Washington, D.C. 20549
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
☐
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Semiconductor Manufacturing International Corporation
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|
|
|
|
|
|
|
Date: December 20, 2018
|
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By:
|
/s/ Dr. Gao Yonggang
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Name:
|
Dr. Gao Yonggang
|
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|
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Title:
|
Executive Director, Chief Financial Officer and Joint Company Secretary
|
If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Semiconductor Manufacturing International Corporation (the ‘‘Company’’), you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
Semiconductor Manufacturing International Corporation
中 芯 國 際 集 成 電 路 製 造 有 限 公 司
*
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 981)
|
(1)
|
|
CONTINUING CONNECTED TRANSACTIONS
IN
RELATION
TO
|
|
|
|
CENTRALISED
FUND
MANAGEMENT
AGREEMENT
WITH
SEMICONDUCTOR
MANUFACTURING
NORTH CHINA
(BEIJING)
CORPORATION
AND
|
|
(2)
|
|
CONTINUING CONNECTED TRANSACTIONS
IN
RELATION
TO
|
|
|
|
CENTRALISED
FUND
MANAGEMENT
AGREEMENT
WITH SJ SEMICONDUCTOR CORPORATION
AND
|
|
|
|
(3)
CONNECTED TRANSACTION
IN
RELATION
TO
PROPOSED
|
|
|
|
GRANT
OF
RESTRICTED
SHARE UNITS
TO
INDEPENDENT NON-EXECUTIVE DIRECTORS
AND
|
|
|
|
(4)
NOTICE
OF
EXTRAORDINARY GENERAL
MEETING
|
Independent Financial Adviser
to
the Independent Board Committee and the Independent Shareholders
A
letter from
the
Independent Board Committee
to
the
Independent Shareholders
is set out
on
pages
36 to 37 of
this circular.
A
letter
from
Messis Capital Limited,
the
Independent Financial Adviser, containing
its
advice
to
the
Independent Board Committee
and the
Independent Shareholders,
is
set
out
on
pages
38
to
65
of
this
circular.
The
notice convening
the EGM to be held at 5
Floor
SO1
Building,18 Zhangjiang Road,
Pu Dong
New
Area, Shanghai, People’s Republic
of
China
on 11
January 2019
at 9 : 00 a.m.
(the
‘‘EGM’’) is
contained
in this
circular. Shareholders are advised
to
read the
notice
and to
complete
and
return
the
enclosed form
of
proxy
for use at the EGM in
accordance with
the
instructions printed thereon.
Whether
you are able
to attend
the EGM
or
not,
please complete
and
return
the
enclosed
form
of proxy to
the
branch share registrar of the Company, Computershare Hong Kong Investor Services Limited, at
17M
Floor, Hopewell Centre,
183
Queen’s
Road
East, Wanchai,
Hong Kong
as
soon
as possible
and
in
any
event
not
less than 48 hours before
the
time appointed
for the
holding of
the EGM
or
any
adjournment thereof.
The
completion
and
delivery of a form of proxy will
not
preclude
you
from attending
and
voting at
the EGM in
person should
you
wish.
All
persons
who
are
registered
holders
of
the
Shares
on
11
January
2019
will
be
entitled
to
attend
and
vote
at
the
EGM.
*
For identification purpose only
21 December 2018
CONTENTS
–
i
–
DEFINITIONS
In this circular, the following expressions have the following meanings unless the context requires otherwise:
|
‘‘2004 Stock Option Plan’’
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|
the 2004 stock option plan adopted by the Company by way of a Shareholders’ resolution on 16 February 2004 but terminated by the Company on 15 November 2013
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|
‘‘2014 Equity Incentive Plan’’
|
|
the 2014 equity incentive plan adopted by the Company pursuant to a resolution passed by the Shareholders at the annual general meeting of the Company held on 13 June 2013 and effective from
|
|
|
|
|
|
|
|
15
November
2013 upon its
registration
with the PRC
State Administration
of
Foreign Exchange,
a
summary
of
which
is
set out
in
the 2015
Annual
Report
|
|
|
|
|
|
‘‘2014 Stock Option Plan’’
|
|
the 2014 stock option plan adopted by the Company by way of a Shareholders’ resolution on 13 June 2013 which became effective from 15 November 2013
|
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|
‘‘2016 SJ Jiangyin Centralised Fund Management Agreement’’
|
|
the
centralised
fund
management agreement
dated
21
March
2016
entered
into among the
Company,
SMIC
Beijing
and
SJ
Jiangyin,
as
referred
to in
the
announcement
of
the
Company
dated
21
March 2016, which
was
approved
by
the
Shareholders
at
the
extraordinary general meeting
of
the
Company
held
on 24
June
2016
|
|
|
|
|
|
‘‘2016
SMNC
|
|
|
|
|
|
|
|
Centralised Fund
Management
Agreement’’
|
|
the
centralised
fund
management agreement
dated
31
March
2016
entered
into
among
the
Company,
SMIC
Beijing
and
SMNC,
as
referred
to in
the
announcement
of
the
Company
dated
8 July
2016
|
|
|
|
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|
‘‘ADS(s)’’
|
|
depositary share(s)
of
the
Company,
each
of
which represents 5
Shares
|
|
|
|
|
|
‘‘Board’’
|
|
the
board
of
Directors
|
|
|
|
|
|
‘‘CGP
Techfund’’
|
|
Beijing Semiconductor Manufacturing
and
Equipment
Equity
Investment
Center
(
Limited
Partnership)*
(
北京集成電路製造和
裝備股權投資中心
（
有限合夥
）
),
a
comp
a
n
y
e
sta
b
lish
e
d
u
nd
e
r
t
h
e laws of the PRC
|
|
|
|
|
|
‘‘China
IC
Fund’’
|
|
China
Integrated Circuit Industry Investment Fund
Co.,
Ltd.*
(
國家集成電路產業投資基金股份有限公司
),
a
company established
under the laws
of
the
PRC
|
|
|
|
|
|
‘‘Collection and Payment Services and Foreign Exchange Services’’
|
|
the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
(as the case may be)
in
relation
to
collection
and
payment
services
and
foreign
exchange
services
|
–
1
–
DEFINITIONS
|
‘‘Company’’
|
|
Semiconductor Manufacturing International Corporation
(
中 芯
|
|
|
|
|
|
|
|
國際集成電路製造有限公司
*),
a
company incorporated
in
the
|
|
|
|
|
|
|
|
Cayman
Islands
with
limited
liability,
the
shares
of
which
are
|
|
|
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|
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|
|
listed
on
the main
board
of
the
Stock Exchange
and
the
American depositary shares
of
which are
listed
on
the
New
York
Stock Exchange,
Inc.
|
|
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|
‘‘connected
person(s)’’
|
|
has the same
meaning
as
ascribed
to it
under
the
Listing
Rules
|
|
|
|
|
|
‘‘Director(s)’’
|
|
the
director(s)
of
the
Company
|
|
|
|
|
|
‘‘EGM’’
|
|
the
extraordinary general meeting
of
the
Company proposed
to be
held
to
approve,
among other
things,
the SMNC
Centralised
Fund
Management Agreement (including
the SMNC CCT
and
the SMNC
Annual Caps),
the
SJ
Cayman
Centralised
Fund
Management
Agreement
(including
the
SJ
Cayman
CCT
and
the
SJ
Cayman
Annual
Caps)
and
the
Proposed
RSU
Grants
|
|
|
|
|
|
‘‘E-Town
Capital’’
|
|
Beijing
E-Town
International Investment & Development Co., Ltd.*
(
北京亦莊國際投資發展有限公司
),
a
limited
liability
company established under
the laws
of
the
PRC
|
|
|
|
|
|
‘‘Group’’
|
|
the
Company
and its
subsidiaries
|
|
|
|
|
|
‘‘HK$’’
|
|
Hong Kong
dollars,
the
lawful currency
of
Hong
Kong
|
|
|
|
|
|
‘‘Hong
Kong’’
|
|
Hong Kong
Special Administrative Region
of
the
PRC
|
|
|
|
|
|
‘‘IDIMC’’
|
|
Beijing Industrial Developing Investment Management
Co.,
Ltd.*
(
北京工業發展投資管理有限公司
),
a
company
established
under
the laws
of
the
PRC
|
|
|
|
|
|
‘‘Independent Board
Committee’’
|
|
the
independent committee
of
the
Board
that
consists
of
all
independent non-executive Directors (excluding Professor Lau
and Mr. Fan
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to
themselves)
who
have
no
direct
or
indirect
interest
in
the SMNC
Centralised
Fund
Management
Agreement,
the
SJ
Cayman Centralised
Fund
Management Agreement,
or
the
Proposed
RSU
Grants, other than, where applicable, being
a
Shareholder
|
|
|
|
|
–
2
–
DEFINITIONS
|
‘‘Independent Financial
Adviser’’
|
|
Messis Capital Limited, a licensed corporation to carry out type 1
(dealing
in
securities)
and type
6
(advising
on
corporate finance) regulated activities
under the SFO and being
the
independent financial adviser appointed
by
the
Company
to
advise
the
Independent Board Committee
and the
Independent Shareholders
in
respect
of
the SMNC
Centralised
Fund
Management Agreement (including
the SMNC CCT and the SMNC
Annual Caps),
the
SJ
Cayman Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT
and
the
SJ
Cayman
Annual
Caps)
and
the
Proposed
RSU
Grants
|
|
|
|
|
|
‘‘Independent
Shareholders’’
|
|
(i) in
relation
to
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management
Agreement,
the
Shareholders
who are not
required under
the
Listing
Rules
to
abstain
from
voting
at
the EGM
to
approve
the
SMNC
Centralised
Fund
Management Agreement (including
the
SMNC CCT and the SMNC
Annual
Caps) and the
SJ
Cayman
Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT and the
SJ
Cayman Annual Caps),
which
shall
include Shareholders other
than
Xinxin (Hongkong) Capital
Co.,
Limited
and other
associates
(as
defined under
the
Listing
Rules)
of
China
IC
Fund; and (ii)
in
relation
to
the
Proposed
RSU
Grants,
the
Shareholders
who are not
required under
the
Listing
Rules
to
abstain
from
voting
at
the EGM
to
approve
the
Proposed
RSU
Grants
|
|
|
|
|
|
‘‘Internal Deposit
Services’’
|
|
the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
(as the case may be)
in
relation
to
internal deposit
services
|
|
|
|
|
|
‘‘Internal Loan Services’’
|
|
the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
(as the case may be)
in
relation
to
internal
loan
services
|
|
|
|
|
|
‘‘Latest Practicable
Date’’
|
|
14 December 2018, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
|
|
|
|
|
|
‘‘Listing
Rules’’
|
|
the Rules
Governing
the
Listing
of
Securities
on
The
Stock
Exchange
of
Hong Kong
Limited
|
|
|
|
|
|
‘‘Mr.
Fan’’
|
|
Mr.
Fan
Ren
Da
Anthony,
an
independent
non-executive
Director
of
the
Company
|
|
|
|
|
|
‘‘Other Financial
Services’’
|
|
the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
(as the case may be)
in
relation
to
other
financial
services
|
|
|
|
|
|
‘‘PBOC’’
|
|
the
Peoples’
Bank
of
China
|
|
|
|
|
–
3
–
DEFINITIONS
|
‘‘PRC’’
|
|
the
People’s Republic
of
China,
but for the
purposes
of
this
circular
only,
excludes
Hong
Kong,
Macau
and
Taiwan
|
|
|
|
|
|
‘‘Professor
Lau’’
|
|
Professor
Lau
Lawrence Juen-Yee,
an
independent
non-executive
Director
of
the
Company
|
|
|
|
|
|
‘‘Proposed RSU Grants’’
|
|
the
proposed grant
of
187,500 Restricted Share
Units
and
187,500 Restricted
Share Units
to
Professor
Lau and Mr.
Fan,
respectively,
pursuant
to
the
2014
Equity
Incentive
Plan
|
|
|
|
|
|
‘‘Provision of Letter of
Credit Services’’
|
|
the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
(as the case may be)
in
relation
to
provision
of
letter
of
credit services
|
|
|
|
|
|
‘‘Restricted Share Units’’
|
|
an
unsecured promise
of
the
Company
to
pay
eligible
individuals
a
specific number
of
Shares
or
ADSs,
as
applicable,
on a
specified
date
pursuant
to
2014
Equity Incentive
Plan,
subject
to
all
applicable
laws,
rules, regulations
and the
applicable
vesting,
transfer
or
forfeiture restrictions
as
set out
in
the 2014
Equity Incentive
Plan
and
the
applicable
award
document
|
|
|
|
|
|
‘‘RMB’’
|
|
Renminbi,
the
lawful currency
of
the
PRC
|
|
|
|
|
|
‘‘SFO’’
|
|
the
Securities
and
Futures Ordinance (Chapter
571
of
the
Laws
of
Hong
Kong)
|
|
|
|
|
|
‘‘Shareholders’’
|
|
holder(s)
of
issued
Shares
|
|
|
|
|
|
‘‘Shares’’
|
|
the
ordinary Share(s)
of
par
value US$0.004
each
in
the
share capital
of
the
Company
|
|
|
|
|
|
‘‘SJ
Cayman’’
|
|
SJ
Semiconductor Corporation,
an
exempted
company
incorporated
with
limited
liability
in
the
Cayman
Islands
|
|
|
|
|
|
‘‘SJ Cayman Annual
Caps’’
|
|
annual caps for the period ending 31 December 2019, 2020 and 2021 in relation to each type of SJ Cayman CCT which are more fully set out in the section headed ‘‘The SJ Cayman Annual Caps and Basis of Determination — SJ Cayman Annual Caps’’ in this circular
|
|
|
|
|
|
‘‘SJ
Cayman
CCT’’
|
|
the
continuing connected transactions contemplated under
the
SJ
Cayman Centralised
Fund
Management Agreement, details
of
which
are set out
in
the
sub-section headed
‘‘Principal
Terms
of
the
SJ
Cayman
Centralised
Fund
Management
Agreement’’ in
this
circular
|
|
|
|
|
|
‘‘SJ Cayman Centralised
Fund Management Agreement’’
|
|
the centralised fund management agreement dated 6 December 2018 entered into among the Company, SMIC Beijing and SJ Cayman in relation to the SJ Cayman CCT
|
|
|
|
|
–
4
–
DEFINITIONS
|
‘‘SJ
Hong
Kong’’
|
|
SJ
Semiconductor
(
HK
)
Limited
(
中芯長電半導體
（
香港
）
有限公
司
), a
company incorporated
with
limited liability
in
Hong
Kong
and
a
wholly-owned subsidiary
of SJ
Cayman
|
|
|
|
|
|
‘‘SJ
Jiangyin’’
|
|
SJ
Semiconductor
(
Jiangyin
)
Corporation*
(
中芯長電半導體
（
江
陰
）
有限公司
),
a
wholly
foreign-owned
enterprise
incorporated
in
the
PRC
and
a
wholly-owned
subsidiary
of
SJ
Hong
Kong
|
|
|
|
|
|
‘‘SJ
USA’’
|
|
SJ
Semiconductor
USA Co.,
a
company incorporated
with
limited liability
in
the United
States
and
a
wholly-owned subsidiary
of SJ
Cayman
|
|
|
|
|
|
‘‘SMIC
Beijing’’
|
|
Semiconductor Manufacturing International (
Beijing)
Corporation*
(
中芯國際集成電路製造
（
北京
）
有限公司
),
a
wholly
foreign-owned
enterprise
established
under
the
laws
of
the
PRC
and a wholly-owned subsidiary of the Company
|
|
|
|
|
|
‘‘SMIC
Holdings’’
|
|
SMIC
Holdings
Corporation*
(
中芯國際控股有限公司
),
a
limited
liability
company
established
under
the
laws
of
the
PRC
and
a wholly-owned subsidiary of the Company
|
|
|
|
|
|
‘‘SMIC
Investment’’
|
|
SMIC
Investment
(Shanghai
)
Corporation*
(
中芯集電投資
（
上
海
）
有限公司
),
a
limited
liability
company
established
under
the
laws
of
the
PRC
and
a
wholly-owned
subsidiary
of
the
Company
|
|
|
|
|
|
‘‘SMNC’’
|
|
Semiconductor Manufacturing
North
China (Beijing) Corporation*
(
中芯北方集成電路製造
（
北京
）
有限公司
),
a company
established
under
the
laws
of
the
PRC
pursuant
to
the joint venture agreement dated 3 June 2013
|
|
|
|
|
|
‘‘SMNC
Annual
Caps’’
|
|
annual
caps for the
period ending
31
December
2019, 2020
and
2021
in
relation
to
each type
of
SMNC CCT
which
are more
fully
set out
in
the
section headed ‘‘The
SMNC
Annual
Caps and
Basis
of
Determination —
SMNC
Annual
Caps’’
in
this
circular
|
|
|
|
|
|
‘‘SMNC
CCT’’
|
|
the
continuing connected transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement, details
of
which
are set out
in
the
sub-section headed
‘‘Principal
Terms
of
the SMNC
Centralised
Fund
Management
Agreement’’
in
this
circular
|
|
|
|
|
|
‘‘SMNC Centralised
Fund Management Agreement’’
|
|
the
centralised
fund
management agreement dated
29
November
2018
entered
into
among
the
Company,
SMIC
Beijing
and
SMNC
in
relation
to
the
SMNC
CCT
|
|
|
|
|
|
‘‘Stock
Exchange’’
|
|
The
Stock Exchange
of
Hong Kong
Limited
|
|
|
|
|
–
5
–
DEFINITIONS
|
‘‘U.S.’’ or ‘‘United
States’’
|
|
the
United States
of
America,
its
territories,
its
possessions
and
all areas
subject
to
its
jurisdiction
|
|
|
|
|
|
‘‘US$’’
|
|
United
States dollar,
the
lawful currency
of
the
United States
of
America
|
|
|
|
|
|
‘‘Xun
Xin’’
|
|
Xun
Xin
(Shanghai
)
Investment
Co
.
Ltd.*
(
巽鑫
（
上海
）
投資有限
公 司
),
a
limited liability company incorporated
in
the
PRC
and a
wholly-owned subsidiary
of
China
IC
Fund
|
|
|
|
|
|
‘‘ZDG’’
|
|
Zhongguancun
Development
Group*
(
中關村發展集團股份有限
公 司
), a company incorporated in the PRC
|
|
|
|
|
|
‘‘%’’
|
|
per
cent.
|
*
For
identification purpose
only
–
6
–
LETTER FROM THE BOARD
Semiconductor Manufacturing International Corporation
中 芯 國 際 集 成 電 路 製 造 有 限 公 司
*
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 981)
|
Executive Directors:
|
|
Registered Office:
|
|
Zhou Zixue
(Chairman)
|
|
Cricket Square, Hutchins Drive PO Box 2681
|
|
Zhao
Haijun
(Co-Chief Executive
Officer)
Liang Mong Song
(Co-Chief Executive
Officer)
Gao
Yonggang
(Chief Financial Officer
and
Joint Company Secretary)
|
|
Grand Cayman, KY1-1111 Cayman Islands
|
|
|
|
Principal Place of Business:
|
|
Non-executive Directors:
|
|
18 Zhangjiang Road Pu Dong New Area Shanghai 201203
|
|
Chen Shanzhi Zhou Jie
|
|
People’s Republic of China
|
|
Ren Kai Lu Jun
|
|
|
|
Tong Guohua
|
|
|
|
|
|
|
|
Independent non-executive Directors:
|
|
|
|
William
Tudor
Brown
Chiang Shang-yi
Cong
Jingsheng
Jason
|
|
|
|
Lau
Lawrence
Juen-Yee Fan Ren
Da
Anthony
|
|
|
|
|
|
21 December 2018
|
To the Shareholders
Dear Sir or Madam, INTRODUCTION
The purpose of this circular is to provide you with, among other things:
|
|
(a)
|
details
of
the SMNC
Centralised
Fund
Management Agreement (including
the
SMNC
CCT
and
the
SMNC
Annual
Caps);
|
|
*
For identification purpose only
–
7
–
LETTER FROM THE BOARD
|
|
(b)
|
details
of
the
SJ
Cayman
Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT
and
the
SJ
Cayman
Annual
Caps);
|
|
|
|
(c)
|
details
of
the
Proposed
RSU
Grants;
|
|
|
|
(d)
|
the
letter
from the
Independent Board Committee
to
the Independent
Shareholders;
|
|
|
|
(e)
|
the
letter
from
Messis Capital Limited,
the
Independent Financial Adviser, containing
its
advice
to
the
Independent
Board
Committee
and the
Independent
Shareholders;
|
|
|
|
(f)
|
other
information
required
to
be
disclosed
under
the
Listing
Rules;
and
|
|
|
(A)
|
THE
SMNC
CENTRALISED
FUND
MANAGEMENT
AGREEMENT
|
Reference
is
made
to
the
Company’s announcement dated
29
November
2018
relating
to
the
Company,
SMIC
Beijing
and SMNC’s
entering
into
of
the SMNC
Centralised
Fund
Management Agreement
in
relation
to: (i) the
Company authorising
its
wholly-owned
subsidiary
SMIC
Beijing
to
carry
out
centralised management
of
the
Group’s
RMB
fund
and
foreign exchange
in
accordance
with the
relevant
PRC laws and
regulations;
and
(ii)
SMNC
participating
in
the
Group’s centralised
fund
management system.
The
principal
terms
of
the
SMNC
Centralised
Fund
Management
Agreement
are
set
out
below.
|
|
|
|
|
|
Date:
|
|
29
November
2018
|
|
|
|
|
|
Parties:
|
|
(i) the
Company (other
than
SMNC);
|
|
|
|
(ii) SMIC
Beijing,
a
wholly-owned subsidiary
of
the
Company;
and
|
|
|
|
(iii) SMNC, a
subsidiary
of
the
Company
|
|
|
|
|
|
Effective period:
|
|
Effective from 1 January 2019 or the date when all the necessary approvals required under the applicable law, the articles of associations of the parties and the requirements of the Stock Exchange and the New York Stock Exchange, Inc. are obtained, whichever is later, and ending on 31 December 2021.
|
|
|
|
|
|
|
|
Termination:
|
|
SMNC may
terminate
the SMNC
Centralised
Fund
Management
Agreement
by
three months’
prior
written notice.
Two
months before
the
expiry date,
the
parties
will
negotiate whether
to
renew
or
terminate
the
SMNC
Centralised
Fund
Management
Agreement.
|
–
8
–
LETTER FROM THE BOARD
Principal Terms of the SMNC Centralised Fund
Management Agreement
The SMNC CCT will include the following:
|
1.
|
Internal Deposit
Services
|
SMIC Beijing will provide deposit services and pay interest to SMNC.
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
SMIC
Beijing
will serve
as
the
platform
for
centralised collection
and
payment activities
and
foreign exchange activities within
the
Group.
SMNC
may
carry out such
activities
by
itself
or
through
SMIC
Beijing.
By
providing
foreign
exchange services,
SMIC
Beijing
will
convert
funds
deposited
with
it by
SMNC
into
different currency
with a
third-party
bank
or
financial institution.
As
SMIC
Beijing
will
be
able
to
convert
the
centralised
fund
deposited
with
it by
the
Group,
it
will
be
able
to
benefit
from a more
favourable exchange
rate
offered
by
the
third-party
bank
or
financial institution
based
on
the
larger amount
of
funds
to
be
converted
and the
stronger bargaining
power.
|
3.
|
Internal
Loan
Services
|
SMIC
Beijing
will
provide internal
loan
services
to
SMNC
in
accordance
with
PRC
laws,
regulations
and
policies.
|
4.
|
Provision
of
Letter
of
Credit
Services
|
Letter
of
Credit Services
will
be
utilised
as
a settlement instrument
through
which
the
Company
will
utilise
its
overseas credit lines
to
provide letter(s)
of
credit
for SMNC
to
facilitate
the
purchase
of
equipment
in
accordance
with
PRC
laws,
regulations
and
policies.
|
5.
|
Other Financial
Services
|
SMIC Beijing will provide other financial services to SMNC in accordance with PRC laws, regulations and policies.
Pricing
The
price
of
the
services provided
by
SMIC
Beijing
to
SMNC
contemplated
under
the
Centralised
Fund
Management Agreement
will
be
fair and
reasonable
under
the
Listing Rules, determined according
to
the
market principle
on
arm’s
length basis, subject
to
compliance
with
requirements
for
connected transactions
of
the
Stock
Exchange
and
relevant requirements
for
connected transactions
that are
applicable
to
the
parties.
The
Company
will
ensure
that the
prices charged
to
SMNC will not
be
more
favourable
than
prices charged
to
its
other subsidiaries
which are not
connected
persons under
the
Listing
Rules.
–
9
–
LETTER FROM THE BOARD
Under the Group’s existing centralised fund management system, SMIC Beijing collectively procures certain fund management services from third-party banks or financial institutions (banks or financial institutions qualified to provide financial services to the Group that do not hold any shares of the entities within the Group and whose shares are not owned by any entities within the Group, such as Industrial and Commercial Bank of China Limited and Bank of China Limited in the PRC). SMIC Beijing will charge its subsidiaries with reference to terms offered by third-party banks or financial institutions for such fund management services.
|
1.
|
Internal Deposit
Services
|
The terms
(including interest rates)
in
respect
of
the
Internal Deposit
Services
provided
by
SMIC
Beijing
to
SMNC will
be on
normal commercial terms
or
better,
in
the
ordinary
and usual
course
of
business
of
the Group and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
relevant provisions
of
PRC laws and
regulations, including
but not
limited
to
the
Notice regarding
the
Administrative Regulations
on
the
Centralised Foreign Exchange
Fund
Management
for
Multinational Corporations issued
by
the
State Administration
of
Foreign
Exchange (Huifa [2015]
No. 36); the
Notice regarding
the
Implementing Regulations
on
the
Centralised Foreign Exchange
Fund
Management
for
Multinational Corporations
in
Beijing issued
by
the
Beijing office
of
the State
Administration
of
Foreign Exchange (Jinghui [2015]
No. 231); and the
Notice
on
Further
Facilitating
Multinational Enterprise Groups
in
Operation
of
the
Cross-Border Bilateral RMB
Cash
Pooling Business issued
by
the PBOC
(Yinfa [2015]
No. 279) (the
‘‘Relevant
PRC Laws and Regulations’’). The
interest
rate
applicable
to
SMNC’s deposits
with
SMIC
Beijing
will
be
determined
based
on
arm’s length
negotiations
by
the
parties.
SMNC
will
obtain
two
or
more
written quotes
from
third-party commercial
banks
in
the
PRC
for
providing deposit services
of
the same type
during
the same
period
to
SMNC. The
interest
rate for
SMNC’s deposits
with SMIC
Beijing
will
be
the same
as or
lower
than
lowest
of
the
quoted interest rates.
The PBOC
publishes benchmark interest
rates
on
the
PBOC’s website
for RMB
deposits
from time
to
time which serve
as
a
guidance
price
for
reference
only for the
commercial banks
in
the PRC. The
Company
understands
that when
determining
the
interest rates quoted
to
SMNC, the
third-party
commercial
banks will refer
to
such PBOC
benchmark interest
rate for RMB
deposits
of
a
similar
type and make
necessary
adjustment.
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
The terms
(including
fees
charged
by
SMIC
Beijing
and
exchange rates)
in
respect
of
the
Collection
and
Payment Services
and
Foreign Exchange Services provided
by
SMIC
Beijing
to
SMNC will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the Group
and in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC Laws and
Regulations.
The fees
charged
by
SMIC Beijing
to
SMNC for
providing
such
services
will
be
determined
based
on
arm’s
length negotiations
by
the
parties
which will not
be
less
favourable
to
SMIC
Beijing
than (1) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which
are
not
connected
persons
under
the
Listing
Rules;
and
(2)
fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the same type
during
the
same
period.
SMIC
Beijing
will
obtain services
of
the same type from
third-party
commercial banks
or
financial institutions first
and then use the fees
charged
to it
to
determine
fees
to be
charged
to
SMNC
as
described above.
In
particular,
SMIC
Beijing
will make
reference
to
the
quotes offered
by
independent third-party commercial banks
or
financial institutions
which take into
account
the
specific market conditions
and
other specific considerations
such
as
the
credit
of
the
customers
and the size
of
the transaction.
–
10
–
LETTER FROM THE BOARD
|
3.
|
Internal
Loan
Services
|
The
terms (including interest rates)
in
respect
of
the
Internal
Loan
Services
provided
by
SMIC
Beijing
to
SMNC will
be on
normal commercial terms
or
better,
in
the
ordinary
and usual
course
of
business
of
the Group and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The
interest
rate
applicable
to
loans granted
to
SMNC
by
SMIC
Beijing
will
be
based
on
arm’s
length negotiation
by
the
parties.
SMNC will
obtain
two
or
more
written quotes
from
third-party commercial banks
in
the PRC for
providing
loan
services
of
the same type
during
the same
period
to
SMNC.
The
interest
rate
for
SMNC’s
loans with SMIC
Beijing
will
be
the same
as or
higher
than the
highest
of
the
quoted interest rates.
The PBOC
publishes benchmark interest
rates
on
the
PBOC’s
website
for RMB loans from time
to
time
which
serve
as
a
guidance
price for
reference
only for the
commercial banks
in
the PRC. The
Company understands
that
when
determining
the
interest
rates
quoted
to
SMNC, the
third-party commercial
banks
will
refer
to
such PBOC
benchmark interest
rate for RMB loan
of
a
similar
type and
make
adjustment
based
on
the
bank’s credit assessment
of
SMNC.
|
4.
|
Provision
of
Letter
of
Credit
Services
|
The
terms (including
fees
charged
by
the
Company)
in
respect
of
the
letters
of
credit provided
by
the Company
to
SMNC will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The fees
charged
by
the
Company
to
SMNC for
providing
such
services
will
be
determined based
on
arm’s
length negotiations
by
the
parties which
will not
be
less
favourable
to
SMIC
Beijing
than (1) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are not
connected persons
under the
Listing
Rules; and (2) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial
institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the
same type
during
the same
period.
SMIC
Beijing
will
obtain services
of
the same
type
from
third-party commercial banks
or
financial institutions first
and then use the fees
charged
to it to
determine
fees
to be
charged
to
SMNC
as
described above.
In
particular, third-party commercial banks
or
financial institutions
will
charge
SMIC
Beijing
an
issuance
fee
according
to
the key terms
of
the
credit facility,
which
is
subject
to the issuer’s credit and financial profile. The final fee charged to SMNC will be determined by the face amount of letter of credit multiplied with the issuance fee rate and the time length of the letter.
|
5.
|
Other Financial
Services
|
The terms
(including
fees
charged
by
SMIC
Beijing)
in
respect
of
Other
Financial
Services provided
by
SMIC
Beijing
to
SMNC will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The fees
charged
by
SMIC
Beijing
to
SMNC for
providing
such
services
will
be
determined based
on
arm’s
length negotiations
by
the
parties which
will not
be
less
favourable
to
SMIC
Beijing
than (1) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are not
connected persons
under the
Listing
Rules; and (2) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial
institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the
same type
during
the same
period.
SMIC
Beijing
will
obtain services
of
the same
type
from
third-party commercial banks
or
financial institutions first
and then use the fees
charged
to
it
to
determine
fees
to
be
charged
to
SMNC
as
described
above.
–
11
–
LETTER FROM THE BOARD
Internal Control Measures
The
Company
has
in
place
a
series
of
internal control measures
to
ensure
that the
terms
of
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
are fair and
reasonable
and that the SMNC
CCT
and
SJ
Cayman
CCT will
be
conducted
on
normal commercial terms.
As
the SMNC CCT and
SJ
Cayman
CCT also
constitute related
party
transactions
for the
Company,
they will
be
subject
to
the
related party transaction policy
of
the
Group, which
is
further
explained below.
|
1.
|
SMNC has
established
a
related party transaction review committee,
which
is
comprised
of
four
non-executive directors
of
SMNC
of
which two
of
them,
namely
Dr. Zhao
Haijun,
the
executive Director
and
co-chief executive officer
of
the
Company
and Dr. Gao
Yonggang,
the
executive Director, chief financial officer
and
joint company secretary
of
the
Company,
were
appointed
by
the
Company
and the
other
two were
appointed
by
each
of
China
IC
Fund and ZDG. The
related party transaction review committee
is
responsible
for
reviewing
and
approving
the
centralised
fund
management agreement
and
pricing policy
of
connected transactions entered
into
by
SMNC and the
Company,
with the
assistance
from the
related
party
transaction office
of
SMNC. The
committee
has
meeting
at
least once
annually
to
monitor
and
review related
party
transactions
between
SMNC and the
Company;
|
|
2.
|
SJ
Cayman management
team
is
responsible
for
reviewing
and
approving
the
centralised
fund
management agreement
and
pricing policy
of
connected
transactions entered
into
by SJ
Cayman
and the
Company.
SJ
Cayman
management
holds
monthly meetings
to
monitor
and
review related
party
transactions between
SJ
Cayman
and the
Company;
|
|
3.
|
The
Company
has also
established
a
related party transaction review
team,
consisting
of
members
from the
finance
and
accounting,
legal and
other
related
departments
of
the
Company, which reviews
the
terms
of
specific
connected
transaction
agreements
and
reports
its
findings
to
the
management;
|
|
4.
|
The
Company’s compliance office
will
perform quarterly check
on
transactions entered
under the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
to
ensure compliance with pricing
policies
and
annual
caps
are
not
exceeded;
and
|
|
5.
|
The
Company’s external auditors
will
conduct
an
annual review
of
the
transactions entered
into
under
the SMNC
Centralised
Fund
Management
Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement
to
ensure
the
transaction amounts
are
within
the
annual
caps and the
transactions
are
in
accordance
with the terms set out
in
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman Centralised
Fund
Management Agreement.
|
In
accordance
with the
Listing Rules,
the
independent non-executive Directors
and
the
auditors
of
the
Company
will also
perform
an
annual review
of
the terms
of
the
SMNC
CCT and the
SJ
Cayman
CCT
to
ensure
that the
pricing policy
and the
annual
caps
remain
fair and
reasonable
and that
appropriate internal control procedures
are
in
place,
and
will
confirm
so
each
year
in
the
annual
report
published
by
the
Company.
–
12
–
LETTER FROM THE BOARD
Considering the general principles and the detailed pricing policies, the Directors (including the independent
non-executive Directors) are of the view that the methods and procedures are sufficient to ensure that the SMNC CCT and the SJ Cayman CCT will be conducted on normal commercial terms or better and not prejudicial to the interests of the Company and its min
ority Shareholders.
Payment
The
consideration
for the
transactions contemplated
under the SMNC
Centralised
Fund
Management Agreement
will
be
paid
in
accordance
with the
specific
and
separate agreements entered
into
between
SMIC
Beijing
and SMNC, the terms
of
which will
be
on
normal
commercial
terms
or
better,
and
funded
by
the
relevant
party’s
internal
resources.
Other Terms
The terms of the SMNC Centralised Fund Management Agreement are subject to applicable laws and regulations including the requirements of any regulatory authorities (including but not limited to the Stock Exchange and the New York Stock Exchange, Inc.).
SMNC’s participation in the centralised fund management system of the Group will not alter its existing rights to its own funds. The rights to own, use, approve of use and benefit from SMNC’s funds will remain with SMNC.
–
13
–
LETTER FROM THE BOARD
THE SMNC ANNUAL CAPS AND BASIS OF DETERMINATION
Historical Transaction
Amounts
The
historical transaction amounts between
the
Company,
SMIC
Beijing
and
SMNC
for the
transactions contemplated under
the 2016 SMNC
Centralised
Fund
Management Agreement
for the two years ended
31
December
2016 and 2017 and the ten
months
ended
31
October
2018
are
as
follows:
|
|
|
Transactions for the
year ended
31 December
|
|
Transactions
from
1
January
2018
to
31
October
|
|
Nature of Continuing Connected Transactions
|
|
2016
(1)
|
|
2017
(1)
|
|
2018
(2)
|
|
|
|
(US$
million)
|
|
(US$
million)
|
|
(US$
million)
|
|
Internal deposit services (representing the maximum
daily outstanding balances
including
accrued
interests)
|
|
719.7
|
|
1,182.3
|
|
1,297.4
|
|
|
|
|
|
|
|
|
|
Collection and payment services and foreign
exchange services (representing the maximum
daily transaction amount for collection and
payment services and foreign
exchange
services)
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Internal loan services (representing the maximum
daily outstanding balance of
loans including
accrued
interests)
|
|
120.5
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Provision of letter of credit services (representing
the maximum aggregate principal amount of the
letter(s) of credit
issued
on
SMNC’s behalf
per
calendar
year)
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Other financial services (representing the maximum
fees charged by the Group for providing other
financial services to SMNC
per
calendar
year)
|
|
—
|
|
—
|
|
—
|
Notes:
|
(1)
|
Representing
the
audited amounts
of
all
transactions among
the
Company,
SMIC
Beijing
and
SMNC
for
the
two
years
ended
31
December
2016
and
2017.
|
|
–
14
–
LETTER FROM THE BOARD
SMNC Annual Caps
|
Nature of SMNC CCT
|
|
For the year ending 31 December
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
|
|
US$ million
|
|
US$ million
|
|
US$ million
|
|
Internal Deposit Services (representing maximum daily outstanding
balances including accrued interests placed by SMNC with SMIC
Beijing)
|
|
2,000
|
|
2,000
|
|
2,000
|
|
|
|
|
|
|
|
|
|
Collection and Payment Services and Foreign Exchange Services
(representing maximum daily transaction amount for collection and
payment services and foreign exchange services)
|
|
200
|
|
200
|
|
200
|
|
|
|
|
|
|
|
|
|
Internal Loan Services (representing maximum daily balance of internal
loans provided by SMIC Beijing to SMNC)
|
|
500
|
|
500
|
|
500
|
|
|
|
|
|
|
|
|
|
Provision of Letter of Credit Services (representing the maximum
aggregate amount of the letter(s) of credit issued on SMNC’s behalf
per calendar year)
|
|
500
|
|
500
|
|
500
|
|
|
|
|
|
|
|
|
|
Other Financial Services (representing the maximum fees charged by
SMIC Beijing for providing other financial services to SMNC per
calendar year)
|
|
50
|
|
50
|
|
50
|
The SMNC Annual Caps are determined based on the assumptions and factors as explained below:
|
1.
|
Internal Deposit
Services
|
|
|
(a)
|
the
expected increase
of
SMNC and the
Group’s respective
fixed
assets
over the
effective period
of
the SMNC
Centralised
Fund
Management
Agreement;
and
|
|
|
|
(b)
|
the
operating
cash flow and
financial needs
of
each
of
SMNC and the
Group
in
respect
of
its
future business
expansion.
|
|
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
|
|
(a)
|
the
practical
needs
of
SMNC
and
the
Group’s
respective
future
business;
and
|
|
|
|
(b)
|
the
future
development
plan
of
each
of
SMNC
and
the
Group.
|
|
|
3.
|
Internal
Loan
Services
|
|
|
(a)
|
the
capital
expenditure
required
for
future
business
expansion
of
SMNC;
and
|
|
|
|
(b)
|
the
operating
cash flow and
financial needs
of
SMNC and the
availability
of
fund
within
the
Group
in
respect
of
its
future
business
expansion.
|
|
–
15
–
LETTER FROM THE BOARD
|
4.
|
Provision
of
Letter
of
Credit
Services
|
|
|
(a)
|
the
capital
expenditure
required
for
future
business
expansion
of
SMNC;
and
|
|
|
|
(b)
|
the
increase
of
SMNC’s
and the
Group’s respective
fixed
assets
over
the
effective
period
of
the
SMNC
Centralised
Fund
Management
Agreement.
|
|
|
5.
|
Other Financial
Services
|
|
|
(a)
|
the
practical needs
of
SMNC’s
and the
Group’s respective future business;
and
|
|
|
|
(b)
|
the
future
development
plan
of
each
of
SMNC
and
the
Group.
|
|
The SMNC
Annual
Caps for each type
of
SMNC CCT are
determined based
on
SMNC’s planned capital expenditures
to
reach
the
designed manufacturing capacity
of
70,000 wafers
per month
in
the
following years.
SMNC
currently
owns one
manufacturing fabrication facility (fab),
which has
reached
the
manufacturing capacity
of
33,000 wafers
per month with
an
accumulated capital expenditure
of
over
US$3.5 billion.
The
second
fab
of
SMNC
is
also
expected
to be
invested
and
constructed
to
reach full
production.
The
total investment
of
SMNC
is
estimated
to
be
around US$7.2 billion
for the two fabs.
The
investment schedule
in
respect
of
SMNC
is
determined based
on
the
expected investment needed
for the two fabs
to
each
reach
a
capacity
of
35,000 wafers
per month and for
completing
the
construction
of
a
second manufacturing
line
to
satisfy
the
overall designed manufacturing capacity.
The
overall follow-on investment
is
expected
to be
between
US$3
to
US$4
billion, subject
to
changing market conditions
and
market
demand.
As
the
investment schedule towards
SMNC will
be
adjusted according
to
the
changing market conditions
and
financial conditions
of
the
Group,
the SMNC
Annual
Caps are set
based
on
the
aggregate
year
capital expenditure plans
to
maintain
flexibility
for the Group
to
expedite
or
slow down
performance
of
its
planned
capital
expenditures.
As
cash
investment
will
be
made
towards
SMNC
to
meet its
planned
capital expenditure
and SMNC will
be
able
to
utilise
the
Internal Deposit Services
and
the
Collection
and
Payment Services
and
Foreign Exchange Services
for
such
investment,
the SMNC
Annual
Caps
in
respect
of
Internal Deposit Services
and the
Collection
and
Payment Services
and
Foreign Exchange Services
are set
based
on
the
aggregate capital expenditure
plans
of
SMNC.
As at
the
Latest Practicable Date,
SMNC has
received capital injection
of
approximately
US$3
billion,
being over 60%
of
SMNC’s registered capital
of
US$4.8
billion,
from its
shareholders, namely
the
Company,
SMIC
Beijing, China
IC
Fund, IDIMC,
ZDG, CGP
Techfund
and
E-Town Capital.
By
2019,
SMNC
is
expected
to
receive capital contribution
from its
shareholders amounting
to
approximately US$1.8 billion,
and most
of
such
sum
would
be
deposited
by
SMNC with SMIC
Beijing.
As
such,
capital contribution
being
the SMNC
Annual
Caps for
Internal Deposit Services
are set
at
US$2
billion.
Since
over 80%
of
SMNC’s capital expenditure
for the
three years
from 2019
to
2021 will
be
for the
purchase
of
equipment
for the
construction
of
its
second manufacturing
line
and such
purchases
will
be
denominated
in
foreign currencies, settlement
and
foreign
exchange services
will
be
needed.
It is
expected
that the daily cap
of
US$200
million
will
sufficiently cover
the
expenditure
of
individual pieces
of
equipment,
as
such,
the SMNC
Annual Caps
for
Collection
and
Payment Services
and
Foreign
Exchange
Services
are set
at
US$200 million
to
reflect
the
highest possible daily
transaction
amount
for the
purchase
of
equipment.
As
at
the
Latest Practicable
Date, the
accumulated investment
of
SMNC has
reached approximately
–
16
–
LETTER FROM THE BOARD
US$3.5 billion,
and
in
order
to
reach
the
des
igned capacity
of
its
second 300mm manufacturing line,
an
additional
US$3
to
4
billion
is
required
to be
invested,
being
around
50%
of
its
planned
total
expenditure
of
US$7.2 billion. Given
the
expected capital contribution
of
approximately US$1.8 billion
and the
existing internal deposit
of
approximately
US$1.3 billion,
SMNC may
still
need
to
finance
the
planned expenditure
through
internal loans.
As
a
supplemental financing approach,
the SMNC
Annual
Caps
for
Internal
Loan
Ser
vices
are set
at
US$500 million,
which aims
to
cover the
majority
of
the
difference between
the
total outstanding capital expenditure
of
about
US$3.7
billion
and the
approximate US$3.1 billion
of
cash SMNC will
expect
to
have.
In
addition,
it is
expected
that SMNC’s
planned capital expenditure
for the
purchase
of
equipment
will
be
obtained through letters
of
credit.
The Group will
utilise
its
credit
facilities
to
provide letter(s)
of
credit for SMNC
to
facilitate
the
purchase
of
equipment, whether
or
not SMNC
finances
the
required capital expenditures internally
or
externally.
This will
enable
SMNC
to
take
advantage
of
the high
credibility
of
the
Group.
The SMNC
Annual
Caps
in
respect
of
Provision
of
Letter
of
Credit Services
are set
at
US$500 milli
on
with
reference
to
the
aggregate capital expenditure plans
of
SMNC for
a
single fiscal year.
The SMNC
Annual
Caps
in
respect
of
Other Financial Services
are set
at
US$50
million
to
reflect
the
expected financial expenses
in
SMNC’s future capital
expendit
ure.
REASONS FOR AND BENEFITS OF THE SMNC CENTRALISED FUND MANAGEMENT AGREEMENT
The Company considers that the entry into of the Centralised Fund Management Agreement and the transactions contemplated thereunder will open up the domestic and foreign funding channels of the Group, increase efficient fund usage and reduce the Group’s overall debt levels and interest expense. The centralised management of foreign exchange risk exposure will also reduce the risks of exchange loss of the Group.
The
Directors (excluding independent non-executive Directors whose
view will
be
given
after
taking
into
account
the
advice
from the
Independent Financial Adviser) consider
that
it is in
the best
interests
of
the
Company
and the
Shareholders
as
a whole
to
enter
into
the SMNC
Centralised
Fund
Management Agreement
and the
transactions
contemplated
thereunder;
the terms
of
the SMNC
Centralised
Fund
Management Agreement
including
the SMNC
Annual
Caps are fair and
reasonable;
and the
entering
into
of
the
SMNC
Centralised
Fund
Management Agreement
and the
transactions contemplated thereunder
are
on
normal commercial terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and
the
Shareholders
as
a
whole.
–
17
–
LETTER FROM THE BOARD
IMPLICATIONS UNDER THE LISTING RULES
As at
the
Latest Practicable
Date,
China
IC
Fund held
approximately 15.82%
equity
interest
in
the
Company through
its
wholly-owned subsidiary, Xinxin (Hongkong) Capital
Co.,
Limited,
it is a
connected person
of
the
Company
at
the
issuer level under
the
Listing Rules.
As at
the
Latest Practicable
Date, the
registered capital
of
SMNC
is
held
as to
approximately
51% and 32%
by
the Group and
China
IC
Fund,
respectively.
SMNC
is
therefore
a
connected subsidiary
of
the
Company
as
defined under
Rule
14A.16
of
the
Listing Rules
and thus
a
connected person
of
the
Company under
the
Listing
Rules.
In
relation
to
the
transactions contemplated
under the SMNC
Centralised
Fund
Management Agreement,
the
Internal Deposit Services
to be
provided
by
SMIC
Beijing
to
SMNC will
constitute continuing connected transactions
by
way
of
financial assistance received
by
SMIC
Beijing
from
a
connected person. Pursuant
to
Rule
14A.90
of
the
Listing
Rules,
as
the
Internal Deposit Services
are
conducted
on
normal commercial terms
and not
secured
by
the
assets
of
the
Group,
the
provision
of
the
Internal Deposit Services
is
fully
exempt
from the
reporting, announcement and/or
the
Independent Shareholders’ approval requirements under
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
each
of
the SMNC
Annual Caps
for the
Collection
and
Payment Services
and
Foreign Exchange Services, Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services exceed
5%, the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
will
constitute continuing
connected
transactions subject
to
the
reporting, announcement
and the
Independent Shareholders’ approval requirements
of
Chapter
14A
of
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
the SMNC
Annual
Caps for
Other Financial Services
are more than 0.1% but less than 5%, the
transaction
is
subject
to
the
reporting, announcement
and
annual review requirements
but
exempt
from
the
Independent Shareholders’ approval requirement under Chapter
14A
of
the
Listing Rules.
In
accordance
with the
Listing Rules,
the
Independent Board Committee
comprising
Mr.
William
Tudor
Brown,
Dr.
Chiang Shang-yi,
Mr. Cong
Jingsheng Jason, Professor Lau Lawrence Juen-Yee
and Mr. Fan Ren
Da
Anthony,
all
being
the
independent non-executive Directors
has been
established
to
advise
and
provide recommendation
to
the
Independent Shareholders
on
the SMNC
Centralised
Fund
Management Agreement (including
the
SMNC CCT and the SMNC
Annual Caps)
and
to
advise
the
Independent Shareholders
on
how
to
vote.
Messis Capital Limited
has been
appointed
by
the
Company
as
the
Independent Financial Adviser
to
advise
the
Independent Board Committee
and the
Independent Shareholders
on
the SMNC
Centralised
Fund
Management Agreement (including
the
SMNC
CCT
and
the
SMNC
Annual
Caps).
–
18
–
LETTER FROM THE BOARD
INFORMATION ABOUT THE PARTIES
Information on the Company and SMIC Beijing
The Company
is
one
of
the
leading foundries
in
the world,
is
Mainland China’s
largest
foundry
in
scale, broadest
in
technology coverage,
and most
comprehensive
in
semiconductor manufacturing services. SMIC provides integrated circuit
(IC)
foundry
and
technology services
on
process
nodes from 0.35
micron
to 28
nanometer. Headquartered
in
Shanghai, China,
SMIC has
an
international manufacturing
and
service
base.
In
China,
SMIC has a 300mm wafer
fabrication facility
(fab) and a
200mmfab
in
Shanghai;
a 300mm fab and a
majority-owned 300mm
fab for
advanced nodes
in
Beijing; 200mm
fabs
in
Tianjin
and
Shenzhen;
and a
majority-owned joint-venture
300mm
bumping facility
in
Jiangyin; additionally,
in
Italy
SMIC has a
majority-owned
200mm
fab. SMIC also has
marketing
and
customer service offices
in
the U.S.,
Europe, Japan,
and
Taiwan,
and a
representative office
in
Hong
Kong.
SMIC
Beijing
is
a
wholly
foreign-owned enterprise established
in
the PRC and a
wholly-owned subsidiary
of
the
Company.
Information on SMNC
SMNC is a joint venture company established in the PRC pursuant to the joint venture agreement dated 3 June 2013, the equity capital of which is owned as to 12.5% by SMIC Beijing, 13% by SMIC Investment, 25.5% by SMIC Holdings and 32% by China IC Fund. The remaining equity capital of SMNC is owned by ZDG, IDIMC, CGP Techfund and E- Town Capital and none of them owns 10% or more equity capital of SMNC. SMNC is primarily engaged in manufacturing and trading of semiconductor products.
–
19
–
LETTER FROM THE BOARD
|
(B)
|
THE SJ
CAYMAN CENTRALISED
FUND
MANAGEMENT
AGREEMENT
|
Reference
is
made
to
the
Company’s announcement dated 6 December
2018
relating
to
the
Company,
SMIC
Beijing
and
SJ
Cayman’s entering
into
of
the
SJ
Cayman
Centralised
Fund
Management Agreement
in
relation
to: (i) the
Company authorising
its
wholly-owned
subsidiary
SMIC
Beijing
to
carry
out
centralised management
of
the
Group’s
RMB
fund
and
foreign exchange
in
accordance
with the
relevant
PRC laws and
regulations;
and (ii)
SJ
Cayman participating
in
the
Group’s centralised
fund
management system.
The
principal
terms
of
the
SJ
Cayman
Centralised
Fund
Management
Agreement
are
set
out
below.
|
|
|
|
|
|
Date:
|
|
6
December
2018
|
|
|
|
|
|
Parties:
|
|
(i) the
Company
on
behalf
of
itself
and
its
subsidiaries
(other
than
SJ
Cayman,
SJ
Hong
Kong,
SJ
USA
and
SJ
Jiangyin);
|
|
|
|
|
|
|
|
(ii) SMIC
Beijing,
a
wholly-owned subsidiary
of
the
Company;
and
|
|
|
|
|
|
|
|
(iii)
SJ
Cayman
on
behalf
of
itself
and its
wholly-owned
subsidiaries
SJ
Hong
Kong,
SJ
USA and
SJ
Jiangyin.
|
|
|
|
|
|
Effective period:
|
|
Effective from 1 January 2019 or the date when all the necessary approvals required under the applicable law, the articles of associations of the parties and the requirements of the Stock Exchange and the New York Stock Exchange, Inc. are obtained, whichever is later, and ending on 31 December 2021.
|
|
|
|
|
|
|
|
Termination:
|
|
SJ
Cayman
may
terminate
the
SJ
Cayman Centralised
Fund
Management Agreement
by
three months’ prior written notice.
Two
months before
the
expiry date,
the
parties
will
negotiate whether
to
renew
or
terminate
the
SJ
Cayman Centralised
Fund
Management
Agreement.
|
–
20
–
LETTER FROM THE BOARD
Principal Terms of the
SJ Cayman Centralised Fund Management Agreement
The SJ Cayman CCT will include the following:
|
1.
|
Internal Deposit
Services
|
SMIC Beijing will provide deposit services and pay interest to SJ Cayman.
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
SMIC
Beijing
will serve
as
the
platform
for
centralised collection
and
payment activities
and
foreign exchange activities within
the
Group.
SJ
Cayman
may
carry
out such
activities
by
itself
or
through
SMIC
Beijing.
By
providing
foreign exchange services,
SMIC
Beijing
will
convert
funds
deposited
with
it by
SJ
Cayman
into
different currency
with a
third-party
bank
or
financial
institution.
As
SMIC
Beijing
will
be
able
to
convert
the
centralised
fund
deposited
with
it by
the Group,
it
will
be
able
to
benefit
from a more
favourable exchange
rate
offered
by
the
third-party
bank
or
financial institution based
on
the
larger amount
of
funds
to be
converted
and the
stronger bargaining
power.
|
3.
|
Internal
Loan
Services
|
SMIC Beijing will provide internal loan services to SJ Cayman in accordance with PRC laws, regulations and policies.
|
4.
|
Provision
of
Letter
of
Credit
Services
|
Letter
of
Credit Services
will
be
utilised
as
a settlement instrument
through
which
the
Company
will
utilise
its
overseas credit lines
to
provide letter(s)
of
credit
for
SJ
Cayman
to
facilitate
the
purchase
of
equipment
in
accordance
with
PRC laws,
regulations
and
policies.
|
5.
|
Other Financial
Services
|
SMIC Beijing will provide other financial services to SJ Cayman in accordance with PRC laws, regulations and policies.
Pricing
The
price
of
the
services provided
by
SMIC
Beijing
to SJ
Cayman
contemplated
under
the
SJ
Cayman Centralised
Fund
Management Agreement
will
be
fair
and
reasonable under
the
Listing Rules, determined according
to
the
market principle
on
arm’s
length basis, subject
to
compliance
with
requirements
for
connected
transactions
of
the Stock
Exchange
and
relevant requirements
for
connected transactions
that are
applicable
to
the
parties.
The
Company
will
ensure
that the
prices charged
to
SJ
Cayman
will not
be
more
favourable
than
prices charged
to
its other
subsidiaries
which
are
not
connected
persons
under
the
Listing
Rules.
–
21
–
LETTER FROM THE BOARD
Under the Group’s existing centralised fund management system, SMIC Beijing collectively procures certain fund management services from third-party banks or financial institutions (banks or financial institutions qualified to provide financial services t
o the Group that do not hold any shares of the entities within the Group and whose shares are not owned by any entities within the Group, such as Industrial and Commercial Bank of China Limited and Bank of China Limited in the PRC). SMIC Beijing will charg
e its subsidiaries with reference to terms offered by third-party banks or financial institutions for such fund management services.
|
1.
|
Internal Deposit
Services
|
The terms (including interest rates) in respect of the Internal Deposit Services provided by SMIC Beijing to SJ Cayman will be on normal commercial terms or better, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, subject to the Relevant PRC Laws and Regulations. The interest rate applicable to SJ Cayman’s deposits with SMIC Beijing will be determined based on arm’s length negotiations by the parties. SJ Cayman will obtain two or more written quotes from third-party commercial banks in the PRC for providing deposit services of the same type during the same period to SJ Cayman. The interest rate for SJ Cayman’s deposits with SMIC Beijing will be lower than lowest of the quoted interest rates. The PBOC publishes benchmark interest rates on the PBOC’s website for RMB deposits from time to time which serve as a guidance price for reference only for the commercial banks in the PRC. The Company understands that when determining the interest rates quoted to SJ Cayman, the third-party commercial banks will refer to such PBOC benchmark interest rate for RMB deposits of a similar type and make necessary adjustment.
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
The terms
(including
fees
charged
by
SMIC
Beijing
and
exchange rates)
in
respect
of
the
Collection
and
Payment Services
and
Foreign Exchange Services provided
by
SMIC
Beijing
to SJ
Cayman will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The fees
charged
by
SMIC
Beijing
to SJ
Cayman
for
providing
such
services
will
be
determined
based
on
arm’s
length negotiations
by
the
parties
which
will
not
be
less
favourable
to
SMIC
Beijing
than
(1)
fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are not
connected persons
under the
Listing
Rules; and (2) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial
institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the
same type
during
the same
period.
SMIC
Beijing
will
obtain services
of
the same
type
from
third-party commercial banks
or
financial institutions first
and then use the fees
charged
to it to
determine
fees
to be
charged
to SJ
Cayman
as
described above.
In
particular,
SMIC
Beijing
will make
reference
to
the
quotes offered
by
independent
third-party commercial banks
or
financial institutions which
take into
account
the
specific market conditions
and other
specific considerations
such
as
the
credit
of
the
customers
and the size
of
the
transaction.
–
22
–
LETTER FROM THE BOARD
|
3.
|
Internal
Loan
Services
|
The
terms (including interest rates)
in
respect
of
the
Internal
Loan
Services
provided
by
SMIC
Beijing
to SJ
Cayman will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the Group and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The
interest
rate
applicable
to
loans granted
to SJ
Cayman
by
SMIC
Beijing
will
be
based
on
arm’s
length negotiation
by
the
parties.
SJ
Cayman
will
obtain
two or
more
written quotes
from
third-party commercial banks
in
the
PRC
for
providing
loan
services
of
the same type
during
the same
period
to SJ
Cayman.
The
interest
rate for
SJ
Cayman’s
loans with SMIC
Beijing
will
be
higher
than the
highest
of
the
quoted interest rates.
The PBOC
publishes benchmark interest rates
on
the
PBOC’s website
for RMB
loans
from time
to
time
which serve
as
a
guidance price
for
reference
only for the
commercial banks
in
the PRC. The
Company understands
that when
determining
the
interest
rates
quoted
to SJ
Cayman,
the
third-party
commercial
banks will refer
to
such PBOC
benchmark interest
rate for RMB loan
of
a
similar
type
and
make
adjustment
based
on
the
bank’s
credit
assessment
of
SJ
Cayman.
|
4.
|
Provision
of
Letter
of
Credit
Services
|
The
terms (including
fees
charged
by
the
Company)
in
respect
of
the
letters
of
credit provided
by
the
Company
to SJ
Cayman
will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The fees
charged
by
the
Company
to SJ
Cayman
for
providing
such
services
will
be
determined
based
on
arm’s
length negotiations
by
the
parties
which
will
not
be
less
favourable
to
SMIC
Beijing
than (1) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are not
connected persons
under the
Listing
Rules; and (2) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial
institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the
same type
during
the same
period.
SMIC
Beijing
will
obtain services
of
the same
type
from
third-party commercial banks
or
financial institutions first
and then use the fees
charged
to it to
determine
fees
to be
charged
to SJ
Cayman
as
described above.
In
particular, third-party commercial banks
or
financial institutions
will
charge
SMIC
Beijing
an
issuance
fee
according
to
the key terms
of
the
credit facility,
which
is
subject
to the issuer’s credit and financial profile. The final fee charged to SJ Cayman will be determined by the face amount of letter of credit multiplied with the issuance fee rate and the time length of the letter.
|
5.
|
Other Financial
Services
|
The terms
(including
fees
charged
by
SMIC
Beijing)
in
respect
of
Other
Financial
Services provided
by
SMIC
Beijing
to SJ
Cayman
will
be on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole, subject
to
the
Relevant
PRC
Laws
and
Regulations.
The
fees
charged
by
SMIC
Beijing
to SJ
Cayman for
providing
such
services
will
be
determined
based
on
arm’s length
negotiations
by
the
parties
which
will
not
be
less
favourable
to
SMIC
Beijing
than (1) fees
charged
by
SMIC
Beijing
to
other subsidiaries
which are not
connected persons
under the
Listing
Rules; and (2) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial
institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the
same type
during
the same
period.
SMIC
Beijing
will
obtain services
of
the same
type
from
third-party commercial banks
or
financial institutions first
and then use the fees
charged
to
it
to
determine
fees
to
be
charged
to
SJ
Cayman
as
described
above.
–
23
–
LETTER FROM THE BOARD
Internal Control Measures
For internal control measures for the SJ Cayman CCT, please refer to the sub-section headed ‘‘Internal Control Measures’’ on page 12 of this circular.
Payment
The
consideration
for the
transactions contemplated under
the
SJ
Cayman
Centralised
Fund
Management Agreement
will
be
paid
in
accordance
with the
specific
and
separate agreements entered
into
between
SMIC
Beijing
and
SJ
Cayman,
the
terms
of
which
will
be
on
normal commercial
terms
or
better,
and
funded
by
the
relevant party’s internal
resources.
Other Terms
The terms of the SJ Cayman Centralised Fund Management Agreement are subject to applicable laws and regulations including the requirements of any regulatory authorities (including but not limited to the Stock Exchange and the New York Stock Exchange, Inc.).
SJ Cayman’s participation in the centralised fund management system of the Group will not alter its existing rights to its own funds. The rights to own, use, approve of use and benefit from SJ Cayman’s funds will remain with SJ Cayman.
THE SJ CAYMAN ANNUAL CAPS AND BASIS OF DETERMINATION
Historical Transaction Amounts
–
24
–
LETTER FROM THE BOARD
The
historical transaction amounts
among the
Company,
SMIC
Beijing
and
SJ
Jiangyin
for the
transactions contemplated under
the 2016
SJ
Jiangyin Centralised
Fund
Management Agreement
for the two
years
ended
31
December
2016 and 2017 and the
ten
months
ended
31
October
2018
are
as
follows:
|
|
|
Transactions for the
year ended
|
|
Transactions from
1 January 2018 to
|
|
Nature of Continuing Connected Transactions
|
|
31 December
|
|
31 October
|
|
|
|
2016
(1)
|
|
2017
(1)
|
|
2018
(2)
|
|
|
|
(US$ million)
|
|
(US$ million)
|
|
(US$ million)
|
|
Internal deposit services (representing the maximum daily outstanding balances including accrued interests)
|
|
93.2
|
|
147.2
|
|
137.9
|
|
|
|
|
|
|
|
|
|
Collection and payment services and foreign exchange services (representing the maximum daily transaction amount for collection and payment services and foreign exchange services)
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Internal loan services (representing the maximum daily outstanding balance of loans (including accrued interests)
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Provision of letter of credit services (representing the maximum aggregate amount under the letter(s) of credit issued on SJ Jiangyin’s behalf per calendar year)
|
|
—
|
|
4.7
|
|
17.3
|
|
|
|
|
|
|
|
|
|
Other financial services (representing the maximum fees charged for provision of other financial services per calendar year)
|
|
—
|
|
—
|
|
—
|
Notes:
|
(1)
|
Representing
the
audited amounts
of
all
transactions among
the
Company,
SMIC
Beijing
and
SJ
Jiangyin
for
the
two
years
ended
31
December
2016
and
2017.
|
–
25
–
LETTER FROM THE BOARD
SJ
Cayman Annual
Caps
|
Nature of SJ Cayman CCT
|
|
For the year ending 31 December
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
|
|
US$ million
|
|
US$ million
|
|
US$ million
|
|
Internal Deposit Services (representing the maximum daily outstanding
balances including accrued interests placed by SJ Cayman with SMIC Beijing)
|
|
130
|
|
130
|
|
130
|
|
|
|
|
|
|
|
|
|
Collection and Payment Services and Foreign Exchange Services
(representing the maximum daily transaction amount for collection and
payment services and foreign exchange services)
|
|
130
|
|
130
|
|
130
|
|
|
|
|
|
|
|
|
|
Internal Loan Services (maximum daily balance of internal loans
provided by SMIC Beijing to SJ Cayman)
|
|
130
|
|
130
|
|
130
|
|
|
|
|
|
|
|
|
|
Provision of Letter of Credit Services (representing the maximum
aggregate amount of the letter(s) of credit issued on SJ Cayman’s
behalf per calendar year)
|
|
130
|
|
130
|
|
130
|
|
|
|
|
|
|
|
|
|
Other Financial Services (representing the maximum fees charged by
SMIC Beijing for providing other financial services to SJ Cayman
per calendar year)
|
|
50
|
|
50
|
|
50
|
The SJ Cayman Annual Caps are determined based on the assumptions and factors as explained below:
|
1.
|
Internal Deposit
Services
|
|
|
(a)
|
the
expected increase
of SJ
Cayman
and
the
Group’s respective
fixed
assets
over the
effective period
of
the
SJ
Cayman Centralised
Fund
Management
Agreement;
and
|
|
|
(b)
|
the
operating
cash flow and
financial needs
of
each
of SJ
Cayman
and
the
Group
in
respect
of
its
future business
expansion.
|
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
|
|
(a)
|
the
practical needs
of SJ
Cayman
and the
Group’s respective future
business;
and
|
|
|
(b)
|
the
future development
plan
of
each
of SJ
Cayman
and the
Group.
|
|
3.
|
Internal
Loan
Services
|
|
|
(a)
|
the
capital expenditure required
for
future business expansion
of SJ
Cayman;
and
|
|
|
(b)
|
the
operating
cash flow and
financial
needs
of SJ
Cayman
and the
availability
of
fund
within
the
Group
in
respect
of
its
future
business
expansion.
|
|
4.
|
Provision
of
Letter
of
Credit
Services
|
|
|
(a)
|
the
capital expenditure required
for
future business expansion
of SJ
Cayman;
and
|
|
|
(b)
|
the
increase
of SJ
Cayman’s
and the
Group’s respective
fixed
assets
over
the
effective period
of
the
SJ
Cayman Centralised
Fund
Management Agreement.
|
–
26
–
LETTER FROM THE BOARD
|
5.
|
Other Financial
Services
|
|
|
(a)
|
the
practical needs
of SJ
Cayman’s
and the
Group’s respective future business;
and
|
|
|
(b)
|
the
future development
plan
of
each
of SJ
Cayman
and the
Group.
|
The
planned
total
capital expenditures
of SJ
Cayman
is
around US$1.2 billion,
of
which
an
accumulated
sum
of
about
US$230 million
has been
invested
as at
the
Latest
Practicable
Date. The
SJ
Cayman Annual
Caps for each type
of SJ
Cayman
CCT
are
determined
based
on SJ
Cayman’s remaining planned capital expenditures
totalling
around
US$1
billion according
to
the
investment schedule
in
respect
of SJ
Cayman.
SJ
Cayman
will
continue
to
invest
and
increase
its
capacity
for
bumping
and
wafer probing.
The
capital expenditure
of SJ
Cayman for the
following
year
is
estimated
to be
over
US$100 million.
It is
expected
that the
annual capital expenditures
for
the
three years from 2019
to
2021 will
remain
on
similar levels,
being over
US$100
million.
As
the
investment schedule towards
SJ
Cayman
will
be
adjusted according
to
the
changing market conditions
and
financial conditions
of
the
Group,
the
SJ
Cayman
Annual
Caps are set
based
on
the
aggregate capital expenditure plans
to
maintain
flexibility
for the Group
to
expedite
or
slow down
performance
of
its
planned
capital
expenditures.
As at
the
Latest Practicable Date,
SJ
Cayman
has
received
capital
contribution
of
over
US$330 million
from its
shareholders, namely
the
Company,
China
IC
Fund, Jiangsu Changjiang Electronics Technology
Co., Ltd. and
Qualcomm
Global Trading
Pte. Ltd..
There
is
currently
no
future
plan
of
capital contribution
to
be
made
towards
SJ
Cayman
by
its
shareholders,
SJ
Cayman
will
utilise
the
Internal Deposit Services
for the
current
US$69
million
of
internal deposit
in
the Group and
for
its
future operating
cash flow. The
SJ
Cayman Annual Caps
in
respect
of
Internal Deposit Services
are set
based
on
the
historical transactions amounts
under the 2016
SJ
Jiangyin Centralised
Fund
Management Agreement
for the two
years
ended
31
December
2016 and 2017 and the ten months ended
31
October 2018,
and
with reference
to
the
planned capital expenditure
of SJ
Cayman
next
year.
As
the
investment continues,
it is
expected
that the
highest
daily
outstanding balance throughout
the
three years
from 2019
to
2021 will not
exceed
the
transaction amount
in
the year
of
2018.
As
such, the
SJ
Cayman Annual
Caps
in
respect
of
Internal Deposit Services
are set
at
US$130 million
to
reflect
the
highest
daily
balance
and
include
a
buffer
to
cater
for
SJ
Cayman’s expansion. Furthermore,
as
the
current
total
investment
of
SJ
Cayman
is
approximately US$230 million
and the
planned capital expenditure
of
SJ
Cayman
in
the
year
of
2019
is
around
US$100
million,
the
SJ
Cayman
Annual
Caps
in
respect
of
the
Collection
and
Payment Services
and
Foreign Exchange Services
are set
at
US$130 million
to
reflect
the
transaction amount
and the
amount
of
internal
loans
obtained
for the
purchase
of
equipment
of
which
procurement
will
be
denominated
in
foreign currencies.
Since the
current outstanding balance
of
internal deposit
in
the Group
is
US$69
million,
SJ
Cayman
will need
to
finance
its
planned
capital
expenditure
of
around US$100 million
for
the
year
of
2019
through internal
loans.
As it is
expected
that
SJ
Cayman’s capital expenditures
for the three
years
from 2019
to
2021 will
remain
on
similar levels,
the
SJ
Cayman Annual
Caps
in
respect
of
Internal
Loan
Services
are thus set
at
US$130 million
for the three years
which include
a
buffer
for the
related financing costs
that may
be
incurred
due
to
unforeseen circumstances
such
as
insufficient capital contribution
from its
shareholders
and
additional capital expenditure originally planned
to be
incurred
in
the year
of
2020
being
–
27
–
LETTER FROM THE BOARD
brought forward
to
2019.
In
addition,
it is
expected
that
SJ
Cayman’s planned capital expenditure
for the
purchase
of
equipment
will
be
obtained through letter
s
of
credit.
The Group will
utilise
its
credit facilities
to
provide letter(s)
of
credit
for
SJ
Cayman
to
facilitate
the
purchase
of
equipment, whether
or
not
SJ
Cayman finances
the
required
capital expenditures internally
or
externally.
This will
enable
SJ
Cayman
to
take
advantage
of
the high
credibility
of
the
Group.
The
SJ
Cayman Annual
Caps
in
respect
of
Provision
of
Letter
of
Credit Services
are set
at
US$130 million
with
reference
to
the
aggregate capital expenditure plans
of SJ
Cayman
and the
possible highest
daily
transaction amount
for the
purchase
of
equipment.
The
SJ
Cayman Annual
Caps
in
respect
of
Other Financial Services
are set
at
US$50
million
to
reflect
the
expected
financial expenses
in SJ
Cayman’s future capital
expenditure.
REASONS FOR AND BENEFITS OF THE SJ CAYMAN CENTRALISED FUND MANAGEMENT AGREEMENT
The
Company considers
that the
entry
into
of
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
transactions contemplated thereunder
will open
up
the
domestic
and
foreign funding channels
of
the
Group, increase efficient
fund
usage
and
reduce
the
Group’s overall
debt
levels
and
interest expense.
The
centralised management
of
foreign
exchange
risk
exposure
will
also
reduce
the
risks
of
exchange
loss
of
the
Group.
The
Directors (excluding independent non-executive Directors whose
view will
be
given
after
taking
into
account
the
advice
from the
Independent Financial Adviser) consider
that
it is in
the best
interests
of
the
Company
and the
Shareholders
as
a whole
to
enter
into
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
transactions
contemplated thereunder;
the terms
of
the
SJ
Cayman Centralised
Fund
Management Agreement including
the
SJ
Cayman
Annual
Caps
are fair and
reasonable;
and the
entering
into
of
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
transactions contemplated thereunder
are
on
normal commercial terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and
the
Shareholders
as
a
whole.
IMPLICATIONS UNDER THE LISTING RULES
As at
the
Latest Practicable Date, China
IC
Fund
holds approximately 15.82%
equity
interest
in
the
Company through
its
wholly-owned subsidiary, Xinxin (Hongkong) Capital
Co.,
Limited,
it is a
connected person
of
the
Company
at
the
issuer level under
the
Listing Rules. China
IC
Fund holds approximately 29.38% equity interest
in SJ
Cayman,
a
majority owned subsidiary
of
the
Company, through
its
wholly-owned subsidiary,
Xun Xin.
SJ
Cayman
is
therefore
a
connected subsidiary
of
the
Company
as
defined under
Rule
14A.16
of
the
Listing Rules
and thus
a
connected person
of
the
Company under
the
Listing
Rules.
Pursuant
to
Rule
14A.81
of
the
Listing Rules,
as
the
nature
of
the
transactions under
the SMNC
Centralised
Fund
Agreement
and the
SJ
Cayman Centralised
Fund
Agreement
are
similar,
the
transactions contemplated under
the
SJ
Cayman Centralised
Fund
Agreement
shall
be
aggregated.
Save
as
disclosed above, there
are
no
other transactions
which
should
be
aggregated.
In
relation
to
the
transactions contemplated under
the
SJ
Cayman Centralised
Fund
Management Agreement,
the
Internal Deposit Services
to be
provided
by
SMIC
Beijing
to SJ
–
28
–
LETTER FROM THE BOARD
Cayman
will
constitute continuing connected transactions
by
w
ay
of
financial
assistance
received
by
SMIC
Beijing
from
a
connected person. Pursuant
to
Rule
14A.90
of
the
Listing
Rules,
as
the
Internal Deposit Services
are
conducted
on
normal commercial terms
and not
secured
by
the
assets
of
the
Group,
the
provision
of
the
Internal Deposit Services
is
fully
exempt
from the
reporting, announcement and/or
the
Independent Shareholders’ approval requirements under
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respe
ct
of
each
of
the
SJ
Cayman Annual
Caps for
the
Collection
and
Payment Services
and
Foreign Exchange Services, Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services,
in
aggregate, exceed
5%, the
transactions
contemplated under
the
SJ
Cayman Ce
ntralised
Fund
Management Agreement will constitute continuing connected transactions subject
to
the
reporting, announcement
and
the
Independent Shareholders’ approval requirements
of
Chapter
14A
of
the
Listing
Rules.
As
one
or
more
of
the
applicable
percentage ratios (other
than the
profits ratio)
in
respect
of
the
SJ
Cayman Annual
Caps for Other
Financial Services
are,
in
aggregate,
more
than
0.1% but less than 5%, the
transaction
is
subject
to
the
reporting, announcement
and
annual review requirements
but
exempt
from the
Independent Shareholders’ approval requirement
under
Chapter
14A
of
the
Listing
Rules.
In
accordance
with the
Listing Rules,
the
Independent Board Committee
comprising
Mr.
William
Tudor
Brown,
Dr.
Chiang Shang-yi,
Mr. Cong
Jingsheng Jason, Professor Lau Lawrence Juen-Yee
and Mr. Fan Ren
Da
Anthony,
all
being
the
independent non-executive Directors
has been
established
to
advise
and
provide recommendation
to
the
Independent Shareholders
on
the
SJ
Cayman Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT and the
SJ
Cayman Annual
Caps) and
to
advise
the
Independent Shareholders
on
how
to
vote.
Messis Capital Limited
has been
appointed
by
the
Company
as
the
Independent Financial Adviser
to
advise
the
Independent Board Committee
and the
Independent Shareholders
on
the
SJ
Cayman Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT
and
the
SJ
Cayman
Annual
Caps).
INFORMATION ABOUT THE PARTIES
Information on the Company and SMIC Beijing
Please
refer
to
sub-section headed
‘‘Information
on
the
Company
and SMIC
Beijing’’ on
page
19
of
this
circular.
Information on SJ Cayman, SJ Hong Kong and SJ Jiangyin
SJ
Cayman wholly
owns
SJ
Hong
Kong, which
in
turn
wholly
owns
SJ
Jiangyin.
SJ
Jiangyin
was
founded
in
November
2014
in
Jiangyin, Jiangsu Province
of
the PRC.
SJ
Cayman,
SJ
Hong
Kong,
SJ
USA and
SJ
Jiangyin
will
serve
as
the
leading
play
Middle- End-Of-Line (MEOL) entity
that
focuses
on
advanced bumping
production.
Complementing nearby advanced back-end assembly infrastructure,
SJ
Jiangyin
aims
to
be an
important
key
to
forming
a
local
integrated circuit ecosystem, providing
a
convenient
one-stop service
to
supply
high
quality
and
efficient chips
for
local
and
international customers,
as
well
as
help
strengthen
their
global
competitiveness.
–
29
–
LETTER FROM THE BOARD
(C)
PROPOSED
GRANT
OF
RESTRICTED
SHARE UNITS
TO
INDEPENDENT NON-EXECUTIVE
DIRECTORS
Reference
is
made
to
the
Company’s announcement dated
13
September
2018
pursuant
to
which
it was
resolved
at
a
Board
meeting
held
on 22
June 2018
to
grant
375,000
Restricted Share
Units
under
the 2014
Equity Incentive Plan, subject
to
the
Independent Shareholders’ approval
at
the
EGM.
Accordingly, subject
to
the
Independent Shareholders’ approval
at
the EGM,
375,000
Restricted Share Units
are
to be
granted, among which, 187,500 Restricted Share
Units
and
187,500 Restricted
Share
Units
will
be
granted
to
Professor
Lau and Mr. Fan,
respectively,
and
it is
intended
that such
Restricted Share
Units will vest over
a period
of
three years
at
the rate
of
33%, 33% and 34% for each
12
month period commencing
on
the date
on
which
the
relevant Director commenced
his term
of
office
as an
independent non-executive
Director.
Each
of
the
Restricted Share
Units
to be
granted
to
Professor
Lau
and Mr.
Fan
represents
the right
to
receive
an
Share
on
the date
it
vests.
In accordance with the terms of the 2014 Equity Incentive Plan, the Proposed RSU Grants will be made for no consideration, other than the minimum payment required by the applicable law in the Cayman Islands (which is the par value of the Shares to be issued pursuant thereto).
As at
the Latest
Practicable
Date, each
of
Professor
Lau and Mr.
Fan is
interested
in
187,500 share options
and
187,500 share options granted
to
him
by
the
Company pursuant
to
the 2014
Stock Option
Plan,
respectively, representing approximately 0.0037%
and
0.0037%
of
the
total issued share capital
of
the
Company. Subject
to
the
Independent Shareholders’ approval
of
the
Proposed
RSU
Grants
at
the EGM and
assuming
that
no
further Shares
will
be
issued
or
repurchased
by
the
Company
prior
to
the date
of
the
EGM,
the
maximum number
of
Shares
that may
be
issued
to
Professor
Lau
and Mr. Fan
in
accordance
with and
subject
to
the terms
of
the 2014 Stock
Option
Plan and the 2014
Equity Incentive
Plan would
be
375,000
and
375,000 respectively, representing
approximately
0.0074%
and
0.0074% respectively
of
the
total issued
share
capital
of
the
Company
as at
the
Latest Practicable
Date and
0.0074%
and
0.0074%
of
the
enlarged total issued
share
capital
of
the
Company.
Based
on
the
closing price
of
HK$7.450
per
Share
as
quoted
on
the
Stock Exchange
on
the Latest
Practicable Date,
the
market
value
of
the
Restricted
Share Units
under
the
Proposed
RSU
Grants
amounts
to
approximately
HK$2,793,750.
REASONS FOR AND BENEFITS OF THE PROPOSED RSU GRANTS
The
Proposed
RSU
Grants
are part
of
the
Company’s remuneration system,
the
purpose
of
which
is to
closely align
the
interests
and
benefits
of
and risk
sharing among
the
Shareholders,
the
Company
and the
employees
in
order
to
maximise
the
motivation
of
the
Directors.
The
Proposed
RSU
Grants
to
Professor
Lau and Mr. Fan aim
to
provide sufficient incentives
to
attract
and
motivate
them
to
remain with,
and
to
strive
for the
future
development
and
expansion
of
the
Group
and
to
enhance Shareholder value
through
further
aligning
these
Directors’
interests
with
the
Company.
–
30
–
LETTER FROM THE BOARD
Furthermore, there
will not
be
substantial
cash
outflow
by
the
Company under
the
Proposed
RSU
Grants.
In
this
regard,
the
Directors
(excluding
Professor
Lau
and
Mr.
Fan,
who
have
reserved
their
view
on
the
Proposed
RSU
Grants
to
themselves)
consider
that
the
terms
of
the
Proposed
RSU
Grants
are fair and
reasonable
and
in
the
interests
of
the
Company
and the
Shareholders
as
a whole.
Reference
is
made
to
the
circulars
of
the
Company dated 7
June 2016 and
18
November
2016
respectively, relating
to
its
revised
Board
policy
(the
‘‘Revised
Board
Policy’’)
which
was
resolved
at
a
Board
meeting
on 12
May
2016, pursuant
to
which the
details
of
the
annual additional
grant
of
share
options
and
Restricted
Share Units (the ‘‘Annual
Additional
Grant’’) to
existing Directors
at
the time
of
the
Annual Additional
Grant
and
the
method
of
calculation
of
the
grant
of
Restricted
Share Units
to
eligible Directors
are
set
out. The
Annual Additional
Grant
to
the
existing non-executive Directors (including
the
independent non-executive Directors)
is
fixed
in
accordance
with
a percentage
of
25%
of
a fixed
sum,
being
the most
recent on-board grant prior
to
the
Revised Board Policy
which
was made
to an
independent non-executive Director.
In
addition,
the
Revised
Board
Policy
also
provides
for
an
on-board grant
to be
made
to
new
Directors.
The
on-board grant
to
new
non-executive Directors (including
the
independent non-executive Directors)
(the
‘‘On- board
Grant’’)
is
fixed
in
accordance
with
a
percentage
of
75%
of
the
fixed
sum
of
the
most
recent on-board grant prior
to
the
Revised Board Policy which
was made
to an
independent non-executive Director.
The
amounts
of
the
Proposed
RSU
Grants
have been
calculated
using
the
relevant methods
of
calculation
set out
above
and then
divided
by
10 to
reflect
the
Company’s 10-to-1
share
consolidation,
which
became effective
on
7 December
2016,
after
the
implementation
of
the
Revised
Board
Policy.
|
(i)
|
Basis for
determining
the number
of
Restricted
Share Units
to be
granted
to
Professor
Lau:
|
|
|
|
|
|
|
|
On-board Grant (50%
share options and
|
=
|
5,000,000
(1)
7
10
(2)
6
75%
(3)
|
=
|
375,000
|
|
50% Restricted Share Units)
|
|
|
|
|
|
|
|
|
|
|
As the On-board Grant comprises a combination of 50% share options and 50% Restricted Share Units, the Proposed RSU Grant applicable to Professor Lau is 50% of 375,000 shares under the On-board Grant, that is, 187,500 Restricted Share Units.
|
(ii)
|
Basis
for
determining
the
number
of
Restricted
Share
Units
to
be
granted
to
Mr.
Fan:
|
|
|
|
|
|
|
|
On-board Grant (50%
share options and
|
=
|
5,000,000
(1)
7
10
(2)
6
75%
(3)
|
=
|
375,000
|
|
50% Restricted Share Units)
|
|
|
|
|
|
|
|
|
|
|
As the On-board Grant comprises a combination of 50% share options and 50% Restricted Share Units, the Proposed RSU Grant applicable to Mr. Fan is 50% of 375,000 shares under the On-board Grant, that is, 187,500 Restricted Share Units.
–
31
–
LETTER FROM THE BOARD
As the On-board Grant comprises a combination of 50% share options and 50% Restricted Share Units, the Proposed RSU Grant applicable to Mr. Fan is 50% of 375,000 shares under the On-board Grant, that is, 187
,500 Restricted Share Units.
Notes:
|
|
(1)
|
Number
of
shares subject
to
the most
recent On-board Grant
made
to an
independent
non-executive
Director
prior
to
the
Revised
Board
Policy
for
share
incentives
for
Directors.
|
|
|
(2)
|
One-tenth, reflecting
the fact that the
calculation
of
the
entitlement under
the
Proposed
RSU
Grants
this year
differs
from the
calculation
of
the
entitlements
to
individual Directors
in 2016
in
accordance
with the
Revised Board Policy
due
to
the
10-to-1 share consolidation effected
by
the
Company, which became effective
on
7
December
2016.
|
|
|
(3)
|
Three-fourth
of
the
number
of
shares
set out
in
footnote
(2)
above, reflecting
the fact that the
On- board Grant made
to
non-executive Directors prior
to
the
Revised Board Policy
was made
at
the
beginning
of
a
four year
period
and
vests
in
respect
of
25%
thereof
each year over such
period
whereas
the
On-board Grant
will
be
granted
at
the
beginning
of
a
three
year
period
and will
vest
over
a
period
of
three
years
at
the rate
of
33%,
33%
and 34% for each
12
month period
commencing
on
the
date
on
which
the
relevant
Director
commenced
his
term
of
office
as
Director.
|
IMPACT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY
|
|
|
As at the Latest Practicable Date
|
|
Immediately upon the completion of the Proposed RSU Grant
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
total issued
|
|
|
|
|
|
|
|
|
|
Percentage of
total issued
|
|
Shareholders
|
|
Number of
Shares
|
|
Share Options
|
|
Others
|
|
Total Interests
|
|
Share capital of
the Company
|
|
Number of
Shares
|
|
Share Options
|
|
Others
|
|
Total Interests
|
|
Share capital of
the Company
|
|
|
|
|
|
|
|
|
|
|
|
(Note 1)
|
|
|
|
|
|
|
|
|
|
(Note 1)
|
|
Directors and Chief Executive
Officer
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor Lau
|
|
—
|
|
187,500
|
|
—
|
|
187,500
|
|
0.003%
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
Mr. Fan
|
|
—
|
|
187,500
|
|
—
|
|
187,500
|
|
0.003%
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
Other Directors and Chief Executive
Officer
|
|
111,186
|
|
7,613,086
|
|
3,729,284
|
|
11,453,556
|
|
0.214%
|
|
111,186
|
|
7,613,086
|
|
3,729,284
|
|
11,453,556
|
|
0.214%
|
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantial Shareholders and Other
Shareholders
(Note 4)
|
|
5,039,588,870
|
|
—
|
|
305,297,338
|
|
5,344,886,208
|
|
99.770%
|
|
5,039,588,870
|
|
—
|
|
305,297,338
|
|
5,344,886,208
|
|
99.764%
|
|
|
|
|
|
|
|
(Note 5)
|
|
|
|
|
|
|
|
|
|
(Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
5,039,700,056
|
|
8,704,512
|
|
308,814,122
|
|
5,357,218,690
|
|
100.00%
|
|
5,039,700,056
|
|
8,704,512
|
|
309,151,622
|
|
5,357,556,190
|
|
100.00%
|
Notes:
|
(1)
|
Based
on
5,039,700,056 Shares
in
issue
as at
the
Latest Practicable
Date.
|
|
(2)
|
Inclusive
of
the
interests
or
short positions
of
the
Directors
and the
chief executive officer
in
the
Shares,
underlying Shares
and
debentures
of
the
Company
or any
of
its
associated corporation (within
the
meaning
of
Part
XV of
the
SFO), which
were
notified
to
the
Company
and the
Stock Exchange
pursuant
to
Divisions
7
and
8
of
Part
XV
of
the SFO
(including interests
or
short positions which
they are
taken
or
deemed
to
have
under
such
provisions
of
the
SFO), and
as
recorded
in
the
register required
to
be
kept
under section
352
of
the SFO
or as
otherwise notified
to
the
Company
and the
Stock Exchange
pursuant
to
the
Model Code
for
Securities Transactions
by
Directors
of
Listed Issuers.
|
|
(3)
|
Inclusive
of
the
Restricted Share Units granted
to
all
Directors
and Chief
Executive Officer other
than
Professor
Lau
and
Mr.
Fan
pursuant
to
the
2014
Equity
Incentive
Plan.
|
|
(4)
|
Inclusive
of
(i) the
interests
or
short positions
of
the
substantial shareholders
(‘‘Substantial Shareholders’’)
in
the
Shares
and
underlying Shares
of the
Company which would fall
to
be
disclosed under Divisions
2
and
3
of
Part
XV of
the SFO,
or
who was
directly
or
indirectly interested
in 5% or
more
of
the
nominal
value
of
any
class
of
share capital carrying rights
to
vote in all
circumstances
at
general meetings
of
the
Company
and its
subsidiaries
and (ii) the
interests
of
other Shareholders
who are
neither Directors
or
Chief Executive Officer
nor
Substantial
Shareholders.
|
|
(5)
|
Inclusive
of
the
derivatives
held
by
the
Substantial
Shareholders.
|
–
32
–
LETTER FROM THE BOARD
SPECIFIC MANDATE TO ISSUE NEW SHARES
The new
Shares
to be
issued under
the
Proposed
RSU
Grants
will
be
issued under
the
specific mandate granted
to
the
Directors
by
the
Shareholders
at
the
annual general meeting
of
the
Company
held
on 13
June 2013 for the
issue
of
Shares
under the 2014
Equity
Incentive
Plan. The
Listing Committee
of
the
Stock Exchange
has
previously granted
its
approval
for the
listing
of, and
permission
to
deal in,
Shares
to be
issued under
the
2014
Equity Incentive Plan, subject
to
the
fulfilment
of
all
other conditions
of
the 2014
Equity
Incentive Plan.
In
the
context
of
the
grant
of
Restricted Share
Units and
issue
of
Shares pursuant thereto under
the 2014
Equity Incentive
Plan
to
a
Director
as
a
connected person,
the
requirements under Chapter
14A
of
the
Listing Rules
would
be
required
to be
satisfied, including
the
obtaining
of
the
approval
of
the
Independent
Shareholders.
The
total
number
of
such new
Shares which
may
be
issued under
the 2014
Equity Incentive
Plan will not
exceed 80,184,428.
As
at
the
Latest Practicable
Date,
1,834,880 Shares remain issuable under
the
2014
Equity
Incentive
Plan.
IMPLICATIONS UNDER THE LISTING RULES
Each
of
Professor
Lau and Mr. Fan
is an
independent non-executive Director
of
the
Company.
As
such,
each
of
Professor
Lau and Mr. Fan
is
a
connected person
of
the
Company.
The
Proposed
RSU
Grants (including
the
allotment
and
issue
of
any new
Shares thereunder) constitutes connected transactions
of
the
Company under Chapter
14A
of
the
Listing Rules
and are thus
subject
to
reporting, announcement
and the
Independent Shareholders’ approval
requirements.
The
Company
has
established
the
Independent
Board
Committee
(excluding
Professor
Lau and Mr. Fan
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to
themselves)
to
advise
the
Independent
Shareholders
in
respect
of
the
Proposed
RSU
Grants.
The
Company
has
appointed
Messis
Capital
Limited
as
the
Independent
Financial
Adviser
to
advise
the
Independent
Board
Committee
and
the
Independent
Shareholders
in
respect
of
the
Proposed
RSU
Grants.
The
letter
from the
Independent Board Committee
to
the
Independent Shareholders
is
set out
on
pages
36 to 37 of
this
circular.
The
letter
from
Messis Capital Limited
to
the
Independent Board Committee
and the
Independent Shareholders
is
set out
on
pages
38 to 65 of
this
circular.
INFORMATION ABOUT THE COMPANY
Please
refer
to
sub-section headed
‘‘Information
on
the
Company
and SMIC
Beijing’’ on
page
19
of
this
circular.
At
the EGM,
ordinary resolutions
will
be
proposed
to
the
Independent Shareholders
to
approve,
among
others,
the SMNC
Centralised
Fund
Management Agreement
(including
the SMNC CCT and the SMNC
Annual Caps),
the
SJ
Cayman
Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT and the
SJ
Cayman Annual Caps)
and the
Proposed
RSU
Grants.
–
33
–
LETTER FROM THE BOARD
As
China
IC
Fund
is
a
connected person
of
the
Company,
its
wholly-owned
subsidiary
Xinxin (Hongkong) Capital
Co.,
Limited
and its other
associates
(as
defined
in
the
Listing
Rules)
will
abstain
from
voting
on
the
ordinary resolutions
to
approve
the
SMNC
Centralised
F
und
Management Agreement (including
the SMNC CCT and the
SMNC
Annual
Caps) and the
SJ
Cayman
Centralised
Fund
Management Agreement (including
the
SJ
Cayman
CCT and the
SJ
Cayman Annual Caps).
Apart from
Xinxin (Hongkong) Capital
Co.,
Limited
and
other ass
ociates
of
China
IC
Fund,
no
other
Shareholder
will
be
required
to
abstain
from
voting
on
the
aforementioned resolutions
at
the EGM.
As
at
the
Latest
Practicable Date, Xinxin (Hongkong) Capital
Co.,
Limited
was
holding 797,054,907 Shares
and
representing approximately 15.82%
of
the
total issued share capital
of
the
Company.
Pursuant to Chapter 14A of the Listing Rules, each of Professor Lau and Mr. Fan and their associates are required to abstain from voting on the relevant ordinary resolutions to approve the Proposed RSU Grants to Professor Lau and Mr. Fan (as the case may be).
Save
as
aforementioned,
no
other Shareholder
will
be
required
to
abstain
from
voting
on
the
resolutions
at
the
EGM.
Mr.
Lu
Jun, who
is
a
Class
II
non-executive Director
and a
member
of
the
Nomination
Committee
of
the
Company, holds
the
position
of
President
in
China
IC
Fund’s
sole
manager
Sino
IC
Capital
Co., Ltd., Mr. Ren Kai,
who is
a Class III
non-executive
Director
and a
member
of
the
Strategic Advisory Committee
of
the
Company, holds
the
position
of
Vice
President
in
China
IC
Fund’s
sole
manager
Sino
IC
Capital
Co., Ltd. Both Mr.
Lu
Jun
and Mr. Ren Kai have
abstained
from
voting
on
the
relevant
board
resolution
in
respect
of
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman Centralised
Fund
Management
Agreement.
Save
as
aforementioned,
no
other Director
was
considered
to
have a
material interest
in
the SMNC
Centralised
Fund
Management Agreement
or
the
SJ
Cayman
Centralised
Fund
Management Agreement which
would have
required
the
Director
to
abstain
from
voting
at
the
relevant
Board
meeting.
Each
of
Professor
Lau
and Mr. Fan,
both
independent non-executive Directors
of
the
Company,
has
abstained
from
voting
on
any
relevant Board resolutions
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to himself.
Your attention is drawn to the general information set out in Appendix I to this circular.
The
Board, including
the
independent non-executive Directors (excluding Professor
Lau and Mr. Fan
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to
themselves), considers
that
it is in
the best
interests
of
the
Company
and the
Shareholders
as
a
whole
to
enter
into the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman
Centralised
Fund
Management Agreement
and
approve
the
Proposed
RSU
Grants;
the terms
of
the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman
Centralised
Fund
Management Agreement
and the
Proposed
RSU
Grants
are fair and
reasonable;
and
the
entering
into
of
the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman
Centralised
Fund
Management Agreement
and
transactions contemplated thereunder
and
the
implementation
of
the
Proposed
RSU
Grants
are
on
normal commercial terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Group
and
in
the
interests
of
the
Company
and the
Shareholders
as
a
whole.
–
34
–
LETTER FROM THE BOARD
Accordingly, the Independent Board Committee (e
xcluding Professor Lau and Mr. Fan in respect of the portion of the Proposed RSU Grants relating to themselves) recommends the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the SMNC Centralised
Fund Management Agreement
(including the SMNC CCT and the SMNC Annual Caps), the SJ Cayman Centralised Fund Management Agreement (including the SJ Cayman CCT and the SJ Cayman Annual Caps) and the Proposed RSU Grants.
|
(F)
|
EXTRAORDINARY GENERAL
MEETING
|
The voting at the EGM will be taken by a poll. The Company will make an announcement of the poll results in accordance with the relevant requirements under the Listing Rules as soon as possible.
To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholders; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby it/he has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its/his Shares to a third party, either generally or on a case-by-case basis.
A form of proxy for the EGM is enclosed with this circular. Whether or not you intend to be present at the EGM, you are requested to complete the form of proxy and return it to the branch share registrar of the Company, Computershare Hong Kong Investor Services Limited, at Hopewell Centre, 17M Floor, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed for the EGM. The completion of a form of proxy will not preclude you from attending and voting at the EGM in person.
For
determining
the
entitlement
to
attend
and vote
at
the EGM, the
register
of
members
of
the
Company
will
be
closed
from 8
January
2019
to 11
January
2019 (both days
inclusive), during
which
period
no
transfer
of
shares
in
the Company will
be
registered.
In
order
to
qualify
for
attending
and
voting
at
the EGM, all
properly completed transfer forms, accompanied
by
the
relevant certificates,
must
be
lodged
with the
branch
share
registrar
of
the
Company, Computershare
Hong Kong
Investor Services Limited,
at
Shops 1712–1716,
17th Floor,
Hopewell Centre,
183
Queen’s
Road
East, Wanchai,
Hong Kong
by no
later
than 4 :
30
p.m.
on
7
January 2019.
All
persons
who are
registered holders
of
the
Shares
on 11
January 2019,
the
record
date for the EGM, will
be
entitled
to
attend
and vote
at
the
EGM.
By Order of the Board
Semiconductor Manufacturing International Corporation
Gao Yonggang
Executive Director, Chief Financial Officer and Joint Company Secretary
Shanghai,
21
December
2018
–
35
–
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Set out
below
is
the text
of
the
letter
of
recommendation, prepared
for
incorporation
in
this
circular,
from
the
Independent
Board
Committee
to
the
Independent
Shareholders.
Semiconductor Manufacturing International Corporation
中 芯 國 際 集 成 電 路 製 造 有 限 公 司
*
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 981)
21 December 2018
To
the
Independent
Shareholders
Dear Sir
or
Madam,
CONTINUING CONNECTED TRANSACTIONS IN RELATION TO
CENTRALISED FUND MANAGEMENT AGREEMENT WITH
SEMICONDUCTOR MANUFACTURING NORTH CHINA (BEIJING)
CORPORATION
AND
CONTINUING CONNECTED TRANSACTIONS IN RELATION TO
CENTRALISED FUND MANAGEMENT AGREEMENT WITH SJ
SEMICONDUCTOR CORPORATION
AND
CONNECTED TRANSACTION IN RELATION TO PROPOSED
GRANT OF RESTRICTED SHARE UNITS TO INDEPENDENT NON-
EXECUTIVE DIRECTORS
We
refer
to
the
circular dated
21
December
2018 (the
‘‘Circular’’)
issued
by
the
Company
to
the
Shareholders
of
which this
letter forms part. Unless
the
context otherwise requires, terms
used
in
this
letter
shall have the same
meanings given
to
them
in
the Circular.
We
(excluding Professor
Lau and Mr. Fan
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to
themselves)
have been
appointed
by
the
Board
to
advise
the
Independent Shareholders
as to
whether
the
terms
of
the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman Centralised
Fund
Management Agreement
and
the
Proposed
RSU
Grants
are fair and
reasonable,
and
whether
the
entering
into
of
the
SMNC
Centralised
Fund
Management
Agreement,
the
SJ
Cayman
Centralised
Fund
|
*
|
For
identification purpose
only
|
–
36
–
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Management Agreement
and the
implementation
of
the
Proposed
RSU
Grants
are
on
normal commercial terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Company
and
in
the
interests
of
the Company and the
Shareholders
as
a
whole,
and
to
advise
the
Independent Shareholders
on
how
to
vote, taking
into
account
the
recommendations
of
Messis Capital
Limited.
Messis Capital Limited
has been
appointed
as
the
Independent Financial Adviser
to
advise
the
Independent
Board
Committee
and the
Independent Shareholders
as to
whether
the terms
of
the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman
Centralised
Fund
Management Agreement
and the
Proposed
RSU
Grants
are fair
and
reasonable,
and
whether
the
entering
into
of
the SMNC
Centralised
Fund
Management Agreement,
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
implementation
of
the
Proposed
RSU
Grants
are
on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Company
and
in
the
interests
of
the
Company
and the
Shareholders
as
a whole,
and
to
advise
the
Independent Shareholders
on
how
to
vote
on
the
relevant resolutions. Details
of
its
advice, together
with the
principal
factors
and
reasons
taken into
consideration
in
arriving
at
such
advice,
are set out
on
pages
38
to
65
of
the
Circular.
We
(excluding Professor
Lau and Mr. Fan
in
respect
of
the
portion
of
the
Proposed
RSU
Grants relating
to
themselves), having taken
into
account
the
advice
of
Messis Capital Limited, consider
that the terms
of
the SMNC
Centralised
Fund
Management
Agreement,
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
Proposed
RSU
Grants
are fair and
reasonable,
and the
entering
into
of
the SMNC
Centralised
Fund
Management
Agreement,
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
implementation
of
the
Proposed
RSU
Grants
are
on
normal commercial
terms
or
better,
in
the
ordinary
and
usual course
of
business
of
the
Company
and
in
the
interests
of
the
Company
and the
Shareholders
as a
whole. Accordingly,
we
recommend
the
Independent Shareholders
to
vote
in
favour
of
all the
ordinary resolutions
to be
proposed
at
the
EGM.
Your
attention
is
also
drawn
to
the
letter
from the
Board
set out
on
pages
7 to 35 of
the
Circular
and
the
additional
information
set
out
in
the
Appendix
I
to
the
Circular.
|
|
|
Yours faithfully,
Independent Board Committee
William Tudor Brown,
Chiang Shang-yi, Cong Jingsheng Jason, Lau
Lawrence Juen-Yee, Fan Ren Da Anthony
Independent non-executive Directors
|
–
37
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The
following
is
the full text
of
the
letter
from the
Independent Financial Adviser
which
sets out its
advice
to
the
Independent
Board
Committee
and the
Independent Shareholders
for
inclusion
in
this
circular.
21 December 2018
The Independent Board Committee and the Independent Shareholders of Semiconductor Manufacturing International Corporation
Dear Sir/Madam,
(1) CENTRALISED FUND MANAGEMENT AGREEMENT WITH
SEMICONDUCTOR MANUFACTURING NORTH CHINA (BEIJING)
CORPORATION;
(2) CENTRALISED FUND MANAGEMENT AGREEMENT WITH SJ
SEMICONDUCTOR CORPORATION;
AND
(3) CONNECTED TRANSACTION IN RELATION TO PROPOSED
GRANT OF RESTRICTED SHARE UNITS TO INDEPENDENT NON-
EXECUTIVE DIRECTORS
INTRODUCTION
We
refer
to
our
appointment
as
the
Independent Financial Adviser
to
advise
the
Independent Board Committee
and the
Independent Shareholders
in
relation
to
(i) the SMNC
Centralised
Fund
Management Agreement;
(ii) the
SJ
Cayman Centralised
Fund
Management Agreement;
and
(iii)
the
Proposed
RSU
Grants, details
of
which are set out
in
the
letter
from the Board (the
‘‘Letter
from the
Board’’)
contained
in
the
circular
of
the
Company dated
21
December
2018
issued
to
the
Shareholders
(the
‘‘Circular’’), of
which this
letter
forms
part.
Terms used
in
this
letter shall
have the same
meanings
as
those defined
in
the
Circular, unless otherwise
specified.
Reference
is
made
to
the
Company’s announcement dated
29
November 2018,
that
the
Company,
SMIC
Beijing
and SMNC
entered
into the SMNC
Centralised
Fund
Management Agreement
in
relation
to: (i) the
Company authorising
its
wholly-owned
subsidiary
SMIC
Beijing
to
carry
out
centralised management
of
the
Group’s
RMB
fund
and
foreign exchange
in
accordance
with the
relevant
PRC laws and
regulations;
and
(ii)
SMNC
participating
in
the
Group’s centralised
fund
management system.
SMIC
Beijing
will
provide internal deposit services, collection
and
payment services, foreign
exchange
services, internal
loan
services, provision
of
letter
of
credit services
and
other
financial
services
to
SMNC
pursuant
to
the
SMNC
Centralised
Fund
Management
Agreement.
Reference
is
also made
to
the
Company’s announcement dated 6 December
2018
relating
to
the
Company,
SMIC
Beijing
and
SJ
Cayman’s entering
into
of
the
SJ
Cayman
Centralised
Fund
Management Agreement
in
relation
to: (i) the
Company authorising
its
wholly-owned subsidiary
SMIC
Beijing
to
carry out
centralised management
of
the
Group’s
RMB
fund and
foreign exchange
in
accordance
with the
relevant
PRC
laws and
regulations;
and (ii)
SJ
Cayman participating
in
the
Group’s centralised
fund
management
system.
–
38
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
As at
the
Latest Practicable
Date,
China
IC
Fund held
approximately 15.82%
equity
interest
in
the
Company through
its
wholly-owned subsidiary, Xinxin (Hongkong) Capital
Co.,
Limited,
it is
a
connected person
of
the
Company
at
the
issuer level under
the
Listing Rules.
As at
the
Latest Practicable
Dat
e, the
registered capital
of
SMNC
is
held
as to
approximately
51% and 32%
by
the Group and China
IC
Fund, respectively. China
IC
Fund
holds approximately 29.38% equity interest
in SJ
Cayman,
a
majority
owned
subsidiary
of
the
Company, through
its
wholly-owned subsidiary,
Xun
Xin. Each
of
SMNC and
SJ
Cayman
is
therefore
a
connected subsidiary
of
the
Company
as
defined under
Rule
14A.16
of
the
Listing Rules
and thus
a
connected person
of
the
Company under
the
Listing
Rules.
In
relation
to
the
transactions contemplated
under the SMNC
Centralised
Fund
Management Agreement,
the
Internal Deposit Services
to be
provided
by
SMIC
Beijing
to
SMNC will
constitute continuing connected transactions
by
way
of
financial assistance received
by
SMIC
Beijing
from
a
connected person. Pursuant
to
Rule
14A.90
of
the
Listing
Rules,
as
the
Internal Deposit Services
are
conducted
on
normal commercial terms
and not
secured
by
the
assets
of
the
Group,
the
provision
of
the
Internal Deposit Services
is
fully
exempt
from the
reporting, announcement and/or
the
Independent Shareholders’ approval requirements under
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
each
of
the SMNC
Annual Caps
for the
Collection
and
Payment Services
and
Foreign Exchange Services, Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services exceed
5%, the
transactions contemplated under
the SMNC
Centralised
Fund
Management Agreement
will
constitute continuing
connected
transactions subject
to
the
reporting, announcement
and the
Independent Shareholders’ approval requirements
of
Chapter
14A
of
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
the SMNC
Annual
Caps for
Other Financial Services
are more than 0.1% but less than 5%, the
transaction
is
subject
to
the
reporting, announcement
and
annual review requirements
but
exempt
from
the
Independent Shareholders’ approval requirement under Chapter
14A
of
the
Listing Rules.
Pursuant
to
Rule
14A.81
of
the
Listing Rules,
as
the
nature
of
the
transactions under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman Centralised
Fund
Management Agreement
are
similar,
the
transactions contemplated under
the
SJ
Cayman
Centralised
Fund
Management Agreement shall
be
aggregated.
Save
as
disclosed above,
there
are
no
other
transactions
which
should
be
aggregated.
In
relation
to
the
transactions contemplated under
the
SJ
Cayman Centralised
Fund
Management Agreement,
the
Internal Deposit Services
to be
provided
by
SMIC
Beijing
to SJ
Cayman
will
constitute
continuing
connected
transactions
by
way
of
financial
assistance
received
by
SMIC
Beijing
from
a
connected person. Pursuant
to
Rule
14A.90
of
the
Listing
Rules,
as
the
Internal Deposit Services
are
conducted
on
normal commercial terms
and not
secured
by
the
assets
of
the
Group,
the
provision
of
the
Internal Deposit Services
is
fully
exempt
from the
reporting, announcement and/or
the
Independent Shareholders’ approval requirements under
the
Listing Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
each
of
the
SJ
Cayman Annual
Caps for
the
Collection
and
Payment Services
and
Foreign Exchange Services, Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services,
in
aggregate, exceed
5%, the
transactions
contemplated under
the
SJ
Cayman Centralised
Fund
Management Agreement will constitute continuing connected transactions subject
to
the
reporting, announcement
and
the
Independent Shareholders’
–
39
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
approval requirements
of
Chapter
14A
of
the
Listing
Rules.
As
one
or
more
of
the
applicable percentage ratios (other
than the
profits ratio)
in
respect
of
the
SJ
Cayman Annual
Caps for Other
Financial Services
are,
in
aggregate,
more
than
0.1% but less than 5%, the
transaction
is
subject
to
the
reporting, announcement
and
annual review requirements
but
exempt
from the
Independent Shareholders’ approval requirement
under
Chap
ter
14A
of
the
Listing
Rules.
In
additional, reference
is
made
to
Company’s announcement dated
13
September
2018
pursuant
to
which
the
Company proposes
to
grant 375,000 Restricted Share
Units
under
the 2014
Equity Incentive
Plan,
subject
to
the
Independent Shareholders’ approval
at
the
EGM.
Among the
375,000 Restricted
Share Units
to be
granted, 187,500 Restricted Share Units
will
be
granted
to
Professor
Lau and
187,500 Restricted
Share
Units
will
be
granted
to
Mr.
Fan.
Each
of
Professor
Lau and Mr. Fan
is an
independent non-executive Director
of
the
Company.
As
such,
each
of
Professor
Lau and Mr. Fan
is
a
connected person
of
the
Company.
The
proposed grant
of
375,000 Restricted
Share Units and any
transactions
contemplated thereunder (including
the
allotment
and
issue
of
any new
Shares thereunder) constitutes non-exempt connected transactions
of
the
Company under Chapter
14A
of
the
Listing
Rules and are thus
subject
to
reporting, announcement
and the
Independent Shareholders’ approval
requirements.
The
Independent Board Committee
has been
established
to
advise
and
provide recommendation
to
the
Independent Shareholders
on
(i) the SMNC
Centralised
Fund
Management Agreement
and its
annual
caps; (ii) the
SJ
Cayman
Centralised
Fund
Management Agreement
and its
annual
caps; and
(iii)
the
Proposed
RSU
Grants
and
any
transactions contemplated thereunder (including
the
allotment
and
issue
of
any new
Shares thereunder)
and
to
advise
the
Independent Shareholders
on
how
to
vote. We,
Messis
Capital
limited,
have been
appointed
as
the
Independent Financial Adviser
to
advise
the
Independent Board Committee
and the
Independent Shareholders
as to
whether
the terms
of
(i) the SMNC
Centralised
Fund
Management Agreement
and its
annual caps;
(ii)
the
SJ
Cayman Centralised
Fund
Management Agreement
and its
annual
caps; and (iii)
the
Proposed
RSU
Grants
and any
transactions contemplated thereunder (including
the
allotment
and
issue
of
any new
Shares thereunder)
are
on
normal commercial terms
and
in
the
ordinary
and
usual course
of
business
of
the
Group;
fair and
reasonable
so
far
as
the
Independent Shareholders
are
concerned
and
is in
the
interests
of
the
Company
and the
shareholders
as
a
whole.
–
40
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
OUR INDEPENDENCE
As at the Latest Practicable Date, we did not have any relationship with or interest in the Company or any other parties that could reasonably be regarded as relevant to our independence. In the last two years, we have acted as the independent financial adviser to the independent board committee and the independent shareholders of the Company for the following transactions:
|
Date of the relevant
circular/announcement
and/or our letter of
advice
|
|
Nature
of
the
transactions
|
|
|
|
|
|
24
May
2017
|
|
Non-exempt connected transactions — proposed grants
of
restricted share units to directors and former chief executive officer
|
|
|
|
|
|
31
July
2017
|
|
Connected transactions — provisions
of
guarantees
|
|
|
|
|
|
13
September
2017
|
|
(1)
Major transaction
and
connected transaction
proposed
capital contribution
in
a joint
venture
in
Beijing,
the
PRC;
(2) non-exempt connected transactions — proposed
grant
of
restricted
share units
to
former Chief Executive Officer;
and
(3) non-exempt
connected
transactions
—
proposed
grant
of
restricted
share units
to
Chief
Executive Officer
and Director
|
|
|
|
|
|
18
January
2018
|
|
Discloseable
and
continuing connected transactions
in
relation
to
framework
agreement
|
|
|
|
|
|
6
March
2018
|
|
Discloseable
and
connected transactions
in
relation
to
proposed capital contribution
and
deemed disposal
of
equity interest
in
SMSC
|
|
|
|
|
|
23
May
2018
|
|
Non-exempt connected transactions —
the
Datang
Subscription and the China IC Fund Subscription
|
|
|
|
|
|
22
October
2018
|
|
(1)
Continuing connected transactions
in
relation
to
framework agreement;
(2)
Continuing
connected
transactions
in
relation
to
Centralised
Fund
Management Agreement;
and (3)
connected transaction
in
relation
to
proposed
grant
of
restricted
share units
to
a
former independent non-executive director,
a
non-executive
director
and
an
independent non-executive
director
|
Apart
from
normal professional
fees paid
or
payable
to us in
connection
with
the
previous appointments mentioned above
as
well
as
this
appointment
as
the
Independent Financial Adviser,
no
arrangement
exist
whereby
we
have
received
or
will
receive
any fees
or
benefits
from the Company
or
any other
parties
that could
reasonably
be
regarded
as
relevant
to
our
independence. Accordingly,
we
consider
that the
aforementioned previous appointment
would not
affect
our
independence,
and that
we
are
independent pursuant
to
Rule
13.84
of
the
Listing
Rules.
–
41
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
BASIS OF OUR OPINION
In
formulating
our
opinion
and
recommendation,
we
have
considered, among other things,
(i) the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement;
(ii) the
Company’s annual report
for the year ended
31
December
2017 (the
‘‘Annual
Report
2017’’),
and the
interim report
for the
six
months ended
30
June 2018 (the
‘‘Interim
Report
2018’’);
and (iii) other
information
as
set
out
in
the
Circular.
We
have also
relied
on
all
relevant information, opinions
and
facts supplied
and
represented
by
the
Company
and the
management
of
the
Company.
We
have
assumed
that all such
information, opinions,
facts and
representations contained
or
referred
to in
the
Circular,
for
which
the
Company
is
fully
responsible,
were true and
accurate
in
all
material respects
as at
the date
hereof
and may
be
relied upon.
We
have
no
reason
to
doubt
the
truth, accuracy
and
completeness
of
the
information
and
representations provided
to us by
the
Company,
and the
Company
has
confirmed
that
no
material
facts have been
withheld
or
omitted
from the
information provided
and
referred
to in
the
Circular,
which
would
make any
statement therein
misleading.
We
consider
that
we
have
reviewed sufficient information currently available
to
reach
an
informed
view and
to
justify
our
reliance
on
the
accuracy
of
the
information contained
in
the
Circular
so as to
provide
a
reasonable basis
for our
recommendation.
We
have
not,
however, carried
out
independent verification
of
the
information provided
by
the
management
and the
representatives
of
the
Company,
nor
have
we
conducted
any
form
of
in-depth investigation
into the
businesses, affairs, operations, financial position
or
future prospects
of
the
Company
or
any
of
its
subsidiaries.
PRINCIPAL FACTORS AND REASONS CONCERNED
In
considering whether
the terms
of
(i) the SMNC
Centralised
Fund
Management Agreement
and its
annual
caps; (ii) the
SJ
Cayman
Centralised
Fund
Management
Agreement
and its
annual
caps and (iii) the
Proposed
RSU
Grants
are fair and
reasonable
in
so
far
as
the
Independent Shareholders
are
concerned,
we
have
taken
into
account
the
principal
factors
and
reasons
set
out
below:
|
(1)
|
The
SMNC
Centralised
Fund
Management Agreement
|
Background of the SMNC Centralised Fund Management Agreement
Reference
is
made
to
the
Company’s announcement dated
29
November 2018,
that the
Company,
SMIC
Beijing
and SMNC
entered
into the SMNC
Centralised
Fund
Management
Agreement
in
relation
to:
(i)
the
Company
authorising
its
wholly-owned
subsidiary
SMIC
Beijing
to
carry out
centralised management
of
the
Group’s
RMB
fund and
foreign exchange
in
accordance
with the
relevant
PRC
laws and
regulations;
and (ii) SMNC
participating
in
the
Group’s centralised
fund
management
system.
SMIC
Beijing
will
provide internal deposit services, collection
and
payment
services,
foreign exchange services, internal
loan
services, provision
of
letter
of
credit services
and
other financial services
to
SMNC
pursuant
to
the SMNC
Centralised
Fund
Management
Agreement.
–
42
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The SMNC CCT will include the following:
|
1.
|
Internal Deposit
Services
|
SMIC Beijing provides deposit services and pays interest to SMNC.
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
SMIC Beijing serves as the platform for centralised collection and payment activities and foreign exchange activities of the Group. SMNC may carry out such activities by itself or through SMIC Beijing.
|
3.
|
Internal
Loan
Services
|
SMIC Beijing provides internal loan services to SMNC in accordance with PRC laws, regulations and policies.
|
4.
|
Provision
of
Letter
of
Credit
Services
|
Letter
of
Credit Services
will
be
utilised
as
a settlement instrument
through
which
the
Company
will
utilise
its
overseas credit lines
to
provide letter
of
credit
on
behalf
of
SMNC for
importing equipment
in
accordance
with PRC
laws,
regulations
and
policies.
|
5.
|
Other Financial
Services
|
SMIC Beijing provides other financial services to SMNC in accordance with PRC laws, regulations and policies.
Reasons for and benefit of the SMNC Centralised Fund Management Agreement
As
stated
in
the
Letter
from the
Board,
SMNC
is
a
joint
venture company established
in
the PRC
pursuant
to
the joint
venture agreement dated
3
June
2013,
the
equity capital
of
which
is
owned
as to
12.5%
by
SMIC
Beijing,
13%
by
SMIC
Investment, 25.5%
by
SMIC
Holdings
and 32%
by
China
IC
Fund. The
remaining
equity capital
of
SMNC
is
owned
by
ZDG,
IDIMC,
CGP
Techfund
and E-Town
Capital
and none
of
them owns 10%
or
more
equity capital
of
SMNC. SMNC
is
primarily
engaged
in
manufacturing
and
trading
of
semiconductor
products.
As
set out
in
the
Letter
from the
Board,
the
Company considers
that the
entry
into
of
the SMNC
Centralised
Fund
Management Agreement
and the
transactions
contemplated thereunder
will have the
benefits
of
reducing
the
Group’s overall
debt
levels
and
increasing efficient
fund
usage, reducing
the
Group’s interest expense
and
obtaining favourable exchange
rate for the
Group.
Based
on
our
discussions
with the
management
of
the
Company,
SMIC
Beijing
is
one
of
the
operating subsidiaries
of
the
Group
and has
taken
the
centralised
fund
management function
for the Group
members.
We
were
given
to
understand
that SMIC
Beijing,
by
leveraging
in
the
economics
of
scale
achieved
by
the
centralisation
of
the
Group’s financial resources,
is
able
to
obtain better
terms from
independent
banks
and
financial institutions
in
respect
of
different financial services,
such
as
relatively
more
favourable interest rate, exchange
rate and
credit term,
than
individual
Group
companies negotiating
its own
terms.
–
43
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
In
addition,
by
centralising
the
internal treasury function,
the
management
of
the
Com
pany considers
that the Group can
reduce unused
loan and the
overall
debt
levels.
The
internal
loan and
provision
of
letter
of
credit services provided
by
SMIC
Beijing
will allow more
efficient utilisation
of
available financial resources
of
the
Group,
suc
h
as
combing
the
borrowing
needs
of
individual
Group
companies
into
a
single
banking
facility. Therefore,
the
Group
can
better monitor
its
treasury
and
working capital
and
increase efficient
fund
usage.
In light of the abovementioned, we consider that entering into the SMNC Centralised Fund Management Agreement is in the interest of the Company and the Shareholders as a whole.
Pricing policies of the SMNC Centralised Fund Management Agreement
As
stated
in
the
Letter
from the
Board,
the
price
of
the
services provided
by
SMIC
Beijing
to
SMNC
contemplated under
the SMNC
Centralised
Fund
Management
Agreement
will
be
fair and
reasonable
under the
Listing Rules
and
determined
according
to
the
market principle
on an
arm’s
length basis, subject
to
compliance with requirements
for
connected transactions
of
the
Stock Exchange. Under
the
Group’s existing centralised
fund
management system,
SMIC
Beijing collectively procures certain
fund
management services
from
third-party banks
or
financial institutions.
SMIC
Beijing
will
charge
its
subsidiaries
with
reference
to
terms
offered
by
third-party banks
or
financial institutions
for such fund
management
services.
Based
on
our
discussion
with the
management
of
the
Company
and
the
information provided,
in
relation
to
the
Internal Deposit Services
and
Internal
Loan
Services,
we
understand
that SMIC Beijing will
obtain
two
or
more
written
quotes
from
third-party commercial banks
in
the
PRC
for
providing deposit
and loan
services
of
the same type
during
the same
period
to
SMNC.
For
Internal Deposit Services,
the
interest
rate
adopted
for
SMNC’s deposits
with SMIC
Beijing
will
be
the same
as or
lower than the
lowest
of
the
interest rates quoted.
For
Internal
Loan
Services,
the
adopted interest
rate for SMNC’s loans from SMIC
Beijing
will
be
the same
as or
higher
than
the
highest
of
the
interest
rates
quoted.
The
Company
understands
that
the
third-party commercial banks
will make
reference
to, and
generally
seek
to be in
line
with the
benchmark interest
rates
specified
by
the PBOC for RMB
deposits
or
RMB
loans
of
a similar type.
For the
purpose
of
clarification,
such
benchmark interest rates
are
guidance rates published
by
the PBOC from time
to
time for
reference
only and
will
not
be
adopted
even
if
(in the case
of
the
internal deposit services)
it is
lower than the
lowest
of
the
interest rates quoted
by
third-party commercial banks
in
the PRC
or
(in
the case
of
the
internal
loan
services)
it is
higher than the
highest
of
the
interest
rates
quoted
by
third-party commercial banks
in
the PRC. The PBOC
publishes
benchmark
interest
rates for RMB
deposits
and RMB loans from time
to
time which serve
as
a guidance price
for
reference
only for the
commercial banks
in
the
PRC.
The
Company understands
that when
determining
the
interest
rates
quoted
to
SMNC, the
third-party commercial
banks will
refer
to
such PBOC
benchmark
interest
rate for
RMB
deposits
or
RMB
loans
of
a
similar
type and make
adjustment based
on
the
bank’s credit assessment
of
SMNC. For due
diligence purpose,
we
have
reviewed
two
interest
rate
quotes
from
third party commercial banks
to
SMNC for loan
services,
and
noticed
that the
interest
rate
charged
to
SMNC
by
the
Company
is
not less
favorable
to
the loan
rates quoted
from such
banks.
In
respect
of
Internal
Deposit
Services,
we
have
reviewed three
bank
quotations
of
deposit
rates
given
by
independent banks
to
the
Company
for each
of
the two
years ended
31
December
2017 and the
period
from 1
January
2018
to 31
October 2018.
We
note that the
deposit rates given
to
SMNC are
no
less
favourable
to
the
Company
when
comparing
to
the
–
44
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
interest rates quoted
from the
independent banks
for
deposits
of
the same type and
duration
at
similar
time.
As
the
quotation
rates
giv
en
by
independent banks
to
the
Company
represent market price
and are
no
less
favourable
to
the
Company
than the
rates provided
to
SMNC
by
the
Company,
we
consider
that the
pricing policies
for
Internal Deposit Services
and
Internal Loan Services
are fair
and
reasonable.
For the terms
in
respect
of
the
Collection
and
Payment Services
and
Foreign Exchange Services,
and
Provision
of
Letter
of
Credit Services
will
be
determined
based
on
arm’s length negotiations
by
the
parties
which will not
be
less
favourable
to
SMIC
Beijing
than (i) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are
not
connected persons
under the
Listing
Rules; and (ii) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
financial institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the same type
during
the
same
period.
SMIC
Beijing
will
obtain services
of
the same type from
third-party
commercial banks
or
financial institutions first
and then use the fees
charged
to it
to
determine
fees
to be
charged
to
SMNC
as
described above.
As
advised
by
the
management
of
the
Company,
in
determining
such terms
offered
to
SMNC,
SMIC
Beijing
will make
reference
to
the terms
offered
by
the
independent banks
and
financial
institutions,
and will not
be
less
favourable
to
SMIC
Beijing
than that
offered
to
other
wholly-owned
subsidiaries.
Taking into account (i) SMIC Beijing will obtain two or more written quotes from third-party commercial banks in the PRC for providing Internal Deposit Services and Internal Loan Services of the same type during the same period to SMNC which is consistent with the Group’s approach to its subsidiaries which are not connected
person
of
the
Company under
its
existing centralised
fund
management system;
and
(ii)
SMIC
Beijing
will make
reference
to
the terms
offered
by
the
independent banks
and
financial institutions
in
respect
of
the
Collection
and
Payment Services
and
Foreign
Exchange Services
and
Provision
of
Letter
of
Credit Services,
we
are
of
the view
that
the
pricing
of
the fund
management services under
the SMNC
Centralised
Fund
Management Agreement based
on
quotes obtained
from
third-party commercial banks
or
financial institutions
could
reflect
the market rate for such
services,
and are not less
favourable
to
SMIC
Beijing
than that
offered
to
other
wholly-owned
subsidiaries
having compared
SMIC
Beijing’s treatment
to
the
wholly-owned subsidiaries
of
the
Company under
the
Group’s existing centralised
fund
management system,
and that the terms
of
the SMNC
Centralised
Fund
Management Agreement
are fair and
reasonable
and
in
the
interests
of
the
Company
and
its
Shareholders
as
a
whole.
–
45
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Historical transaction amounts
The
historical transaction amounts between
the Company and SMNC for
the
transactions contemplated under
the SMNC
Centralised
Fund
Management
Agreement
are
as
follows:
|
|
|
|
|
|
|
|
|
|
|
Annual Cap
|
|
|
|
|
|
|
|
|
|
|
|
for each of the
|
|
|
|
|
|
|
|
|
|
From
|
|
three financial
|
|
|
|
|
|
For the
|
|
For the
|
|
1 January
|
|
years end
|
|
|
|
|
|
year ended
|
|
year ended
|
|
2018 to
|
|
31 December
|
|
|
|
|
|
31 December
|
|
31 December
|
|
31 October
|
|
2016, 2017 and
|
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|
|
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|
2016
(1)
|
|
2017
(1)
|
|
2018
(2)
|
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2018
|
|
|
|
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|
(US$ million)
|
|
(US$ million)
|
|
(US$ million)
|
|
(US$ million)
|
|
1.
|
|
Internal Deposit Services
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719.7
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1,182.3
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1,297.4
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2,000
|
|
2.
|
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Collection and Payment Services and Foreign
Exchange Services
|
|
—
|
|
—
|
|
—
|
|
2,000
|
|
3.
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Internal Loan Services
|
|
120.5
|
|
—
|
|
—
|
|
2,000
|
|
4.
|
|
Provision of Letter of Credit Services
|
|
—
|
|
—
|
|
—
|
|
2,000
|
|
5.
|
|
Other Financial Services
|
|
—
|
|
—
|
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—
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50
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|
|
|
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Notes:
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The Annual Cap
The
annual
caps
under
the SMNC
Centralised
Fund
Management Agreement
are set out
below:
|
|
|
For the year ending 31 December
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
|
|
US$ million
|
|
US$ million
|
|
US$ million
|
|
Internal Deposit Services (representing the maximum
daily outstanding balance, including accrued interests)
|
|
2,000
|
|
2,000
|
|
2,000
|
|
Collection and Payment Services and Foreign Exchange
Services (representing the maximum daily transaction
amount for collection and payment services and
foreign
exchange
services)
|
|
200
|
|
200
|
|
200
|
|
Internal Loan Services (representing the daily maximum
balance of internal loans including accrued
interests)
|
|
500
|
|
500
|
|
500
|
|
Provision of Letter of Credit Services (representing the
maximum aggregate principal amount of the letter(s)
of credit issued on SMNC’s
behalf
per
calendar
year)
|
|
500
|
|
500
|
|
500
|
|
Other Financial Services (representing the maximum fees
charged by the Company for providing the Other
Financial Services to SMNC per
calendar
year)
|
|
50
|
|
50
|
|
50
|
As
stated
in
the Letter from the
Board,
the
aforementioned annual
caps
are
determined based
on
factors
such
as
the
expected increase
of
fixed assets
over
the
effective period
of
the SMNC
Centralised
Fund
Management Agreement;
the
operating
cash flow and the
financial
and
practical
needs
in
respect
of
the
business expansion
and the
future development
plan
of
each
of
SMNC and the
Group. Reference
is
made
to
the
Company’s circular dated
13
September 2017,
the
total investment
for SMNC,
is
estimated
to be
US$7.2 billion
and aims
to
reach
a
total
–
46
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
manufacturing capacity
of
70,0
00 wafers
per
month.
As
stated
in
the
Letter
from
the
Board,
the
overall development
plan
of
SMNC
consists
of
two
fabs, where
each
of
the fabs has
a
target manufacturing capacity
of
35,000 wafers
per
month.
The
first
fab has
reached
a
manufacturing capacity
of
33,000 wafers
per
month,
which
we
note
is
close
to
the full
target capacity
of
35,000 wafers
per month, while the
second
fab has yet
to
commence operation.
As
advised
by
the
Company,
the
accumulated investment
of
SMNC h
as
reached
over
US$3.5 billion
and
the
schedule
of
the
remaining
follow-on
investment
of
approximately
US$3.7
billion
is
subject
to
changing market
conditions
and
market demand.
We
are
given
to
understand
that the SMNC
Centralised
Fund
Management Agreement
Annual
Caps are
mainly based
on
such
investment
plan
of
SMNC,
where
details
of
our
analysis
of
the
annual
caps
are
set
out
below.
In
respect
of
the
Internal Deposit Services,
we
notice
that
historical
transaction
amounts
were
approximately US$719.7 million, US$1,182.3 million US$1,297.4 million,
for each
of
the two
years ended
31
December
2017 and the
period
from
1
January
2018
to 31
October 2018, respectively.
As
advised
by
the
Company,
as
cash
investment
is
made
towards SMNC’s registered capital,
SMNC had
utilised
the
Internal Deposit Services
for cash
management purpose. Reference
is
made
to
the
Company’s circular dated
13
September
2017
in
relation
to
further
capital
contributions towards
SMNC. The
registered capital
of
SMNC
is
increased
to
US$4.8 billion
and the total
investment
of
the two fabs
of
SMNC
is
estimated
to be
US$7.2 billion.
The
investments
will
be
used
to
fund
development, expansion
and
related needs
for
equipment
of
SMNC’s second
fab.
As
advised
by
the
Company,
SMNC had
received
an
aggregate
of
approximately
US$3
billion
cash
capital
injection
and
is
expected
to
receive
the
remaining
of the
cash
capital injection
of
approximately US$1.8 billion
by
2019.
As
discussed
with the
Company,
since the
investment schedule
of
SMNC will
be
adjusted according
to
the
changing market conditions
and
financial
conditions
of
the
Group,
the
annual
caps for the
Internal Deposit Services
are set
at
US$2
billion
for each
of
the year
ending
31
December
2019, 2020 and 2021
to
provide
greater
cash
management
flexibility.
For the
Collection
and
Payment Services
and
Foreign Exchange Services,
no
historical transaction
is
noted.
As
discussed
with the
Company,
for the
three years ending
31
December 2021,
it is
expected
that SMNC would
mainly utilise
the
Collection
and
Payment Services
and
Foreign Exchange Services
for
payments
to
suppliers
of
equipment.
As
advised
by
the
Company,
the
follow-on investment
of
SMNC, which
mainly consist
of
investment
to
the
second
fab, will
be
capital
expenditure
for
equipment
and such
equipment
cost will
be
over 80%
of
SMNC’s capital expenditure
for the three years from 2019
to
2021. Moreover,
the
equipment
suppliers
are
mainly foreign companies
and the
settlement
of
the
equipment purchases
will
mainly
be
denominated
in
foreign currencies,
which will
require
the
payment
and
foreign exchange services.
As
advised
by
the
Company, though
the
remaining
follow-
on
investment
of
SMNC
approximates
to
US$3.7 billion
and over 80% will
be
for
purchase
of
equipment, based
on
past
experience,
the
expected highest amount
of
a
purchase
order for
equipment would
not
exceed US$200 million.
As
discussed
with
the
Company,
it is
expected
that the
daily amount
for
foreign exchange
and
payment
for
equipment purchase
order will not
exceed US$200 million. Therefore,
the
maximum daily transaction amount
for
Collection
and
Payment Services
and
Foreign Exchange Services
is
set
at
US$200 million
for each
of
the three years
ending
31
December
2021,
which
we
consider
fair and
reasonable.
–
47
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
We
have
discussed
with the
management
of
the
Company
and
given
to
understand
that the
Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services annual
caps are
based
on
the
capital expenditure
and
business developme
nt
plan for SMNC.
As
mentioned earlier
the
total investment
of
SMNC
is
estimated
to be
US$7.2 billion,
and
as
advised
by
the
Company,
SMNC has
currently invested approximately US$3.5 billion,
and hence
a
further
of
approximately US$3.7 billion would
be
needed
for
such
investment.
For the
funding
of
the
US$3.7 billion required,
the
Company
had
considered SMNC’s remaining
US$1.8
billion capital contributions expected
to be
received
by
2019, and the
amount
of
approximately US$1.3 billion
cash that
SMNC
curr
ently deposited
with the
Company
under the
Internal Deposit Services.
The
cash
expected
to be
available
for SMNC will
therefore approximate
to
US$3.1 billion
and
a
further
of
roughly US$600 million
will
be
required
for the
remaining investment
of
SMNC.
As
discussed
with the
Company,
to
provide
a
higher level
of
flexibility
to
the
funding options
for SMNC’s
investment
plan,
internal
loans from the
Company
are
also make
available
to
SMNC.
We
have
discussed
with the
management
of
the
Company
and are
given
to
understand
that
it is
also
a
common practice
for
other subsidiaries
of
the Group
to
utilise
the
Internal
Loan
Services, depending
on
the
individual subsidiary’s
cash
generating ability
and
payment needs
to
suppliers.
Therefore,
the
Internal
Loan
Service
s annual
cap
is
set
at
US$500 million
for
each
of
the
three
years
ending
31
December
2021, which
covers
the
majority
of
the
difference between
the
total outstanding capital expenditure
of
around US$3.7
billion
and the
approximate US$3.1 billion
of
c
ash SMNC will
expect
to
have.
Moreover,
for
due
diligence purpose,
we
have obtained
the
historical investment
of
SMNC’s first
fab
since
its
establishment
in
2014,
and note that the
current accumulated
capital
expenditure
is
approximately US$3.35 billion.
As
mentioned earlier,
the
first
fab has
reached
a
manufacturing capacity
of
33,000 wafers
per
month,
which
is
close
to
the
full
target capacity
of
35,000 wafers
per
month. Therefore, approximately
five
years’
time
is
required
for the first fab
to
roughly
reach full
target production capacity. Though
the
investment schedule
of
the
second
fab
is
subject
to
changing market
conditions,
assuming
the
second
fab
would
take
a
similar
time
of
around
five years
to
reach the
full
target capacity
of
35,000 wafers
per
month
and
around
US$3.6
billion
or
half
of
the
total investment
of
US$7.2 billion
would
be
required
for the
second
fab,
an
average
of
over
US$700 million investment
would
be
required
for each year.
As
such,
we
consider
an
Internal
Loan
Services annual
cap
of
US$500
million provides
a
flexibility
towards
SMNC’s investment schedule
and
is
fair and
reasonable.
Moreover,
as
mentioned above,
the
investment
costs
of
SMNC
mainly consists
of
equipment costs,
which could
be
settled
by
letter
of
credit.
For
clarification,
for
the
Provision
of
Letter
of
Credit Services,
the
Company provides
the
letter
of
credit
on
behalf
of
SMNC for
importing equipment,
and SMNC will
be
ultimately responsible
for the
settlement
of
the
letter
of
credit.
SMNC may use its own
funds
or
utilise
the
Internal
Loan
Services
to
settle
such letter
of
credit.
As
discussed
with the
Company,
the Letter
of
Credit
Services
from the Company
provides
an
additional option
for
SMNC’s settlement method
and will
enable
SMNC
to
take
advantage
of
the
high
creditability
of
the
Group.
As
mentioned earlier,
the
total investment
of
SMNC
is
approximately US$7.2 billion
and
as
SMNC has
currently invested
approximately
US$3.5 billion, a further
of
approximately US$3.7 billion
would
be
needed
for
such
investment.
As
advised
by
the
Company, based
on
the
aggregate capital expenditure
plans
of
SMNC,
it is
expected
that the
accumulative letter
of
credit amount
of up
to
US$500 million
per annum would
be
required
from the
Company
for
settling
payments
to
equipment suppliers.
Given the
substantial further investment amount
of
approximately US$3.7 billion
of
SMNC,
we
considered
the
Provision
of
Letter
of
Credit
Services
cap
of
US$500
million
is
fair
and
reasonable.
–
48
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Taking
into
account
(i) the
basis
of
annual
caps
under
the SMNC
Centralised
Fund
Management Agreement;
and (ii) the
large investment
of
SMNC,
we
are
of
the view that the
annual
caps under the SMNC
Centralised
Fund
Management
Agreement
are fair and
reasonable
and
in
the
interest
of
the
Company
and
Shareholders
as
a
whole.
Internal Control Procedures
We
have also
considered
and
reviewed
the
internal control procedures
in
respect
of
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management Agreement. Please refer
to
the
section headed
‘‘(2)
The
SJ
Cayman Centralised
Fund
Management Agreement
—
Internal
Control
Procedures’’
for
details
and
our
analysis.
Recommendation on the SMNC Centralised Fund Management Agreement
Having considered the principal factors and reasons described above, in particular
(i) the
Group
is
able
to
obtain better interest rates
and
exchange rates
from
independent
banks and
financial institutions
in
respect
of
different financial services through
SMIC
Beijing;
(ii) the
pricing
of
the SMNC
CCT
based
on
quotes
obtained
from
independent banks
or
financial institutions could reflect
the
market terms,
and
are not less
favourable
to
SMIC
Beijing
than that
offered
to
the
wholly-owned subsidiaries
of
the
Company;
and (iii) the
basis
of
annual
caps
in
relation
to
the
SMNC
Centralised
Fund
Management Agreement
are fair and
reasonable,
we
are
of
the
opinion
that the
terms
of
the SMNC
Centralised
Fund
Management Agreement including
the
annual
caps are
on
normal commercial
terms and are fair and
reasonable
as
far
as
the
interests
of
the
Independent Shareholders
are
concerned,
and
in
the
interests
of
the
Company
and its
Shareholders
as
a
whole. Accordingly,
we
recommend
the
Independent Shareholders
to
vote
in
favour
of
the
ordinary resolution
to
approve
the SMNC
Centralised
Fund
Management Agreement
and the
related annual
caps
at
the
EGM.
|
|
(2)
|
The
SJ
Cayman
Centralised
Fund
Management
Agreement
|
Background of the SJ Cayman Centralised Fund Management Agreement
Reference is made to the Company’s announcement dated 6 December 2018, that the Company, SMIC Beijing and SJ Cayman entered into the SJ Cayman Centralised Fund Management Agreement in relation to: (i) the Company authorising its wholly- owned subsidiary SMIC Beijing to carry out centralised management of the Group’s RMB fund and foreign exchange in accordance with the relevant PRC laws and
regulations;
and (ii)
SJ
Cayman participating
in
the
Group’s centralised
fund
management system.
SMIC
Beijing
will
provide internal deposit services,
collection
and
payment services, foreign exchange services, internal
loan
services, provision
of
letter
of
credit services
and
other financial services
to SJ
Cayman pursuant
to
the
SJ
Cayman Centralised
Fund
Management
Agreement.
The SJ Cayman CCT will include the following:
|
|
1.
|
Internal Deposit
Services
|
SMIC Beijing provides deposit services and pays interest to SJ Cayman.
|
|
2.
|
Collection
and
Payment
Services
and
Foreign
Exchange
Services
|
–
49
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
SMIC Beijing serves as the platform for centralised collection and payment activities and foreign exchange activities of the Group. SJ Cayman may carry out such activities by itself or through SMIC Beijing.
|
|
3.
|
Internal
Loan
Services
|
SMIC
Beijing provides internal
loan
services
to SJ
Cayman
in
accordance
with
PRC
laws,
regulations
and
policies.
|
|
4.
|
Provision
of
Letter
of
Credit
Services
|
Letter
of
Credit Services
will
be
utilised
as
a settlement instrument
through
which
the
Company
will
utilise
its
overseas credit lines
to
provide letter
of
credit
on
behalf
of SJ
Cayman
for
importing equipment
in
accordance
with
PRC
laws, regulations
and
policies.
|
|
5.
|
Other Financial
Services
|
SMIC Beijing provides other financial services to SJ Cayman in accordance with PRC laws, regulations and policies.
Reasons for and benefit of the SJ Cayman Centralised Fund Management Agreement
As
stated
in
the
Letter
from the
Board,
SJ
Cayman wholly
owns
SJ
Hong
Kong, which
in
turn
wholly
owns
SJ
Jiangyin.
SJ
Jiangyin
was
founded
in
November
2014
in
Jiangyin, Jiangsu Province
of
the PRC.
SJ
Cayman,
SJ
Hong
Kong,
SJ
USA and
SJ
Jiangyin
will serve
as
the
leading
play
Middle-End-Of-Line (MEOL) entity
that
focuses
on
advanced bumping production. Complementing nearby advanced
back-end
assembly infrastructure,
SJ
Jiangyin
aims
to be an
important
key
to
forming
a
local integrated circuit ecosystem, providing
a
convenient one-stop service
to
supply
high
quality
and
efficient chips
for
local
and
international customers,
as
well
as
help
strengthen
their
global
competitiveness.
As
set out
in
the
Letter
from the
Board,
the
Company considers
that the
entry
into
of
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
transactions
contemplated thereunder
will have the
benefits
of
reducing
the
Group’s overall
debt
levels
and
increasing efficient
fund
usage, reducing
the
Group’s interest expense
and
obtaining favourable exchange
rate for the
Group.
Based
on
our
discussions
with the
management
of
the
Company,
SMIC
Beijing
is
one
of
the
operating subsidiaries
of
the
Group
and has
taken
the
centralised
fund
management function
for the Group
members.
We
were
given
to
understand
that SMIC
Beijing,
by
leveraging
in
the
economics
of
scale
achieved
by
the
centralisation
of
the
Group’s financial resources,
is
able
to
obtain better
terms from
independent
banks
and
financial institutions
in
respect
of
different financial services,
such
as
relatively
more
favourable interest rate, exchange
rate and
credit term,
than
individual
Group
companies negotiating
its own
terms.
In
addition,
by
centralising
the
internal treasury function,
the
management
of
the
Company considers
that the Group can
reduce unused
loan and the
overall
debt
levels.
The
internal
loan and
provision
of
letter
of
credit services provided
by
SMIC
Beijing
will allow more
efficient utilisation
of
available financial resources
of
the
Group,
such
as
combing
the
borrowing
needs
of
individual
Group
companies
into
a
single
banking
facility. Therefore,
the
Group
can
better monitor
its
treasury
and
working capital
and
increase efficient
fund
usage.
–
50
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
In light of the abovementioned, we consider that entering into the SJ Cayman Centralised Fund Management Agreement is in the interest of the Company and the Shareholders as a whole.
Pricing policies of the SJ Cayman Centralised Fund Management Agreement
As
stated
in
the
Letter
from the
Board,
the
price
of
the
services provided
by
SMIC
Beijing
to
SJ
Cayman contemplated under
the
SJ
Cayman Centralised
Fund
Management Agreement
will
be
fair and
reasonable under
the
Listing
Rules
and
determined according
to
the
market principle
on an
arm’s length basis, subject
to
compliance
with
requirements
for
connected transactions
of
the Stock
Exchange.
Under the
Group’s existing centralised
fund
management system,
SMIC
Beijing
collectively procures certain
fund
management services
from
third-party
banks
or
financial institutions.
SMIC
Beijing
will charge its
subsidiaries
with
reference
to
terms
offered
by
third-party
banks
or
financial institutions
for such fund
management
services.
Based
on
our
discussion
with the
management
of
the
Company
and
the
information provided,
in
relation
to
the
Internal Deposit Services
and
Internal
Loan
Services,
we
understand
that SMIC Beijing will
obtain
two
or
more
written
quotes
from
third-party commercial banks
in
the
PRC
for
providing deposit
and loan
services
of
the same type
during
the same
period
to SJ
Cayman.
For
Internal Deposit
Services,
the
interest
rate
adopted
for
SJ
Cayman’s deposits
with SMIC
Beijing
will
be
the
same
as or
lower than the
lowest
of
the
interest rates quoted.
For
Internal
Loan
Services,
the
adopted
interest
rate
for
SJ
Cayman’s
loans
from
SMIC
Beijing
will
be
the
same
as
or
higher
than the
highest
of
the
interest
rates
quoted.
The
Company understands
that
the
third-party commercial banks
will make
reference
to, and
generally
seek
to be in
line
with the
benchmark interest
rates
specified
by
the PBOC for RMB
deposits
or
RMB
loans
of
a similar type.
For the
purpose
of
clarification,
such
benchmark interest rates
are
guidance rates published
by
the PBOC from time
to
time for
reference
only and
will
not
be
adopted
even
if
(in the case
of
the
internal deposit services)
it is
lower than the
lowest
of
the
interest rates quoted
by
third-party commercial banks
in
the PRC
or
(in
the case
of
the
internal
loan
services)
it is
higher than the
highest
of
the
interest
rates
quoted
by
third-party commercial banks
in
the PRC. The PBOC
publishes
benchmark
interest
rates for RMB
deposits
and RMB loans from time
to
time which serve
as
a guidance price
for
reference
only for the
commercial banks
in
the
PRC.
The
Company understands
that when
determining
the
interest
rates
quoted
to SJ
Cayman,
the
third-party commercial banks
will
refer
to
such PBOC
benchmark
interest
rate for
RMB
deposits
or RMB
loans
of
a
similar
type and make
adjustment
based
on
the
bank’s credit assessment
of SJ
Cayman.
In
respect
of
Internal
Deposit
Services,
we
have
reviewed
a
total
of
six bank
quotations
of
deposit
rates
given
by
independent banks
to
the
Company during
the two
years ended
31
December
2017
and
the
period
from 1
January
2018
to 31
October 2018.
We
note that the
interest rates
given
to SJ
Cayman are
no
less
favourable
to
the Company when
comparing
to
the
interest rates quoted
from the
independent banks
for
deposits
of
the same type
and
duration
at
similar
time. Given that
SMIC Beijing
will
obtain
two
or
more
written
quotes
from
third-party commercial banks
in
the PRC for
providing deposit services
and loan
services
of
the same type
during
the same
period
to SJ
Cayman which
is
consistent
with the
Group’s existing centralised
fund
management system
for
deposit
service,
we
consider
that the
pricing
policy for
internal deposit
and
internal
loan
services
is
fair and
reasonable.
–
51
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
For the terms
in
respect
of
the
Collection
and
Payment Services
and
Foreign Exchange Services,
and
Provision
of
Letter
of
Credit Services
will
be
determined
based
on
arm’s length negotiations
by
the
parties
which will not
be
less
favourable
to
SMIC
Beijing
than (i) fees
charged
by
SMIC
Beijing
to
other
subsidiaries
which are
not
connected persons
under the
Listing
Rules; and (ii) fees
charged
to
SMIC
Beijing
by
other third-party commercial banks
or
fi
nancial institutions providing
fund
management services
to
SMIC
Beijing
for
services
of
the same type
during
the
same
period.
SMIC
Beijing
will
obtain services
of
the same type from
third-party
commercial banks
or
financial institutions first
and then use the fees
charged
to it
to
determine
fees
to be
charged
to SJ
Cayman
as
described above.
As
advised
by
the
management
of
the
Company,
in
determining
such terms
offered
to SJ
Cayman,
SMIC
Beijing
will make
reference
to
the terms
offered
by
the
i
ndependent banks
and
financial
institutions,
and will not
be
less
favourable
to
SMIC
Beijing
than that
offered
to
other
wholly-owned subsidiaries.
We
have
reviewed
three
letter
of
credit
bank
advices
issued
by
independent
banks
to
the Company which were
is
sued
on
behalf
of SJ
Cayman.
We
note that the
letter
of
credit issuance
fees
charged
by
the
Company
to SJ
Cayman
are the
same
as
the
fees
charged
by
the
independent
banks.
As
the
price
offered
by
independent banks represents market price, the price
offered to SJ Cayman is no less favourable to the Company as compared with the market price offered by independent third parties to the Company.
Taking
into
account
(i) SMIC
Beijing
will
obtain
two
or
more
written quotes
from
third-party commercial banks
in
the PRC for
providing Internal Deposit Services
and
Internal
Loan
Services
of
the same type
during
the same
period
to SJ
Cayman
which
is
consistent
with the
Group’s approach
to
its
subsidiaries which
are not
connected
person
of
the
Company under
its
existing centralised
fund
management system;
and
(ii)
SMIC
Beijing
will make
reference
to
the terms
offered
by
the
independent banks
and
financial institutions
in
respect
of
the
Collection
and
Payment Services
and
Foreign
Exchange Services
and
Provision
of
Letter
of
Credit Services,
we
are
of
the view
that
the
pricing
of
the fund
management services under
the
SJ
Cayman Centralised
Fund
Management Agreement based
on
quotes obtained
from
third-party commercial banks
or
financial institutions
could
reflect
the market rate for such
services,
and are not less
favourable
to
SMIC
Beijing
than that
offered
to
other
wholly-owned
subsidiaries
having compared
SMIC
Beijing’s treatment
to
the
wholly-owned subsidiaries
of
the
Company under
the
Group’s existing centralised
fund
management system,
and that the
terms
of
the
SJ
Cayman Centralised
Fund
Management Agreement
are fair
and
reasonable
and
in
the
interests
of
the
Company
and
its
Shareholders
as
a
whole.
–
52
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Historical transaction amounts
The
historical transaction amounts between
the
Company
and
SJ
Jiangyin
for the
transactions contemplated under
the 2016
SJ
Jiangyin Centralised
Fund
Management Agreement
are
as
follows:
|
|
|
|
|
|
|
|
|
|
|
Annual Cap
|
|
|
|
|
|
|
|
|
|
|
|
for each of the
|
|
|
|
|
|
|
|
|
|
From
|
|
three financial
|
|
|
|
|
|
For the
|
|
For the
|
|
1 January
|
|
years end
|
|
|
|
|
|
year ended
|
|
year ended
|
|
2018 to
|
|
31 December
|
|
|
|
|
|
31 December
|
|
31 December
|
|
31 October
|
|
2016, 2017 and
|
|
|
|
|
|
2016
(1)
|
|
2017
(1)
|
|
2018
(2)
|
|
2018
|
|
|
|
|
|
(US$ million)
|
|
(US$ million)
|
|
(US$ million)
|
|
(US$ million)
|
|
1.
|
|
Internal Deposit Services
|
|
93.2
|
|
147.2
|
|
137.9
|
|
500
|
|
2.
|
|
Collection and Payment Services and Foreign Exchange
Services
|
|
—
|
|
—
|
|
—
|
|
500
|
|
3.
|
|
Internal Loan Services
|
|
—
|
|
—
|
|
—
|
|
500
|
|
4.
|
|
Provision of Letter of Credit Services
|
|
—
|
|
4.7
|
|
17.3
|
|
500
|
|
5.
|
|
Other Financial Services
|
|
—
|
|
—
|
|
—
|
|
50
|
Notes:
–
53
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The
Annual Cap
The annual caps under the SJ Cayman Centralised Fund Management Agreement are set out below:
|
|
|
For the year
ending
31
December
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
|
|
US$ million
|
|
US$ million
|
|
US$ million
|
|
Internal Deposit Services (representing the maximum
daily outstanding balance, including
accrued
interests)
|
|
130
|
|
130
|
|
130
|
|
Collection and Payment Services and Foreign Exchange
Services (representing the maximum daily transaction
amount for collection and payment services and
foreign
exchange
services)
|
|
130
|
|
130
|
|
130
|
|
Internal Loan Services (representing the daily maximum
balance of internal loans including accrued
interests)
|
|
130
|
|
130
|
|
130
|
|
Provision of Letter of Credit Services (representing the
maximum aggregate principal amount of the letter(s) of
credit issued on SJ Cayman’s behalf per calendar year)
|
|
130
|
|
130
|
|
130
|
|
Other Financial Services (representing the maximum fees
charged by the
Company
for
providing
the
Other
Financial Services to SJ Cayman per calendar year)
|
|
50
|
|
50
|
|
50
|
As stated in the Letter from the Board, the aforementioned annual caps are determined based on factors such as the expected increase of fixed assets over the effective period of the SJ Cayman Centralised Fund Management Agreement; the operating cash flow and the financial and practical needs in respect of the business expansion and the future development plan of each of SJ Cayman and the Group.
In
respect
of
the
Internal Deposit Services,
we
notice
that
historical
transaction
amounts
were
approximately US$93.2 million, US$147.2 million US$137.9 million,
for
each
of
the two
years
ended
31
December
2017 and the
period
from
1
January
2018
to 31
October 2018, respectively,
which shows
an
increasing trend.
We
also
notice
that
the
annual
cap for each
of
the
three years ending
31
December
2021
in
respect
of
Internal Deposit Services
is
US$130 million.
As
advised
by
the
Company,
the
historical
amount
for 2018
of
approximately US$137.9 million represents
the
highest
daily
balance,
which was in the first quarter of 2018. The current balance of the internal deposit of SJ Cayman with the Company is approximately US$69 million. As discussed with the Company, the decrease in the internal deposit balance was due to investment made in relation to SJ Cayman’s expansion plan. As discussed with the Company, SJ Cayman had approximately US$37 million cash balance currently. Therefore, SJ Cayman’s own cash balance, together with its internal deposits with the Company amount to over US$100 million. As such, the annual cap for Internal Deposit Services is set at US$130 million for each of the three years ending 31 December 2021, which provides a reasonable buffer to cater for SJ Cayman’s business expansion.
For the
Collection
and
Payment Services
and
Foreign Exchange Services,
no
historical transaction
is
noted.
As
discussed
with the
Company,
for the
three years ending
31
December 2021,
it is
expected
that
SJ
Cayman would
mainly utilise
the
Collection
and
Payment Services
and
Foreign Exchange Services
for its
capital expenditure, which mainly includes exchanging
funds into
foreign currencies
for
payments
to
suppliers
of
equipment. Reference
is
made
to
the
Company’s circular dated
7 June 2016
in
relation
to
the 2016
SJ
Jiangyin Centralised
Fund
–
54
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Management Agreement.
As
advised
by
the
Company,
the
planned
total
investment
of SJ
Cayman
together
w
ith its
subsidiaries,
which
include
its main
operating subsidiary
SJ
Jiangyin,
is
approximately US$1.2 billion.
As
advised
by
the
Company,
the
current
total
investment
of SJ
Cayman
is
approximately US$230 million
and the
remaining
capital
expenditure
of
approximately
US$1
billion
would
be
made
subject
to
market
conditions
and
financial conditions
of
the
Group.
The
planned capital expenditure
for
SJ
Cayman
is
approximately US$100 million
for the year
ending
31
December
2019, and will
remain
at
a
si
milar
level
of
approximately
US$100
million
for each
of
the
years ending
31
December
2020 and
2021.
As
advised
by
the
Company,
as
the
investment schedule
of SJ
Cayman
will
be
adjusted according
to
the
changing market conditions
and
financial conditions
of
the
Group,
the
maximum daily
transaction
amount
for
Collection
and
Payment Services
and
Foreign Exchange Services
is
set
at
US$130 million
for each
of
the three years ending
31
December
2021. Given the
large
capital expenditure
of SJ
Cayman,
we
consider
a
cap
of
US$130 million would
provide
a
flexibility
to
the
investment schedule
to SJ
Cayman
which would
expedite
or
slow
down
according
to
market
conditions
and
financial
conditions
of
the
Group.
We
have
discussed
with the
management
of
the
Company
and
given
to
understand
that the
Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services
are
based
on
the
capital expenditure
and
business development
plan for
SJ
Cayman.
As
mentioned
earlier,
the
planned
total
investment
of SJ
Cayman
is
approximately US$1.2
billion
and the
current
total
investment
of SJ
Cayman
is
approximately US$230 million.
As
advised
by
the
Company,
the
planned capital expenditure
for each
of
the
three years ending
31
December
2021
is
approximately US$100 million.
As
advised
by
the
Company,
SJ
Cayman’s internal deposit placed
with the
Company amounted
to
approximately
US$69
million currently.
Since the
deposits
are
in
turn
placed
with
banks
as
timed
deposits,
the
Internal Loan Services
from the
Company could provide
a
greater flexibility
for
SJ
Cayman’s
cash
management. Further,
the
capital
contributions
for
SJ
Cayman
had been fully
received,
and
currently there
is
no
future
plan
of
capital
contribution
to
be
made.
As
the
capital
expenditure
is
subject
to
the
investment schedule
to SJ
Cayman which would
expedite
or
slow down
according
to
market conditions
and
financial conditions
of
the
Group, where
the
planned capital expenditure
of a
year
could
be
brought forward
or
postponed,
and
SJ
Cayman
would
require
cash for its
working capital,
it is
expected
that
SJ
Cayman would require Internal
Loan
Services
for
an
amount
up
to
US$130
million
for
each
of
the
year
ending
31
December 2021.
As
discussed
with the
Company,
such
annual
cap
of
US$130
million
had
considered
the
planned capital expenditure
of
around US$100 million
for
each
of
the
three years
and
a
buffer
for
SJ
Cayman’s operating needs. Moreover,
the
Company advised
that the
investment costs
of SJ
Cayman mainly consists
of
equipment costs, which
could
be
settled
by
letter
of
credit.
As
discussed
with
the
Company,
it is
also
a
common practice
for other
subsidiaries
of
the Group
to
utilise
the
Letter
of
Credit Services, depending
on
the
individual subsidiary’s payment needs
to
suppliers
and its own
facility lines.
For
clarification,
for the
Provision
of
Letter
of
Credit Services,
the
Company provides
the
letter
of
credit
on
behalf
of SJ
Cayman
for
importing equipment,
and
SJ
Cayman will
be
ultimately responsible
for the
settlement
of
the
letter
of
credit.
SJ
Cayman
may use its own funds
or
utilise
the
Internal
Loan
Services
to
settle
such
letter
of
credit.
As
advised
by
the
Company,
it is
expected
that
letter
of
credit
of an
amount
of up to
US$130
million
per annum would
be
required
from the
Company
for
settling payments
to
equipment suppliers
for
SJ
Cayman. Considering
the total
investment, capital expenditures
and
working capital needs
of SJ
Cayman,
we
consider
an
annual
cap
of
US$130
million
for each
of
the three
years
ending
31
December
2021 for each
of
the
Internal
Loan
Services
and
Provision
of
Letter
of
Credit Services
is
fair and
reasonable.
–
55
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Taking
into
account
(i) the
basis
of
annual
caps
under
the
SJ
Cayman
Centralised
Fund
Management Agreement;
and (ii) the large
investment
of SJ
Cayman,
we
are
of
the view that the
annual
caps
under
the
SJ
Cayman
Centralised
Fund
Management
Agreement
are fair and
reasonable
and
in
the
interest
of
the
Company
and
Shareholders
as
a
whole.
Internal Control Procedures
The
Company
has
in
place
a
series
of
internal
control
measures
to
ensure
that
the terms
of
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management
Agreement
are
fair
and
reasonable
and
that
the
SMNC
CCT and
SJ
Cayman CCT will
be
conducted
on
normal commercial terms.
As
the
SMNC CCT and
SJ
Cayman CCT also
constitute related
party
transactions
for
the
Company,
they will
be
subject
to
the
related party transaction policy
of
the
Group, which
is
further explained
below.
|
|
1.
|
SMNC has
established
a
related
party
transaction review committee
(the
‘‘Review
Committee’’), which
is
comprised
of
four
non-executive directors
of
SMNC
of
which two
of
them,
namely
Dr.
Zhao
Haijun,
the
executive Director
and
co-chief executive officer
of
the
Company
and Dr.
Gao
Yonggang,
the
executive Director, chief financial officer
and
joint company secretary
of
the
Company,
were
appointed
by
the
Company
and the
other
two were
appointed
by
each
of
China
IC
Fund
and ZDG. The
related party transaction review committee
is
responsible
for
reviewing
and
approving
the
centralised
fund
management agreement
and
pricing policy
of
connected
transactions entered
into
by
SMNC and the
Company,
with the
assistance
from the
related
party
transaction office
of
SMNC. The
committee
has
meeting
at
least
once
annually
to
monitor
and
review related
party
transactions between
SMNC and
the
Company;
|
|
|
2.
|
SJ
Cayman management
team
is
responsible
for
reviewing
and
approving
the
centralised
fund
management agreement
and
pricing policy
of
connected
transactions
entered
into
by SJ
Cayman and the
Company.
SJ
Cayman
management holds monthly meetings
to
monitor
and
review related party transactions between
SJ
Cayman and
the
Company;
|
|
|
3.
|
The
Company
has also
established
a
related party transaction review
team,
consisting
of
members
from the
finance
and
accounting,
legal and other
related
departments
of
the
Company, which reviews
the
terms
of
specific
connected
transaction
agreements
and
reports
its
findings
to
the
management;
|
|
|
4.
|
The
Company’s compliance office
will
perform quarterly
check
on
transactions entered under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman Centralised
Fund
Management Agreement
to
ensure compliance
with
pricing policies
and
annual
caps
are
not
exceeded;
and
|
|
|
5.
|
The
Company’s external auditors
will
conduct
an
annual review
of
the
transactions
entered
into
under
the
SMNC
Centralised
Fund
Management
Agreement
and the
SJ
Cayman Centralised
Fund
Management Agreement
to
ensure
the
transaction amounts
are
within the
annual
caps and the
transactions
are
in
accordance
with the terms set out
in
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman
Centralised
Fund
Management
Agreement.
|
–
56
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
We
have
reviewed
the
Group’s internal control policy regarding
intra-group
related party transactions
and
noted resolutions
of
the
Review Committee should
be
effective
with the
approval
by
half
of
the
committee members.
In
addition,
the
Company
will
periodically review
the
pricing policy
at
least quarterly
to
ensure
the
SMNC CCT
and
SJ
Cayman
CCT are
in
accordance
with the
respective
pricing
policies.
Other than
that,
as
advised
by
the
Company,
for both
of
the SMNC CCT
and
the
SJ
Cayman
CCT, the
Company,
SMNC and
SJ
Cayman maintain separate business units,
and
therefore separate personnel
to
ensure segregation
of
duties,
which
we
consider
is
effective
in
ensuring
the
transactions
are
conducted
on
normal commercial terms.
We
are
of
the view that the above
internal control procedures
are
sufficient
to
ensure
that
the
transactions conducted under
the SMNC
Centralised
Fund
Management Agreement
and the
SJ
Cayman Centralised
Fund
Management Agreement
will
be
conducted
on
normal commercial terms
or
better,
and will not
be
prejudicial
to
the
interests
of
the
Company
and
the
Shareholders.
Recommendation on the SJ Cayman Centralised Fund Management Agreement
Having considered the principal factors and reasons described above, in particular
(i) the
Group
is
able
to
obtain better interest rates
and
exchange rates
from
independent
banks and
financial institutions
in
respect
of
different financial services through
SMIC
Beijing;
(ii) the
pricing
of
the
SJ
Cayman
CCT
based
on
quotes
obtained
from
independent banks
or
financial institutions could reflect
the
market terms,
and are not less
favourable
to
SMIC
Beijing
than that
offered
to
the
wholly-
owned
subsidiaries
of
the
Company;
and
(iii)
the
basis
of
annual
caps
in
relation
to
the
SJ
Cayman Centralised
Fund
Management Agreement
are fair and
reasonable,
we
are
of
the
opinion
that the terms
of
the
SJ
Cayman Centralised
Fund
Management Agreement including
the
annual
caps are
on
normal commercial terms
and are fair
and
reasonable
as
far
as
the
interests
of
the
Independent Shareholders
are
concerned,
and
in
the
interests
of
the
Company
and its
Shareholders
as
a whole.
Accordingly,
we
recommend
the
Independent Shareholders
to
vote
in
favour
of
the
ordinary
resolution
to
approve
the
SJ
Cayman Centralised
Fund
Management Agreement
and the
related
annual
caps
at
the
EGM.
|
(3)
|
The
proposed
grant
of
Restricted
Share
Units
to
Directors
|
Background of and reasons for the Proposed RSU Grants
Reference
is
made
to
the
Company’s announcement dated
13
September
2018
pursuant
to
which the
Company proposes
to
grant 375,000 Restricted Share Units under
the 2014
Equity Incentive
Plan,
subject
to
the
Independent Shareholders’ approval
at
the EGM. Among the
375,000 Restricted Share
Units
to be
granted,
187,500 Restricted
Share Units will
be
granted
to
Professor
Lau
and
187,500
Restricted
Share
Units will
be
granted
to
Mr. Fan. Each
of
the
Restricted Share Units
to be
granted
to
Professor
Lau and Mr. Fan
represents
the
right
to
receive
one
Share
on
the date
it
vests.
It is
intended
that
Restricted
Share Units
to be
granted
to
Professor
Lau
and Mr. Fan will vest over
a period
of
three years
at
the rate
of
33%, 33% and 34%
for
each
12
month
period commencing
on
the date
on
which the
relevant Director commenced
his term
of
office
as
independent non-executive
Director.
Furthermore,
the
Company conditionally granted
an
aggregate
of
375,000 share options
(the
‘‘Share
Options’’)
under
its 2014
Stock Option
Plan
to
subscribe
for
Shares, subject
to
acceptance
of
the
grantees
and
compliance
with
applicable
laws
and
regulations.
Among the
share options granted, 187,500 share options
were
granted
to
Professor
Lau
and
187,500
share
options
were
granted
to
Mr.
Fan.
–
57
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
As stated in the Letter from the Board, the Proposed RSU Grants are part of the Company’s remuneration system, the purpose of which is to closely align the interests and benefits of and risk sharing among the Shareholders, the Company and the employees in
order to maximise the motivation of the Directors. The proposed RSU Grants to Professor Lau and Mr. Fan aim to provide sufficient incentives to attract and motivate them to remain with, and to strive for the future development and expansion of the Group. F
urthermore, there will not be substantial cash outflow by the Company under the Proposed RSU Grants.
Reference
is
made
to
the
circulars
of
the
Company dated 7
June 2016 and
18
November
2016
respectively, relating
to
its
revised
Board
policy
(the
‘‘Revised
Board
Policy’’)
which
provides
for
an
on-board
grant
to be
made
to
new
Directors.
The
on-
board grant
to
new
non-executive Directors (including
the
independent non-executive Directors)
(the
‘‘On-board Grant’’) is
fixed
in
accordance
with
a percentage
of
75%
of
the
fixed
sum
of
the most
recent on-board grant prior
to
the
Revised Board
Policy
which
was
made
to an
independent non-executive Director.
The
amounts
of
the
Proposed
RSU
Grants
have been
calculated using
the
relevant methods
of
calculation
set out below and then
divided
by 10 to
reflect
the
Company’s 10-to-1
share
consolidation,
which
became effective
on
7 December
2016,
after
the
implementation
of
the
Revised
Board
Policy.
Below sets out the
basis
for
determining
the
number
of
Restricted
Share Units
to be
granted
to
Professor
Lau
and
Mr.
Fan:
|
(i)
|
Basis
for
determining
the
number
of
Restricted Share Units
to
be
granted
to
Professor
Lau:
|
|
|
|
|
|
|
|
On-board Grant (50%
share options and
|
=
|
5,000,000
(1)
7
10
(2)
x 75%
(3)
|
=
|
375,000
|
|
50% Restricted Share Units)
|
|
|
|
|
|
|
|
|
|
|
As the On-board Grant comprises a combination of 50% share options and 50% Restricted Share Units, the Proposed RSU Grant applicable to Professor Lau is 50% of 375,000 shares under the On-board Grant, that is, 187,500 Restricted Share Units.
|
(ii)
|
Basis for
determining
the
number
of
Restricted
Share
Units
to be
granted
to
Mr.
Fan:
|
|
|
|
|
|
|
|
On-board Grant (50%
share options and
|
=
|
5,000,000
(1)
7
10
(2)
x 75%
(3)
|
=
|
375,000
|
|
50% Restricted Share Units)
|
|
|
|
|
|
|
|
|
|
|
As the On-board Grant comprises a combination of 50% share options and 50% Restricted Share Units, the Proposed RSU Grant applicable to Mr. Fan is 50% of 375,000 shares under the On-board Grant, that is, 187,500 Restricted Share Units.
Notes:
|
|
(1)
|
number
of
shares subject
to
the most
recent On-board Grant
made
to
an
independent
non-
executive
Director
prior
to
the
Revised
Board
Policy
for
share
incentives
for
Directors.
|
–
58
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
|
|
(2)
|
one-tenth, reflecting
the fact that the
calculation
of
all
entitlements under
the
Proposed
RSU
Grants
this year
differs
from the
calculation
of
the
entitlements
to
individual Directors
in
2016
in
accordance
with the
Revised Board Policy
due
to
the
10-to-1 share consolidation effected
by
the
Company,
which
became
effective
on
7
December
2016.
|
|
|
(3)
|
three-fourth
of
the
number
of
shares
set out
in
footnote
(1)
above, reflecting
the fact that
the
On-board Grant
made to
non-executive Directors prior
to
the
Revised Board Policy
was
made
at
the
beginning
of
a
four
year
period
and vests
in
respect
of
25%
thereof
each year over
such
period whereas
the
On-board Grant will
be
granted
at
the
beginning
of
a
three year
period
and
will vest over
a
period
of
three
years
at
the rate
of
33%, 33% and 34% for each
12
month
period commencing
on
the date
on
which
the
relevant Director commenced
his
term
of
office
as
Director.
|
As
understood
from the
Company,
if
a
Restricted
Share Units
holder
resigns
before
the
vesting
of
the
Restricted Share
Units
granted under
the 2014
Equity
Incentive Plan,
the
unvested Restricted
Share Units will
be
subject
to
forfeiture.
Therefore
we
consider
that such
vesting mechanism
of
the
grants
could serve
the
purpose
to
retain
the
Directors
over the
vesting period
by
providing incentive
to
remain
in
the Group
before
the full
vesting
of
the
Restricted Share
Units
under
the
2014 Equity
Incentive
Plan.
For our due
diligence purpose,
we
have
reviewed
the
background
and
duties
of
Professor
Lau
and Mr.
Fan in
the
Group. Based
on
the
biographies
as
set out
in
the
Company’s announcement dated
22
June 2018
in
relation
to
the
appointment
of
Professor
Lau and Mr. Fan
as
independent non-executive directors,
we
notice
that
Professor
Lau
has
strong academic background
in
economics
and also
serves
as
independent non-executive director
of AIA
Group Limited (Stock Code:
4457),
CNOOC
Limited (Stock
Code:
0883),
and
Hysan Development Company
Limited
(Stock
Code:
0014),
all
listed
on
the Hong Kong Stock
Exchange,
and Far
EasTone
Telecommunications
Company
Limited (Taiwan: 4904), Taipei,
which
is
listed
on
the
Taiwan Stock Exchange. Similarly,
Mr. Fan also
serves
as
independent non-executive director
for over five
listed companies
in
Hong
Kong.
As
such,
we
consider
that
Professor Lau’s
and Mr. Fan’s
experience
in
other
listed companies allows
them
to
have
strong understanding
in
corporate governance
system.
We
notice
that
Professor
Lau is a
member
of
each
of
the
Compensation Committee, Nomination Committee
and the
Strategic Advisory Committee.
Mr.
Fan,
is
the
chairman
of
the
Audit Committee
and
a
member
of
the
Nomination
Committee.
As
advised
by
the
management
of
the
Company,
the
responsibilities
of
the
Strategic
Advisory Committee include
(i)
to
evaluate
and
consider
any
strategic alternative;
(ii)
to
contribute
and
participate
in
discussions
with
potential strategic partners
with
respect
to
any
strategic alternative;
and
(iii)
to
make
recommendations
to
the
Board
and the
management
of
the
Company
with
respect
to
any
strategic alternative,
with
such
strategic alternative essential
to
the
Group’s business development.
While
the
Audit Committee
is
responsible
for but not
limited
to
(i)
reviewing reports
from
the
Company’s independent auditor regarding
the
independent auditor’s internal
quality-
control procedures;
(ii)
reviewing
the
Company’s annual, interim
and
quarterly
financial statements
and
earnings releases;
and (iii)
reviewing
the
Company’s
internal
controls,
risk
assessment
and
management policies.
As
such,
we
are
of
the
opinion
that
it is
justifiable
to
attract
and
retain Professor
Lau and Mr. Fan
through
the
Proposed
RSU
Grants.
–
59
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Principal terms of the Proposed RSU Grants
The
Restricted
Share
Units
Each of the Restricted Share Units to be granted to Professor Lau and Mr. Fan represents the right to receive a Share on the date it vests. In accordance with the terms of the 2014 Equity Incentive Plan, the Proposed RSU Grants will be made for no consideration, other than the minimum payment required by the applicable law in the Cayman Islands (which is the par value of the Shares to be issued pursuant thereto).
Consideration of the Proposed RSU Grants
In
accordance
with the terms
of
the 2014
Equity Incentive
Plan, the
Proposed
RSU
Grants
will
be
made for
no
consideration, other
than the
minimum payment required
by
the
applicable
law
in
the
Cayman Islands.
We
understand
that the
Restricted
Share
Units
are
granted
as
compensation
for
service
or
performance
to
attract, retain
and
motivate employees
and
directors
of, and
other service providers
to,
the
Company,
and
to
allow
them
to
participate
in
the
growth
and
profits
of
the
Company.
We
intend
to
quantify
and
analyse
the
remuneration
of
each
of
Professor
Lau
and
Mr.
Fan
for the
first
full
vesting year.
We
have
obtained estimations
from
the
Company
on
the
expenses (collectively known
as
the
‘‘Expenses’’)
to be
incurred
for the
grant/issue
of
the
Restricted
Share
Units under
the
Proposed
RSU
Grants
and the
Share Options, which
in
our view
reflects
the
value
of
such
incentives
to be
provided.
Based
on
the
closing prices
per Share
as
quoted
on
the
Stock Exchange
on
the
grant
date,
the
estimated Expenses relating
to
Professor
Lau and Mr. Fan
were
approximately US$209,000
and
US$209,000 respectively.
The
Expenses
are
estimations
only and are
unaudited
and
do
not
represent
the
expenses
to be
recognised
in
the
financial statements
of
the
Company.
The
aggregated
remuneration (comprising
cash
compensation
as
set out
in
the
Company’s
announcement
dated
22
June 2018 and the
Expenses,
(the ‘‘Aggregate Remuneration’’)
of
each
of
Professor
Lau and Mr. Fan for the first full
vesting
year
is
set out
below:
|
|
Position
|
|
Grantee
|
|
Cash
compensation
|
|
Estimated
expenses
for
the
Proposed
RSU
Grants
and
the
share
|
|
Aggregate
remuneration
|
|
|
|
|
|
|
(US$’000)
|
|
(US$’000)
|
|
(US$’000)
|
|
|
Independent non- executive Director
|
|
Professor Lau
|
|
60
|
|
209
|
|
269
|
|
|
Independent non- executive Director
|
|
Mr.
Fan
|
|
65
|
|
209
|
|
274
|
–
60
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Set out below are the
analysis
on
the
Aggregated Remuneration
of
the
Company
as
compared
with the key
financial figures
of
the
Group.
The ratio
calculations
of
the
Company
are
as
follows:
|
|
(i)
|
Basis
for
Aggregated
Remuneration
as
a
percentage
of
revenue
|
= Aggregated Remuneration
7
Revenue for the year ended 31 December 2017
= (Cash compensation + Estimated expenses for the Proposed RSU Grants and the Share Options)
7
Revenue for the year ended 31 December 2017
|
|
(ii)
|
Basis
for
Aggregated
Remuneration
as
a
percentage
of
profit
after
tax
|
=
Aggregated Remuneration
7
Profit after
tax for the year ended
31
December
2017
=
(Cash
compensation
+
Estimated expenses
for the
Proposed
RSU
Grants
and
the
Share
Options)
7
Profit
after
tax
for
the
year
ended
31
December
2017
|
|
(iii)
|
Basis for
Aggregated Remuneration
as
a
percentage
of
total
equity
|
|
|
=
|
Aggregated Remuneration
7
Total equity
as at 30
June
2018
|
|
=
(Cash
compensation
+
Estimated expenses
for the
Proposed
RSU
Grants
and the
Share Options)
7
Total equity
as at 30
June
2018
|
|
Position
|
|
Grantee
|
|
Aggregate
Remuneration
|
|
% of revenue
|
|
% of profit
after tax
|
|
% of total
equity
|
|
|
|
|
|
|
(US$’000)
|
|
(note 1)
|
|
(note 1)
|
|
(note 2)
|
|
|
|
|
|
|
|
|
%
|
|
%
|
|
%
|
|
|
Independent non-executive Director
|
|
Professor Lau
|
|
269
|
|
0.009
|
|
0.21
|
|
0.004
|
|
|
Independent non-executive Director
|
|
Mr. Fan
|
|
274
|
|
0.009
|
|
0.22
|
|
0.004
|
Notes:
|
|
1.
|
The
revenue
and
profit after
tax used
in
the
calculations
for
%
of
revenue
and
%
of
profit
after
tax are
extracted
from the
Annual Report
2017.
|
|
|
|
2.
|
The total
equity
used
in
the
calculation
for
%
of
total equity
is
extracted
from the
Interim Report
2018.
|
|
As shown from the table above, for illustrative purpose, the Aggregated Remuneration of each of Professor Lau and Mr. Fan represents an insignificant amount of the revenue of the Group (less than 0.01% of the revenue) for the year ended 31 December 2017, and also represents an insignificant amount of the net profit of the Group (only about 0.2% of the net profit) for the year ended 31 December 2017, which we consider a commercially justifiable incentive reward for attract and motivate them to remain with the Group.
–
61
–
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
We
consider
that the
number
of
Restricted Share
Units
granted
to
each
of
Professor
Lau and Mr. Fan are fair and
reasonable,
and that the
Proposed
RSU
Grants
at no
consideration, other
than the
minimum payment required
by
the
applicable
law
in
the
Cayman Islands (which
is
the par
value
of
the
Shares
to be
issued
pursuant thereto),
is
acceptable. Having considered
the
principal
terms
of
t
he
Proposed
RSU
Grants
as
highlighted above,
we
are
of
the
opinion
that the
terms
of
the
Proposed
RSU
Grants
are fair and
reasonable
so
far
as
the
Independent Shareholders
are concerned.
Recommendation on the Proposed RSU Grants
Having taken
into
consideration
the
factors
and
reasons
as
stated above,
we
are
of
the
opinion
that (i) the terms
of
the
Proposed
RSU
Grants
to
the
relevant
connected
grantees
are
on
normal commercial terms
and are fair and
reasonable
so
far
as
the
Independent Shareholders
are
concerned;
and (ii) the
Proposed
RSU
Grants
are
in
the
interests
of
the
Company
and the
Shareholders
as
a whole. Accordingly,
we
recommend
the
Independent Board Committee
to
advise
the
Independent
Shareholders
to
vote
in
favour
of
the
resolutions
to be
proposed
at
the
EGM
to
approve
the
Proposed
RSU
Grants
and the
transactions contemplated thereunder
and
we
recommend
the
Independent Shareholders
to
vote
in
favour
of
the
resolutions
in
this
regard.
|
|
|
Yours
faithfully,
For and
on
behalf
of
Messis Capital
Limited
Wallace Cheung
Director
|
Note:
Mr. Wallace Cheung is a licensed person registered with the Securities and Future Commission of Hong Kong
and a responsible officer of Messis Capital Limited to carry out type 6 (advising on corporate finance)
regulated activities under the SFO and has over 8 years of experience in the corporate finance industry.
–
62
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
RESPONSIBILITY STATEMENT
This
circular,
for
which
the
Directors collectively
and
individually accept
full
responsibility, includes particulars
given
in
compliance
with the
Listing
Rules for
the
purpose
of
giving information
with
regard
to
the
Company.
The
Directors, having
made all
reasonable enquiries, confirm
that
to
the best
of
their
knowledge
and belief the
information
contained
in
this
circular
is
accurate
and
complete
in
all
material respects
and
not
misleading
or
deceptive,
and there are
no
other
matters
the
omission
of
which would
make
any
statement herein
or
this
circular
misleading.
DISCLOSURE OF INTERESTS
|
(a)
|
Directors’ Interests
in
Securities
of
the
Company
|
As at
the
Latest Practicable
Date, the
interests
or
short
positions
of
the
Directors
and
the
chief executive officer
in
the
Shares, underlying Shares
and
debentures
of
the
Company
or
any
of
its
associated corporation (within
the
meaning
of
Part
XV of
the SFO),
which
were
notified
to
the Company and the
Stock Exchange pursuant
to
Divisions
7
and
8 of
Part
XV of
the SFO
(including interests
or
short positions which
they are
taken
or
deemed
to
have
under
such
provisions
of
the SFO), and
as
recorded
in
the
register required
to be
kept
under section
352
of
the SFO
or as
otherwise notified
to
the
Company
and the
Stock
Exchange pursuant
to
the
Model
Code for
Securities Transactions
by
Directors
of
Listed
Issuers
were
as
follows:
|
|
|
|
|
|
|
|
|
|
|
Derivative
|
|
|
|
Percentage
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
of
aggregate interests
to
total
issued
share
capital
|
|
|
|
Long/Short
|
|
Nature of
|
|
of Shares
|
|
Share
|
|
|
|
Total
|
|
of the
|
|
Name of Director
|
|
Position
|
|
Interests
|
|
held
|
|
Options
|
|
Other
|
|
Interests
|
|
Company
|
|
|
|
|
|
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
1
)
|
|
Executive Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhou Zixue
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
2,521,163
|
|
1,080,498
|
|
3,601,661
|
|
0.071%
|
|
|
|
|
|
Owner
|
|
|
|
(Note
2)
|
|
(Note
3)
|
|
|
|
|
|
Zhao Haijun
|
|
Long Position
|
|
Beneficial
|
|
49,311
|
|
1,875,733
|
|
1,687,500
|
|
3,612,544
|
|
0.072%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 4)
|
|
(Note 5)
|
|
|
|
|
|
Liang Mong Song
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Gao Yonggang
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
1,964,003
|
|
85,505
|
|
2,049,508
|
|
0.041%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 6)
|
|
(Note 7)
|
|
|
|
|
|
Non-executive Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chen
Shanzhi
|
|
Long
Position
|
|
Beneficial
|
|
—
|
|
602,187
|
|
287,656
|
|
889,843
|
|
0.018%
|
|
|
|
|
|
Owner
|
|
|
|
(Note
8)
|
|
(Note
9)
|
|
|
|
|
|
Zhou Jie
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Ren Kai
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Lu Jun
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Tong Guohua
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 10)
|
|
(Note 11)
|
|
|
|
|
–
63
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
aggregate
interests
to
total
issued
share
capital
|
|
|
|
Long/Short
|
|
Nature of
|
|
Number of Shares
|
|
Share
|
|
|
|
Total
|
|
of
the
|
|
Name of Director
|
|
Position
|
|
Interests
|
|
held
|
|
Options
|
|
Other
|
|
Interests
|
|
Company
|
|
|
|
|
|
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
22)
|
|
(Note
1
)
|
|
Independent non-executive
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Tudor Brown
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
87,500
|
|
87,500
|
|
175,000
|
|
0.003%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 12)
|
|
(Note 13)
|
|
|
|
|
|
Chiang Shang-yi
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 14)
|
|
(Note 15)
|
|
|
|
|
|
Cong Jason Jingsheng
|
|
Long Position
|
|
Beneficial
|
|
61,875
|
|
187,500
|
|
125,625
|
|
375,000
|
|
0.007%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 16)
|
|
(Note 17)
|
|
|
|
|
|
Lau Lawrence Juen-Yee
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 18)
|
|
(Note 19)
|
|
|
|
|
|
Fan Ren Da Anthony
|
|
Long Position
|
|
Beneficial
|
|
—
|
|
187,500
|
|
187,500
|
|
375,000
|
|
0.007%
|
|
|
|
|
|
Owner
|
|
|
|
(Note 20)
|
|
(Note 21)
|
|
|
|
|
Notes:
|
|
(1)
|
Based on 5,039,700,056 Shares in issue as at the Latest Practicable Date.
|
|
|
(2)
|
On May 20, 2015, Dr. Zhou was granted options to purchase 2,521,163 Shares at a price of HK$8.30 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of May 19, 2025 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(3)
|
On May 20, 2015, Dr. Zhou was granted an award of 1,080,498 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan. These RSUs, 25% of which will vest on each anniversary of March 6, 2015, shall fully vest on March 6, 2019. As of the Latest Practicable Date, 810,373 Restricted Share Units were vested.
|
|
|
(4)
|
These options comprise: (a) options which were granted to Dr. Zhao on June 11, 2013 to purchase 1,505,854 Shares at a price of HK$6.40 per Share pursuant to the 2004 Stock Option Plan and will expire on the earlier of June 10, 2023 or 90 days after termination of his service, (b) options which were granted to Dr. Zhao on September 7, 2017 to purchase 1,687,500 Shares at a price of HK$7.9 per Share pursuant to the 2014 Stock Option Plan and will expire on the earlier of September 6, 2027 or 90 days after termination of his service as Co-Chief Executive Officer. As of the Latest Practicable Date, 1,317,621 of these options have been exercised.
|
|
|
(5)
|
On September 7, 2017, Dr. Zhao was granted an award of 1,687,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan. These RSUs will vest over one year commencing on the date on which Dr. Zhao commenced his term of office as Chief Executive Officer. As of the Latest Practicable Date, none of these RSUs has been exercised.
|
–
64
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
(6)
|
These opt
ions comprise: (a) options which were granted to Dr. Gao on May 24, 2010 to purchase 314,531 Shares at a price of HK$6.4 per Share pursuant to the 2004 Stock Option Plan and will expire on the earlier of May 23, 2020 or 120 days after termination of his se
rvice as a Director to the Board, (b) options which were granted to Dr. Gao on June 17, 2013 to purchase 1,360,824 Shares at a price of HK$6.24 per Share pursuant to the 2004 Stock Option Plan and will expire on the earlier of June 16, 2023 or 120 days aft
er termination of his service as a Director to the Board, (c) options which were granted to Dr. Gao on June 12, 2014 to purchase 288,648 Shares at a price of HK$6.4
per Share pursuant to the 2014 Stock Option Plan and will expire on the earlier of June 11,
2024 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(7)
|
On November 17, 2014, Dr. Gao was granted an award of 291,083 Restricted Share Units pursuant to the 2014 Equity Incentive Plan, consisting of (a) 240,145 Restricted Share Units, 25% of which vest on each anniversary of June 17, 2013 and which shall fully vest on June 17, 2017; and (b) 50,938 Restricted Share Units, 25% of which vest on each anniversary of March 1, 2014 and which shall fully vest on March 1, 2018. As of the Latest Practicable Date, a total of 291,083 Restricted Share Units were vested, among which, 205,578 were settled in cash.
|
|
|
(8)
|
These options comprise: (a) On May 24, 2010, Dr. Chen was granted options to purchase 314,531 Shares at a price of HK$6.4 per Share pursuant to the 2004 Stock Option Plan. These options will expire on the earlier of May 23, 2020 or 120 days after termination of his service as a Director to the Board. (b) On May 25, 2016, options to purchase 98,958 Shares at a price of HK$6.42 per Share pursuant to the 2014 Stock Option Plan were granted to Dr. Chen. These options are vested immediately and will expire on the earlier of May 24, 2026 or 120 days after termination of his service as a Director to the Board. (c) On September 12, 2016, options to purchase 1,198 Shares at a price of HK$8.72 per Share pursuant to the 2014 Stock Option Plan were granted to Dr. Chen. These options are vested immediately and will expire on the earlier of September 11, 2026 or 120 days after termination of his service as a Director to the Board. (d) On April 5, 2017, options to purchase 62,500 Shares at a price of HK$9.834 per Share pursuant to the 2014 Stock Option Plan were granted to Dr. Chen. These options are vested immediately and will expire on the earlier of April 4, 2027 or 120 days after termination of his service as a Director to the Board. (e) On May 23, 2018, options to purchase 125,000 Shares at a price of HK$10.512 per Share pursuant to the 2014 Stock Option Plan were granted to Dr. Chen. These options will expire on the earlier of May 22, 2028 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(9)
|
These Restricted Share Units comprise: (a) On May 25, 2016, 98,958 Restricted Share Units were granted to Dr. Chen pursuant to the 2014 Equity Incentive Plan. Dr. Chen’s Restricted Share Units are vested immediately. (b) On September 12, 2016, 1,198 Restricted Share Units were granted to Dr. Chen pursuant to the 2014 Equity Incentive Plan. Dr. Chen’s Restricted Share Units are vested immediately. (c) On April 5, 2017, 62,500 Restricted Share Units were granted to Dr. Chen pursuant to the 2014 Equity Incentive Plan. Dr. Chen’s Restricted Share Units are vested immediately. (d) On May 23, 2018, 125,000 Restricted Share Units were granted to Dr. Chen pursuant to the 2014 Equity Incentive Plan, subject to the Independent
|
–
65
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
|
Shareh
olders’ approval at the EGM. Among the 125,000 Restricted Share Units, 62,500 Restricted Share Units are vested immediately and 62,500 Restricted Share Units will vest on January 1, 2019. As of the Latest Practicable Date, none of these RSUs has been exerc
ised.
|
|
|
(10)
|
On April 5, 2017, Dr. Tong was granted options to purchase 187,500 Shares at a price of HK$9.834 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of April 4, 2027 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(11)
|
On April 5, 2017, Dr. Tong was granted an award of 187,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan. These RSUs, over a period of three years at the rate of 33%, 33% and 34% of which will vest on each anniversary of February 14, 2017, shall fully vest on February 14, 2020. As of the Latest Practicable Date, none of these RSUs has been exercised.
|
|
|
(12)
|
These options comprise: (a) On September 6, 2013, Mr. Brown was granted options to purchase 449,229 Shares at a price of HK$5.62 per Share pursuant to the 2004 Stock Option Plan. These options will expire on the earlier of September 5, 2023 or 120 days after termination of his service as a Director to the Board. (b) On May 23, 2018, options to purchase 87,500 Shares at a price of HK$10.512 per Share pursuant to the 2014 Stock Option Plan were granted to Mr. Brown. These options will expire on the earlier of May 22, 2028 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, 449,229 options have been exercised.
|
|
|
(13)
|
On May 23, 2018, 87,500 Restricted Share Units were granted to Mr. Brown pursuant to the 2014 Equity Incentive Plan, subject to the Independent Shareholders’ approval at the EGM. Among the 87,500 Restricted Share Units, 25,000 Restricted Share Units are vested immediately and 62,500 Restricted Share Units will vest on January 1, 2019. As of the Latest Practicable Date, none of these RSUs has been exercised.
|
|
|
(14)
|
On April 5, 2017, Dr. Chiang was granted options to purchase 187,500 Shares at a price of HK$9.834 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of April 4, 2027 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(15)
|
On April 5, 2017, Dr. Chiang was granted an award of 187,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan. These RSUs, over a period of three years at the rate of 33%, 33% and 34% of which will vest on each anniversary of December 20, 2016, shall fully vest on December 20, 2019. As of the Latest Practicable Date, none of these RSUs has been exercised.
|
|
|
(16)
|
On April 5, 2017, Dr. Cong was granted options to purchase 187,500 Shares at a price of HK$9.834 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of April 4, 2027 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
–
66
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
(17)
|
On April 5, 2017, Dr. Cong was granted an award of 187,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan. These RSUs, over a period of
three years at the rate of 33%, 33% and 34% of which will vest on each anniversary of February 14, 2017, shall fully vest on February 14, 2020. As of the Latest Practicable Date, 61,875 of these Restricted Share Units were exercised.
|
|
|
(18)
|
On September 13, 2018, Professor Lau was granted options to purchase 187,500 Shares at a price of HK$8.574 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of September 12, 2028 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(19)
|
On September 13, 2018, Professor Lau was granted an award of 187,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan, subject to the Independent Shareholders’ approval at the extraordinary general meeting. These RSUs, over a period of three years at the rate of 33%, 33% and 34% of which will vest on each anniversary of June 22, 2018, shall fully vest on June 22, 2021. As of the Latest Practicable Date, none of these Restricted Share Units was exercised.
|
|
|
|
(20)
|
On September 13, 2018, Mr. Fan was granted options to purchase 187,500 Shares at a price of HK$8.574 per Share pursuant to the 2014 Stock Option Plan. These options will expire on the earlier of September 12, 2028 or 120 days after termination of his service as a Director to the Board. As of the Latest Practicable Date, none of these options has been exercised.
|
|
|
(21)
|
On September 13, 2018, Mr. Fan was granted an award of 187,500 Restricted Share Units (each representing the right to receive one Share) pursuant to the 2014 Equity Incentive Plan, subject to the Independent Shareholders’ approval at the extraordinary general meeting. These RSUs, over a period of three years at the rate of 33%, 33% and 34% of which will vest on each anniversary of June 22, 2018, shall fully vest on June 22, 2021. As of the Latest Practicable Date, none of these Restricted Share Units was exercised.
|
|
|
(22)
|
These interests have been adjusted upon the Share Consolidation taking effect from December 7, 2016 on the basis of consolidating every ten ordinary shares of US$0.0004 each into one ordinary share of US$0.004 each.
|
–
67
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
(b)
|
Substantial
Shareholders
|
Save as disclosed below, the Directors are not aware that there was any party who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company and its subsidiaries:
|
|
|
|
|
|
|
|
|
Percentage of Shares Held to Total Issued Share Capital of
|
|
|
|
|
|
Percentage
of
Total
interests
to
Total
Issued
|
|
Name of Shareholder
|
|
Nature of Interests
|
|
Long/Short
Position
|
|
Number of
Shares held
|
|
the
Company
|
|
Derivatives
|
|
Total
Interests
|
|
Share Capital
of the
Company
|
|
|
|
|
|
|
|
(Note
9)
|
|
(Note
1)
|
|
(Note
9)
|
|
(Note
9)
|
|
(Note
1)
|
|
Pagoda Tree
Investment
Company Limited
|
|
A
concert party
to an
agreement
to
buy shares
described
in
s.317(1)(a)
|
|
Long Position
|
|
859,522,595
|
|
17.06%
|
|
122,118,935
|
|
981,641,530
|
|
19.48%
|
|
|
|
|
|
|
|
(Note
2)
|
|
|
|
(Note
2)
|
|
|
|
|
|
Datang Telecom
Technology &
Industry Holdings
Co., Ltd.
|
|
Interest of corporation controlled
|
|
Long Position
|
|
859,522,595
|
|
17.06%
|
|
122,118,935
|
|
981,641,530
|
|
19.48%
|
|
|
|
|
|
|
|
(Note
3
)
|
|
|
|
(Note
4
)
|
|
|
|
|
|
Integrated Circuit
Industry Investment
Fund Co.,
|
|
Interest of corporation controlled
|
|
Long Position
|
|
797,054,901
|
|
15.82%
|
|
183,178,403
|
|
980,233,304
|
|
19.45%
|
|
|
|
|
|
|
|
(Note
5
)
|
|
|
|
(Note
6
)
|
|
|
|
|
|
Tsinghua University
|
|
Interest of corporation controlled
|
|
Long Position
|
|
374,665,110
|
|
7.43%
|
|
|
|
374,665,110
|
|
7.43%
|
|
|
|
|
|
|
|
(Note 7)
|
|
|
|
|
|
|
|
|
|
Zhao Weiguo
|
|
Interest of corporation controlled
|
|
Long position
|
|
350,301,600
|
|
6.95%
|
|
|
|
350,301,600
|
|
6.95%
|
|
|
|
|
|
|
|
(Note
7)
|
|
|
|
|
|
|
|
|
Notes:
|
|
(1)
|
Based
on
5,039,700,056 Shares
in
issue
as
at
the
Latest Practicable
Date.
|
|
|
(2)
|
Lightmane Holdings Company Limited,
a
wholly-owned subsidiary
of
CNIC
Corporation
Limited,
of
which Compass Investment Company Limited,
a
wholly owned subsidiary
of
Pagoda
Tree
Investment Company Limited,
has
a
90%
control, signed
an
agreement
with
Datang
Holdings
(Hongkong) Investment Company Limited
(‘‘Datang
HK’’)
with terms falling under
the
Section
317
(1)(a)
or
(b)
of
the SFO.
Lightmane Holdings Company Limited,
CNIC
Corporation
Limited,
Compass Investment Company Limited, Pagoda
Tree
Investment Company Limited
are
therefore deemed
to be
interested
in
981,641,530 Shares
of
the
Company.
|
|
|
(3)
|
859,522,595 Shares
are held
by
Datang
HK
which
is a
wholly-owned subsidiary
of
Datang Telecom Technology
&
Industry Holdings
Co., Ltd.
(‘‘Datang’’).
|
–
68
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
(4)
|
On
April
23,
2018,
the
Company entered into
the
Datang
PSCS
Subscription Agreement
with
Datang
and
Datang
HK,
pursuant
to
which,
on
and
subject
to
the
terms
of
the
Datang
PSCS
Subscription Agreement,
the
Company conditionally agreed
to
issue,
and
Datang, through
Datang
HK,
conditionally agreed
to
subscribe
for, the
Datang
PSCS
which
are
convertible
into
122,118,935
Shares (assuming
full
conversion
of
the
Datang
PSCS
at
the
initial Conversion
Price
of
HK$12.78
per
Share).
In
this
regard, Datang
and
Datang
HK
are
deemed
to be
interested
in
these
122,118,935
Shares under
the SFO.
Completion
of
the
Datang
PSCS
Subscription Agreement
has
occurred
on
June 29,
2018.
|
|
|
(5)
|
797,054,901 Shares
are held
by
Xinxin (Hongkong) Capital
Co., Ltd (‘‘Xinxin
HK’’), a
wholly-owned
subsidiary
of
Xunxin (Shanghai) Investment
Co., Ltd.,
which
in
turn
is
wholly-owned
by
China
IC
Fund.
On
April
23, 2018, the
Company entered
into the
China
IC
Fund
Pre-emptive
Share
Subscription Agreement with China
IC
Fund
and
Xinxin
HK,
pursuant
to
which,
on
and
subject
to
the terms
of
the
China
IC
Fund
Pre-emptive Share Subscription Agreement,
the
Company
conditionally agreed
to
issue,
and
China
IC
Fund, through Xinxin
HK,
conditionally agreed
to
subscribe
for, the
57,054,901 Shares
at
the
price
of
HK$10.65
per
Share. Completion
of
the
China
IC
Fund
Pre-emptive
Share
Subscription
Agreement
has
occurred
on
August
29,
2018.
|
|
|
(6)
|
On
April 23, 2018, the
Company entered into
the
China
IC
Fund PSCS
Subscription Agreement
with
China
IC
Fund
and
Xinxin
HK,
pursuant
to
which,
on
and
subject
to
the
terms
of
the
China
IC
Fund PSCS
Subscription Agreement,
the
Company conditionally agreed
to
issue,
and
China
IC
Fund, through Xinxin
HK,
conditionally agreed
to
subscribe for,
the
China
IC
Fund PSCS
which
are
convertible
into
183,178,403 Shares (assuming
full
conversion
of
the
China
IC
Fund PSCS
at
the
initial Conversion Price
of
HK$12.78
per
Share).
In
this
regard, China
IC
Fund and
Xinxin
HK
are
deemed
to be
interested
in
these 183,178,403 Shares under
the
Securities
and
Futures
Ordinance
(Cap.
571) (the
‘‘SFO’’).
Completion
of
the
China
IC
Fund PSCS
Subscription Agreement
has
occurred
on
August
29,
2018.
|
|
|
(7)
|
Tsinghua University holds 374,665,110 Shares
in
long position through Tsinghua Unigroup
Co.,
Ltd.
(a
51%
indirectly
held
subsidiary
of
Tsinghua University
and
a
49%
indirectly
held
subsidiary
of
Zhao
Weiguo)
and
another corporation controlled
by
it.
On
September
4,
2018,
Tsinghua Holdings
Co., Ltd.,
a
subsidiary
of
Tsinghua University, entered
into
equity transfer agreements
with each
of
Suzhou High-speed
Rail New Town
State-owned Assets Management
and
Operation
Co., Ltd. and
Hainan Union Asset Management Corporation
to
transfer
30% and
6% of
the
entire
equity interest
in
Tsinghua Unigroup
Co., Ltd.
respectively.
|
|
|
(8)
|
Zhao
Weiguo holds
70%
of
Beijing Jiankun Investment Group
Co., Ltd.
which
in
turns
holds
49%
of
Tsinghua Unigroup
Co.,
Ltd..
Zhao
Weiguo
is
therefore deemed
to be
interested
in
350,301,600
Shares
held
in
long
position
through
Tsinghua
Unigroup
Co.,
Ltd..
|
|
|
(9)
|
These interests
have been
adjusted
upon the
Share Consolidation taking effect
from
December
7,
2016
on
the
basis
of
consolidating every
ten
ordinary shares
of
US$0.0004
each into one
ordinary
share
of
US$0.004.
|
–
69
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
MATERIAL CHANGES
As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial and trading position of the Group since 31 December 2017, the date of the latest published audited accounts of the Group.
LITIGATION AND CLAIMS
As at
the
Latest Practicable Date,
the
Directors
were not aware
of
any
litigation
or
claims
of
material importance pending
or
threatened against
any
member
of
the
Group.
DIRECTORS’ INTEREST
IN
SERVICE
CONTRACTS
None
of
the
Directors
has
entered
into a
service contract
with any
member
of
the
Group (excluding contracts expiring
or
determinable within
one year
without payment
of
compensation (other
than
statutory
compensation)).
OTHER INTERESTS OF THE DIRECTORS
As
at
the Latest
Practicable
Date:
|
|
(a)
|
none
of
the
Directors
had any
direct
or
indirect interest
in
any
assets which
have
been,
since the date
of
the
latest published audited accounts
of
the
Company, acquired
or
disposed
of by or
leased
to
any
member
of
the
Group,
or
are
proposed
to be
acquired
or
disposed
of by or
leased
to
any
member
of
the
Group;
|
|
|
(b)
|
save for the fact that Dr. Chen
Shanzhi,
a
non-executive Director,
is
currently
the
senior
vice
president
of
Datang Telecom Technology
&
Industry Holdings
Co.,
Ltd.,
a
substantial shareholder
of
the
Company
and Dr.
Tong Guohua,
a
non- executive Director
of
the
Company,
is
currently
the
president
and
an
executive
director
of
Datang Telecom Technology
&
Industry Holdings
Co., Ltd.,
a
substantial shareholder
of
the
Company,
none
of
the
Directors
was
a
director
or
employee
of
a
company
which had
an
interest
or
short
position
in
the
Shares
or
underlying Shares which would
fall
to be
disclosed
to
the
Company
and the
Stock
Exchange
under
provisions
of
Divisions
2
and
3
of
Part
XV
of
the
SFO;
|
|
|
(c)
|
none
of
the
Directors
was
materially interested
in
any
contract
or
arrangement entered
into
by
any
member
of
the
Group
which
is
subsisting
as
at
the
date
of
this
circular
and
which
is
significant
in
relation
to
the
business
of
the
Group;
and
|
|
|
(d)
|
none
of
the
Directors
and their
associates
had any
competing interest,
in
a
business which competes
or is
likely
to
compete either directly
or
indirectly, with
the
business
of
the
Group.
|
EXPERT AND CONSENT
The
following
is
the
qualification
of
the
Independent Financial Adviser which
has
given opinions
or
advice contained
in
this
circular:
–
70
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
|
|
|
|
|
|
|
Name
|
|
Qualification
|
|
|
|
|
|
Messis
Capital
Limited
|
|
A
licensed corporation
to
carry out type
1
(dealing
in
|
|
|
|
securities) and type 6 (advising on corporate finance) regulated activities under the SFO
|
As
at
the Latest
Practicable
Date,
Messis Capital Limited
has
given
and has
not
withdrawn
its
written consent
to
the issue
of
this
circular
with the
inclusion
of
its
statements, letter, report
and
opinion
(as the case may be)
as
set out
in
this
circular
and
references
to
its
name
in
the
form
and
context
in
which
they
are
included.
As at
the
Latest Practicable Date, Messis Capital Limited
was not
beneficially
interested
in
the share
capital
of
any
member
of
the Group and did not have any
right,
whether legally enforceable
or
not,
to
subscribe
for
or
nominate persons
to
subscribe
for
securities
of
any
member
of
the
Group.
As at
the
Latest Practicable
Date,
Messis Capital Limited
did not have any
direct
or
indirect interest
in
any
assets
which have been, since
31
December 2017,
the date
of
the
latest published audited accounts
of
the
Company, acquired
or
disposed
of by or
leased
to
any
member
of
the
Group,
or
are
proposed
to be
acquired
or
disposed
of by or
leased
to
any
member
of
the
Group.
The
letter
from
Messis Capital Limited dated
21
December
2018
is
set out
on
pages
38 to 65
for
incorporation
herein.
MISCELLANEOUS
The Company has two joint company secretaries, Dr. Gao Yonggang and Dr. Liu Wei.
Dr. Gao graduated from Nankai University with a PhD in management. He is the chief financial officer of the Company. Dr. Gao is also a Fellow of the Institute of Chartered Accountants in Australia, and a Founding Member and director of The Hong Kong Independent Non-Executive Director Association.
Dr. Liu graduated from the Northwest University of China, the Chinese University of Political Science and Law and the University of Cambridge with a bachelor in Chinese literature, a master degree in law and a PhD in law respectively. Dr. Liu has PRC lawyer qualification and is a solicitor qualified to practice law in Hong Kong and England and Wales.
The
registered office
of
the
Company
is
Cricket Square, Hutchins Drive,
P.O.
Box
2681,
Grand
Cayman, KY1-1111, Cayman Islands
and the head
office
of
the
Company
is
18
Zhangjiang
Road,
Pu
Dong
New
Area,
Shanghai
201203,
People’s
Republic
of
China.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at Suite 3003, 30th Floor, 9 Queen’s Road Central, Hong Kong during normal business hours on any weekday, excluding public holidays, from 27 December 2018 to 11 January 2019 (both days inclusive):
|
|
(a)
|
the
memorandum
and
articles
of
association
of
the
Company;
|
–
71
–
|
|
|
|
|
APPENDIX I
|
|
GENERAL INFORMATION
|
|
|
(b)
|
the SMNC
Centralised
Fund
Management
Agreement;
|
|
|
(c)
|
the
SJ
Cayman
Centralised
Fund
Management
Agreement;
|
|
|
(d)
|
the 2014
Equity Incentive
Plan;
|
|
|
(e)
|
the
letter
from the
Independent Board Committee,
the text
of
which
is
set out
in
this
circular;
|
|
|
(f)
|
the
letter
of
advice
from
Messis Capital Limited
to
the
Independent Board Committee
and the
Independent Shareholders,
the text
of
which
is
set out
in
this
circular;
|
|
|
(g)
|
the
written consent
of
Messis Capital Limited referred
to in
this
appendix;
and
|
–
72
–
NOTICE
OF
EXTRAORDINARY GENERAL
MEETING
Semiconductor Manufacturing International Corporation
中 芯 國 際 集 成 電 路 製 造 有 限 公 司
*
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 981)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (‘‘EGM’’) of Semiconductor Manufacturing International Corporation (the ‘‘Company’’) will be held at 5 Floor SO1 Building, 18 Zhangjiang Road, Pu Dong New Area, Shanghai, People’s Republic of China on 11 January 2019 at 9 : 00 a.m. for the purpose of transacting the following businesses:
ORDINARY RESOLUTIONS
To consider and, if thought fit, to pass with or without modification the following ordinary resolutions:
|
|
(a)
|
the
centralised
fund
management agreement dated
29
November
2018
(the
‘‘SMNC
Centralised
Fund
Management
Agreement’’) and
entered
into
among
the
Company, Semiconductor Manufacturing International
(Beijing)
Corporation
and
Semiconductor Manufacturing
North China
(Beijing) Corporation,
a
copy
of
which
having
been
produced
to
the
EGM
marked
‘‘A’’
and
signed
by
the
chairman
of
the
EGM
for
identification purpose,
and
the
transactions contemplated thereunder
be
and are
hereby approved, confirmed
and
ratified;
|
|
|
|
(b)
|
the SMNC
Centralised
Fund
Management Agreement annual
caps for
the
three
years ending
31
December 2019,
31
December
2020 and
31
December 2021, respectively
be
and are
hereby approved
and
confirmed;
and
|
|
|
|
(c)
|
any
director(s)
of
the
Company
be
and
is
hereby authorised,
for and
on
behalf
of
the
Company,
to
enter
into any
agreement,
deed
or
instrument
and/
or to
execute
and
deliver
all such
documents and/or
do
all such acts
on
behalf
of
the
Company
as
he/she
may
consider necessary, desirable
or
expedient
for the
purpose
of,
or in
connection
with (i) the
implementation
and
completion
of
the SMNC
Centralised
Fund
Management Agreement
and
transactions
contemplated thereunder, and/or
(ii) any
amendment, variation
or
|
|
|
*
|
For
identification purpose
only
|
–
73
–
NOTICE
OF
EXTRAORDINARY GENERAL
MEETING
modification
of
the SMNC
Centralised
Fund
Management Agreement
and
the
transactions contemplated thereunder
upon such terms and
conditions
as
the
board
of
directors
of
the
Company
may
think
fit.’’
|
|
(a)
|
the
centralised
fund
management agreement dated
6
December
2018 (the
‘‘SJ
Cayman Centralised
Fund
Management
Agreement’’) and
entered
into
among
the
Company, Semiconductor Manufacturing International
(Beijing)
Corporation
and
SJ
Semiconductor Corporation,
a
copy
of
which
having
been
produced
to
the EGM
marked
‘‘B’’
and
signed
by
the
chairman
of
the
EGM for
identification purpose,
and the
transactions
contemplated
thereunder
be
and
are
hereby
approved,
confirmed
and
ratified;
|
|
|
(b)
|
the
SJ
Cayman Centralised
Fund
Management Agreement annual
caps for the three
years ending
31
December 2019,
31
December
2020 and
31
December
2021,
respectively
be
and
are
hereby
approved
and
confirmed;
and
|
|
|
(c)
|
any
director(s)
of
the
Company
be
and
is
hereby authorised,
for and
on
behalf
of
the
Company,
to
enter
into any
agreement,
deed
or
instrument
and/
or to
execute
and
deliver
all such
documents and/or
do
all such acts
on
behalf
of
the
Company
as
he/she
may
consider necessary, desirable
or
expedient
for the
purpose
of,
or in
connection
with (i) the
implementation
and
completion
of
the
SJ
Cayman
Centralised
Fund
Management Agreement
and
transactions contemplated thereunder, and/or
(ii) any
amendment, variation
or
modification
of
the
SJ
Cayman Centralised
Fund
Management
Agreement
and the
transactions contemplated thereunder
upon such
terms
and
conditions
as
the
board
of
directors
of
the
Company
may
think
fit.’’
|
|
|
(a)
|
the
proposed grant
of
187,500 restricted share units
(‘‘RSUs’’)
to
Professor
Lau
Lawrence Juen-Yee,
an
independent non-executive director
of
the
Company,
in
accordance
with the terms
of
the 2014
Equity Incentive
Plan,
and
subject
to
all
applicable laws, rules, regulations
and the
other applicable documents,
be
and
is
hereby approved
and
confirmed;
|
|
|
(b)
|
any
director(s)
of
the
Company
be
and
is
hereby authorised
to
exercise
the
powers
of
the
Company
to
allot and issue the
Shares
of
the Company
pursuant
to
the
proposed
RSU
grant under
the
specific mandate granted
to
the
Directors
by
the
Shareholders
at
the
annual general meeting
of
the
Company
held
on 13
June 2013
in
accordance
with the
terms
of
the
2014
Equity Incentive
Plan
and/or
do
all such acts
on
behalf
of
the Company
as
he/she
may
consider necessary, desirable
or
expedient
for the
purpose
of,
or
in
connection
with the
implementation
and
completion
of
the
transactions contemplated
pursuant
to
the
proposed
RSU
grant.’’
|
–
74
–
NOTICE OF
EXTRAORDINARY GENERAL
MEETING
|
|
(a)
|
the
proposed grant
of
187,500
RSUs
to
Mr. Fan Ren
Da
Anthony,
an
independent non-executive director
of
the
Company,
in
accordance
with the
terms
of
the 2014
Equity Incentive Plan,
and
subject
to
all
applicable
laws,
rules, regulations
and the other
applicable documents,
be
and
is
hereby
approved
and
confirmed;
|
|
|
(b)
|
any
director(s)
of
the
Company
be
and
is
hereby authorised
to
exercise
the
powers
of
the
Company
to
allot and issue the
Shares
of
the Company
pursuant
to
the
proposed
RSU
grant under
the
specific mandate granted
to
the
Directors
by
the
Shareholders
at
the
annual general meeting
of
the
Company
held
on 13
June 2013
in
accordance
with the
terms
of
the
2014
Equity Incentive
Plan
and/or
do
all such acts
on
behalf
of
the Company
as
he/she
may
consider necessary, desirable
or
expedient
for the
purpose
of,
or
in
connection
with the
implementation
and
completion
of
the
transactions contemplated
pursuant
to
the
proposed
RSU
grant.’’
|
By Order of the Board
Semiconductor Manufacturing International Corporation Gao Yonggang
Executive Director, Chief Financial Officer and Joint Company Secretary
Shanghai,
21
December
2018
Principal place of business:
18 Zhangjiang Road Pu Dong New Area Shanghai 201203
People’s Republic of China
Registered office:
Cricket Square, Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111 Cayman Islands
As at
the date
of
this
notice,
the Board
comprises
four
executive Directors, namely
Dr. Zhou
Zixue (Chairman),
Dr. Zhao
Haijun (Co-Chief Executive Officer),
Dr. Liang
Mong
Song
(Co-Chief Executive Officer)
and Dr. Gao
Yonggang (Chief Financial Officer
and
Joint Company Secretary);
five
non-executive Directors, namely
Dr. Chen
Shanzhi,
Mr. Zhou Jie, Mr. Ren Kai, Mr.
Lu
Jun and Dr. Tong
Guohua;
and five
independent non-executive Directors, namely
Mr.
William
Tudor
Brown,
Dr.
Chiang Shang-yi,
Dr. Cong
Jingsheng
Jason,
Professor
Lau
Lawrence
Juen-Yee
and
Mr.
Fan
Ren
Da
Anthony.
Notes:
|
1.
|
A
member entitled
to
attend
and vote
at
the EGM
convened
by
the
above notice
is
entitled
to
appoint
a
proxy
or,
if
such
member
is
a
holder
of
more than one
share,
more than one
proxy
to
attend
and vote
instead
of
such
member. Where
a
member appoints
more than one
proxy,
the
instrument
of
proxy shall state which
proxy
is
entitled
to
vote
on
a
poll.
A
proxy
need
not
be
a
member
of
the
Company.
|
–
75
–
NOTICE OF
EXTRAORDINARY GENERAL
MEETING
|
2.
|
To be
valid,
a
form
of
proxy
must
be
delivered
to
the
Company’s branch
share
registrar, Computershare
Hong Kong
Investor Services Limited,
at
17M
Floor, Hopewell Centre,
183
Queen’s
Road East,
Wanchai,
Hong
Kong,
not less than
48
hours before
the
meeting
or
adjourned meeting
(or
24
hours before
a
poll
is
taken,
if
the poll
is
not
taken
on
the same day
as
the
meeting
or
adjourned meeting).
If
a
form
of
proxy
is
signed under
a
power
of
attorney,
the
power
of
attorney
or
other
authority
relied
on to
sign
it
(or
an
office copy)
must
be
delivered
to
the
Company’s branch share registrar
with the form
of
proxy, except
that the power
of
attorney
which has
already
been
registered
with the
Company
need not
be so
delivered. Compl
etion
and
return
of
a
form
of
proxy
will not
preclude
a
member
from
attending
in
person
and
voting
at
the EGM
or
any
adjournment thereof should
he so
wish.
|
|
3.
|
The
register
of
members
of
the
Company
will
be
closed
from
8
January
2019
to
11
January
2019
(both
days
inclusive), during which period
no
transfer
of
shares
in
the
Company
will
be
registered.
In
order
to
qualify
for
attending
and
voting
at
the
EGM,
all
properly completed transfer forms, accompanied
by
the
relevant
share
certificates
must
be
lodged
with the
branch
share
registrar
of
the
Company, Computershare
Hong Kong
Investor Services Limited,
at
Shops 1712–1716,
17th
Floor, Hopewell Centre,
183
Queen’s
Road East,
Wanchai,
Hong Kong
by no
later than
4 :
30
p.m.
on
7
January
2019. All
persons
who are
registered holders
of
the
Shares
on 11
January
2019,
the
record
date
for
the
EGM,
will
be
entitled
to
attend
and
vote
at
the
EGM.
|
|
4.
|
Shareholders
are
advised
to
read the
circular
of
the
Company dated
21
December
2018
which
contains
information
concerning
the
resolutions
to
be
proposed
at
the
EGM.
|
|
5.
|
The
voting
at
the EGM will
be
taken
by
a
poll.
|
–
76
–