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

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tax rates and other measures. Foreign-invested enterprises that are determined by PRC tax authorities to be manufacturing companies with authorized terms of operation for more than ten years are eligible for: ‚ a two-year exemption from the national enterprise income tax beginning with their first profitable year; and ‚ a 50% reduction of their applicable national enterprise income tax rate for the succeeding three years. The local preferential enterprise taxation treatment is within the jurisdiction of the local provincial authorities as permitted under the current PRC tax laws relating to foreign-invested enterprises. The local tax authorities decide whether to grant any tax preferential treatment to foreign-invested enterprises on basis of their local conditions. The Jiangxi provincial government has announced that energy companies with authorized terms of operation for more than ten years are eligible for: ‚ a five-year exemption from the 3% local enterprise income tax from their first profitable year; and ‚ a 50% reduction of their local enterprise income tax rate for the succeeding five years. Under current PRC laws and regulations, Jiangxi LDK Solar is entitled to a two-year exemption from the national enterprise income tax for 2006 and 2007 and will be subject to a reduced national enterprise income tax rate of 15% from 2008 through 2010. Likewise, Jiangxi LDK Solar is entitled to a five-year exemption from the local enterprise income tax beginning in 2006 and will be subject to a reduced local enterprise income tax rate of 1.5% from 2011 through 2015. When these tax benefits expire, the effective tax rate of our PRC subsidiary will increase, which will result in an increase in our income tax expenses. In March 2007, the National People's Congress of China enacted a new Enterprise Income Tax Law, which will become effective on January 1, 2008. The new tax law would impose a unified income tax rate of 25% on all domestic enterprises and foreign-invested enterprises unless they qualify under certain limited exceptions. The new tax law permits companies to continue to enjoy their existing preferential tax treatment until such treatment expires in accordance with its current terms. Under the new tax law, ""high and new technology enterprises'' specially supported by the PRC government will continue to enjoy a reduced national enterprise tax rate of 15%. The new tax law, however, does not specify what high and new technology enterprises will be eligible for special support from the government. Our wholly owned subsidiary, Jiangxi LDK Solar, obtained the ""high and new technology enterprise'' status in December 2006. Such status is valid for two years and is renewable upon review and approval by the Science and Technology Bureau of Jiangxi Province. If we fail to maintain our status as a ""high and new technology enterprise'' or fail to qualify for special support from the PRC government, we will be subject to the 25% unified enterprise income tax rate beginning in 2011 after our current preferential tax treatment expires. Under the current PRC tax law, dividend payments to foreign investors made by foreign-invested enterprises such as our PRC subsidiary, Jiangxi LDK Solar, are exempt from PRC withholding tax. Pursuant to the new tax law, however, dividends payable by a foreign-invested enterprise to its foreign investors will be subject to a 20% withholding tax, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where we are incorporated, does not have such a tax treaty with China. Although the new tax law contemplates the possibility of exemptions from withholding taxes for China-sourced income of foreign-invested enterprises, the PRC tax authorities have not promulgated any related implementation rules and it remains unclear whether we would be able to obtain exemptions from PRC withholding taxes. In addition, under the new tax law, enterprises organized under the laws of jurisdictions outside China with their ""de facto management bodies'' located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The new tax law, however, does not define the term ""de facto management bodies.'' If a majority of the members of our management team continue to be located in China after the effective date of the new tax law, we may be considered a PRC resident enterprise and therefore subject to PRC enterprise income tax at the rate of 25% on our worldwide income. If our current tax benefits expire or otherwise become unavailable to us for any reason, our profitability may be materially and adversely affected. 24
Our failure to obtain the prior approval of the China Securities Regulatory Commission, or CSRC, for the listing and trading of our ADSs on the New York Stock Exchange could significantly delay this offering or adversely affect our business and reputation and the trading price of our ADSs, and may also create uncertainties for this offering. On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective on September 8, 2006. This regulation, among other things, includes provisions that purport to require that an offshore special purpose vehicle formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to complete the approval process. The application of this new PRC regulation remains unclear with no consensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement. Our PRC counsel, Grandall Legal Group, has advised us that, based on their understanding of the current PRC laws and regulations as well as the procedures announced on September 21, 2006: ‚ The CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to this new procedure; and ‚ In spite of the above, given that we have completed our restructuring before September 8, 2006, the effective date of the new regulation, this regulation does not require an application be submitted to the CSRC for its approval of the listing and trading of our ADSs on the New York Stock Exchange, unless we are clearly required to do so by possible later rules of the CSRC. If the CSRC requires that we obtain its approval prior to the completion of this offering, this offering will be delayed until we obtain CSRC approval, which may take several months. If prior CSRC approval is required but not obtained, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, 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 CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ADSs offered hereby. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. Also, if the CSRC subsequently requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC approval requirement could have a material adverse effect on the trading price of our ADSs. Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to distribute profits to us, or otherwise materially and adversely affect us. The SAFE issued a public notice in October 2005, or the SAFE notice, requiring PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside China, referred to as an ""offshore special purpose company,'' for the purpose of acquiring any assets of or equity interest in PRC companies and raising funds from overseas. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend its SAFE registration with the local SAFE branch with respect to that offshore special purpose 25
Page 1: PROSPECTUS 17,384,000 American Depo
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Page 6 and 7: We were incorporated in the Cayman
Page 8 and 9: percentage of light energy from the
Page 10 and 11: Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏ
Page 12 and 13: (1) Gross profit for the year ended
Page 14 and 15: RISK FACTORS Investment in our ADSs
Page 16 and 17: Reduction or elimination of governm
Page 18 and 19: capacity or to increase our manufac
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Page 24 and 25: Compliance with environmental regul
Page 26 and 27: operations or the price of our ADSs
Page 30 and 31: company in connection with any incr
Page 32 and 33: of approximately $22.05 in the net
Page 34 and 35: outside the United States. As a res
Page 36 and 37: The forward-looking statements cont
Page 38 and 39: CAPITALIZATION The following table
Page 40 and 41: DILUTION If you invest in our ADSs,
Page 42 and 43: DIVIDEND POLICY We have never decla
Page 44 and 45: SELECTED CONSOLIDATED FINANCIAL AND
Page 46 and 47: MANAGEMENT'S DISCUSSION AND ANALYSI
Page 48 and 49: polysilicon prices will decline in
Page 50 and 51: listed public company in the United
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Page 54 and 55: subjective. The assumptions used in
Page 56 and 57: 2006 and February 6, 2007. During t
Page 58 and 59: value of the our business. Under th
Page 60 and 61: Year Ended December 31, 2006 (in th
Page 62 and 63: ""Exchange Rate Information'' in th
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Page 66 and 67: For additional information relating
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Page 72 and 73: module production will increase fro
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Wafering. After passing inspection,
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our revenue and customer base to ta
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‚ Our agreement with E'mei Semi-c
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photovoltaic cell or modules, and w
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A breakdown of our employees by are
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tax treatments to foreign-invested
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On September 21, 2006, the CSRC pub
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Gang Wang is a non-executive direct
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directors on our audit committee wi
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monies of or belonging to us may be
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(10) Vests on July 31, 2007. Brilli
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Securities (USA) LLC, which is a re
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interest-bearing loans directly to
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person, by its duly authorized repr
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History of Securities Issuances The
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persuasive authority in the Cayman
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making any sale by public or privat
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Reports and Other Communications Wi
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Amendment and Termination How may t
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‚ deliver distributions on any AD
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SHARES ELIGIBLE FOR FUTURE SALE Upo
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TAXATION The following summary of m
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individual, up to $3,000 of capital
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person and on sales of ordinary sha
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The estimated offering expenses pay
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Pricing of the Offering Prior to th
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ADS with a view to selling it to th
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EXPENSES RELATING TO THIS OFFERING
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‚ no new admissible evidence rele
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WHERE YOU CAN FIND ADDITIONAL INFOR
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REPORT OF INDEPENDENT REGISTERED PU
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LDK SOLAR CO., LTD. AND SUBSIDIARIE
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