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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of October, 2014

Commission File Number: 001-31994

Semiconductor Manufacturing International Corporation

(Translation of registrant’s name into English)

18 Zhangjiang Road

Pudong New Area, Shanghai 201203

People’s Republic of China

(Address of principal executive office)

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): o

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): o

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

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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, 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 or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities or an invitation to enter into an agreement to do any such things, nor is it calculated to invite any offer to acquire, purchase or subscribe for any securities. This circular is not an offer of securities for sale in the PRC, Hong Kong and the United States or elsewhere. The Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares are not available for general subscription in Hong Kong or elsewhere.

This circular does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares mentioned herein have not been, and will not be, registered under the Securities Act, and may not be offered or sold in the United States except pursuant to registration or an exemption from the registration requirements of the Securities Act. No public offering of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares will be made in the United States.

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)

NON-EXEMPT CONNECTED TRANSACTIONS

(1) PRE-EMPTIVE SUBSCRIPTIONS BY DATANG AND COUNTRY HILL

(2) PROPOSED PRE-EMPTIVE SPECIFIC MANDATES

(3) DATANG SUPPLEMENTAL AGREEMENT

(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 45 and 46 of this circular. A letter from Messis Capital, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 47 to 73 of this circular.

The notice convening an extraordinary general meeting of the Company to be held at 18 Zhangjiang Road, PuDong New Area, Shanghai, People’s Republic of China on Wednesday, 5 November 2014 at 4 : 00 p.m. 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 extraordinary general meeting in accordance with the instructions printed thereon.

Whether you are able to attend the extraordinary general meeting 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 extraordinary general meeting or any adjournment thereof. The completion and delivery of a form of proxy will not preclude you from attending and voting at the extraordinary general meeting in person. Only shareholders of record on 5 November 2014 are entitled to attend and vote at the extraordinary general meeting.

*     for identification purposes only

20 October 2014

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CONTENTS

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

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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)

To the Shareholders

Dear Sir or Madam,

NON-EXEMPT CONNECTED TRANSACTIONS

(1) PRE-EMPTIVE SUBSCRIPTIONS BY DATANG AND COUNTRY HILL

(2) PROPOSED PRE-EMPTIVE SPECIFIC MANDATES

(3) DATANG SUPPLEMENTAL AGREEMENT

(4) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in which the Company announced that on 22 August 2014, it entered into (1) the Datang Pre-emptive Share Subscription Agreement with Datang, pursuant to which, on and subject to the terms of the Datang Pre-emptive Share Subscription Agreement, the Company conditionally agreed to issue, and Datang conditionally agreed to subscribe for, the Datang Pre-emptive Shares, (2)  the Datang Pre-emptive Bond Subscription Agreement with Datang, pursuant to which, on and subject

*   for identification purposes only

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to the terms of the Datang Pre-emptive Bond Subscription Agreement, the Company conditionally agreed to issue, and Datang conditionally agreed to subscribe for, the Datang Pre-emptive Bonds in an aggregate principal amount of US$22,200,000 for a total cash consideration of US$22,533,000 which is 101.5% of the aggregate principal amount of the Datang Pre-emptive Bonds, (3) the Datang Supplemental Agreement with Datang and Datang Telecom, in which Datang and Datang Telecom agreed to amend the pre-emptive rights provision in the Datang Share Purchase Agreement in order to give effect to the parties’ understanding of the purpose of the pre-emptive rights provision, (4) the Country Hill Pre-emptive Subscription Agreement with Country Hill, pursuant to which, on and subject to the terms of the Country Hill Pre-emptive Subscription Agreement, the Company conditionally agreed to issue, and Country Hill conditionally agreed to subscribe for, the Country Hill Pre-emptive Shares.

Datang currently holds 17.53% of the entire existing issued share capital of the Company. Country Hill currently holds 10.34% of the entire existing issued share capital of the Company. As each of Datang and Country Hill is a substantial Shareholder of the Company by virtue of their respective shareholding interest, each of them is a connected person of the Company and the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement as well as the transactions contemplated there under (including the allotment and issue of the Datang Pre-emptive Shares, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Country Hill Pre-emptive Shares and any Datang Conversion Shares) will constitute connected transactions of the Company under Chapter 14A of the Listing Rules. Therefore, the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder are subject to reporting, announcement and Independent Shareholders’ approval requirements under the Chapter 14A of the Listing Rules.

The purpose of this circular is to provide you with (i) details regarding the Datang Pre-emptive Subscription, the Datang Supplemental Agreement and the granting of the Datang Pre-emptive Specific Mandate; (ii) details regarding the Country Hill Pre-emptive Subscription and the granting of the Country Hill Pre-emptive Specific Mandate; and (iii) a notice to convene the EGM.

I                     THE DATANG PRE-EMPTIVE SUBSCRIPTION

A.           Pre-emptive rights of Datang

References are made to the Company’s announcements dated 10 November 2008, 4 June 2014, 18 June 2014 and 22 August 2014 in relation to the Datang Share Purchase Agreement and the delivery by Datang of an irrevocable notice to the Company that it will fully exercise its pre-emptive right in respect of the issue of the Subscription Shares and the Further Bonds and any Country Hill Pre-emptive Subscription.

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Pursuant to the Datang Share Purchase Agreement, in case of any issue of new Shares or securities convertible into Shares, subject to certain exceptions, Datang has the pre-emptive right to purchase such number of additional Shares or securities convertible into Shares so as to enable Datang to hold, after the issue of such securities, a pro rata portion of such securities equivalent to the percentage of the issued share capital of the Company then beneficially owned by Datang prior to the issue of such securities. Datang’s pre-emptive right is applicable to the issue of the Subscription Shares, the Further Bonds and any Country Hill Pre-emptive Subscription. Pursuant to the Datang Share Purchase Agreement, completion of any such issue of the Datang Pre-emptive Shares and the Datang Pre-emptive Bonds to Datang upon exercise of its pre-emptive right will be further subject to the receipt of any required regulatory approvals. Any exercise by Datang of its pre-emptive right to subscribe for the Datang Pre-emptive Shares and the Datang Pre-emptive Bonds in connection with the issue of the Subscription Shares, the Further Bonds and any Country Hill Pre-emptive Subscription will be at a price equivalent to the Subscription Price (in the case of the Datang Pre-emptive Shares) or at a price equivalent to the issue price of the Further Bonds (in the case of the Datang Pre-emptive Bonds) and conditional on the obtaining of the necessary governmental approval and the obtaining of the approval of the Independent Shareholders for the Datang Pre-emptive Subscription.

The Company has notified Datang in accordance with the terms of the Datang Share Purchase Agreement in respect of the issue of the Subscription Shares, the issue of the Further Bonds and the possibility of the Country Hill Pre-emptive Subscription. Pursuant to the Datang Share Purchase Agreement, Datang delivered an irrevocable notice to the Company on 18 June 2014 stating that it would be fully exercising its pre-emptive right in respect of the issue of the Subscription Shares, the Further Bonds and the Country Hill Pre-emptive Subscription. The subscription by Datang of the Datang Pre-emptive Shares and the Datang Pre-emptive Bonds will be based on terms and conditions that are substantially the same as the Placing, the Subscription and the issue of the Further Bonds.

The Datang Pre-emptive Securities were calculated in accordance with Datang’s shareholding immediately before the Company’s entry into the Placing and Subscription Agreement and the Further Bonds Subscription Agreement, being approximately 18.98% of the issued share capital of the Company. As a result of the place down of Shares by Datang under the Placing and the dilutive effect of the Subscription pursuant to the Placing and Subscription Agreement, Datang’s shareholding immediately before the issue of the Subscription Shares and immediately before the issue of the Further Bonds were approximately 10.94% and 17.56% of the issued share capital of the Company, respectively. However, the parties have agreed that it is fair and reasonable for Datang’s pre-emptive right to be based on its shareholding immediately before the date of the Placing and Subscription Agreement and the Further Bonds Subscription Agreement, being 18.98%, in order to give effect to the purpose of the relevant pre-emptive rights provision in the Datang Share Purchase Agreement. Datang, Datang Telecom and the Company have further

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agreed to enter into the Datang Supplemental Agreement to amend the pre-emptive rights provision in the Datang Share Purchase Agreement to give effect to this understanding.

B.           The Datang Pre-emptive Share Subscription Agreement

On 22 August 2014, the Company entered into the Datang Pre-emptive Share Subscription Agreement with Datang, pursuant to which, on and subject to the terms of the Datang Pre-emptive Share Subscription Agreement, the Company conditionally agreed to issue, and Datang conditionally agreed to subscribe for, the Datang Pre-emptive Shares. The subscription by Datang of the Datang Pre-emptive Shares will be at a price equivalent to the Subscription Price, and conditional upon the obtaining of the necessary governmental approvals and the approval of the Independent Shareholders. As at the Latest Practicable Date, the governmental approvals are pending. Datang has reported the proposed subscription of the Datang Pre-emptive Shares to the National Development and Reform Commission (“NDRC”) of the PRC for its review. Datang will in turn report the proposed subscription of the Datang Pre-emptive Shares to the Ministry of Commerce and the State Administration of Foreign Exchange (“SAFE”) of the PRC for their approvals after the NDRC has completed its review.

The principal terms of the Datang Pre-emptive Share Subscription Agreement are set out below:

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C.          The Datang Pre-emptive Bond Subscription Agreement

On 22 August 2014, the Company entered into the Datang Pre-emptive Bond Subscription Agreement with Datang, pursuant to which, on and subject to the terms of the Datang Pre-emptive Bond Subscription Agreement, the Company conditionally agreed to issue, and Datang conditionally agreed to subscribe for, the Datang Pre-emptive Bonds in an aggregate principal amount of US$22,200,000 for a total cash consideration of US$22,533,000 which is 101.5% of the aggregate principal amount of the Datang Pre-emptive Bonds. The subscription by Datang of the Datang Pre-emptive Bonds will be based on terms and conditions that are substantially the same as the issue of the Further Bonds, with the major differences being the conditions relating to the obtaining of the necessary governmental approvals and the approval of the Independent Shareholders.  The trust deed and the paying, conversion and transfer agency agreement in respect of the Further Bonds currently do not extend to the Datang Pre-emptive Bonds. Pursuant to the Datang Pre-emptive Bond Subscription Agreement and the terms and conditions of the Datang Pre-emptive Bonds, the Company will enter into a supplemental trust deed and a supplemental paying, conversion and transfer agency agreement for the Datang Pre-emptive Bonds to extend the trust deed and the paying, conversion and transfer agency agreement in respect of the Further Bonds to the Datang Pre-emptive Bonds.  The Datang Pre-emptive Bonds will be consolidated and form a single series with the Original Bonds and the Further Bonds.  The subscription by Datang of the Datang Pre-emptive Bonds will be conditional upon the obtaining of the necessary governmental approvals and the approval of the Independent Shareholders. As at the Latest Practicable Date, the governmental approvals are pending.  Datang has reported the proposed subscription

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of the Datang Pre-emptive Bonds to the NDRC for its review. Datang will in turn report the proposed subscription of the Datang Pre-emptive Bonds to the Ministry of Commerce and the SAFE for their approvals after the NDRC has completed its review. An application to the Singapore Stock Exchange in respect of the listing and quotation of the Datang Pre-emptive Bonds will be made after receipt of Independent Shareholders approval.

The Conversion Price will initially be HK$0.7965 per Share (which is approximately the net Conversion Price per Share), but will be subject to adjustment, with a fixed exchange rate of HK$7.7532 = US$1.00.  Based on the initial Conversion Price of HK$0.7965  per Share and assuming full conversion of the Datang Pre-emptive Bonds at the initial Conversion Price, the Datang Pre-emptive Bonds will be convertible into 216,096,723 Shares, representing approximately 0.62% of the issued share capital of the Company on the Latest Practicable Date and approximately 0.62% of the issued share capital of the Company as at the Latest Practicable Date as enlarged by and assuming full conversion of the Datang Pre-emptive Bonds.

The principal terms of the Datang Pre-emptive Bond Subscription Agreement are set out below:

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The Conversion Price will be subject to adjustment for consolidation, subdivision or reclassification of Shares, capitalisation of profits or reserves, distribution (meaning any distribution of assets in specie and any cash dividend or distribution), rights issue of Shares or options over Shares, rights issue or other securities (other than Shares or options), issue of securities at below the Current Market Price, modification of rights of conversion and other offers to Shareholders, subject to the terms and conditions of the Datang Pre-emptive Bonds.

E.                   The Datang Supplemental Agreement

On 22 August 2014, the Company entered into the Datang Supplemental Agreement with Datang and Datang Telecom to amend the pre-emptive rights provision in the Datang Share Purchase Agreement in order to give effect to the parties’ understanding of the purpose of the pre-emptive rights provision. The Datang Share Purchase Agreement contains a pre-emptive right for Datang to maintain its shareholding percentage immediately prior to a new issue of securities carrying voting rights. The proposed amendment clarifies that the pro rata portion of new securities that Datang Telecom or Datang is entitled to subscribe for will be determined by reference to Datang’s shareholding immediately prior to the Company’s entry into the agreement or agreements for the transaction involving the issuance of such new securities (in this case, its shareholding prior to the Placing), since, for instance, in the context of the Placing and the Subscription, the original provision in the Datang Share Purchase Agreement will only entitle Datang to subscribe in accordance with a lower level of shareholding created as a result of its role in assisting the Company to raise capital in the Placing and the Subscription.

The principal terms of the Datang Supplemental Agreement are set out below:

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II                         THE COUNTRY HILL PRE-EMPTIVE SUBSCRIPTION

A.                   Pre-emptive rights of Country Hill

References are made to the Company’s announcements dated 18 April 2011, 4 June 2014, 18 June 2014 and 22 August 2014 in relation to the Country Hill Subscription Agreement and the delivery by Country Hill of an irrevocable notice to the Company stating that it will exercise its pre-emptive right in respect of the issue of the Subscription Shares only for a total consideration of an amount equivalent to approximately US$20.6 million.

Pursuant to the Country Hill Subscription Agreement, in case of any issue of new Shares or securities convertible into Shares, subject to certain exceptions, Country Hill shall have the pre-emptive right to subscribe for such number of additional Shares or securities convertible into Shares so as to enable Country Hill to hold, after the issue of such securities, a pro rata portion of such securities equivalent to the percentage of the issued share capital of the Company then beneficially owned by Country Hill immediately prior to the issue of such securities. Country Hill’s pre-emptive right is applicable to the issue of the Subscription Shares, the Further Bonds and any Datang Pre-emptive Subscription. Pursuant to the Country Hill Subscription Agreement, completion of any such issue of the Country Hill Pre-emptive Shares and Country Hill Pre-emptive Bonds to Country Hill upon exercise of its pre-emptive right will be further subject to the receipt of any required regulatory approvals. Any exercise by Country Hill of its pre-emptive right to subscribe for the Country Hill Pre-emptive Securities in connection with the issue of the Subscription Shares, the Further Bonds and any Datang Pre-emptive Subscription will be at a price equivalent to the Subscription Price (in the case of the Country Hill Pre-emptive Shares) or the issue price of the Further Bonds (in the case of the Country Hill Pre-emptive Bonds) and conditional on the obtaining of the necessary governmental approval and the obtaining of the approval of the independent Shareholders for the Country Hill Pre-emptive Subscription.

The Company has notified Country Hill in accordance with the terms of the Country Hill Share Subscription Agreement in respect of the issue of the Subscription Shares, Further Bonds and the possibility of the Datang Pre-emptive Subscription.

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Pursuant to the Country Hill Subscription Agreement, Country Hill delivered an irrevocable notice to the Company on 18 June 2014 stating that it would be exercising its pre-emptive right in respect of the issue of the Subscription Shares only for a total consideration of an amount equivalent to approximately US$20.6 million. The subscription by Country Hill of the Country Hill Pre-emptive Shares will be based on terms and conditions that are substantially the same as the Placing and the Subscription.

B.                   The Country Hill Pre-emptive Subscription Agreement

On 22 August 2014, the Company entered into the Country Hill Pre-emptive Subscription Agreement with Country Hill, pursuant to which, on and subject to the terms of the Country Hill Pre-emptive Subscription Agreement, the Company conditionally agreed to issue, and Country Hill conditionally agreed to subscribe for, the Country Hill Pre-emptive Shares. The subscription by Country Hill of the Country Hill Pre-emptive Shares will be at a price equivalent to the Subscription Price, and conditional upon the approval of the Independent Shareholders.

The principal terms of the Country Hill Pre-emptive Subscription Agreement are set out below:

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III                      EFFECT ON THE SHARE CAPITAL OF THE COMPANY AS A RESULT OF THE ISSUE OF THE DATANG PRE-EMPTIVE SECURITIES AND THE COUNTRY HILL PRE-EMPTIVE SHARES

The subscription price of any exercise by Datang of its pre-emptive right to subscribe for the Datang Pre-emptive Shares and by Country Hill of its pre-emptive right to subscribe for the Country Hill Pre-emptive Shares will be at a price equivalent to the Subscription Price.

Based on the initial Conversion Price of HK$0.7965 per Share and assuming full conversion of the Datang Pre-emptive Bonds at the initial Conversion Price (subject to adjustment in accordance with the terms and conditions of the Datang Pre-emptive Bonds), the Datang Pre-emptive Bonds will be convertible into 216,096,723 Shares, representing approximately 0.62% of the issued share capital of the Company as at the Latest Practicable Date and approximately 0.62% of the issued share capital of the Company as enlarged by and assuming full conversion of the Datang Pre-emptive Bonds.

The following table illustrates (i) the shareholding structure of the Company immediately before the Company’s entry into the Placing and Subscription Agreement and the Further Bonds Subscription Agreement and assuming no conversion of the Original Bonds and the Original Pre-emptive Bonds; (ii) the existing shareholding structure of the Company; (iii) the shareholding structure of the Company after the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares and assuming no conversion of the Bonds; (iv) the shareholding structure of the Company after the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares and assuming full conversion of the Datang Pre-emptive Bonds but no conversion of the Original Bonds, the Original Pre-emptive Bonds and the Further Bonds; and (v) the shareholding structure of the Company after the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares and assuming full conversion of the Bonds.

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Notes:

(1)                      Assuming that other than the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares, no Share issuance, no issuance of any further pre-emptive securities, no restricted share units are granted, none of the outstanding share options is exercised and no conversion into Shares of any securities. As at 30 September 2014, the Company has 477,904,226 outstanding share options.

(2)                      Assuming that other than the issue of the Datang Pre-emptive Securities, the Country Hill Pre-emptive Shares and assuming full conversion of the Datang Pre-emptive Bonds, no Share issuance, no issuance of further Pre-emptive securities, no restricted share units are granted, none of the outstanding share options is exercised and no conversion into Shares of any securities. As at 30 September 2014, the Company has 477,904,226 outstanding share options.

(3)                      Assuming that other than the issue of the Datang Pre-emptive Securities, the Country Hill Pre-emptive Shares and assuming full conversion of the Bonds, no Share issuance, no issuance of further pre-emptive securities, no restricted share units are granted, none of the outstanding share options is exercised and no conversion into Shares of any securities. As at 30 September 2014, the Company has 477,904,226 outstanding share options. Country Hill’s shareholding percentage has been diluted compared to its shareholding percentage immediately before the Company’s entry into the Placing and Subscription Agreement and the Further Bonds Subscription Agreement primarily due to dilution as a result of (i) a partial exercise by Country Hill of its pre-emptive right to subscribe for the Country Hill Pre-emptive Shares in respect of the issue of the Subscription Shares pursuant to the Placing and Subscription Agreement and the subsequent issue of the Datang Pre-emptive Shares, and (ii) the shares to be issued assuming full conversion of the Further Bonds and the Datang Pre-emptive Bonds.

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IV                    COMPARISON OF THE CONVERSION PRICE

The Conversion Price will initially be HK$0.7965 per Share (which is approximately the net Conversion Price per Share), but will be subject to adjustment, with a fixed exchange rate of HK$7.7532 = US$1.00.

The initial Conversion Price of HK$0.7965 represents:

(1)                a premium of approximately 35.00% over the Closing Price of HK$0.59 per Share as quoted on the Hong Kong Stock Exchange on the Last Trading Day;

(2)                a premium of approximately 32.05% over the volume weighted average Closing Price of HK$0.6032 per Share for the last five consecutive trading days up to and including the Last Trading Day; and

(3)                a premium of approximately 31.48% over the volume weighted average Closing Price of HK$0.6058 per Share for the last ten consecutive trading days up to and including the Last Trading Day.

The initial Conversion Price was determined after arm’s length negotiations between the Company and the Joint Managers with reference to the closing price of the Shares quoted on the Hong Kong Stock Exchange on the Last Trading Day, being the last trading day immediately before the entering into of the subscription agreement between the Company and the Joint Managers dated 24 October 2013 in relation to the Original Bonds.

Further to the execution of the Datang Pre-emptive Bond Subscription Agreement, the initial Conversion Price of HK$0.7965 represents:

(1)                a premium of approximately 9.11% over the Closing Price of HK$0.730 per Share as quoted on the Hong Kong Stock Exchange on the last full trading day immediately before execution of the Datang Pre-emptive Bond Subscription Agreement;

(2)                a premium of approximately 7.93% over the volume weighted average Closing Price of HK$0.738 per Share for the last five consecutive trading days up to and including the last full trading day immediately before execution of the Datang Pre-emptive Bond Subscription Agreement; and

(3)                a premium of approximately 10.01% over the volume weighted average Closing Price of HK$0.724 per Share for the last ten consecutive trading days up to and including the last full trading day immediately before execution of the Datang Pre-emptive Bond Subscription Agreement.

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V                       GRANT OF PRE-EMPTIVE SPECIFIC MANDATES

Any Datang Pre-emptive Shares will be allotted and issued under the Datang Pre-emptive Specific Mandate to be obtained from the Independent Shareholders at the EGM.

Any Datang Pre-emptive Bonds and any Datang Conversion Shares to be issued pursuant to the conversion of the Datang Pre-emptive Bonds will be allotted and issued under the Datang Pre-emptive Specific Mandate to be obtained from the Independent Shareholders at the EGM.

Any Country Hill Pre-emptive Shares will be allotted and issued under the Country Hill Pre-emptive Specific Mandate to be obtained from the Independent Shareholders at the EGM.

Application will be made by the Company to the Listing Committee of the Hong Kong Stock Exchange for the grant of the listing of, and permission to deal in, any Datang Pre-emptive Shares, any Datang Conversion Shares and any Country Hill Pre-emptive Shares.

On the assumption that the approvals of the Independent Shareholders and any other necessary governmental approvals are successfully obtained, the maximum gross proceeds of (i) the issue of the Datang Pre-emptive Bonds, and (ii) the issue of the Datang Pre-emptive Shares and the Country Hill Pre-emptive Shares will be approximately US$22,533,000 (approximately HK$174,600,000 based on the exchange rate of US$1.00 : HK$7.75 as at the Latest Practicable Date) and HK$562,866,850.20, respectively.

VI                    FUND RAISING ACTIVITIES BY THE COMPANY IN THE LAST 12 MONTHS

References are made to the Company’s announcements dated 7 November 2013, 18 December 2013, 4 June 2014, 12 June 2014 and 24 June 2014 and the Company’s circular dated 29 January 2014 in relation to the issue of the Original Bonds and the Original Pre-emptive Bonds, the Placing, the Subscription and the issue of the Further Bonds.

On 7 November 2013, the Company issued the Original Bonds in an aggregate principal amount of US$200,000,000. The net proceeds (net of fees, commissions and expenses) from the issue of the Original Bonds were approximately US$194.6 million. The Company intended to use the net proceeds from the issue of the Original Bonds for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes. As at the Latest Practicable Date, the net proceeds from the issue of the Original Bonds have been fully utilized for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes.

On 17 February 2014, the Independent Shareholders approved the issue of the Original Pre-emptive Bonds to Datang and Country Hill which was completed on 29 May 2014, with an aggregate principal amount of US$54,600,000 and US$32,200,000, respectively. The net proceeds (net of fees, commissions and expenses) from the issue of the Original Pre-emptive Bonds were approximately US$86.8 million. The Company intended to use the net proceeds from the issue of the Original Pre-emptive Bonds for the Company’s capital expenditure in

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capacity expansion associated with 12-inch manufacturing facilities. As at the Latest Practicable Date, the net proceeds from the issue of the Original Pre-emptive Bonds have been fully utilized for the Company’s capital expenditure in capacity expansion associated with 12-inch manufacturing facilities.

On 12 June 2014, the Company allotted and issued 2,590,000,000 Subscription Shares to Datang. The net proceeds (net of fees, commissions and expenses) from the issue of the Subscription Shares were approximately US$197.2 million. The Company intended to use the net proceeds from the issue of the Subscription Shares for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes. As at the Latest Practicable Date, the net proceeds from the issue of the Subscription Shares have been fully utilized for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes.

On 24 June 2014, the Company issued the Further Bonds in an aggregate principal amount of US$95,000,000. The net proceeds (net of fees, commissions and expenses) from the issue of the Further Bonds were approximately US$94.2 million. The Company intended to use the net proceeds from the issue of the Further Bonds for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes. As at the Latest Practicable Date, the net proceeds from the issue of the Further Bonds have been fully utilized for the Company’s capital expenditure in capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes.

Other than the fund raising activities disclosed above, the Company has not raised any funds on any issue of equity securities in the past 12 months up to the Latest Practicable Date.

VI                    REASONS FOR, AND BENEFITS OF, THE DATANG PRE-EMPTIVE SUBSCRIPTION AND THE COUNTRY HILL PRE-EMPTIVE SUBSCRIPTION

The Company is of the view that the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription will strengthen the relationship between Datang, Country Hill and the Company and provide an additional source of funding for the Company’s needs beyond the capital raised through the Placing and the Subscription.

The lock-up undertakings provided by the Company to each of Datang and Country Hill were provided on the basis that any pre-emptive subscriptions by each of Datang and Country Hill would be on substantially the same terms and conditions as the Placing, the Subscription and the issue of the Further Bonds. The lock-up undertaking in respect of the Further Bonds was provided to the Joint Managers on the basis that such lock-up undertakings are generally required in respect of an issue of bonds, and the issue of the Further Bonds was in the interests of the Company and the Shareholders as a whole.

On this basis, the Directors (excluding the independent non-executive Directors who will form their view upon considering the advice of the Independent Financial Adviser) consider that, subject to the opinion of Messis Capital, the terms of the Datang Pre-emptive

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Subscription and the Country Hill Pre-emptive Subscription are fair and reasonable, the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement including the respective lock-up undertakings provided by the Company to each of Datang and Country Hill is 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.

VIII              USE OF PROCEEDS

It is estimated that the net proceeds (net of fees and expenses) from (i) the issue of the Datang Pre-emptive Bonds, and (ii) the issue of the Datang Pre-emptive Shares and the Country Hill Pre-emptive Shares will be approximately US$22.4 million (approximately HK$173.6 million) and HK$562.5 million, respectively.

As disclosed in the Company’s interim report for the six months ended 30 June 2014, the Company plans to spend approximately US$1.1 billion in capital expenditures for foundry operations in 2014, which are subject to adjustment based on market conditions. The capital expenditures are mainly for: 1) the development of a majority-owned 12-inch fab for advance nodes in Beijing, 2) the acquisition of used equipment for the Company’s 8-inch fab in Shenzhen, 3) the product-mix change including conversion from 40/45nm to 28nm in the Company’s 12-inch fab in Shanghai, and 4) the expansion of capacity in the Company’s 8-inch fab from 39K to 42K in Tianjin. The primary sources of capital resources and liquidity include cash generated from operations, bank borrowings and debt or equity issuances and other forms of financing.

The Company intends to use the net proceeds (net of fees and expenses) from the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares for the Company’s capital expenditure used for capacity expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes.

IX                    IMPLICATIONS OF THE LISTING RULES

Datang currently holds 17.53% of the entire existing issued share capital of the Company. Country Hill currently holds 10.34% of the entire existing issued share capital of the Company. As each of Datang and Country Hill is a substantial Shareholder of the Company by virtue of their respective shareholding interest, each of them is a connected person of the Company and the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement as well as the transactions contemplated thereunder (including the allotment and issue of the Datang Pre-emptive Shares, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Country Hill Pre-emptive Shares and any Datang Conversion Shares) will constitute connected transactions of the Company under Chapter 14A of the Listing Rules. Therefore, the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement

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and the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder are subject to reporting, announcement and Independent Shareholders’ approval requirements under the Chapter 14A of the Listing Rules.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, apart from Datang and its associates (as defined in the Listing Rues) (in the case of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement and the transactions contemplated thereunder, the Datang Pre-emptive Specific Mandate and the Datang Supplemental Agreement) and Country Hill and its associates (in the case of the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder and the Country Hill Pre-emptive Specific Mandate), no other Shareholder will be required to abstain from voting on the resolutions to be proposed at the EGM.

In accordance with the Listing Rules, an Independent Board Committee (consisting of all the independent non-executive Directors who have no direct or indirect interest in the Datang Pre-emptive Subscription, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription, other than, where applicable, being a Shareholder) has been established to advise the Independent Shareholders as to whether the respective terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement are fair and reasonable, whether the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement is 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 the Independent Financial Adviser. Other than Dr. Gao Yonggang and Dr. Chen Shanzhi (both being Directors nominated by Datang) and Professor Lawrence Juen-Yee Lau (being a Director nominated by Country Hill), none of the Directors has a material interest in the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement or the transactions contemplated thereunder and therefore none of them (save for the above named Directors) is required to abstain from voting on the Board resolutions in respect of the above.

Messis Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders as to whether the respective terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement are fair and reasonable, and whether the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement is 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 as to whether they

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should vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder.

X                       GENERAL

At the EGM, ordinary resolutions will be proposed to the Independent Shareholders to approve (i) the Datang Pre-emptive Share Subscription Agreement and the allotment and issue of the Datang Pre-emptive Shares, (ii) the Datang Pre-emptive Bond Subscription Agreement, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Datang Conversion Shares, (iii) the grant of the Datang Pre-emptive Specific Mandate, (iv) the Datang Supplemental Agreement, (v) the Country Hill Pre-emptive Subscription Agreement, the allotment and issue of the Country Hill Pre-emptive Shares, and (vi) the grant of the Country Hill Pre-emptive Specific Mandate.

Datang and its associates, being connected persons of the Company in respect of the Datang Pre-emptive Subscription, will abstain from voting on the ordinary resolutions to approve (i) the Datang Pre-emptive Share Subscription Agreement and the allotment and issue of the Datang Pre-emptive Shares, (ii) the Datang Pre-emptive Bond Subscription Agreement, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Datang Conversion Shares, (iii) the grant of the Datang Pre-emptive Specific Mandate, and (iv) the Datang Supplemental Agreement.

Country Hill and its associates, being connected persons of the Company in respect of the Country Hill Pre-emptive Subscription, will abstain from voting on the ordinary resolutions to approve (i) the Country Hill Pre-emptive Subscription Agreement and the allotment and issue of the Country Hill Pre-emptive Shares, and (ii) the grant of the Country Hill Pre-emptive Specific Mandate.

An application will be made by the Company to the Listing Committee of the Hong Kong Stock Exchange for the granting of the approval for the listing of, and permission to deal in, the Datang Pre-emptive Shares, the Datang Conversion Shares and the Country Hill Pre-emptive Shares. An application will be made by the Company to the Singapore Exchange for the listing and quotation of the Datang Pre-emptive Bonds on the bonds market of the Singapore Exchange.

XI                    UNITED STATES SECURITIES LAW MATTERS

The Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares have not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to US persons (as defined in the Securities Act) unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. There will be no public offering of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares in the United States. This circular does not constitute an offer of any securities for sale.

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XII                 INFORMATION ABOUT THE COMPANY

The Company is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China. The Company provides integrated circuit (IC) foundry and technology services at 0.35-micron to 28-nanometer. Headquartered in Shanghai, China, the Company has a 300mm wafer fabrication facility (fab) and a 200mm mega-fab in Shanghai; a 300mm mega-fab in Beijing and a majority owned 300mm fab for advance nodes under development; a 200mm fab in Tianjin; and a 200mm fab project under development in Shenzhen. The Company also has marketing and customer service offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

XIII              INFORMATION ABOUT DATANG

Datang is a subsidiary of Datang Telecom headquartered in Beijing. It is mainly engaged in the core business of TD-SCDMA third generation (3-G) mobile telecommunication, wireless access and integrated circuit design. Datang has experience in technology development and innovation in mobile telecommunication and chip design, and has developed a series of telecommunication products of advance domestic and international standards. Datang is one of the leading forces in technology innovation in the PRC.

XIV           INFORMATION ABOUT COUNTRY HILL

Country Hill is a controlled subsidiary of China Investment Corporation (CIC). Headquartered in Beijing, CIC was founded on September 2007 as a wholly state-owned company incorporated in accordance with the Company Law of China. The company was established as a vehicle to diversify China’s foreign exchange holdings and seek maximum returns for its shareholder within acceptable risk tolerance. As a financial investor, CIC invests on a commercial basis.

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XV              RECOMMENDATIONS

The Board (including the independent non-executive Directors) considers that the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Pre-emptive Specific Mandate, the Datang Supplemental Agreement, the Country Hill Subscription Agreement and the Country Hill Pre-emptive Specific Mandate are fair and reasonable, and the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement, the Country Hill Pre-emptive Subscription Agreement and the proposal for the grant of the Datang Pre-emptive Specific Mandate and the Country Hill Pre-emptive Specific Mandate are in the interests of the Company and the Shareholders as a whole, and the terms and transactions contemplated in each of which are fair and reasonable so far as the Shareholders are concerned. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve (i) the Datang Pre-emptive Share Subscription Agreement and the allotment and issue of the Datang Pre-emptive Shares, (ii) the Datang Pre-emptive Bond Subscription Agreement, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Datang Conversion Shares, (iii) the grant of the Datang Pre-emptive Specific Mandate, (iv) the Datang Supplemental Agreement, (v) the Country Hill Pre-emptive Subscription Agreement, the allotment and issue of the Country Hill Pre-emptive Shares, and (vi) the grant of the Country Hill Pre-emptive Specific Mandate.

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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)

To the Independent Shareholders

NON-EXEMPT CONNECTED TRANSACTIONS

(1) PRE-EMPTIVE SUBSCRIPTIONS BY DATANG AND COUNTRY HILL

(2) PROPOSED PRE-EMPTIVE SPECIFIC MANDATES

(3) DATANG SUPPLEMENTAL AGREEMENT

(4) NOTICE OF EXTRAORDINARY GENERAL MEETING

We refer to the circular dated 20 October 2014 (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 have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement, the Country Hill Pre-emptive Subscription Agreement, and the transactions contemplated thereunder (including but not limited to the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Datang Pre-emptive Shares, the Country Hill Pre-emptive Shares and the Datang Conversion Shares upon the exercise of the conversion rights attaching to the Datang Pre-emptive Bonds) are fair and reasonable and in the interests of the Company and the Shareholders so far as the Independent Shareholders are concerned. Messis Capital has been appointed as the Independent Financial Adviser to advise us and the Independent Shareholders.

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We wish to draw your attention to the “Letter from Messis Capital” set out in the Circular. Having considered the terms and conditions of the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription, the advice of Messis Capital and the other factors contained in the “Letter from the Board” as set out on pages 8 to 44 of the Circular, we consider that the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription are fair and reasonable, the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement is on normal commercial terms or better and in the interests of the Company and its shareholders as a whole. Accordingly, we recommend that the Independent Shareholders vote in favour of the ordinary resolutions set out in the notice of the EGM at the end of the Circular.

*                   for identification purpose only

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LETTER FROM MESSIS CAPITAL

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.

20 October 2014

To:     The Independent Board Committee and the Independent Shareholders of Semiconductor Manufacturing International Corporation

Dear Sir/Madam,

NON-EXEMPTED CONNECTED TRANSACTIONS
PRE-EMPTIVE SUBSCRIPTIONS BY DATANG AND COUNTRY HILL

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement, details of which are set out in the letter from the Board (the “Letter from the Board”) contained in the circular (the “Circular”) of the Company to the Shareholders dated 20 October 2014, of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

Mr. William Tudor Brown, Mr. Sean Maloney, Mr. Frank Meng, Mr. Lip-Bu Tan and Ms. Carmen I-Hua Chang, being all the independent non-executive Directors, have been appointed as the members of the Independent Board Committee to consider and to advise the Independent Shareholders as to (i) whether the terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and whether they are in the interests of the Company and the Shareholders as a whole; and (ii) whether to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder. As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in such regard.

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We do not have any relationship with or interests in the Company or any other parties that could reasonably be regarded as relevant to our independence.

BASIS OF OUR ADVICE

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all statements, information and representations provided by the Directors and the management of the Company, for which they are solely and wholly responsible, were true and accurate at the time when they were provided and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and expectation made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information has been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Directors and the management of the Company. We believe that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders, we have taken the following principal factors and reasons into consideration:

1.                       Background of and reasons for entering into the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement

(i)               Background of the Placing and Subscription Agreement, the Further Bond Subscription Agreement, the Datang Share Purchase Agreement and the Country Hill Subscription Agreement

On 4 June 2014, Datang entered into the Placing and Subscription Agreement with the Joint Placing Agents and the Company. The completion of the Placing took place on 9 June 2014 and the completion of the Subscription took place on 12 June 2014. Pursuant to the terms and conditions of the Placing and Subscription Agreement, (i) a total of 2,590,000,000 Sale Shares were

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successfully placed by the Joint Placing Agents to no fewer than 6 independent placees, who were third parties independent of and not connected with the Company and its connected persons, at the placing price of HK$0.60 per Sale Share, and (ii) the Company allotted and issued 2,590,000,000 Subscription Shares, representing approximately 7.44% of the issued share capital of the Company as enlarged by the issue of the 2,590,000,000 Subscription Shares, to Datang at the price of HK$0.60 per Subscription Share.

On 4 June 2014, the Company and the Joint Managers entered into the Further Bond Subscription Agreement, pursuant to which each of the Joint Managers agreed to subscribe and pay for, or to procure subscribers to subscribe and pay for, the Further Bonds to be issued by the Company in an aggregate principal amount of US$95 million. The Further Bonds will be convertible into 924,738,230 Shares assuming full conversion of the Further Bonds at the initial Conversion Price of HK$0.7965. The issue of the Further Bonds was completed on 24 June 2014.

Pursuant to the Datang Share Purchase Agreement, in case of any issue of new Shares or securities convertible into Shares, subject to certain exceptions, Datang has the pre-emptive right to purchase such number of additional Shares or securities convertible into Shares so as to enable Datang to hold, after the issue of such securities, a pro rata portion of such securities equivalent to the percentage of the issued share capital of the Company then beneficially owned by Datang prior to the issue of such securities. Datang’s pre-emptive right is applicable to the issue of the Subscription Shares and the Further Bonds and any Country Hill Pre-emptive Subscription. Pursuant to the Datang Share Purchase Agreement, completion of any such subscription of the Datang Pre-emptive Shares and the Datang Pre-emptive Bonds by Datang upon exercise of its pre-emptive right will be further subject to the receipt of any required regulatory approvals. Any exercise by Datang of its pre-emptive right to subscribe for the Datang Pre-emptive Shares and the Datang Pre-emptive Bonds in connection with the issue of the Subscription Shares and the Further Bonds and any Country Hill Pre-emptive Subscription will be at a price equivalent to the Subscription Price (in the case of the Datang Pre-emptive Shares) or at a price equivalent to the issue price of the Further Bonds (in the case of the Datang Pre-emptive Bonds) and conditional on the obtaining of the necessary governmental approval and the obtaining of the approval of the Independent Shareholders for the Datang Pre-emptive Subscription.

Pursuant to the Country Hill Subscription Agreement, in case of any issue of new Shares or securities convertible into Shares, subject to certain exceptions, Country Hill shall have the pre-emptive right to subscribe for such number of additional Shares or securities convertible into Shares so as to enable Country Hill to hold, after the issue of such securities, a pro rata portion of such securities equivalent to the percentage of the issued share capital of the Company then beneficially owned by Country Hill immediately prior to the issue of such securities. Country Hill’s pre-emptive right is applicable to the issue of the

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Subscription Shares and the Further Bonds and any Datang Pre-emptive Subscription. Pursuant to the Country Hill Subscription Agreement, completion of any subscription of the Country Hill Pre-emptive Shares by Country Hill upon exercise of its pre-emptive right will be further subject to the receipt of any required regulatory approvals. Any exercise by Country Hill of its pre-emptive right to subscribe for the Country Hill Pre-emptive Shares in connection with the issue of the Subscription Shares and the Further Bonds and any Datang Pre-emptive Subscription will be at a price equivalent to the Subscription Price (in the case of the Country Hill Pre-emptive Shares) and conditional on the obtaining of the necessary governmental approval and the obtaining of the approval of the Independent Shareholders for any such Country Hill Pre-emptive Subscription.

The Datang Pre-emptive Securities were calculated in accordance with Datang’s shareholding immediately before the Company’s entry into the Placing and Subscription Agreement and the Further Bonds Subscription Agreement, being approximately 18.98% of the issued share capital of the Company. As a result of the place down of Shares by Datang under the Placing and the dilutive effect of the Subscription pursuant to the Placing and Subscription Agreement, Datang’s shareholding immediately before the issue of the Subscription Shares and immediately before the issue of the Further Bonds were 10.94% and 17.56% of the issued share capital of the Company, respectively.

Datang currently holds 17.53% of the entire existing issued share capital of the Company. Country Hill currently holds 10.34% of the entire existing issued share capital of the Company. As each of Datang and Country Hill is a substantial shareholder of the Company by virtue of their respective shareholding interest, each of them is a connected person of the Company and the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement as well as the transactions contemplated thereunder (including the allotment and issue of the Datang Pre-emptive Shares, the issue of the Datang Pre-emptive Bonds and the allotment and issue of the Country Hill Pre-emptive Shares and any Datang Conversion Shares) will constitute connected transactions of the Company under Chapter 14A of the Listing Rules. Therefore, the entering into of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement and the transactions contemplated thereunder are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

(ii)                   Information of the Company, Datang and Country Hill

The Company is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China. The Company provides integrated circuit (“IC”) foundry and technology services at 0.35-micron to 28-nanometer. Headquartered in Shanghai, China, the Company has a 300mm

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wafer fabrication facility (“fab”) and a 200mm mega-fab in Shanghai; a 300mm mega-fab in Beijing and a majority owned 300mm fab for advance nodes under development; a 200mm fab in Tianjin; and a 200mm fab project under development in Shenzhen. The Company also has marketing and customer service offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

Datang is a subsidiary of Datang Telecom headquartered in Beijing. It is mainly engaged in the core business of TD-SCDMA third generation (3-G) mobile telecommunication, wireless access and integrated circuit design. Datang has experience in technology development and innovation in mobile telecommunication and chip design, and has developed a series of telecommunication products of advance domestic and international standards. Datang is one of the leading forces in technology innovation in the PRC.

Country Hill is a controlled subsidiary of China Investment Corporation (“CIC”). Headquartered in Beijing, CIC was founded on September 2007 as a wholly state-owned company incorporated in accordance with the Company Law of China. The company was established as a vehicle to diversify China’s foreign exchange holdings and seek maximum returns for its shareholder within acceptable risk tolerance. As a financial investor, CIC invests on a commercial basis.

(iii)               Reasons for and benefits of the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription

The Company is of the view that the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription will strengthen the relationship between Datang, Country Hill and the Company and provide an additional source of funding for the Company’s needs beyond the capital raised through the Placing and the Subscription.

It is estimated that the net proceeds (net of fees and expenses) from (i) the issue of the Datang Pre-emptive Bonds, and (ii) the issue of the Datang Pre-emptive Shares and the Country Hill Pre-emptive Shares will be approximately US$22.4 million and HK$562.5 million, respectively. The Company intends to use the net proceeds (net fees and expenses) from the issue of the Datang Pre-emptive Securities and the Country Hill Pre-emptive Shares for the Company’s capital expenditure used for capital expansion associated with 8-inch and 12-inch manufacturing facilities and general corporate purposes.

Furthermore, as discussed in the section headed “Potential financial effect on the Datang Pre-emptive Subscription and the Country Hill Pre-emptive Subscription” below, the issue of the Datang Pre-emptive Shares, the Datang Pre-emptive Bonds and the Country Hill Pre-emptive Shares will not have any material adverse impact on the Group’s financial position. Instead, it strengthens the financial position of the Company by raising additional cash.

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Taking into consideration (i) the additional funding available for the Group; (ii) the rationale of pre-emptive rights; and (iii) no material adverse impact on the Group’s financial position, we are of the view that the issue of the Datang Pre-emptive Shares, Datang Pre-emptive Bonds and the Country Hill Pre-emptive Shares is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

2.                     Principal terms of the Datang Pre-emptive Share Subscription Agreement, the Datang Pre-emptive Bond Subscription Agreement, the Datang Supplemental Agreement and the Country Hill Pre-emptive Subscription Agreement

(i)                     Principal terms of the Datang Pre-emptive Share Subscription Agreement and the Country Hill Pre-emptive Subscription Agreement

On 22 August 2014, the Company entered into the Datang Pre-emptive Share Subscription Agreement with Datang and the Country Hill Pre-emptive Subscription Agreement with Country Hill (the “Share Subscription Agreements”), pursuant to which, on and subject to the terms of Share Subscription Agreements, the Company has conditional agreed to issue, and Datang and Country Hill have conditionally agreed to subscribe for, the Datang Pre-emptive Shares and the Country Hill Pre-emptive Shares, respectively. The principal terms of the Share Subscription Agreements are set out below.

The Datang Pre-emptive Share Subscription Agreement:

For further details of the terms of the Datang Pre-emptive Share Subscription Agreement, please refer to the Letter from the Board.

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The Country Hill Pre-emptive Subscription Agreement:

For further details of the terms of the Country Hill Pre-emptive Subscription Agreement, please refer to the Letter from the Board.

We have reviewed major terms of the Share Subscription Agreements including issue price and the Company’s lock-up undertakings. We noted that these terms are the same as those of the Placing and Subscription Agreement. Furthermore, we are not aware of any terms which are unusual.

(a)                 Subscription price analysis

We note that the Subscription Price of HK$0.6 per Share represents:

(1)                 a discount of approximately 20.00% over the Closing Price of HK$0.750 per Share as quoted on the Hong Kong Stock Exchange on the Latest Practicable Date;

(2)                 a discount of approximately 17.81% over the Closing Price of HK$0.730 per Share as quoted on the Hong Kong Stock Exchange on the last full trading day immediately before execution of the Share Subscription Agreements;

(3)                 a discount of approximately 18.70% over the volume weighted average Closing Price of HK$0.738 per Share for the last five consecutive trading days up to and including the last full trading day immediately before execution of the Share Subscription Agreements; and

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(4)                 a discount of approximately 17.13% over the volume weighted average Closing Price of HK$0.724 per Share for the last ten consecutive trading days up to and including the last full trading day immediately before execution of the Share Subscription Agreements.

(b)               Historical performance of the Shares

We have reviewed the movements in the Closing Prices of the Shares for the period commencing from 23 August 2013, being the 12-month period prior to the date of the last full trading day immediately before execution of the Share Subscription Agreements (the “Review Period”). The Closing Prices of the Shares during the Review Period are set out below:

Source: website of the Hong Kong Stock Exchange (www.hkex.com.hk)

We note that the Closing Prices of the Shares during the Review Period ranged from HK$0.52 per Share (recorded on 19 September 2013) to HK$0.84 per Share (recorded on 14 February 2014). We note that the Subscription Price of HK$0.60 per Share is within such range.

(c)                 Comparison with other subscriptions

In assessing the fairness of the Subscription Price, we have, to our best endeavor, conducted a search of all subscriptions of shares issued under the general mandates conducted by companies listed on the Main Board of Hong Kong Stock Exchange in the last 3 months prior to the date of the Announcement (the “Subscription Comparables”) by searching through published information on the Hong Kong Stock Exchange’s website. Based on such criteria, we have identified 48 Subscription Comparables.

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Subscriptions of shares issued under general mandates were chosen for comparison purpose because (i) the Subscription Shares will be issued under the 2013 General Mandate; and (ii) the exercise by Datang of its pre-emptive right to subscribe for the Datang Pre-emptive Shares in connection with the issue of the Subscription Shares is at a price equivalent to the Subscription Price, and the exercise by Country Hill of its pre-emptive right to subscribe for the Country Hill Pre-emptive Shares in connection with the issue of the Subscription Shares is at a price equivalent to the Subscription Price.

We consider that a period of three months is adequate and appropriate for studying the Subscription Comparables having considered that (i) such period is sufficiently recent for reflecting the prevailing market practice in respect of the subscriptions of shares issued under general mandates; and (ii) we were able to identify 48 Subscription Comparables within such three-month period, which, in our opinion, constitute a sufficiently representative sample for comparison purpose.

We compared the respective premium/discount over/to the Closing Prices of the shares of the relevant companies in respect of the Subscription Comparables with those of the Country Hill Pre-emptive Subscription and Datang Pre-emptive Subscription.

We set out our findings in the table below: