Grace Semiconductor Manufacturing Corporation (“GSMC”) is a semiconductor foundry company in China. GSMC offers semiconductor wafer fabrication services to fabless design firms, integrated device manufacturers (“IDM”) and systems companies by manufacturing integrated circuits (“IC” or “chips” based on logic, flash memory, and static random access memory (“SRAM”) processes.

GSMC’s manufacturing facilities are located in the Pudong New Area of Shanghai. Initial construction of the project started in January 2001, and commercial production of semiconductor wafers commenced in December 2003. GSMC is currently manufacturing around 27,000 eight-inch semiconductor wafers per month, and expects to ramp up to at least 35,000 wafers per month by the end of 2005.

GSMC broke even on a cash basis after four months of commercial operations and generated an EBITDA of approximately US$50 million in 2004. Major customers include Oki Electric Industry (“Oki”), Silicon Storage Technology (“SST”), and Via Technologies.

Following our investment into GSMC, GEMS Funds shareholders Cheung Kong and Hutchison Whampoa, as well as Sanyo of Japan invested an additional US$140 million. The pricing indications for new fundraising rounds are expected to generate an increase in appraisal value compared to our effective investment cost of over 60% within 12 months.