Section 1 Necessity of Issuing Securities and Choosing Their Type
LIZHONG GROUP CO., LTD. (hereinafter referred to as "Lizhong Group" or "the Company" or "the Issuer") is a company listed on the Growth Enterprise Market of the Shenzhen Stock Exchange. To meet the capital needs for the Company's business development, enhance its capital strength, and improve its profitability, in accordance with the "Company Law of the People's Republic of China" (hereinafter referred to as the "Company Law"), the "Securities Law of the People's Republic of China" (hereinafter referred to as the "Securities Law"), the "Administrative Measures for the Registration of Securities Issuance by Listed Companies" (hereinafter referred to as the "Registration Measures"), and other relevant laws, regulations, and normative documents such as the "Securities and Futures Legal Application Opinion No. 18," the Company intends to raise funds by issuing convertible corporate bonds to unspecified targets.
I. Type of Securities to Be Issued
The type of securities to be issued is convertible corporate bonds that can be converted into the Company's shares. The convertible corporate bonds to be issued and the shares converted from them will be listed on the Shenzhen Stock Exchange.
II. Necessity of Choosing the Type of Securities to Be Issued
1. Meeting the Capital Demand for the Fundraising Investment Projects
The fundraising investment projects are closely aligned with the Company's main business and long-term development strategy, conform to national industrial policies, and are necessary for the Company's business development. They will further enhance the Company's core competitiveness and sustainable development capabilities. For a detailed analysis, please refer to the "Feasibility Analysis Report on the Use of Raised Funds for the Issuance of Convertible Corporate Bonds to Unspecified Targets by LIZHONG GROUP CO., LTD." announced on the same day.
2. Convertible Bonds Combine Dual Features of Equity and Debt, Helping to Reduce Financing Costs
Compared with traditional debt financing methods such as bank loans, convertible bonds typically have lower coupon rates, which helps to reduce the Company's financing costs. Convertible bonds combine the dual characteristics of equity financing and debt financing. When bondholders convert their bonds into shares, it helps to reduce the Company's debt repayment pressure. By choosing to issue convertible corporate bonds to meet the capital demand for the fundraising investment projects, the Company can optimize its capital structure, reduce financing costs, increase shareholder returns, and meet its long-term stable development needs, which is necessary.
Section 2 Appropriateness of the Scope, Number, and Standards of Issuance Targets
I. Appropriateness of the Scope of Issuance Targets
The specific issuance method for the convertible corporate bonds will be determined through negotiation between the Board of Directors (or its authorized personnel) and the sponsor (underwriter). The issuance targets for the convertible corporate bonds are natural persons, legal persons, securities investment funds, and other investors that hold securities accounts with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited (excluding those prohibited by national laws and regulations).
The convertible corporate bonds to be issued will be preferentially offered to the Company's existing shareholders. The specific proportion of the preferential offering to existing shareholders will be submitted to the shareholders' meeting for authorization to the Board of Directors (or its authorized personnel) to determine based on the specific circumstances at the time of issuance and will be disclosed in the issuance announcement of the convertible corporate bonds. Existing shareholders have the right to waive their pre-emptive subscription rights.
The portion not subscribed by existing shareholders or waived by them will be offered to institutional investors offline and/or through online fixed-price issuance via the Shenzhen Stock Exchange trading system. The remaining portion will be underwritten by the underwriter.