THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENTOUR HISTORY AND DEVELOPMENT

TA 16(i)History and Development

3-day 15(i)We are a leading pure-play 200mm wafer foundry with headquarters located in Shanghai,
China. Currently we have three 200mm wafer manufacturing facilities in Shanghai. Our sales
and technical support extends outside the PRC to Taiwan, Japan, Europe and North America.

3rd Sch 21

Our history can be traced back to July 1997, when HHNEC was founded by Shanghai Hua
Hong Microelectronics Co., Ltd., NEC and NEC (China) Co., Ltd.. HHNEC was establishedinitially to develop, manufacture and sell DRAM wafers for NEC. In 2003, HHNEC phased out

App 1A 28(2)GL49-13 3.3(a)DRAM production and started its foundry services. Our Company was established in January2005 as the holding company of HHNEC. In December 2000, Grace Shanghai was establishedby Grace Cayman as a pure-play foundry to develop, manufacture and sell semiconductor
wafers. Since 2006, both HHNEC and Grace Shanghai have focused on the research,development and manufacture of semiconductors using eNVM and power discrete
technologies.
In 2009, our Company and Grace Cayman decided to consolidate our businesses by wayof the Merger, with a view to increasing operational efficiency, improving core competitivenessand enhancing our ability to access global capital market. The Merger was completed in
December 2011 and the subsequent intra-group Restructuring, which resulted in the
consolidation of our primary operating entities in China, was substantially completed in
October 2013.
The following are the important milestones in our business history to date:Year

Milestones

1997

•

HHNEC was established.

1999

•

HHNEC successfully pilot-ran the DRAM production line.

2000

•

Grace Cayman established Grace Shanghai.

2003

•

HHNEC phased out DRAM production and commenced its foundry
services.

•

Grace Shanghai commenced production of 0.20 ␮ m PC chipsets.

•

Grace Shanghai commenced production of 0.25/0.18 ␮ m standalone
NOR Flash.

2004

•

Grace Shanghai commenced production of 0.25 ␮ m eFlash automotiveengine control units.

2005

•

Our Company was incorporated in Hong Kong as the holding company
of HHNEC.

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GL49-13 3.3(a)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENTYear

Milestones•

Grace Shanghai commenced production of 0.15 ␮ m PC chipsets.

•

HHNEC commenced production of embedded EEPROM for China’s
national ID card.

•

HHNEC licensed the 0.13 ␮ m SONOS technology from Cypress for the
production of eFlash.

•Grace Shanghai licensed the SuperFlash technology from SST.

•HHNEC commenced production of 0.35 ␮ m BCD semiconductors.

•

Grace Shanghai commenced production of 0.18 ␮ m eFlash.

2008

•

HHNEC commenced production of 0.13 ␮ m SONOS eFlash.

2009

•

Grace Shanghai commenced production of the 0.13 ␮ m Logic and0.12 ␮ m NOR Flash.

•Grace Shanghai commenced production of 0.13 ␮ m SONOS for touch
panel controllers.

•

HHNEC commenced production of 0.18 ␮ m BCD.

•

Grace Shanghai commenced production of 0.13 ␮ m eFlash based on
Superflash technology.

•

Accumulated shipments by HHNEC of power MOSFET exceeded two
million wafers.

•

Accumulated shipments by Grace Shanghai andSuperFlash-based ICs exceeded one million wafers.

•

HHNEC commenced production of 600V SJNFET and 1200V NPT
IGBT.

•

The Merger was completed.

2012

•

Annual shipments by Grace Shanghai and HHNEC of 0.13 ␮ m ICs for
SIM cards reached approximately 1.8 billion units.

2013

•

The intra-group Restructuring
substantially completed.

•

HHGrace delivered magnetic sensor samples for mobile applications.

2006

2007

2010

2011

pursuant

to

the

HHNEC

MergerofwasHistory of HHNEC and Grace Shanghai prior to the Merger
1.

HHNEC and Our Company

HHNEC was established on July 17, 1997, with a total investment of US$1.2 billion anda registered capital of US$700 million, which was fully paid up. The founders of HHNEC were:(i) Shanghai Hua Hong Microelectronics Co., Ltd., which contributed US$500 million, holding
a 71.4% equity interest, (ii) NEC, which contributed US$130 million, holding a 18.6% equity— 98 —

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT
interest, and (iii) NEC (China) Co., Ltd., a subsidiary of NEC, which contributed US$70 million,
holding a 10% equity interest. At its inception, HHNEC manufactured DRAM for NEC and laterchanged its focus to developing, manufacturing and selling semiconductor wafers specializing
in four technology platforms: eNVM, analog and power management, high voltage and RF.
Following the initial establishment of HHNEC in 1997, there were several changes to its
ownership until it was converted into a WFOE in 2005. A series of capital injections and equity
transfers from 2003 to 2005 resulted in the following shareholders of HHNEC: (i) Hua HongInternational, an exempted company incorporated in the Cayman Islands with limited liability
on December 28, 2001 and a wholly-owned subsidiary of Huahong Group, (ii) NEC, a company
incorporated in Japan, (iii) Hylintek Limited, a company incorporated in Hong Kong and (iv)
Newport Fab LLC, a company incorporated in the United States. Huahong Group and Hylintek
Limited were under the common control of CEC. The other shareholders of HHNEC wereindependent of each other.
On January 21, 2005, our Company was incorporated as a limited company under thelaws of Hong Kong as the holding company of HHNEC. Pursuant to a share purchaseagreement dated March 3, 2005, and in order to establish an offshore holding structure, Hua
Hong International, NEC, Hylintek Limited and Newport Fab LLC transferred all of their equity
interests in HHNEC to the Company in return for an allotment of Shares of our Company. As
confirmed by our PRC Legal Advisor, we obtained all necessary approvals from the relevant
PRC government authorities for such share transfer. Immediately after such share transfer, on
October 9, 2005, HHNEC became a WFOE and a wholly-owned subsidiary of our Company.
The resulting equity interests of our Company were held as to (i) 61.42% by Hua HongInternational (of which 0.49% was held on behalf of Shanghai Zhangjiang (Group) Co., Ltd.);(ii) 17.36% by NEC; (iii) 11.22% by Hylintek Limited; and (iv) 10% by Newport Fab LLC.
Subsequently, in a series of equity interest transfers pursuant to the PRC Government’s
instruction, an equity stake in Huahong Group was transferred to SAIL, as a result of which,by 2009, SAIL had obtained 47.08% in Huahong Group, which in turn held 100% in Hua HongInternational. As at the Latest Practicable Date, the shareholders of Huahong Group are SAIL,
CEC, INESA and Shanghai Jinqiao (Group) Co., Ltd., which are state-owned enterprises
directly administered by the State-Assets Supervision and Administration Commission(SASAC).
In September 2011, HHNEC resolved to make an investment of RMB700 million in
Shanghai Huali, a company primarily engaged in the fabrication of 300mm wafers. The
investment was fully settled in January 2012, which resulted in HHNEC holding an 8.86%
equity interest in Shanghai Huali.
In August 2011, our Company repurchased for US$32 million the shares held by Newport
Fab LLC. As a result and immediately prior to the Merger, our Company was held as to 68.24%
by Huahong Group through Hua Hong International (of which 0.54% was held on behalf ofShanghai Zhangjiang (Group) Co., Ltd.), 19.29% by NEC and 12.47% by Hylintek Limited.

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HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT
2.

Grace Cayman and Grace Shanghai

Grace Cayman was established as an exempted company with limited liability in the
Cayman Islands on October 5, 1999. Since then, it raised a total share capital of US$993.6
million from various investors. Immediately prior to the Merger, SAIL (through its offshore
subsidiaries), SST, Cheung Kong (Holdings) Limited/Hutchison Whampoa Limited, Sanyo andother international investors held 69.19%, 9.59%, 3.12%, 1.06% and 17.04%, respectively, ofGrace Cayman. All shareholders were independent of each other.
Grace Shanghai, a wholly-owned subsidiary of Grace Cayman, was established in the
PRC as a WFOE on December 20, 2000 with a registered capital of US$700 million. Grace
Shanghai commenced operations in 2003 to provide foundry services based on a broad
portfolio of differentiated technologies and services.
Grace Cayman also had subsidiaries in Japan, Hong Kong, Austria, Germany and theUnited States. The registered capital of Grace Shanghai was increased and paid-up to US$900
million in 2009. Grace Cayman closed its subsidiary in Austria in 2010.
In February 2010, Grace Shanghai resolved to make an investment of RMB700 million in
Shanghai Huali. The first installment of RMB350 million was made in 2010 and the remaining
RMB350 million was fully settled in February 2014, which resulted in Grace Shanghai holding
an 8.86% equity interest in Shanghai Huali.
The Merger and the Restructuring
In order to leverage our complementary strengths to further expand our product range
and customer coverage, in September 2011 our shareholders approved a merger with Grace
Cayman, which included two aspects: the Merger and the Restructuring.
1.

The Merger

3-day 15(iii)
GL49-13 3.3(c)On September 13, 2011, we entered into the Merger Agreement with Grace Cayman and
the Merger Subsidiary. Pursuant to the Merger Agreement and the plan of merger adopted by
our Board on October 18, 2011, Grace Cayman merged with the Merger Subsidiary.
Following the merger of Grace Cayman and the Merger Subsidiary, Grace Cayman, as thesurviving entity, then became our wholly-owned subsidiary. The shareholders of Grace
Cayman at the time of the Merger Agreement were issued and allotted 280,715,021 Sharesbased on a pre-determined exchange ratio of 13.9969315 Grace Cayman shares to one Share(the “Exchange Ratio”).
The major steps of the Merger are set out below:•

On September 7, 2011, we established the Merger Subsidiary prior to the executionof the Merger Agreement to facilitate the merger process.

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GL49-13 3.3(c)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT•

Upon completion of the Merger on December 28, 2011:(a)the Merger Subsidiary was merged into Grace Cayman with Grace Cayman as
the surviving company, and Grace Cayman became our wholly-owned
subsidiary. The issued shares of the Merger Subsidiary were converted into
Grace Cayman shares and all the then outstanding shares of Grace Cayman
were cancelled (the “Cancelled Grace Shares”); and(b)in exchange for the Cancelled Grace Shares, we issued a total of 280,715,021
Shares to Grace Cayman’s shareholders based on the Exchange Ratio.

In October 2011, all holders of then-existing outstanding options to purchase Grace
Cayman’s preferred shares assigned all of their rights, benefits, liabilities and obligations
under the options granted to them in 2009 to SAIL. The options were then exercised by SAIL
at a total exercise price of approximately US$40.7 million. In consideration of the assignmentof the relevant options to SAIL, SAIL granted the relevant option holders a right to purchasethe corresponding number of Shares from SAIL based on the Exchange Ratio.
Prior to the completion of the Merger, SAIL converted US$20 million in principal amountof convertible bonds of Grace Cayman (the “Grace Convertible Bonds”) that it held into
preferred shares of Grace Cayman. We assumed the remaining Grace Convertible Bonds inthe principal amount of US$69 million upon the completion of the Merger.
To eliminate any dilution effect caused by the conversion of the outstanding Grace
Convertible Bonds, our Company issued an additional 11,010,635 Shares upon completion of
the Merger which were held in escrow by SAIL as the escrow agent (the “Escrow Shares”).
The Escrow Shares were to be released to the pre-Merger shareholders of our Company if theoutstanding Grace Convertible Bonds were converted after the Merger, and would be released
to the pre-Merger shareholders of Grace Cayman if no conversion took place prior to thematurity date of September 30, 2012.
Subsequent to the Merger, the outstanding Grace Convertible Bonds were not converted
and had lapsed upon the maturity date of September 30, 2012. Pursuant to the escrowarrangement, the Escrow Shares were released to the pre-Merger shareholders of Grace
Cayman (1) .

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GL49-13 3.3(c)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT
The following chart illustrates the structure of our Company immediately prior to theMerger (unless otherwise specified, each subsidiary is 100% owned by its holding company):

GL49-13 3.3(b)Our Company(Hong Kong)(1)(2)

Merger Subsidiary(Cayman Islands)

HHNEC
(PRC)

Shanghai Huajie
(PRC)

(1)

As at the Latest Practicable Date, Sino-Alliance International, Ltd. was still holding 3,645 Escrow Shares as therelevant shareholders did not return the relevant signed transfer documents for the release of the Escrow(2)

Associates are not included in the chart. For details of our associates, see Note 1 to the Accountants’ Reportin Appendix I.

Shares.

The following chart illustrates the structure of Grace Cayman immediately prior to theMerger (unless otherwise specified, each subsidiary is 100% owned by its holding company):

Grace Cayman(Cayman Islands)(2)Grace Japan(Japan)Global Synergy
Technology Limited(Hong Kong)

Grace Shanghai(PRC)

Grace Germany(Germany)— 102 —

Grace USA
(U.S.)

GL49-13 3.3(b)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT
The following chart illustrates the structure of our Company immediately after the Merger
and immediately prior to the Restructuring (unless otherwise specified, each subsidiary is
100% owned by its holding company):

GL49-13 3.3(b)Our Company(Hong Kong)(1)Grace Cayman(Cayman Islands)

HHNEC
(PRC)

Grace Japan(Japan)Grace Shanghai(PRC)

Global Synergy
Technology Limited(Hong Kong)

Grace USA
(U.S.)

Grace Germany(Germany)
Shanghai Huajie
(PRC)

(1)

Associates are not included in the chart. For details of our associates, see Note 1 to the Accountants’ Reportin Appendix I.

2.

The Restructuring

3-day 5(iv)Following the Merger, we undertook a series of restructuring steps that resulted in: (i) the
consolidation of our primary operating subsidiaries, namely HHNEC and Grace Shanghai, into
HHGrace and (ii) the transfer of ownership of all other subsidiaries under Grace Cayman to ourCompany and renaming of these subsidiaries.
The major steps of the Restructuring are set out below:•

On March 16, 2012, Grace Cayman and our Company entered into an equity transfer
agreement.

•

On March 31, 2012, Grace Shanghai received the approval of Shanghai Municipal
Commission of Commerce for the equity transfer. Following such approval, Grace
Shanghai registered the equity transfer with the Shanghai Administration for Industry& Commerce.

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GL49-13 3.3(b)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT•

On January 24, 2013, HHGrace was established as a wholly-owned subsidiary of ourCompany and a WFOE to consolidate the assets and liabilities of HHNEC and Grace
Shanghai. This consolidation has been substantially completed except for certain
administrative formalities which still need to be fulfilled before we dissolve andderegister HHNEC and Grace Shanghai.

As advised by our PRC Legal Advisor, all approvals from the relevant PRC authorities
have been obtained with respect to the Merger and the Restructuring, and the Restructuring
will be completed upon the deregistration of HHNEC and Grace Shanghai.

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GL49-13 3.3(c)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENTGROUP STRUCTURE
The following chart depicts the shareholding and corporate structure of our Group as atthe Latest Practicable Date (unless otherwise specified, each subsidiary is 100% owned by its
holding company):
SAIL(14)(PRC)

47.08%

Shanghai Jinqiao(Group) Co., Ltd.
(PRC)

INESA(14)
(PRC)

CEC
(PRC)

47.08%

GL49-13 3.3(b)App 1A 28(2)3-day 15(ii)

4.75%

1.09%

CEC
(PRC)
27.56%SAIL(10)(PRC)

Huahong Group(PRC)(12)43.52%

Shanghai BellingCo., Ltd.
(PRC)(11)NEC(Japan)25.88%

12.30%

Microchip(U.S.)

7.95%

Other
Investors(13)

3.47%

6.88%

Our Company(Hong Kong)(1)

HHGrace(2)(PRC)

HHNEC(3)
(PRC)

Grace
Shanghai(4)(PRC)

GlobalSynergy
HHGrace USA(6)Technology Limited(5)(U.S.)(Hong Kong)

HHGrace
Japan(7)(Japan)Grace
Cayman(8)(Cayman Islands)

Shanghai
Huajie(9)
(PRC)

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)

(14)

Associates are not included in the chart. For details of our associates, see Note 1 to the Accountants’ Reportin Appendix I.
The principle business of HHGrace is to research, develop, manufacture and sell semiconductors as a pure-playfoundry.
The principle business of HHNEC was to research, develop, manufacture and sell semiconductors as apure-play foundry.
The principle business of Grace Shanghai was to research, develop, manufacture and sell semiconductors as
a pure-play foundry.
Global Synergy Technology Limited is a trading company.
The principle business of HHGrace USA is to serve as a representative of our Company and to promote ourinterests and brand in the United States.
The principle business of HHGrace Japan is to serve as a representative of our Company and to promote ourinterests and brand in Japan.
The principle business of Grace Cayman is investment holding.
The principle business of Shanghai Huajie is to design, develop and market IC products.
SAIL indirectly holds interests in the Company through four wholly owned subsidiaries.
Shanghai Belling Co., Ltd. holds interest in the Company through Hylintek Limited, a wholly-owned subsidiaryof Shanghai Belling Co., Ltd., an investment holding company.
Huahong Group holds interest in the Company through Hua Hong International, a wholly-owned subsidiary of
Huahong Group and an investment holding company.
Other investors include 55 shareholders of our Company, all of whom are independent third parties. These 55
shareholders were shareholders of Grace Cayman at the time of the Merger Agreement and pursuant to theterms and conditions of the Merger Agreement, they were issued and allotted shares in the Company. The
issuance of such Shares was completed and fully settled on December 28, 2011. For detailed information, see
the section headed “— The Merger and the Restructuring — 1. The Merger.”Pursuant to a voting agreement dated June 6, 2014 between SAIL and INESA, SAIL and INESA are voting inconcert.

— 105 —

GL49-13 3.3(d)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT
The following chart depicts the shareholding and corporate structure of our Group
immediately following the completion of the [REDACTED], assuming that the Over-allotment
Option is not exercised (unless otherwise specified, each subsidiary is 100% owned by its
holding company):
SAIL(14)(PRC)

47.08%INESA(14)
(PRC)

CEC
(PRC)

47.08%

Shanghai Jinqiao(Group) Co., Ltd.
(PRC)

4.75%

1.09%

CEC
(PRC)
27.56%
Other public
Shareholders

Huahong Group(PRC)(12)[REDACTED][REDACTED]

SAIL(10)(PRC)

NEC(Japan)[REDACTED]

Shanghai BellingCo., Ltd.(11)(PRC)[REDACTED][REDACTED]

Other
Investors(13)Microchip(U.S.)[REDACTED][REDACTED]

Our Company(Hong Kong)(1)

HHGrace(2)(PRC)

HHNEC(3)
(PRC)

Grace
Shanghai(4)(PRC)

GlobalSynergy
HHGrace USA(6)Technology Limited(5)(U.S.)(Hong Kong)

HHGrace
Japan(7)(Japan)Grace
Cayman(8)(Cayman Islands)

Shanghai
Huajie(9)
(PRC)

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)

(14)

Associates are not included in the chart. For details of our associates, see Note 1 to the Accountants’ Reportin Appendix I.
The principle business of HHGrace is to research, develop, manufacture and sell semiconductors as a pure-playfoundry.
The principle business of HHNEC is to research, develop, manufacture and sell semiconductors as a pure-playfoundry.
The principle business of Grace Shanghai is to research, develop, manufacture and sell semiconductors as apure-play foundry.
Global Synergy Technology Limited is a trading company.
The principle business of HHGrace USA is to serve as a representative of our Company and to promote ourinterests and brand in the United States.
The principle business of HHGrace Japan is to serve as a representative of our Company and to promote ourinterests and brand in Japan.
The principle business of Grace Cayman is investment holding.
The principle business of Shanghai Huajie is to design, develop and market IC products.
SAIL indirectly holds interests in the Company through four wholly owned subsidiaries.
Shanghai Belling Co., Ltd. holds interest in the Company through Hylintek Limited, a wholly-owned subsidiaryof Shanghai Belling Co., Ltd., an investment holding company.
Huahong Group holds interest in the Company through Hua Hong International, a wholly-owned subsidiary of
Huahong Group and an investment holding company.
Other Investors include 55 shareholders of our Company, all of whom are independent third parties. These 55
shareholders were shareholders of Grace Cayman at the time of the Merger Agreement and pursuant to theterms and conditions of the Merger Agreement, they were issued and allotted shares in the Company. The
issuance of such Shares was completed and fully settled on December 28, 2011. For detailed information, see
the section headed “— The Merger and the Restructuring — 1. The Merger.”Pursuant to a voting agreement dated June 6, 2014 between SAIL and INESA, SAIL and INESA are voting inconcert.

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GL49-13 3.3(b)App 1A 28(2)3-day 15(ii)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENTOUR SUBSIDIARIES
1.

3rd Sch 29
GL49-13 3.3(a)3-day 15(i)Subsidiaries of the GroupSet forth below are the details of the subsidiaries of our Group.

(1)

HHGrace

As a result of the Merger and the Restructuring, HHGrace was incorporated on January
24, 2013 as a wholly-owned subsidiary of our Company and a WFOE. HHNEC and Grace
Shanghai are in the process of transferring all of their respective assets and liabilities to
HHGrace.
As of the Latest Practicable Date, the registered capital of HHGrace was RMB5.87 billion,
being the total net assets of HHNEC and Grace Shanghai as of December 31, 2011. The
principal business of HHGrace as a pure-play foundry is research, development andmanufacturing of semiconductors on 200mm wafers for specialty applications, in particulareNVM and power discretes.
(2)

Global Synergy Technology Limited

On November 12, 2003, Silicon Synergy Technology Limited was incorporated under thelaws of Hong Kong. It was renamed Global Synergy Technology Limited on April 4, 2005.
Pursuant to a certificate of registration dated December 18, 2013, Grace Cayman transferred
all its equity interest in Global Synergy Technology Limited to our Company, and it is now awholly-owned subsidiary of our Company.
As of the Latest Practicable Date, the authorized share capital of Global Synergy
Technology Limited was HK$10,000 divided into 10,000 shares of a nominal value of HK$1.00
each. Its principal business is a trading company.
(3)

HHGrace USA

On October 20, 2005, Grace USA was incorporated under the laws of the State ofCalifornia, United States. As at the date of incorporation, Grace USA was authorized to issue
10,000 shares of common stock with no par value.
Pursuant to the Merger and the Restructuring, Grace Cayman transferred all its equity
interest in this subsidiary to our Company on December 20, 2013, and it is now a wholly-owned
subsidiary of our Company. On February 4, 2014, Grace USA was renamed HHGrace USA.
As of the Latest Practicable Date, the authorized share capital of HHGrace USA was
10,000 shares of common stock with no par value. HHGrace USA serves as a representativeof our Company and promotes our interests and brand in the United States.

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GL49-13 3.3(b)THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND
THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT(4)

HHGrace JapanOn May 2, 2006, Grace Japan was incorporated under the laws of Japan. The maximum
number of authorized shares is 800, of which 200 are issued. As at the date of incorporation,
Grace Cayman held all 200 shares of Grace Japan.
Pursuant to the Merger and the Restructuring, Grace Cayman transferred all its equity
interest in this subsidiary to our Company on December 10, 2013 and it is now a wholly-owned
subsidiary of our Company. On September 1, 2013, Grace Japan was renamed HHGrace
Japan.
As of the Latest Practicable Date, the authorized share capital of HHGrace Japan was
JPY 10 million divided into 200 shares. HHGrace Japan serves as a representative of ourCompany and promotes our interests and brand in Japan.
(5)

Shanghai Huajie
On April 8, 2002, Shanghai Huajie was incorporated under the laws of the PRC as a

Chinese-foreign equity joint venture with a registered capital of US$5 million, with its equity
interests held as to 50% by Unified Technologies Corporation, an independent third party
incorporated in Mauritius, 15% by Huahong Group, 5% by HHNEC, 15% by Shanghai BellingCo., Ltd. and 15% by Shanghai Xinxin Investment Co., Ltd., a company incorporated in the
PRC. At that time, Huahong Group was the largest shareholder of both Shanghai Belling Co.,
Ltd. and Shanghai Xinxin Investment Co., Ltd. From March to August 2006, pursuant to aseries of share transfer agreements, all the other shareholders transferred their respective
interests in Shanghai Huajie to HHNEC. As a result, Shanghai Huajie became a wholly-owned
subsidiary of HHNEC on December 19, 2006.
As of the Latest Practicable Date, the registered capital of Shanghai Huajie wasapproximately RMB41.4 million. The principal business of Shanghai Huajie is to design,develop and market IC products. Upon the completion of the Restructuring, Shanghai Huajie
will be a wholly-owned subsidiary of HHGrace.
(6)

HHNEC

For detailed information for HHNEC, see the section headed “ — History of HHNEC andGrace Shanghai prior to the Merger — HHNEC and Our Company”. Upon completion of thetransfer of the relevant assets and liabilities, we intend to deregister HHNEC.

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THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION
HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

OUR HISTORY AND DEVELOPMENT(7)

Grace Shanghai

For detailed information for Grace Shanghai, see the section headed “ — History of
HHNEC and Grace Shanghai prior to the Merger — Grace Cayman and Grace Shanghai”.
Upon completion of the transfer of the relevant assets and liabilities, we intend to deregister
Grace Shanghai.
(8)

Grace Cayman

For detailed information for Grace Cayman, see the section headed “ — History of
HHNEC and Grace Shanghai prior to the Merger — Grace Cayman and Grace Shanghai”.
2.

Subsidiary that was liquidated during the Track Record Period(1)

Grace Germany

Grace Germany was a company incorporated on February 21, 2008 under the laws ofGermany with a registered capital of EUR25,000. In order to facilitate and develop ourbusiness for European customers, pursuant to a share purchase agreement, on April 30, 2008,
Blitzstart Holding AG and Blitz Beteiligungs GmbH sold a share of EUR 24,750 and a share of
EUR250 in Blitz 08-349 GmbH respectively to Grace Semiconductor Europe GmbH. Blitz
08-349 GmbH was subsequently renamed Grace Semiconductor Germany GmbH. The original
intention to set up the representative office in Germany was to help maintain customer
relationships and to handle daily sales operation matters for our fast growing European
customer base. However, as it turned out, the European office was less effective in serving the
local customers as compared with our other regional offices, mainly due to its high overhead
costs and the scattered geographical distribution of the European customers. In order tostreamline our operations, we decided to liquidate this company for cost reasons and maintainthe customer relationships and daily sales operation matters for the region from our Shanghai
office. The liquidation process was completed on December 11, 2012.
SHAREHOLDERS’ APPROVAL AND PRC LEGAL COMPLIANCE
We obtained shareholders’ approval for the [REDACTED] on May 12, 2014. Based on theconfirmation of the Shanghai Branch of SAFE, our PRC Legal Advisor is of the view that interms of the foreign exchange compliance, our Controlling Shareholders have completed allnecessary registration and filing procedures with SAFE for their offshore investments during
the Merger and the Restructuring.
Our PRC Legal Advisor further confirmed that all necessary approvals from the relevant
PRC authorities have been obtained with respect to the [REDACTED] and the Listing.

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