Stock abbreviation: Changzhou Galaxy Century Microelectronics Co.Ltd(688689) Stock Code: 688689 Changzhou Galaxy Century Microelectronics Co.Ltd(688689) (registered address: No. 19, Changjiang North Road, Xinbei District, Changzhou City)
Prospectus for issuing convertible corporate bonds to unspecified objects
(application draft)
Sponsor (lead underwriter)
December, 2021
statement
The company and all directors, supervisors and senior managers promise that there are no false records, misleading statements or major omissions in the prospectus and other information disclosure materials, and bear corresponding legal liabilities for their authenticity, accuracy and completeness.
The person in charge of the company, the person in charge of accounting and the person in charge of accounting institutions shall ensure that the financial and accounting data in the prospectus are true and complete.
Any decision or opinion made by the CSRC and the exchange on this issuance does not indicate that they guarantee the authenticity, accuracy and completeness of the application documents and the information disclosed, nor do they indicate that they make substantive judgment or guarantee on the profitability, investment value of the issuer or the income of investors. Any statement to the contrary is a false statement.
Once any investor holds the bonds through subscription, transaction, transfer, inheritance or other legal means, it shall be deemed to agree to the trustee agreement, rules of bondholders’ meeting and other relevant agreements on the rights and obligations of the issuer, bondholders, bond trustee and other subjects in this prospectus.
According to the provisions of the securities law, the issuer shall be responsible for the changes in the operation and income of the issuer after the securities are issued according to law. Investors independently judge the investment value of the issuer, make investment decisions independently, and bear the investment risks caused by changes in the operation and income of the issuer or changes in securities prices after securities are issued according to law.
Tips on major events
The company specially reminds investors that before making investment decisions, they must carefully read the text of this prospectus and pay special attention to the following important matters. 1、 The risk that the convertible bonds held by investors who do not meet the appropriateness of investors cannot be converted into shares after entering the conversion period
The company is a listed company on the science and innovation board. The investors who issue convertible corporate bonds to unspecified objects this time and participate in the conversion of convertible bonds into shares shall meet the suitability management requirements of stock investors on the science and innovation board. If the convertible bond holder fails to meet the requirements for the appropriateness management of stock investors on the science and innovation board, the convertible bond holder will not be able to convert its convertible bonds into company shares.
The company has set redemption terms for this issuance of convertible bonds, including maturity redemption terms and conditional redemption terms. The maturity redemption price is determined by the board of directors (or the person authorized by the board of directors) through consultation with the sponsor (lead underwriter) according to the market conditions at the time of issuance, and the conditional redemption price is the face value plus the accrued interest for the current period. If the holders of the company’s convertible bonds do not meet the suitability requirements of the stock investors of the science and innovation board, and the convertible bonds they hold are facing redemption, considering that the convertible bonds they hold cannot be converted into the company’s shares, if the redemption price determined by the company according to the redemption terms agreed in advance is lower than the price (or cost) of the convertible bonds obtained by the investors, Investors are at risk of loss due to low redemption price. 2、 On the credit rating of the convertible bonds issued by the company this time
The convertible corporate bonds issued by the company to unspecified objects are rated by Dongfang Jincheng International Credit Evaluation Co., Ltd. according to the rating report issued by Dongfang Jincheng, the credit rating of the convertible corporate bonds is a +, Changzhou Galaxy Century Microelectronics Co.Ltd(688689) subject credit rating is a +, and the rating outlook is stable.
After the convertible bonds issued this time are listed, during the duration of the bonds, Dongfang Jincheng will track and rate the credit status of the bonds regularly or irregularly, and issue a tracking and rating report. Regular follow-up rating shall be conducted at least once a year during the duration of the bond. If the credit rating of convertible corporate bonds is reduced due to external business environment, the company’s own situation or changes in rating standards, it will increase the investment risk of investors and have a certain impact on the interests of investors.
3、 Explanation on no guarantee provided for this issuance
There is no guarantee for the issuance of convertible bonds to unspecified objects. Please note that the convertible corporate bonds may have cashing risk due to the absence of guarantee. 4、 Special risk tips
The company urges investors to carefully read the full text of “risk factors” in this prospectus and pay special attention to the following risks:
(i) Project risk
1. Implementation risk of investment projects with raised funds
The implementation of the investment project with raised funds will greatly promote the company’s development strategy, performance level and sustainable development level. If there are major adverse changes in product R & D, market development and external economic environment during the project implementation, there will be uncertainty whether the project invested by the raised funds can be implemented on time, whether the products can finally be successfully recognized by the market, whether the project implementation effect can meet the expectation, and whether the expected benefits of the project can be realized, So as to bring certain risks to the company’s production, operation and future development. 2. Risks of depreciation of new fixed assets of raised funds investment projects affecting the company’s operating performance
The investment project with raised funds involves large capital expenditure, and the new fixed assets are mainly machinery and equipment. After the construction of all the investment projects with raised funds is completed, the annual depreciation expense will increase significantly. As it still takes some time for project construction, capacity release and economic benefits, the new depreciation will affect the company’s net profit and return on net assets to a certain extent, and have a certain negative impact on the company’s overall profitability.
3. Risk that the project invested with raised funds has not obtained the EIA approval
After the completion of the investment project with raised funds, it will help to comprehensively improve the company’s core competitiveness and have a positive impact on the company’s future development strategy and product technology layout. At present, the EIA approval of the raised investment project is being actively promoted. If the review and consent of the relevant environmental protection authorities on the project environmental impact report form and other relevant approval / filing documents cannot be obtained in the future, it will have a great impact on the investment progress and construction progress of the raised investment project.
（2） Operational risk
1. High risk of chip outsourcing
In each period of the reporting period, the amount of purchased chips of the company was 107.5692 million yuan, 90.036 million yuan, 118.6266 million yuan and 131.3235 million yuan, and the proportion of purchased chips in the chip demand of the company was high. Chips are the core components of discrete devices. Although the company has mastered the basic principles of chip design such as semiconductor diodes and has the ability to identify the performance of discrete device chips and self-made some power diode chips, it does not have the ability to manufacture all chips required for production and operation. At present, the market supply of small signal devices, optoelectronic devices and some power device chips purchased by the company is sufficient, and the chip production line will be built this time. However, if some chips cannot be purchased due to various external reasons, or the raised investment fails to achieve the expected benefits, it will have a significant adverse impact on the production and operation of the company.
2. Market competition risk
In the international market, after more than 60 years of development, international leading enterprises represented by Infineon, ansenmey and Italian French semiconductor have occupied the main market share of global semiconductor discrete devices. At the same time, international leading enterprises master multi specification medium and high-end chip manufacturing technology and advanced packaging technology, and their R & D investment intensity is also higher than that of Chinese enterprises. They maintain an advantageous position in the global competition and almost monopolize the application fields with high profit margins such as automotive electronics, industrial control and medical equipment.
The Chinese market is relatively scattered, with a high degree of marketization, and companies are in a state of full competition. At present, China has become the world’s largest semiconductor discrete device market and maintained a rapid development speed, which may attract more competitors to join, resulting in intensified market competition. If the company’s R & D effect does not meet the expectations and can not meet the requirements of emerging markets and fields, the company’s market share is at risk of decline.
3. Raw material price fluctuation risk
During the reporting period, the company’s material cost accounted for more than 60% of the cost, which had a great impact on the company’s gross profit margin. The price of main raw materials required by the company is closely related to the price of bulk commodities such as silicon, copper and oil, and is affected by many factors such as market supply and demand, national macro-control, International Geopolitics and so on. If the price of the above raw materials fluctuates sharply, it will directly lead to the fluctuation of the company’s product cost, and then affect the company’s profitability. （3） Risks related to the issuance of convertible bonds
1. Principal and interest payment risk
During the duration of convertible bonds, the company shall pay interest on the convertible bonds that have not been converted into shares and cash the principal at maturity. In addition, when convertible bonds trigger resale conditions, if investors exercise the resale right, the company will face greater cash expenditure pressure in a short time, which will have a negative impact on the production and operation of the enterprise. Therefore, if the company fails to achieve the expected return in its business activities and fails to obtain sufficient funds from the expected repayment sources, it may affect the company’s timely and full payment of the principal and interest of convertible bonds and the acceptance ability of investors during resale.
2. Risk of failure to convert convertible bonds into shares at maturity
The convertible bond conversion is affected by many factors, such as the conversion price, the company’s stock price during the conversion period, investor preferences and expectations. If the convertible bonds cannot be converted into shares during the conversion period due to the downturn of the company’s stock price or failure to meet the expectations of bondholders, the company shall pay the principal and interest of the convertible bonds that have not been converted into shares, thus increasing the company’s financial expense burden and capital pressure.
3. Risk that the downward revision clause of convertible bond price is not implemented or the downward revision range is uncertain during the duration of convertible bonds. The company has set the downward revision clause of convertible bond price in this convertible bond issuance, but when triggering the downward revision clause of convertible bond price in the future, the board of directors of the company may consider based on multiple factors such as market factors, business development and financial status of the company, The company does not propose a downward correction plan for the conversion price, or although the board of Directors proposes a downward correction plan for the conversion price, the plan fails to pass the vote of the general meeting of shareholders and thus fails to be implemented. If the above circumstances occur, the holders of convertible bonds may face the risk that the downward correction clause of the conversion price cannot be implemented during the duration. In addition, if the board of directors of the company proposes a downward correction scheme for the conversion price and is approved by the general meeting of shareholders, but the downward correction range of the conversion price in the correction scheme is uncertain, the stock price of the company may still be lower than the corrected conversion price. The occurrence of the above situation may still lead to the risk that the convertible corporate bonds held by investors cannot be converted into shares.
4. Investment value risk of convertible bonds
The duration of this issue of convertible bonds is long, and the market interest rate and stock price level affecting the investment value of this convertible bond are affected by many uncertain factors such as international and Chinese political and economic situation, overall operation of national economy, national monetary policy and so on. Therefore, during the duration of the convertible bond, when the above factors change adversely, the value of the convertible bond may decrease accordingly, resulting in losses to investors.
5. Risk of dilution of earnings per share and return on net assets after share conversion
After the issuance of convertible bonds, if the bondholders convert most or all of the convertible bonds into the company’s shares within a short period after the start of the share conversion period, the company’s share capital and net assets will increase to a certain extent. However, it will take a certain time from the investment of the raised funds to the generation of income, so the growth rate of the company’s profit may be less than that of the total share capital and net assets. After the funds raised in this offering are in place, the company has the risk of decline in earnings per share and return on net assets. 5、 Measures to fill the diluted immediate return of this offering and commitments of relevant subjects
(i) Main measures taken by the company to dilute the immediate return of this offering
In order to protect the legitimate rights and interests of the majority of investors and reduce the impact of this issuance on the dilution of the immediate return, the company plans to take a variety of measures to ensure the effective use of the funds raised in this issuance and effectively prevent the risk of dilution of the immediate return. The specific measures taken by the company to fill the immediate return are as follows:
1. Actively and steadily promote the construction of raised investment projects, and improve operating efficiency and profitability
The implementation of this raised investment project will enhance the company’s profitability and core competitive strength, optimize the company’s capital structure, enhance the company’s influence and provide guarantee for subsequent business development. The company will actively and steadily promote the construction of raised investment projects, improve the utilization efficiency of raised funds, and strive to realize the expected benefits of raised investment projects as soon as possible, so as to improve the profitability of the company, enhance shareholder returns, and reduce the risk of dilution of immediate returns caused by issuance. 2. Strengthen the management of raised funds and ensure the standardized and effective use of raised funds
After the raised funds of this offering are in place, The company will strictly implement the securities law of the people’s Republic of China, the measures for the administration of securities issuance and registration of companies listed on the science and Innovation Board (for Trial Implementation), the rules for the listing of shares on the science and Innovation Board of Shanghai Stock Exchange, and the guidelines for the application of self regulatory rules for companies listed on the science and Innovation Board of Shanghai Stock Exchange No. 1 – standardized operation The guidelines for the supervision of listed companies No. 2 – regulatory requirements for the management and use of raised funds by listed companies and the requirements of the company’s raised funds management system shall store and use the raised funds in a special account to ensure that the raised funds are fully and effectively utilized according to the original purpose and effectively prevent the use risk of raised funds. 3. Continuously improve corporate governance and improve the company’s operation and management level
The company will continuously improve the corporate governance structure in strict accordance with the requirements of laws, regulations and normative documents such as the company law of the people’s Republic of China, the securities law of the people’s Republic of China and the governance standards for listed companies, so as to ensure that shareholders can fully exercise their rights, the board of directors can exercise their powers in accordance with the provisions of the articles of association, and independent directors can earnestly perform their duties, The board of supervisors can independently and effectively exercise the right to supervise and inspect the company’s directors, senior managers and the company’s finance, and provide scientific and effective governance structure and system guarantee for the sustainable and stable development of the company. At the same time, the company will continue to improve business processes, improve business efficiency, strengthen the management of R & D, procurement, sales and other links, and further improve the company’s operation and management level.
4. Further improve the profit distribution policy, especially the cash dividend policy, and optimize the return on investment mechanism
According to the opinions on Further Strengthening the protection of the legitimate rights and interests of small and medium-sized investors in the capital market issued by the State Council, the notice on further implementing matters related to cash dividends of listed companies issued by the CSRC and the guidelines for the supervision of listed companies No. 3 – cash dividends of listed companies
