PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
To: Vivienne St. Claire, Partner; Robert Adeyemi, Partner
From: Claire Dempsey, Lead Associate; Audrey Zhou, Working Associate
Date: March 3, 2026
Re: Halcyon Semiconductor AG — US ADR IPO: Consolidated Due Diligence Summary and Risk Assessment
Matter No.: 1032-00003
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I. Executive Summary and Purpose
The purpose of this memorandum is to consolidate and synthesize the due diligence findings from all workstreams commenced on January 27, 2026, in connection with the prospective initial public offering in the United States of American Depositary Shares ("ADSs") representing ordinary shares of Halcyon Semiconductor Aktiengesellschaft ("Halcyon," the "Company," or the "Issuer") through a Level III American Depositary Receipt ("ADR") program. Calderwood & Harkness LLP ("C&H") serves as US securities counsel to the Issuer in connection with this transaction. This memorandum synthesizes findings from seven separate due diligence memoranda covering the following workstreams: (i) corporate and organizational matters; (ii) material contracts; (iii) intellectual property; (iv) litigation and regulatory proceedings; (v) environmental and manufacturing compliance; (vi) employee benefit plans and compensation; (vii) related-party transactions; and (viii) sanctions, anti-corruption, and export controls (treated as a sub-workstream of the regulatory review but producing a standalone memorandum given the sensitivity and complexity of the semiconductor export control issues).
Due diligence has been conducted in close coordination with Bähr Stein Rechtsanwälte, German counsel to the Issuer (lead partners: Dr. Christoph Maurelban and Johanna Weiß), and Blackmere & Whitfield GmbH Wirtschaftsprüfungsgesellschaft ("B&W"), the Company's independent auditors (engagement partner: Dieter Kaufmann). Each of these parties has contributed to the factual record upon which this memorandum is based, and we have relied upon the representations and documents provided by them in preparing our analysis.
The Offering. The Company proposes to register ADSs on a registration statement on Form F-1 under the Securities Act of 1933, as amended (the "Securities Act"). The base deal contemplates the offering of 21,400,000 ADSs at an anticipated price range of $39.00 to $45.00 per ADS, with targeted gross proceeds of approximately $900,000,000 (at the midpoint of the range). The ADSs are expected to be listed on the Nasdaq Global Select Market under the ticker symbol "HCYN." Each ADS will represent two ordinary shares (Stammaktien) of the Company. The offering will consist of a combination of primary shares (new ordinary shares to be issued by the Company) and secondary shares (existing ordinary shares to be sold by certain selling shareholders, principally Rheintal Industrieholding GmbH).
Purpose of This Memorandum. This memorandum serves three functions:
(a) It summarizes the key findings from each due diligence workstream, organized thematically and with cross-references to the underlying individual workstream memoranda;
(b) It provides a consolidated risk assessment matrix that prioritizes identified items according to risk level (High, Moderate-High, Moderate, Low-Moderate, and Low) and identifies which items require prospectus disclosure, along with the relevant prospectus sections affected; and
(c) It identifies any potential impediments to SEC registration on Form F-1 and recommends pre-filing remedial actions where appropriate.
Overall Conclusion. Based on the due diligence conducted to date, we have not identified any findings that would constitute an impediment to SEC registration of the ADSs on Form F-1. Several items, however, require careful and prominent prospectus disclosure, and certain pre-filing actions must be completed prior to the confidential submission currently targeted for April 14, 2026. The most significant items requiring attention are (i) the related-party relationship between CEO Dr. Friedrich Wendt and Rheintal Industrieholding GmbH (the Wendt family holding company), (ii) the evolving US and EU export control regulatory landscape as it pertains to the Company's operations in the People's Republic of China through its Shanghai subsidiary, and (iii) a pending patent invalidity challenge before the European Patent Office. Each of these items, and others of lesser significance, is discussed in detail below and reflected in the risk assessment matrix set forth in Section V.
This memorandum should be read in conjunction with Appendices A through D, which provide, respectively, the full risk assessment matrix, a cross-reference table to individual workstream memoranda, a list of key documents reviewed, and an open items tracker.
II. Issuer Profile — Summary of Key Facts
A. Corporate Identity
The full legal name of the Issuer is Halcyon Semiconductor Aktiengesellschaft. The Company is organized as an Aktiengesellschaft (AG), a German public stock corporation, under the laws of the Federal Republic of Germany. It is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Munich under registration number HRB 217458. The registered and principal executive offices of the Company are located at Maximilianstraße 72, 80539 Munich, Germany.
The Company's ordinary shares are currently listed and traded on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) under the ticker symbol FRA: HCY in the Prime Standard segment, which is the most regulated market segment of the Frankfurt Stock Exchange and imposes enhanced transparency and disclosure requirements in line with international standards.
Halcyon was founded in 1997 and has grown to employ approximately 8,400 people worldwide as of the end of fiscal year 2025. The Company operates in the advanced power semiconductor industry, with particular expertise in silicon carbide (SiC) and gallium nitride (GaN) chip technology for applications across the automotive, industrial, and renewable energy sectors. The Company's products are used in electric vehicle powertrains, industrial motor drives, photovoltaic inverters, wind turbine converters, and other high-efficiency power conversion applications.
B. Key Financial Metrics
The following table summarizes key financial data for the Company based on unaudited figures for fiscal year 2025 and audited figures for prior periods, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU:
Revenue has grown at a compound annual growth rate (CAGR) of approximately 9.0% from FY2023 to FY2025, driven principally by increasing adoption of SiC power devices in automotive and renewable energy applications.
As of January 10, 2026, the Company's market capitalization on the Frankfurt Stock Exchange was approximately €8.6 billion. For reference, the EUR/USD exchange rate on that date was €1.00 = $1.078, as published by the European Central Bank.
C. Capital Structure
As of the date of this memorandum, the Company has 215,000,000 ordinary shares (Stammaktien), with no par value (Stückaktien), issued and outstanding. The Company's Satzung (articles of association) provides for authorized capital (genehmigtes Kapital) that permits the Vorstand, with the approval of the Supervisory Board, to issue additional shares.
In connection with the IPO, the Company intends to issue 30,000,000 new ordinary shares, resulting in a post-IPO total of 245,000,000 ordinary shares outstanding. The ADS ratio has been set at 1 ADS = 2 ordinary shares. Accordingly, the 30,000,000 new shares will underlie 15,000,000 ADSs, and additional ADSs will be created from existing shares sold by selling shareholders.
There are no outstanding convertible securities, warrants, or stock options other than the 6,665,000 ordinary shares held by the Halcyon Employee Stock Ownership Trust (ESOT), which are subject to transfer restrictions under the governing trust deed and are not being offered in the IPO.
D. Major Shareholders (Pre-IPO)
The following table sets forth the Company's major shareholders as of the date of this memorandum, prior to giving effect to the IPO:
Rheintal Industrieholding GmbH ("Rheintal") is a German limited liability company (Gesellschaft mit beschränkter Haftung) that serves as the holding company for the Wendt family's investments. Rheintal's Managing Director (Geschäftsführer) is Margarethe Wendt, who is the sister of the Company's CEO, Dr. Friedrich Wendt. This familial relationship is discussed in detail in Section III.G and is flagged as a high-priority disclosure item in the risk assessment matrix.
Kestrel Capital Partners AG is a European technology-focused investment fund based in Glenrock Assurance, Switzerland. Its Managing Partner is Henrik Sørensen. Kestrel acquired its stake in 2015 and has been a long-term strategic investor.
The Halcyon ESOT holds shares for the benefit of eligible employees of the Company and its subsidiaries. The ESOT is governed by German trust law, and shares held in the trust are subject to transfer restrictions set forth in the trust deed.
E. Key Executives and Supervisory Board
The Company's management board (Vorstand) and supervisory board (Aufsichtsrat) are constituted as follows:
Vorstand (Management Board):
Aufsichtsrat (Supervisory Board) — Chair:
The full composition of the Supervisory Board, including employee representatives as required under the German Codetermination Act (Mitbestimmungsgesetz), is set forth in the corporate and organizational due diligence memorandum and will be reflected in the prospectus.
III. Workstream-by-Workstream Summary of Due Diligence Findings
A. Corporate and Organizational
1. Organizational Structure
Halcyon Semiconductor Aktiengesellschaft is duly organized and validly existing under the laws of the Federal Republic of Germany. We have reviewed the Company's Satzung (articles of association) in its most recently amended form, as well as the current extract from the Commercial Register (Handelsregisterauszug) dated January 22, 2026, obtained from the Amtsgericht München, registration number HRB 217458. Based on our review and the analysis provided by Bähr Stein Rechtsanwälte, the Company is in good standing and its corporate existence has been continuously maintained since its founding in 1997.
The Company operates under the dual-board governance structure mandated by the German Stock Corporation Act (Aktiengesetz, "AktG"). The management board (Vorstand) currently comprises five members, as detailed in Section II.E above, and is responsible for the day-to-day management and strategic direction of the Company. The supervisory board (Aufsichtsrat) is chaired by Prof. Dr. Anneliese Voss and exercises oversight functions including the appointment and dismissal of Vorstand members, approval of significant corporate actions, and review of the Company's financial statements.
The Company's corporate governance practices have been reviewed for compliance with both the German Stock Corporation Act and the German Corporate Governance Code (Deutscher Corporate Governance Kodex, or DCGK). The Company's most recent declaration of conformity pursuant to Section 161 AktG, published in December 2025, confirms compliance with the DCGK with specified deviations that are customary for a company of Halcyon's size and industry. These deviations relate primarily to the structure of Vorstand compensation (specifically, the absence of a share-based long-term incentive component, which the Company has indicated it may adopt post-IPO). No deviations were identified that would present concerns for US investors or require unusual prospectus disclosure.
2. Subsidiary Structure
The Company conducts its global operations through a network of subsidiaries. We have reviewed the organizational structure and corporate standing of the following five material subsidiaries:
(a) Halcyon Semiconductor USA Inc. — Incorporated in the State of Delaware; 100% owned by Halcyon Semiconductor AG. Registered agent: Crowne Albany Corporation, 1209 Orange Street, Wilmington, Delaware 19801. Principal office: 2500 Augustine Drive, Suite 100, Santa Clara, California 95054. Employer Identification Number (EIN): 84-3927561. This subsidiary conducts US sales, marketing, and application engineering activities. It is the primary interface between Halcyon and its US customer base. The entity maintains a standard Delaware corporate charter and is in good standing with the Delaware Secretary of State as of the most recent franchise tax filing.
(b) Halcyon Power Solutions GmbH — Organized under German law; registered in Dresden; 100% owned by Halcyon Semiconductor AG. This subsidiary operates the Company's silicon carbide fabrication facilities. Fab 2 is fully operational and produces SiC wafers and die for automotive and industrial applications. Fab 3, an expansion facility, is currently under construction at the adjacent site in Dresden, with an anticipated operational date in the second half of 2027. The construction of Fab 3 is a significant component of the IPO use of proceeds, with approximately $280,000,000 of net proceeds to be allocated to this project.
(c) Halcyon Asia Pacific Pte. Ltd. — Incorporated in Singapore; 100% owned by Halcyon Semiconductor AG. This subsidiary serves as the Company's hub for sales and distribution activities across the Asia-Pacific region, with particular focus on Japan, South Korea, and Southeast Asian markets.
(d) Halcyon Shanghai Semiconductor Co., Ltd. — Organized as a wholly foreign-owned enterprise (WFOE) under the laws of the People's Republic of China; 100% owned by Halcyon Semiconductor AG. This subsidiary conducts sales, customer support, and engineering activities in the PRC market. It does not operate any fabrication or manufacturing facilities. The export control implications of this entity's operations are discussed in detail in Section III.H below.
(e) Halcyon Automotive Components s.r.o. — Organized under Czech law; registered in Brno, Czech Republic; 100% owned by Halcyon Semiconductor AG. This subsidiary operates a module assembly and testing facility that serves the Company's automotive customer base. The facility packages and tests SiC and GaN power modules for integration into electric vehicle powertrains and other automotive applications.
All five material subsidiaries have been confirmed as wholly owned by Halcyon Semiconductor AG, either directly or through intermediate holding structures. No minority interests, joint ventures, or unconsolidated affiliates with material operations were identified. Good standing (or the local law equivalent thereof) has been confirmed in all relevant jurisdictions through the review of Commercial Register extracts, certificates of good standing, annual return filings, and comparable local compliance documentation.
3. Authorized Capital and Share Issuance
We have reviewed the authorized capital (genehmigtes Kapital) provisions contained in the Company's Satzung. The currently effective authorized capital provision, adopted by the shareholders' meeting (Hauptversammlung) in June 2024, permits the Vorstand, with the approval of the Aufsichtsrat, to issue up to 50,000,000 new ordinary shares against cash or in-kind contributions through June 2029. This authorized capital is sufficient to permit the issuance of the 30,000,000 new shares contemplated by the IPO.
The issuance of new shares in connection with the IPO will require the exclusion of statutory pre-emptive rights (Bezugsrechtsausschluss) for existing shareholders. Under the AktG, such an exclusion requires the approval of the Aufsichtsrat and must satisfy the requirements of a justified business interest. We are coordinating with Bähr Stein Rechtsanwälte on the preparation of the Aufsichtsrat resolution and the accompanying justification report (Bericht des Vorstands), which must satisfy the standards established by German case law (including the Harborview Group/Nold and Mangusta/Commerzbank decisions) regarding the proportionality of pre-emptive rights exclusions. We do not anticipate any difficulties in obtaining this approval given the precedent established by other German AG issuers that have conducted US ADR offerings.
Other than the 6,665,000 ordinary shares held by the ESOT, there are no outstanding convertible securities, warrants, stock options, or other instruments that could result in the issuance of additional shares or dilution of existing shareholders. The ESOT shares are fully issued ordinary shares held in trust and do not represent a contingent equity obligation.
4. LEI and Registrations
The Company's Legal Entity Identifier (LEI) is 5299007KBTVZ3XQHGL48, issued by Pemberton Services Inc. and currently active and in good standing with the Global LEI Foundation. The Company does not currently have a Central Index Key (CIK) number assigned by the SEC; a CIK will be obtained upon the Company's initial filing on the EDGAR system in connection with the confidential submission of the draft registration statement on Form F-1.
5. Findings / Risk Items
No material deficiencies were identified in the Company's corporate organization, subsidiary structure, or governance framework. The Company is duly organized, validly existing, and in good standing in all relevant jurisdictions.
Low Risk: The principal action item arising from this workstream is the need to obtain the formal Aufsichtsrat resolution authorizing the new share issuance and the exclusion of pre-emptive rights (Bezugsrechtsausschluss) prior to the SEC filing. We are coordinating with Bähr Stein on the timing and content of this resolution and expect it to be adopted at a special meeting of the Aufsichtsrat scheduled for late March 2026. This item is tracked in the open items log (Appendix D).
B. Material Contracts
1. Scope of Review
We have reviewed all contracts meeting the materiality threshold for disclosure under Form F-1 and Form 20-F, applying a quantitative threshold of €10,000,000 or more in annual value and a qualitative threshold that captures contracts material to the Company's business operations, competitive position, or financial condition regardless of dollar amount. The categories of contracts reviewed include supply agreements (both raw material procurement and customer supply), technology licenses and joint development agreements, the Company's revolving credit facility and other financing arrangements, real property leases for manufacturing and office facilities, and intercompany agreements among Halcyon entities.
2. Key Findings
a. Revolving Credit Facility. The Company maintains a syndicated revolving credit facility (the "Facility") with a consortium of European and US financial institutions, with Adriatic Trust Bank acting as administrative agent. The Facility has a total committed amount of €500,000,000 and includes a US dollar-denominated tranche of $100,000,000 that was drawn in connection with the Company's 2024 capital expenditure program. The Company intends to repay the outstanding $100,000,000 US dollar tranche from the net proceeds of the IPO.
The Facility agreement contains a change-of-control clause that is triggered if any person or group of persons acting in concert acquires more than 30% of the outstanding voting shares of the Company. We have analyzed whether the IPO would trigger this provision and have concluded that it would not, because the IPO involves the issuance of new shares (which dilutes, rather than concentrates, ownership) and the sale of existing shares by Rheintal (which reduces Rheintal's ownership from 22.3% to approximately 16.1%). No single shareholder or shareholder group will exceed the 30% threshold as a result of the IPO. The Facility does, however, require the Company to provide written notice to the administrative agent of any new equity listing within 15 business days of the listing becoming effective. This notification is ministerial in nature and does not require lender consent.
The material terms of the Facility, including the interest rate (EURIBOR plus a margin of 125 basis points, or SOFR plus a margin of 150 basis points for the US dollar tranche), financial covenants (net leverage ratio not to exceed 3.0x; interest coverage ratio not less than 4.0x), and maturity date (June 2028), will need to be disclosed in the prospectus under "Use of Proceeds," "Management's Discussion and Analysis," and "Description of Indebtedness."
b. Major Supply Agreements. We have reviewed the Company's key raw material supply agreements, with particular focus on the procurement of silicon carbide substrates and gallium nitride wafers, which are critical inputs for the Company's fabrication processes. The Company maintains long-term supply agreements with three primary substrate suppliers, each with terms ranging from three to five years and containing automatic renewal provisions.
Two of these supply agreements contain assignment restrictions and change-of-control notification requirements. Specifically, each requires the Company to provide written notification to the supplier of any new equity listing within 30 days of the listing date. Importantly, neither agreement requires the supplier's consent to the listing, and neither agreement contains a termination right triggered by a change of listing status. The notification obligations are ministerial in nature and can be readily satisfied.
The remaining supply agreements do not contain change-of-control or listing notification provisions and are not affected by the IPO.
c. Customer Contracts. The Company's revenue is derived from supply agreements with major automotive original equipment manufacturers (OEMs), industrial equipment manufacturers, and renewable energy system integrators. We have reviewed the Company's top twenty customer contracts by revenue, representing approximately 72% of FY2025 consolidated revenue.
The majority of these contracts contain stringent confidentiality provisions that restrict the Company's ability to publicly disclose the identity of the customer, the specific terms of the agreement (including pricing, volume commitments, and duration), and the nature of the products supplied. These confidentiality provisions are standard in the automotive semiconductor supply chain, where OEMs closely guard their supplier relationships and component specifications.
We recommend that the deal team evaluate whether confidential treatment requests (CTRs) will be necessary in connection with the filing of any customer contracts as exhibits to the Form F-1. Under the SEC's revised confidential treatment procedures (effective 2019), the Company may redact confidential information from material contracts filed as exhibits without submitting a formal CTR, provided that the redacted information is both (i) not material and (ii) the type of information that the Company treats as private or confidential. For any redactions involving material terms, a formal CTR may be required.
d. Joint Development Agreements. The Company maintains several technology co-development agreements with academic institutions and industry partners relating to next-generation SiC crystal growth techniques and GaN-on-Si device architectures. We have reviewed these agreements for intellectual property assignment and licensing implications. All reviewed agreements contain clear provisions allocating foreground IP (generated during the collaboration) and background IP (pre-existing), and none of the agreements impose restrictions on the Company's ability to commercialize its technology or conduct an equity offering. No restrictions were identified that would impede the IPO.
e. Lease Agreements. We have reviewed the Company's material real property leases, including the Munich headquarters lease, the Dresden Fab 2 and Fab 3 site leases, and the Brno assembly facility lease. None of these leases contain change-of-control provisions or assignment restrictions that would be triggered by the IPO. The Munich headquarters lease has a remaining term of approximately nine years (expiring 2035) with two five-year renewal options. The Dresden fabrication site leases are long-term ground leases (Erbbaurechte) with terms extending to 2057 and 2062, respectively.
3. Findings / Risk Items
Moderate Risk: The material terms of the revolving credit facility must be disclosed in the prospectus, including the intended use of $100,000,000 of IPO proceeds for repayment of the outstanding US dollar tranche. The change-of-control provision should be described, along with the Company's analysis that the IPO does not trigger this provision.
Low Risk: The supply agreement notification requirements are ministerial in nature and do not present blocking consent rights. The Company's legal team should ensure that notifications are prepared and sent within 30 days of the listing date.
Low-Moderate Risk: The confidentiality provisions in customer contracts should be evaluated in conjunction with the SEC filing process to determine whether confidential treatment requests will be necessary. The Company's General Counsel, Wilhelm Ostermann, has indicated that the Company's automotive OEM customers are sensitive about public disclosure of supplier relationships, and the Company may need to describe its customer base in general terms rather than by name.
C. Intellectual Property
1. Patent Portfolio
Halcyon holds a substantial and strategically significant portfolio of patents relating to SiC and GaN power semiconductor technology. As of the due diligence cut-off date, the Company's patent portfolio comprises approximately 1,240 issued patents and 380 pending patent applications across multiple jurisdictions, including Germany, the broader European Union (via the European Patent Office), the United States, the People's Republic of China, Japan, and South Korea.
The patent portfolio has been reviewed for scope of coverage, validity (including an analysis of potential invalidity risks based on prior art), and expiration dates. The portfolio is well-distributed across the Company's core technology areas, including SiC crystal growth and substrate processing, SiC and GaN device architectures, power module packaging, and gate driver integrated circuits. No material patent expirations are anticipated within the next three years; the earliest significant cluster of expirations relates to first-generation SiC device patents that will begin expiring in 2031, by which time the Company expects to have transitioned its product lines to next-generation designs covered by newer patents.
2. Trade Secrets and Proprietary Technology
A significant portion of the Company's competitive advantage derives from proprietary manufacturing processes, particularly in the areas of SiC crystal growth (including seed crystal preparation and growth rate optimization), SiC wafer slicing and polishing, and GaN epitaxial layer deposition. These processes constitute trade secrets that are protected through a combination of physical security measures, information technology access controls, employee confidentiality agreements, and the Company's compliance with the German Employee Inventions Act (Arbeitnehmererfindungsgesetz).
We have reviewed the Company's standard form employee invention agreements and non-disclosure agreements. The Company maintains a comprehensive program under which all technical employees are required to disclose inventions made in the course of their employment, and the Company exercises its right to claim such inventions under the Arbeitnehmererfindungsgesetz. Compensation for claimed employee inventions is paid in accordance with the statutory guidelines. No disputes regarding employee invention claims are currently pending.
The Company also maintains an NDA program with all suppliers, customers, and collaboration partners that have access to proprietary technical information. We have reviewed a sample of these NDAs and found them to be consistent in their terms and adequate in scope.
3. Trademarks. The "Halcyon" word mark and the "HSAG" Abbreviated mark are registered trademarks in all major jurisdictions where the Company conducts business, including Germany, the EU (via the EUIPO), the United States (via the USPTO), China, Japan, and South Korea. We have conducted a search for potential conflicts with the proposed Nasdaq ticker symbol "HCYN" and have identified no trademark conflicts or pre-existing registrations that would impede the Company's use of this ticker symbol.
4. IP Licensing
We have reviewed the Company's in-bound and out-bound intellectual property licensing agreements. The Company holds several in-bound licenses for foundational semiconductor process technology from academic institutions and industry licensors. These licenses are non-exclusive, perpetual, and fully paid-up (or subject to modest annual royalties that are immaterial in the context of the Company's revenue). No in-bound license contains restrictions on the Company's ability to conduct a public offering, change its listing status, or transfer the licensed technology to subsidiaries.
The Company's out-bound licensing activities are limited; the Company does not broadly license its proprietary technology to third parties. A small number of cross-licensing arrangements exist with other semiconductor companies for the purpose of resolving potential patent overlap in specific product categories. These cross-licenses are customary in the semiconductor industry and do not impose material restrictions on the Company's business.
5. IP Litigation
One pending intellectual property dispute has been identified. A competitor, whose identity is subject to confidentiality provisions in the EPO proceedings, has filed a petition for invalidity before the European Patent Office challenging one of Halcyon's SiC-related patents (European Patent No. EP 2,847,XXX). The challenged patent covers a specific aspect of the Company's proprietary SiC crystal growth process. The petition was filed in September 2025 and is currently in the written proceedings phase before the Opposition Division.
The Company, through its patent counsel and in consultation with Bähr Stein, considers the invalidity challenge to be without merit. The challenged patent was granted after a thorough examination by the EPO, and the prior art cited by the challenger is, in Halcyon's assessment, distinguishable from the claimed invention. Nevertheless, patent validity proceedings inherently involve uncertainty, and the outcome cannot be predicted with certainty.
If the patent were to be invalidated, the potential impact would relate to the Company's ability to prevent competitors from employing the specific SiC crystal growth technique covered by the patent. The Company has indicated that its manufacturing advantage derives from a combination of numerous patents and trade secrets, and that the invalidation of this single patent, while undesirable, would not fundamentally undermine its competitive position. We have requested that the Company's technical team provide a quantitative assessment of the product lines and revenue that rely on the technology covered by this patent for purposes of prospectus risk factor disclosure.
No US patent litigation is currently pending or, to the Company's knowledge, threatened against Halcyon or any of its subsidiaries.
6. Findings / Risk Items
Moderate Risk: The pending EPO patent invalidity challenge should be disclosed in the prospectus in both the risk factors section and the legal proceedings section. The disclosure should describe the nature of the challenge, the Company's defense posture, the current procedural status, and the potential impact on the Company's business if the patent were to be invalidated. We recommend that the Company provide data quantifying the revenue associated with products that rely on the challenged patent so that investors can assess the potential magnitude of the risk.
Low Risk: No US patent litigation is pending or threatened. The Company's trade secret protections, employee invention programs, and NDA practices appear adequate and consistent with industry standards. The trademark portfolio is well-maintained and presents no conflicts with the proposed Nasdaq ticker symbol.
D. Litigation and Regulatory Proceedings
1. Pending Litigation
In addition to the EPO patent invalidity challenge discussed in Section III.C.5 above, we have identified one other pending litigation matter. This is an employment-related proceeding in Germany in which a former employee has filed an unfair dismissal claim (Kündigungsschutzklage) before the Labor Court (Arbeitsgericht) in Munich. The claim was filed in October 2025 and relates to the termination of a mid-level engineering manager. The amount at stake is less than €500,000, comprising severance pay and compensation for alleged lost benefits. The Company considers the claim to be routine and without significant merit. The matter is at the conciliation hearing (Güteverhandlung) stage, and the Company expects resolution through settlement or adjudication within the ordinary course of business.
No litigation is currently pending or, to the Company's knowledge, threatened against Halcyon or any of its subsidiaries in the United States, whether in federal or state court.
We have conducted a comprehensive search of US federal and state court dockets, as well as arbitration filings, and have identified no proceedings involving the Company or its subsidiaries. We have also reviewed the Company's directors' and officers' insurance coverage and confirmed that the Company maintains D&O policies with aggregate coverage of €50,000,000, with a US-specific sub-policy (Side A DIC) providing additional coverage for US-listed company exposures. The Company intends to enhance its D&O coverage in connection with the US listing.
2. Regulatory Investigations
We have reviewed representations from the Company's General Counsel and from Bähr Stein regarding the existence of any pending or threatened regulatory investigations or enforcement proceedings. No pending investigations by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin"), the US Securities and Exchange Commission ("SEC"), the US Department of Justice ("DOJ"), or any other regulatory authority have been identified.
We note that approximately 18 months ago (in approximately September 2024), the Company received an informal inquiry from the Saxon State Agency for Environment, Agriculture and Geology (Sächsisches Landesamt für Umwelt, Landwirtschaft und Geologie) regarding wastewater discharge levels at the Dresden Fab 2 facility. The inquiry related to monitoring data indicating elevated levels of certain chemical compounds in the facility's treated wastewater discharge during a specific period. The Company cooperated fully with the inquiry, provided detailed monitoring data and remediation documentation, and the matter was resolved without any enforcement action, fine, or modification to the facility's environmental permits. Bähr Stein has confirmed that the matter is closed with no residual regulatory exposure.
3. Contingent Liabilities
No material contingent liabilities have been identified beyond the items described above. The total estimated litigation exposure across all pending matters (the EPO patent challenge and the employment proceeding) is less than €1,500,000 in aggregate. This amount is immaterial in the context of the Company's overall financial position and does not require establishment of a significant litigation reserve under IFRS (IAS 37). The Company's auditors, Blackmere & Whitfield, have confirmed that no material contingent liabilities are reflected or required to be reflected in the FY2025 financial statements.
4. Findings / Risk Items
Low-Moderate Risk: The EPO patent invalidity challenge warrants prospectus disclosure as discussed in Section III.C above.
Low Risk: The employment litigation matter is immaterial by any measure and does not require prospectus disclosure. The resolved environmental inquiry at the Dresden Fab 2 facility should be referenced in the environmental risk factors section of the prospectus as background, to provide a complete picture of the Company's environmental compliance history. The disclosure should emphasize that the matter was resolved without enforcement action or fine.
No findings in this workstream constitute an impediment to SEC registration.
E. Environmental and Manufacturing Compliance
1. Manufacturing Facilities
The Company operates the following principal facilities, each of which has been reviewed for environmental permits, regulatory compliance, and operational status:
(a) Munich Headquarters — Located at Maximilianstraße 72, 80539 Munich. This facility serves as the Company's principal design center and administrative headquarters. It does not involve manufacturing operations and therefore does not present significant environmental compliance issues. The facility houses approximately 1,200 employees, including the Company's executive team, design engineering groups, and corporate functions.
(b) Dresden Fab 2 — Operated by Halcyon Power Solutions GmbH. This is the Company's primary operational SiC fabrication facility, located in the Dresden Technology Park (Technologiepark Dresden). Fab 2 produces SiC wafers, processes SiC die, and performs front-end fabrication steps. The facility is fully permitted under the German Federal Immission Control Act (Bundes-Immissionsschutzgesetz, "BImSchG") and holds all required permits for the handling, use, and storage of hazardous materials associated with semiconductor fabrication processes. Approximately 2,800 employees work at this facility.
(c) Dresden Fab 3 — Also to be operated by Halcyon Power Solutions GmbH. Fab 3 is currently under construction at a site adjacent to Fab 2 within the Dresden Technology Park. The facility will expand the Company's SiC fabrication capacity by approximately 60% when fully operational. Building permits have been obtained, and the required environmental impact assessment (Umweltverträglichkeitsprüfung) has been completed and approved by the relevant Saxon state authority. Approximately $280,000,000 of the IPO net proceeds will be allocated to the completion of Fab 3 construction, including clean room build-out and equipment installation. The Company's current target is for Fab 3 to commence initial production in the second half of 2027, with full production capacity expected by mid-2028.
(d) Brno Assembly Facility — Operated by Halcyon Automotive Components s.r.o. This facility performs power module assembly, wire bonding, encapsulation, and electrical testing. The facility holds all required Czech environmental permits, including permits for the use and disposal of solder materials, cleaning solvents, and other chemicals associated with semiconductor packaging operations. Approximately 1,400 employees work at this facility.
2. Environmental Permits and Compliance
All required environmental permits across the Company's manufacturing facilities are current and in good standing. Specifically:
• BImSchG permits for the Dresden Fab 2 facility have been reviewed and confirmed to be in force, with no pending modification proceedings or compliance orders.
• The environmental impact assessment for the Dresden Fab 3 construction was approved by the Saxon State Agency for Environment, Agriculture and Geology in April 2025, subject to standard conditions regarding construction noise, dust mitigation, and drainage management during the construction phase.
• Czech environmental permits for the Brno facility are current, and the facility has passed its most recent regulatory inspection (conducted in June 2025) without any findings.
The semiconductor fabrication process involves the use of regulated hazardous chemicals, including silane (SiH4), hydrogen fluoride (HF), various organic solvents, and process gases. The Company's handling, storage, and disposal of these materials comply with applicable German and EU regulations, including the EU REACH Regulation, the CLP Regulation, and the Seveso III Directive (to the extent applicable based on the quantities of hazardous substances stored on-site). The Company maintains comprehensive environmental, health, and safety (EHS) programs at all manufacturing facilities, with dedicated EHS officers and regular internal and external audits.
As noted in Section III.D.2, the resolved Dresden wastewater inquiry in September 2024 did not result in any enforcement action, fine, or modification to the facility's permits. The Company implemented voluntary improvements to its wastewater treatment system following the inquiry, including the installation of additional filtration capacity and enhanced real-time monitoring of discharge parameters.
3. ESG Considerations
Halcyon publishes an annual sustainability report prepared in accordance with the GRI Standards (Global Reporting Initiative). The most recent report, published in April 2025 for FY2024, includes disclosures on the Company's environmental footprint, energy consumption, water usage, waste generation, and greenhouse gas emissions (Scope 1 and Scope 2).
As the Company prepares for its US listing, several ESG-related disclosure requirements should be considered:
(a) SEC Climate Disclosure Rules: The SEC's climate-related disclosure rules (adopted in March 2024 but subject to ongoing legal challenges and a partial stay) may require the Company to include certain climate-related disclosures in its Form F-1 and ongoing Form 20-F filings, including material climate-related risks, governance and risk management processes, and, for larger registrants, greenhouse gas emissions data. The current status of these rules should be monitored, and the prospectus should include appropriate climate-related risk factors regardless of the mandatory disclosure requirements, as US institutional investors increasingly expect such disclosures.
(b) EU Corporate Sustainability Reporting Directive (CSRD): As a company listed on the Frankfurt Stock Exchange's Prime Standard segment, Halcyon is already subject to the EU CSRD requirements, which mandate comprehensive sustainability reporting under the European Sustainability Reporting Standards (ESRS). Compliance with CSRD will be required beginning with the FY2025 reporting period. The Company's CSRD compliance preparations are well advanced and should provide a solid foundation for any US climate or sustainability disclosures.
(c) Investor Expectations: US institutional investors, particularly those subject to ESG-focused investment mandates, may request detailed carbon footprint data, including Scope 3 emissions (supply chain and downstream use of products). While Scope 3 disclosure is not currently mandatory for the Form F-1, the Company should be prepared to discuss its Scope 3 emissions profile in investor presentations and roadshow materials.
4. Findings / Risk Items
Low Risk: Environmental compliance across all manufacturing facilities appears robust. No outstanding violations, enforcement actions, or compliance orders have been identified. The Company maintains comprehensive EHS programs and environmental management systems at all facilities.
Moderate Risk (Disclosure): The Fab 3 construction project, including its environmental impact assessment, construction timeline, and the allocation of $280,000,000 of IPO proceeds, should be discussed in the prospectus's business description, use of proceeds, and risk factors sections. Construction and execution risks (including the risk of construction delays, cost overruns, and the failure to achieve anticipated production capacity on schedule) should be disclosed as risk factors. The resolved Dresden wastewater inquiry should be referenced in the environmental risk factors as part of the Company's compliance history, with emphasis that the matter was resolved without adverse consequences.
Forward-Looking: The evolving landscape of SEC climate disclosure requirements should be evaluated on an ongoing basis for their impact on the Form F-1 and subsequent annual reporting on Form 20-F. We recommend that the deal team coordinate with the Company's sustainability reporting team to ensure consistency between the Company's GRI/CSRD disclosures and any climate-related disclosures in the prospectus.
F. Employee Benefit Plans and Compensation
1. German Employee Benefit Plans
As a German employer, the Company is subject to the statutory social insurance system (Sozialversicherung), which includes health insurance, pension insurance, unemployment insurance, long-term care insurance, and accident insurance contributions. The Company makes all required employer contributions to these statutory programs and has no outstanding contribution obligations or compliance deficiencies.
In addition to the statutory system, the Company maintains supplementary company pension arrangements (betriebliche Altersversorgung) for its German employees. These arrangements consist of (i) direct pension commitments (Direktzusagen) for senior employees and Vorstand members, providing defined benefit pension entitlements based on years of service and final salary, and (ii) a deferred compensation program (Entgeltumwandlung) available to all eligible German employees, under which employees may voluntarily defer a portion of their salary into a pension vehicle.
The Company's pension obligations have been reviewed in coordination with Blackmere & Whitfield and are reflected in the Company's IFRS financial statements under IAS 19 (Employee Benefits). As of FY2025, the Company's defined benefit pension obligation was approximately €310,000,000, with plan assets (held in contractual trust arrangements, or CTAs) of approximately €275,000,000, resulting in a net pension liability of approximately €35,000,000. The funded status is adequate, and the actuarial assumptions used to calculate the obligation (including discount rate, salary escalation rate, and mortality tables) are consistent with market practice for German employers of comparable size.
2. Halcyon Employee Stock Ownership Trust (ESOT)
The Halcyon ESOT holds 6,665,000 ordinary shares of the Company, representing 3.1% of the pre-IPO outstanding shares. The ESOT was established in 2010 as a mechanism for providing equity-based incentives to eligible employees, and shares have been allocated over time through periodic grants to qualifying employees.
The ESOT is structured as a German trust (Treuhand) governed by a trust deed (Treuhandvertrag). The trustee is Halcyon Mitarbeiter-Treuhand e.V., a registered association that holds the shares for the benefit of ESOT participants. Under the terms of the trust deed, ESOT shares are subject to transfer restrictions that prohibit participants from selling, pledging, or otherwise disposing of their allocated shares for a period of five years from the date of allocation, with limited exceptions for death, disability, and termination of employment.
The ESOT shares are not participating in the selling shareholder component of the IPO. While the ESOT shares will not be subject to the standard underwriter lock-up agreement (which will apply to the Company, Rheintal, Kestrel, and Vorstand members), they will remain subject to the existing transfer restrictions under the trust deed. As a practical matter, the transfer restrictions under the trust deed are more restrictive than a typical 180-day underwriter lock-up, as they impose a rolling five-year restriction from each allocation date. We expect that some ESOT shares allocated in 2020 and earlier will become freely transferable during or shortly after the lock-up period; the prospectus will need to disclose the number of shares potentially eligible for sale under "Shares Eligible for Future Sale."
3. Executive Compensation
We have reviewed the compensation packages for all five members of the Vorstand, including base salary, annual performance-based bonus, supplementary pension entitlements, and any other benefits. The key observations are as follows:
(a) Base Salary and Annual Bonus: Vorstand members receive fixed annual salaries ranging from €480,000 to €980,000, with the CEO, Dr. Friedrich Wendt, at the top of the range. Annual performance-based bonuses are determined by the Aufsichtsrat based on the achievement of financial and operational targets, with target bonus amounts ranging from 50% to 100% of base salary and maximum bonus amounts capped at 150% of base salary.
(b) Long-Term Incentives: The Company does not currently maintain a US-style equity incentive plan (such as a stock option plan or restricted stock unit plan). Vorstand members do not currently receive equity-based long-term compensation. The Company has indicated that it may consider adopting a US-compliant equity incentive plan following the IPO, which would likely require shareholder approval at the next Hauptversammlung. Any such plan would need to comply with both German law (including the AktG provisions on Vorstand compensation and the DCGK recommendations) and US securities laws (including registration on Form S-8).
(c) Compensation Disclosure: As a foreign private issuer, the Company is entitled under Item 6 of Form 20-F to disclose aggregate compensation for all directors and executive officers as a group, rather than providing the individualized named executive officer compensation tables required of domestic US issuers under Regulation S-K Item 402. We recommend that the Company take advantage of this FPI accommodation, subject to discussion with underwriters' counsel regarding investor expectations. We should coordinate with the Company on the level of disclosure to be provided in the prospectus and ensure that the aggregate disclosure is consistent with the Company's German annual report disclosures.
4. Non-German Employee Benefits
We have reviewed the employee benefit programs maintained by each of the Company's material non-German subsidiaries:
(a) Halcyon Semiconductor USA Inc.: The US subsidiary maintains a 401(k) retirement savings plan with a Company matching contribution of up to 4% of eligible compensation. The subsidiary also provides group health insurance (medical, dental, and vision), life insurance, disability insurance, and a flexible spending account program. These are standard employee benefit arrangements for a technology company of comparable size in the United States. We have reviewed the 401(k) plan document and confirmed that it is operated in compliance with ERISA and the Internal Revenue Code. No ERISA-related issues, fiduciary breaches, or prohibited transactions have been identified.
(b) Halcyon Asia Pacific Pte. Ltd. (Singapore): The subsidiary complies with Singapore's Central Provident Fund (CPF) requirements and provides supplementary medical and insurance benefits consistent with local market practice.
(c) Halcyon Shanghai Semiconductor Co., Ltd. (PRC): The subsidiary complies with PRC statutory requirements for social insurance contributions (including pension, medical, unemployment, work injury, and maternity insurance) and the housing provident fund.
(d) Halcyon Automotive Components s.r.o. (Czech Republic): The subsidiary complies with Czech statutory social security and health insurance requirements and provides supplementary benefits consistent with local practice.
No compliance deficiencies or pending disputes have been identified with respect to any non-German employee benefit program.
5. Findings / Risk Items
Low Risk: Employee benefit plans across all jurisdictions are in compliance with applicable legal requirements. Pension obligations are appropriately funded and properly reflected in the Company's IFRS financial statements.
Low Risk: The ESOT structure is straightforward. Shares are subject to adequate transfer restrictions under the trust deed, and the ESOT is not participating in the IPO.
Moderate Disclosure Item: Executive compensation tables for the prospectus should be prepared in accordance with Item 6 of Form 20-F, taking advantage of the FPI aggregate disclosure accommodation. We should coordinate with the Company on the level of detail to be provided, bearing in mind that certain US institutional investors may request more granular compensation information during the roadshow, even if it is not required in the prospectus. The Company should be prepared to address these inquiries.
G. Related-Party Transactions
1. Rheintal Industrieholding GmbH
Rheintal Industrieholding GmbH ("Rheintal") is the Wendt family holding company, which holds 47,945,000 ordinary shares of Halcyon, representing 22.3% of the pre-IPO outstanding shares. Rheintal is a Gesellschaft mit beschränkter Haftung organized under German law and registered in Munich. The sole Managing Director (Geschäftsführer) of Rheintal is Margarethe Wendt, who is the sister of the Company's Chief Executive Officer, Dr. Friedrich Wendt. This familial relationship between the Company's CEO and the controlling person of the Company's largest shareholder is the most significant related-party matter identified in our due diligence and requires prominent and detailed disclosure throughout the prospectus.
Rheintal is participating in the IPO as a selling shareholder. Rheintal intends to sell 8,500,000 ordinary shares (representing 4,250,000 ADSs) in the offering. Following the completion of the IPO (assuming no exercise of the underwriters' option to purchase additional ADSs), Rheintal's ownership will be reduced from 22.3% (47,945,000 shares out of 215,000,000) to approximately 16.1% (39,445,000 shares out of 245,000,000). Even after the IPO, Rheintal will remain the Company's largest single shareholder and will continue to have significant influence over the Company's affairs, including the ability to influence the election of Supervisory Board members and the outcome of matters submitted to a shareholder vote.
2. Transactions Between Halcyon and Rheintal
We have conducted a detailed review of all inter-company transactions between Halcyon and Rheintal, including a review of relevant contracts, invoices, Board minutes reflecting approval of related-party transactions, and the Supervisory Board's arm's-length determination.
The principal transaction is a services agreement under which Rheintal provides certain administrative and strategic consulting services to Halcyon. The services include strategic advisory support, real estate management services (relating to certain properties owned by Rheintal entities that are used by the Company), and investor relations coordination. The fees paid by Halcyon to Rheintal under this services agreement in FY2025 were approximately €1.2 million. The Aufsichtsrat has determined that the services agreement is on arm's-length terms, based on a benchmarking analysis conducted by an independent advisory firm that compared the fees and services to those provided by unrelated third-party service providers for comparable services.
Beyond the services agreement, we have not identified any loans, guarantees, or other financial arrangements between Halcyon and Rheintal or any other entity controlled by the Wendt family. We have reviewed the Company's general ledger entries for FY2023, FY2024, and FY2025 for payments to or from Rheintal, Margarethe Wendt personally, or any other Wendt family entities, and no transactions other than the services agreement have been identified.
3. Supervisory Board Interlocks
Prof. Dr. Anneliese Voss, Chair of the Aufsichtsrat, has been confirmed as independent under both the DCGK standards and, based on our preliminary analysis, the applicable Nasdaq and Exchange Act standards. She has no business relationship with Halcyon, Rheintal, or the Wendt family beyond her service as a Supervisory Board member since 2018. She receives standard board fees and does not hold shares of the Company or Rheintal.
We have identified, however, that one member of the Supervisory Board (whose identity is being confirmed through additional due diligence) has a historical advisory relationship with Kestrel Capital Partners AG, the Company's second-largest shareholder (9.7% pre-IPO). Specifically, this board member provided paid advisory services to Kestrel on semiconductor sector investments during the period from 2017 to 2020. While the advisory engagement has been terminated and no ongoing financial relationship exists, this historical relationship must be assessed under two independence frameworks:
(a) Nasdaq Listing Rule 5605(a)(2): Under the Nasdaq independence standard, a director is not considered independent if, among other things, the director has accepted compensation from the listed company or any parent or subsidiary of the listed company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the independence determination. The compensation received from Kestrel (rather than from Halcyon) would not directly implicate this provision, but the broader "material relationship" prong of the Nasdaq independence test requires consideration of whether the historical Kestrel advisory relationship could be deemed to interfere with the exercise of independent judgment in carrying out board responsibilities.
(b) Exchange Act Rule 10A-3: For purposes of audit committee membership, Rule 10A-3(b)(1) prohibits any member of the audit committee from receiving, directly or indirectly, any consulting, advisory, or other compensatory fee from the issuer or any subsidiary thereof (other than board compensation). The historical advisory relationship with Kestrel (a shareholder, not the issuer) does not directly implicate Rule 10A-3, but the analysis should consider whether payments from Kestrel could be characterized as indirect payments from the issuer if Kestrel's investment in Halcyon is viewed as creating an affiliate relationship.
We are conducting a detailed independence assessment and expect to complete it prior to the first draft F-1 circulation. We note that, as a foreign private issuer, Halcyon is entitled to rely on certain FPI exemptions under Nasdaq Listing Rule 5615(a)(3), which permits foreign private issuers to follow home-country corporate governance practices in lieu of certain Nasdaq corporate governance standards, provided that the Company discloses the significant differences between its home-country practices and the Nasdaq standards that would otherwise apply.
4. Other Related-Party Matters
We note for accuracy that Dr. Friedrich Wendt and Margarethe Wendt are siblings — Dr. Wendt is her brother. An earlier internal draft of the due diligence questionnaire referred to the relationship as "brother-in-law," which is incorrect. This correction has been communicated to the transaction team and reflected in all workstream memoranda.
No other members of the Vorstand have disclosed material related-party relationships, financial interests in the Company's significant customers or suppliers, or other conflicts of interest that would require prospectus disclosure. The Company's related-party transaction policies, which require Aufsichtsrat review and approval of any transaction between the Company and a member of the Vorstand, a member of the Aufsichtsrat, or a shareholder holding more than 10% of the Company's shares, appear robust and have been consistently applied.
5. Findings / Risk Items
High Risk (Disclosure): The Wendt family relationship — specifically, the fact that the Company's CEO (Dr. Friedrich Wendt) is the brother of the Managing Director (Margarethe Wendt) of Rheintal Industrieholding GmbH, which holds 22.3% of the Company's pre-IPO shares — must be prominently disclosed in the prospectus. Disclosure is required in (i) the risk factors section (risks associa