LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

LDK SOLAR CO., LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005
AND THE YEAR ENDED DECEMBER 31, 2006
(Amounts in US$ thousands, except share and per share data)
(1) PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION
Principal activities
The accompanying consolidated financial statements consist of the financial statements of LDK Solar
Co., Ltd. (the ""Company'' or ""LDK''), and its subsidiaries Jiangxi LDK Solar Hi-Tech Co., Ltd.
(""JXLDK'') and LDK International Solar Co., Ltd. (""LDK International''). The Company and its
subsidiaries are collectively referred to as the ""Group''.
The Group's principal activities are manufacture, processing and sale of multicrystalline silicon wafers.
Organization
JXLDK was incorporated on July 5, 2005, in Xinyu, Jiangxi Province, the People's Republic of China
(""PRC'') by Suzhou Liouxin Industry Co., Ltd. (""SZ Liouxin'') and Liouxin Industrial Limited (""HK
Liouxin'') which are both controlled by Mr. Peng. SZ Liouxin is fully owned by HK Liouxin. The registered
shareholders of HK Liouxin are Mr. Xiaofeng Peng (""Mr. Peng'') and his father, who acts as a nominee and
holds the shares in trust for Mr. Peng. JXLDK was in a development stage from July 2005 to April 2006 and
started product sales at the end of April 2006. The development stage activities mainly included constructing
new manufacturing plants, design, formulation and testing of new products. The registered capital of JXLDK
as at the date of its inception and prior to the Reorganization described below was US$29,000. From the
inception date to December 31, 2005, SZ Liouxin and HK Liouxin contributed paid-in capital of US$7,479
and US$4,055 respectively to JXLDK in cash. In 2006 prior to the Reorganization, SZ Liouxin contributed to
JXLDK paid-in capital of US$521, and HK Liouxin contributed US$1,501 in cash and US$15,444 in the
form of property, plant and equipment. The value of these property, plant and equipment, which were newly
acquired by HK Liouxin for the purpose of injecting into JXLDK as paid-in capital, are based on the actual
purchase costs incurred by HK Liouxin to acquire these property, plant and equipment from the vendors.
On May 1, 2006, Mr. Peng, through his wholly owned subsidiary, LDK New Energy Holding Limited
incorporated the Company in the Cayman Islands under the laws of the Cayman Islands as part of the
reorganization of JXLDK (the ""Reorganization''). In connection with the Reorganization and the preparation
for the intended Initial Public Offering, the Company entered into the following series of transactions:
1) The issuance of 75,000,000 ordinary shares of the Company at par value of US$0.10 per share
(adjusted for the ten-for-one share split effected on July 18, 2006) to LDK New Energy Holding Limited
during 2006 in connection with the Reorganization;
2) The Company's acquisition of all interests in JXLDK from SZ Liouxin and HK Liouxin for the
consideration of US$8,000 on July 10, 2006, when government approval was obtained, as part of the
Reorganization;
3) The issuance of exchangeable notes to two unrelated investors for cash consideration of
US$8,000 which is mandatorily convertible into 3,000,000 Series A redeemable convertible preferred
shares as mentioned below (refer to note 14);
4) The issuance of 4,580,000 Series A redeemable convertible preferred shares to a group of
unrelated investors including 3,000,000 Series A-1 redeemable convertible preferred shares converted
from the exchangeable notes above and 1,580,000 Series A-2 redeemable convertible preferred shares
issued for cash consideration of US$7,000 (refer to note 16);
F-9