit
2,693
19.4
25,113
29.5
68,562
30.3
Operating expenses
Selling expenses
559
4.0
1,750
2.1
3,667
1.6
General and administrative
expenses
1,234
8.9
2,889
3.4
18,874
8.4
Research and development expenses
148
1.1
465
0.5
3,358
1.5
Total operating expenses
1,941
14.0
5,104
6.0
25,899
11.5
Income from operations
752
5.4
20,009
23.5
42,663
18.8
Interest expenses, net
(1)
(221
)
(1.6
)
(979
)
(1.1
)
(7,611
)
(3.4
)
Other income (expenses)
93
0.7
167
0.2
(758
)
(0.3
)
Tax benefit (expenses)
301
2.2
611
0.7
(3,753
)
(1.7
)
Net income after taxes before
minority interest
925
6.7
19,808
23.3
30,541
13.4
Minority interest
—
—
—
—
34
0.0
Equity in (loss) gain of affiliates
—
—
(51
)
(0.1
)
121
0.1
Net income
$
925
6.7
%
$
19,757
23.2
%
$
30,628
13.5
%
Deemed
dividend on Series A
redeemable convertible preferred
shares
—
—
—
—
$
2,406
1.1
%
Net income attributable to holders
of ordinary shares
$
925
6.7
%
$
19,757
23.2
%
$
28,222
12.4
%
(1)
Include "interest expenses" and "interest income" contained in our consolidated financial
statements included elsewhere in this annual report on Form 20-F.
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Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Net Revenues.
Our total net revenues increased significantly from $85.3 million in 2004 to
$226.0 million in 2005. The increase was due primarily to a significant increase in our capacity
and the volume of our products sold from 29.5 MW in 2004 to 67.7 MW in 2005. The significant
increase in our capacity and the volume of our products sold was driven primarily by a significant
increase in market demand for our products, especially in the European and China markets. Our total
net revenues from sales in Europe increased significantly from $76.2 million in 2004 to $161.3
million in 2005 as a result of an increased recognition of our brand and acceptance of our products
in Europe. Our total net revenues from sales in China increased significantly from $6.7 million in
2004 to $56.4 million in 2005 as we sold more of our PV cells to PV module manufacturers in China.
The increase in our total net revenues was also attributable to an increase in the average selling
price of our PV modules and cells from $3.01 and $2.02 per watt in 2004, respectively, to $3.42 and
$3.05 per watt in 2005, respectively, as a result of increased demand in the PV market.
Cost of Revenues.
Our cost of revenues increased significantly from $60.2 million in 2004 to
$157.4 million in 2005. However, cost of revenues as a percentage of our total net revenues
decreased from 70.6% in 2004 to 69.7% in 2005. The increase in our cost of revenues was due
primarily to a significant increase in our expenditures on raw materials, which was caused by a
significant increase in the quantity of silicon wafers needed as a result of the significant
increase in the volume of PV products we sold and, by a lesser extent, increases of unit costs of
silicon wafers. Our average cost of silicon wafers increased in 2005 over 2004 due to supply
shortages and the rising market price of silicon wafers. The effect of unit cost increase was
partially offset by decreases in silicon wafer usage per watt because we were able to manufacture
PV products with higher conversion efficiencies in 2005.
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Gross Profit.
As a result of the foregoing, our gross profit increased significantly from
$25.1 million in 2004 to $68.6 million in 2005. Our gross margin increased from 29.5% in 2004 to
30.3% in 2005.
Operating Expenses.
Our operating expenses increased significantly from $5.1 million in 2004
to $25.9 million in 2005. Operating expenses as a percentage of our total net revenues increased
from 6.0% in 2004 to 11.5% in 2005. The increase in our operating expenses was due primarily to
significant increases in our general and administrative expenses and selling expenses and, to a
lesser extent, an increase in our and research and development expenses.
•
Selling Expenses. Our selling expenses increased significantly from $1.7 million in
2004 to $3.7 million in 2005. However, selling expenses as a percentage of our total
net revenues remained stable in 2005 compared to 2004. The increase in our selling
expenses was due primarily to a significant increase in provision for warranties as a
result of our increased sales. We accrued 1.0% of our module revenues as warranty costs
at the time revenue is recognized. The increase was also attributable to increases in
advertising and other selling expenses, premiums for our product quality insurance
against warranty claims, and salary and benefits paid to our sales and marketing
personnel.
•
General and Administrative Expenses. Our general and administrative expenses
increased significantly from $2.9 million in 2004 to $18.9 million in 2005. General and
administrative expenses as a percentage of our total net revenues increased from 3.4%
in 2004 to 8.4% in 2005. The increase in our general and administrative expenses was
due primarily to $2.2 million fees paid to our outside consultants who provided
advisory services to us in connection with our restructuring. The increase was also
attributable to $1.6 million and $5.6 million share-based compensation expenses for
share options granted to certain of our consultants and administrative employees in
September 2005, respectively, as well as foreign exchange losses resulting from our
trade accounts receivable and increases in salary and benefit expenses for our
administrative personnel.
•
Research and Development Expenses. Our research and development expenses increased
significantly from $465,332 in 2004 to $3.4 million in 2005. The increase was due
primarily to increases in raw material costs related to research and development
activities, salary and benefit expenses for our research and development personnel.
The increase was also attributable to
$2.2 million share-based compensation expenses for share options granted to certain
of our research and development personnel. Research and development expenses as a
percentage of our total net revenues increased from 0.5% in 2004 to 1.5% in 2005.
Interest Expenses, net
. Our net interest expenses increased significantly from $1.0 million
in 2004 to $7.6 million in 2005 due primarily to $5.7 million share option expenses for options
granted to certain individuals who contributed capital to one of our shareholders to effect our
restructuring, as well as our increased bank borrowings.
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Other Income (Expenses)
. We incurred other expenses of $758,245 in 2005, while generating
other income of $166,972 in 2004. Our other expenses in 2005 mainly consisted of net foreign
currency exchange loss from sales of our products. Other income in 2004 consisted mainly of
government grants.
Tax Benefit (Expenses).
We incurred tax expenses of $3.8 million in 2005, while generating
tax benefit of $611,447 in 2004. We incurred tax expenses in 2005 because our two-year
exemption from enterprise income tax for our first two profitable years of operation expired on
January 1, 2005. We generated tax benefit in 2004 primarily because of increases in accrued
warranty and government grants, which were recorded as deferred tax assets under U.S. GAAP and
generated tax benefit. The tax benefit was also attributable to an increase in our manufacturing
equipment, the depreciation of which was recorded over 10 years in accordance with PRC tax law.
However, such depreciation is recorded over the estimated useful life of the asset in accordance
with U.S. GAAP, and the estimated useful life for our manufacturing equipment is five years. The
amount that was not recorded as depreciation in accordance with PRC tax law was recorded as
deferred tax assets under U.S. GAAP and generated tax benefit.
Net Income.
As a result of the cumulative effect of the above factors, net income increased
by 54.5% from $19.8 million in 2004 to $30.6 million in 2005. Our net margin decreased from 23.2%
in 2004 to 13.5% in 2005.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Net Revenues.
Our total net revenues increased significantly from $13.9 million in 2003 to
$85.3 million in 2004. The increase was due primarily to a significant increase in our capacity and
the volume of our products sold from 6.4 MW in 2003 to 29.5 MW in 2004, especially changes in
product mix toward PV modules. The significant increase in our capacity and the volume of our
products sold was due primarily to a significant increase in market demand for our products,
especially in Germany as well as other countries in Europe, which became our largest market in
2004. Our total net revenues from sales in Europe increased significantly from $3.4 million in 2003
to $76.2 million in 2004 as a result of an increased recognition of our brand and acceptance of our
products in Europe. The increase in our total net revenues was also due to changes in our product
mix in 2004 compared to 2003, as a significantly greater percentage of our sales in 2004 came from
the sales of PV modules, which had a higher average selling price compared to that of PV cells. We
changed our product mix to increase the sales of PV modules in order to capture the incremental
profit opportunities and build brand recognition. The increase in our total net revenues was also
attributable to an increase in the average selling price of our PV modules from $2.77 per watt in
2003 to $3.01 per watt in 2004 as a result of increased demand in the PV market.
Cost of Revenues.
Our cost of revenues increased significantly from $11.2 million in 2003 to
$60.2 million in 2004. However, cost of revenues as a percentage of our total net revenues
decreased from 80.6% in 2003 to 70.6% in 2004. The increase in our cost of revenues was due
primarily to a significant increase in our expenditures on raw materials, which was caused by a
significant increase in the quantity of silicon wafers needed as a result of the significant
increase in the volume of PV products we sold and, by a lesser extent, increases of unit costs of
silicon wafers. Our average cost of silicon wafers increased in 2004 compared to 2003 due to supply
shortages and the rising market prices of silicon wafers. The effect of unit cost increase was
partially offset by decreases in silicon wafer usage per watt because we were able to manufacture
PV products with higher conversion efficiencies in
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2004. Among different categories of cost of
revenues, direct labor cost as a percentage of cost of revenues increased in 2004 compared to 2003
because we produced in 2004 a significantly greater percentage of PV modules, the manufacturing of
which was more labor-intensive.
Gross Profit.
As a result of the foregoing, our gross profit increased significantly from
$2.7 million in 2003 to $25.1 million in 2004. Our gross margin increased from 19.4% in 2003 to
29.5% in 2004.
Operating Expenses.
Our operating expenses increased significantly from $1.9 million in 2003
to $5.1 million in 2004. However, operating expenses as a percentage of our total net revenues
decreased from 14.0% in 2003 to 6.0% in 2004. The increase in our operating expenses was due
primarily to significant increases in our general and administrative expenses and selling expenses
and, to a lesser extent, an increase in our research and development expenses.
•
Selling Expenses.
Our selling expenses increased significantly from $0.6 million in
2003 to $1.8 million in 2004. However, selling expenses as a percentage of our total
net revenues declined from 4.0% in 2003 to 2.1% in 2004. The increase in our selling
expenses was due primarily to a significant increase in provision for warranties from
$39,319 in 2003 to $0.8 million in 2004 as a result of our increased sales. We accrued
1.0% of our module revenues as warranty costs at the time revenue is recognized. The
increase was also attributable to increases in advertising and other selling expenses,
premiums for our product quality insurance against warranty claims, and salary and
benefits paid to our sales and marketing personnel.
•
General and Administrative Expenses.
Our general and administrative expenses
increased significantly from $1.2 million in 2003 to $2.9 million in 2004. However,
general and administrative expenses as a percentage of our total net revenues declined
from 8.9% in 2003 to 3.4% in 2004. The increase in our general and administrative
expenses was primarily due to increases in bank and other fees in connection with our
increased export sales, amortization expenses for improvement of our rented offices,
foreign exchange losses resulting from our trade accounts receivable, and provision for
bad debts.
•
Research and Development Expenses.
Our research and development increased
significantly from $0.1 million in 2003 to $0.5 million in 2004. The increase was due
primarily to increases in raw material costs related to research and development
activities, salary and benefit expenses for our research and development personnel, and
testing expenses paid to our research
and development partners and other independent third parties. Research and
development expenses as a percentage of our total net revenues declined from 1.1% in
2003 to 0.5% in 2004.
Interest Expenses, net.
Our net interest expenses increased significantly from $0.2 million
in 2003 to $1.0 million in 2004 due primarily to our increased short-term borrowings in 2004, which
was partially offset by a decrease in our average interest rate in 2004 because we were able to
obtain a portion of our short-term borrowings in 2004 at below-market rate.
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Other Income.
Other income increased by 79.4% from $93,094 in 2003 to $166,972 in 2004 due
mainly to an increase in the portion of the government grants we received that we recognized as
revenue.
Tax Benefit.
Our tax benefit increased significantly from $300,730 in 2003 to $611,447 in
2004 due primarily to an increase in deferred tax assets. The increase in deferred tax assets was
due primarily to an increase in our manufacturing equipment, the depreciation of which was recorded
over 10 years in accordance with PRC tax law. However, such depreciation is recorded over the
estimated useful life of the asset in accordance with U.S. GAAP, and the estimated useful life for
our manufacturing equipment is five years. The amount that was not recorded as depreciation in
accordance with PRC tax law was recorded as deferred tax assets under U.S. GAAP and generated tax
benefit. The increase was also attributable to increases in accrued warranty and government grants,
which were recorded as deferred tax assets under U.S. GAAP and generated tax benefit.
Net Income.
As a result of the cumulative effect of the above factors, net income increased
significantly from $0.9 million in 2003 to $19.8 million in 2004. Our net margin increased from
6.7% in 2003 to 23.2% in 2004.
B.
Liquidity and Capital Resources
Liquidity and Capital Resources
Cash Flows and Working Capital
To date, we have financed our operations primarily through cash flows from operations,
short-term and long-term bank borrowings, as well as equity contributions by our shareholders. As
of December 31, 2005, we had $359.3 million in cash and cash equivalents, $52.2 million in
short-term borrowings and $3.7 million in long-term borrowings. Our short-term bank borrowings
outstanding as of December 31, 2005 bore average interest rates of 5.9%. Each of these borrowings
has a term of one year, and expires at various times throughout the year. These facilities contain
no specific renewal terms but we have historically been able to obtain extensions of some of the
facilities shortly before they mature. We plan to repay these short-term bank borrowings with cash
generated by our operating activities in the event we are unable to obtain extensions of these
facilities or alternative fundings in the future. As of December 31, 2005, we had a single
long-term credit facility with a maximum borrowing amount of $6.2 million, of which $2.5 million
was drawn on March 31, 2005 and $3.7 million was drawn on September 26, 2005. This facility has a
three-year term expiring on March 28, 2008 and requires no collateral or guarantee. The facility
bears an interest rate of 5.76% for the first drawing made on March 31, 2005, and 6.34% for the
second drawing made on September 26, 2005. Our cash and cash equivalents primarily
consist of cash on hand, demand deposits and liquid investments with original maturities of
three months or less that are placed with banks and other financial institutions.
On October 25, 2005 and November 7, 2005, we obtained approximately $3.7 million and $0.7
million short-term bank borrowings, respectively, to make advance payments to our suppliers for raw
materials. The first facility bears interest at a rate of 5.86%, contains no guarantee and is
unsecured. The second facility bears interest at a rate of 5.48% and is unsecured but contains a
guarantee provided by a third party vendor. We paid a nominal fee to the third party vendor to
secure such guarantee.
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The following table sets forth a summary of our cash flows for the periods indicated:
For the Year Ended December 31,
2003
2004
2005
(in thousands)
Net cash provided by operating activities
$
716
$
2,576
$
22,622
Net cash used in investing activities
(3,026
)
(13,129
)
31,120
Net cash provided by financing activities
3,581
28,112
348,096
Net increase in cash and cash equivalents
1,272
17,563
340,202
Cash and cash equivalents at beginning of
period
287
1,559
19,122
Cash and cash equivalents at end of period
$
1,559
$
19,122
$
359,324
Operating Activities
Net cash provided by operating activities increased significantly from $2.6 million in 2004 to
$22.6 million in 2005, due primarily to a significant increase in the amount of cash provided by
sales of our products. The increase was also attributable to share based compensation incurred in
2005, increases in depreciation and amortization, accounts payable, other payables and advances
from customers. The increase was partially offset by increases in advances to suppliers and
inventories. Net cash provided by operating activities in 2005 was mainly a result of net income
of $30.6 million, as well as non-cash share-based compensation, which were partially offset by
increases in inventories and advances to suppliers. Net cash provided by operating activities in
2004 was primarily because of net income of $19.8 million, which was partially offset by increases
in inventories, advances to suppliers and accounts receivable at the end of the period exceeded
those at the beginning of the period.
Net cash provided by operating activities increased significantly from $0.7 million in 2003 to
$2.6 million in 2004, due primarily to a significant increase in the amount of cash provided by
sales of our products. The increase was also attributable to increases in accrued payroll,
depreciation and amortization and accounts payable. The increase was partially offset by increases
in inventories and accounts receivables. Net cash provided by operating activities in 2003 was a
result of net income of $0.9 million, as well as non-cash depreciation and amortization of $1.2
million. Operating assets and liabilities also increased in line with overall trends and largely
offset each other.
Investing Activities
Net cash used in investing activities increased significantly from $13.1 million in 2004 to
$31.1 million in 2005, due primarily to a significant increase in our purchase of property, plant
and equipment to expand our manufacturing lines for the production of PV cells and modules, offset
in part by a smaller increase in restricted cash. Increase in restricted cash was due to our
increased use of letters of credit, which requires us to make restricted deposits with banks that
issue such letters of credit.
Net cash used in investing activities increased significantly from $3.0 million in 2003 to
$13.1 million in 2004, due primarily to (i) a significant increase in our purchase of property,
plant and equipment to expand our manufacturing lines for the production of PV cells and modules
(ii) a significant increase in restricted cash as a result of our increased use
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of letters of
credit. Our increased use of letters of credit was attributable to our increased purchases of raw
materials in amounts from overseas suppliers in 2004.
Financing Activities
Net cash provided by financing activities increased significantly from $28.1 million in 2004
to $348.1 million in 2005, due primarily to the net proceeds from our initial public offering. In
2005, we received $320.0 million from our initial public offering and $80.0 million from the
issuance of Series A preferred shares and paid $83.1 million for the return of capital upon our
reorganization.
Net cash provided by financing activities increased significantly from $3.6 million in 2003 to
$28.1 million in 2004, due primarily to a significant increase in short-term bank borrowings. Net
cash provided by financing activities, which consists of net proceeds from short-term borrowing
remained stable at approximately $3.6 million in 2003.
We believe that our current cash and cash equivalents and anticipated cash flow from
operations will be sufficient to meet our anticipated cash needs, including our cash needs for
working capital and capital expenditures for at least the next 12 months. We may, however, require
additional cash due to changing business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet
our requirements, we may seek to sell additional equity securities, debt securities or borrow from
lending institutions. We cannot assure you that financing will be available in the amounts we need
or on terms acceptable to us, if at all. The sale of additional equity securities, including
convertible debt securities, would dilute our shareholders. The incurrence of debt would divert
cash for working capital and capital expenditures to service debt obligations and could result in
operating and financial covenants that restrict our operations and our ability to pay dividends to
our shareholders. If we are unable to obtain additional equity or debt financing as required, our
business operations and prospects may suffer.
Capital Expenditures
We made capital expenditures of $2.5 million, $8.2 million and $29.7 million in 2003, 2004 and
2005, respectively. In the past, our capital expenditures were used primarily to purchase
manufacturing equipment to expand our manufacturing lines for the production of PV cells and
modules. We estimate that our capital expenditures in 2006 will also be used primarily to purchase
manufacturing equipment for the expansion of our PV cell and module
manufacturing lines and the construction of an administrative office building. We are in the
process of upgrading our enterprise resource planning system, or ERP and expect that our new ERP
system will become operational in June 2006.
C.
Research and Development
Research and Development
We focus our research and development activities principally on the development and
implementation of more advanced and lower cost process technologies, as well as next-generation PV
cells. Our research and development efforts enable us to lower the cost of raw materials, increase
the conversion efficiency of our products, streamline manufacturing processes and increase
economies of scale.
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We believe that the continual improvement of our technology is vital to maintaining our long
term competitiveness. Therefore, we intend to continue to devote our management and financial
resources in research and development. Our senior management team spearheads our research and
development efforts and sets strategic directions for the advancement of our products and
manufacturing processes. Dr. Zhengrong Shi, our founder, chairman of our board of directors and our
chief executive officer, Dr. Stuart R. Wenham, our chief technical officer, and Dr. Jingjia Ji, a
member of our board of directors and one of our senior research scientists, are all prominent
experts in the PV industry.
Our research and development center employs 76 personnel, including 28 PV technology experts
from China and abroad. We have established technological cooperative relationships with a number of
universities in China and abroad, including the Center of Excellence for Photovoltaic Engineering
at the University of New South Wales in Australia, the research and application institute of solar
energy at Zhongshan University in China, the research institute of solar energy at Shanghai
Jiaotong University in China, as well as Zhengzhou University, Nanjing Aeronautic University and
Jiangnan University in China.
We have focused, and will continue to focus our research and development efforts in the following
areas:
•
Increase Conversion Efficiencies.
We are developing new technologies and
designing more advanced equipment to manufacture, on a large scale and cost-effectively, PV
cells with high conversion efficiencies. We are enhancing the conversion efficiencies of PV
cells through the "selective emitter" process, by which we improve the surface properties
of PV cells so that the infrared and ultraviolet rays captured are more fully utilized. We
are also working on reducing light shading by narrowing the metal grid in the front of a PV
cell. We have eliminated certain manufacturing steps in our pilot manufacturing line, and
are building a new manufacturing line capable of manufacturing monocrystalline silicon PV
cells with a target conversion efficiency rate of 18.0% by the end of 2006 and of 20.0% by
2008. Since October 2005, by using our pilot manufacturing line equipped with our latest
technology, we have been able to produce PV cells with an average conversion efficiency
rate of over 18.0%.
•
Reduce Silicon Usage by Using Thinner Silicon Wafers.
We have reduced our
silicon wafer thickness to the current 240 micron and are working towards thinning it
further. Since thinning the wafers typically causes an increase in the breakage rate and
cell warpage, for the short-term, we are working on a new metallization technology,
which focuses on the application of metal electrodes to shade in order to improve light
absorption and to reduce breakage rate. To this end, we are also redesigning tools and
procedures used in our manufacturing process and working with suppliers to improve the
quality of metallic pastes.
•
Utilize Low Cost Solar Grade Silicon.
We are developing innovative silicon
purification technologies, which we believe will substantially reduce silicon cost while
maintaining and enhancing the conversion efficiencies of our products. We have produced PV
cells with an 11.0% conversion efficiency rate using multicrystalline silicon wafers made
from low-cost solar grade refined silicon materials. We are improving the refining process
to produce higher quality silicon for the manufacturing of PV cells with higher conversion
efficiencies. We are also designing the refining equipment and expect to have the pilot
manufacturing line ready for operations in the second quarter of 2006.
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•
Developing Thin Film Silicon PV Cell Technologies.
We are developing
manufacturing technologies for next generation thin film PV cells on glass, which will
significantly reduce the consumption of silicon materials and manufacturing costs.
Our research and development expenditures were $147,759, $465,332 and $3,357,828 in 2003, 2004
and 2005, respectively.
D.
Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends,
uncertainties, demands, commitments or events for the period from January 1, 2003 to December 31,
2005 that are reasonably likely to have a material adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that caused the disclosed financial information
to be not necessarily indicative of future operating results or financial conditions.
E.
Off-Balance Sheet Arrangements
As of December 31, 2005, we were contingently liable as guarantor with respect to borrowings
by an ex-shareholder, Wuxi Shanhe Group, in an aggregate amount of $988,631. The underlying loan
was matured and repaid on January 23, 2006. Since January 2004, we have provided guarantees for the
entire principal amount, and any penalties to be incurred by the borrower in the event of any
default. We had no recourse for recovery from third parties as a result of any payments by us under
the guarantees. As of December 31, 2005, the carrying value of the guarantees was nil as the fair
value of the guarantees was immaterial.
Other than the above, we have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of third parties. We have not entered into any
derivative contracts that are indexed to our shares and classified as shareholder's equity, or that
are not reflected in our consolidated financial statements. Furthermore, we do not have any
retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or credit support to us
or that engages in leasing, hedging or research and development services with us.
F.
Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments as of
December 31, 2005:
Payment Due by Period
Less than
More than 5
Total
1 Year
1-3 Years
3-5 Years
Years
(in thousands)
Long-term debt obligations
$
3,717
—
$
3,717
—
—
Capital (finance) lease obligations
—
—
—
—
—
Operating lease obligations
396
233
163
—
—
Purchase obligations
(1)
99,408
22,706
12,050
18,472
46,180
Other long-term liabilities
reflected on the company's balance
sheet
2,619
—
—
—
$
2,619
Total
$
106,140
$
22,939
$
15,930
18,472
$
48,799
(1)
Include commitments to purchase production equipment in the amount of $15.9 million and
commitments to purchase raw materials in the amount of
$4.0 million as well as future minimum obligation in the amount
of $79.5 million under a 10-year supply agreement.
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Other than the contractual obligations and commercial commitments set forth above, we do
not have any other long-term debt obligations, operating lease obligations, purchase obligations or
other long-term liabilities.
G.
Safe Harbor
This annual report on Form 20-F contains forward-looking statements that relate to future
events, including our future operating results and conditions, our prospects and our future
financial performance and condition, all of which are largely based on our current expectations and
projections. The forward-looking statements are contained principally in the sections entitled
"Item 3. Key Information—D. Risk Factors," "Item 4. Information on the Company" and "Item 5.
Operating and Financial Review and Prospects." These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these
forward-looking statements by terminology such as "may," "will," "expect," "anticipate," "future,"
"intend," "plan," "believe," "estimate," "is/are likely to" or other and similar expressions.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could
cause actual results to differ materially from those contained in any forward-looking statement,
including but not limited to the following: expectations regarding the worldwide demand for
electricity and the market for solar energy; the company's beliefs regarding the effects of
environmental regulation, the lack of infrastructure reliability and long-term fossil fuel supply
constraints; the importance of environmentally friendly power generation; expectations regarding
governmental support for the deployment of solar energy; expectations regarding the scaling of the
company's manufacturing capacity; expectations with respect to the company's ability to secure raw
materials in the future; future business development, results of operations and financial
condition; and competition from other manufacturers of PV products and conventional energy
suppliers.
This annual report on Form 20-F also contains data related to the PV market worldwide and in
China taken from third party reports. The PV market may not grow at the rates projected by the
market data, or at all. The failure of the market to grow at the projected rates may have a
material adverse effect on our business and the market price of our ADSs. In addition, the rapidly
changing nature of the PV market subjects any projections or estimates relating to the growth
prospects or future condition of our market to significant uncertainties. If any one or more of the
assumptions underlying the market data turns out to be incorrect, actual results may differ from
the projections based on these assumptions. You should not place undue reliance on these
forward-looking statements.
The forward-looking statements made in this annual report on Form 20-F relate only to events
or information as of the date on which the statements are made in this annual report on Form 20-F.
Except as required by law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise,
after the date on which the statements are made or to reflect the occurrence of unanticipated
events. You should read this annual report on Form 20-F
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completely and with the understanding that
our actual future results may be materially different from what we expect.
Item 6.
Directors, Senior Management and Employees
A.
Directors and Senior Management
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers as
of April 25, 2006.
Name
Age
Position/ Title
Zhengrong Shi
43
Chairman of the board of directors, chief executive Officer
Chengyu Fu
55
Independent director
Jingjia Ji
51
Director
Jason E. Maynard
34
Independent director
Zhi Zhong Qiu
51
Independent director
Songyi Zhang
50
Independent director
Weiguo Zhang
64
Director, vice general manager
Amy Yi Zhang
39
Chief financial officer
Graham Artes
51
Chief operating officer
Stuart R. Wenham
49
Chief technical officer
Guangchun Zhang
49
Deputy research director of research and development
Tihu Wang
43
Vice general manager
Yichuan Wang
63
Manager of PV cell research and development department
Dr. Zhengrong Shi
is our founder, chairman of our board of directors and our chief
executive officer. Prior to founding our company in 2001, he was a research director and executive
director of Pacific Solar Pty., Ltd., an Australian PV company engaged in the commercialization of
next-generation thin film technology, from 1995 to 2001. From 1992 to 1995, he was a senior
research scientist and the leader of the Thin Film Solar Cells Research Group in the Centre of
Excellence for Photovoltaic Engineering at the University of New South Wales in Australia, the only
government-sponsored PV industry research center in
Australia. Dr. Shi is the inventor for 11 patents in PV technologies and has published or
presented a number of articles and papers in PV-related scientific magazines and at conferences.
Dr. Shi received a bachelor's degree in optical science from Jilin University in China in 1983, a
master's degree in laser physics from the Shanghai Institute of Optics and Fine Mechanics, the
Chinese Academy of Sciences in 1986, and a Ph.D degree in electrical engineering from the
University of New South Wales in Australia in 1992.
Mr. Chengyu Fu
is a director of our company. Since October 2003, Mr. Fu has served as the
president of China National Offshore Oil Corporation, a PRC state-owned enterprise, as well as the
chairman of the board of directors and the chief executive officer of CNOOC Limited, a Hong Kong
limited liability company. Mr. Fu has over 30 years of experience in the oil industry in the PRC.
Mr. Fu received his bachelor's degree in geology from Northeast Petroleum Institute in China, and a
master's degree in petroleum engineering from the University of Southern California in the United
States.
Dr. Jingjia Ji
is a director and senior research scientist of our company and has been with
our company since 2003. From 1995 to 2002, Dr. Ji worked as a senior research scientist
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in Pacific
Solar Pty., Ltd.. From 1991 to 1994, he worked at the University of New South Wales as a senior
research assistant. From 1985 to 1990, he worked in the Shanghai Institute of Organo-Fluorine
Materials in China as the head of the department of chemical engineering. Dr. Ji received his
bachelor's degree in chemical engineering from the East China Institute of Chemical Technology in
China in 1983, and a Ph.D degree in industrial chemistry from the University of New South Wales in
Australia in 1994.
Mr. Jason E. Maynard
is a director of our company. He is the managing director of the Asian
Special Situations Group at Goldman Sachs (Asia) LLC. Mr. Maynard has over 13 years of experience
with distressed and high-yield investments and corporate restructurings, with a recent focus on
Asian industrial companies (excluding Japan). Mr. Maynard joined Goldman Sachs (Asia) LLC as an
executive director in 1999. Previously, he held positions at Merrill Lynch Asia Pacific in 1998,
Chase Manhattan Asia from 1996 to 1998 and Citicorp International from 1992 to 1996. Mr. Maynard
received his bachelor's degree in East Asia political economy from Hamilton College in the United
States in 1992.
Mr. Zhi Zhong Qiu
is a director of our board of directors. He is the founder and chairman of
Dragon Advisors Limited, and the chairman of the board of directors of the DragonTech Ventures
Management Company, the management company for DragonTech Ventures Fund. Mr. Qiu is also the
founder and chairman of Quartz Capital Companies, a group of companies engaged in direct investment
and business and strategic consulting in China. From 1998 to 2002, Mr. Qiu was the chairman of the
Greater China Region of Credit Suisse First Boston, or CSFB. From 1995 to 1998, Mr. Qiu was a
managing director of CSFB and was responsible for all derivatives activities for Credit Suisse
Financial Products, the CSFB's financial derivatives affiliate. Mr. Qiu received his bachelor of
science degree
magna cum laude
in computer science from New York University in the United States,
his bachelor of engineering degree
summa cum laude
in electrical engineering from Cooper Union, his
master of science degree in electrical power engineering from Ohio State University, and his MBA
degree from Harvard Business School.
Mr. Songyi Zhang
is a director of our company. He is an advisory director of Morgan Stanley,
Hong Kong and a director of SINA Corporation, a China-based Internet media company quoted on the
Nasdaq. Through his investment vehicle, Mandra Capital, he is the controlling shareholder of Mandra
Forestry Finance Limited, a joint venture that Mr. Zhang
set up with Morgan Stanley and the Toronto Stock Exchange-listed Sino-Forest Corporation to
acquire and manage commercial forestry plantations in China. Previously, he was a managing director
of Morgan Stanley in its Asia Mergers, Acquisitions, Restructuring and Divestiture Group, and
co-head of its Asia Power and Utilities/Infrastructure Group. Prior to that, he was an attorney at
Milbank, Tweed, Hadley & McCloy LLP in its Banking/Project Finance Group. Mr. Zhang received his
J.D. degree from Yale Law School in 1985.
Mr. Weiguo Zhang
is a director and the vice general manager of our company. From 2000 to 2001,
he worked in Wuxi Trust Investment Co., Ltd. and was in charge of operations for its high-tech risk
investment fund. From 1985 to 2002, he worked as the manager of Jiangsu International Trust and
Investment Company, Wuxi Branch, and was responsible for various departments including operation,
chartering, comprehensive planning and investment. Mr. Zhang received his bachelor's degree in
finance from People's University of China in 1966.
Ms. Amy Yi Zhang
has been our chief financial officer since August 2005. From 2004 to 2005,
she was a director and the chief financial officer of Deloitte Consulting China, and
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was
responsible for the management of various departments, including finance, accounting, human
resources and IT, as well as back office management and general office administration. From 1999 to
2004, Ms. Zhang was the chief financial officer of Atos Origin China. From 1997 to 1999, she worked
as the financial controller of Atos Origin China. Ms. Zhang received her bachelor's degree in
Nanjing University in China in 1989 and her master's degree in business administration from the
joint MBA program of Webster University and Shanghai University of Finance & Economics in 1998.
Mr. Graham Artes
has been our chief operations officer since September 2005. Mr. Artes has
over 30 years of experience in service, production and sales management in the United Kingdom as
well as in other international operations. From 2001 to August 2004, he served as the technical
plant manager of Kuttler Automation Systems (Suzhou) Co, Ltd., a manufacturer of handling and
chemical processing equipment for the printed circuit board industry. From 1998 to 2001, Mr. Artes
served as the vice president and technical director of manufacturing for GTY PCB machine
manufacturer. Mr. Artes studied mechanical engineering in Abbey Road Technical and Engineering
College in the United Kingdom.
Dr. Stuart Wenham
has been our chief technical officer since July 2005. He is also currently a
Scientia Professor and the Director of the Centre of Excellence for Advanced Silicon Photovoltaics
and Photonics, at the University of New South Wales in Australia. From 1995 to 2004, he was the
co-director of Research at Pacific Solar Pty. Ltd. From 1999 to 2003, he was the head of School for
Photovoltaic Engineering and the director of the Key Centre for Photovoltaic Engineering at the
University of New South Wales. From 1996 to 1998, he was the head of the Electronics Department and
from 1991 to 1998, the associate director of the Photovoltaics Special Research Centre, also at the
University of New South Wales. In 1999, Dr. Wenham received The Australia Prize for Energy Science
and Technology and in 1998, the Chairman's Award at the Australian Technology Awards, in both cases
jointly with Martin A. Green. Dr. Wenham received his Ph.D. degree in electrical engineering and
computer science from the University of New South Wales in Australia in 1986.
Mr. Guangchun Zhang
is our deputy research director of research and development and has been with our
company since November 2005. Prior to joining us, from January 2003 to October 2005, Mr. Zhang had been a professional officer at the Centre for Photovoltaic Engineering and the School for Photovoltaic
Engineering at the University of New South Wales. From 1997 to 2002, Mr. Zhang had been a research engineer at Technology Development Group and was seconded to Pacific Solar Pty. Limited from the University
of New South Wales. From 1994 to 1996, he worked at the Photovoltaics Special Research Centre and the Centre for Photovoltaic Devices and System, also at the University of New South Wales. From 1982 to 1994,
Mr. Zhang taught and researched in the School of Electronic Engineering at Shandong Polytechnic University in China, first as an assistant lecturer, then as a lecturer and finally as an associate
professor. Mr. Zhang received his bachelor degree and his master
degree in 1982 and 1988, respectively, from the School of Electronic Engineering at Shandong Polytechnic University.
Dr. Tihu Wang
is a vice general manager of our research and development department and has
been with our company since April 2006. From 1991 to March 2006, he worked as a project leader in
National Renewable Energy Laboratory, the United States and was
responsible for silicon material research. From 1988 to 1991, Dr. Wang worked in the General
Research Institute for Non-Ferrous Metals in China, and was mainly responsible for silicon crystal
growth project. Dr. Wang received a bachelor's degree in physics from Xiamen University in China in
1982, a master's degree in materials sciences from the General Research Institute for non-Ferrous
Metals in China in 1991, and a Ph.D degree in applied physics from Colorado School of Mines in the
United States in 1992.
Mr. Yichuan Wang
is a manager of our PV cell research and development department and has been
with our company since 2001. From 1979 to 2001, he worked at Yunnan Semiconductor Co., Ltd. on the
research, development and manufacturing of PV products. From 1996 to 2000, he worked on sci-tech
planning projects organized by the PRC Ministry of Science and Technology. In 1984, he participated
in the introduction of PV cells manufacturing line with an annual production of 500 KWh. Mr. Wang
received his bachelor's degree in physics from Yunnan University in China in 1968.
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The address of our directors and executive officers is c/o Suntech Power Holdings Co., Ltd.,
17-6 Changjiang South Road, New District, Wuxi, Jiangsu Province 214028, People's Republic of
China.
B.
Compensation of Directors and Executive Officers
Compensation of Directors and Executive Officers
In 2005, the aggregate cash compensation to our executive officers, including all the
directors, was
$303,014. For options granted to officers and directors, see "—2005 Equity
Incentive Plan."
2005 Equity Incentive Plan
We adopted our 2005 equity incentive plan on September 5, 2005, which amended and restated the
stock option plan adopted by Suntech BVI on April 29, 2005. Our equity incentive plan provides for
the grant of options as well as restricted shares, referred to as "awards." The purpose of the plan
is to attract and retain the best available personnel for positions of substantial responsibility,
provide additional incentive to employees, directors and consultants and promote the success of our
business. Our board of directors believes that our company's long-term success is dependent upon
our ability to attract and retain superior individuals who, by virtue of their ability, experience
and qualifications, make important contributions to our business.
Termination of Awards.
Options and restricted shares shall have specified terms set forth in
an award agreement. Options will be exercisable following the recipient's termination of services
with us, or the recipient's disability or death, if the options are not exercised or purchased on
the last day of the specified period or the last day of the original term of the options, whichever
occurs first they will terminate.
Administration.
Our 2005 equity incentive plan is administered by the compensation committee
of our board of directors. The committee will determine the provisions, terms and conditions of
each option grant, including, but not limited to, the exercise price for the options, vesting
schedule, forfeiture provisions, form of payment of exercise price and other applicable terms.
Option Exercise.
The term of options granted under the 2005 equity incentive plan may not
exceed five years from the date of grant. The consideration to be paid for our ordinary shares upon
exercise of an option or purchase of shares underlying the option will be determined by the 2005
equity incentive plan administrator and may include cash, check, ordinary shares, a promissory
note, consideration received by us under a cashless exercise program implemented by us in
connection with our 2005 equity incentive plan, or any combination of the foregoing methods of
payment.
Third-party Acquisition.
If a third-party acquires us through the purchase of all or
substantially all of our assets, a merger or other business combination, all outstanding share
options or restricted shares will be assumed or equivalent share options or restricted shares will
be substituted by the successor corporation or parent or subsidiary of successor corporation. In
the event that the successor corporation refuses to assume or substitute for the share options or
restricted shares, all share options or restricted shares will become fully vested and exercisable
immediately prior to such transaction and all unexercised options will
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terminate unless, in either
case, the options are assumed by the successor corporation or its parent.
Amendment and Termination of Plan.
Our board of directors may at any time amend, suspend or
terminate our 2005 equity incentive plan. Amendments to our 2005 equity incentive plan are subject
to shareholder approval, to the extent required by law, or by stock exchange rules or regulations.
Any amendment, suspension or termination of our 2005 equity incentive plan must not adversely
affect awards already granted without written consent of the recipient of such awards. Unless
terminated earlier, our 2005 equity incentive plan shall continue in effect for a term of five
years from the date of adoption.
Our board of directors authorized the issuance of up to 13,503,991 ordinary shares upon
exercise of awards granted under our 2005 equity incentive plan. The 13,503,991 ordinary shares
include the 4,699,383 ordinary shares issuable upon the exercise of options granted by Suntech BVI
and assumed by us. The following table summarizes, as of April 25, 2006, our outstanding options.
Ordinary Shares
Exercise
Underlying Outstanding
Price
Name
Option
($/Share)
Grant Date
Expiration Date
Certain of our consultants
and capital
contributors
4,699,383
$
2.3077
May 6, 2005
May 6, 2010
Zhengrong Shi
1,500,000
6.922
September 5, 2005
September 5, 2010
Weiguo Zhang
1,000,000
6.922
September 5, 2005
September 5, 2010
Jingjia Ji
500,000
6.922
September 5, 2005
September 5, 2010
Amy Yi Zhang
240,000
6.922
September 5, 2005
September 5, 2010
Graham Artes
200,000
6.922
September 5, 2005
September 5, 2010
Stuart R. Wenham
200,000
6.922
September 5, 2005
September 5, 2010
Yichuan Wang
150,000
6.922
September 5, 2005
September 5, 2010
Jason E. Maynard
50,000
6.922
September 5, 2005
September 5, 2010
Zhi Zhong Qiu(1)
50,000
6.922
September 5, 2005
September 5, 2010
Other employees as a
group(2)
2,020,000
6.922
September 5, 2005
September 5, 2010
Other consultants as a
group(3)
200,000
$
6.922
September 5, 2005
September 5, 2010
Total:
10,809,383
(1)
Mr. Qiu was granted options to purchase 50,000 ordinary shares in his capacity as a
consultant prior to his joining our board of directors upon the completion of our initial
public offering.
(2)
None of these employees is a director or an officer of our company.
(3)
Excludes options to purchase 50,000 ordinary shares granted to Mr. Qiu, but includes options
to purchase 50,000 ordinary shares granted to a consultant of our company who was a director
of our company at the date of the grant.
C.
Board Practices
Committees of the Board of Directors
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Audit Committee
Our audit committee consists of Mr. Zhi Zhong Qiu, Dr. Zhengrong Shi and Mr. Songyi Zhang and
is chaired by Mr. Songyi Zhang, a director with accounting and financial management expertise as
required by the New York Stock Exchange corporate governance rules, or the NYSE Rules. Messrs. Zhi
Zhong Qiu and Songyi Zhang satisfy the "independence" requirements of the NYSE Rules. Our audit
committee will consist solely of independent directors within one year of our initial public
offering. The audit committee will oversee our accounting and financial reporting processes and the
audits of the financial statements of our company. The audit committee will be responsible for,
among other things:
•
selecting our independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by our independent auditors;
•
reviewing with our independent auditors any audit problems or difficulties and
management's response;
•
reviewing and approving all proposed related-party transactions, as defined in Item
404 of Regulation S-K under the Securities Act;
•
discussing the annual audited financial statements with management and our
independent auditors;
•
reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies;
•
annually reviewing and reassessing the adequacy of our audit committee charter;
•
such other matters that are specifically delegated to our audit committee by our
board of directors from time to time;
•
meeting separately and periodically with management and our internal and independent
auditors; and
•
reporting regularly to the full board of directors.
Our audit committee was formed upon the completion of our initial public offering on December
19, 2005 and did not hold any meeting in 2005.
Compensation Committee
Our compensation committee will consist of Messrs. Chengyu Fu and Zhi Zhong Qiu, both of whom
satisfy the "independence" requirements of the NYSE Rules. Our compensation committee assists the
board in reviewing and approving the compensation structure of our directors and executive
officers, including all forms of compensation to be provided to our directors and executive
officers. Members of the compensation committee are not prohibited from direct involvement in
determining their own compensation. Our chief executive officer may not be present at any committee
meeting during which his compensation is deliberated. The compensation committee will be
responsible for, among other things:
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•
approving and overseeing the compensation package for our executive officers;
•
reviewing and making recommendations to the board with respect to the compensation
of our directors;
•
reviewing and approving corporate goals and objectives relevant to the compensation
of our chief executive officer, evaluating the performance of our chief executive
officer in light of those goals and objectives, and setting the compensation level of
our chief executive officer based on this evaluation; and
•
reviewing periodically and making recommendations to the board regarding any
long-term incentive compensation or equity plans, programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.
Our compensation committee was formed upon the completion of our intial public offering on
December 19, 2005 and did not hold any meeting in 2005.
Corporate Governance and Nominating Committee
Our corporate governance and nominating committee will consist of Messrs. Jason E. Maynard and
Zhi Zhong Qiu, both of whom satisfy the "independence" requirements of the NYSE Rules. The
corporate governance and nominating committee will assist the board of directors in identifying
individuals qualified to become our directors and in determining the composition of the board and
its committees. The corporate governance and nominating committee will be responsible for, among
other things:
•
identifying and recommending to the board nominees for election or re-election to
the board, or for appointment to fill any vacancy;
•
reviewing annually with the board the current composition of the board in light of
the characteristics of independence, age, skills, experience and availability of
service to us;
•
identifying and recommending to the board the directors to serve as members of the
board's committees;
•
advising the board periodically with respect to significant developments in the law
and practice of corporate governance as well as our compliance with applicable laws and
regulations, and making recommendations to the board on all matters of corporate
governance and on any corrective action to be taken; and
•
monitoring compliance with our code of business conduct and ethics, including
reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Our corporate governance and nominating committee was formed upon the completion of our intial
public offering on December 19, 2005 and did not hold any meeting in 2005.
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Duties of Directors
Under Cayman Islands law, our directors have a duty of loyalty to act honestly, in good faith
and with a view to our best interests. Our directors also have a duty to exercise the skill they
actually possess and such care and diligence that a reasonably prudent person would exercise in
comparable circumstances. In fulfilling their duty of care to us, our directors must ensure
compliance with our memorandum and articles of association, as amended and re-stated from time to
time. A shareholder has the right to seek damages if a duty owed by our directors is breached.
The functions and powers of our board of directors include, among others:
•
convening shareholders' annual general meetings and reporting its work to
shareholders at such meetings;
•
declaring dividends and distributions;
•
appointing officers and determining the term of office of officers;
•
exercising the borrowing powers of our company and mortgaging the property of our
company; and
•
approving the transfer of shares of our company, including
the registering of such shares in our share register.
Terms of Directors and Executive Officers
Our officers are elected by and serve at the discretion of the board of directors. Our
directors are not subject to a term of office and hold office until such time as they are removed
from office by special resolution or the unanimous written resolution of all shareholders. A
director will be removed from office automatically if, among other things, the director (i) becomes
bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by
our company to be or becomes of unsound mind.
Employment Agreements
We have entered into employment agreements with all of our executive officers. Under these
agreements, each of our executive officers is employed for a specified time period. We may
terminate his or her employment for cause at any time, with prior written notice, for certain acts
of the employee, including but not limited to a conviction to a felony, or willful gross misconduct
by the employee in connection with his employment, and in each case if such acts have resulted in
material and demonstrable financial harm to us. An executive officer may, with prior written
notice, terminate his or her employment at any time for any material breach of the employment
agreement by us that is not remedied promptly after receiving the remedy request from the employee.
Furthermore, either party may terminate the employment agreement at any time without cause upon
advance written notice to the other party. Upon termination, the employee is generally entitled to
a severance pay of at least one month's salary.
Each executive officer has agreed to hold, both during and subsequent to the terms of his or
her agreement, in confidence and not to use, except in pursuance of his or her duties in
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connection
with the employment, any of our confidential information, technological secrets, commercial secrets
and know-how. Our executive officers have also agreed to disclose to us all inventions, designs and
techniques resulted from work performed by them, and to assign us all right, title and interest of
such inventions, designs and techniques.
D.
Employees
Employees
We had 205, 852 and 1,374 employees as of December 31, 2003, 2004 and 2005, respectively. The
following table sets forth the number of our employees categorized by our areas of operations and
as a percentage of our workforce as of December 31, 2005:
Number of Employees
Percentage of Total
Manufacturing and engineering
967
70.4
%
Quality assurance
113
8.2
General and administration
79
5.7
Purchasing and logistics
73
5.3
Research and development
76
5.6
Marketing and sales
39
2.8
Others
27
2.0
Total
1,374
100.0
%
From time to time, we also employ part-time employees and independent contractors to support
our research and development, manufacturing and sales and marketing activities. We plan to hire
additional employees as we expand.
Our success depends to a significant extent upon, among other factors, our ability to attract,
retain and motivate qualified personnel. As of December 31, 2005, 141 of our employees held
bachelor's or higher degrees, and all of our manufacturing line employees have post-high school
technical degrees or high school diplomas. Many of these employees have overseas education and
industry experience and we periodically send our technical
personnel overseas for study and training. Our employees receive periodical training every
year.
We offer our employees additional annual merit-based bonuses based on the overall performance
of our company, his or her department and the individual. We are required by applicable PRC
regulations to contribute amounts equal to 22%, 8%, 8%, 2%, 0.6% and 0.9%, of our employees'
aggregate salary to a pension contribution plan, a medical insurance plan, a housing fund, an
unemployment insurance plan, a personal injury insurance plan and a maternity insurance plan,
respectively, for our employees.
Our employees are not covered by any collective bargaining agreement. We believe that we have
a good relationship with our employees.
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E.
Share Ownership
The following table sets forth information with respect to the beneficial ownership of our
ordinary shares as of April 25, 2006, the latest practicable date, by:
•
each of our directors and executive officers; and
•
each person known to us to own beneficially more than 5.0% of our ordinary shares.
Shares Beneficially Owned(1)(2)
Number
%
Directors and Executive Officers:
Zhengrong Shi(3)
66,500,000
44.97
Jason E. Maynard(4)
10,806,787
7.33
Zhi Zhong Qiu(5)
5,476,728
3.71
Weiguo Zhang(6)
333,333
3.71
Jingjia Ji(7)
166,667
0.11
Amy Yi Zhang(8)
80,000
0.05
Graham Artes(9)
66,667
0.05
Stuart R. Wenham(10)
66,667
0.05
Yichuan Wang(11)
50,000
0.03
All directors and executive officers as a group
83,546,849
56.15
Principal Shareholders:
D&M Technologies Limited(12)
66,000,000
44.75
Goldman Sachs (Asia) Finance(13)
10,790,120
7.32
(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 held by such person. Percentage of
beneficial ownership of each listed person prior to the offering is based on 147,487,707
ordinary shares outstanding as of April 25, 2006, 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.
(3)
Includes 67,500,000 ordinary shares held by D&M Technologies Limited and 500,000 ordinary
shares issuable upon exercise of options within 60 days of the date of this annual report on
Form 20-F held by Dr. Shi. D&M Technologies Limited, a British Virgin Islands company, is
ultimately owned by Dr. Shi's family trust. Dr. Shi is the sole director of D&M Technologies
Limited on all matters of Suntech requiring shareholder approval. Dr. Shi's business address
is 17-6 Changjiang South Road, New District, Wuxi, Jiangsu Province 214028, People's Republic
of China.
(4)
Includes 10,790,120 ordinary shares held by Goldman Sachs (Asia) Finance and 16,667 ordinary
shares issuable upon exercise of options within 60 days of the date of this annual report on
Form 20-F held by Mr. Jason E. Maynard. Mr. Maynard, a managing director of Goldman Sachs
(Asia) Finance, disclaims beneficial ownership of shares held by Goldman Sachs (Asia) Finance
except to the extent of his pecuniary interest in these shares. Mr. Maynard's business address
is c/o Goldman Sachs (Asia) Finance, 68th Floor, Cheung Kong Center, 2 Queens Road Central,
Hong Kong.
(5)
Includes 5,460,061 ordinary shares held by DragonTech Energy Investment Limited and 16,667
ordinary shares issuable upon exercise of options within 60 days of the date of this annual
report on Form 20-F held by Mr. Zhi Zhong Qiu. Mr. Qiu, a director of DragonTech Energy
Investment Limited, disclaims beneficial ownership of shares held by DragonTech Energy
Investment Limited except to the extent of his pecuniary interest in these shares. Mr. Qiu's
business address is c/o DragonTech Energy Investment Limited, Room 2503, Alexandra House, 18
Chater Road, Central, Hong Kong.
(6)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Mr. Zhang.
(7)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Mr. Ji.
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(8)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Ms. Zhang.
(9)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Mr. Artes.
(10)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Mr. Wenham.
(11)
Represents ordinary shares issuable upon exercise of options within 60 days of the date of
this annual report on Form 20-F held by Mr. Wang.
(12)
D&M Technologies Limited, a British Virgin Islands company, is ultimately owned by Dr. Shi's
family trust. Dr. Shi is the sole director of D&M Technologies Limited on all matters of
Suntech requiring shareholder approval. The address of D&M Technologies Limited is Akara
Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands.
(13)
Represents 10,790,120 ordinary shares held by Goldman Sachs (Asia) Finance. Goldman Sachs
(Asia) Finance is a wholly-owned subsidiary of Goldman Sachs Group, Inc., which is a public
company listed on the New York Stock Exchange. The address of Goldman Sachs (Asia) Finance is
Suite 802, St James Court, St Denis Street, Port Louis, Mauritius.
As of April 25, 2006, approximately 20.6% of our outstanding ordinary shares are held by
one record holder in the United States.
Item 7.
Major Shareholders and Related Party Transactions
A.
Major Shareholders
Please refer to "Item 6. Directors, Senior Management and Employees
¾
Share Ownership."
B.
Related Party Transactions
After the completion of our initial public offering on December 19, 2005, we adopted an audit
committee charter, which requires that the audit committee review all related party
transactions on an ongoing basis and all such transactions be approved by the committee. Set
forth below is a description of all of our related party transactions since January 1, 2003.
Transactions with Dr. Zhengrong Shi
Dr. Zhengrong Shi is our founder, chairman of our board of directors and our chief executive
officer. Our predecessor company, Suntech China, was established in January 2001 by certain PRC
companies and Power Solar System Pty. Ltd., or PSS, a company wholly-owned by Dr. Shi, with PSS
owning 25% of its equity interests. In October 2004, PSS' ownership in Suntech China increased to
31.389% after it purchased an additional 6.389% of the equity interests in Suntech China from
another shareholder. In January 2005, Suntech BVI was founded by Dr. Shi and Million Power Finance
Ltd., or Million Power, with Dr. Shi and Million Power owning 60% and 40% of the equity interests
in Suntech BVI, respectively. Suntech BVI acquired 100.0% of the equity interests in Suntech China
through a series of transactions between April 2005 and May 2005. These transactions, including
Suntech BVI's acquisition of the entire ownership interest in PSS from Dr. Shi for $1,000 and
13,500,000 ordinary shares of Suntech BVI, have been accounted for as a reorganization of entities
in a manner similar to pooling-of-interest. This is because no single shareholder or group of
shareholders acting in concert controlled Suntech China either prior to and after Suntech BVI's
acquisition of all equity interest of Suntech China.
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Transactions with Certain Directors, Shareholders and Affiliates
We have historically made cash advances to certain directors and shareholders and have
purchased raw materials from certain affiliates.
As of December 31, 2004 and 2005, amounts due from related parties were $265,199 and $nil,
respectively. Amounts due from related parties as of December 31 2004 included (i) cash advances to
Mr. Yanren Li, who used to be a member of our board of directors, and Dr. Shi, and (ii) trade and
other receivables from our affiliate, Wuxi Shangneng, in which we had owned 50% of its equity
interests until August 2005, when it became our wholly-owned subsidiary. Amounts due from related
parties as of December 31, 2004 also included other receivables from one of Wuxi Shangneng's
shareholders, Wuxi Jinwei Solar Energy Technical Co. All cash advances to Dr. Shi were repaid by
Dr. Shi in full in October 2005. These amounts were unsecured, interest free and had no fixed
repayment terms. All cash advances to Mr. Li had been repaid as of July 31, 2005. We will not make
such cash advances to any of our directors or shareholders in the future.
As of December 31, 2004 and 2005, amounts due to related parties were $149,341 and $468,220,
respectively. Amounts due to related parties as of December 31, 2004 and 2005 included (i) payroll
payable to Mr. Li and Dr. Shi, and (ii) trade payables to Wuxi Shangneng and Jiangsu Huariyuan.
In 2003, 2004 and 2005 (up to the date when Wuxi Shangneng became our wholly-owned
subsidiary), we purchased raw materials from Wuxi Shangneng in amounts of $nil, $27,085 and
$38,311, respectively. In April 2005, we acquired 25.0% of the equity interest in Jiangsu Huariyuan
Electronics Technology Co., Ltd., or Jiangsu Huariyuan, a silicon ingot manufacturer located in
Jiangsu province, China. From April 2005 to December 31, 2005, we purchased silicon ingots from
Jiangsu Huariyuan in the amount of $1,142,692.
As of December 31, 2005, we were contingently liable as guarantor with respect to three
separate borrowings by an ex-shareholder, Wuxi Shanhe Group, in an aggregate amount of $1.0
million. As of December 31, 2003, 2004 and 2005, $2.9 million, $1.9 million and $1.0 million,
respectively, of our short-term bank borrowings were guaranteed by Wuxi Shanhe Group.
On August 25, 2005, we, through Suntech China, acquired an additional 50% of the equity
interests in Wuxi Shangneng for $123,449. We merged Wuxi Shangneng into Suntech China and
liquidated Wuxi Shangneng in early 2006.
Issuance and Sale of Series A Preferred Shares
In May 2005, Suntech BVI sold a total of 34,667,052 Series A preferred shares in a private
placement at a price of $2.3077 per share for an aggregate of $80.0 million. The investors in our
Series A preferred share private placement consisted of Goldman Sachs (Asia) Finance, which
purchased 10,790,120 shares, DragonTech Energy Investment Limited, which purchased 5,460,061
shares, Actis China Investment Holdings No. 4 Ltd., which purchased 5,416,727 shares, Financiere
Natexis Singapore 3 Pte., Ltd., which purchased 4,766,720 shares, Bestmanage Consultants Ltd. which
purchased 4,333,381 shares, and Prax Capital Fund 1, LP, which purchased 3,900,043 shares. Two
members of our board of directors were appointed by Series A preferred shareholders. The $80.0
million proceeds from our Series A preferred financing were used primarily to purchase equity
interests in
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Suntech China from certain previous equity holders. The purchases occurred
concurrently with the Series A private placement. Series A preferred shares were converted into
our ordinary shares on the completion of our initial public offering. Each of our Series A
preferred shares was converted into one ordinary share.
Holders of former Series A preferred shares are also entitled to certain registration rights,
including demand registration, piggyback registration and Form F-3 or Form S-3 registration.
Equity Incentive Plan
See Item 6.B., "—2005 Equity Incentive Plan."
C.
Interests of Experts and Counsel
Not applicable.
Item 8.
Financial Information
A.
Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
Legal and Administrative Proceedings
We are currently not a party to any material legal or administrative proceedings, and we are
not aware of threatened material legal or administrative proceedings against us. We may from time
to time become a party to various legal or administrative proceedings arising in the ordinary
course of our business.
Dividend Policy
We have never declared or paid any dividends, nor do we have any present plan to pay any cash
dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if
not all, of our available funds and any future earnings to operate and expand our business.
Our board of directors has complete discretion on whether to pay dividends, subject to the
approval of our shareholders. Even if our board of directors decides to pay dividends, the form,
frequency and amount will depend upon our future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and other factors that the board of
directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including
the fees and expenses payable thereunder. See "Description of American Depositary Shares." Cash
dividends on our ordinary shares, if any, will be paid in U.S. dollars.
B.
Significant Changes
We have not experienced any significant changes since the date of our audited consolidated
financial statements included in this annual report.
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Item 9.
The Offer and Listing
A.
Offering and Listing Details.
Our ADSs, each representing four of our ordinary shares, have been listed on the New York
Stock Exchange since December 14, 2005 under the symbol "STP."
In 2005 (December 14, 2005 through December 31, 2005), the trading price of our ADSs on New
York Stock Exchange ranged from $19.00 to $28.30 per ADS.
The following table provides the high and low trading prices for our ADSs on the New York
Stock Exchange for (1) the first quarter in 2006 and each quarter in 2005, and (2) each of the past
six months.
Sales Price
High
Low
Quarterly High and Low
Fourth Quarter 2005 (From December 14, 2005)
28.30
19.00
First Quarter 2006
45.95
19.00
Monthly Highs and Lows
December 2005 (from December 14, 2005)
28.30
19.00
January 2006
45.95
25.50
February 2006
44.25
30.20
March 2006
39.00
31.51
April 2006 (through April 25)
41.50
32.10
B.
Plan of Distribution
Not applicable.
C.
Markets
Our ADSs, each representing four of our ordinary shares, have been listed on the New York
Stock Exchange since December 14, 2005 under the symbol "STP."
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
Item 10.
Additional Information
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A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
We incorporate by reference into this annual report the description of our amended and
restated memorandum of association contained in our F-1 registration statement (File No.
333-129367), as amended, initially filed with the Commission on November 1, 2005. Our shareholders
adopted our amended and restated memorandum and articles of association by unanimous resolutions on
November 7, 2005.
C.
Material Contracts
We have not entered into any material contracts other than in the ordinary course of business
and other than those described in "Item 4. Information on the Company" or elsewhere in this annual
report on Form 20-F.
D.
Exchange Controls
Foreign Currency Exchange
Foreign currency exchange regulation in China is primarily governed by the following rules:
•
Foreign Currency Administration Rules (1996), as amended, or the Exchange Rules; and
•
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996),
or the Administration Rules;
Under the Exchange Rules, the Renminbi is convertible for current account items, including the
distribution of dividends, interest payments, trade and service-related foreign exchange
transactions. Conversion of Renminbi for capital account items, such as direct investment, loan,
security investment and repatriation of investment, however, is still subject to the approval of
the PRC State Administration of Foreign Exchange, or SAFE.
Under the Administration Rules, foreign-invested enterprises may only buy, sell and/or remit
foreign currencies at those banks authorized to conduct foreign exchange business after providing
valid commercial documents and, in the case of capital account item transactions, obtaining
approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are
also subject to limitations, which include approvals by the Ministry of Commerce, the SAFE and the
State Reform and Development Commission.
E.
Taxation
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon
profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or
estate duty. There are no other taxes likely to be material to us levied by the Government of the
Cayman Islands except for stamp duties which may be applicable on
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instruments executed in, or
brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any
double tax treaties. There are no exchange control regulations or currency restrictions in the
Cayman Islands.
United States Federal Income Taxation
The following discussion describes certain material U.S. federal income tax consequences to
U.S. Holders (defined below) under present law of an investment in the ADSs or ordinary shares.
This summary applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets
and that have the U.S. dollar as their functional currency. This discussion is based on the tax
laws of the United States as in effect on the date of this annual report on Form 20-F and on U.S.
Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report on
Form 20-F, as well as judicial and administrative interpretations thereof available on or before
such date. All of the foregoing authorities are subject to change, which change could apply
retroactively and could affect the tax consequences described below.
The following discussion does not address the tax consequences to any particular investor or
to persons in special tax situations such as:
•
banks;
•
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 holding an ADS or ordinary share as part of a straddle, hedging, conversion or
integrated transaction;
•
persons that actually or constructively own 10.0% or more of our voting stock; or
•
persons holding ADSs or ordinary shares through partnerships or other pass-through
entities.
The discussion below of the U.S. federal income tax consequences to "U.S. Holders" will apply
if you are a beneficial owner of ADSs or ordinary shares and you are, for U.S. federal income tax
purposes,
•
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 thereof or the District
of Columbia;
•
an estate whose income is subject to U.S. federal income taxation regardless of its
source; or
•
a trust that (1) is subject to the supervision of a court within the United States and
the control of one or more U.S. persons or (2) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.
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If you are a partner in a partnership or other entity taxable as a partnership that holds
ADSs or ordinary shares, your tax treatment generally will depend on your status and the activities
of the partnership.
The discussion below assumes that the representations contained in the deposit agreement are
true and that the obligations in the deposit agreement and any related agreement will be complied
with in accordance with their terms. If you hold ADSs, you should be treated as the holder of the
underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.
The U.S. Treasury has expressed concerns that parties to whom ADSs are pre-released may be
taking actions that are inconsistent with the claiming, by U.S. Holders of ADSs, of foreign tax
credits for U.S. federal income tax purposes. Such actions would also be inconsistent with the
claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S.
Holders, as described below. Accordingly, the availability of the reduced tax rate for dividends
received by certain non-corporate U.S. Holders could be affected by future actions that may be
taken by the U.S. Treasury or parties to whom ADSs are pre-released.
Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares
Subject to the passive foreign investment company rules discussed below, the gross amount of
all our distributions to you with respect to the ADSs or ordinary shares generally will be included
in your gross income as foreign source dividend income on the date of receipt by the depositary, in
the case of ADSs, or by you, in the case of ordinary shares, but only to the extent that the
distribution is paid out of our current or accumulated earnings and profits (as determined under
U.S. federal income tax principles). The dividends will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends received from other U.S. corporations.
With respect to non-corporate U.S. Holders including individual U.S. Holders, for taxable
years beginning before January 1, 2009, dividends may be taxed at the lower applicable capital
gains rate, and thus may constitute "qualified dividend income" provided that (1) the ADSs or
ordinary shares are readily tradable on an established securities market in the United States, (2)
we are not a passive foreign investment company (as discussed below) for either our taxable year in
which the dividend was paid or the preceding taxable year, and (3) certain holding period
requirements are met. Under Internal Revenue Service authority, common or ordinary shares, or ADSs
representing such shares, are considered for the purpose of clause (1) above to be readily tradable
on an established securities market in the United States if they are listed on the New York Stock
Exchange, as our ADSs are. You should consult your tax advisors regarding the availability of the
lower rate for dividends paid with respect to our ADSs or ordinary shares.
To the extent that the amount of the distribution exceeds our current and accumulated earnings
and profits, it will be treated first as a tax-free return of your tax basis in your ADSs or
ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the
excess will be taxed as capital gain. We do not intend to calculate our earnings and profits
under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a
distribution will generally be treated as a dividend.
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Taxation of Disposition of Shares
Subject to the passive foreign investment company rules discussed below, you will recognize
taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or ordinary share
equal to the difference between the amount realized for the ADS or ordinary share and your tax
basis in the ADS or ordinary share. The gain or loss generally will be capital gain or loss. If you
are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADS or
ordinary share for more than one year, you will be eligible for reduced tax rates. The
deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize
will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Passive Foreign Investment Company
A Non-U.S. corporation is considered a passive foreign investment company ("PFIC") for any taxable
year if either
•
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.
We will be treated as owning our proportionate share of the assets and earning our
proportionate share of the income of any other corporation in which we own, directly or indirectly,
25% or more (by value) of the stock.
We believe that we were not a PFIC for our taxable year ended December 31, 2005, and we do not
expect to be a PFIC for our current taxable year for U.S. federal income tax purposes. We must
make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status
may change. In particular, our PFIC status may be determined in large part based on the market
price of our ADSs and ordinary shares, which is likely to fluctuate (and may fluctuate considerably
given that market prices of technology companies have been especially volatile). Accordingly,
fluctuations in the market price of the ADSs and ordinary shares may result in our being a PFIC for
any year. Thus, there can be no assurance that we will not be considered a PFIC for our current
taxable year or any future taxable year. If we are a PFIC for any year during which you hold ADSs
or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years
during which you hold ADSs or ordinary shares.
If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, you will
be subject to special tax rules with respect to any "excess distribution" that you receive and any
gain you realize from a sale or other disposition (including a pledge) of the ADSs or ordinary
shares, unless you make a "mark-to-market" election as discussed below. Distributions you receive
in a taxable year that are greater than 125% of the average annual distributions you received
during the shorter of the three preceding taxable years or your holding period for the ADSs or
ordinary shares will be treated as an excess distribution. Under these special tax rules: 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
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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.
The tax liability for amounts allocated to years prior to the year of disposition or "excess
distribution" cannot be offset by any net operating losses for such years, and gains (but not
losses) realized on the sale of the ADSs or ordinary shares cannot be treated as capital, even if
you hold the ADSs or ordinary shares as capital assets.
Alternatively, a U.S. Holder of "marketable stock" (as defined below) in a PFIC may make a
mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed in the
two preceding paragraphs. If you make a mark-to-market election for the ADSs or ordinary shares,
you will include in income each year an amount equal to the excess, if any, of the fair market
value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis
in such ADSs or ordinary shares. You are allowed a deduction for the excess, if any, of the
adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the
taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains
on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in
your income under a mark-to-market election, as well as gain on the actual sale or other
disposition of the ADSs or ordinary shares, are treated as ordinary income. Ordinary loss treatment
also applies to the deductible portion of any mark-to-market loss on the ADSs or ordinary shares,
as well as to any loss realized on the actual sale or disposition of the ADSs or ordinary shares,
to the extent that the amount of such loss does not exceed the net mark-to-market gains previously
included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be
adjusted to reflect any such income or loss amounts. The tax rules that apply to distributions by
corporations that are not PFICs would apply to distributions by us, except that the preferential
dividend rates with respect to "qualified dividend income" would not apply.
The mark-to-market election is available only for "marketable stock," which is stock that is
traded in other than de minimus quantities on at least 15 days during each calendar quarter on a
qualified exchange, including the New York Stock Exchange, or other market, as defined in
applicable U.S. Treasury regulations. The ADSs are listed on the New York Stock Exchange and,
consequently, if you are a holder of ADSs the mark-to-market election would be available to you
were we to be or become a PFIC, provided the ADSs were traded in sufficient quantities.
If you hold ADSs or ordinary shares in any year in which we are a PFIC, you will be required
to file Internal Revenue Service Form 8621 regarding distributions received on the ADSs or ordinary
shares and any gain realized on the disposition of the ADSs or ordinary shares. You are urged to
consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or
ordinary shares.
Information Reporting and Backup Withholding
Dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange
or redemption of ADSs or ordinary shares may be subject to information
reporting to the Internal Revenue Service and possible U.S. backup withholding at a current rate of
28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer
identification number and makes any other required certification or who is
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otherwise exempt from
backup withholding. U.S. Holders who are required to establish their exempt status generally must
provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their
tax advisors regarding the application of the U.S. information reporting and backup withholding
rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be
credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with
the Internal Revenue Service and furnishing any required information.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We have previously filed with the Commission our registration statement on Form F-1, as
amended.
We are subject to the periodic reporting and other informational requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange Act, we are
required to file reports and other information with the Securities and Exchange Commission.
Specifically, we are required to file annually a Form 20-F no later than six months after the close
of each fiscal year, which is December 31. Copies of reports and other information, when so filed,
may be inspected without charge and may be obtained at prescribed rates at the public reference
facilities maintained by the Securities and Exchange Commission at 100 F. Street, N.E., Washington,
D.C. 20549, and at the regional office of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may
obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission
at 1-800-SEC-0330. The SEC also maintains a Web site at www.sec.gov that contains reports, proxy
and information statements, and other information regarding registrants that make electronic
filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
Our financial statements have been prepared in accordance with U.S. GAAP.
We will furnish our shareholders with annual reports, which will include a review of
operations and annual audited consolidated financial statements prepared in conformity with U.S.
GAAP.
I.
Subsidiary Information
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For a listing of our subsidiaries, see Item 4. C. of this annual report, "Information on the
Company – Organizational Structure".
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk
A substantial portion of our sales is currently denominated in U.S. dollars, with the
remainder in Renminbi and Euros, while a substantial portion of our costs and expenses is
denominated in U.S. dollars and Renminbi, with the remainder in Euros. Therefore, fluctuations in
currency exchange rates could have a significant impact on our financial stability due to a
mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange
rates, particularly among the U.S. dollar, Renminbi and Euro, affect our gross and net profit
margins and could result in foreign exchange and operating losses. Our exposure to foreign exchange
risk primarily relates to currency gains or losses resulting from timing differences between
signing of sales contracts and settling of these contracts. As of December 31, 2005, we held $1.7
million in accounts receivable, of which $735,733 was denominated in U.S. dollars. Assuming we had
converted the U.S. dollar denominated accounts receivable of $735,733 as of December 30, 2005 into
Renminbi at the exchange rate of $1.00 for RMB8.0702 as of December 30, 2005, the accounts
receivable would have been RMB5.9 million. Assuming a 10% appreciation of the Renminbi against the
U.S. dollar, our accounts receivable denominated in U.S. dollars would have decreased by $73,573 to
$809,306 million as of December 31, 2005.
We recorded net foreign currency gain of $3,961 and $24,678 in 2003 and 2004, respectively,
but recorded net foreign exchange loss of $883,541 in 2005 due to the appreciation of the U.S.
dollar against Euro. We cannot predict the impact of future exchange rate fluctuations on our
results of operations and may incur net foreign currency losses in the future. We anticipate that
the effect of our exposure to foreign exchange risk will be reduced through hedging arrangements we
adopted in February 2006; such arrangements include forward exchange contracts and foreign currency
option contracts. However, we cannot assure you that such hedging activities will be effective in
managing our foreign exchange risk exposure.
Our financial statements are expressed in U.S. dollars but our functional currency is
Renminbi. The value of your investment in our ADSs will be affected by the foreign exchange rate
between U.S. dollars and Renminbi. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from our initial public offering, any appreciation of the Renminbi
against the U.S. dollar could result in a change to our statement of operations and a reduction in
the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of
Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial
results, the value of your investment in our company and the dividends we may pay in the future, if
any, all of which may have a material adverse effect on the prices of our ADSs.
Interest Rate Risk
Our exposure to interest rate risk primarily relates to interest expenses incurred by our
short-term and long-term bank borrowings, as well as interest income generated by excess cash
invested in demand deposits and liquid investments with original maturities of three months or
less. Such interest-earning instruments carry a degree of interest rate risk. We have
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not used any
derivative financial instruments to manage our interest risk exposure. We have not been exposed nor
do we anticipate being exposed to material risks due to changes in interest rates. However, our
future interest expense may increase due to changes in market interest rates.
Item 12.
Description of Securities Other than Equity Securities
Not Applicable.
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
None of these events occurred in any of the years ended December 31, 2003, 2004 and 2005.
Item 14.
Material Modifications to the Rights of Security Holders and Use of
Proceeds
See "Item 10. Additional Information" for a description of the rights of securities holders,
which remain unchanged.
We completed our initial public offering of 30,377,000 ordinary shares, in the form of ADSs,
at $15.00 per ADS on December 19, 2005, after our ordinary shares and American Depositary Receipts
were registered under the Securities Act. The aggregate price of the offering amount registered
and sold was $342.3 million, of which we received net proceeds of $321.8 million. The effective
date of our registration statement on Form F-1 (File number: 333-129367) was December 13, 2005.
Credit Suisse and Morgan Stanley were the joint global coordinators and book runners for the global
offering of our ADSs.
The net proceeds from our initial public offering have been allocated as follows:
•
approximately $100.0 million to purchase or prepay for raw materials;
•
approximately $40.0 million to expand our manufacturing lines for the production
of PV cells and modules; and
•
approximately $20.0 million to enhance our research and development efforts.
The remaining of the net proceeds will be used for general corporate purposes, including
funding our working capital needs. As of December 31, 2005, our cash resources amounted to $359.3
million, comprising of cash on hand and demand deposits.
Item 15.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and our Chief Financial Officer have performed an evaluation of
our disclosure controls and procedures, as that term is defined in Rules 13a-14(c) and 15d-14(c) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within 90 days prior to the
date of this report, and each has concluded that such disclosure controls and procedures are
effective to ensure that information required to be
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disclosed in our periodic reports filed under
the Exchange Act is recorded, processed, summarized and reported, within the time period specified
by the Securities and Exchange Commission's rules and regulations.
Changes in Internal Controls
No significant changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses, were made as a result of the
evaluation.
Item 16A.
Audit Committee Financial Expert
Our Board of Directors has determined that Songyi Zhang qualify as "audit committee financial
expert" as defined in Item 16A of Form 20-F. Each of the members of the Audit Committee except for
Dr. Zhengrong Shi is an "independent director" as defined in the Nasdaq Marketplace Rules. We
intend to have an independent audit committee before the first anniversary of our initial public
offering.
Item 16B.
Code of Ethics
Our board of directors has adopted a code of ethics that applies to our directors, officers,
employees and agents, including certain provisions that specifically apply to our chief executive
officer, chief financial officer, chief operating officer, chief technology officer, vice
presidents and any other persons who perform similar functions for us. We have filed our code of
business conduct and ethics as an exhibit to this annual report on Form 20-F, and posted the code
on our website www.suntech-power.com. We hereby undertake to provide to any person without charge,
a copy of our code of business conduct and ethics within ten working days after we receive such
person's written request.
Item 16C.
Principal Accountant Fees and Services
The following table sets forth the aggregate fees by categories specified below in connection
with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our principal
external auditors, for the periods indicated. We did not pay any other fees to our
auditors during the periods indicated below.
For the Year Ended December 31,
2003
2004
2005
Audit fees
(1)
—
—
$
1,434,000
Tax
Fees
(2)
—
—
$
100,000
(1)
"Audit fees" means the aggregate fees billed for professional services rendered by our principal
auditors for the audit of our annual financial statements, review of the comparative interim financial statements
for the nine months ended September 30, 2005 and audit of our historical financial statements for each of the three
years ended December 31, 2004 in connection with our initial public
offering in 2005.
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(2)
"Tax fees" include fees billed for tax consultations.
The policy of our audit committee is to pre-approve all audit and non-audit services
provided by Deloitte Touche Tohmatsu CPA Ltd., including audit services, audit-related services,
tax services and other services as described above, other than those for de minimus services which
are approved by the Audit Committee prior to the completion of the audit.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None.
PART III
Item 17.
Financial Statements
We have elected to provide financial statements pursuant to Item 18.
Item 18.
Financial Statements
The following financial statements are filed as part of this Annual Report on Form 20-F,
together with the report of the independent auditors:
•
Independent Auditors' Report
•
Consolidated Balance Sheets as of December 31, 2004 and 2005
•
Consolidated Statements of Operations and Comprehensive Income for the years ended
December 31, 2003, 2004 and 2005
•
Consolidated Statements of Shareholders' Equity for the years ended December 31,
2003, 2004 and 2005
•
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2004
and 2005
•
Notes to the Consolidated Financial Statements
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Item 19.
Exhibits
Exhibit Number
Description of Document
1.1
Memorandum and Articles of Association of Suntech
Power Holdings
Co., Ltd. (incorporated by
reference to Exhibit 3.1 from our F-1 registration
statement (File No. 333-129367), as amended,
initially filed with the Commission on November 1,
2005)
1.2
Form of Second Amended and Restated Memorandum and
Articles of Association of Suntech Power Holdings
Co., Ltd. (incorporated by reference to Exhibit
3.2 from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November 1, 2005)
2.1
Specimen Certificate for Ordinary Shares of
Suntech Power Holdings Co., Ltd. (incorporated by
reference to Exhibit 4.2 from our F-1 registration
statement (File No. 333-129367), as amended,
initially filed with the Commission on November 1,
2005)
2.2
Form of American Depositary Receipt of Suntech
Power Holdings Co., Ltd. (incorporated by
reference to Exhibit 4.1 from our F-1 registration
statement (File No. 333-129367), as amended,
initially filed with the Commission on November 1,
2005)
2.3
Form of Deposit Agreement among Suntech Power
Holdings Co., Ltd., the depositary and owners and
beneficial owners of the American Depositary
Receipts (incorporated by reference to Exhibit 4.3
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November 1, 2005)
4.1
Share Purchase Agreement, dated as of April 29,
2005, among the Power Solar System Co., Ltd. and
other parties therein (incorporated by reference
to Exhibit 4.4 from our F-1 registration statement
(File No. 333-129367), as amended, initially filed
with the Commission on November 1, 2005)
4.2
Sale and Purchase Agreement in relation to the
entire issued share capital of Power Solar System
Co., Ltd. dated as of August 29, 2005 among
Suntech Power Holdings Co., Ltd. and other parties
therein (incorporated by reference to Exhibit 4.5
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November 1, 2005)
4.3
Agreement for the Transfer and Assumption of
Obligations under the Share Purchase Agreement and
the Right of First Refusal and Co-Sale Agreement
dated as of August 29, 2005 among Suntech Power
Holdings Co., Ltd. and other parties therein
(incorporated by reference to Exhibit 4.6 from our
F-1 registration statement (File No. 333-129367),
as amended, initially filed with the Commission on
November 1, 2005)
4.4
Long-term Loan Agreement between Wuxi Suntech
Solar Power Company Limited and Industrial and
Commercial Bank of China, Wuxi Branch dated March
31, 2005 (incorporated by reference to Exhibit 4.7
from our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November 1, 2005)
4.5
RMB Loan Agreement (Short-term) between Wuxi
Suntech Solar Power Company Limited and Bank of
China, New & Hi-tech Industrial Development Zone
Wuxi Branch dated April 30, 2005
90
Table of Contents
(incorporated by
reference to Exhibit 4.8 from our F-1 registration
statement (File No. 333-129367), as amended,
initially filed with the Commission on November 1,
2005)
4.6
Foreign Currency Loan Agreement between Wuxi
Suntech Solar Power Company Limited and Bank of
China, New & Hi-tech Industrial Development Zone
Wuxi Branch dated January 31, 2005 (incorporated
by reference to Exhibit 4.9 from our F-1
registration statement (File No. 333-129367), as
amended, initially filed with the Commission on
November 1, 2005)
4.7
Amended and Restated 2005 Share Incentive Plan
(incorporated by reference to Exhibit 10.1 from
our F-1 registration statement (File No.
333-129367), as amended, initially filed with the
Commission on November 1, 2005)
4.8
Form of Indemnification Agreement with the
Registrant's directors (incorporated by reference
to Exhibit 10.2 from our F-1 registration
statement (File No. 333-129367), as amended,
initially filed with the Commission on November 1,
2005)
4.9
Form of Employment and Confidentiality Agreement
between Suntech Power Holdings Co., Ltd. and
senior executive officers of Suntech Power
Holdings Co., Ltd. (incorporated by reference to
Exhibit 10.3 from our F-1 registration statement
(File No. 333-129367), as amended, initially filed
with the Commission on November 1, 2005)
4.10
Form of Non-Disclosure, Non-Competition and
Proprietary Information Agreement (incorporated by
reference to Exhibit 10.4 from our F-1
registration statement (File No. 333-129367), as
amended, initially filed with the Commission on
November 1, 2005)
8.1
List of Subsidiaries (incorporated by reference to
Exhibit 21.1 from our F-1 registration statement
(File No. 333-129367), as amended, initially filed
with the Commission on November 1, 2005)
11.1
Code of Business Conduct and Ethics (incorporated
by reference to Exhibit 99.1 from our F-1
registration statement (File No. 333-129367), as
amended, initially filed with the Commission on
November 1, 2005)
12.1*
CEO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
12.2*
CFO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
13.1*
CEO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
13.2*
CFO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
15.1*
Consent of Maples and Calder
*
Filed with this Annual Report on Form 20-F
91
Table of Contents
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing its annual
report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.
SUNTECH POWER HOLDINGS CO., LTD.
By
/S/ Zhengrong Shi
Name: Dr. Zhengrong Shi
Title:
Chief Executive Officer
Date: April 27, 2006
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2004 and 2005
F-3
Consolidated Income Statements for the Years Ended December 31, 2003, 2004 and 2005
F-4
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the Years
ended December 31, 2003, 2004 and 2005
F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005
F-6
Notes to the Consolidated Financial Statements
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Suntech Power Holdings Co., Ltd.:
We have audited the accompanying consolidated balance sheets of Suntech Power Holdings Co.,
Ltd. and its subsidiaries (the "Company") as of December 31, 2004 and 2005, and the related
consolidated statements of income, shareholders' equity and comprehensive income, and cash flows
for the three years in the period ended December 31, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2004 and 2005 and the results of
their operations and their cash flows for the three years in the period ended December 31, 2005 in
conformity with accounting principles generally accepted in the United States of America.
/s/
Deloitte Touche Tohmatsu
CPA
Ltd
.
Shanghai, China
April 11, 2006
F-2
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)
December 31,
2004
2005
$
$
ASSETS
Current assets:
Cash and cash equivalents
19,122,090
359,324,290
Restricted cash
5,995,477
7,997,225
Inventories
17,472,429
40,427,815
Accounts receivable, net of allowance for doubtful accounts of $159,318 and $243,013 in 2004
and 2005
5,252,725
1,659,445
Other receivable, net of allowance for doubtful accounts of $14,064 and $12,434 in 2004 and 2005
233,165
2,407,875
Value-added tax recoverable
1,222,634
338,998
Advances to suppliers
2,195,265
24,001,202
Amounts due from related parties
265,199
—
Deferred tax assets
154,504
322,481
Total current assets
51,913,488
436,479,331
Property, plant and equipment, net
13,211,346
39,717,333
Intangible assets, net
2,412,754
2,922,989
Goodwill
—
135,343
Investments in affiliates
69,402
1,059,103
Non-current receivables
42,233
—
Deferred tax assets
818,854
1,350,368
TOTAL ASSETS
68,468,077
481,664,467
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term bank borrowings
34,441,687
52,193,048
Accounts payable
2,864,263
3,522,221
Other payables
202,307
4,769,722
Payables in respect of purchase of property, plant and equipment
75,878
550,093
Advances from customers
374,139
3,059,206
Accrued payroll and welfare
57,037
1,408,393
Government grants
2,060,049
4,106,444
Amounts due to related parties
149,341
468,220
Income tax payable
—
1,898,435
Total current liabilities
40,224,701
71,975,782
Long-term bank borrowings
—
3,717,360
Accrued warranty costs
847,580
2,619,104
Total liabilities
41,072,281
78,312,246
Commitments and contingencies (Note 18)
Minority interest
—
1,429,102
Shareholders' equity:
Ordinary share of par value $0.01: authorized 465,332,947 shares; 90,000,000 shares issued and
outstanding as of December 31, 2004; 147,487,707 shares issued and outstanding as of December
31, 2005
900,000
1,474,877
Additional paid-in capital
7,108,868
364,043,762
Deferred compensation
—
(12,716,132
)
Retained earnings
19,380,188
47,602,672
Accumulated other comprehensive income
6,740
1,517,940
Total shareholders' equity
27,395,796
401,923,119
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
68,468,077
481,664,467
See notes to consolidated financial statements.
F-3
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED INCOME STATEMENTS
(In U.S. dollars, except share data)
Years Ended December 31,
2003
2004
2005
$
$
$
Net revenues:
PV cells
9,741,119
7,331,577
54,653,423
PV modules
4,104,408
77,898,293
170,128,460
PV system integration
42,784
57,667
1,218,267
Total net revenues
13,888,311
85,287,537
226,000,150
Cost of revenues:
PV cells
7,695,484
5,269,342
35,440,452
PV modules
3,467,220
54,861,953
121,183,426
PV system integration
32,977
43,108
814,280
Total cost of revenues
11,195,681
60,174,403
157,438,158
Gross profit
2,692,630
25,113,134
68,561,992
Selling expenses
558,886
1,749,800
3,667,261
General and administrative expenses
1,233,817
2,889,026
18,874,277
Research and development expenses
147,759
465,332
3,357,828
Total operating expenses
1,940,462
5,104,158
25,899,366
Income from operations
752,168
20,008,976
42,662,626
Interest expenses
(226,592
)
(1,036,442
)
(7,907,323
)
Interest income
5,948
57,143
296,612
Other income (expense)
93,094
166,972
(758,245
)
Income before income taxes
624,618
19,196,649
34,293,670
Tax benefit (expenses)
300,730
611,447
(3,752,679
)
Net income after taxes before minority interest and equity in
(loss) earnings of affiliates
925,348
19,808,096
30,540,991
Minority interest
—
—
(33,915
)
Equity in (loss) earnings of affiliates
—
(51,421
)
121,408
Net income
925,348
19,756,675
30,628,484
Deemed dividend on Series A redeemable convertible preferred shares
—
—
(2,406,000
)
Net income attributable to holders of ordinary shares
925,348
19,756,675
28,222,484
Net income per share:
Basic
$
0.01
$
0.22
$
0.31
Diluted
$
0.01
$
0.22
$
0.26
Shares used in computation:
Basic
90,000,000
90,000,000
92,047,507
Diluted
90,000,000
90,000,000
116,825,138
See notes to consolidated financial statements.
F-4
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In U.S. dollars, except share data)
Accumulated
Additional
Retained
Other
Ordinary
Paid-in
Deferred
Subscription
Earnings
Comprehensive
Shares
Capital
compensation
receivable
(Deficit)
Income
Total
Number
$
$
$
$
$
$
Balance at January 1, 2003
90,000,000
900,000
7,108,868
—
(876,165
)
(1,301,835
)
2,341
5,833,209
Net income
—
—
—
—
—
925,348
—
925,348
Foreign currency translation adjustments
—
—
—
—
—
—
470
470
Balance at December 31, 2003
90,000,000
900,000
7,108,868
—
(876,165
)
(376,487
)
2,811
6,759,027
Collection of subscription capital
—
—
—
—
876,165
—
—
876,165
Net income
—
—
—
—
—
19,756,675
—
19,756,675
Foreign currency translation adjustments
—
—
—
—
—
—
3,929
3,929
Balance at December 31, 2004
90,000,000
900,000
7,108,868
—
—
19,380,188
6,740
27,395,796
Return of
capital upon
re-organization
—
—
(74,459,423
)
—
—
—
—
(74,459,423
)
Deemed dividend on Series A redeemable
convertible preferred shares
—
—
—
—
—
(2,406,000
)
—
(2,406,000
)
Issuance of ordinary shares pursuant to
initial public offering
22,820,655
228,207
319,943,822
—
—
—
—
320,172,029
Conversion of preferred shares into
ordinary shares upon the completion of
initial public offering
34,667,052
346,670
82,059,429
—
—
—
—
82,406,099
Share based compensation
—
—
29,391,066
(22,150,680
)
—
—
—
7,240,386
Amortization of deferred compensation
—
—
—
9,434,548
—
—
—
9,434,548
Net income
—
—
—
—
—
30,628,484
—
30,628,484
Foreign currency translation adjustments
—
—
—
—
—
—
1,511,200
1,511,200
Balance at December 31, 2005
147,487,707
1,474,877
364,043,762
(12,716,132
)
—
47,602,672
1,517,940
401,923,119
See notes to consolidated financial statements.
F-5
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
Years Ended December 31,
2003
2004
2005
$
$
$
Operating activities:
Income attributable to holders of ordinary shares
925,348
19,756,675
28,222,484
Deemed dividend on Series A redeemable convertible preferred shares
—
—
2,406,000
Net income
925,348
19,756,675
30,628,484
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest
—
—
33,915
Share based compensation
—
—
16,674,934
Depreciation and amortization
1,182,390
1,970,475
3,873,053
Deferred taxes
(300,745
)
(611,465
)
(680,959
)
Loss on disposal of property, plant and equipment
—
16,151
320,659
Provision for doubtful receivables
32,593
85,415
82,065
Equity in loss (earnings) of affiliates
—
51,421
(121,408
)
Changes in operating assets and liabilities:
Inventories
(2,137,869
)
(14,125,206
)
(22,722,600
)
Accounts receivable
(858,075
)
(2,846,672
)
4,146,524
Other receivable
(174,466
)
(20,535
)
(2,166,103
)
Value-added tax recoverable
(99,464
)
(1,088,922
)
883,636
Advances to suppliers
(102,594
)
(2,006,768
)
(21,582,465
)
Amounts due from related parties
28,531
(206,196
)
265,199
Accounts payable
2,054,131
677,133
601,116
Other payables
42,410
(75,689
)
4,325,857
Advances from customers
21,469
187,233
2,681,899
Accrued payroll and welfare
7,211
21,757
1,346,955
Income tax payable
—
—
1,898,435
Amounts due to related parties
86,587
12,230
318,879
Accrued warranty costs
39,319
779,236
1,771,524
Non-current receivables
(30,417
)
(1
)
42,233
Net cash provided by operating activities
716,359
2,576,272
22,621,832
Investing activities:
Acquisitions of subsidiaries, net of cash acquired
—
—
(587,655
)
Purchases of property, plant and equipment
(2,546,544
)
(8,232,571
)
(29,058,708
)
Purchases of intangibles
(241,642
)
(1,144,346
)
(639,988
)
Proceeds from disposal of property, plant and equipment
—
9,605
27,136
Government grants
—
2,060,049
2,046,395
Investments in affiliates
—
(120,823
)
(905,837
)
Increase in restricted cash
(237,915
)
(5,700,966
)
(2,001,748
)
Net cash used in investing activities
(3,026,101
)
(13,129,052
)
(31,120,405
)
(Continued)
F-6
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
Years Ended December 31,
2003
2004
2005
$
$
$
Financing activities:
Net proceeds from issuance of ordinary shares
—
—
320,172,029
Net proceeds from short-term bank borrowings
3,581,206
27,236,121
15,273,121
Proceeds from long-term bank borrowings
—
—
6,195,600
Proceeds from subscription receivable
—
876,165
—
Return of capital upon reorganization
—
—
(83,056,473
)
Proceeds from shareholder loan
—
—
8,597,050
Net proceeds from issuance of preferred shares
—
—
80,000,099
Contribution from minority shareholder of a subsidiary
—
—
914,952
Net cash provided by financing activities
3,581,206
28,112,286
348,096,378
Effect of exchange rate changes
470
3,929
604,395
Net increase in cash and cash equivalents
1,271,934
17,563,435
340,202,200
Cash and cash equivalents at the beginning of the year
286,721
1,558,655
19,122,090
Cash and cash equivalents at the end of the year
1,558,655
19,122,090
359,324,290
Supplemental disclosure of cash flow information:
Interest paid
226,593
997,946
2,254,371
Income taxes paid
—
—
2,499,623
Supplemental schedule of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable
173,201
75,878
550,093
See notes to consolidated financial statements.
F-7
Table of Contents
SUNTECH POWER HOLDINGS CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(In U.S. dollars, except share data)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Suntech Power Holdings Co., Ltd. ("Suntech Power") was incorporated in the Cayman Islands
under the laws of the Cayman Islands on August 8, 2005. On December 14, 2005, the Company became
listed on the New York Stock Exchange ("NYSE") in the United States.
Suntech Power and it subsidiaries (collectively the "Company") are principally engaged in the
design, development, manufacturing and marketing of photovoltaic ("PV") products in the People's
Republic of China (the "PRC") and overseas markets. During the years covered by the consolidated
financial statements, substantially all of the Company's business was conducted through an
operating subsidiary established in the PRC, Wuxi Suntech Power Co., Ltd. ("Wuxi Suntech"), in
which Suntech Power indirectly holds a 100% interest.
Suntech Power, through its subsidiary, Power Solar System Co., Ltd. ("Power Solar BVI"),
acquired 100% of the voting interests in Wuxi Suntech through a series of planned transactions that
were completed on May 19, 2005. These transactions have been accounted for as a recapitalization
because there was no control or collaborative group established.
On August 8, 2005, the Company issued 1 share for par value of $0.01 on incorporation. On
August 29, 2005, in connection with a legal reorganization, the Company issued 89,999,999 fully
paid up shares of $0.01 each on a pro-rata basis to the shareholders of Power Solar BVI that owned
100% of Wuxi Suntech in exchange for those interests. The Company has accounted for the issuance
of shares in connection with this reorganization as a legal reorganization of entities under common
control in a manner similar to a pooling-of-interests, and accordingly all share and per share data
have been restated to give retroactive effect to this transaction. Accordingly, the share capital
represents the capital amount of the Company as if the reorganization had been completed as of the
earliest period presented.
As of December 31, 2005, the Suntech Power's subsidiaries include the following entities:
Date of
Place of
Percentage
Subsidiary
Date of acquisition
incorporation
incorporation
of ownership
Power Solar BVI
N/A
June 23, 2000
BVI
100
%
Power Solar System Pty. Ltd.
N/A
June 23, 2000
Australia
100
%
Eucken Capital Limited
N/A
February 9, 2005
BVI
100
%
Wuxi Suntech
N/A
January 22, 2001
PRC
100
%
Luoyang Suntech Power Co., Ltd.
("Luoyang Suntech")
N/A
October 16, 2005
PRC
87
%
Qinghai Suntech Nima Power Co., Ltd.
("Qinghai Suntech")
July 18, 2005
July 24, 2000
PRC
51
%
Wuxi Shangneng Photovoltaic Sciences
System Co., Ltd. ("Wuxi Shangneng")
August 25, 2005
June 9, 2004
PRC
100
%
F-8
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
(a) Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with the
accounting principles generally accepted in the United States of America ("US GAAP").
(b) Basis of Consolidation
The consolidated financial statements include the financial statements of Suntech Power and
its majority-owned subsidiaries. All significant intercompany transactions and balances are
eliminated on consolidation.
(c) Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could differ from those
estimates. The Company bases its estimates on historical experience and various other factors
believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Significant accounting estimates reflected in the Company's consolidated financial
statements include reserve for obsolete inventory and allowance for doubtful receivables, the
useful lives of and impairment for property, plant and equipment and intangible assets, accruals
for warranty costs, valuation allowance of deferred tax assets and impairment of goodwill.
(d) Cash and cash equivalents and restricted cash
Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted
as to withdrawal and use, and which have maturities of three months or less when purchased.
Restricted cash represents bank deposits for securing letter of credit facilities granted to
the Company. The Company has classified as restricted certain cash and cash equivalents that are
not available for use in its operations.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the weighted
average method.
(f) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on a straight-line basis over the
following estimated useful lives:
Buildings
20 years
Leasehold improvements
over the shorter of the lease term or their estimated useful lives
Plant and machinery
5-10 years
Furniture, fixtures and equipment
5 years
Motor vehicles
5 years
Costs incurred in constructing new facilities, including progress payments and other costs
relating to the construction, are capitalized and transferred to property, plant and equipment on
completion and depreciated from that time.
F-9
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(g) Intangible assets
Technical know-how is carried at cost less accumulated amortization. The technical know-how
comprises the design of the PV manufacturing line, selection of facility and manufacturing
equipment, provision of manufacturing technologies and process for high efficiency silicon Solar
cells based on screen printing method, provision of innovations for continuous improvement of cell
efficiencies, and manufacturing cost reduction. Amortization is calculated on a straight-line
basis over the expected useful life of the assets of 10 years. The technical know-how would be
amortized over its useful life following the pattern in which the expected benefits will be
consumed or otherwise used up.
Land use rights are recorded at cost less accumulated amortization. Amortization is provided
on a straight-line basis over the term of the land use right agreement, which ranges from 46.3 to
49.4 years.
Amortization expenses for the years ended December 31, 2003, 2004 and 2005 were $159,911,
$159,986 and $206,110, respectively.
(h) Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the
identifiable assets and liabilities acquired.
Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired. The Group completes a two-step goodwill
impairment test. The first step compares the fair values of each reporting unit to its carrying
amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount,
goodwill is not considered to be impaired and the second step will not be required. If the carrying
amount of a reporting unit exceeds its fair value, the second step compares the implied fair value
of goodwill to the carrying value of a reporting unit's goodwill. The implied fair value of
goodwill is determined in a manner similar to accounting for a business combination with the
allocation of the assessed fair value determined in the first step to the assets and liabilities of
the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to
the assets and liabilities is the implied fair value of goodwill. This allocation process is only
performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust
the value of any assets or liabilities. An impairment loss is recognized for any excess in the
carrying value of goodwill over the implied fair value of goodwill.
(i) Investments in affiliates
The affiliated companies in which the Company owns more than 20% and less than 51% of the
investment are accounted for using the equity method of accounting. The Company's share of earnings
of the equity investments are included in the accompanying consolidated income statements.
(j) Impairment of long-lived assets
The Company evaluates its long-lived assets and finite lived intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. When these events occur, the Company measures impairment by comparing the carrying
amount of the assets to future undiscounted net cash flows expected to result from the use of the
assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less
than the carrying amount of the assets, the Company would recognize an impairment loss based on the
fair value of the assets.
F-10
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(k) Income taxes
Deferred income taxes are recognized for temporary differences between the tax basis of assets
and liabilities and their reported amounts in the financial statements, net operating loss
carryforwards and credits by applying enacted statutory tax rates applicable to future years.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets will not be realized.
Current income taxes are provided for in accordance with the laws of the relevant taxing
authorities. The components of the deferred tax assets and liabilities are individually classified
as current and non-current based on the characteristics of the underlying assets and liabilities,
or the expected timing of their use when they do not relate to a specific asset or liability.
(l) Revenue recognition
Sales of PV cells and modules are recorded when the products are delivered and title has
passed to the customers. A majority of the Company's contracts are written such that products are
shipped CIF destination. Accordingly, the Company must receive written evidence that the products
have been delivered to and accepted by the customer prior to recognizing revenue. Additionally,
certain of the Company's agreements provide for settlement through document-against-payment (D/P
method), whereby the Company presents shipping documents to its bank and the Company's bank
forwards the shipping documents along with a collection notice to the customer's bank, which then
sends the collection notice to the customer. The customer makes payment upon receiving the notice
and only after payment does the customer take possession of the products. A majority of the
Company's sales to domestic customers require the customers to prepay before delivery has occurred.
Such prepayments are recorded as advances from customers, in the Company's consolidated balance
sheet, until delivery has occurred.
The Company has distributor arrangements with certain parties for sales on their own account
or, through arrangements with the Company, to direct ship to specified customers. In either
arrangement the distributor pays the Company for products based on pre-arranged price lists which
are subject to periodic update. The payment terms with the distributors are either down payment
upon delivery to the warehouse or payment terms of up to 2 months if collateralized by bank letters
of credit. The Company also offers a one percent discount to certain distributors if payment is
made upon delivery to the warehouse. The agreements with the distributors contain the Company's
customary product warranties and contain no post shipment obligations nor any return or credit
provisions.
The Company recognizes revenues for systems integration at the time the integration project is
completed (contracts are typically one to two weeks in duration), primarily because the Company
does not have vendor specific objective evidence to allow for separating the various components of
the systems integration contracts into separate units of accounting.
In addition to evidence of contractual arrangements and delivery of products or services, as
discussed above, the Company only recognizes revenues when prices to the seller are fixed or
determinable, and collectibility is reasonably assured.
Revenues also include reimbursements of shipping and handling costs of products sold to
customers.
(m) Buy/sell arrangements
The Company has buy/sell arrangements with certain raw materials vendors wherein the Company
sells finished goods, comprised of either solar cells or solar modules, in exchange for the
acquisition of raw materials in the form of silicon wafers. These arrangements are with
counterparties in the same line of business as the Company and are executed as a means of securing
a consistent supply of silicon wafer raw materials. The exchanges of its finished goods inventory
items for raw material silicon wafers are recorded at fair value.
During the year ended December 31, 2005, the Company purchased $60,564,462 of raw materials
and sold $129,358,026 of finished goods under these buy/sell arrangements.
(n) Cost of revenue
Cost of revenue includes production and indirect costs, as well as shipping and handling costs
for products sold.
F-11
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(o) Research and development
Research and development costs are expensed when incurred.
(p) Advertising expenses
Advertising expenses are charged to the income statements in the period incurred. The Company
incurred advertising expenses amounting to $48,514, $129,660 and $456,586 for the years ended
December 31, 2003, 2004 and 2005, respectively.
(q) Warranty cost
The Company warrants its products for up to 25 years after sales have taken place. Due to
limited warranty claims to date, the Company accrues the estimated costs of warranties based on an
assessment of its competitors' accrual history while incorporating some estimates of failure rates
through its quality review staff. Actual warranty costs are accumulated and charged against the
accrued warranty liability. To the extent that actual warranty costs differ from the estimates,
the Company will prospectively revise its accrual rate.
(r) Government grants
Government grants are recognized when received and all the conditions for their receipt have
been met. Government grants are recognized as income in the period in which the related
expenditures are recorded. Capital grants for the acquisition of equipment are recorded as a
liability until earned and then offset against the related capital assets.
(s) Start-up costs
In accordance with Statement of Position No. 98-5, "Reporting on the costs of start-up
activities," the Company expenses all costs incurred in connection with start-up activities,
including preproduction costs associated with new manufacturing facilities and costs incurred with
the formation of the Company such as organization costs. Preproduction costs including the design,
formulation and testing of new products or process alternatives are included in research and
development expenses. Preproduction costs including facility and employee costs incurred in
connection with constructing new manufacturing plants are included in general and administrative
expenses.
(t) Foreign currency translation and comprehensive income
The functional currency of the Company is Renminbi ("RMB"). Transactions dominated in other
currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur.
Monetary assets and liabilities denominated in other currencies are translated into RMB at rates of
exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the income
statements.
The Company has chosen the U.S. dollar as its reporting currency. Accordingly assets and
liabilities are translated using exchange rates in effect at each year end and average exchange
rates are used for the income statements. Translation adjustments resulting from translation of
these financial statements are reflected as accumulated translation reserve in the shareholders'
equity.
Total comprehensive income is comprised of net income and foreign currency translation
adjustments and amounted to $925,818, $19,760,604 and $32,139,684 for the years ended December 31,
2003, 2004 and 2005, respectively.
(u) Foreign currency risk
The RMB is not a freely convertible currency. The PRC State Administration for Foreign
Exchange, under the authority of the People's Bank of China, controls the conversion of RMB into
foreign currencies. The value of the RMB is subject to changes in central government policies and
to international economic and political developments affecting supply and demand in the China
foreign exchange trading system market. The Company's aggregate amount of cash and cash equivalents
and restricted cash dominated in RMB amounted to $21,015,109 and $22,740,651 at December 31, 2004
and 2005, respectively.
F-12
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(v) Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist of principally of cash and cash equivalent and advances to suppliers.
The Company places its net proceeds from public offering in one high quality financial
institution in Hong Kong. With respects to advance to suppliers, such suppliers are primarily
suppliers of silicon wafers raw materials in the PRC. The Company performs ongoing credit
evaluations of its suppliers' financial conditions. The Company generally does not require
collateral or other security against advance to suppliers; however, it maintains reserve for
potential credit losses and such losses have historically been within management's expectations.
(w) Fair value of financial instruments
The carrying amounts of trade receivables, accounts payable and short-term borrowings
approximate their fair values due to the short-term maturity of these instruments.
The long-term bank borrowings approximate their fair value since the contract was recently
entered into and market interest rates have not fluctuated significantly since that date.
(x) Share-based compensation
The Company accounts for share-based awards to non-employees by recording a charge for the
services rendered by the non-employees using the Black-Scholes option pricing model. The Company
records a compensation charge for the excess of the fair value of the shares at the grant date or
any other measurement date over the amount an employee must pay to acquire the shares. The
compensation expense is recognized over the applicable service period, which is usually the vesting
period.
For the purpose of the foregoing pro forma calculation, had compensation costs for options granted
to employees under the Company's share option plan been determined based on fair value of the
options at the grant dates, the Company's pro forma income would have been:
Year ended December 31,
2003
2004
2005
Net income, as reported
$
925,348
$
19,756,675
$
30,628,484
Add: Employee stock compensation expense included in earnings
$
—
$
—
$
9,434,548
Deduct: Employee stock compensation expense determined
using the fair value method not included in earnings
$
—
$
—
$
17,306,876
Pro forma net income
$
925,348
$
19,756,675
$
22,756,156
Deemed dividend on Series A redeemable convertible preferred shares
$
—
$
—
$
2,406,000
Pro forma net income available to ordinary shareholders
$
925,348
$
19,756,675
$
20,350,156
Shares used in computation:
Basic
90,000,000
90,000,000
92,047,507
Diluted
90,000,000
90,000,000
116,825,138
Net income per share:
Basic, as reported
$
0.01
$
0.22
$
0.31
Basic — pro forma
$
0.01
$
0.22
$
0.22
Diluted, as reported
$
0.01
$
0.22
$
0.26
Diluted — pro forma
$
0.01
$
0.22
$
0.19
F-13
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(y) Income per share
Basic income per share is computed by dividing income attributable to holders of ordinary
shares by the weighted average number of ordinary shares outstanding during the year. Diluted
income per ordinary share reflects the potential dilution that could occur if securities or other
contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share
equivalents are excluded from the computation in loss periods as their effects would be
anti-dilutive.
The following table sets forth the computation of basic and diluted income per share for the
periods indicated:
Year ended December 31,
2003
2004
2005
Income available to ordinary shareholders
$
925,348
$
19,756,675
$
28,222,484
Deduct: Deemed dividend on Series A redeemable convertible preferred shares
$
—
$
—
$
2,406,000
Net earnings assuming dilution
$
925,348
$
19,756,675
$
30,628,484
Weighted average number of ordinary shares for the calculation of basic income
per share
90,000,000
90,000,000
92,047,507
Effect of dilutive potential ordinary shares:
Series A redeemable convertible preferred shares
—
—
21,465,079
Share options
—
—
3,312,552
Weighted average number of ordinary shares for the calculation of diluted income
per share
90,000,000
90,000,000
116,825,138
Basic income per share
$
0.01
$
0.22
$
0.31
Diluted income per share
$
0.01
$
0.22
$
0.26
(z) Recently issued accounting pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 123 (revised 2004) ("SFAS No. 123-R"). "Share-Based
Payment", which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No.
123-R supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". Generally, the
approach in SFAS No. 123-R is similar to the approach described in SFAS No. 123. However, SFAS No.
123-R requires all share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on the grant-date fair values. Pro forma disclosure
previously permitted under SFAS No. 123 is no longer an alternative. The new standard, as recently
amended, will be effective for the Company in the annual reporting period beginning after January
1, 2006. Under SFAS No. 123-R, the Company could elect the modified prospective or modified
retroactive option for transition on the adoption of this new standard. Under the modified
retroactive option, prior periods are adjusted on a basis consistent with the pro forma disclosures
previously required for those periods by SFAS No. 123. Under the modified prospective option,
compensation expense for all unvested stock options must be recognized on or after the required
effective date based on the grant-date fair value of those stock options. The unrecognized fair
value of share options issued prior to January 1, 2006 approximates $23,326,659 which will be
incurred by the Company through fiscal 2008. Prior to the adoption of SFAS No. 123-R, the Company
utilized the accounting method prescribed by APB Opinion No. 25 and adopted the disclosure
requirements of SFAS No. 148 as allowed by SFAS No. 123.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs — an amendment of ARB No. 43,
Chapter 4" ("SFAS No. 151"). SFAS No. 151 clarifies the accounting that requires abnormal amounts
of idle facility expenses, freight, handling costs, and spoilage costs to be recognized as
current-period charges. It also requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS No. 151 has been
effective for inventory costs incurred on or after July 1, 2005. The adoption of this standard did
not have a material effect on the Company's financial position or results of operations.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets — an
amendment of APB Opinion No. 29" ("SFAS No. 153"), which amends Accounting Principles Board Opinion
No. 29, "Accounting for Nonmonetary Transactions" to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. SFAS No. 153 is effective for nonmonetary
assets exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not
anticipate that the adoption of this statement will have a material effect on the Company's
financial position or results of operations.
F-14
Table of Contents
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES — continued
(z) Recently issued accounting pronouncements — continued
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS
No. 154") which replaces Accounting Principles Board Opinions No. 20 "Accounting Changes" and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion
No. 28." SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes
and error corrections. It establishes retrospective application, or the latest practicable date, as
the required method for reporting a change in accounting principle and the reporting of a
correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The Company does not anticipate that the
adoption of this statement will have a material effect on the Company's financial position or
results of operations.
In September 2005 the Emerging Issues Task Force (EITF) published Issue 04-13,
Accounting for
Purchases and Sales of Inventory with the Same Counterparty.
The Issue addresses the accounting and
disclosure requirements of accounting for purchases and sales of inventory with the same
counterparty. In certain situations, as discussed further in the Issue, generally accepted
accounting principles may require these types of transactions be carried at historical cost of
inventory as opposed to the inventory's fair value, and potentially to defer revenue recognition
primarily in situations wherein the transactions may not represent a completed revenue earnings
cycle. Although the Issue is applicable for arrangements entered into by entities for interim or
annual periods beginning after March 15, 2006, the Company has elected to early adopt the
disclosure provisions of the Issue which the Company believes are the only provisions currently
applicable to the Company.
In March 2005, the FASB issued FASB Interpretation No. ("FIN") 47, "Accounting for Conditional
Assets Retirement Obligations, an interpretation of SFAS No. 143". FIN 47 clarifies that an entity
is required to recognize a liability for legal obligation to perform an asset retirement activity
if the fair value can be reasonably estimated even though the timing and/or method of settlement
are conditional on a future event. FIN 47 is required to be adopted for annual reporting periods
ending after December 15, 2005. The adoption of this interpretation is not expected to have a
material impact on the Company's financial position, results of operations or cash flows.
3. ACQUISITIONS
During the year ended December 31, 2005, the Company made the following acquisitions:
(a)
In August 2005, the Company increased its existing ownership of Wuxi Shangneng, a
company engaged in the manufacture of PV products, from 50% to 100% by acquiring an
additional 50% equity interest for a cash consideration of $123,449; and
(b)
In July 2005, the Company entered into an equity interest transfer agreement to acquire
51% equity interest in Qinghai Suntech, a company engaged in the manufacture of PV
products, for a cash consideration of $538,145.
The acquisitions were recorded using the purchase method of accounting and, accordingly, the
acquired assets and liabilities were recorded at their fair values at the date of acquisition. The
purchase prices were allocated as follows:
Net tangible assets assumed
526,251
Goodwill
135,343
Total consideration
661,594
Cash flow information
Cash consideration paid
661,594
Less: cash acquired
(73,939
)
Business acquisitions, net of cash acquired
587,655
The results of these acquired entities have been included in the Company's consolidated
results from their respective acquisition dates. Pro forma results from these acquisitions would
not have been materially different from the amounts reported.
The only movement of goodwill was the goodwill arising from the acquisitions incurred during
the year ended December 31, 2005.
F-15
Table of Contents
4. INVENTORIES
Inventories consist of the following:
At December 31,
2004
2005
$
$
Raw materials
4,627,865
19,784,394
Work-in-process
657,232
1,831,388
Finished goods
12,187,332
18,812,033
17,472,429
40,427,815
5. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLE
As of December 31, 2004 and 2005, accounts receivable of $3,760,185 and $Nil, respectively,
were pledged to certain banks as collateral for the letter of credit facilities granted to the
Company.
The Company made provisions for doubtful debts of in the aggregate amount of $32,593, $85,415
and $82,065 during the years ended December 31, 2003, 2004 and 2005, respectively.
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
At December 31,
2004
2005
$
$
Cost
Buildings
80,620
6,668,498
Leasehold improvements
1,227,718
1,498,258
Plant and machinery
10,959,894
26,252,789
Furniture, fixtures and equipment
358,499
828,338
Motor vehicles
214,918
429,648
Construction in process
3,853,152
11,215,251
Total
16,694,801
46,892,782
Less: Accumulated depreciation
(3,483,455
)
(7,175,449
)
Property, plant and equipment, net
13,211,346
39,717,333
Depreciation expense was $1,022,479, $1,810,489 and $3,666,943 for the years ended December
31, 2003, 2004 and 2005, respectively.
The construction in process primarily represents the construction of a new plant that includes
several new production lines.
F-16
Table of Contents
7. INTANGIBLE ASSETS, NET
Amortized intangible assets, net consist of the following:
At December 31,
2004
2005
$
$
Cost
Technical know-how
1,600,116
1,641,051
Land use rights
1,385,988
2,061,398
Total
2,986,104
3,702,449
Less: Accumulated amortization
Technical know-how
(573,350
)
(751,921
)
Land use rights
—
(27,539
)
Total
(573,350
)
(779,460
)
Intangible assets, net
2,412,754
2,922,989
At inception, certain shareholders agreed to contribute approximately $6.4 million for an 80%
interest in Wuxi Suntech and the other shareholder agreed to contributed unpatented technical
know-how for a 20% interest. The implied fair value of the unpatented technical know-how was
approximately $1.6 million. The unpatented technical know-how was a contractual provision between
Dr. Shi and the remaining equity interest holders at the formation of Wuxi Suntech.
For each of the next five years, annual amortization expenses of the above technical know-how
and land use rights will be approximately $164,106 and $38,372, respectively.
8. INVESTMENTS IN AFFILIATES
During June 2004, the Company and four other parties formed a joint venture, Wuxi Shangneng.
The Company contributed $120,823 in cash to fund the initial investment in the venture. Due to its
50% voting interest in Wuxi Shangneng, the Company accounts for this investment using the equity
method of accounting. In 2004, the Company's equity in earnings/losses of this affiliate are
recognized in the income statements from the period Wuxi Shangneng began operations.
On August 25, 2005, Wuxi Suntech acquired the additional 50% interest in Wuxi Shangneng for
total consideration of $123,449. The Company has merged its business into Wuxi Suntech and is in
the process of liquidating Wuxi Shangneng.
During April 2005, the Company acquired a 25% equity interest in Jiangsu Huariyuan Electronics
Technology Co., Ltd. ("Jiangsu Huariyuan") for a purchase price of $905,837. Due to its 25% voting
interests in Huariyuan, the Company accounts for this investment using the equity method of
accounting. The Company's equity in earnings/losses of this affiliate are recognized in the income
statement.
F-17
Table of Contents
9. BANK BORROWINGS
At December 31,
2004
2005
$
$
Bank borrowings
34,441,687
55,910,408
Analysis as:
Short-term
34,441,687
49,714,808
Long-term, current portion
—
2,478,240
Subtotal
34,441,687
52,193,048
Long-term, non-current portion
—
3,717,360
Total
34,441,687
55,910,408
The short-term bank borrowings outstanding as of December 31, 2004 and 2005 bore an average
interest rate of 4.47% and 5.90% per annum, respectively. These loans are borrowed from various
financial institutions and represent the maximum amount of each facility. These loans does not
contain any financial covenants or restrictions. The borrowings have one year terms and expire at
various times throughout the year. These facilities contain no specific renewal terms but the
Company has traditionally negotiated renewal of certain of the facilities shortly before they
mature. The short-term bank borrowings of $1,933,184 and $991,301 as of December 31, 2004 and 2005
were guaranteed by an ex-shareholder. The remaining amounts were guaranteed by certain independent
financial institutions, in return for which the Company paid them service charges of $3,262,
$241,150 and $299,472, for the years ended December 31, 2003, 2004 and 2005, respectively, for the
provision of the guarantee.
The Company has a long-term credit facility ("Credit Facility") with Industrial and Commercial
Bank of China. The Credit Facility does not contain any financial covenants or restrictions. The
maximum borrowing amount under the Credit Facility is $6,178,950 (RMB50,000,000), of which
$2,471,587 (RMB20,000,000) was borrowed on March 31, 2005; and an additional $3,707,370
(RMB30,000,000) was borrowed on September 26, 2005. The debt does not require any collateral or
guarantee. The Credit Facility provides for a three-year term expiring on March 28, 2008 at an
interest rate of 5.76% per annum for the first drawing of $2,471,587 (RMB20,000,000) and 6.336% per
annum for the second drawing of $3,707,370 (RMB30,000,000) in the first year, and at market rate
for the subsequent years.
10. ACCRUED WARRANTY COSTS
The Company's accrued warranty costs are based on the Company's best estimates of product
failure rates and costs to repair. The movement of Company's accrued warranty costs is summarized
below:
At December 31,
2004
2005
$
$
Beginning balance
68,344
847,580
Warranty provision
779,236
1,813,458
Warranty costs incurred
—
(41,934
)
Ending balance
847,580
2,619,104
F-18
Table of Contents
11. REDEEMABLE CONVERTIBLE PREFERRED SHARES
In May 2005, the Company issued 34,667,052 Series A redeemable convertible preferred shares,
par value $0.01 per share (the "Series A Shares"), to a group of third party investors for gross
cash proceeds of $80,001,156, net of issuance costs of $1,057. The cash proceeds were used
primarily to purchase the equity interests of the previous shareholders with the remainder for
general corporate purposes.
Upon the completion of the Company's listing on NYSE (the "IPO"), all of the issued and
outstanding Series A redeemable convertible preferred Shares converted into ordinary shares.
The holder of Series A Shares could have redeemed, at any time after the earlier of (i) the
date that was thirty-seven months from the date of the issuance of the Series A shares and (ii)
such time as the holders of no less than two-thirds of the then outstanding preferred shares
required, upon fulfillment of certain conditions, that the Company redeemed all of the preferred
shares outstanding. In connection with the redemption of any Series A Shares, the Company would
have had to pay a redemption price equal to 115% of the original purchase price of the preferred
shares. The Company accrued the premium over the redemption period as a deemed dividend with a
debit to the retained earnings of $2,406,000 until the IPO.
12. ORDINARY SHARE
(a) On August 8, 2005, the Company issued 1 ordinary share for par value of $0.01 on
incorporation.
(b) On August 29, 2005, in connection with a legal reorganization, the Company issued
89,999,999 fully paid up shares of $0.01 each on a pro-rata basis to the shareholders of Power
Solar BVI that owned 100% of Wuxi Suntech in exchange for those interests.
(c) In December 2005, the Company offered 22,820,655 American Depositary Shares ("ADSs"),
representing 22,820,655 ordinary shares, at $15 each to the public, raising proceeds of
$320,172,029, net of issuance costs of $22,137,796 . The Company's ADSs are quoted on
the NYSE.
(d) Issued and outstanding Series A redeemable convertible preferred Shares converted into
34,667,052 ordinary shares on a one to one basis upon the completion of the Company's IPO.
13. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION
(a) China Contribution Plan
Full time employees of the Company in the PRC participate in a government-mandated
multi-employer defined contribution plan pursuant to which certain pension benefits, medical
care, unemployment insurance, employee housing fund and other welfare benefits are provided to
employees. PRC labor regulations require the Company to accrue for these benefits based on
certain percentage of the employees' salaries. The total contribution for such employee benefits
were $110,737, $204,866 and $492,053 for the years ended December 31, 2003, 2004 and 2005,
respectively.
(b) Statutory Reserves
Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the
Company in the PRC must make appropriations from after-tax profit to non-distributable reserve
funds. These reserve funds include one or more of the following: (1) a general reserve, (ii) an
enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative
limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as
determined under accounting principles generally accepted in the PRC at each year-end); the other
fund appropriations are at the subsidiaries' discretion. These reserve funds can only be used for
specific purposes of enterprise expansion and staff bonus and welfare and are not distributable
as cash dividends. No appropriation was made by the subsidiaries in 2003, 2004, and 2005.
F-19
Table of Contents
13. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION — continued
(c) Other
Pursuant to the board resolution in August 2005, retained earnings of $4,999,998 was
transferred and declared as the registered capital of a subsidiary of the Company. The
transferred retained earnings are therefore unavailable for distribution as a normal dividend to
the Company.
14. SHARE OPTIONS
In April 2005, the Company adopted a stock option scheme (the "Option Plan") which allows the
Company to offer a variety of incentive awards to employees, directors and consultants of the
Company. As of December 31, 2005, options to purchase not more than 13,503,991 ordinary shares are
authorized under the Option Plan. Under the terms of the Option Plan, options are generally granted
at prices not less than 100% of the fair market value of ordinary shares on the date of grant and
not less than $2.3077 per share. Each option granted should expire within 5 years from the date of
grant and generally vest over 3 years while certain options granted vest immediately. As of
December 31, 2005, options to purchase 10,809,383 ordinary shares were granted and outstanding. No
option was exercised during the year ended December 31, 2005.
Options to Employees
On September 5, 2005, the Company granted options to acquire 5,910,000 ordinary shares to
certain directors and employees. One-third of these options vested on December 31, 2005, one-third
of the options will vest on September 5, 2007 and 2008, respectively. These options were granted in
anticipation of services to be provided during the respective vesting periods. The exercise price
of these options is $6.922 per option. The ordinary shares that underlie the options that vest on
December 31, 2005 are restricted as to the later of (i) one year from the date of grant, or (ii)
180 days after the Company successfully completes an initial public offering. The difference
between the exercise price of the options and the fair market value of the Company's ordinary share
at the date of grant had been recorded as deferred compensation of approximately $22.2 million.
The compensation expense was to be amortized over the three year vesting period. During the year
ended December 31, 2005, compensation expense of approximately $9,434,548 was amortized as
compensation expenses.
Options to Non-employees
On May 6, 2005, the Company granted 455,000 share options to its external consultants in
exchange for reorganization advisory services, and 4,244,383 share options to certain individuals
(the "Contributors") who contributed capital to one of the Company's shareholders, Million Power, a
portion of which proceeds were ultimately loaned to the Company in order to effect the
reorganization (see note 17). The exercise price of these options is $2.3077 per option. The
options granted to the external consultants vest immediately while the options granted to the
contributors vest over a three year period. On September 5, 2005, the Company granted 200,000
options to certain consultants for services previously provided. One-third of these options vested
on December 31, 2005, one-third of the options will vest on September 5, 2007 and 2008,
respectively. These options were granted with an exercise price of $6.922 per option. The Company
recorded expense of approximately $7,240,386 for the year ended December 31, 2005 estimated using
the Black-Scholes option pricing model. Included in total compensation expenses, $5,652,952 is
recorded as finance cost for the fund provided by the contributors in order to effect the
shareholder loan; $212,357 is regarded as professional charges related to the reorganization, and
$1,375,077 for other consulting services provided to the Company.
The following assumptions were used in the Black-Scholes option pricing model:
Year ended December 31, 2005
Options to
Options to
Options to
employees
consultants
contributors
Average risk-free rate of return
4.460
%
4.264
%
4.160
%
Weighted average expected option life
3.35 years
1.47 years
3.50 years
Volatility rate
80
%
70
%
80
%
Dividend yield
0
%
0
%
0
%
F-20
Table of Contents
14. SHARE OPTIONS — continued
A summary of the option activity is as follows:
Weighted average
Number of options
exercise price
Options outstanding at January 1, 2005
—
—
Granted on May 6, 2005
4,699,383
$
2.3077
Granted on September 5, 2005
6,110,000
$
6.9220
Cancelled
—
—
Exercised
—
—
Options outstanding on December 31, 2005
10,809,383
$
4.9159
The weighted average fair value of options granted during the year ended December 31,
2005 was $4.4289.
The following table summarizes information with respect to share options outstanding on
December 31, 2005:
Options Outstanding
Options Exercisable
Weighted average
Number
remaining
Weighted average
Number
Weighted average
outstanding
contractual life
exercise price
exercisable
exercise price
Ordinary shares:
May 6, 2005
4,699,383
3.22 years
$
2.3077
455,000
$
2.3077
September 5, 2005
6,110,000
3.35 years
$
6.9220
—
—
10,809,383
The following table summarizes information regarding options issued within 12-months
prior to December 31, 2005:
Number of
Fair value of
Grant Date
Options Issued
ordinary shares
Exercise price
Intrinsic value
Type of valuation
May 6, 2005
4,699,383
$
2.3077
$
2.3077
—
*
September 5, 2005
6,110,000
$
10.6700
$
6.9220
$
3.748
*
Type of Valuation
*
The fair value was determined based on a contemporaneous valuation by a third party
valuation specialist.
15. OTHER INCOME (EXPENSES)
Year Ended December 31,
2003
2004
2005
$
$
$
Foreign currency exchange gain (loss), net
3,961
24,678
(883,541
)
Government grants
88,982
128,833
100,028
Others
151
13,461
25,268
93,094
166,972
(758,245
)
16. TAXES BENEFIT (EXPENSES)
The tax benefit (expenses) comprises:
Year Ended December 31,
2003
2004
2005
$
$
$
Current Tax
—
—
(4,398,058
)
Deferred Tax
300,730
611,447
645,379
300,730
611,447
(3,752,679
)
F-21
Table of Contents
16. TAXES BENEFIT (EXPENSES) — continued
Suntech Power is a tax exempted company incorporated in the Cayman Islands.
The major operating subsidiary, Wuxi Suntech, is governed by the Income Tax Law of PRC
Concerning Foreign Investment and Foreign Enterprises and various local income tax laws (the
"Income Tax Laws"). Pursuant to the PRC Income Tax Laws, foreign-invested manufacturing enterprises
are subject to income tax at a statutory rate of 33% (30% of state income tax plus 3% local income
tax) on PRC taxable income. Foreign-invested manufacturing enterprises are entitled to tax
exemption from the income tax for its first two profitable years of operation, after taking into
account any tax losses brought forward from prior years, and a 50% tax deduction for the succeeding
three years thereafter.
However, preferential tax treatment of Wuxi Suntech as "High or New Technology" company has
been agreed with the relevant tax authorities. On this basis, Wuxi Suntech is entitled to a
preferential tax rate of 15% for the two years ending December 31, 2006. Pursuant to the PRC Income
Tax Laws, the high or new technology company status needs to be reviewed and approved every two
years.
As a result, Wuxi Suntech was exempt from income tax for the two years ended December 31, 2004
and its applicable income tax rate is 7.5% for the two years ending December 31, 2006.
The principal components of the deferred income tax assets are as follows:
At December 31,
2004
2005
$
$
Deferred tax assets:
Accrued warranty costs
279,702
787,515
Depreciation of property, plant and equipment
325,444
553,683
Government grant
154,504
322,481
Pre-operating expense
14,902
9,170
Tax credit on acquisition of domestic equipment
194,949
—
Equity in loss of an affiliate
3,857
—
Total deferred tax assets
973,358
1,672,849
Analysis as:
Current
154,504
322,481
Non-current
818,854
1,350,368
973,358
1,672,849
Reconciliation between the provision for income tax computed by applying the PRC enterprise
income rate of 33% to income before income taxes and the actual provision for income taxes is as
follows:
Year Ended December 31,
2003
2004
2005
PRC Enterprise Income tax
33
%
33
%
33
%
Losses with no tax benefit
—
—
20
%
Other expenses not deductible for tax purpose
1
%
7
%
2
%
Tax exemption and tax relief granted to the Company (note)
(51
%)
(43
%)
(44
%)
Tax credit on acquisition of domestic equipment
(31
%)
—
—
(48
%)
(3
%)
11
%
Note:
The aggregate amount and per share effect of the tax holiday are as follows:
Year Ended December 31,
2003
2004
2005
The aggregate dollar effect (in thousands)
319
8,255
15,089
Per share
effect — basic
—
0.09
0.16
Per share
effect — diluted
—
0.09
0.13
F-22
Table of Contents
17. RELATED PARTY TRANSACTIONS AND BALANCES
Related party balances
The amounts due to related parties as of December 31, 2004 included trade payable to Wuxi
Shangneng and payroll payable to Dr. Shi, director, who has beneficial interest in the Company.
The amounts due to related parties as of December 31, 2005 included trade payable to Jiangsu
Huariyuan and other payable to Dr. Shi.
The amounts are unsecured, interest free and have no fixed repayment terms.
Related party transactions:
Other than as disclosed in notes 9 and 18 c), the Company has the following related party
transactions:
During the period from April 15, 2005, (the date on which Jiangsu Huariyuan became an
affiliate of the Company), to December 31, 2005, the Company purchased raw materials from Jiangsu
Huariyuan in the amount of $1,142,692.
During the years ended December 31, 2004 and 2005 (up to the date Wuxi Shangneng became a
subsidiary of the Company), the Company purchased raw materials from Wuxi Shangneng in amounts of
$27,085 and $38,311, respectively.
Financing was provided by a shareholder of Power Solar BVI who provided approximately $8.6
million that Power Solar BVI used as down payments to initiate its purchase of all of the equity
interests of the previous equity interest holders of Wuxi Suntech. The financing agreement was
entered into on January 6, 2005 among Power Solar BVI and its two shareholders at the time, Dr.
Shi, who owned 31.389% of Wuxi Suntech, and Million Power. Pursuant to the financing agreement,
unless Power Solar BVI was able, within 180 days of the financing agreement, to complete its
purchases of the 68.611% equity interests of Wuxi Suntech that were not held by Dr. Shi, the $8.6
million loan would be repayable to Million Power by July 5, 2005, 180 days from the date of the
financial agreement, and the loan would have borne the then-applicable interest rate during its
term. If by July 5, 2005, Power Solar BVI was able to complete its purchases of 68.611% equity
interests of Wuxi Suntech that was not held by Dr. Shi, the loan would be forgiven. The loan
agreement also required Power Solar BVI to obtain the remaining financing necessary to consummate
the acquisition of the remaining equity interests of Wuxi Suntech. Such requirement was fulfilled
through Power Solar BVI's issuance of $80 million Series A redeemable convertible preferred shares
on May 6, 2005.
18. COMMITMENTS AND CONTINGENCIES
a) Operating lease commitments
The Company has operating lease agreements principally for its office properties in the PRC.
Such leases have remaining terms ranging from 12 to 24 months and are renewable upon negotiation.
Rental expense was $69,726, $101,273 and $170,323 for the years ended December 31, 2003, 2004 and
2005, respectively.
Future minimum lease payments under non-cancellable operating lease agreements at December 31,
2005 were as follows:
Year ending December 31
$
2006
233,390
2007
162,898
Total
396,288
F-23
Table of Contents
18. COMMITMENTS AND CONTINGENCIES — continued
b) Commitments
As of December 31, 2004 and 2005, commitments outstanding for the purchase of property, plant
and equipment approximated $11,077,842 and $15,869,310, respectively. The Company has entered into
several purchase agreements with certain suppliers whereby the Company is committed to purchase a
minimum amount of raw materials to be used in the manufacture of its products. As of December 31,
2004 and 2005, future minimum purchases remaining under the agreements approximated $3,863,627 and
$4,022,930, respectively.
c) Contingencies
As of December 31, 2005, the Company was contingently liable as guarantor with respect to
$988,631 borrowing of an ex-shareholder, Wuxi Shanhe Group. The underlying loan was matured and
repaid in January 2006. The Company guarantees the entire principal amount, any accrued interest,
and any penalties to be incurred by the borrower in the event of any default. The Company has no
recourse for recovery from third parties as a result of any payments under the guarantees. The
Company has provided guarantees to Wuxi Shanhe Group since January 2004. The carrying value of the
guarantees is Nil, as the fair value of the guarantees was immaterial.
d) Long-term obligation
On October 14, 2005, the Company entered into a 10-year supply agreement with a supplier,
under which the Company was absolutely and irrevocably required to accept and pay for the
contracted volume each year over a 10-year period starting from January 1, 2006 at agreed price
adjusted for cost structure changes.
In connection with this transaction, the Company is obligated to advance $3.64 million to the
supplier which will be applied to the purchase commitment pro rata over the term of the contract.
The advance payment is included in advance to suppliers until utilized.
The following is a schedule, by year, of future minimum obligation under this 10-year supply
agreement as of December 31, 2005 (in thousands):
Year ending December 31
$
2006
2,814
2007
2,814
2008
9,236
2009
9,236
2010
9,236
Thereafter
46,180
Total
79,516
F-24
Table of Contents
19. SEGMENT INFORMATION
The Company operates in a single business segment that includes the design, development, and
manufacture of PV products. The following table summarizes the Company's net revenues generated
from different geographic locations:
Year Ended December 31,
2003
2004
2005
$
$
$
Europe:
- Germany
2,616,465
61,527,847
101,590,474
- Others
819,831
14,691,607
59,696,784
Europe Total
3,436,296
76,219,454
161,287,258
China
6,449,691
6,704,863
56,399,958
South Africa
3,452,520
1,345,065
488,374
Others
549,804
1,018,155
7,824,560
Total net revenues
13,888,311
85,287,537
226,000,150
All the identifiable assets of the Company are located in the PRC.
20. MAJOR CUSTOMERS
Details of the customers accounting for 10% or more of total net sales are as follows:
Year Ended December 31,
2003
2004
2005
$
$
$
Company A
3,452,520
*
—
Company B
1,529,353
*
*
Company C
*
17,465,180
*
Company D
—
20,083,254
*
Company E
—
9,969,044
*
Company F
—
—
72,443,049
*
Less than 10%
The accounts receivable from the 2 customers with the largest receivable balances represents
62% and 24% of the balance of the account at December 31, 2004 and 2005, respectively.
F-25