Edgar Filing: SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORP

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 September, 2017

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:

x Form 20-F o 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:

o Yes x No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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: 0981)

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017

FINANCIAL HIGHLIGHTS

•

Revenue was a record high of US$1,544.3 million for the six months ended June 30, 2017, compared to US$1,324.5 million for the six months ended June 30, 2016, representing an increase of 16.6%.

•

Gross profit was a record high of US$415.0 million for the six months ended June 30, 2017, compared to US$371.6 million for the six months ended June 30, 2016, representing an increase of 11.7%.

•

Gross margin was 26.9% for the six months ended June 30, 2017, compared to 28.1% for the six months ended June 30, 2016.

•

Revenue from 28nm grew to 5.8% of total wafer revenue for the six months ended June 30, 2017, 13.8 times to the six months ended June 30, 2016.

RESULTS

The Board of Directors (the “Board”) of Semiconductor Manufacturing International Corporation (the “Company” or “SMIC”) would like to announce the unaudited interim results of operations of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the six months ended June 30, 2017.

– 1 –

CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended June 30, 2017 and 2016

(In USD’000, except per share data)

			Six months ended
	Notes		06/30/17			06/30/16
			(unaudited)			(unaudited)
Revenue		6		1,544,278			1,324,533
Cost of sales				(1,129,327	)		(952,967	)
Gross profit				414,951			371,566
Research and development expenses, net				(218,963	)		(118,024	)
Sales and marketing expenses				(19,816	)		(17,938	)
General and administration expenses				(93,593	)		(60,988	)
Other operating income (expense), net		7		16,439			6,940
Profit from operation				99,018			181,556
Interest income				12,248			3,524
Finance costs		8		(21,507	)		(12,548	)
Foreign exchange gains or losses				(10,201	)		153
Other gains or losses, net		9		29,287			(15,907	)
Share of loss of investment using equity method				(7,658	)		(9,490	)
Profit before tax		10		101,187			147,288
Income tax expense		11		(3,658	)		(1,035	)
Profit for the period				97,529			146,253
Other comprehensive income (loss)
Item that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations				9,069			(7,326	)
Change in value of available-for-sale financial assets				(1,859	)		(476	)
Cash flow hedges		24		30,118			—
Others				(131	)		4
Items that will not be reclassified to profit or loss
Actuarial gains or losses on defined benefit plans				88			—
Total comprehensive income (loss) for the period				134,814			138,455
Profit (loss) for the period attributable to:
Owners of the Company				106,062			159,061
Non-controlling interests				(8,533	)		(12,808	)
				97,529			146,253
Total comprehensive income (loss) for the period attributable to:
Owners of the Company				142,897			151,267
Non-controlling interests				(8,083	)		(12,812	)
				134,814			138,455
Earnings per share*
Basic		13	$	0.02		$	0.04
Diluted		13	$	0.02		$	0.04

The basic and diluted earnings per share for the prior period have been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares and preferred shares of US$0.0004 each consolidated into one ordinary share and preferred share of US$0.004 each, which was accounted for as a reverse stock split effective on December 7, 2016.

– 2 –

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At June 30, 2017 and December 31, 2016

(In USD’000)

	Notes	06/30/17		12/31/16
		(unaudited)		(audited)
Assets
Non-current assets
Property, plant and equipment	15		6,482,526		5,687,357
Land use right			98,604		99,267
Intangible assets			234,976		248,581
Investments in associates	16		737,111		240,136
Investments in joint ventures	17		14,588		14,359
Deferred tax assets			46,538		45,981
Derivative financial instrument			—		32,894
Other financial assets	20		4,120		—
Restricted cash	21		12,788		20,080
Other assets			31,374		42,870
Total non-current assets			7,662,625		6,431,525
Current assets
Inventories	18		577,179		464,216
Prepayment and prepaid operating expenses			53,061		27,649
Trade and other receivables	19		722,911		645,822
Other financial assets	20		516,002		31,543
Restricted cash	21		344,100		337,699
Cash and cash equivalent			876,118		2,126,011
			3,089,371		3,632,940
Assets classified as held-for-sale	14		49,654		50,813
Total current assets			3,139,025		3,683,753
Total assets			10,801,650		10,115,278
Equity and liabilities
Capital and reserves
Ordinary shares	22		18,603		17,012
Share premium			4,474,996		4,950,948
Reserves			100,736		93,563
Retained earnings (accumulated deficit)			106,062		(910,849	)
Equity attributable to owners of the Company			4,700,397		4,150,674
Non-controlling interests			1,244,687		1,252,553
Total equity			5,945,084		5,403,227
Non-current liabilities
Borrowings	26		1,456,108		1,233,594
Convertible bonds	27		402,549		395,210
Bonds payable	29		495,789		494,909
Medium-term notes	28		219,370		214,502
Deferred tax liabilities			18,353		15,382
Deferred government funding			305,998		265,887
Other financial liabilities	30		27,792		74,170
Other liabilities	31		29,771		37,497
Total non-current liabilities			2,955,730		2,731,151
Current liabilities
Trade and other payables	25		1,268,158		940,553
Borrowings	26		305,898		209,174
Short-term notes			—		86,493
Convertible bonds	27		—		391,401
Deferred government funding			146,071		116,021
Accrued liabilities			179,597		230,450
Other financial liabilities	30		—		6,348
Current tax liabilities			1,112		460
Total current liabilities			1,900,836		1,980,900
Total liabilities			4,856,566		4,712,051
Total equity and liabilities			10,801,650		10,115,278

– 3 –

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the six months ended June 30, 2017 and 2016

(In USD’000)

												Change in
						Equity-						value of
						settle			Foreign			available-			Convertible			Defined								Retained			Attributable
						employee			currency			for-sale			bonds			benefit		Cash						earnings			to owner of			Non-
	Ordinary		Share			benefits			translation			financial			equity			plan		flow						(accumulated			the			controlling			Total
	shares		premium			reserve			reserve			assets			reserve			reserve		hedges			Others			deficit)			Company			interest			equity
	(Note 22)					(Note 23)									(Note 27)					(Note 24)
Balance at December 31, 2015 (audited)		16,830		4,903,861			70,459			(3,956	)		447			29,564			—		—			130			(1,287,479	)		3,729,856			460,399			4,190,255
Profit for the period		—		—			—			—			—			—			—		—			—			159,061			159,061			(12,808	)		146,253
Other comprehensive income (losses) for the period		—		—			—			(7,326	)		(472	)		—			—		—			4			—			(7,794	)		(4	)		(7,798	)
Total comprehensive income (losses) for the period		—		—			—			(7,326	)		(472	)		—			—		—			4			159,061			151,267			(12,812	)		138,455
Exercise of stock options		46		10,524			(9,902	)		—			—			—			—		—			—			—			668			—			668
Share-based compensation		—		—			7,960			—			—			—			—		—			—			—			7,960			103			8,063
Capital contribution from non- controlling interests		—		—			—			—			—			—			—		—			—			—			—			636,000			636,000
Subtotal		46		10,524			(1,942	)		—			—			—			—		—			—			—			8,628			636,103			644,731
Balance at June 30, 2016 (unaudited)		16,876		4,914,385			68,517			(11,282	)		(25	)		29,564			—		—			134			(1,128,418	)		3,889,751			1,083,690			4,973,441
Balance at December 31, 2016 (audited)		17,012		4,950,948			65,703			(22,087	)		1,245			81,678			1,520		(34,627	)		131			(910,849	)		4,150,674			1,252,553			5,403,227
Profit for the period		—		—			—			—			—			—			—		—			—			106,062			106,062			(8,533	)		97,529
Other comprehensive income (losses) for the period		—		—			—			8,600			(1,840	)		—			88		30,118			(131	)		—			36,835			450			37,285
Total comprehensive income (losses) for the period		—		—			—			8,600			(1,840	)		—			88		30,118			(131	)		106,062			142,897			(8,083	)		134,814
Exercise of stock options		60		15,380			(11,767	)		—			—			—			—		—			—			—			3,673			—			3,673
Share-based compensation		—		—			10,848			—			—			—			—		—			—			—			10,848			217			11,065
Conversion options of convertible bonds exercised during the period		1,531		419,517			—			—			—			(28,743	)		—		—			—			—			392,305			—			392,305
Share premium reduction*		—		(910,849	)		—			—			—			—			—		—			—			910,849			—			—			—
Subtotal		1,591		(475,952	)		(919	)		—			—			(28,743	)		—		—			—			910,849			406,826			217			407,043
Balance at June 30, 2017 (unaudited)		18,603		4,474,996			64,784			(13,487	)		(595	)		52,935			1,608		(4,509	)		—			106,062			4,700,397			1,244,687			5,945,084

In the first half of 2017, the Board proposed to reduce the amount standing to the credit of the share premium account of the Company by an amount of US$910.8 million and to apply such amount to eliminate the accumulated losses of the Company as of December 31, 2016. The proposed share premium reduction has been approved by the shareholders at the Annual General Meeting held on June 23, 2017.

– 4 –

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2017 and 2016

(In USD’000)

	Six months ended
	06/30/17			06/30/16
	(unaudited)			(unaudited)
Cash flow from operating activities
Cash generated from operations		415,501			386,617
Interest paid		(31,554	)		(16,873	)
Interest received		8,517			3,165
Income taxes paid		(322	)		(755	)
Net cash from operating activities		392,142			372,154
Cash flow from investing activities:
Payments for property, plant and equipment		(1,239,784	)		(1,511,323	)
Payments for intangible assets		(29,128	)		(37,012	)
Net changes in restricted cash relating to investing activities		63,361			(288	)
Payments to acquire financial assets		(643,470	)		(378,518	)
Proceeds on sale of financial assets		162,438			359,675
Net proceeds after netting off land appreciation tax from disposal of property, plant and equipment and assets classified as held for sale		259,054			5,098
Proceeds from disposal of available-for-sale investment		—			3,083
Payments to acquire long-term investment		(422,748	)		(64,650	)
Payment for business combination		—			(3,391	)
Net cash used in investing activities		(1,850,277	)		(1,627,326	)
Cash flow from financing activities:
Proceeds from borrowings		529,558			1,026,044
Repayment of borrowings		(238,525	)		(134,770	)
Proceeds from issuance of medium-term and short-term notes		—			316,627
Repayment of short-term notes		(87,858	)		—
Proceeds from exercise of employee stock options		3,673			668
Proceeds from non-controlling interest — capital contribution		—			636,000
Net cash from financing activities		206,848			1,844,569
Net (decrease) increase in cash and cash equivalents		(1,251,287	)		589,397
Cash and cash equivalent, beginning of period		2,126,011			1,005,201
Effects of exchange rate changes on the balance of cash held in foreign currencies		1,394			(7,927	)
Cash and cash equivalent, end of period		876,118			1,586,671

– 5 –

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2017

GENERAL INFORMATION

Semiconductor Manufacturing International Corporation (the “Company” or “SMIC”) was established as an exempted company incorporated under the laws of the Cayman Islands on April 3, 2000. The address of the principal place of business is 18 Zhangjiang Road, Pudong New Area, Shanghai, China, 201203. The registered address is at PO Box 309, Ugland House, Grand Cayman, KY1-1104 Cayman Islands. SMIC is an investment holding company. SMIC and its subsidiaries (hereinafter collectively referred to as the “Group”) are mainly engaged in the computer-aided design, manufacturing, testing, packaging, and trading of integrated circuits and other semiconductor services, as well as designing and manufacturing semiconductor masks.

BASIS OF PREPARATION

The unaudited condensed consolidated financial statements of the Group have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” issued by the International Accounting Standards Board (the “IASB“) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The interim condensed consolidated financial statements should be read in conjunction with the Group’s annual financial statements for the year ended December 31, 2016, which have been prepared in account with IFRSs.

PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair values.

The accounting policies and methods of computation used in the condensed consolidated financial statements as of and for the six months ended June 30, 2017 are the same as those followed in the preparation of the Group’s annual financial statements as of and for the year ended December 31, 2016.

Amendments to IFRS and IAS effective for the financial year Beginning January 1, 2017 do not have a material impact on the Group.

ESTIMATES

The preparation of condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements for the year ended December 31, 2016.

FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at December 31, 2016.

There have been no changes in the risk management department since December 31, 2016 or in any risk management policies since December 31, 2016.

– 6 –

SEGMENT INFORMATION

The Group is engaged principally in the computer-aided design, manufacturing and trading of integrated circuits. The Group’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about resources allocation and assessing performance of the Group. The Group operates in one segment. The measurement of segment profits is based on profit from operation as presented in the statements of profit or loss and other comprehensive income.

The Group operates in three principal geographical areas — United States, Europe, and Asia Pacific. The Group’s operating revenue from customers, based on the location of their headquarters, is detailed below.

	Revenue from external customers
	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
United States⁽²⁾		618,058		369,205
Mainland China and Hong Kong		710,040		658,453
Eurasia⁽¹⁾		216,180		296,875
		1,544,278		1,324,533

(1)

Not including Mainland China and Hong Kong

(2)

Presenting the revenue to those companies whose headquarters are in the United States, but ultimately selling products to their global customers.

The Group’s operating revenue by product and service type is detailed below:

	Revenue from external customers
	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Sales of wafers		1,496,585		1,268,195
Mask making, testing and others		47,693		56,338
		1,544,278		1,324,533

The Group’s business is characterized by high fixed costs relating to advanced technology equipment purchases, which result in correspondingly high levels of depreciation expenses. The Group will continue to incur capital expenditures and depreciation expenses as it equips and ramps-up additional fabs and expands its capacity at the existing fabs. The following table summarizes property, plant and equipment of the Group by geographical location.

	Property, plant and equipment
	06/30/17		12/31/16
	USD’000		USD’000
United States		56		69
Europe*		137,431		125,339
Taiwan		83		97
Hong Kong		2,720		2,839
Mainland China*		6,342,236		5,559,013
		6,482,526		5,687,357

* Fabrication facilities are owned and operated only in Mainland China and Italy.

– 7 –

OTHER OPERATING INCOME (EXPENSE), NET

	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Gain on disposal of property, plant and equipment and assets classified as held-for-sale		2,286		5,204
Government funding		14,153		1,726
Others		—		10
		16,439		6,940

The gain on disposal of property, plant and equipment and assets classified as held-for-sale for the six months ended June 30, 2017 was primarily arising from a sales and leaseback transaction of property, plant and equipment with Sino IC Leasing (Tianjin) Co., Ltd. Please refer to Note 34 for details.

The gain on disposal of property, plant and equipment and assets classified as held-for-sale for the six months ended June 30, 2016 was primarily arising from the sales of the staff living quarters in Beijing to employees.

FINANCE COSTS

	Six months ended
	06/30/17			06/30/16
	USD’000			USD’000
Interest on:
Bank and other borrowings
— wholly repayable within five years		6,920			6,416
— not wholly repayable within five years		2,234			1,361
Interest on finance leases		117			—
Interest on convertible bonds		8,244			6,784
Interest on corporate bonds		11,193			11,154
Interest on short-term notes		1,164			225
Interest on medium-term notes		4,012			691
Total interest expense for financial liabilities not classified as at fair value through profit or loss (“FVTPL”)		33,884			26,631
Less: amounts capitalized		(12,377	)		(14,083	)
		21,507			12,548

The weighted average interest rate on funds borrowed generally is 2.36% per annum (six months ended June 30, 2016: 2.82% per annum).

OTHER GAINS AND LOSSES, NET

For the six months ended June 30, 2017, other gains or losses, the net gain was US$29.3 million, within which the gain of fair value of the financial products were US$0.4 million, the gain of fair value of the derivative financial instrument was US$1.5 million, the gain of fair value of the cross currency swap contracts were US$0.2 million, the gain of fair value of the forward contracts were US$2.0 million and the gain arising from the disposal agreement and the subscription agreement (see Note 16) entered by Siltech Semiconductor (Shanghai) Corporation Limited (“SilTech Shanghai”) (an indirectly wholly-owned subsidiary of the Company) and Jiangsu Changjiang Electronics Technology Co., Ltd. (“JCET”) were US$18.5 million.

For the six months ended June 30, 2016, other gains or losses, the net loss was US$15.9 million, within which the gain of fair value of the financial products were US$2.5 million, the loss of fair value of the derivative financial instrument was US$5.6 million and the changes of fair value of the cross currency swap contracts were US$16.8 million loss.

– 8 –

10.

PROFIT BEFORE TAX

	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Profit before tax has been arrived at after taking into account:
Depreciation and amortization of property, plant and equipment		443,400		301,558
Amortization of land use rights		1,124		678
Amortization of acquired intangible assets		31,921		26,356
Impairment loss recognized on inventory		31,137		13,175
Impairment loss recognized (reversal) in respect of trade and other receivables		2,535		(490	)
Foreign exchange gains or losses		10,201		(153	)

11.

INCOME TAX EXPENSE

	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Current tax — Enterprise Income Tax		1,117		22
Current tax — Land Appreciation Tax		127		670
Deferred tax		2,414		343
Total income tax expense		3,658		1,035

Under the Law of the People’s Republic of China (the “PRC”) on Enterprise Income Tax, or the EIT Law (became effective on January 1, 2008), the profits of a foreign invested enterprise arising in 2008 and beyond that distributed to its immediate holding company who is a non-PRC tax resident will be subject to a withholding tax rate of 10%. A lower withholding tax rate may be applied if there is a favorable tax treaty between mainland China and the jurisdiction of the foreign holding company. For example, holding companies in Hong Kong that are also tax residents in Hong Kong (which should have commercial substance and proceed the formal treaty benefit application with in-charge tax bureau) are eligible for a 5% withholding tax on dividends under the Tax Memorandum between China and the Hong Kong Special Administrative Region.

The Company is incorporated in the Cayman Islands, where it is not currently subject to taxation.

The EIT Law applies a uniform 25% enterprise income tax rate to both tax resident enterprise and non-tax resident enterprise, except where a special preferential rate applies. In addition, according to the law of Italy on enterprise income tax, the enterprise income tax (IRES) rate is 24%.

Pursuant to Caishui Circular [2008] No. 1 (“Circular No. 1”) promulgated on February 22, 2008, integrated circuit production enterprises whose total investment exceeds RMB8,000 million (approximately US$1,095 million) or whose integrated circuits have a line width of less than 0.25 micron are entitled to a preferential tax rate of 15%. Enterprises with an operation period of more than 15 years are entitled to a full exemption from income tax for five years starting from the first profitable year after utilizing all prior years’ tax losses and 50% reduction of the tax for the following five years. Pursuant to Caishui Circular [2009] No. 69 (“Circular No. 69”), the 50% reduction should be based on the statutory tax rate of 25%.

On January 28, 2011, the State Council of China issued Guofa [2011] No. 4 (“Circular No. 4”), the Notice on Certain Policies to Further Encourage the Development of the Software and Integrated Circuit Industries which reinstates the EIT incentives stipulated by Circular No. 1 for the software and integrated circuit enterprises.

On April 20, 2012, State Tax Bureau issued CaiShui [2012] No. 27 (“Circular No. 27”), stipulating the income tax policies for the development of integrated circuit industry. Circular No. 1 was partially abolished by Circular No. 27 and the preferential taxation policy in Circular No. 1 was replaced by Circular No. 27.

– 9 –

11.

INCOME TAX EXPENSE (CONTINUED)

On July 25, 2013, State Tax Bureau issued [2013] No. 43 (“Circular No. 43”), clarifying that the accreditation and preferential tax policy of integrated circuit enterprise established before December 31, 2010, is applied pursuant to Circular No. 1.

On May 4, 2016, State Tax Bureau, Ministry of Finance and other joint ministries issued Caishui [2016] No. 49 (“Circular No. 49”), which highlights the implementation of the record-filing system, clarification on certain criteria for tax incentive entitlement and establishment of a post-record filing examination mechanism and enhancement of post-administration.

The detailed tax status of SMIC’s principal PRC entities with tax holidays is elaborated as follows:

Semiconductor Manufacturing International (Shanghai) Corporation (“SMIS” or “SMIC Shanghai”)

Pursuant to the relevant tax regulations, SMIS is qualified as an integrated circuit enterprise and enjoyed a 10-year tax holiday (five year full exemption followed by five year half reduction) beginning from 2004 after utilizing all prior years’ tax losses. The income tax rate for SMIS is 15% in 2017 (2016: 15%).

Semiconductor Manufacturing International (Tianjin) Corporation (“SMIT” or “SMIC Tianjin”)

In accordance with Circular No. 43 and Circular No. 1, SMIT is qualified as an integrated circuit enterprise and enjoying a 10-year tax holiday (five year full exemption followed by five year half reduction) beginning from 2013 after utilizing all prior years’ tax losses. The income tax rate for SMIT was 0% from 2013 to 2017 and 12.5% from 2018 to 2022.

Semiconductor Manufacturing International (Beijing) Corporation (“SMIB” or “SMIC Beijing”)

In accordance with Circular No. 43 and Circular No. 1, SMIB is qualified as an integrated circuit enterprise and enjoying a 10-year tax holiday (five year full exemption followed by five year half reduction) beginning from 2015 after utilizing all prior years’ tax losses. The income tax rate for SMIB was 0% from 2015 to 2019 and 12.5% from 2020 to 2024. After that, the income tax rate will be 15%.

Semiconductor Manufacturing International (Shenzhen) Corporation (“SMIC Shenzhen”), Semiconductor Manufacturing North China (Beijing) Corporation (“SMNC”) and SJ Semiconductor (Jiangyin) Corporation (“SJ Jiangyin”)

In accordance with Circular No. 43, Circular No. 1 and Circular No. 27, SMIC Shenzhen, SMNC and SJ Jiangyin are entitled to the preferential tax rate of 15% and 10-year tax holiday (five year full exemption followed by five year half reduction) subsequent to its first profit-making year after utilizing all prior tax losses on or before December 31, 2017. SMIC Shenzhen, SMNC and SJ Jiangyin were in accumulative loss positions as of June 30, 2017 and the tax holiday has not begun to take effect.

All the other PRC entities of SMIC are subject to income tax rate of 25%. Under the law of Italy on enterprise income tax, LFoundry S.r.l’s (“LFoundry”, a majority-owned subsidiary in Avezzano, Italy) income tax (IRES) rate is 24%.

12.

DIVIDEND

The Board did not recommend the payment of any dividend for the six months ended June 30, 2017 (six months ended June 30, 2016: Nil).

– 10 –

13.

EARNINGS PER SHARE

The calculation of basic and diluted earnings per share attributable to the owners of the Company is based on following data.

	Six months ended
	06/30/17		06/30/16*
	USD		USD
Basic earnings per share		0.02		0.04
Diluted earnings per share		0.02		0.04

	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Earnings
Earnings used in the calculation of basic earnings per share		106,062		159,061
Interest expense from convertible bonds		8,244		6,784
Earnings used in the calculation of diluted earnings per share		114,306		165,845
Weighted average numbers of shares*
Weighted average number of ordinary shares used in the calculation of basic earnings per share		4,566,648,399		4,213,320,657
Effect of dilutive potential ordinary shares
Employee option and restricted share units		43,424,095		28,400,453
Convertible bonds		455,004,655		393,257,099
Weighted average number of ordinary shares used in the calculation of diluted earnings per share		5,065,077,149		4,634,978,209

For the six months ended June 30, 2017, the Group had 4,325,059 (six months ended June 30, 2016: 35,284,759) weighted average outstanding employee stock options which were excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of the ordinary shares.

The weighted average numbers of shares for the prior period have been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares and preferred shares of US$0.0004 each consolidated into one ordinary share and preferred share of US$0.004 each, which was accounted for as a reverse stock split effective on December 7, 2016.

14.

ASSETS CLASSIFIED AS HELD FOR SALE

	06/30/17		12/31/16
	USD’000		USD’000
Assets related to employee’s living quarters		49,654		50,813

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

– 11 –

15.

PROPERTY, PLANT AND EQUIPMENT

Construction in progress

The construction in progress balance of approximately US$1,980.6 million as of June 30, 2017, primarily consisted of US$1,140.7 million of the manufacturing equipment acquired to further expand the production capacity at two 300mm fabs in Beijing, US$175.0 million of the manufacturing equipment acquired to further expand the production capacity at the 300mm fab in Shanghai and the investment of a new Shanghai project, US$479.9 million was for our new project in Shenzhen, US$83.8 million of the manufacturing equipment acquired to enhance our portfolio of comprehensive foundry solutions, US$18.3 million of machinery and equipment acquired to more research and development activities at the subsidiary, SMIC Advanced Technology Research & Development (Shanghai) Corporation in Shanghai. In addition, US$82.9 million was related to various ongoing capital expenditures projects of other SMIC subsidiaries, which are expected to be completed by the end of 2017.

Impairment losses recognized in the period

The Group didn’t record any impairment loss of property, plant and equipment for the six months ended June 30, 2017 and 2016.

Assets pledged as security

As of June 30, 2017, property, plant and equipment with carrying amount of approximately US$576.2 million (December 31, 2016: approximately US$631.4 million) have been pledged to secure borrowings of the Group (see Note 26) under a mortgage. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to other entities.

16.

INVESTMENTS IN ASSOCIATES

Details of the Group’s associates, which are all unlisted companies except for JCET listed on the Shanghai Stock Exchange, at the end of the reporting period are as follows:

Name of company	Place of establishment and operation	Class of share held	Percentage of ownership interest and voting power held by the Group
			06/30/17			12/31/16
Toppan SMIC Electronic (Shanghai) Co., Ltd (“Toppan”)	Shanghai, PRC	Ordinary		30.0	%		30.0	%
Zhongxin Xiecheng Investment (Beijing) Co., Ltd (“Zhongxin Xiecheng”)	Beijing, PRC	Ordinary		49.0	%		49.0	%
Brite Semiconductor Corporation	Cayman Island	Ordinary		47.3	%		47.3	%
Suzhou Changjiang Electric Xinke Investment Co., Ltd. (“Changjiang Xinke”)***	Jiangsu, PRC	Ordinary		—			19.6	%
Jiangsu Changjiang Electronics Technology Co., Ltd (“JECT”)***	Jiangsu, PRC	Ordinary		14.3	%		NA
Sino IC Leasing Co., Ltd. (“Sino IC Leasing”)	Shanghai, PRC	Ordinary		11.4	%*		11.4	%*
China Fortune-Tech Capital Co., Ltd (“China Fortune- Tech”)	Shanghai, PRC	Ordinary		30.0	%		30.0	%
Beijing Wu Jin Venture Investment Center (Limited Partnership) (“WuJin”)**	Beijing, PRC	Ordinary		32.6	%		32.6	%
Shanghai Fortune-Tech Qitai Invest Center (Limited Partnership) (“Fortune-Tech Qitai”)**	Shanghai, PRC	Ordinary		33.0	%		33.0	%
Shanghai Fortune-Tech Zaixing Invest Center (Limited Partnership) (“Fortune-Tech Zaixing”)**	Shanghai, PRC	Ordinary		66.2	%*		66.2	%*
Suzhou Fortune-Tech Oriental Invest Fund Center (Limited Partnership) (“Fortune-Tech Oriental”)**	Jiangsu, PRC	Ordinary		44.8	%		44.8	%
Juyuan Juxin Integrated Circuit Fund (“Juyuan Juxin”)**	Shanghai, PRC	Ordinary		31.6	%		40.9	%

– 12 –

16.

INVESTMENTS IN ASSOCIATES (CONTINUED)

In accordance with investment agreements, the Group has significant influence over Sino IC Leasing and Fortune-Tech Zaixing.

The Group invested in these associates indirectly though China IC Capital Co., Ltd (the “Fund”), a wholly-owned investment fund company of the Company. The Fund is intended to invest primarily in integrated circuits related fund products and investment projects. The Group’s joint ventures invested indirectly through the Fund are disclosed in Note 17.

***

On April 27, 2016, SilTech Shanghai and JCET entered into a disposal agreement (the “Disposal Agreement”), pursuant to which SilTech Shanghai agreed to sell its 19.61% ownership interest in Changjiang Xinke to JCET in consideration of RMB664.0 million, which will be satisfied by JCET’s issue of 43,229,166 shares of JCET to SilTech Shanghai at RMB15.36 per share. On the same day, SilTech Shanghai and JCET entered into a subscription agreement (the “Subscription Agreement”), pursuant to which SilTech Shanghai agreed to subscribe for and JCET agreed to issue 150,681,044 shares of JCET in consideration of an aggregate subscription price of RMB2,655.0 million in cash. On May 10, 2017, the Company was notified by JCET that the China Securities Regulatory Commission has granted approval for this transaction, and the Disposal Agreement and the Subscription Agreement became effective accordingly. On June 19, 2017, the transactions were completed and SMIC became the single largest shareholder of JCET. The Group recorded its ownership interest of JCET as investment in associate due to its right to nominate directors of JCET’s board.

Above associates are accounted for using the equity method in these condensed consolidated financial statements.

17.

INVESTMENTS IN JOINT VENTURES

Details of the Group’s joint ventures, which are all unlisted companies invested directly through China IC Capital Co., Ltd, at the end of the reporting period are as follows:

Name of company	Place of establishment and operation	Class of share held	Percentage of ownership interest and voting power held by the Group
			06/30/17			12/31/16
Shanghai Xinxin Investment Centre (Limited Partnership) (“Shanghai Xinxin”)	Shanghai, PRC	Ordinary		49.0	%		49.0	%
Shanghai Chengxin Investment Center (Limited Partnership) (“Shanghai Chengxin”)	Shanghai, PRC	Ordinary		42.0	%		42.0	%

18.

INVENTORIES

	06/30/17		12/31/16
	USD’000		USD’000
Raw materials		136,321		126,526
Work in progress		328,493		280,216
Finished goods		112,365		57,474
		577,179		464,216

– 13 –

19.

TRADE AND OTHER RECEIVABLES

	06/30/17			12/31/16
	USD’000			USD’000
Trade receivables		490,875			491,018
Allowance for doubtful debts		(4,026	)		(1,491	)
		486,849			489,527
Other receivables and refundable deposits		236,062			156,295
		722,911			645,822

The Group determines credit terms ranging generally from 30 to 60 days for each customer on a case-by-case basis, based on its assessment of such customer’s financial standing and business potential with the Group.

The following is analysis of trade receivables presented based on the invoice date at the end of the reporting period:

	06/30/17		12/31/16
	USD’000		USD’000
Within 30 days		273,348		274,087
Between 31–60 days		151,116		179,453
Over 60 days		66,411		37,478
Total		490,875		491,018

The following is analysis of trade receivables (net of allowance for doubtful debt) by age, presented based on due date:

	06/30/17		12/31/16
	USD’000		USD’000
Current		409,850		444,145
Past due but not impaired
Within 30 days		51,639		34,872
Between 31–60 days		14,082		8,875
Over 60 days		11,278		1,635
Total		486,849		489,527

20.

OTHER FINANCIAL ASSETS

	06/30/17		12/31/16
	USD’000		USD’000
Non-current
*Derivatives*
Cross currency swap contracts — cash flow hedges		4,120		—
Current
Derivatives
Foreign currency forward contracts		1,951		—
Cross currency swap contracts — cash flow hedges		636		—
Short-term investments
Financial products sold by banks		86,763		24,931
Bank deposits will mature over 3 months		426,652		6,612
		516,002		31,543

– 14 –

21.

RESTRICTED CASH

	06/30/17		12/31/16
	USD’000		USD’000
Restricted cash
Non-current		12,788		20,080
Current		344,100		337,699
		356,888		357,779

Restricted cash — non current

As of June 30, 2017, the non-current restricted cash consisted of US$12.8 million (EUR11.2 million), of bank time deposits (December 31, 2016: US$20.1 million) pledged against long-term borrowings from MPS Capital Services S.p.A. of US$1.3 million (EUR1.1 million) and from Cassa Depositie Prestiti of US$11.5 million (EUR10.1 million).

Restricted cash — current

As of June 30, 2017, the current restricted cash consisted of US$8.1 million of bank time deposits (December 31, 2016: US$2.9 million), within which US$1.7 million was pledged against letters of credit and short-term borrowings, US$5.3 million (EUR4.7 million) was pledged against long-term borrowing current portions from MPS Capital Services S.p.A. of US$0.5 million (EUR0.5 million) and from Cassa Depositie Prestiti of US$4.8 million (EUR4.2 million), and US$1.1 million (EUR1.0 million) was related to a security deposit made with the Abruzzo Regional Government for the Integrated Environmental Authorization associated with the treatment plant for some special waste.

As of June 30, 2017, the current restricted cash consisted of US$232.4 million (December 31, 2016: US$191.9 million) of government funding received mainly for the reimbursement of research and development expenses to be incurred.

As of June 30, 2017, the current restricted cash of US$103.6 million (December 31, 2016: US$142.9 million) was from low interest cost entrusted loans granted by CDB Development Fund through China Development Bank, which is designated to be used for future capacity expansion. The Group expects to spend the restricted cash within the next 12 months.

22.

SHARES AND ISSUED CAPITAL

Ordinary shares of US$0.004 each issued and fully paid

	Six months ended June 30, 2017				Six months ended June 30, 2016
	Number of shares		Share capital		Number of shares*		Share capital
			USD’000				USD’000
Balance at January 1		4,252,922,259		17,012		4,207,374,896		16,830
Issuance of shares under the Company’s employee stock incentive plans		15,207,492		60		11,656,849		46
Conversion of convertible bonds during the period		382,744,250		1,531		—		—
Balance at June 30		4,650,874,001		18,603		4,219,031,745		16,876

Fully paid ordinary shares, which have a par value of US$0.004, carry one vote per share and carry a right to dividends.

– 15 –

22.

SHARES AND ISSUED CAPITAL (CONTINUED)

In the first half of 2017, the Board proposed to increase the authorized share capital of the Company to US$42,000,000 divided into 10,000,000,000 ordinary shares and 500,000,000 preferred shares by the creation of an additional 5,000,000,000 ordinary shares in the share capital of the Company, which will rank pari passu with all existing ordinary shares. The proposed increase in authorized share capital has been approved by the shareholders at the Annual General Meeting held on June 23, 2017.

The number of shares for the prior period has been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares and preferred shares of US$0.0004 each consolidated into one ordinary share and preferred share of US$0.004 each, which was accounted for as a reverse stock split effective on December 7, 2016.

23.

SHARE-BASED PAYMENTS

Share incentive plans

The Company’s stock incentive plans allow the Company to offer a variety of incentive awards to employees, consultants or external service advisors of the Group.

The expense recognized for employee services received during the period is shown in the following table:

	Six months ended
	06/30/17		06/30/16
	USD’000		USD’000
Expense arising from equity-settled share-based payment transactions		11,065		8,063

Movements during the period

(i)

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period (excluding Restricted Share Units (“RSUs”) and share option plan for subsidiaries (“Subsidiary Plan”):

	2017			2017		2016			2016
	Number			WAEP		Number*			WAEP
Outstanding at January 1		72,482,764			US$0.82		100,295,578			US$0.82
Granted during the period		4,196,477			US$1.20		1,459,247			US$0.83
Forfeited and expired during the period		(3,348,691	)		US$1.38		(3,618,791	)		US$1.21
Exercised during the period		(4,728,150	)		US$0.77		(1,203,176	)		US$0.52
Outstanding at June 30		68,602,400			US$0.81		96,932,858			US$0.81

In the current interim period, share options were granted on April 5, 2017 and May 22, 2017. The fair values of the options determined at the dates of grant using the Black-Scholes Option Pricing model were US$0.51.

The weighted average closing price of the Company’s shares immediately before the dates on which the share options were exercised was US$1.29.

The following table lists the inputs to the Black Scholes Option Pricing model used for the options granted during the six months ended June 30, 2017 and 2016:

	2017			2016
Dividend yield (%)		—			—
Expected volatility		43.38	%		45.66	%
Risk-free interest rate		1.91	%		1.47	%
Expected life of share options		6 years			5 years

– 16 –

23.

SHARE-BASED PAYMENTS (CONTINUED)

Movements during the period (CONTINUED)

(i)

The risk-free rate for periods within the contractual life of the options is based on the yield of the US Treasury Bond. The expected term of options granted represents the period of time that options granted are expected to be outstanding. Expected volatilities are based on the average volatility of the Company’s stock prices with the time period commensurate with the expected term of the options. The dividend yield is based on the Group’s intended future dividend plan.

The valuation of the options is based on the best estimates from the Group by taking into account a number of assumptions and is subject to limitation of the valuation model. Changes in variables and assumptions may affect the fair value of these options.

The number of share options for the prior period has been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares and preferred shares of US$0.0004 each consolidated into one ordinary share and preferred share of US$0.004 each, which was accounted for as a reverse stock split effective on December 7, 2016.

(ii)

The following table illustrates the number and weighted average fair value (WAFV) of, and movements in, RSUs during the period (excluding share option plan and Subsidiary Plan):

	2017			2017		2016			2016
	Number			WAFV		Number*			WAFV
Outstanding at January 1		26,489,152			US$0.98		30,451,267			US$0.99
Granted during the period		11,696,477			US$1.13		7,745,648			US$0.82
Forfeited during the period		(344,786	)		US$1.08		(624,900	)		US$1.00
Exercised during the period		(10,479,342	)		US$0.96		(10,453,673	)		US$0.92
Outstanding at June 30		27,361,501			US$1.05		27,118,342			US$0.97

In the current interim period, RSUs were granted on April 5, 2017 and May 22, 2017. The fair value of the RSUs determined at the date of grant using the Black-Scholes Option Pricing model was US$1.13.

The weighted average closing price of the Company’s shares immediately before the date on which the RSUs were exercised was US$1.29 per share.

The following table lists the inputs to the Black Scholes Option Pricing model used for the RSUs granted during the six months ended June 30, 2017 and 2016:

	2017			2016
Dividend yield (%)		—			—
Expected volatility		39.72	%		39.60	%
Risk-free interest rate		1.22	%		0.91	%
Expected life of RSUs		2 years			2 years

The risk-free rate for periods within the contractual life of the RSUs is based on the yield of the US Treasury Bond. The expected term of RSUs granted represents the period of time that RSUs granted are expected to be outstanding. Expected volatilities are based on the average volatility of the Company’s stock prices with the time period commensurate with the expected term of the RSUs. The dividend yield is based on the Group’s intended future dividend plan.

– 17 –

23.

SHARE-BASED PAYMENTS (CONTINUED)

Movements during the period (CONTINUED)

(ii)

The following table illustrates the number and weighted average fair value (WAFV) of, and movements in, RSUs during the period (excluding share option plan and Subsidiary Plan): (CONTINUED)

The valuation of the RSUs is based on the best estimates from the Group by taking into account a number of assumptions and is subject to limitation of the valuation model. Changes in variables and assumptions may affect the fair value of these RSUs.

The number of RSUs for the prior period has been adjusted to reflect the impact of the share consolidation, on the basis that every ten ordinary shares and preferred shares of US$0.0004 each consolidated into one ordinary share and preferred share of US$0.004 each, which was accounted for as a reverse stock split effective on December 7, 2016.

(iii)

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options of the Subsidiary Plan during the period (excluding share option plan and RSUs):

	2017			2017		2016		2016
	Number			WAEP		Number		WAEP
Outstanding at January 1		14,598,750			US$0.19		7,000,000		US$0.06
Granted during the period		—			—		—		—
Forfeited and expired during the period		(315,000	)		US$0.31		—		—
Exercised during the period		—			—		—		—
Outstanding at June 30		14,283,750			US$0.19		7,000,000		US$0.06

In the current interim period, no share option of the Subsidiary Plan was granted.

The range of exercise prices for share options of the Subsidiary Plan outstanding at the end of the period was from US$0.05 to US$0.31 (six months ended June 30, 2016: US$0.05 to US$0.08).

24.

CASH FLOW HEDGES

To protect against volatility of future cash flows caused by the changes in exchange rates associated with outstanding debt denominated in a currency other than the US dollar, the Group entered into several cross currency swap contracts, which were designated as hedging instruments since October 2016. Any gains or losses arising from changes in fair value of these hedging instruments are taken directly to the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow hedges and that are recognized in other comprehensive income. Amounts will be reclassified to profit or loss when the associated hedged transaction affects profit or loss.

	Six months ended
	06/30/17
	USD’000
Balance at beginning of the period		(34,627	)
Other comprehensive gains on cash flow hedges recognized during the period:
Total fair value gains included in other comprehensive gains		56,810
Reclassified from other comprehensive gains to offset foreign exchange losses		(26,692	)
		30,118
Balance at end of the period		(4,509	)

Please refer to Note 20 and Note 30 for the outstanding balances of these hedging instruments.

– 18 –

25.

TRADE AND OTHER PAYABLES

	06/30/17		12/31/16
	USD’000		USD’000
Trade payables		1,038,577		781,161
Advance receipts from customers		66,351		60,157
Deposit received		48,545		41,324
Other payable		114,685		57,911
		1,268,158		940,553

Trade payables are non-interest bearing and are normally settled on 30-day to 60-day terms.

As of June 30, 2017, trade payables were US$1,038.6 million (as of December 31, 2016: US$781.2 million), within which the payables for property, plant and equipment were US$726.9 million (as of December 31, 2016: US$483.0 million).

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period.

	06/30/17		12/31/16
	USD’000		USD’000
Within 30 days		861,533		630,896
Between 31–60 days		50,041		43,984
Over 60 days		127,003		106,281
Total		1,038,577		781,161

An aged analysis of the trade payable is as follows:

	06/30/17		12/31/16
	USD’000		USD’000
Current		899,036		659,094
Overdue:
Within 30 days		51,832		55,394
Between 31 to 60 days		19,624		7,658
Over 60 days		68,085		59,015
		1,038,577		781,161

– 19 –

26.

BORROWINGS

	06/30/17		12/31/16
	USD’000		USD’000
At amortized cost
Short-term commercial bank loans		256,685		176,957
		256,685		176,957
Long-term debt by contracts
2013 USD Loan (SMIC Shanghai)		10,760		10,760
2015 USD Loan (SMIC Shanghai)		33,034		39,641
2015 RMB Loan I (SMIC Shanghai)		147,189		144,155
2015 RMB Loan II (SMIC Shanghai)		69,915		68,473
2015 CDB USD Loan (SJ Jiangyin)		2,000		2,000
2015 CDB RMB Loan (SMIC Beijing)		28,702		28,110
2016 CDB RMB Loan (SMIC Beijing)		214,895		210,466
2015 EXIM RMB Loan (SMIC Shanghai)		73,594		72,077
2017 EXIM RMB Loan (SMIC Shanghai)		147,189		—
2016 EXIM RMB Loan I (SMIC Beijing)		35,325		34,597
2016 EXIM RMB Loan II (SMIC Beijing)		58,875		57,662
2016 EXIM RMB Loan (SMIC)		73,594		72,077
2017 EXIM RMB Loan (SMIC Tianjin)		73,594		—
2014 Cassa Depositie Prestiti loan (LFoundry)		26,426		26,026
2014 MPS Capital Service loan (LFoundry)		4,924		4,578
2014 Citizen Finetech Miyota Loan (LFoundry)		4,003		3,926
2017 Banca del Mezzogiorno Loan (LFoundry)		1,455		—
Finance Lease Payables		6,666		7,057
Loans from non-controlling interests shareholders		10,634		1,627
Others		482,547		482,579
		1,505,321		1,265,811
Less: current maturities of long-term debt		49,213		32,217
Non-current maturities of long-term debt		1,456,108		1,233,594
Borrowing by repayment schedule:
Within 1 year		305,898		209,174
Within 1–2 years		448,633		171,900
Within 2–5 years		660,224		698,070
Over 5 years		347,251		363,624
		1,762,006		1,442,768

As of June 30, 2017, property, plant and equipment with carrying amount of approximately US$576.2 million (December 31, 2016: US$631.4 million) have been pledged to secure borrowings of the Group (see Note 15).

– 20 –

26.

BORROWINGS (CONTINUED)

As at June 30, 2017, other borrowings represented US$482.5 million (December 31, 2016: US$482.6 million) of borrowings under three financing arrangements entered into by the Group with third-party financing companies in 2016 in the form of a sale and leaseback transaction with a repurchase option. A batch of production equipment of the Group was sold and leased back under the financing arrangement. As the repurchase prices are set at below US$1.00, which are minimal compared to the expected fair value and the Group is certain that it will exercise the repurchase options, the above financing arrangements were accounted for as collateralized borrowings of the Group.

27.

CONVERTIBLE BONDS

(i)

Redemption of Zero Coupon Convertible Bonds

The Company exercised its right to redeem the US$200.0 million zero coupon convertible bonds due 2018, the US$86.8 million zero coupon convertible bonds due 2018, the US$95.0 million zero coupon convertible bonds due 2018 and the US$22.2 million zero coupon convertible bonds due 2018 (the “Bonds”) on March 10, 2017 being the option redemption date when all of the Bonds would be redeemed in cash at 100% of the Bonds’ principal amount. The conversion price is HK$7.965, approximately US$1.027. On March 3, 2017, the Company received notices from all holders of the Bonds for the full conversion of the outstanding Bonds. As all outstanding Bonds have been fully converted and no Bonds remain outstanding, no redemption of the Bonds were carried out. The Company delisted the Bonds from the Singapore Exchange Securities Trading Limited.

(ii)

Issue of US$450.0 million zero coupon convertible bonds due 2022

On July 7, 2016, the Company issued zero coupon convertible bonds at a par value of US$250,000 each with an aggregate principal amount of US$450.0 million (the “2016 Convertible Bonds”). The issue price was 100% of the aggregate principal amount of the 2016 Convertible Bonds. The 2016 Convertible Bonds issued is a compound instrument included a liability component and an equity component. There are embedded derivatives in respect of the early redemption features of the 2016 Convertible Bonds, which are deemed to be clearly and closely related to the host contract and therefore, do not need to be separately accounted for. The fair value of the liability component of the 2016 Convertible Bonds was approximately US$387.9 million and the equity component was approximately US$52.9 million, determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole.

	USD’000
Principal amount		450,000
Transaction cost		(9,194	)
Liability component at the date of issue		(387,871	)
Equity component		52,935

Subsequent to the initial recognition, the liability component of the 2016 Convertible Bonds was carried at amortized cost using the effective interest method. The effective interest rate of the liability component of the 2016 Convertible Bonds was 3.78% per annum. The liability component and equity component of the 2016 Convertible Bonds for the six months ended June 30, 2017 is set out below:

Liability
Component

Equity
Component

Total

USD’000

As at December 31, 2016

395,210

52,935

448,145

Interest charged during the period

7,339

—

7,339

As at June 30, 2017

402,549

52,935

455,484

The equity component will remain in convertible bond equity reserve until the embedded conversion option is exercised or the 2016 Convertible Bonds mature.

– 21 –

28.

MEDIUM-TERM NOTES

On June 8, 2016, the Company issued the three-year medium-term notes of RMB1,500.0 million (approximately US$226.2 million) through National Association of Financial Market Institutional Investors (“NAFMII”). The medium- term notes carry a coupon interest rate of 3.35% per annum with note interest payable annually on June 8, 2017, June 8, 2018 and June 8, 2019. As at the issue date, the net book value of the liabilities of medium-term notes amounted to RMB1,485.2 million (approximately US$223.9 million).

	USD’000
Principal amount		226,162
Transaction cost		(2,226	)
Notes payable as at the issue date		223,936

The movement of the medium-term notes for the six months ended June 30, 2017 is set out below:

	USD’000
As at the date of issue		223,936
Interest charged during the period		691
Interest payable recognized during the period		(631	)
As at June 30, 2016		223,996
As at December 31, 2016		214,502
Interest charged during the period		4,012
Interest payable recognized during the period		(3,662	)
Foreign exchange loss		4,518
As at June 30, 2017		219,370

29.

BONDS PAYABLE

On October 7, 2014, the Company issued 5-year unsecured corporate bonds for a total amount of US$500.0 million. The corporate bonds carry a coupon interest rate of 4.125% with bond interest payable semi-annually on March 31 and September 30. As at the issue date, the net book value of the liabilities amounted to US$491.2 million after the deduction of (1) a discount of US$5.2 million and (2) issue expenses of US$3.6 million.

	USD’000
Principal amount		500,000
Discount of bonds payable		(5,185	)
Transaction cost		(3,634	)
Bonds payable as at the issue date		491,181

The movement of the corporate bonds for the period ended June 30, 2017 is set out below:

	USD’000
As at December 31, 2015		493,207
Interest charged during the period		11,154
Interest payable recognized during the period		(10,313	)
As at June 30, 2016		494,048
As at December 31, 2016		494,909
Interest charged during the period		11,193
Interest payable recognized during the period		(10,313	)
As at June 30, 2017		495,789

– 22 –

30.

OTHER FINANCIAL LIABILITIES

	06/30/17		12/31/16
	USD’000		USD’000
Derivatives carried at fair value through profit or loss (FVTPL)
Cross currency swap contracts — cash flow hedges:
Non-current		27,792		74,170
Current		—		6,348
		27,792		80,518

31.

OTHER LIABILITIES

	06/30/17		12/31/16
	USD’000		USD’000
Defined benefit obligation		26,035		24,213
Others		3,736		13,284
		29,771		37,497

Defined Benefit Plan

Trattamento di Fine Rapporto (“TFR”, termination payments) relates to the amounts that employees in Italy are entitled to receive when they leave the Group and is calculated based on the period of employment and the taxable earnings of each employee. Under certain conditions, the entitlement may be partially advanced to an employee during the employee’s working life.

The Group operates defined benefit pension plans in Italy under broadly similar regulatory frameworks, which is an unfunded plan where the Group meets the benefit payment obligation as it falls due. This plan is final salary pension plan, which provides benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their salary in the final years leading up to retirement. The TFR in payment are generally updated in line with the retail price index.

32.

COMMITMENTS FOR EXPENDITURE

Purchase commitments

As of June 30, 2017, the Group had the following commitments to purchase machinery, equipment and construction obligations. The machinery and equipment is scheduled to be delivered to the Group’s facility by December 31, 2017.

	06/30/17		12/31/16
	USD’000		USD’000
Commitments for the facility construction		443,586		239,759
Commitments for the acquisition of machinery and equipment		460,826		800,597
Commitments for the acquisition of intangible assets		7,006		5,491

– 23 –

33.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Group considers that the carrying amounts of financial assets and financial liabilities recognized in the condensed consolidated financial statements approximate their fair values.

Valuation techniques and assumptions applied for the purposes of measuring fair value

The fair values of financial assets and financial liabilities are determined as follows:

•

the fair value of financial instruments based on quoted market prices in active markets, valuation techniques that use observable market-based inputs or unobservable inputs that are corroborated by market data. Pricing information the Group obtains from third parties is internally validated for reasonableness prior to use in the condensed consolidated financial statements. When observable market prices are not readily available, the Group generally estimates the fair value using valuation techniques that rely on alternate market data or inputs that are generally less readily observable from objective sources and are estimated based on pertinent information available at the time of the applicable reporting periods. In certain cases, fair values are not subject to precise quantification or verification and may fluctuate as economic and market factors vary and the Group’s evaluation of those factors changes.

Fair value measurements recognized in the consolidated statement of financial position

The following tables provide an analysis of financial instruments that are measured at fair value on a recurring basis subsequent to initial recognition, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. There is no transfer within different levels of the fair value hierarchy in the period ended June 30, 2017.

•

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities;

•

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

•

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

– 24 –

33.

FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

		06/30/17
	Valuation technique(s) and key input	Level 1		Level 2		Level 3		Total
		USD’000		USD’000		USD’000		USD’000
Financial assets at FVTPL
Short-term investment carried at fair value through profit or loss	Discounted cash flow. Future cash flows are estimated based on contracted interest rates and discounted		—		86,763		—		86,763
Foreign currency forward contracts classified as other financial assets in the statement of financial position	Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contracted forward exchange rates and discounted		—		1,951		—		1,951
Available-for-sale investment	Quoted prices in active markets		2,942		—		—		2,942
Available-for-sale investment	Recent transaction price		—		—		16,406		16,406
Cross currency swap contracts classified as other financial assets in the statement of financial position — cash flow hedges	Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contracted forward exchange rates and discounted		—		4,756		—		4,756
Total			2,942		93,470		16,406		112,818

		06/30/17
	Valuation technique(s) and key input	Level 1		Level 2		Level 3		Total
		USD’000		USD’000		USD’000		USD’000
Financial liabilities at FVTPL
Cross currency swap contracts classified as other financial liabilities in the statement of financial position — cash flow hedges	Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contracted forward exchange rates and discounted		—		27,792		—		27,792
Finance lease payables	Discounted cash flow. Future cash flows are discounted based on effective interest rates		—		6,666		—		6,666
Total			—		34,458		—		34,458

– 25 –

33.

FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

		12/31/16
	Valuation technique(s) and key input	Level 1		Level 2		Level 3		Total
		USD’000		USD’000		USD’000		USD’000
Financial assets at FVTPL
Short-term investment carried at fair value through profit or loss	Discounted cash flow. Future cash flows are estimated based on contracted interest rates and discounted		—		24,931		—		24,931
Available-for-sale investment	Quoted prices in active markets		4,713		—		—		4,713
Available-for-sale investment	Recent transaction price		—		—		16,067		16,067
Derivative financial instrument	Measured by Binomial Model with key assumptions including exercise multiple (75%), risk free rate of interest (0.51%), expected volatility (24.5%) and rate of return (10%)		—		—		32,894		32,894
Total			4,713		24,931		48,961		78,605

		12/31/16
	Valuation technique(s) and key input	Level 1		Level 2		Level 3		Total
		USD’000		USD’000		USD’000		USD’000
Financial liabilities at FVTPL
Cross currency swap contracts classified as other financial liabilities in the statement of financial position — cash flow hedges	Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contracted forward exchange rates and discounted		—		80,518		—		80,518
Finance lease payables	Discounted cash flow. Future cash flows are discounted based on effective interest rates		—		7,057		—		7,057
Total			—		87,575		—		87,575

– 26 –

34.

RELATED PARTY TRANSACTIONS

The names of the related parties which had transactions with the Group for the period ended June 30, 2017 and the relationships with the Group are disclosed below.

Related party name		Relationship with the Group
Datang Telecom Technology & Industry Holdings Co., Ltd. (“Datang Holdings”)		A member of Datang Telecom Technology & Industry Group (“Datang Group”) and a substantial shareholder of the Company
Datang Microelectronics Technology Co., Ltd.		A member of Datang Group
Datang Semiconductor Co., Ltd.		A member of Datang Group
Leadcore Technology Co., Ltd. and Leadcore Technology (Hong Kong) Co., Ltd. (“Leadcore”)		A member of Datang Group
Datang Telecom Group Finance Co., Ltd. (“Datang Finance”)		A member of Datang Group
Toppan		An associate of the Group
Brite Semiconductor Corporation and its subsidiaries (“Brite”)		An associate of the Group
China Fortune-Tech		An associate of the Group
Zhongxin Xiecheng		An associate of the Group
Jiangsu Changjiang Electronics Technology Co., Ltd (“JECT”) and its subsidiaries		An associate of the Group
Sino IC Leasing (Tianjin) Co., Ltd.		An associate of the Group

Trading transactions

During the period, group entities entered into the following trading transactions with related parties that are not members of the Group:

	Sale of goods				Sale of services
	Six months ended				Six months ended
	06/30/17		06/30/16		06/30/17		06/30/16
	USD’000		USD’000		USD’000		USD’000
Datang Microelectronics Technology Co., Ltd.		10,105		5,453		—		—
Datang Semiconductor Co., Ltd.		119		528		—		—
Leadcore		2,953		757		—		—
Toppan		—		—		2,197		1,923
Brite		24,688		19,308		—		—
China Fortune-Tech		—		—		31		33
JCET and its subsidiaries		17		6		16		1

– 27 –

34.

RELATED PARTY TRANSACTIONS (CONTINUED)

Trading transactions (CONTINUED)

	Purchase of goods				Purchase of services
	Six months ended				Six months ended
	06/30/17		06/30/16		06/30/17		06/30/16
	USD’000		USD’000		USD’000		USD’000
Toppan		5,570		4,515		24		138
Zhongxin Xiecheng		—		—		—		4
Brite		—		25		857		898
China Fortune-Tech		—		—		461		17
Datang Finance		—		—		—		15
JCET and its subsidiaries		—		—		869		1,218
Sino IC Leasing (Tianjin) Co., Ltd		—		—		16,696		—

The following balances were outstanding at the end of the reporting period:

	Amounts due from related parties				Amounts due to related parties
	06/30/17		12/31/16		06/30/17		12/31/16
	USD’000		USD’000		USD’000		USD’000
Datang Microelectronics Technology Co., Ltd		6,446		6,354		—		—
Leadcore		1,715		—		—		—
Toppan		1,254		615		619		2,414
Brite		11,563		6,507		—		279
China Fortune-Tech		—		38		—		—
JCET and its subsidiaries		34		2		2		192

In February 2017 and in December 2016, there were three and two financing arrangements respectively in consideration of US$250.6 million and US$249.2 million entered into by the Group with Sino IC Leasing (Tianjin) Co., Ltd. (a wholly-owned subsidiary of Sino IC Leasing Co., Ltd.) in the form of a sale and leaseback transaction with a repurchase option. A batch of production equipment of the Group was sold and leased back under the financing arrangements. As the repurchase prices are set at the expected fair value and the Group is not reasonably certain that it will exercise the repurchase options, the above transaction have been accounted for a disposal of property, plant and equipment followed with an operating lease.

Arrangements/contracts for sale of self-developed living quarter unit

In 2016, the Group entered into arrangement/contracts with one of directors of the Company for sale of self- developed living quarter unit and the amount of the consideration is approximately US$1.0 million. The transaction was completed in March 2017.

In 2015, the Group entered into arrangement/contracts with 4 of the Company’s directors and key management for sale of self-developed living quarter units and the amount of the considerations was approximately US$3.6 million, within which two transactions amounted to US$1.6 million were completed as of the date of this result announcement.

– 28 –

35.

SUBSEQUENT EVENTS

(i)

Capital Contribution in Sino IC Leasing

Subject to the amended joint venture agreement, revised on July 20, 2017, the Company agreed to increase its capital contribution obligation towards Sino IC Leasing from RMB600.0 million to RMB800.0 million (from approximately US$88.3 million to US$117.8 million), while its shareholding in Sino IC Leasing will decrease from approximately 10.56% to approximately 7.44%.

(ii)

Financing Arrangements with Sino IC Leasing

In July 2017, there were seven financing arrangements in total consideration of US$410.8 million entered into by the Group with Xincheng Leasing (Tianjin) Co., Ltd, Xindian Leasing (Tianjin) Co., Ltd and Xinlu Leasing (Tianjin) Co., Ltd. (the three leasing companies are wholly-owned subsidiaries of Sino IC Leasing, an associate of the Group) respectively, in the form of a sale and leaseback transaction with a repurchase option. A batch of production equipment of the Group was sold and leased back under these financing arrangements. As the repurchase prices are set at the expected fair value and the Group is not reasonably certain that it will exercise the repurchase options, the above transactions have been accounted for a disposal of property, plant and equipment followed with an operating lease.

(iii)

Capital Contribution in SMNC

On August 10, 2017, the Company, SMIC Beijing, SMIC Holdings Corporation, China Integrated Circuit Industry Investment Fund Co., Ltd., Beijing Semiconductor Manufacturing and Equipment Equity Investment Centre (Limited Partnership), Beijing Industrial Development Investment Management Co., Ltd., Zhongguancun Development Group and Beijing E-Town International Investment & Development Co., Ltd. agreed to amend the previous joint venture agreement through the amended joint venture agreement, pursuant to which, the Company, SMIC Beijing and SMIC Holdings Corporation have agreed to make further cash contribution of US$1,224 million into the registered capital of SMNC. The Company’s aggregate shareholding in SMNC will remain at 51%.

– 29 –

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Board of Directors (the “Board”) of Semiconductor Manufacturing International Corporation (the“Company” or “SMIC”) would like to announce the unaudited interim results of operations of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the six months ended June 30, 2017, and would like to express its gratitude to the shareholders and its staff for their support for the Group.

SALES

Sales increased by 16.6% from US$1,324.5 million for the six months ended June 30, 2016 to US$1,544.3 million for the six months ended June 30, 2017, primarily due to an increase in wafer shipments during this period. The number of wafer shipments increased by 17.0% from 1,803,170 8-inch wafer equivalents for the six months ended June 30, 2016 to 2,109,919 8-inch wafer equivalents for the six months ended June 30, 2017.

COST OF SALES AND GROSS PROFIT

Cost of sales increased by 18.5% from US$953.0 million for the six months ended June 30, 2016 to US$1,129.3 million for the six months ended June 30, 2017, primarily due to an increase in wafer shipment during this period and lower fab utilization.

The Group had a gross profit of US$415.0 million for the six months ended June 30, 2017 compared to a gross profit of US$371.6 million for the six months ended June 30, 2016, representing an increase of 11.7%. Gross margin decreased to 26.9% for the six months ended June 30, 2017 from 28.1% for the six months ended June 30, 2016. The decrease in gross margin was primarily due to lower fab utilization.

PROFIT FOR THE PERIOD FROM OPERATIONS

Profit from operations decreased from US$181.6 million for the six months ended June 30, 2016 to US$99.0 million for the six months ended June 30, 2017 primarily due to an increase of advanced technology research and development activities in the first half of 2017.

Research and development expenses increased by 85.5% from US$118.0 million for the six months ended June 30, 2016 to US$219.0 million for the six months ended June 30, 2017. The increase was mainly due to the increase of advanced technology research and development activities.

General and administrative expenses increased by 53.5% from US$61.0 million for the six months ended June 30, 2016 to US$93.6 million for the six months ended June 30, 2017. The increase was primarily due to 1) the general and administrative expense of LFoundry S.r.l (“LFoundry”, our majority-owned subsidiary in Avezzano, Italy which was acquired in July 2016), 2) the start-up cost relating to our new project in Shenzhen, 3) an increase in expense arising from the share-based compensation payment transaction.

Sales and marketing expenses increased by US$1.9 million from US$17.9 million for the six months ended June 30, 2016 to US$19.8 million for the six months ended June 30, 2017.

Other operating incomes were US$16.4 million and US$6.9 million for the six months ended June 30, 2017 and 2016, respectively. The increase was mainly due to the increase in government funding received in the first half of 2017.

As a result, the Group’s profit from operations decreased to US$99.0 million for the six months ended June 30, 2017 from US$181.6 million for the six months ended June 30, 2016.

PROFIT FOR THE PERIOD

The Group had a profit of US$97.5 million for the six months ended June 30, 2017 compared to US$146.3 million for the six months ended June 30, 2016.

– 30 –

FUNDING SOURCES FOR MATERIAL CAPITAL EXPENDITURE IN THE COMING YEAR

In 2017, the Group plans to spend approximately US$2.3 billion in capital expenditures for foundry operations which are subject to adjustment based on market conditions. The capital expenditures are mainly for 1) the expansion of capacity in our majority-owned Beijing 300mm fab, Beijing 300mm fab and Shenzhen 200mm fab, 2) our new projects in Shanghai and Shenzhen, 3) a majority-owned joint venture company, which we expect will focus on research and development on 14nm FinFET technology, 4) enhancing our portfolio of comprehensive foundry solutions available to our customers, and 5) research and development equipment, mask shops and intellectual property acquisition.

In addition, the Group budgeted approximately US$70 million in 2017 as capital expenditures for non-foundry operations. This is mainly for the construction of living quarters for employees as part of the Group’s employee retention program.

The Group’s actual expenditures may differ from its planned expenditures for a variety of reasons, including changes in its business plan, market conditions, equipment prices, or customer requirements. The Group will monitor the global economy, the semiconductor industry, the demands of its customers, and its cash flow from operations and will adjust its capital expenditures plans as necessary.

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. Future acquisitions, mergers, strategic investments, or other developments also may require additional financing. The amount of capital required to meet the Group’s growth and development targets is difficult to predict in the highly cyclical and rapidly changing semiconductor industry.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2017, the Group incurred capital expenditures of US$1,508.7 million compared to US$1,543.2 million for the six months ended June 30, 2016. The Group financed its capital expenditures primarily from cash flows generated from operating and financing activities.

The Group had US$876.1 million in cash and cash equivalent as of June 30, 2017. These cash and cash equivalent are held in the form of United States Dollars, Japanese Yen, Euro, and Chinese Renminbi. The net cash from operating activities increased by 5.4% from US$372.2 million for the six months ended June 30, 2016 to US$392.1 million for the six months ended June 30, 2017.

Net cash used in investing activities was US$1,850.3 million for the six months ended June 30, 2017, primarily attributable to 1) purchases of plant and equipment mainly for the fabs in Shanghai, Beijing and Shenzhen, 2) the net result of proceeds from selling and payments for acquiring financial assets, 3) payments for acquiring long-term investment and 4) the net proceeds from disposal of property, plant and equipment and assets classified as held for sale. Net cash used in investing activities was US$1,627.3 million for the six months ended June 30, 2016, primarily attributable to 1) purchases of plant and equipment for the fabs in Shanghai, Beijing, Shenzhen and Jiangyin, 2) the net result of proceeds from selling and payments for acquiring financial assets and 3) payments for acquiring long-term investment.

Net cash generated from financing activities was US$206.9 million for the six months ended June 30, 2017, which was primarily 1) the net result of proceeds from new financing and repayments of bank borrowings and 2) the repayment of short-term notes. Net cash generated from financing activities was US$1,844.6 million for the six months ended June 30, 2016, which was primarily 1) the net result of proceeds from new financing and repayments of bank borrowings, 2) net proceeds from the issue of medium-term and short-term notes and 3) capital contribution from China Integrated Circuit Industry Investment Fund Co., Ltd. (“China IC Fund”) into the registered capital of Semiconductor Manufacturing North China (Beijing) Corporation (“SMNC”) in the first half of 2016.

As of June 30, 2017, the Group’s outstanding long-term liabilities primarily consisted of US$561.6 million in secured bank loans, US$943.7 million in unsecured bank loans, US$402.5 million in convertible bonds, US$495.8 million in USD bonds and US$219.4 million in medium-term notes. Of which, US$49.2 million was classified as the current portion of long-term loans.

– 31 –

2013 USD Loan (SMIC Shanghai)

In August 2013, Semiconductor Manufacturing International (Shanghai) Corporation (“SMIS” or “SMIC Shanghai”) entered into a loan facility in the aggregate principal amount of US$470.0 million with a syndicate of financial institutions based in the PRC. This seven-year bank facility was used to finance the planned expansion for SMIS’ 300mm fab. The facility is secured by the manufacturing equipment located in the SMIS’ 300mm fab. As of June 30, 2017, SMIS had drawn down US$260.0 million and repaid US$249.2 million on this loan facility. The outstanding balance of US$10.8 million is repayable from February 2018 to August 2018. The interest rate on this loan facility ranges from 5.71% to 5.86% per annum in 2017. SMIS was in compliance with the related financial covenants as of June 30, 2017.

2015 USD Loan (SMIC Shanghai)

In April 2015, SMIS entered into a loan facility in the aggregate principal amount of US$66.1 million with US Export- Import Bank. This five-year bank facility was used to finance the planned expansion for SMIS’ 300mm fab. The facility is secured by the manufacturing equipment located in the SMIS’ 300mm fab. As of June 30, 2017, SMIS had drawn down US$66.1 million and repaid US$33.1 million on this loan facility. The outstanding balance of US$33.0 million is repayable from December 2017 to December 2019. The interest rate on this loan facility ranges from 2.30% to 2.42% per annum in 2017. SMIS was in compliance with the related financial covenants as of June 30, 2017.

2015 RMB Loan I (SMIC Shanghai)

In December 2015, SMIS entered into a loan facility in the aggregate principal amount of RMB1,000.0 million with China Development Bank, which is guaranteed by SMIC. This fifteen-year bank facility was used for new SMIS’ 300mm fab. As of June 30, 2017, SMIS had drawn down RMB1,000.0 million (approximately US$147.2 million) on this loan facility. The outstanding balance is repayable from November 2021 to November 2030. The interest rate on this loan facility is 1.20% per annum in 2017.

2015 RMB Loan II (SMIC Shanghai)

In December 2015, SMIS entered into a loan facility in the aggregate principal amount of RMB475.0 million with China Development Bank, which is guaranteed by SMIC. This ten-year bank facility was used to expand the capacity of SMIS’ 300mm fab. As of June 30, 2017, SMIS had drawn down RMB475.0 million (approximately US$69.9 million) on this loan facility. The outstanding balance is repayable from December 2018 to December 2025. The interest rate on this loan facility is 1.20% per annum in 2017.

2015 EXIM RMB Loan (SMIC Shanghai)

In December 2015, SMIS entered into a loan facility in the aggregate principal amount of RMB500.0 million with The Export-Import Bank of China, which is unsecured. This three-year bank facility was used for working capital purposes. As of June 30, 2017, SMIS had drawn down RMB500.0 million (approximately US$73.6 million) on this loan facility. The outstanding balance is repayable in December 2018. The interest rate on this loan facility is 2.65% per annum in 2017.

2017 EXIM RMB Loan (SMIC Shanghai)

In March 2017, SMIS entered into a loan facility in the aggregate principal amount of RMB1,000.0 million with The Export-Import Bank of China, which is unsecured. This two-year bank facility was used for working capital purposes. As of June 30, 2017, SMIS had drawn down RMB1,000.0 million (approximately US$147.2 million) on this loan facility. The outstanding balance is repayable in March 2019. The interest rate on this loan facility is 2.65% per annum in 2017.

2016 EXIM RMB Loan (SMIC)

In May 2016, SMIC entered into a loan facility in the aggregate principal amount of RMB500.0 million with The Export- Import Bank of China, which is unsecured. This three-year bank facility was used for working capital purposes. As of June 30, 2017, SMIC had drawn down RMB500.0 million (approximately US$73.6 million) on this loan facility. The outstanding balance is repayable in May 2019. The interest rate on this loan facility is 2.75% per annum in 2017.

– 32 –

2015 CDB RMB Loan (SMIC Beijing)

In December 2015, Semiconductor Manufacturing International (Beijing) Corporation (“SMIB” or “SMIC Beijing”) entered into an RMB loan, a fifteen-year working capital loan facility in the principal amount of RMB195.0 million with China Development Bank, which is unsecured. As of June 30, 2017, SMIB had drawn down RMB195.0 million (approximately US$28.7million) on this loan facility. The principal amount is repayable from December 2017 to December 2030. The interest rate on this loan facility is 1.20% per annum in 2017.

2016 CDB RMB Loan (SMIC Beijing)

In May 2016, SMIB entered into an RMB loan, a fifteen-year working capital loan facility in the principal amount of RMB1,460.0 million with China Development Bank, which is guaranteed by SMIC. As of June 30, 2017, SMIB had drawn down RMB1,460.0 million (approximately US$214.9 million) on this loan facility. The principal amount is repayable from May 2018 to May 2031. The interest rate on this loan facility is 1.20% per annum in 2017.

2016 EXIM RMB Loan I (SMIC Beijing)

In December 2016, SMIB entered into an RMB loan, a two-year working capital loan facility in the principal amount of RMB240.0 million with The Export-Import Bank of China, which is unsecured. This two-year bank facility was used for working capital purposes. As of June 30, 2017, SMIB had drawn down RMB240.0 million (approximately US$35.3 million) on this loan facility. The principal amount is repayable in December 2018. The interest rate on this loan facility is 2.65% per annum in 2017.

2016 EXIM RMB Loan II (SMIC Beijing)

In January 2016, SMIB entered into an RMB loan, a three-year working capital loan facility in the principal amount of RMB400.0 million with The Export-Import Bank of China, which is unsecured. This three-year bank facility was used for working capital purposes. As of June 30, 2017, SMIB had drawn down RMB400.0 million (approximately US$58.9 million) on this loan facility. The principal amount is repayable in January 2019. The interest rate on this loan facility is 2.65% per annum in 2017.

2017 EXIM RMB Loan (SMIC Tianjin)

In February 2017, Semiconductor Manufacturing International (Tianjin) Corporation (“SMIT” or “SMIC Tianjin”) entered into a new RMB loan, a three-year working capital loan facility in the principal amount of RMB500.0 million with The Export-Import Bank of China, which is unsecured. This three-year bank facility was used for working capital purposes. As of June 30, 2017, SMIT had drawn down RMB500.0 million (approximately US$73.6 million) on this loan facility. The outstanding balance is repayable in February 2020. The interest rate on this loan facility is 2.65% per annum in 2017.

2015 CDB USD Loan (SJ Jiangyin)

In September 2015, SJ Semiconductor (Jiangyin) Corporation (“SJ Jiangyin”) entered into the USD loan, a seven-year working capital loan facility in the principal amount of US$44.5 million with China Development Bank. This bank facility was used to expand the capacity of SJ Jiangyin’s 300mm bumping fab. The facility is guaranteed by SMIB. As of June 30, 2017, SJ Jiangyin had drawn down US$20.0 million and repaid US$18.0 million on this loan facility. The outstanding amount of US$2.0 million is repayable from September 2017 to September 2022. The interest rate on this loan facility ranges from 4.72% to 4.83% per annum in 2017.

2014 Cassa Depositie Prestiti Loan (LFoundry)

In January 2014, LFoundry entered into a loan facility in the aggregate principal amount of EUR35.8 million with Cassa Depositie Prestiti. This ten-year bank facility was in relation to the admission of LFoundry to the benefits of the technology innovation fund. The facility is secured by bank deposits of EUR14.3 million and the manufacturing equipment located in LFoundry’s 200mm fab. As of June 30, 2017, LFoundry had drawn down EUR35.8 million and repaid EUR9.9 million on this loan facility. The outstanding balance of EUR26.4 million (its present value is EUR23.2 million, approximately US$26.4 million) including principal amount of EUR25.9 million and interest cash flow of EUR0.5 million is repayable from December 2017 to December 2023. The interest rate on this loan facility is 0.5% per annum in 2017.

– 33 –

2014 MPS Capital Service Loan (LFoundry)

In January 2014, LFoundry entered into a loan facility in the aggregate principal amount of EUR4.0 million with MPS Capital Service. This ten-year bank facility was in relation to the admission of LFoundry to the benefits of the technology innovation fund. The facility is secured by bank deposits of EUR1.6 million and the manufacturing equipment located in LFoundry’s 200mm fab. As of June 30, 2017, LFoundry had drawn down EUR4.0 million on this loan facility. The outstanding balance of EUR5.3 million (its present value is EUR4.3 million, approximately US$4.9 million) including principal amount of EUR4.0 million and interest cash flow of EUR1.3 million is repayable from June 2020 to December 2023. The interest rate on this loan facility is approximately 6% per annum in 2017.

2014 Citizen Finetech Miyota Loan (LFoundry)

In June 2014, LFoundry entered into a loan facility in the aggregate principal amount of JPY480.0 million with Citizen Finetech Miyota Co. Ltd. This five-year facility was used to finance the expansion of LFoundry’s 200mm fab. The facility is secured by the manufacturing equipment located in LFoundry’s 200mm fab. As of June 30, 2017, LFoundry had drawn down JPY480.0 million on this loan facility. The outstanding balance of JPY499.4 million (its present value is JPY455.4 million, approximately US$4.0 million) including principal amount of JPY480.0 million and interest cash flow of JPY19.4 million is repayable from December 2017 to December 2019. The interest rate on this loan facility is 4.04% per annum in 2017.

2017 Banca del Mezzogiorno Loan (LFoundry)

In June 2017, LFoundry entered into a soft loan facility in the aggregate principal amount of EUR1.2 million with Banca del Mezzogiorno, which is unsecured. This nine-year facility was in relation to the admission of LFoundry to the benefits of the European Project called Horizon. As of June 30, 2017, LFoundry had drawn down EUR1.2 million (approximately US$1.5 million) on this loan facility. The principal amount is repayable from December 2018 to June 2026. The interest rate on this loan facility is 0.8% per annum in 2017.

Finance Lease Payables

In 2016, a leasing contract entered into by the Group with one of its suppliers for the construction and installation of gas generation equipment. This transaction was accounted for a finance leasing with remaining lease term of 5 year. As of June 30, 2017, the total net future minimum lease payments was US$6.7 million.

Loans from non-controlling interests shareholders

In 2016, LFoundry entered into a loan facility in the aggregate principal amount of EUR15.0 million from non-controlling interests shareholders of LFoundry. This seven-year facility was in relation to the construction of the new co-generation. As of June 30, 2017, LFoundry had drawn down EUR9.3 million on this loan facility. The outstanding balance of EUR9.3 million (approximately US$10.6 million) is repayable from September 2018 to December 2023. The interest rate on this loan facility is 3.5% per annum in 2017.

Sales and Leaseback Borrowings

As of June 30, 2017, the three financing arrangements of sales and leaseback borrowings amounted to US$482.5 million (December 31, 2016: US$482.6 million) which were entered into by the Group with third-party financing companies in 2016 in the form of a sale and leaseback transaction with a repurchase option. A batch of production equipment of the Group was sold and leased back under the financing arrangements. As the repurchase prices are set at below US$1.00, which are minimal compared to the expected fair value and the Group is certain that it will exercise the repurchase options, the above financing arrangements were accounted for as collateralized borrowings of the Group.

Short-term Credit Agreements

As of June 30, 2017, the Group had 30 short-term credit agreements that provided total credit facilities of up to US$1,761.8 million on a revolving basis. As of June 30, 2017, the Group had drawn down US$256.7 million under these credit agreements. The outstanding borrowings under these credit agreements are unsecured. The interest rate ranges from 1.23% to 3.92% per annum in 2017.

– 34 –

DISPOSAL OF 19.61% EQUITY INTEREST IN CHANGJIANG XINKE BY SILTECH SHANGHAI TO JCET AND ISSUE OF A SHARES TO SILTECH SHANGHAI BY JCET AND PRIVATE PLACEMENT OF A SHARES TO SILTECH SHANGHAI BY JCET

On April 27, 2016, SilTech Semiconductor (Shanghai) Corporation Limited (“SilTech Shanghai”) and Jiangsu Changjiang Electronics Technology Co., Ltd (“JCET”) entered into a disposal agreement (the “Disposal Agreement”), pursuant to which SilTech Shanghai agreed to sell its 19.61% equity interest in Suzhou Changjiang Electric Xinke Investment Co., Ltd. (“Changjiang Xinke”) to JCET in consideration of RMB664.0 million, which will be satisfied by JCET’s issue of 43,229,166 shares of JCET to SilTech Shanghai at RMB15.36 per share. On the same day, SilTech Shanghai and JCET entered into a subscription agreement (the “Subscription Agreement”), pursuant to which SilTech Shanghai agreed to subscribe for and JCET agreed to issue 150,681,044 shares of JCET in consideration of an aggregate subscription price of RMB2,655.0 million in cash. On May 10, 2017, the Company was notified by JCET that the China Securities Regulatory Commission has granted approval for this transaction, and the Disposal Agreement and the Subscription Agreement became effective accordingly. On June 19, 2017, the transactions were completed and SMIC became the single largest shareholder of JCET. The Group recorded its ownership interest of JCET as investment in associate due to its right to nominate directors of JCET’s Board.

COMMITMENTS

As of June 30, 2017, the Group had commitments of US$443.6 million for facilities construction obligations in connection with the Company’s Shanghai, Beijing, Tianjin and Shenzhen facilities, US$460.8 million to purchase machinery and equipment mainly for the Shanghai, Beijing and Shenzhen fabs and US$7.0 million to purchase intellectual property.

DEBT TO EQUITY RATIO

As of June 30, 2017, the Group’s debt to equity ratio was approximately 48.4%, which was calculated by dividing the sum of the short-term and long-term borrowings, medium-term notes, convertible bonds and corporate bonds by total shareholders’ equity. The net debt to equity ratio was approximately 25.0%, which was calculated by dividing the total debt minus cash and cash equivalents and other financial assets by total shareholders’ equity.

FOREIGN EXCHANGE RATE FLUCTUATION RISK

The Group’s revenue, expense, and capital expenditures are primarily transacted in U.S. dollars. The Group also enters into transactions in other currencies. The Group is primarily exposed to changes in exchange rates for the Euro, Japanese Yen, and RMB.

To minimize these risks, the Group purchases foreign-currency forward exchange contracts with contract terms normally lasting less than twelve months to protect against the adverse effect that exchange rate fluctuation may have on foreign-currency denominated activities. These forward exchange contracts are principally denominated in RMB, Japanese Yen or Euros and do not qualify for hedge accounting in accordance with IFRS.

Outstanding Foreign Exchange Contracts

As of June 30, 2017, the Group had outstanding foreign currency forward exchange contract with notional amounts of US$56.6 million, which will mature in 2018. As of June 30, 2017, the fair value of foreign currency forward exchange contracts was approximately US$2.0 million, which was recorded in other financial assets.

As of December 31, 2016, the Group had no outstanding foreign currency forward exchange contracts.

– 35 –

The Group does not enter into foreign currency exchange contracts for speculative purposes.

As of
June 30, 2017

As of
December 31, 2016

(in US$ thousands)

Notional
value

Fair Value

Notional
value

Fair Value

Forward Exchange Agreement

(Receive EUR/Pay US$)

Contract Amount

27,750

1,690

—

(Receive RMB/Pay US$)

Contract Amount

28,881

261

—

Total Contract Amount

56,631

1,951

—

CROSS CURRENCY SWAP FLUCTUATION RISK

The Group entered into several RMB denominated loan facility agreements and issued RMB notes (hereinafter collectively referred to as the “RMB Debts”). As a result, the Group was primarily exposed to changes in the exchange rate for the RMB. To minimize the currency risk, the Group entered into cross currency swap contracts with a contract term fully matching the repayment schedule of the whole part of these RMB Debts to protect against the adverse effect of exchange rate fluctuations arising from the RMB Debts.

Outstanding Cross Currency Swap Contracts

As of June 30, 2017, the Group had outstanding cross currency swap contracts with notional amounts of RMB6,101.0 million (approximately US$898.0 million). Notional amounts are stated in the U.S. dollar equivalents at spot exchange rates as of the respective dates. As of June 30, 2017, the fair value of cross currency swap contracts was approximately US$(23.0) million, of which approximately US$(27.8) million was recorded in other financial liabilities and approximately US$4.8 million was recorded in other financial assets. The cross currency swap contracts will mature during the period 2017 to 2021.

As of December 31, 2016, the Group had outstanding cross currency swap contracts with notional amounts of RMB5,927.0 million (approximately US$854.4 million). Notional amounts are stated in the U.S. dollar equivalents at spot exchange rates as of the respective dates. As of December 31, 2016, the fair value of cross currency swap contracts was approximately US$(80.5) million and was recorded in other financial liabilities. The cross currency swap contracts will mature during the period 2017 to 2021.

	As of June 30, 2017					As of December 31, 2016
	(in US$ thousands)					(in US$ thousands)
	Notional value		Fair Value			Notional value		Fair Value
Cross Currency Swap Contracts (Receive RMB/Pay US$)
Contract Amount		897,998		(23,036	)		854,404		(80,518	)
Total Contract Amount		897,998		(23,036	)		854,404		(80,518	)

EMPLOYEES EQUITY INCENTIVE PLAN

Save as disclosed in this result announcement, there is no material change to the information disclosed in the 2016 annual report of the Group in relation to the number and remuneration of employees, remuneration policies, bonus and share option schemes of employees.

– 36 –

PROSPECTS AND FUTURE PLANS

In the first half of 2017, the Group achieved historical high first half revenue of US$1.54 billion, an increase of 16.6% compared to the first half of 2016. Revenue for the third quarter of 2017 is guided to be flat to up by 3% quarter over quarter. This year the Group continues to ramp up 28nm, which will be one of SMIC’s primary growth drivers. 28nm revenue grew 12-fold year over year in the second quarter of 2017 and 25.1% quarter over quarter, and is on track to reach high single-digits contribution by the fourth quarter this year. In addition, fingerprint sensors and flash memory are targeted to grow in the second half of 2017. SMIC continues to work closely with its clients to capture opportunities in new handset models, IOT, automotive, and industrial segments. Revenue in 2017 is now targeted to grow mid to high single digits percentage year over year, in line with foundry industry growth. With regard to SMIC’s future plans for capacity, the Group plans to decrease its capex intensity while expanding both 8-inch and 12-inch capacities. The Group’s planned foundry capital expenditures are around US$2.3 billion for 2017 for both mature and advanced capacity expansion.

SHARE CAPITAL

During the six months ended June 30, 2017, the Company issued 4,142,430 and 3,102,735 Ordinary Shares as a result of the exercise of equity awards granted pursuant to the Company’s 2004 stock option plan (the “2004 Stock Option Plan”) and the Company’s 2004 equity incentive plan (the “2004 Equity Incentive Plan”), respectively. During this period, there were 585,720 and 7,376,607 Ordinary Shares issued as a result of the exercise of equity awards granted pursuant to the Company’s 2014 stock option plan (the “2014 Stock Option Plan”) and the Company’s 2014 equity incentive plan (the “2014 Equity Incentive Plan”) which have replaced the 2004 Stock Option Plan and the 2004 Equity Incentive Plan, respectively, upon their termination.

	Number of Shares Outstanding
Outstanding Share Capital as of June 30, 2017:
Ordinary Shares		4,650,874,001

Under the terms of the Company’s 2014 Equity Incentive Plan, the Compensation Committee may grant restricted share units (“RSU(s)”) to eligible participants. Each RSU represents the right to receive one Ordinary Share. RSUs granted to new employees and existing employees generally vest at a rate of 25% upon the first, second, third, and fourth anniversaries of the vesting commencement date. Upon vesting of the RSUs and subject to the terms of the Insider Trading Policy and the payment by the participants of applicable taxes, the Company will issue the relevant participants the number of Ordinary Shares underlying the awards of RSUs.

REPURCHASE SALE OR REDEMPTION OF SECURITIES

The Company exercised its right to redeem the US$200.0 million zero coupon convertible bonds due 2018, the US$86.8 million zero coupon convertible bonds due 2018, the US$95.0 million zero coupon convertible bonds due 2018 and the US$22.2 million zero coupon convertible bonds due 2018 (the “Bonds”) on March 10, 2017 being the option redemption date when all of the Bonds would be redeemed in cash at 100% of the Bonds’ principal amount. The conversion price is HK$7.965, approximately US$1.027. On March 3, 2017, the Company received notices from all holders of the Bonds for the full conversion of the outstanding Bonds. As all outstanding Bonds have been fully converted and no Bonds remain outstanding, no redemption of the Bonds were carried out. The Company delisted of the Bonds from the Singapore Exchange Securities Trading Limited.

For the six months ended June 30, 2017, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s securities.

– 37 –

CORPORATE GOVERNANCE PRACTICES

The Corporate Governance Code (the “CG Code”) as set out in Appendix 14 to the Hong Kong Stock Exchange Listing Rules contains code provisions (the “Code Provisions”) which an issuer, such as the Company, is expected to comply with or advise as to reasons for deviations from and recommends best practices which an issuer is encouraged to implement (the “Recommended Practices”). The Company has adopted a set of Corporate Governance Policy (the “CG Policy”) since January 25, 2005 as its own code of corporate governance, which is amended from time to time to comply with the CG Code. The CG Policy, a copy of which can be obtained on the Company’s website at www.smics. com under “Investor Relations > Corporate Governance > Policy and Procedures”, substantially incorporates Code Provisions and the Recommended Practices of the CG Code. The Company will seek to comply with the Code Provisions of the CG Code whenever practicable. In addition, the Company has adopted or put in place various policies, procedures, and practices in compliance with the provisions of the CG Policy.

During the six months ended June 30, 2017, in the opinion of the Directors, the Company had complied with all Code Provisions set out in the CG Code.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

The Company has adopted an Insider Trading Compliance Program (the “Insider Trading Policy”) which encompasses the requirements of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Hong Kong Stock Exchange Listing Rules (the “Model Code”). The Company, having made specific enquiry of all Directors, confirms that all Directors have complied with the Insider Trading Policy and the Model Code throughout the six months ended June 30, 2017. The senior management of the Company as well as all officers, directors, and employees of the Company and its subsidiaries are also required to comply with the provisions of the Insider Trading Policy.

THE BOARD

The Board has a duty to the Company’s shareholders to direct and oversee the affairs of the Company in order to maximize shareholder value. The Board, acting by itself and through its various committees, actively participates in and is responsible for the determination of the overall strategy of the Company, the establishment and monitoring of the achievement of corporate goals and objectives, the oversight of the Company’s financial performance and the preparation of the accounts, the establishment of corporate governance practices and policies, and the review of the Company’s system of internal controls. The management of the Company is responsible for the implementation of the overall strategy of the Company and its daily operations and administration. The Board has access to the senior management of the Company to discuss enquiries on management information.

The Board consists of thirteen Directors as at the date of this result announcement. Directors may be elected to hold office until the expiration of their respective term upon a resolution passed at a duly convened shareholders’ meeting by holders of a majority of the Company’s issued shares being entitled to vote in person or by proxy at such meeting. The Board is divided into three classes with one class of Directors eligible for re-election at each annual general meeting of the Company. Each class of Directors (including all non-executive Directors) serves a term of three years.

– 38 –

The following table sets forth the names, classes and categories of the Directors as at the date of this result announcement:

Name of Director	Category of Director	Class of Director	Year of Re-election
Zhou Zixue	Chairman, Executive Director	Class I	2020
Tzu-Yin Chiu	Vice Chairman and Non-executive Director	Class I	2020
Gao Yonggang	Chief Financial Officer and Executive Director	Class I	2020
William Tudor Brown	Independent Non-executive Director	Class I	2020
Tong Guohua	Non-executive Director	Class I	2020
Chen Shanzhi	Non-executive Director	Class II	2018
Lip-Bu Tan	Independent Non-executive Director	Class II	2018
Carmen I-Hua Chang	Independent Non-executive Director	Class II	2018
Lu Jun	Non-executive Director	Class II	2018
Zhou Jie	Non-executive Director	Class III	2019
Ren Kai	Non-executive Director	Class III	2019
Shang-yi Chiang	Independent Non-executive Director	Class III	2019
Jason Jingsheng Cong	Independent Non-executive Director	Class III	2019

As of the date of this result announcement, the roles of Chairman and Chief Executive Officer are segregated and such roles are performed by Dr. Zhou Zixue and Dr. Haijun Zhao, respectively.

On an annual basis, each independent non-executive Director confirms his/her independence to the Company, and the Company considers these Directors to be independent as such term is defined in the Hong Kong Stock Exchange Listing Rules. There are no relationships among members of the Board, including between the Chairman of the Board and the Chief Executive Officer.

The Board meets at least four times a year at approximately quarterly intervals and on such other occasions as may be required to discuss and vote upon significant issues affecting the Company. The schedule of Board meetings for a given year is planned in the preceding year. The joint company secretaries of the Company (the “Joint Company Secretaries”) assist the Chairman in preparing the agenda for the Board meetings and also assist the Board in complying with applicable laws, rules and regulations. The relevant papers for the Board meetings are dispatched to Board members in accordance with the CG Code. Directors may include matters for discussion in the agenda if the need arises. Upon the conclusion of the Board meeting, minutes are circulated to all Directors for their review and comments prior to their approval of the minutes at the following or subsequent Board meeting. Transactions in which any Directors are considered to have a conflict of interest which the Board has determined to be material are dealt with by physical Board meetings rather than written resolutions and the interested Directors are not counted in the quorum of such Board meetings and abstain from voting on the relevant matters.

All Directors have access to the Joint Company Secretaries, who are responsible for assisting the Board in complying with applicable procedures regarding compliance matters. Every Board member is entitled to have access to documents tabled at the Board meeting or filed into the Company’s minutes book. Furthermore, the Board has established the procedures pursuant to which a Director, upon reasonable request, may seek independent professional advice at the Company’s expense in order for such Director to discharge his/her duties. The Joint Company Secretaries continuously update all Directors on the latest development of the Hong Kong Stock Exchange Listing Rules and other applicable regulatory requirements to ensure the Company’s compliance with and maintenance of good corporate governance practices. Each new Director is provided with training with respect to his/her responsibilities under the Hong Kong Stock Exchange Listing Rules and other regulatory requirements and the Company’s corporate governance policies and practices.

– 39 –

UPDATES TO INFORMATION RELATING TO DIRECTORS AND CHIEF EXECUTIVE

Changes in, and updates to, previously disclosed information relating to the Directors and Chief Executive As required under Rules 13.51B of the Hong Kong Stock Exchange Listing Rules, certain changes in, and updates to, the information previously disclosed regarding the Directors and chief executive during their respective terms of office are set out below:

•

With effect from February 14, 2017:

Dr. Tong Guohua has been appointed as a member of the Compensation Committee of the Company;

Dr. Shang-yi Chiang has been appointed as a member of the Compensation Committee of the Company;

Mr. Lip-Bu Tan has ceased to be the Chairman of the Compensation Committee, and will continue to serve as a member of the Compensation Committee of the Company; and

Mr. William Tudor Brown has been appointed as the Chairman of the Compensation Committee of the Company.

•

Dr. Tzu-Yin Chiu stepped down from the position of Chief Executive Officer of the Company on May 10, 2017. He was appointed as the non-executive Vice Chairman of the Board of Directors of the Company and re-designated as a Non-Executive Director on May 11, 2017.

•

Dr. Gao Yonggang was appointed as one of the Joint Company Secretaries and authorized representative of the Company under Rule 3.05 of the Hong Kong Stock Exchange Listing Rules on July 3, 2017.

•

Mr. Lip-Bu Tan did not offer himself for re-election to the Board of Directors of Ambarella Corp. and his term with the Board of Ambarella Corp. expired on June 7, 2017.

WAIVER FROM COMPLIANCE WITH THE HONG KONG STOCK EXCHANGE LISTING RULES

Save as disclosed in the prospectus of the Company dated March 8, 2004, the Company has not received any waivers from compliance with the Hong Kong Stock Exchange Listing Rules which are still in effect.

REVIEW BY AUDIT COMMITTEE

The Audit Committee has reviewed with the management of the Company the accounting principles and practices accepted by the Company and the interim financial statements of the Company for the six months ended June 30, 2017.

INTERIM REPORT

The Company’s Interim report for the six months ended June 30, 2017 containing financial statements and notes to the accounts will be published on the website of the SEHK (http://www.hkex.com.hk) as well as the website of the Company (http://www.smics.com) in due course.

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This result announcement may contain, in addition to historical information, “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These forward- looking statements are based on SMIC’s current assumptions, expectations and projections about future events. SMIC uses words like “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project” and similar expressions to identify forward looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting judgment of SMIC’s senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC’s actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, intense competition, timely wafer acceptance by SMIC’s customers, bad debt risk, timely introduction of new technologies, SMIC’s ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity and financial stability in end markets.

– 40 –

Except as required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise.

	Semiconductor Manufacturing International Corporation Gao Yonggang
	Executive Director, Chief Financial Officer and Joint Company Secretary

Shanghai, August 30, 2017

As at the date of this announcement, the directors of the Company are:

Executive Directors

Zhou Zixue (Chairman)

Gao Yonggang (Chief Financial Officer)

Non-executive Directors

Tzu-Yin Chiu (Vice Chairman)

Chen Shanzhi

Zhou Jie

Ren Kai

Lu Jun

Tong Guohua

Independent Non-executive Directors

Lip-Bu Tan

William Tudor Brown

Carmen I-Hua Chang

Shang-yi Chiang

Jason Jingsheng Cong

For identification purposes only

– 41 –

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.

	Semiconductor Manufacturing International Corporation

Date: September 1, 2017	By:	/s/ Dr. Gao Yonggang
		Name:	Dr. Gao Yonggang
		Title:	Executive Director, Chief Financial Officer and Joint Company Secretary