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

LDK SOLAR CO., LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
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)
regulatory or other factors; the ability to obtain necessary financial and other resources at commercially viable
terms; the ability to attract and retain employees necessary to support the Group's growth and general risks
associated with the solar industry.
The Group conducts its principal operations in the PRC and accordingly is subject to special
considerations and significant risks not typically associated with investments in equity securities of United
States and Western European companies. These include risks associated with, among others, the political,
economic, legal environment and social uncertainties in the PRC, government agencies' influence over certain
aspects of the Group's operations and competition in the solar industry.
In addition, the ability to negotiate and implement specific business development projects in a timely and
favorable manner may be impacted by political considerations unrelated to or beyond the control of the Group.
Although the PRC government has been pursuing economic reform policies for the past two decades, no
assurance can be given that the PRC government will continue to pursue such policies or that such policies
may not be significantly altered. There is also no guarantee that the PRC government's pursuit of economic
reforms will be consistent or effective and as a result, changes in the rate or method of taxation and changes in
State policies may have a negative impact on the Group's operating results and financial position.
Currency risk
Substantially all of the revenue generating operations of the Group are transacted in RMB, which is not
fully convertible into foreign currencies.
On July 21, 2005, the People's Bank of China announced that the PRC government reformed the
exchange rate regime by adopting a managed floating exchange rate regime based on market supply and
demand with reference to a basket of currencies. The exchange rate of United States dollars against RMB was
adjusted to RMB8.11 per United States dollar with effect from July 21, 2005, and the RMB has gradually
appreciated against the US dollar since then.
(22) RELATED PARTY TRANSACTIONS
The Group has entered into a number of transactions with related parties. Amounts outstanding and the
amounts of transactions with these related parties for the period from July 5, 2005 to December 31, 2005 and
the year ended December 31, 2006 are as follows:
(a) Transactions
(i) JXLDK signed an agreement on September 22, 2005 to borrow up to US$24,221 from Mr. Peng
which carried an average interest rate of 5.829% in September 2005. During the period from October 27, 2005
to December 31, 2005, JXLDK borrowed from Mr. Peng cumulative loan amount of US$16,109 and at the
same time lent US$5,478 to Saiweng Technology (Suzhou) Co., Ltd. (""Saiweng''), a company controlled by
Mr. Peng. JXLDK borrowed an additional US$8,112 and repaid US$5,354 to Mr. Peng in the first six months
of 2006. In March 2006, JXLDK signed an agreement with Mr. Peng to offset US$5,478 lent to Saiweng
against amounts borrowed from Mr. Peng. In December 2006, JXLDK repaid the remaining US$13,389 to
Mr. Peng. Interest expenses incurred amounted to US$100 and US$781 for the period from July 5, 2005 to
December 31, 2005 and the year ended December 31, 2006.
(ii) JXLDK borrowed US$8,075 interest free loan from a company controlled by Mr. Peng, SZ Liouxin,
in July 2006, which was repaid in December 2006.
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