No. 3055 Middle Fuxing Road

Baoding 071051, People’s Republic of China

(86 312) 3100-500

(Address, including zip code, and telephone number, including area code, of

registrant’s principal executive offices)

 

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering.

 

 

 

	•	government subsidies and economic incentives;
	•	advances in technologies making solar power more cost-efficient;
	•	rising demand for and increasing costs of fossil energy resources;
	•	increasing environmental concerns over conventional energy; and
	•	narrowing cost differentials between solar and conventional energy sources.

	•	continuing reliance on government subsidies and economic incentives;
	•	need for further cost-competitiveness;
	•	raw materials supply shortage and the increasing costs of polysilicon; and
	•	aesthetic concern.

	•	vertically integrated business model;
	•	high-quality products and growing brand recognition;
	•	established customer and supplier relationships;
	•	cost-effective and efficient manufacturing process;
	•	steadily improving research and development capability; and
	•	experienced management team.

	•	expand global reach for our products;
	•	expand PV system sales to overseas markets;
	•	increase production capacity;
	•	secure and strengthen stable and long-term relationships with polysilicon suppliers;
	•	achieve technological advances through dedicated and continuous research and development efforts; and
	•	expand market share in China.

	•	risks associated with our ability to obtain sufficient quantities of quality silicon raw materials in a timely manner;
	•	risks associated with the increasing price of polysilicon and its adverse effect on our profitability;
	•	risks associated with the potential reduction in or discontinuation of government subsidies and economic incentives for solar energy applications which could reduce demand for our products and, in turn, our revenues;
	•	uncertainties associated with responding effectively to competition in the PV modules and PV systems markets as well as from conventional energy and other renewable energy sources, including other solar energy systems;
	•	risks associated with our ability to expand our operations and manage such expansion effectively;
	•	risks associated with our ability to successfully implement our overseas expansion;
	•	risks associated with our ability to improve manufacturing efficiency or yield commercially viable new products; and
	•	uncertainties associated with our ability to establish and maintain an effective internal control system and procedures.

	•	Yingli Power Holding Company Ltd., or Yingli Power, became our controlling shareholder, holding 59.58% of our issued and outstanding share capital on an as-converted, fully diluted basis immediately prior to our initial public offering;
	•	on September 5, 2006, Yingli Group, an entity controlled by Mr. Liansheng Miao, our chairperson and chief executive officer, who also controls our controlling shareholder, Yingli Power, transferred to us its 51% controlling equity interest in Tianwei Yingli. As a result of such transfer, Tianwei Yingli became our subsidiary. For financial statements reporting purposes, Tianwei Yingli is deemed to be our predecessor;
	•	Tianwei Yingli became a Sino-foreign equity joint venture enterprise established under PRC law and subject to certain PRC laws and regulations as described in “PRC Government Regulations — Equity Joint Ventures”;
	•	certain investors became holders of our Series A preferred shares, Series B preferred shares, warrants to purchase our ordinary shares and mandatory convertible bonds convertible into our ordinary shares, which represented on an aggregate basis 40.42% of our issued and outstanding share capital on an as-converted, fully diluted basis immediately prior to our initial public offering;
	•	our equity interest in Tianwei Yingli increased to 62.13% in December 2006 and further increased to 70.11% in June 2007 upon the completion of relevant PRC registration procedures for the additional equity contribution into Tianwei Yingli which was funded by the

	•	On June 13, 2007, we completed our initial public offering of our ADSs and listed our ADSs on the New York Stock Exchange. Upon completion of our initial public offering, we sold 26,550,000 ordinary shares in the form of ADSs, raising US$274,527,000 in proceeds, before expenses to us, and Yingli Power sold 2,450,000 ordinary shares in the form of ADSs.
	•	Upon our initial public offering, all of our Series A and Series B preferred shares were converted into our ordinary shares on a one-for-one basis. Upon the exercise of the underwriters’ option to purchase additional ADSs, certain of our Series A and Series B shareholders sold 500,000 ordinary shares in the form of ADSs. As a result of the completion of our initial public offering, our Series A and Series B shareholders and other shareholders in the aggregate own 31.00% of our issued and outstanding share capital immediately prior to this offering.

(1)		The family trust of Mr. Liansheng Miao, our chairperson and chief executive officer, owns all of the issued and outstanding share capital of Yingli Power. Mr. Miao is also vice chairperson and chief executive officer of Tianwei Yingli. The principal business of Yingli Power is holding of investment securities in Yingli Green Energy. Mr. Miao beneficially owns 100% equity interest in Yingli Group, which transferred its controlling equity interest in Tianwei Yingli to us as part of the restructuring. See “— Restructuring”.
(2)		Indicates jurisdiction of incorporation.
(3)		Includes Inspiration Partners Limited, Baytree Investments (Mauritius) Pte Ltd., an affiliate of Temasek Holdings Pte Ltd., and a number of other financing investors who were holders of our Series A and Series B preferred shares or holders of the mandatory exchangeable notes issued by Yingli Power prior to our initial public offering. See “— Private Equity Investments and Other Financings Following the Restructuring” and “Principal and Selling Shareholders”.
(4)		The principal business of Tianwei Baobian is the manufacture of large electricity transformers. The common shares of Tianwei Baobian are listed on the Shanghai Stock Exchange. Tianwei Baobian is controlled and 51.1% owned by Baoding Tianwei Group Co., Ltd., or Tianwei Group, a wholly state-owned limited liability company established in the PRC, which is in turn controlled by the State-owned Assets Supervision and Administration Commission of the Baoding Municipal Government in Hebei Province of the PRC, or Baoding SASAC. Baoding SASAC has entered into an agreement to transfer its equity interest in Tianwei Group to China South Industries Group Corporation, or China South, subject to government approvals.

(5)		Indicates the percentage as of the date of this prospectus. Pursuant to the latest amendment to our joint venture contract with Tianwei Baobian and upon obtaining requisite approval by relevant PRC authority, we expect to make an additional equity contribution into Tianwei Yingli, which would increase our equity interest to 74.01%, with Tianwei Baobian holding the remaining 25.99% of equity interest in Tianwei Yingli.
(6)		The principal business of Yingli International is the sale and marketing of PV products and relevant accessories and investments in renewable energy projects.
(7)		The principal business of Tianwei Yingli is the design, manufacture and sale of PV modules and the design, assembly, sale and installation of PV systems. See “Business — Overview”.
(8)		The principal business of Yingli China is the research, manufacture, sale and installation of renewable energy products.
(9)		The principal business of Chengdu Yingli is sale and installation of PV systems.
(10)		The principal business of Tibetan Yingli is assembly of PV modules and sale and installation of PV systems. The remaining 50% equity interest of Tibetan Yingli is owned, as to 30%, by Weiping Yu, vice chairperson of Tibetan Yingli and, as to the other 20%, by Tibetan Energy Demonstration Center, an entity wholly owned by the Tibetan Bureau of Technology, a Tibetan government agency. Tibetan Yingli was initially established as a joint venture enterprise with the Tibetan Bureau of Technology, through the Tibetan Energy Demonstration Center, in order to comply with a mandate of the Tibetan government to foster regulated competition in its solar energy industry. Neither Mr. Yu nor Tibetan Energy Demonstration Center is otherwise affiliated with us.
(11)		The principal business of Dongfa Tianying is the manufacture and sale of tempered glass and related accessories.
(12)		The principal business of Tibet Keguang is the assembly of PV modules.
(13)		The principal business of Yingli Europe is the sale and marketing of PV products and relevant accessories in Europe.

	•	“€” and “Euro” are to the legal currency of the member states of the European Union that adopted such currency as their single currency in accordance with the Treaty Establishing the European Community (signed in Rome on March 25, 1957), as amended by the Treaty on European Union (signed in Maastricht on February 7, 1992);
	•	“$”, “US$” and “U.S. dollars” are to the legal currency of the United States;
	•	“China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this prospectus, Taiwan and the special administrative regions of Hong Kong and Macau; and
	•	“RMB” and “Renminbi” are to the legal currency of the PRC.

		We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs.
		To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled “Description of American Depositary Shares”. We also encourage you to read the deposit agreement, which is an exhibit to the registration statement that includes this prospectus.
Use of proceeds		We estimate that we will receive net proceeds of approximately US$      million from this offering, assuming a public offering price of US$      per ADS based on the last trading price of our ADSs on November   , 2007 and after deducting the estimated underwriting discount and estimated offering expenses payable by us. If the underwriters’ over-allotment option is exercised in full, we estimate that the net proceeds we will received from this offering will be approximately US$     million.
		We intend to use our net proceeds from this offering for the following purposes:
		• approximately US$60 million to make an equity contribution to our newly formed subsidiary, Yingli China, in connection with our capacity expansion plan; and
		• the remaining amount for other general corporate purposes.
		See “Use of Proceeds” for additional information.
		We will not receive any of the proceeds from the sale of the ADSs by the selling shareholders
Risk factors		See “Risk Factors” and other information included in this prospectus for a discussion of the risks you should carefully consider before deciding to invest in our ADSs.
New York Stock Exchange trading symbol		“YGE”
Depositary		JPMorgan Chase Bank, N.A.
Lock-up		We, the selling shareholders and our directors and executive officers have agreed with the underwriters not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 90 days after the date of this prospectus. See “Underwriting”.

															Yingli												Yingli
															Green												Green
		Predecessor													Energy				Combined								Energy				Combined				Yingli Green Energy
										For the					For the
										Period					Period												For the
										From					from												Period				For the				For the
										January 1,					August 7,												August 7,				Nine-Month				Nine-Month
		For the								2006					2006												2006				Period				Period
		Year Ended								through					through				For the								through				Ended				Ended
		December 31,								September 4,					December 31,				Year Ended December 31,								September 30,				September 30,				September 30,
		2004				2005				2006					2006				2006								2006				2006				2007
		(In thousands													(In thousands				(In thousands				(In thousands				(In thousands				(In				(In				(In
		of RMB)													of RMB,				of RMB)				of US$)				of RMB,				thousands				thousands				thousands
															except for												except				of RMB)				of RMB, except				of US$, except
															per share												for per								for per				for per
															and per												share								share				share
															ADS data)												and per								and per				and per
																											ADS data)								ADS data)				ADS data)
Consolidated Statement of Income Data
Net revenues			120,483				361,794				883,988					754,793				1,638,781				218,714				212,167				1,096,155				2,606,167				347,823
Gross profit			25,180				108,190				272,352					179,946				452,298				60,364				55,044				327,396				597,253				79,710
Operating expenses			11,436				24,515				37,721					47,658				85,379				11,395				3,734				41,455				184,661				24,645
Income from operations			13,744				83,675				234,631					132,288				366,919				48,969				51,310				285,941				412,592				55,065
Interest expense, (net)			(6,324	)			(5,003	)			(21,923	)				(25,201	)			(47,124	)			(6,289	)			(4,942	)			(26,865	)			(34,387	)			(4,589	)
Income tax (expense) benefit			(1,221	)			(12,736	)			(22,546	)				(22,968	)			(45,514	)			(6,074	)			(7,001	)			(29,547	)			2,343				312
Income before minority interest			6,013				65,918				186,147					75,302				261,449				34,893				38,192				224,339				376,384				50,233
Minority interest			76				36				76					(45,285	)			—	(2)			—	(2)			(19,100	)			—	(2)			(125,752	)			(16,783	)
Net income			6,089				65,954				186,223					30,017				—	(2)			—	(2)			19,092				—	(2)			250,632				33,450
Net income (loss) attributable to ordinary shareholders																23,048				—	(2)			—	(2)			19,092				—	(2)			197,481				26,356
Net income (loss) attributable per ordinary share — basis (1)(5)																0.36				—	(2)			—	(2)			0.36				—	(2)			1.85				0.25
Net income (loss) attributable per ordinary share — diluted (1)(5)																0.36				—	(2)			—	(2)			0.36				—	(2)			1.77				0.24
Net income (loss) attributable per ADS — basic (1)(5)																0.36				—	(2)			—	(2)			0.36				—	(2)			1.85				0.25
Net income (loss) attributable per ADS — diluted (1)(5)																0.36				—	(2)			—	(2)			0.36				—	(2)			1.77				0.24

															Yingli								Yingli
															Green								Green
		Predecessor													Energy				Combined				Energy				Combined				Yingli Green Energy
										For the					For the								For the
										Period					Period								Period
										from					from								from				For the				For the
		For the								January 1,					August 7,								August 7,				Nine-Month				Nine-Month
		Year								2006					2006								2006				Period				Period
		Ended								through					through				For the				through				Ended				Ended
		December 31,								September 4,					December 31,				Year Ended December 31,				September 30,				September 30,				September 30,
		2004				2005				2006					2006				2006				2006				2006				2007
		(In percentage)
Other Consolidated Financial Data
Gross profit margin			20.9	%			29.9	%			30.8	%				23.8	%			27.6	%			25.9	%			29.9	%			22.9	%
Operating profit margin			11.4	%			23.1	%			26.5	%				17.5	%			22.4	%			24.2	%			26.1	%			15.8	%
Net profit margin			5.1	%			18.2	%			21.1	%				4.0	%			—	(2)			9.0	%			—	(2)			9.6	%

 

		Predecessor
										As of					Yingli Green Energy
		As of December 31,								September 4,					As of December 31,								As of September 30,
		2004				2005				2006					2006								2007
		(In thousands													(In thousands				(In thousands				(In thousands				(In thousands
		of RMB)													of RMB)				of US$)				of RMB)				of US$)
Consolidated Balance Sheet Data
Total current assets			62,437				335,372				1,272,347					1,725,885				230,339				3,811,038				508,627
Total assets			204,076				704,775				1,787,535					2,813,461				375,489				6,010,799				802,210
Total current liabilities			132,570				566,471				1,473,396					668,241				89,184				1,432,026				191,120
Mandatory redeemable bonds payable to Yingli Power			—				—				—					293,110				39,119				—				—
Mandatory convertible bonds payable to Yingli Power			—				—				—					362,530				48,384				—				—
Total liabilities			132,836				567,617				1,474,696					1,339,878				178,822				1,466,346				195,701
Minority interest			606				569				983					387,716				51,745				687,939				91,813
Series A and B preferred shares			—				—				—					1,017,337				135,776				—				—
Total owners’ / shareholders’ equity			70,634				136,589				311,856					68,530				9,146				3,856,514				514,696

 

														For the
														Nine-Month
		For the Year Ended												period Ended
		December 31,												September 30,
		2004				2005				2006				2007
Consolidated Operating Data
PV modules sold (in megawatts)(3)			4.7				11.9				51.3				91.6
Average selling price of PV modules (per watt in US$)(4)			2.83				3.49				3.82				3.77
Notes:

 

(1)		Tianwei Yingli, our predecessor, is not a share-based company and had no outstanding shares for the periods presented, and therefore, we have not presented earnings per share for Tianwei Yingli.
(2)		This line item for the combined period is not presented because it is not comparable to the item that would have been in this period if Yingli Group had transferred its 51% equity interest in Tianwei Yingli to us on January 1, 2006 because the minority interest for the periods from August 7, 2006 through September 30, December 31, 2006 and September 30, 2007, which reflects the ownership of Tianwei Yingli not held by us, is not comparable or relevant to the results of operations of our predecessor.
(3)		PV modules sold, for a given period, represents the total PV modules, as measured in megawatts, delivered to customers under the effective supply contracts during such period.

(4)		We compute the average selling price of PV modules per watt for a given period as the total sales of PV modules divided by the total watts of the PV modules sold during such period, and translated into U.S. dollars at the noon buying rate at the end of such period as certified by the United States Federal Reserve Board.
(5)		Commencing January 1, 2007, our primary operating subsidiary, Tianwei Yingli, was entitled to certain exemptions from income tax. These income tax exemptions had the effect of increasing our net income by RMB 69.3 million (US$9.2 million) and increasing our net income attributable to ordinary shareholders on a basic per share basis by RMB 0.79 (US$0.11) and on a dilutive per share basis by RMB 0.76 (US$0.10) for the nine-month period ended September 30, 2007. Prior to this period there was no tax exemption in place.

 

RISK FACTORS

 

An investment in our ADSs involves significant risks. You should carefully consider the risks described below and the other information in this prospectus, including the consolidated financial statements of Yingli Green Energy and the consolidated financial statements of its predecessor, Tianwei Yingli, and related notes included elsewhere in the prospectus, before you decide to buy our ADSs. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially harmed, the trading price of our ADSs could decline and you could lose all or part of your investment.

 

Risks Related to Us and the PV Industry

 

We are currently experiencing and may continue to experience an industry-wide shortage of polysilicon. Our failure to obtain sufficient quantities of polysilicon in a timely manner could disrupt our operations, prevent us from operating at full capacity or limit our ability to expand as planned, which will reduce, and limit the growth of, our manufacturing output and revenue.

 

Polysilicon is the most important raw material used in the production of our PV products. To maintain competitive manufacturing operations, we depend on timely delivery by our suppliers of polysilicon in sufficient quantities. The global supply of polysilicon is controlled by a limited number of producers, and there is currently an industry-wide shortage of polysilicon. The current shortage of polysilicon is the result of a combination of factors, including a significant increase in demand for polysilicon due to the rapid growth of the PV industry, the significant lead time required for building additional capacity for polysilicon production and significant competing demand for polysilicon from the semiconductor industry.

 

Partly as a result of the industry-wide shortage, we have from time to time faced the prospect of a shortage of polysilicon and late or failed delivery of polysilicon from suppliers. We may experience actual shortage of polysilicon or late or failed delivery in the future for the following reasons, among others. First, the terms of our polysilicon contracts with, or purchase orders to, our suppliers may be altered or cancelled by the suppliers with limited or no penalty to them, in which case we may not be able to recover damages fully or at all. Second, we generally do not have a history of long-term relationships with polysilicon suppliers who may be able to meet our polysilicon needs consistently or on an emergency basis. Third, compared to us, many of our competitors who also purchase polysilicon from our suppliers have had longer and stronger relationships with and greater buying power and bargaining leverage over our suppliers.

 

If we fail to obtain delivery of polysilicon in amounts and according to time schedules as agreed with the suppliers, or at all, we may be forced to reduce production or secure alternative sources of polysilicon in the spot market, which may not provide polysilicon in amounts required by us or at comparable or affordable prices, or at all. Our failure to obtain the required amounts of polysilicon on time and at affordable prices can seriously hamper our ability to meet our contractual obligations to deliver PV products to our customers. Any failure by us to meet such obligations could have a material adverse effect on our reputation, retention of customers, market share, business and results of operations and may subject us to claims from our customers and other disputes. In addition, our failure to obtain sufficient polysilicon will result in underutilization of our existing and new production facilities and an increase of our marginal production cost, and may prevent us from implementing capacity expansion as currently planned. Any of the above events could have a material adverse effect on our growth, profitability and results of operations.

 

The price of polysilicon may continue to rise and we may not be able to pass on the increase in raw material costs to our customers, which may reduce our profitability.

 

The industry-wide shortage of polysilicon has resulted in a significant increase in polysilicon prices. Our average purchase price of polysilicon per kilogram has increased by 106.5% in 2005 compared to 2004, 185.5% in 2006 compared to 2005, 45.2% in the nine-month period ended

September 30, 2007 compared to the full year in 2006 and by 80.9% in the nine-month period ended September 30, 2007 compared to the nine-month period ended September 30, 2006. We believe the average price of polysilicon will remain high in the near term compared to its historical levels. The increasing price of polysilicon has largely contributed to the increase in our production costs for PV modules in the past three years and in the nine-month period ended September 30, 2007 and may continue to have the same effect in the future, notwithstanding our continuing efforts to use polysilicon more efficiently.

 

Despite the rise in the price of polysilicon, PV module manufacturers worldwide are expanding their production capacities in response to the growing popularity worldwide of PV products. We believe that such capacity expansion, in addition to a decline in government subsidies to promote solar energy consumption in certain countries, will cause a gradual decline in the price of PV modules, which may more than offset any cost savings from technological improvements that lead to a more efficient use of polysilicon. In addition, in case of a general decline in the price of PV modules, we may not be able to pass to our customers our increased production costs resulting from, among others, the increased costs of polysilicon. Any significant decline of the price for PV modules, together with the rising production costs for PV modules, would materially and adversely affect our profitability and results of operations.

 

A significant reduction in or discontinuation of government subsidies and economic incentives may have a material adverse effect on our results of operations.

 

Demand for our products depends substantially on government incentives aimed to promote greater use of solar power. In many countries in which we are currently, or intend to become, active, the PV markets, particularly the market of on-grid PV systems, would not be commercially viable without government incentives. This is because the cost of generating electricity from solar power currently exceeds, and we believe will continue to exceed for the foreseeable future, the costs of generating electricity from conventional or non-solar renewable energy sources.

 

The scope of the government incentives for solar power depends, to a large extent, on political and policy developments in a given country related to environmental concerns, which could lead to a significant reduction in or a discontinuation of the support for renewable energies in such country. For example, in Germany, the feed-in tariffs, which require grid system operators to purchase electricity from renewable energy sources at fixed rates, are subject to scheduled reviews by the end of 2007 under the Renewable Energies Act. Utility companies and grid operators burdened by the minimum feed-in tariffs under the Renewable Energies Act in Germany or by comparable regulations in other countries may lobby for a reduction in or cancellation of such tariffs. In addition, in certain countries, including countries to which we export PV products, government financial support of PV products has been, and may continue to be, challenged as being unconstitutional or otherwise unlawful. A significant reduction in the scope or discontinuation of government incentive programs, such as the Renewable Energies Act, would have a materially adverse effect on the demand for our PV modules as well as our results of operations.

 

Our dependence on a limited number of suppliers for a substantial majority of polysilicon could prevent us from delivering our products in a timely manner to our customers in the required quantities, which could result in order cancellations, decreased revenue and loss of market share.

 

In 2006 and the nine-month period ended September 30, 2007, our five largest suppliers supplied in the aggregate approximately 83% and 79%, respectively, of our total polysilicon purchases. If we fail to develop or maintain our relationships with these or our other suppliers, we may be unable to manufacture our products, our products may only be available at a higher cost or after a long delay, or we could be prevented from delivering our products to our customers in the required quantities, at competitive prices and on acceptable terms of delivery. Problems of this kind could cause us to experience order cancellations, decreased revenue and loss of market share. In general,

the failure of a supplier to supply materials and components that meet our quality, quantity and cost requirements in a timely manner due to lack of supplies or other reasons could impair our ability to manufacture our products or could increase our costs, particularly if we are unable to obtain these materials and components from alternative sources in a timely manner or on commercially reasonable terms. Some of our suppliers have a limited operating history and limited financial resources, and the contracts we entered into with these suppliers do not clearly provide for remedies to us in the event any of these suppliers is not able to, or otherwise does not, deliver, in a timely manner or at all, any materials it is contractually obligated to deliver. Any disruption in the supply of polysilicon to us may adversely affect our business, financial condition and results of operations.

 

In addition, due to a shortage of raw materials for the production of PV modules, increased market demand for polysilicon raw materials, a failure by some polysilicon suppliers to achieve expected production volumes and other factors during the nine-month period ended September 30, 2007, a few of our polysilicon suppliers failed to fully perform on their polysilicon supply contractual commitments to us, and we consequently did not receive part of the contractually agreed quantities of polysilicon raw materials from these suppliers which represented approximately 8.4% of the total committed quantities polysilicon supplies under contracts entered into by the Company during the nine-month period ended September 30, 2007. We subsequently cancelled or renegotiated these polysilicon supply contracts. While we in each case were able to replace such expected deliveries through purchases of polysilicon from the spot market and new supply contracts, we cannot assure you that any future failure of our suppliers to deliver agreed quantities of polysilicon could be substantially replaced in a timely manner or at all through spot market purchases or new supply contracts or that the price of such purchases or terms of such contracts will be favorable to us.

 

We depend, and expect to continue to depend, on a limited number of customers for a high percentage of our revenues. As a result, the loss of, or a significant reduction in orders from, any of these customers would significantly reduce our revenues and harm our results of operations. In addition, a significant portion of our outstanding account receivable is derived from sales to a limited number of customers. Failure of any of these customers to meet their payment obligations would materially and adversely affect our financial position, liquidity and results of operations.

 

We currently expect that our results of operations will, for the foreseeable future, continue to depend on the sale of our PV modules to a relatively small number of customers until we become successful in significantly expanding our customer base or diversifying product offerings. In 2005, 2006 and for the nine-month period ended September 30, 2007, sales to our customers that individually exceeded 10% of our net revenues accounted for approximately 38.7%, 38.9% and 50.7%, respectively, of our net revenues. Our relationships with such key customers have been developed over a short period of time and are generally in their early stages. We cannot assure you that these customers will continue to generate significant revenues for us or that we will be able to maintain these customer relationships. In addition, our business is affected by competition in the market for the products that many of our major customers sell, and any decline in the businesses of our customers could reduce the purchase of our products by these customers. The loss of sales to any of these customers could also have a material adverse effect on our business, prospects and results of operations.

 

In addition, a significant portion of our outstanding accounts receivable is derived from sales to a limited number of customers. As of December 31, 2006 and September 30, 2007, our top five customers in terms of outstanding accounts receivable accounted for approximately 85.4% and 61.8%, respectively, of our total outstanding accounts receivable. We are exposed to the credit risk of these customers, some of which are new customers with whom we have not had extensive business dealings historically. The failure of any of these customers to meet their payment obligations would materially and adversely affect our financial position, liquidity and results of operations.

We face intense competition in the PV modules and PV system markets and our PV products compete with different solar energy systems as well as other renewable energy sources in the alternative energy market. If we fail to adapt to changing market conditions and to compete successfully with existing or new competitors, our business prospects and results of operations would be materially and adversely affected.

 

The PV market is intensely competitive and rapidly evolving. The number of PV product manufacturers is rapidly increasing due to the growth of actual and forecast demand for PV products and the relatively low barriers to entry. If we fail to attract and retain customers in our target markets for our current and future core products, namely PV modules and PV systems, we will be unable to increase our revenues and market share.

 

Since 2004, a substantial majority of our revenues have been derived from overseas markets, particularly Germany, and increasingly Spain, Italy and the United States, and we expect these trends to continue. A substantial portion of our revenues is also derived from China. In these markets, we often compete with local and international producers of PV products that are substantially larger than us, including the solar energy divisions of large conglomerates such as BP Solar and Sharp Corporation, PV module manufacturers such as Sunpower Corp. and Suntech Power Holdings Co., Ltd., and integrated PV product manufacturers such as SolarWorld AG, Renewable Energy Corporation and Trina Solar Limited.

 

We may also face competition from new entrants to the PV market, including those that offer more advanced technological solutions or that have greater financial resources, such as semiconductor manufacturers, several of which have announced their intention to start production of PV cells and PV modules. A significant number of our competitors are developing or currently producing products based on the more advanced PV technologies, including thin film solar module, amorphous silicon, string ribbon and nano technologies, which may eventually offer cost advantages over the crystalline polysilicon technologies currently used by us. A widespread adoption of any of these technologies could result in a rapid decline in our position in the renewable energy market and our revenues if we fail to adopt such technologies. In addition, like us, some of our competitors have become, or are becoming, vertically integrated in the PV industry value chain, from silicon ingot manufacturing to PV system sales and installation. This could further erode our competitive advantage. Furthermore, the entire PV industry also faces competition from conventional energy and non-solar renewable energy providers.

 

Many of our existing and potential competitors have substantially greater financial, technical, manufacturing and other resources than we do. The greater size of many of our competitors provides them with cost advantages as a result of their economies of scale and their ability to obtain volume discounts and purchase raw materials at lower prices. For example, our competitors that also manufacture semiconductors may compete with us for the procurement of silicon raw materials. As a result, such competitors may have stronger bargaining power with their suppliers and have an advantage over us in pricing as well as securing sufficient supply of polysilicon during times of shortage. Many of our competitors also have better brand name recognition, more established distribution networks, larger customer bases or more in-depth knowledge of the target markets. As a result, they may be able to devote greater resources to the research and development, promotion and sale of their products and respond more quickly to evolving industry standards and changes in market conditions as compared to us. Our failure to adapt to changing market conditions and to compete successfully with existing or future competitors would have a material adverse effect on our business, prospects and results of operations.

Advance payment arrangements between us and most of our polysilicon suppliers and equipment suppliers expose us to the credit risks of such suppliers and may increase our costs and expenses, which could in turn have a material adverse effect on our liquidity.

 

Under existing supply contracts with most of our polysilicon suppliers and our equipment suppliers, consistent with the industry practice, we make advance payments to our suppliers prior to the scheduled delivery dates for polysilicon and equipment. In many such cases, we make the advance payments without receiving collateral for such payments. As a result, our claims for such payments would rank as unsecured claims, which would expose us to the credit risks of our suppliers in the event of their insolvency or bankruptcy. Under such circumstances, our claims against the defaulting suppliers would rank below those of secured creditors, which would undermine our chances of obtaining the return of our advance payments. In addition, if the market price of polysilicon decreases after we prepay our suppliers, we will not be able to adjust any historical payment insofar as it relates to a future delivery at a fixed price. Furthermore, if demand for our products decreases, we may incur costs associated with carrying excess materials. Accordingly, any of the above scenarios may have a material adverse effect on our financial condition, results of operations and liquidity.

 

Our expansion plans require substantial capital expenditures, significant engineering efforts, timely delivery of manufacturing equipment and dedicated management attention, and our failure to complete these plans would have a material adverse effect on the growth of our sales and earnings.

 

Our future success depends, to a large extent, on our ability to expand our production capacity. If we are unable to do so, we will not be able to attain the desired level of economies of scale in our operations or cut the marginal production cost to the level necessary to effectively maintain our pricing and other competitive advantages. We expect that we will make substantial capital expenditures for our future growth. This expansion has required and will continue to require substantial capital expenditures, significant engineering efforts, timely delivery of manufacturing equipment and dedicated management attention, and is subject to significant risks and uncertainties, including:

 

 

Any of these or similar difficulties could significantly delay or otherwise constrain our ability to undertake our capacity expansion plans as currently planned, which in turn would limit our ability to increase sales, reduce marginal manufacturing costs or otherwise improve our prospects and profitability.

We may undertake acquisitions, investments, joint ventures or other strategic alliances, which may have a material adverse effect on our ability to manage our business, and such undertakings may be unsuccessful.

 

Our strategy includes plans to grow both organically and through acquisitions, participation in joint ventures or other strategic alliances with suppliers or other companies in China and overseas along the PV industry value chain. Joint ventures and strategic alliances may expose us to new operational, regulatory, market and geographic risks as well as risks associated with additional capital requirements.

 

Acquisitions of companies or businesses and participation in joint ventures or other strategic alliances are subject to considerable risks, including:

 

 

Any of these events could disrupt our ability to manage our business, which in turn could have a material adverse effect on our financial condition and results of operations. Such risks could also result in our failure to derive the intended benefits of the acquisitions, strategic investments, joint ventures or strategic alliances and we may be unable to recover our investment in such initiatives.

 

Our product development initiatives may fail to improve manufacturing efficiency or yield commercially viable new products.

 

We are making efforts to improve our manufacturing processes and improve the quality of our PV products. We plan to undertake research and development to continuously reduce the thickness of our wafers and develop more advanced products. We are also exploring ways to improve our PV module production. Additional research and development efforts will be required before our products in development may be manufactured and sold at a commercially viable level. We cannot assure you that such efforts will improve the efficiency of manufacturing processes or yield new products that are commercially viable. In addition, the failure to realize the intended benefits from our product development initiatives could limit our ability to keep pace with the rapid technological changes, which in turn would hurt our business and prospects.

 

Failure to achieve satisfactory output of our PV modules and PV systems could result in a decline in sales.

 

The manufacture of PV modules and PV systems is a highly complex process. Deviations in the manufacturing process can cause a substantial decrease in output and, in some cases, disrupt production significantly or result in no output. We have from time to time experienced lower-than-anticipated manufacturing output during the ramp-up of production lines. This often occurs during the production of new products, the installation of new equipment or the implementation of new process technologies. As we bring additional lines or facilities into production, we may operate at less than

intended capacity during the ramp-up period and produce less output than expected. This would result in higher marginal production costs which could have a material adverse effect on our profitability.

 

We believe the efficient use of polysilicon is essential to reducing our manufacturing costs. We have been exploring several measures to improve the efficient use of polysilicon in our manufacturing process, including reducing the thickness of silicon wafers. However, the use of thinner silicon wafers may have unforeseen negative consequences, such as increased breakage and reduced reliability and conversion efficiency of our PV cells and modules. As a result, reducing the thickness of silicon wafers may not lead to the cost reductions we expect to achieve, while at the same time it may reduce customer satisfaction with our products, which in turn could have a material adverse effect on our customer relationships, reputation and results of operations.

 

Unsatisfactory performance of or defects in our products may cause us to incur warranty expenses, damage our reputation and cause our sales to decline.

 

Our PV modules are typically sold with a two-year limited warranty for defects in materials and workmanship, and a 10-year and 25-year warranty against declines of initial power generation capacity by more than 10.0% and 20.0%, respectively. As a result, we bear the risk of extensive warranty claims long after we sell our products and recognize revenues. As we began selling PV modules only since January 2003, none of our PV modules has been in use for more than five years. For our PV systems in China, we provide a one-to five-year limited warranty against defects in modules, storage batteries and certain other system parts. As of December 31, 2005, 2006 and as of September 30, 2007, our accrued warranty costs amounted to RMB 5.0 million, RMB 20.7 million (US$2.8 million) and RMB 46.5 million (US$6.2 million), respectively. Because our products have only been in use for a relatively short period of time, our assumptions regarding the durability and reliability of our products may not be accurate, and because our products have relatively long warranty periods, we cannot assure you that the amount of accrued warranty by us for our products will be adequate in light of the actual performance of our products. If we experience a significant increase in warranty claims, we may incur significant repair and replacement costs associated with such claims. Furthermore, widespread product failures will damage our reputation and customer relationships and may cause our sales to decline, which in turn could have a material adverse effect on our financial condition and results of operations.

 

We have limited insurance coverage and may incur losses resulting from product liability claims, business interruption or natural disasters.

 

We are exposed to risks associated with product liability claims if the use of our PV products results in injury. Since our PV products are components of electricity producing devices, it is possible that users could be injured or killed by our PV products, whether by product malfunctions, defects, improper installation or other causes. We do not maintain any business interruption insurance coverage. As a result, we may have to pay, out of our own funds, for financial and other losses, damages and liabilities, including those in connection with or resulting from third-party product liability claims and those caused by natural disasters and other events beyond our control, which could have a material adverse effect on our financial condition and results of operations.

 

We obtain some of the equipment used in our manufacturing process from a small number of selected suppliers and if our equipment is damaged or new or replacement equipment is not delivered to us in a timely manner or is otherwise unavailable, our ability to deliver products timely will suffer, which in turn could result in cancellations of orders and loss of revenue for us.

 

Some of the equipment used in our production of polysilicon ingots, wafers, PV cells and PV modules, such as ingot cashing furnaces, diffusion furnaces and wire saws, have been customized to our specifications, are not readily available from multiple vendors and would be difficult to repair or replace. If any of our key equipment suppliers were to experience financial difficulties or go out of

business, we may have difficulties with repairing or replacing our customized equipment in the event of any damage to or a breakdown of such equipment. Furthermore, new or replacement equipment may not be delivered to us in a timely manner. In such cases, our ability to deliver products in a timely manner would suffer, which in turn could result in cancellations of orders from our customers and loss of revenue for us. In addition, the equipment we need for our expansion is in high demand. In addition, supplier’s failure to deliver the equipment in a timely manner, in sufficient quantity and on terms acceptable to us could delay our capacity expansion and otherwise disrupt our production schedule or increase our production costs.

 

The practice of requiring our customers to make advance payments when they place orders with us has diminished, we have experienced and will continue to experience increased needs to finance our working capital requirements and are exposed to increased credit risk.

 

Historically, we required many of our customers to make an advance payment of a certain percentage of their orders, a business practice that helped us to manage our accounts receivable, prepay our suppliers and reduce the amount of funds that we needed to finance our working capital requirements. However, this practice of requiring our customers to make advance payments has diminished, which in turn has increased our need to obtain additional short-term borrowings to fund our current cash requirements. For the nine months period ended September 30, 2007, a small portion of our revenue was derived from sales that required advance payments from our customers. Currently, a significant portion of our revenue is derived from credits sales to our customers, generally with payments due within two to five months. In addition, other customers now pay us through letters of credit, which typically take 30 to 90 days to process for us to be paid. As a result, the general decrease in the use of cash advance payments has negatively impacted our short-term liquidity and, coupled with increased sales to a small number of major customers, exposed us to additional and more concentrated credit risk since a significant portion of our outstanding accounts receivable is derived from sales to a limited number of customers. As of December 31, 2006 and September 30, 2007, our top five customers in terms of outstanding accounts receivable accounted for approximately 85.4% and 61.8%, respectively, of our total outstanding accounts receivable. The failure of any of these customers to meet their payment obligations would materially and adversely affect our financial position, liquidity and results of operations. Although we have been able to maintain adequate working capital primarily through short-term borrowing, in the future we may not be able to secure additional financing on a timely basis or on terms acceptable to us or at all.

 

Fluctuations in exchange rates could adversely affect our results of operations

 

Most of our sales are currently denominated in U.S. dollars and Euros, and to a lesser extent, in Renminbi, while a substantial portion of our costs and expenses is denominated in U.S. dollars, Renminbi, Japanese Yen and Euros. In addition, we must convert Renminbi into foreign currencies to make payments to overseas suppliers. Therefore, fluctuations in currency exchange rates could have a significant effect on our results of operations due to mismatches among various foreign currency-denominated transactions, including sales of PV modules in overseas markets and purchases of silicon raw materials and equipment, and the time gap between the signing of the related contracts and cash receipts and disbursements related to such contracts.

 

We incurred net foreign exchange losses of RMB 1.8 million in 2005 and RMB 8.1 million (US$1.1 million) in 2006 primarily due to the adjustment of the exchange rate between the U.S. dollar and Renminbi, effective July 21, 2005. We also recorded a net foreign currency exchange loss of RMB 3.5 million (US$0.5 million) in the nine-month period ended September 30, 2007, primarily due to foreign exchange loss related to sales denominated in U.S. dollars, which was partially offset by increased sales denominated in Euro during this period as Euro appreciated against Renminbi. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the effect of exchange rate fluctuations on our net foreign exchange losses in the future. We may choose to reduce the effect of such exposure through hedging

arrangements, but because of the limited availability of hedging instruments in China, we cannot assure you that we will find a hedging arrangement suitable to us, or that such hedging activities will be effective in managing our foreign exchange risk.

 

We face risks associated with the marketing and sale of our PV products internationally, and if we are unable to effectively manage these risks, our ability to expand our business abroad will be limited.

 

In 2005, 2006 and for the nine-month period ended September 30, 2007, we sold 84.3%, 95.1% and 98.1%, respectively, of our products to customers outside of China, including customers in Germany, Spain, Italy and the United States. We intend to further grow our business activities in international markets, in particular in the United States, Spain and selected countries in southern Europe and Southeast Asia where we believe the PV market is likely to grow significantly in the near term. The marketing and sale of our PV products to international markets expose us to a number of risks, including, but not limited, to:

 

 

Our business in foreign markets requires us to respond timely and effectively to rapid changes in market conditions in the relevant countries. Our overall success as a global business depends, in part, on our ability to succeed in different legal, regulatory, economic, social and political conditions. We may not be able to develop and implement policies and strategies that will be effective in each location where it does business. To the extent that we conduct business in foreign countries by means of participations or joint ventures, there are additional risks. See “ — We may undertake acquisitions, investments, joint ventures or other strategic alliances, which may have a material adverse effect on our ability to manage our business, and such undertakings may end up being unsuccessful”. A change in one or more of the factors described above may have a material adverse effect on our business, prospects, financial condition and results of operations.

 

We have significant outstanding short-term borrowings, and we may not be able to obtain extensions when they mature.

 

Our short-term borrowings from banks outstanding as of December 31, 2005 and 2006 and September 30, 2007, were RMB 279.0 million, RMB 255.3 million (US$34.1 million) and RMB 1,152.0 million (US$153.7 million), respectively, and bore a weighted average interest rate of 5.42%, 5.99% and 5.91%, respectively, of which RMB 222.0 million, RMB 221.0 million (US$29.5 million) and

RMB 472.4 million (US$63.0 million) were arranged or guaranteed by related parties as of December 31, 2005 and 2006 and September 30, 2007, respectively. For the period from October 1, 2007 to October 31, 2007, we borrowed additional short-term loans of RMB 94.5 million (US$12.6 million) and repaid RMB 86.4 million (US$11.5 million). Other non-bank short-term borrowings, consisting principally of loans from a customer, a government body and loans arranged by Mr. Liansheng Miao, the chairperson of our board of directors and our chief executive officer, amounted to RMB 67.7 million, RMB 12.0 million (US$1.6 million) and nil, respectively, as of December 31, 2005 and 2006 and September 30, 2007. We also have short-term borrowings from related parties, the outstanding amount of which was RMB 100.4 million, RMB 31.8 million (US$4.3 million) and RMB 3.6 million (US$0.5 million) as of December 31, 2005 and 2006 and September 30, 2007, respectively, which represents 22.4%, 10.6% and 0.3% of our short-term borrowings, as of the same dates, respectively.

 

Generally, these loans contain no specific renewal terms, although we have traditionally negotiated renewal of certain of the loans shortly before they mature. However, we cannot assure you that we will be able to renew these loans in the future as they mature. In particular, a substantial portion of our short-term borrowings are arranged or guaranteed by Tianwei Baobian or its controlling shareholder, Tianwei Group. Since Tianwei Baobian is no longer Tianwei Yingli’s controlling equity interest holder, both Tianwei Baobian and Tianwei Group may be less inclined to guarantee bank borrowings of Tianwei Yingli. If we are unable to obtain renewals of these loans or sufficient alternative funding on reasonable terms from banks or related or third parties, we will have to repay these borrowings with additional funding from Tianwei Yingli’s equity interest holders, including us, or cash generated by our future operations, if any. We cannot assure you that our business will generate sufficient cash flow from operations to repay these borrowings.

 

Most of our production, storage, administrative and research and development facilities are located in close proximity to one another in an industrial park in China. Any damage or disruption at these facilities would have a material adverse effect on our financial condition and results of operations.

 

Our production, storage, administrative, research and development facilities are located in close proximity to one another in an industrial park in Baoding, Hebei Province, China. A natural disaster or other unanticipated catastrophic event, including power interruption, and war, could significantly disrupt our ability to manufacture our products and operate our business. If any of our production facilities or material equipment were to experience any significant damage or downtime, we would be unable to meet our production targets and our business would suffer.

 

Our manufacturing processes generate noise, waste water, gaseous and other industrial wastes. This creates a risk of work-related accidents and places high demands on work safety measures. No major injuries have occurred at our facilities in connection with work-related accidents to date. Nonetheless, we cannot assure you that accidents involving serious or fatal injuries will not occur at our facilities. Furthermore, there is a risk of contamination and environmental damage associated with hazardous substances used in our production processes. The materialization of any of the above risks could have a material adverse effect on our financial condition and results of operations.

 

Our controlling shareholder has significant influence over our management and their interests may not be aligned with our interests or the interests of our other shareholders.

 

Yingli Power, which is 100% owned by Liansheng Miao, the chairperson of our board of directors and our chief executive officer and the vice chairperson and the chief executive officer of Tianwei Yingli, currently beneficially owns approximately 45.76% of our outstanding ordinary shares. Upon completion of this offering, approximately 44.62% of our outstanding ordinary shares will be held by Yingli Power. The interests of this shareholder may conflict with the interests of our other shareholders. Yingli Power has significant influence over us, including on matters relating to 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 us, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of us or of our assets and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders, including those who purchase ADSs in this offering.

 

You will experience substantial dilution immediately upon Tianwei Baobian’s exercise of the subscription right that we granted under the joint venture contract with Tianwei Baobian.

 

Under a PRC law-governed joint venture contract between us and Tianwei Baobian entered in August 2006, as amended from time to time after August 2006, we granted to Tianwei Baobian a right to subscribe for ordinary shares newly issued by us in exchange for all but not part of Tianwei Baobian’s equity interest in Tianwei Yingli on the condition that Tianwei Baobian has obtained all necessary approvals from the relevant PRC government authorities for acquiring our shares after completion of our initial public offering and listing of our ADSs on the NYSE. If Tianwei Baobian exercises the subscription right, we will be obligated to issue such number of our ordinary shares that represent the value of Tianwei Baobian’s interest in Tianwei Yingli according to a pre-agreed formula. Such number of new shares will be substantial. See “Restructuring — Joint Venture Contract — Subscription Right”. As a result, the equity interest that you hold in us in the form of ADSs will be substantially diluted.

 

We may not be able to obtain adequate funding to acquire the equity interest in Tianwei Yingli held by Tianwei Baobian, and if we issue new shares to raise funds to acquire Tianwei Baobian’s equity interest, you may experience substantial dilution.

 

Under the joint venture contract entered into between Tianwei Baobian and us, Tianwei Baobian may request us to make best efforts to purchase all, but not part, of its then-owned equity interest in Tianwei Yingli if Tianwei Baobian fails to exercise the right to subscribe for newly issued ordinary shares of us for any reason within 300 days after completion of our initial public offering on June 13, 2007. The price will be decided by mutual agreement between Tianwei Baobian and us based on the then fair market value of the equity interest in Tianwei Yingli held by Tianwei Baobian and in accordance with the requirements of relevant laws and regulations of the PRC. If the purchase of Tianwei Baobian’s equity interest in Tianwei Yingli is required to be paid in cash, we may not be able to obtain adequate funding in time and on terms acceptable to us, if at all, to pay for such purchase price. In addition, we may decide to issue new shares to raise the funds required to pay the purchase price to Tianwei Baobian. If we choose to do so, the equity interest you hold in us may be substantially diluted immediately upon our issuance of new shares.

 

Tianwei Baobian has significant influence over Tianwei Yingli, our principal operating entity, from which we currently derive substantially all of our revenue and earnings, and Tianwei Baobian may influence Tianwei Yingli from taking actions that are in the best interest of us or Tianwei Yingli, which could result in a material adverse effect on our or Tianwei Yingli’s business prospects, financial condition and results of operations. In addition, Tianwei Baobian will have significant influence over us if it exercises the subscription right, and Tianwei Baobian’s interests may not be aligned with our interests or the interests of our other shareholders. Furthermore, it is unclear how the pending acquisition by China South Industries Group Corporation of Tianwei Group, the controlling shareholder of Tianwei Baobian, will affect Tianwei Baobian’s approach with respect to the management and operation of Tianwei Yingli.

 

Tianwei Baobian currently owns a 29.89% equity interest in Tianwei Yingli, our principal operating entity from which we derive substantially all of our revenue and earnings, and is expected to own a 25.99% equity interest in Tianwei Yingli upon completion of our additional equity contribution to Tianwei Yingli primarily using part of the proceeds from our initial public offering, which would

increase our equity interest in Tianwei Yingli to 74.01%. Such additional equity contribution is currently pending approval by the relevant PRC authority. Tianwei Baobian has significant influence over Tianwei Yingli through its board representation in Tianwei Yingli and other rights in accordance with the joint venture contract with us and the articles of association of Tianwei Yingli.

 

Tianwei Baobian is entitled to appoint three of the nine directors of Tianwei Yingli. Tianwei Baobian is also entitled to appoint a director to serve as the chairperson of the board of Tianwei Yingli. Tianwei Baobian may have different views and approaches with respect to the management and operation of Tianwei Yingli from those of us. Tianwei Baobian may disagree with us in the management and operation of Tianwei Yingli and may vote against actions that we believe are in the best interest of Tianwei Yingli or us. For example, directors appointed by Tianwei Baobian may vote against matters that require unanimous approval of all directors. Directors appointed by Tianwei Baobian may also hinder or delay adoption of relevant resolutions by not attending a board meeting, thereby preventing achievement of a quorum and forcing the meeting to be postponed for no more than seven days. See “Restructuring — Joint Venture Contract — Tianwei Yingli’s Management Structure — Board of Directors”. Due to Tianwei Baobian’s ability to exercise influence over Tianwei Yingli through its appointed directors, and through its other rights under the joint venture contract, any significant deterioration of our relationship or our disagreement with Tianwei Baobian may cause disruption to Tianwei Yingli’s business, which could in turn result in a material adverse effect on our business prospects, financial condition and results of operations.

 

Tianwei Baobian may also have disagreement or dispute with us with respect to our respective rights and obligations on matters such as the exercise of Tianwei Baobian’s right to subscribe for ordinary shares newly issued by us in exchange for its equity interest in Tianwei Yingli. Except in limited circumstances, we may not be able to unilaterally terminate the joint venture contract in the event of such disagreement or dispute even if such termination would be in our best interest. See “Restructuring — Joint Venture Contract — Unilateral Termination of the Joint Venture Contract”. Any such disputes may result in costly and time-consuming litigations or other dispute resolution proceedings which may significantly divert the efforts and resources of our management and disrupt our business operations.

 

Furthermore, Tianwei Baobian may transfer all or a part of its equity interest in Tianwei Yingli pursuant to the joint venture contract entered into between Tianwei Baobian and us. If we fail to exercise our right of first refusal in accordance with the procedures set forth in the joint venture contract and are thus deemed to have consented to any such proposed transfer by Tianwei Baobian to a third party or if Tianwei Baobian transfers its equity interest in Tianwei Yingli to its affiliates, such third party or such Tianwei Baobian’s affiliate will become a holder of Tianwei Yingli’s equity interest. The interests of such third party or such Tianwei Baobian’s affiliate may not be aligned with our interests or the interest of Tianwei Yingli. See “Restructuring — Joint Venture Contract — Transfer of Equity Interests in Tianwei Yingli — Right of First Refusal”.

 

In addition, Baoding State-Owned Assets Supervision and Administration Commission, or Baoding SASAC, entered into an agreement in September 2007 to transfer all of its equity interest in Tianwei Group, Tianwei Baobian’s controlling shareholder, to China South Industries Group Corporation, or China South, subject to government approvals. It is unclear how Tianwei Baobian’s business strategy with respect to its shareholding in Tianwei Yingli will change subsequent to the acquisition by China South of Tianwei Group and how such change, if any, will affect the management and operation of Tianwei Yingli.

 

Furthermore, Tianwei Baobian may exercise the subscription right, and if it exercises the subscription right, it will become a significant shareholder of us. Once Tianwei Baobian becomes our shareholder, it will have significant influence over our and Tianwei Yingli’s business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our or Tianwei Yingli’s assets, election of directors and other significant corporate actions. If Tianwei Baobian becomes our shareholder, its interests may not be aligned with the interests of our other shareholders.

This concentration of ownership may discourage, delay or prevent a change in control of us, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of us and might reduce the price of our ADSs.

 

Negative rumors or media coverage of Tianwei Baobian, our affiliates or business partners could materially and adversely affect our reputation, business, financial condition and the price of our ADSs.

 

There has been negative media coverage concerning the corporate affairs of Tianwei Baobian. For example, in October 2006, there were news articles containing allegations, among others, that Tianwei Baobian had materially overstated its results of operations related to the export sales of Tianwei Yingli’s PV product components and its local tax rates in its published financial statements. Since Tianwei Baobian and we together hold all of Tianwei Yingli’s equity interests, such media coverage, whether or not accurate and whether or not applicable to us, may have a material adverse effect on our reputation, business, financial condition and the price of our ADSs. We cannot assure you that there will not be similar or other negative rumors or media coverage related to Tianwei Baobian, our affiliates or business partners in the future.

 

If the proposed acquisition of the parent of our minority partner in Tianwei Yingli is consummated, and such acquirer engages in sanctioned activities inconsistent with the laws and policies of other countries, some of our shareholders may divest our shares and prospective investors may decide not to invest in our shares.

 

The United States and other countries maintain economic and other sanctions against several countries and persons engaged in specified activities, such as support of the proliferation of weapons of mass destruction and of terrorism. The parent company of Tianwei Baobian, which owns 29.89% in our principal operating subsidiary Tianwei Yingli, is currently expected to be acquired, subject to government approvals, by China South, an affiliate of which has been designated by the U.S. State Department under the Iran Nonproliferation Act of 2000 as engaged in the transfer to Iran of equipment and technology having the potential to make a material contribution to the development of weapons of mass destruction. To the extent the acquisition by China South Industries Group Corporation of the parent company of Baoding Tianwei is consummated and if our affiliates are involved in activities that, if performed by a U.S. person, would be illegal under U.S. sanctions, reputational issues relating to Tianwei Yingli or us may arise. Investors in the United States may choose not to invest in, and to divest any investments in, issuers that are associated even indirectly with sanctioned activities.

 

We have no legal right to prevent Tianwei Baobian from entering into a competing business with us and if Tianwei Baobian chooses to do so, our business, prospects, financial condition and results of operations could be adversely affected.

 

Our joint venture contract with Tianwei Baobian and Tianwei Yingli’s articles of association does not impose non-competition restrictions upon Tianwei Baobian. Tianwei Baobian’s current principal business is the manufacture of large electricity transformers but Tianwei Baobian may enter into the PV business directly or through acquisitions of or strategic alliances with an entity that is engaged in PV business. For example, on December 1, 2006, Tianwei Baobian announced that it acquired a controlling interest in a manufacturer of PV products in Tibet. If Tianwei Baobian chooses to further expand into the PV business, including the manufacture of polysilicon ingots and wafers, PV cells or PV modules, it may compete with us for both supply of polysilicon and customers and we may not have any legal right to prevent Tianwei Baobian from doing so. Because of Tianwei Baobian’s familiarity with and its ability to influence Tianwei Yingli’s business, competition from Tianwei Baobian could have a material adverse effect on our business, prospects, financial condition and results of operations.

The grant of employee share options and other share-based compensation could adversely affect our net income.

 

We adopted our 2006 stock incentive plan in December 2006. Our board of directors approved in April 2007 and our shareholders approved in May 2007 amendment No. 1 to the 2006 stock incentive plan to increase the number of ordinary shares we are authorized to issue under the 2006 stock incentive plan. Under the 2006 stock incentive plan, as amended, we may grant to our directors, employees and consultants up to 2,715,243 restricted shares and options to purchase up to 5,525,414 of our ordinary shares. As of the date of this prospectus, we have granted to eight executive officers and three independent directors options to purchase 886,629 ordinary shares in the aggregate and an aggregate of 2,606,060 restricted shares to the trustee for the benefit of 69 directors, officers and employees (not including 15,000 restricted shares granted to a non-employee). In accordance with the Financial Accounting Standards Board, or FASB, Statement No. 123 (Revised 2004), “Share-Based Payments”, or SFAS No. 123R, we account for compensation costs for all share-based awards including share options granted to our directors and employees using a fair-value based method, 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 stock incentive plan, we may not be able to attract and retain key personnel, as share options are an important tool to recruit and retain qualified and desirable employees.

 

Our results of operations are difficult to predict, and if we do not meet the market expectations, the price of our ADSs will likely decline.

 

Our results of operations are difficult to predict and have fluctuated from time to time in the past. We expect that our results of operations may continue to fluctuate from time to time in the future. It is possible that our results of operations in some reporting periods will be below market expectations. Our results of operations will be affected by a number of factors as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”. If our results of operations for a particular reporting period are lower than the market expectations for such reporting period, investors are likely to react negatively, and as a result, the price of our ADSs may materially decline.

 

Evaluating our business and prospects may be difficult because of our limited operating history.

 

There is limited historical information available about us upon which you can base your evaluation of our business and prospects. We started selling PV modules in January 2003 and have experienced a high growth rate since then. As a result, our historical results of operations 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 and at higher volumes. Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance. You should consider our business and prospects in light of the risks, expenses and challenges that we will face as an early-stage company seeking to develop and manufacture new products in a rapidly growing market.

 

Our lack of patent protection inside and outside of China may undermine our competitive position and subject us to intellectual property disputes with third parties, both of which may have a material adverse effect on our business, results of operations and financial condition.

 

We do not have, and have not applied for, any patents for our proprietary technologies whether inside or outside of China, and rely primarily on trade secret protections, employment agreements and third party confidentiality agreements to safeguard our intellectual property rights. Nevertheless, these measures provide 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 our other intellectual property rights, which could have a material adverse effect on our business, financial condition or results of operations. Policing the unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to 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 our other resources away from our business. 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. An adverse determination in any such litigation could result in the loss of our intellectual property rights and may harm our business, prospects and reputation.

 

We have exported, and expect to continue to export, a substantial portion of our PV products outside China. Because we do not have, and have not applied for, any patents for our proprietary technologies outside of China, it is possible that 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 export our PV modules. If any third parties are successful in obtaining patents for technologies that are substantially equivalent to or the same as our proprietary technologies in any of our markets before we are 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 will be materially and adversely affected.

 

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 depends, in large part, on our ability to use and develop 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. The steps we take in our product development to ensure that we are not infringing the existing intellectual property rights of others, such as review of related patents and patent applications prior to our product developments, may not be adequate. While we are not currently aware of any action pending or threatened against us, 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 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 PV modules or subject us to injunctions prohibiting the manufacture and sale of our PV modules or the use of our technologies. Protracted litigation could also cause our customers or potential customers to defer or limit their purchase or use of our PV modules until the resolution of such litigation.

 

Our business depends substantially on the continuing efforts of our executive officers and key technical personnel, and our ability to maintain a skilled labor force. Our business may be materially and adversely affected if we lose their services.

 

Our future success depends substantially on the continued services of our executive officers, especially Liansheng Miao, our chief executive officer, Xiangdong Wang, our vice president, Zhiheng Zhao, our vice president, Zongwei Li, our chief financial officer, Seok Jin Lee, our chief operating officer, Guoxiao Yao, our chief technology officer, Dr. Nabih Cherradi, our vice president and Stuart Branningan, our managing director of Europe. 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. In addition, if any of our executive officers join 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 were to arise between one of our executive officers and us, we cannot assure you of the extent to which such officer’s employment agreement could be enforced in China.

 

Furthermore, recruiting and retaining capable personnel, particularly experienced engineers and technicians familiar with our PV products manufacturing processes, is vital to maintaining the quality of our PV products and to continuously improving our production methods. There is substantial competition for qualified technical personnel, and we cannot assure you that we will be able to attract or retain qualified technical personnel. If we are unable to attract and retain qualified employees, key technical personnel and our executive officers, our business may be materially and adversely affected.

 

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

 

We are subject to reporting obligations under the U.S. federal securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting. These requirements will first apply to our annual report on Form 20-F for the fiscal year ending December 31, 2008. Our management may conclude that our internal control over our financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may determine that our internal controls over financial reporting are not operating effectively. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

 

Prior to our initial public offering in June 2007, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. In connection with the audits of our consolidated financial statements for the years ended December 31, 2004, and 2005, the period from January 1, 2006 through September 4, 2006 and the period from August 7, 2006 through December 31, 2006, our independent auditors identified a number of significant control deficiencies in our internal control procedures which, in the judgment of our independent auditors, adversely affect our ability to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of our consolidated financial statements that is more than inconsequential will not be prevented or detected. Specifically, the significant control deficiencies identified by our independent auditors consist of: (i) the lack of clear procedures, timetables, segregation of duty and review in the financial reporting process, (ii) failure to regularly reconcile the balances of accounts receivable and customer prepayments as recorded in our books and records with our customers, (iii) the lack of sub-ledgers to classify sales transactions by customer, (iv) the lack of process and related controls procedures relating to the recognition of accounts payable and reduction of advance payments, (v) failure to properly record all related party transactions and periodically update the list of such transactions and (vi) failure to properly record the transfer of construction-in-progress to fixed assets on our financial statements. None of the significant deficiencies identified by our auditors were, individually or in combination with one another, material weaknesses as described in Audit Standard No. 2, An Audit of Internal Control over Financial Reporting Performed in conjunction with an Audit of Financial Statements, of the Public Company Accounting Standards Board. In the past, we also had certain material weaknesses, which have since been remedied other than the remaining significant deficiencies discussed above. In addition, in

connection with our preparation of the unaudited condensed consolidated financial statements for the nine-month period ended September 30, 2007 included in this registration statement, certain other significant control deficiencies were identified, which consist of (i) the lack of sufficient controls to timely identify related party companies and obtain proper pre-approval prior to entering into such transactions, (ii) the lack of sufficient internal review on the interim financial statement disclosure, including classification between operating cash flows and investing cash flows, disclosure of the estimated useful life of intangible assets, and disclosure of share-based payments and (iii) the lack of process and related controls procedures related to the accounting of intercompany foreign currency transactions, which resulted in the improper recognition of a RMB 13.5 million foreign currency exchange gain in the quarter ended June 30, 2007.

 

 

In order to remedy the remaining significant deficiencies, we are undertaking several measures to further improve our internal control over financial reporting. We appointed a new chief financial officer and a new financial controller in the fourth quarter of 2006, both of whom have experience with and knowledge of U.S. GAAP. In October 2006, we hired Protiviti, an outside consulting firm, to review our internal control processes, policies and procedures in order to assist us in identifying weaknesses in our internal control over financial reporting. We plan to provide further training to our financial and accounting staff to enhance their knowledge of U.S. GAAP. We are also adopting and implementing additional policies and procedures, including an enterprise resource planning system, to strengthen our internal controls over financial reporting. We plan to continue to take additional steps to remedy these significant deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. If, however, we fail to timely achieve and maintain the adequacy of our internal control, we may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our ADSs. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

 

Failure to manage our growth, or otherwise develop appropriate internal organizational structures, internal control environment and risk monitoring and management systems in line with our fast growth could result in a material adverse effect on our business, prospects, financial condition and results of operations.

 

Our business and operations have been expanding rapidly. Significant management resources must be expended to develop and implement appropriate structures for internal organization and information flow, an effective internal control environment and risk monitoring and management systems in line with our fast growth as well as to hire and integrate qualified employees into our organization. It is challenging for us to hire, integrate and retain qualified employees in key areas of operations, such as engineers and technicians who are familiar with the PV industry. In addition, disclosure and other ongoing obligations associated with being a public company further increase the challenges to our finance and accounting team. It is possible that our existing risk monitoring and management system, which recently underwent further development as a result of our fast growth and initial public offering, could prove to be inadequate. If we fail to appropriately develop and implement structures for internal organization and information flow, an effective internal control environment and a risk monitoring and management system, we may not be able to identify unfavorable business trends, administrative oversights or other risks that could materially and adversely affect our business, prospects, financial condition and results of operations.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity, potentially significant monetary damages and fines and supervision of our business operations.

 

The 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. Our manufacturing processes generate noise, waste water, gaseous and other industrial wastes and are required to comply with national and local regulations regarding environmental protection. We believe we are currently in compliance with present environmental protection requirements and have all necessary environmental permits to conduct our business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of compliance with these new regulations could be substantial. If we fail to comply with any future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations. See “PRC Government Regulations — Environmental Regulations”.

 

The ordinary shares underlying the ADSs you purchase in this offering could become redeemable by us without your approval.

 

The ordinary shares underlying the ADSs in our issued and outstanding share capital have not been issued on the express terms that they are redeemable. However, our board of directors may pass resolutions to allow us to redeem the ordinary shares from the holders and two-thirds of the votes cast by the holders of the ordinary shares may approve such variation of share rights. The minority shareholders will not be able to prevent their share rights being varied in such a way and their ordinary shares could become redeemable by us as a result.

 

We have adopted a shareholders rights plan, which, together with the other anti-takeover provisions of our articles of association, could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including ordinary shares represented by our ADSs, at a premium.

 

On May 11, 2007, we adopted our third amended and restated articles of association, which became effective immediately upon completion of our initial public offering in June 2007. Our current articles of association contain provisions that limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. On October 17, 2007, our board of directors adopted a shareholders rights plan. Under this rights plan, one right was distributed with respect to each of our ordinary shares outstanding at the closing of business on October 26, 2007. These rights entitle the holders to purchase ordinary shares from us at half of the market price at the time of purchase in the event that a person or group obtains ownership of 15% or more of our ordinary shares (including by acquisition of the ADSs representing an ownership interest in the ordinary shares) or enters into an acquisition transaction without the approval of our board of directors).

 

This rights plan and the other anti-takeover provisions of our articles of association 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. Our existing authorized ordinary shares confer on the holders of our ordinary shares equal rights, privileges and restrictions. The shareholders have, by virtue of adoption of our third amended and restated articles of association, authorized the issuance of shares of par value of US$0.01 each without specifying any special rights, privileges and restrictions. Therefore, our board of directors may, without further action by our shareholders, issue our ordinary shares, or issue shares of such class and attach to such shares special rights, privileges or restrictions, which may be different from those associated with our ordinary shares. Preferred shares could also 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

ordinary shares or 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.

 

A simple majority of the holders of our shares who vote at a general meeting may sub-divide any of our shares into shares of a smaller par value and may determine that, among the shares so sub-divided, some of such shares may have preferred or other rights or restrictions that are different from those applicable to other such shares.

 

Under our new articles of association, a simple majority of the holders of our shares who vote at a general meeting may sub-divide any of our shares into shares of a smaller par value than is fixed by our articles of association, subject to the Companies Law of the Cayman Islands, and may by such resolution determine that, among the shares so sub-divided, some of such shares may have preferred or other rights or restrictions that are different from those applicable to the other such shares resulting from the sub-division. Any sub-divided shares will be allocated on a pro-rated basis among the holders of our shares, and a two-thirds vote of any class of shares having special rights or restrictions as a result of such sub-division will be required to further vary the special rights or restrictions attached to such shares. The purpose of this provision is to give flexibility to the shareholders to vary the share capital by effecting a sub-division and alter the rights attaching to the sub-divided shares in order to facilitate transactions where shareholders provide benefits or contribute assets to the Company in consideration of an enhancement of the rights of their shares rather than an issue of new shares. However, as the minority shareholders will not be able to prevent the majority shareholders from effecting such sub-division and designation of special rights or restrictions, such rights of our majority shareholders may discourage investors making an investment in us, which may have a material adverse effect on the price of our ADSs.

 

The quorum for the general meeting of our shareholders is one-third of our issued voting shares. Accordingly, shareholder resolutions may be passed without the presence of the majority of our shareholders in person or by proxy.

 

The quorum required for the general meeting of our shareholders is two shareholders entitled to vote and present in person or by proxy or, if the shareholder is a corporation, by its duly authorized representative representing not less than one-third in nominal value of our total issued voting shares. Therefore, subject to obtaining the requisite approval from a majority of the shareholders so present, a shareholder resolution may be passed at our shareholder meetings without the presence of the majority of our shareholders present in person or by proxy. Such rights by the holders of the minority of our shares may discourage investors from making an investment in us, which may have a material adverse effect on the price of our ADSs.

 

If a poll is not demanded at our shareholder meetings, voting will be by show of hands and shares will not be proportionately represented.

 

Voting at any of our shareholder meetings is by show of hands unless a poll is demanded. A poll may be demanded by the chairperson of the meeting, or by at least three shareholders present in person or by proxy, or by any shareholder or shareholders present in person or by proxy holding at least 10% of the total voting rights of all shareholders having the right to vote at the meeting, or by a shareholder or shareholders present in person or by proxy holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on the shares conferring that right. 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.

Our special U.S. counsel is unable to opine as to whether we are a passive foreign investment company.

 

We do not believe that we are, for U.S. federal income tax purposes, a passive foreign investment company, or a PFIC, and we expect to operate in such a manner so as not to become a PFIC, although there can be no assurance in this regard. However, because the determination of PFIC status requires extensive factual investigation, including ascertaining the fair market value of our assets on a quarterly basis and the character of each item of gross income that we earn, this determination is beyond the scope of legal counsel’s role, and our special U.S. counsel expresses no opinion with respect to our PFIC status and also expresses no opinion with respect to our expectations contained in this paragraph. If we are or become a PFIC, you could be subject to additional U.S. federal income taxes on gain recognized with respect to the ADSs or ordinary shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. Non-corporate U.S. holders will not be eligible for reduced rates of taxation on any dividends received from us, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. See “Taxation — United States Federal Income Taxation — Passive Foreign Investment Company”.

 

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.

 

Our business is based 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:

 

 

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 have a negative effect on us. For example, our financial condition and results of operations may be materially and 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 allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or 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 are incorporated in Cayman Islands and are subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to Sino-foreign equity joint venture companies and wholly foreign owned companies. 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.

 

A new PRC rule on mergers and acquisitions may subject us to sanctions, fines and other penalties and affect our future business growth through acquisition of complementary business.

 

On August 8, 2006, six PRC government and regulatory authorities, including the PRC Ministry of Commerce, or MOFCOM and the Chinese Securities Regulatory Commission, or CSRC, promulgated a rule entitled “Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors”, or the New M&A Rule, which became effective on September 8, 2006. The New M&A Rule, among other things, requires that an offshore specific purpose vehicle, or SPV, formed for the listing purpose through acquisition of PRC domestic entity and controlled by PRC residents should obtain approval from the CSRC prior to publicly listing its securities on an overseas stock market. Based on consultation with the International Department of the CSRC regarding its interpretation of the New M&A Rule, our PRC counsel, Fangda Partners, advised us that the CSRC approval was not required for our initial public offering and the listing of our ADSs on the NYSE and this offering. However, we cannot assure you that the relevant PRC government agency, including the MOFCOM or other applicable departments of the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that the CSRC’s approval was required for our initial public offering and the listing of our ADSs on the NYSE or this offering, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from our initial public offering or this offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.

 

The New M&A Rule also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In the future, we may grow our business in part by acquiring complementary businesses, although we do not have any plans to do so at this time. Complying with the requirements of the New M&A Rule to complete such transactions could be time-consuming, and any required approval processes, including obtaining

approval from the MOFCOM, may delay or inhibit the completion of such transactions, which could affect or ability to expand our business or maintain our market share.

 

Recent PRC regulations relating to overseas investment by PRC residents may restrict our overseas and cross-border investment activities and adversely affect the implementation of our strategy as well as our business and prospects.

 

In 2005, the SAFE issued a number of rules regarding offshore investments by PRC residents. The rule currently in effect, the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Return Investment Activities of Domestic Residents Conducted Via Offshore Special Purpose Companies, known as SAFE Notice 75, was issued in October 2005 and the complementation procedures of such rules have been further clarified by Circular No. 106 issued by SAFE on May 29, 2007. SAFE Notice 75 requires PRC residents to register with and/or receive approvals from the SAFE in connection with certain offshore investment activities. Since we are a Cayman Islands company that is controlled by Yingli Power Holding Company Ltd., whose controlling shareholder is Mr. Liansheng Miao, our chairperson and chief executive officer and a PRC resident, Mr. Miao is subject to the registration requirements imposed by SAFE Notice 75.

 

Mr. Miao made the requisite SAFE registration with respect to his investment in Yingli Power Holding Company Ltd. and us in August 2006. After completion of our initial public offering, Mr. Miao submitted an application for additional amendment to his SAFE registration in connection with our initial public offering in June 2007. Within 30 days of this offering, Mr. Miao will be required to submit an application for additional amendment to his SAFE registration in connection with this offering and he has advised us that he intends to submit this application. We have requested our other beneficial owners who are PRC residents to make the necessary applications and filings in connection with this offering as required under the SAFE Notice 75 and its implementing rules. However, we cannot assure you that all of our beneficial owners who are PRC residents will comply with our request to apply for or obtain any registrations or approvals required under these or other regulations or legislation.

 

If Mr. Miao or any of our other beneficial owners who are PRC residents fails to comply with the registration procedures set forth in SAFE Notice 75, Mr. Miao or such beneficial owner who is a PRC resident could be subject to fines and legal penalties and Tianwei Yingli could face restrictions on its foreign currency exchange activities, including the payment of dividends and other distributions to its equity interest holders and Tianwei Yingli’s ability to receive capital from us. Any of these events could materially and adversely affect our results of operations, acquisition opportunities, financing alternatives and our ability to pay dividends to our shareholders.

 

See “PRC Government Regulations — Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions”.

 

A newly enacted PRC tax law could increase the enterprise income tax rate applicable to our principal subsidiary in China, which could have a material adverse effect on our results of operations.

 

In accordance with Income Tax Law of China for Enterprises with Foreign Investment and Foreign Enterprises, or the FIE Income Tax Law, and the related implementing rules, as a foreign invested enterprise primarily engaged in manufacturing, Tianwei Yingli is entitled to a two-year exemption from the enterprise income tax for its first two profitable years following its conversion into a Sino-foreign equity joint venture company, which are currently expected to be 2007 and 2008 for purposes of relevant PRC tax regulations. Tianwei Yingli will thereafter be entitled to a preferential enterprise income tax rate of that is half of the rate that would otherwise be applicable for the succeeding three years, or until 2011. Yingli Green Energy would also be exempted from the withholding tax on dividends it receives from Tianwei Yingli.

On March 16, 2007, the PRC Enterprise Income Tax law, or EIT Law, was enacted, and will become effective on January 1, 2008 when the FIE Income Tax Law and the Enterprise Income Tax Provisional Regulations of the PRC are scheduled to expire. The EIT Law adopts a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises) and revokes the current tax exemption, reduction and preferential treatments which are applicable only to foreign-invested enterprises. However, any enterprises established before the promulgation of the EIT Law that are entitled to preferential tax treatments for a fixed period will continue to be entitled to such preferential tax treatments until the expiration of such period. If the fixed period has not commenced because of tax losses, it shall be deemed to commence in 2008. In addition, certain qualified high-technology enterprises may still benefit from a preferential tax rate of 15% under the EIT Law if they meet the definition of “high and new technology enterprises strongly supported by the State” to be set forth in the more detailed implementing rules when they are adopted. As a result, if Tianwei Yingli qualifies as “high and new technology enterprises strongly supported by the State”, it will continue to benefit from a preferential tax rate of 15%, subject to any transitional period rules implemented starting from January 1, 2008. Otherwise, the applicable tax rate of Tianwei Yingli may increase from its existing tax rate of 15% to the unified tax rate of 25% under the EIT Law, in accordance with more detailed implementing rules to be adopted in the future. As Yingli China was established on October 16, 2007, Yingli China’s income tax rate will be 25% since January 1, 2008. If Yingli China qualifies as a “high and new technology enterprise strongly supported by the State”, it will benefit from a preferential tax rate of 15% subject to the more detailed implementing rules to be adopted in the future. Otherwise, the applicable tax rate of Yingli China will be the unified tax rate of 25% under the EIT Law.

 

Unlike the FIE Income Tax Law, the EIT Law provides that an income tax rate of 20% will normally be applicable to dividends payable to foreign investors and does not specifically exempt withholding tax on dividend payable to foreign investors. Although the EIT Law provides for the possibility of withholding tax exemption or reduction for China source income, the details have not been published.

 

If Tianwei Yingli and Yingli China fails to qualify as a “high and new technology enterprises strongly supported by the State” and therefore is not entitled to a preferential tax rate of 15%, or if withholding tax imposed on our dividends from Tianwei Yingli and Yingli China is not exempted or reduced, our results of operations and financial condition would be materially and adversely affected. See also “Dividends payable by us to our foreign investors may become subject to withholding taxes under PRC tax laws” below.

 

We may be deemed a Chinese resident enterprise under the EIT law and be subject to PRC taxation on our worldwide income.

 

Under the EIT Law, enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located within the PRC territory are considered resident enterprises and will normally be subject to the enterprise income tax at the rate of 25% on its global income, but the EIT Law does not define the term “de facto management bodies”. Substantially all of our management is currently located in the PRC, and if they remain located in the PRC after the effective date of the EIT Law, Yingli Green Energy may be considered a resident enterprise and therefore be subject to the enterprise income tax at the rate of 25% on its global income. The tax consequences of the “resident enterprise” treatment are currently unclear, as they will depend on regulations that have not yet been issued that would implement the EIT Law, and on local tax authorities’ ability to follow such regulations in tax administration. See “Dividends payable by us to our foreign investors may become subject to withholding taxes under PRC tax laws” and “Gains on the sales of our shares or ADSs may become subject to PRC income taxes” below.

Dividends payable by us to our foreign investors may become subject to withholding taxes under PRC tax laws.

 

Under the EIT Law, dividends payable to foreign investors which are “derived from sources within the PRC” may be subject to income tax at the rate of 20% by way of withholding. Since we are a holding company and substantially all of our income will come from dividends that we receive from our PRC subsidiaries, dividends that we declare from such income may be deemed “derived from sources within the PRC” for purposes of the EIT Law and therefore subject to a 20% withholding tax. While the EIT Law stipulates that such taxes may be exempted or reduced, no rules or guidance implementing the EIT Law have been issued yet, and it is unclear under what circumstances, and to what extent, such tax would be exempted or reduced.

 

The EIT Law also provides that dividend income between “qualified resident enterprises” is exempted income, which may imply that dividends we receive from our PRC subsidiaries would be exempt from tax, but we cannot assure you that we will be able to obtain such treatment for dividends paid to us by our PRC subsidiaries. Moreover, if we are deemed to be a PRC resident enterprise under the EIT law, a foreign investor in us may be able to claim the benefits of any income tax treaty between his or her resident country and China. We cannot assure you, however, that treaty benefits will be available to you (for example with respect to the withholding tax rate on dividends) even if we are deemed a PRC resident enterprise.

 

If we are required under the EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders and ADSs holders, the value of your investment in our ADSs may be materially and adversely affected.

 

Gains on the sales of our shares or ADSs may become subject to PRC income taxes.

 

Under the EIT Law, our foreign enterprise shareholders and enterprise ADSs holders may be subject to a 20% income tax upon any gains they realize from the transfer of their shares or ADSs, if such income is regarded as income from “sources within the PRC”. What will constitute “sources within the PRC” and whether or not there will be any exemption or reduction in taxation for our foreign corporate investors, however, are unclear since no rules or guidance concerning the new tax law has been issued yet. If our foreign shareholders and ADSs holders are required to pay PRC income tax on the transfers of their shares or ADSs, the value of your investment in our ADSs may be materially and adversely affected.

 

We rely principally on dividends and other distributions on equity paid by our principal operating subsidiaries, including Tianwei Yingli and Yingli China, and limitations on their ability to pay dividends to us could have a material adverse effect on our business and results of operations.

 

We are a holding company, and we rely principally on dividends and other distributions on equity paid by our principal operating subsidiaries, including Tianwei Yingli and Yingli China, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. If Tianwei Yingli or Yingli China incurs debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

 

As entities established in China, Tianwei Yingli and Yingli China are subject to certain limitations with respect to dividend payments. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Following its conversion into a Sino-foreign equity joint venture, Tianwei Yingli is also required to set aside each year a percentage, as decided by its board of directors, of its after-tax profits based on PRC accounting standards to its reserve fund, enterprise development fund and employee bonus and welfare fund. As of September 30, 2007, such restricted reserves of Tianwei Yingli amounted to RMB 31.2 million (US$4.2 million) and our accumulated profits that were unrestricted and were available for

distribution amounted to RMB 675.7 million (US$90.2 million). Yingli China is also required to allocate a portion of its after-tax profits to its reserve fund and employee bonus and welfare fund. These reserve funds may not be distributed as cash dividends. In addition, if any of our PRC subsidiaries 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. Limitations on the ability of Tianwei Yingli or Yingli China to pay dividends to us could adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business. Accordingly, if for any of the above or other reasons, we do not receive dividends from Tianwei Yingli or Yingli China, our liquidity, financial condition and ability to make dividend distributions to our shareholders will be materially and adversely affected.

 

In addition, under the EIT Law, dividends from our PRC subsidiaries to us may be subject to a withholding tax rate of up to 20%, subject to exemptions or reductions granted by the State Council, unless we are deemed to be a PRC “resident enterprise’’. (See “— We may be deemed a Chinese resident enterprise under the EIT Law and be subject to PRC taxation on our worldwide income”.) Since the implementing rules of the EIT Law have not been issued, it remains unclear as to whether we would be able to obtain exemptions from Chinese withholding taxes for dividends distributed to us by our PRC subsidiaries.

 

Fluctuation in the value of the Renminbi may have a material adverse effect on your Investment.

 

The change in the 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, in a reversal of a long-standing policy, the PRC government announced that Renminbi would be permitted to fluctuate within a narrow and managed band against a basket of specified foreign currencies. Since this announcement, the Renminbi has appreciated against the U.S. dollar by approximately 5.7% as of December 31, 2006 and approximately 4.2% as of September 28, 2007. While international reactions to the Renminbi revaluation have generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible foreign currency policy, which could result in further and more significant appreciation of the Renminbi against the U.S. dollar. In addition, as we rely entirely on dividends paid to us by Tianwei Yingli, any significant foreign currency exchange rate fluctuations of the Renminbi may have a material adverse effect on our reported revenues and financial condition as well as the value of, and any dividends payable on, our ADSs in foreign currency. In addition, to the extent that Tianwei Yingli needs to convert U.S. dollars it receives from this offering in the form of capital contribution or shareholder loan from us into Renminbi for its operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount it receives from the conversion. Conversely, if Tianwei Yingli decides to convert Renminbi into U.S. dollars for the purpose of making dividend payments 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 it distributes to us.

 

Restrictions on currency exchange may limit our ability to receive dividends from Tianwei Yingli and Yingli China and their ability to obtain overseas financing.

 

Tianwei Yingli and Yingli China may convert a portion of Renminbi held by it into foreign currencies to meet its foreign currency obligations, including, among others, payments of dividends declared, if any, in respect of our ordinary shares. Under China’s existing foreign exchange regulations, Tianwei Yingli and Yingli China are able to pay dividends in foreign currencies without prior approval from the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements. However, we cannot assure you that the PRC government will not take measures in the future to restrict access to foreign currencies for current account transactions, including payment of dividends.

Foreign exchange transactions for capital account items, such as direct equity investments, loans and repatriation of investments, by Tianwei Yingli and Yingli China continue to be subject to significant foreign exchange controls and require the approval of PRC governmental authorities, including the SAFE. In particular, if Tianwei Yingli and Yingli China borrows foreign currency-denominated loans from us or other foreign lenders, these loans must be registered with the local offices of the SAFE. These limitations could affect their ability to obtain additional equity or debt funding that is denominated in foreign currencies.

 

PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries.

 

Any capital contributions or loans that we, as an offshore entity, make to Tianwei Yingli or Yingli China, our PRC subsidiaries, including from the proceeds of this offering, are subject to PRC regulations. For example, any of our loans to our PRC subsidiaries cannot exceed the difference between the total amount of investment our PRC subsidiaries are approved to make under relevant PRC laws and the respective registered capital of our PRC subsidiaries, and must be registered with the local branch of the SAFE as a procedural matter. In addition, our capital contributions to our PRC subsidiaries must be approved by MOFCOM or its local counterpart. We cannot assure you that we will be able to obtain these approvals on a timely basis, or at all. If we fail to obtain such approvals, our ability to make equity contributions or provide loans to our PRC subsidiaries or to fund their operations may be negatively affected, which could adversely affect their liquidity and its ability to fund its working capital and expansion projects and meet its obligations and commitments.

 

In addition, our capital contributions and, in limited circumstances, loans, to Tianwei Yingli are also subject to approvals by Tianwei Baobian, the holder of the minority equity interest in Tianwei Yingli. See “Restructuring — Joint Venture Contract — Increase or Reduction of Tianwei Yingli’s Registered Capital”.

 

All employee participants in our existing stock option plans who are PRC citizens may be required to register with SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt additional option plans for our directors and employees under PRC law.

 

On March 28, 2007, SAFE issued the Operating Procedures on Administration of Foreign Exchange regarding PRC Individuals’ Participating in Employee Stock Ownership Plan and Stock Option Plan of Overseas Listed Companies, or the Stock Option Rule. It is not clear whether the Stock Option Rule covers any type of equity compensation plans or incentive plans which provide for the grant of ordinary share options or authorize the grant of restricted share awards. For any plans which are so covered and are adopted by an overseas listed company, the Stock Option Rule requires the employee participants who are PRC citizens to register with SAFE or its local branch within ten days of the beginning of each quarter. In addition, the Stock Option Rule also requires the employee participants who are PRC citizens to follow a series of requirements on making necessary applications for foreign exchange purchase quota, opening special bank account and filings with SAFE or its local branch before they exercise their stock option.

 

The Stock Option Rule has not yet been made publicly available or formally promulgated by SAFE, but SAFE has begun enforcing its provisions. Nonetheless, it is not predictable whether it will continue to enforce this rule or adopt additional or different requirements with respect to equity compensation plans or incentive plans.

 

We have contacted the Baoding branch of SAFE and attempted to submit documents prepared for their registration. The officials at the local SAFE branch in Baoding acknowledged receipt of such documents but refused to indicate whether they would effect the registration under the Stock Option Rule. We are seeking further guidance from the relevant government authorities and will promptly take all steps to comply with their requirements when they become available. To date, we have not

received any notice from SAFE or its local branch in Baoding regarding any legal sanctions to us or our employees. If it is determined that our employee stock option plan is subject to the Stock Option Rule, failure to comply with such provisions may subject us and the participants of our employee stock option plan who are PRC citizens to fines and legal sanctions and prevent us from further granting options under our employee stock option plan to our employees, which could adversely affect our business operations.

 

We face risks related to health epidemics and other outbreaks.

 

Our business could be adversely affected by the effects of avian flu, Severe Acute Respiratory Syndrome, or SARS, or another epidemic or outbreak in China or elsewhere in the world. China reported a number of cases of SARS in April 2003. Since 2004, there have been reports on the occurrences of avian flu in various parts of China, including several confirmed human cases. Any prolonged recurrence of avian flu, SARS or other adverse public health developments in China or other key markets of us may have a material adverse effect on our business operations. These could affect our ability to travel or export our products outside of China or import raw materials, as well as temporary closure of our manufacturing facilities. Such closures or travel or shipment restrictions would severely disrupt our business and 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 ADSs and This Offering

 

The market price for our ADSs has been volatile.

 

The market price for our ADSs has been and will continue to be highly volatile. Since our ADSs became listed on the NYSE on June 8, 2007, the closing prices of our ADSs have ranged from US$10.50 to US$37.85 per ADS, and the last reported trading price on November 6, 2007 was US$35.30 per ADS. The price of our ADSs may continue to fluctuate in response to factors including the following:

 

 

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.

Because the offering price for this offering is substantially higher than our net tangible book value per share, you will incur immediate and substantial dilution.

 

If you purchase ADSs in this offering, you will experience immediate and substantial dilution of approximately US$      per ADS, representing the difference between our net tangible book value per ADS as of September 30, 2007, after giving effect to this offering at the assumed public offering price of US$      per ADS, based on the last trading price of our ADSs on November     , 2007. In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of share options. See “Dilution”.

 

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 in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have 129,923,609 ordinary shares outstanding (assuming that the underwriters do not exercise their over-allotment option and excluding all unvested restricted shares). All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. Substantially all of the remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of either (i) the 180-day lock-up period beginning on June 7, 2007 relating to our initial public offering or (ii) the additional 90-day lock-up period beginning from the date of this prospectus applicable to our directors, officers and the selling shareholders in the offering, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. See “Shares Eligible for Future Sale”. 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 global coordinator. 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.

 

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.

 

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. As a holder of ADSs, you will not be treated as one of our shareholders and you will not have shareholder rights. Instead, the depositary will be treated as the holder of the shares underlying your ADSs. However, you may exercise some of the shareholders’ rights through the depositary, and you will have the right to withdraw the shares underlying your ADSs from the deposit facility as described in “Description of American Depositary Shares — Deposit and Withdrawal” and “Description of American Depositary Shares — Your Right to Receive the Shares Underlying Your ADRs”.

 

Under our current articles of association, the minimum notice period required to convene a general meeting will be ten 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 plan to 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.

The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.

 

Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders’ meetings if you do not vote, unless:

 

 

The effect of this discretionary proxy is that you cannot prevent our ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this discretionary proxy.

 

You may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to you.

 

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for our ADSs 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 our ordinary shares your ADSs represent. However, the depositary is not responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts are made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may have a material and adverse effect on the value of your ADSs.

 

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.

As a holder of our ADSs, your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings and you may not receive 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 you 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 with respect to all holders of ADSs. 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, as a holder of our ADSs, you may be unable to participate in our rights offerings and may experience dilution in your 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 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 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 have 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, shareholders of a Cayman Islands company 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 company incorporated in a jurisdiction in the United States. For example, contrary to the general practice in most corporations incorporated in the United States, Cayman Islands law does not require that shareholders approve sales of all or substantially all of a company’s assets. The limitations described above will also apply to the depositary who is treated as the holder of the shares underlying your ADSs.

 

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 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. See “Enforceability of Civil Liabilities”.

 

We have not determined any specific use for a portion of the net proceeds to us from this offering and we may use such portion of the net proceeds in ways with which you may not agree.

 

We have not allocated a portion of the net proceeds to us from this offering to be used for any specific purpose. Rather, our management will have considerable discretion in the application of such portion of the net proceeds received by us. See “Use of Proceeds”. You will not have the opportunity, as part of your investment decision, to assess whether such proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the proceeds we receive from this offering. Such proceeds may be used for corporate purposes that do not improve our profitability or increase our share price and may also be placed in investments that do not produce income or that may lose value.

 

We have incurred and will continue to incur increased costs as a result of being a public company.

 

As a public company, we have incurred and will continue to incur a significantly higher level of legal, accounting and other expenses than we did as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the NYSE, requires changes in corporate governance practices of public companies. We expect these rules and regulations will continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements relate to our current expectations and views of future events and are contained principally in the sections entitled “Prospectus Summary”, “Risk Factors”, “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors”, all of which are difficult to predict and many of which are beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

 

In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

 

 

This prospectus also contains data related to the PV market worldwide and in China. These market data, including market data from Solarbuzz, a solar energy research and consulting firm, and PV Status Report by the European Commission, include projections that are based on a number of assumptions. The PV market may not grow at the rates projected by the market data, or at all. The failure of the PV 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 prospectus relate only to events or information as of the date on which the statements are made in this prospectus. 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 prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds from this offering of approximately US$      million, after deducting underwriting discount and estimated offering expenses payable by us, and assuming a public offering price of US$      per ADS, based on the last trading price of our ADSs on November  , 2007. A US$1.00 increase (decrease) in the assumed public offering price of US$      per ADS would increase (decrease) the net proceeds to us from this offering by US$      million, after deducting the underwriting discount and estimated aggregate offering expenses payable by us and no other change to the number of ADSs offered by us as set forth on the cover page of this prospectus.

 

We intend to use the net proceeds we receive from this offering for the following purposes:

 

 

We have not yet finalized all of our anticipated expenditures and therefore cannot provide definitive estimates of the exact amounts to be used for each of the purposes discussed above. The amounts and timing of any expenditure will vary depending on the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. Accordingly, our management will have significant discretion in the allocation of the net proceeds we will receive for this offering. Depending on future events and other changes in the business climate, we may determine at a later time to use the net proceeds for different purposes.

 

Pending the use of our net proceeds, we intend to place the net proceeds in short-term bank deposits.

 

Since we are an offshore holding company, we may need to make capital contributions or loans to our PRC subsidiaries such that the net proceeds of the offering can be used in the manner described above. Such capital contributions and loans are subject to a number of limitations and approval processes under PRC laws and regulations. We cannot assure you that we can obtain the approvals from the relevant governmental authorities, or complete the registration and filing procedures required to use our net proceeds as described above, in each case on a timely basis, or at all. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries”.

 

We will not receive any of the proceeds from the sale of ADSs by the selling shareholders. We will not pay to any of our affiliates any of the proceeds received by us from the issuance and sale of ADSs.

 

MARKET PRICE INFORMATION FOR OUR ADSs

 

Our ADSs have been traded on the NYSE under the symbol “YGE” since June 8, 2007. Each ADS represents one ordinary share. On November 6, 2007, the reported last trading price of our ADSs on the NYSE was US$35.30.

 

The table below sets forth, for the periods indicated, the highest and lowest closing prices for our ADSs on the NYSE.

 

 

CAPITALIZATION

 

The following table sets forth our capitalization as of September 30, 2007:

 

 

The as adjusted information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the actual public offering price of our ADSs and other terms of this offering determined at pricing. You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

 

 

 

DILUTION

 

If you invest in our ADSs, your interest will be diluted to the extent of the difference between the public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

 

Our net tangible book value as of September 30, 2007 was approximately RMB 3,484.9 million (US$465.1 million) or RMB 27.46 (US$3.66) per ordinary share and per ADS. Net tangible book value represents our total consolidated assets, minus the amount of our total consolidated intangible assets, total consolidated liabilities and minority interest. Our net tangible book value per share as of September 30, 2007 is calculated as our net tangible book value as of September 30, 2007, without taking into account any other changes in such net tangible book value after September 30, divided by the number of ordinary shares outstanding at September 30, 2007.

 

Without taking into account any other changes in such net tangible book value after September 30, 2007 except for the issuance and sale of          ordinary shares in the form of ADSs offered by us in this offering, at the assumed public offering price of US$      per ADS, based on the last trading price of our ADSs on November   , 2007, and after deduction of underwriting discount and estimated aggregate offering expenses of this offering payable by us, our pro forma net tangible book value as of September 30, 2007 would have increased to US$      million or US$      per ordinary share and per ADS. This represents an immediate increase in net tangible book value of US$      per ordinary share and per ADS to the existing shareholder and an immediate dilution in net tangible book value of US$      per ordinary share and per ADS to investors purchasing ADSs in this offering.

 

The following table illustrates such per share dilution:

 

 

A US$1.00 increase (decrease) in the assumed public offering price of US$      per ADS would increase (decrease) our pro forma net tangible book value after giving effect to this offering by US$      per ordinary share and per ADS and the dilution in pro forma net tangible book value per ordinary share and per ADS to new investors in this offering by US$      per ordinary share and per ADS, assuming no change in the number of ADSs offered by us as set forth on the cover page of this prospectus and without deducting underwriting discount and other offering expenses.

 

The following table summarizes, on a pro forma basis as of September 30, 2007, the differences between existing shareholders and the new investors with respect to the number of ordinary shares in the form of ADSs purchased from us, the total consideration paid and the average price per ordinary share and per ADS. In the case of the ordinary shares purchased by the new investors, the total consideration paid and amounts per share paid are before deducting underwriting discount and

estimated aggregate offering expenses, assuming a public offering price of US$      per ADS, based on the last trading price of our ADSs on November   , 2007.

 

 

The discussion and table above excludes unvested restricted shares and also assumes no exercise of any outstanding options under the 2006 stock incentive plan. As of the date of this prospectus, we have granted 886,629 options and 2,621,060 restricted shares.

 

A US$1.00 increase (decrease) in the assumed public offering price of US$      per ADS would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and the average price per ADS paid by all shareholders by US$      million, US$      million and US$     , respectively, assuming no change in the number of ADSs sold by us as set forth on the cover page of this prospectus and without deducting underwriting discount and other offering expenses.

 

The pro forma information in this section is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual public offering price of our ADSs and other terms of this offering determined at pricing.

 

DIVIDEND POLICY

 

Since its incorporation, Yingli Green Energy has never declared or paid any dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future.

 

Our board of directors has complete discretion on whether to pay dividends, subject, in certain cases, 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 our board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as if they were holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable under the deposit agreement. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars. See “Description of American Depositary Shares”.

 

As we are a holding company incorporated in the Cayman Islands, we primarily rely on dividends paid to us by our subsidiaries in the PRC, including Tianwei Yingli and Yingli China, for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. PRC regulations currently permit payment of dividends only out of accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Neither the registered capital nor these reserves are distributable as cash dividends. In addition, at the discretion of their respective board of directors, Tianwei Yingli is required to allocate a portion of its after-tax profits to its reserve fund, enterprise development fund and employee bonus and welfare fund, and Yingli China is required to allocate a portion of its after-tax profits to its reserve fund and employee bonus and welfare fund. These reserve funds may not be distributed as cash dividends either. Further, if any of our PRC subsidiaries incurs debt in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

 

Under the PRC Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises currently in effect, any dividends payable by foreign-invested enterprises to non-PRC investors are exempt from any PRC withholding tax. Under the EIT Law which will become effective on January 1, 2008, dividends from our PRC subsidiaries to us may be subject to a withholding tax rate of up to 20%, subject to exemptions or reductions granted by the State Council, unless we are deemed to be a PRC “resident enterprise”.

 

Moreover, the EIT Law and Income Tax Law for Individuals provide that an income tax rate of 20% will normally be applicable to dividends payable to non-PRC investors who are individuals or considered as “non-resident enterprise” which have no establishment inside the PRC, or derives income with no substantial connection with its establishment inside the PRC, to the extent such dividends are derived from sources within the PRC, although such income tax may be subsequently exempted or reduced by the State Council. We are a Cayman Islands holding company and substantially all of our income may be derived from dividends we receive from our operating subsidiaries located in the PRC. If we declare dividends from such income, it is unclear whether such dividends will be deemed to be derived from sources within the PRC under the EIT Law and be subject to the 20% income tax. See “Taxation — People’s Republic of China Taxation”.

 

EXCHANGE RATE INFORMATION

 

Our business is primarily conducted in China and a portion of our revenues are denominated in Renminbi. The conversion of Renminbi into U.S. dollars in this prospectus is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus were made at a rate of RMB 7.4928 to US$1.00, the noon buying rate in effect as of September 28, 2007. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On November 6, 2007, the noon buying rate was RMB 7.4515 to US$1.00.

 

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

 

 

Source: Federal Reserve Bank of New York

 

 

ENFORCEABILITY OF CIVIL LIABILITIES

 

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

 

 

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:

 

 

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

 

Substantially all of our current operations are conducted in China, and substantially all of our assets are located in China. A majority of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon us or such persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

 

We have appointed Law Debenture Corporate Services Inc. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

 

Conyers Dill & Pearman, our counsel as to Cayman Islands law, and Fangda Partners, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and the PRC, respectively, would:

 

 

Conyers Dill & Pearman has further advised us that the courts of the Cayman Islands would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment, (ii) such courts did not contravenue the rules of natural justice of the Cayman Islands, (iii) such judgment was not obtained by fraud, (iv) the

enforcement of the judgment would not be contrary to the public policy of the Cayman Islands, (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands, and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.

 

Fangda Partners has advised us further that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments, which do not otherwise violate basic legal principles, state sovereignty, safety or social public interest of the PRC, in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between the PRC and the country where the judgment is made or on reciprocity between jurisdictions. As there currently exists no treaty or other form of reciprocity between the PRC and the United States governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, there is uncertainty whether and on what basis a PRC court would recognize and enforce judgments rendered by U.S. courts.

 

HISTORY AND RESTRUCTURING

 

Our Shareholding and Corporate Structure

 

The following chart sets forth our main operational and shareholding structure immediately prior to this offering.

 

 

Notes:

 

 

Our History