Semiconductor Manufacturing 'l : Announcements and Notices - (1) Grant of Share Options and (2) Non-exempt Connected Transactions - Proposed Grant of Restricted Share Units to Directors and Chief Executive Officer

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SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION

中 芯 國 際 集 成 電 路 製 造 有 限 公 司 *

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 981)

1. GRANT OF SHARE OPTIONS AND
2. NON-EXEMPT CONNECTED TRANSACTIONS - PROPOSED GRANT OF RESTRICTED SHARE UNITS TO DIRECTORS AND

CHIEF EXECUTIVE OFFICER GRANT OF SHARE OPTIONS AND PROPOSED GRANT OF RESTRICTED SHARE UNITS

The Board announces that on 5 April 2017, the Company conditionally granted an aggregate of 2,796,818 share options under its 2014 Stock Option Plan to subscribe for Ordinary Shares, subject to acceptance of the grantees and compliance with applicable laws and regulations. Of the 2,796,818 share options granted, 2,109,318 share options were granted to Dr. Chiu, 62,500 share options were granted to Dr. Chen, 62,500 share options were granted to Mr. Tan, 187,500 share options were granted to Dr. Chiang, 187,500 share options were granted to Dr. Tong and 187,500 share options were granted to Dr. Cong. If any grant of the share options as detailed below has not been accepted by Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong or Dr. Cong or is not otherwise in compliance with any applicable laws and regulations, such grant in respect of the relevant grantee would not proceed or become effective for legal and regulatory purposes.

The Board announces that the Company proposes to grant 2,796,818 Restricted Share Units under the 2014 Equity Incentive Plan, subject to the Independent Shareholders' approval at the AGM. Among the 2,796,818 Restricted Share Units to be granted, 2,109,318 Restricted Share Units will be granted to Dr. Chiu, 62,500 Restricted Share Units will be granted to Dr. Chen, 62,500 Restricted Share Units will be granted to Mr. Tan, 187,500 Restricted Share Units will be granted to Dr. Chiang, 187,500 Restricted Share Units will be granted to Dr. Tong and 187,500 Restricted Share Units will be granted to Dr. Cong. Each of the Restricted Share Units to be granted to Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong represents the right to receive an Ordinary Share on the date it vests. It is intended that the Restricted Share Units to be granted to Dr. Chiu, Dr. Chen and Mr. Tan will vest immediately upon their grant, while the Restricted Share Units to be granted to Dr. Chiang, Dr. Tong and Dr. Cong will vest

over a period of three years at the rate of 33%, 33% and 34% for each 12 month period commencing on the date on which the relevant director commenced his term of office as director.

IMPLICATIONS UNDER THE LISTING RULES

Dr. Chiu is the Chief Executive Officer of the Company and an executive director, Dr. Chen is a non- executive Director, Mr. Tan is an independent non-executive Director, Dr. Chiang is an independent non- executive Director, Dr. Tong is a non-executive Director and Dr. Cong is an independent non-executive Director. As such, each of Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong is a connected person of the Company. The conditional grant of the share options to Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong was approved by the independent non-executive Directors (excluding Mr. Tan, Dr. Chiang and Dr. Cong in relation to their own grant) on 20 December 2016 and 14 February 2017 respectively in accordance with Rule 17.04(1) of the Listing Rules and the announcement of the grant of the share options is made pursuant to Rule 17.06A of the Listing Rules. Furthermore, the proposed grant of 2,796,818 Restricted Share Units and any transactions contemplated thereunder (including the allotment and issue of any new Ordinary Shares thereunder) constitutes non- exempt connected transactions of the Company under Chapter 14A of the Listing Rules and are thus subject to reporting, announcement and the Independent Shareholders' approval requirements.

GRANT OF SHARE OPTIONS TO DIRECTORS

The Board announces that on 5 April 2017, the Company conditionally granted an aggregate of 2,796,818 share options under the 2014 Stock Option Plan to subscribe for Ordinary Shares, subject to acceptance of the grantees and compliance with applicable laws and regulations. Among the 2,796,818 share options granted, 2,109,318 share options were granted to Dr. Chiu, 62,500 share options were granted to Dr. Chen, 62,500 share options were granted to Mr. Tan, 187,500 share options were granted to Dr. Chiang, 187,500 share options were granted to Dr. Tong and 187,500 share options were granted to Dr. Cong. If any grant of the share options as detailed below has not been accepted by Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong or Dr. Cong or is not otherwise in compliance with any applicable laws and regulations, such grant in respect of the relevant grantee would not proceed or be effective for legal and regulatory purposes. The following are the details of the share options granted:

Date of grant: 5 April 2017

Exercise price of the share options:

HK$9.834 per Share

(being the higher of (a) the closing market price of the Shares on the Stock Exchange as stated in the daily quotation sheet of the Stock Exchange (the ''Closing Price'') on 5 April 2017, being HK$9.700 and (b) the average Closing Price for the period from 28 March 2017 to 3 April 2017 (both days inclusive), being HK$ 9.834)

Number of share options granted:

2,796,818 share options, of which

1. 2,109,318 share options were granted to Dr. Chiu;

2. 62,500 share options were granted to Dr. Chen;

3. 62,500 share options were granted to Mr. Tan;

4. 187,500 share options were granted to Dr. Chiang;

5. 187,500 share options were granted to Dr. Tong; and

6. 187,500 share options were granted to Dr. Cong;

Closing price of the Shares on the date of grant:

HK$9.700 per Share

Validity period of the share options:

The share options are valid for a period of 10 years commencing on 5 April 2017, subject to earlier termination as provided under the 2014 Stock Option Scheme and applicable award documents.

PROPOSED GRANT OF RESTRICTED SHARE UNITS TO DIRECTORS AND CHIEF EXECUTIVE OFFICER

The Board announces that at meetings of the Board held on 20 December 2016 and 14 February 2017 respectively, the Board resolved to grant 2,796,818 Restricted Share Units (the ''Proposed RSU Grants'') under the 2014 Equity Incentive Plan, subject to the Independent Shareholders' approval at the AGM. Among the 2,796,818 Restricted Share Units, 2,109,318 Restricted Share Units will be granted to Dr. Chiu, 62,500 Restricted Share Units will be granted to Dr. Chen, 62,500 Restricted Share Units will be granted to Mr. Tan, 187,500 Restricted Share Units will be granted to Dr. Chiang, 187,500 Restricted Share Units will be granted to Dr. Tong and 187,500 Restricted Share Units will be granted to Dr. Cong. Each of the Restricted Share Units to be granted to Dr. Chiu, Dr. Chen, and Mr. Tan represents the right to receive an Ordinary Share on the date it vests, and it is intended that such Restricted Share Units will vest immediately upon their grant. Each of the Restricted Share Units to be granted to Dr. Chiang, Dr. Tong and Dr. Cong represents the right to receive an Ordinary Share on the date it vests, and it is intended that such Restricted Share Units will vest over a period of three years at the rate of 33%, 33% and 34% for each 12 month period commencing on the date on which the relevant director commenced his term of office as director. In accordance with the terms of the 2014 Equity Incentive Plan, the Proposed RSU Grants will be made for no consideration, other than the minimum payment required by the applicable law in the Cayman Islands (which is the par value of the Ordinary Shares to be issued pursuant thereto).

As at the date of this announcement, Dr. Chiu holds 4,519,361 Ordinary Shares, is interested in 7,752,111 share options granted to him by the Company pursuant to the 2004 Stock Option Plan and the 2014 Stock Option Plan, representing in aggregate approximately 0.2640% of the total issued share capital of the Company. As at the date of this announcement, Dr. Chen is interested in a total of 414,687 share options granted to him by the Company pursuant to the 2004 Stock Option Plan and the 2014 Stock Option Plan and is interested in 100,156 Restricted Share Units granted to him by the Company pursuant to the 2014 Equity Incentive Plan, representing approximately 0.0111% of the total issued share capital of the Company. As at the date of this announcement, Mr. Tan holds 115,439 Ordinary Shares and is interested in a total of 528,926 share options granted to him by the Company pursuant to the 2004 Stock Option Plan and the 2014 Stock Option Plan, representing approximately 0.0139% of the total issued share capital of the Company. As at the of this announcement, neither Dr. Chiang, Dr. Tong or Dr. Cong holds any Ordinary Shares or is interested in any share options of the Company or any Restricted Share Units.

Subject to the grant of the share options becoming effective and the Independent Shareholders' approval of the Proposed RSU Grants at the AGM and assuming that no further Shares will be issued or repurchased by the Company prior to the date of the AGM, the maximum number of Ordinary Shares that may be issued to Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong in accordance with and subject to the terms of the 2014 Stock Option Plan and the 2014 Equity Incentive Plan would be 4,218,636, 125,000, 125,000, 375,000, 375,000 and 375,000 respectively, representing approximately 0.0908%, 0.0027%,

0.0027%, 0.0081%, 0.0081%, and 0.0081% respectively of the total issued share capital of the Company as at the date of this announcement and 0.0907%, 0.0027 %, 0.0027%, 0.0081%, 0.0081% and 0.0081% respectively of the enlarged total issued share capital of the Company. The total interests of Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong in the underlying shares of the Company under the 2004 Stock Option Plan, 2014 Stock Option Plan and the 2014 Equity Incentive Plan would represent approximately 0.3548%, 0.0138%, 0.0165%, 0.0081%, 0.0081% and 0.0081% respectively of the total issued share capital of the Company as at the date of this announcement and 0.3544%, 0.0138%, 0.0165%, 0.0081%, 0.0081%and 0.0081% respectively of the enlarged total issued share capital of the Company.

Based on the closing price of HK$9.700 per Share as quoted on the Stock Exchange on 5 April 2017, the market value of the Restricted Share Units under the Proposed RSU Grants amounts to approximately HK$27,129,134.60.

REASONS FOR AND BENEFITS OF THE PROPOSED RSU GRANTS

The Proposed RSU Grants are part of the Company's remuneration system, the purpose of which is to closely align the interests and benefits of and risk sharing among the Shareholders, the Company and the employees in order to maximise the motivation of the Directors and senior management.

The Proposed RSU Grants aim to provide sufficient incentives to attract, retain and motivate Dr. Chiu and Dr. Chen to participate in the continuing operation and long-term development of the Company and to recognise Dr. Chiu and Dr. Chen's contributions to the growth of the Company. The Proposed RSU Grants also aim to recognise Mr. Tan's past contributions to the Group and provide an incentive to retain Mr. Tan for his contributions to the Group. The proposed RSU Grants to Dr. Chiang, Dr. Tong and Dr. Cong aim to provide sufficient incentives to attract and motivate them to remain with, and to strive for the future development and expansion of the Group and to enhance shareholder value through further aligning these Directors' interests with the Company.

Furthermore, there will not be substantial cash outflow by the Company under the Proposed RSU Grants. In this regard, the Directors (excluding the independent non-executive Directors and subject to advice from the Independent Financial Adviser) consider that the terms of the Proposed RSU Grants are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

SPECIFIC MANDATE TO ISSUE NEW ORDINARY SHARES

The new Ordinary Shares to be issued under the Proposed RSU Grants will be issued under the specific mandate granted to the Directors by the Shareholders at the annual general meeting of the Company held on 13 June 2013 for the issue of Shares under the 2014 Equity Incentive Plan. The Listing Committee of the Stock Exchange has previously granted its approval for the listing of, and permission to deal in, Ordinary Shares to be issued under the 2014 Equity Incentive Plan, subject to the fulfilment of all other conditions of the 2014 Equity Incentive Plan. In the context of the grant of Restricted Share Units and issue of Ordinary Shares pursuant thereto under the 2014 Equity Incentive Plan to a director as a connected person, the requirements under Chapter 14A of the Listing Rules would be required to be satisfied, including the obtaining of the approval of the Independent Shareholders. The total number of such new Ordinary Shares which may be issued under the 2014 Equity Incentive Plan will not exceed 801,844,281.

LISTING RULES IMPLICATIONS

Dr. Chiu is the Chief Executive Officer of the Company and an executive director, Dr. Chen is a non- executive Director, Mr. Tan is an independent non-executive Director, Dr. Chiang is an independent non- executive Director, Dr. Tong is a non-executive Director and Dr. Cong is an independent non-executive Director. As such, each of Dr. Chiu, Dr. Chen, Mr. Tan, Dr. Chiang, Dr. Tong and Dr. Cong is a connected person of the Company. The conditional grant of the share options to Dr. Chiu, Dr. Chen, Mr. Tan, Dr.