About GRACEWINE Company

Under the “Yiyuan Winery” brand, we are an award-winning and long-standing wine producer located in Shanxi, dedicated to producing high-quality wines that satisfy a wide range of tastes and pricing preferences of our customers. During the track record period, the vast majority of our wine products were sold in China, and the largest sales location was the Shanxi headquarters. According to the Frost & Sullivan report, based on retail revenue in 2016, the revenue generated by the Shanxi headquarters accounted for an average of about 59.7% of our revenue, making it the largest wine producer, accounting for about 14.9% of the market share. Our “Yiyuan Winery” wine product portfolio mainly includes red wines, which can be broadly divided into (1) high-end wine combinations, with retail prices ranging from RMB 199 to RMB 598 per 750 ml bottle, targeting executive customers and corporate customers with high spending power and focus on quality when selecting wines, and (2) entry-level wine combinations, which have a reasonable retail price of RMB 125 or less per 750 ml bottle, aimed at the more price-sensitive mass market. The wine product mix varied between high-end wine combinations and entry-level wine portfolios during the track record period, and we made adjustments in response to customer preferences, the Chinese government's policy on alcohol consumption and expenditure, and the overall climate of the Chinese wine market. From time to time, to cater to the diverse tastes and preferences of our customers, we will also (1) produce white and sparkling wines as well as seasonal and specialty red wines, and (2) import a small amount of wine produced overseas. We began developing our business in Shanxi in 1997 and have now developed into a recognized wine producer in China, famous for its quality and value for money. Our “Yiyuan Winery” brand is highly respected in Shanxi, as evidenced by our sales performance in the province during the track record period and the recognition of us as a “top brand in Shanxi” by the Shanxi Administration for Industry and Commerce. Our wine product portfolio has received numerous awards and recognition from domestic and international industries, such as winning the Gold Award in 2017 and “LarevueDuvindeFrance” (Chinese version) as “Best Value for Money”. This wine product portfolio is also popular with tasters in mainland China and Hong Kong, and is available at many multinational luxury hotel chains. Details of our awards and industry recognitions can be found below under “- Our Wine Product Portfolio - Awards and Recognition”. Our wine products are currently produced in our winery in Shanxi, which has a construction area of about 29,064.27 square meters and 125 wine tanks. It is estimated that brewing tanks will occupy about 95.2% and 80.6% respectively during the FY15 and FY2016 brewing seasons. We believe that we are making full use of the Shanxi wineries as a whole and need more brewing facilities to achieve future growth. During our track record period, we began construction of a new winery in Ningxia, with a construction area of about 72,800 square meters, and we expect to install 75 wine tanks by the end of 2018. We have also been growing and harvesting most of the grapes used for winemaking in the neighboring vineyards of Shanxi Winery and Ningxia Winery during the Track Record Green Period. We have also purchased small quantities of various grapes from external sources to meet additional winemaking needs from time to time. In FY2015 and FY2016, our homegrown grapes accounted for about 91.7% of the average amount of grapes used for winemaking. We believe that our wineries and wineries in Shanxi and Ningxia complement each other to spread the risks caused by weather and other natural disasters that are detrimental to grape growing and winemaking. We also receive subsidies and other intangible support from the Ningxia regional government from time to time, and the Ningxia regional government has invested a lot of energy and investment in the wine industry. Most of our wine products are sold mainly to mainland China through a network of 13 distributors, but also to Hong Kong, China and other international markets. In terms of revenue during the track record period, an average of about 59.1% of our wine products were sold in Shanxi through our exclusive distributor, Shanxi Jiajia, and we have established a long-term business relationship with Shanxi Jiajia for over 12 years. We believe that we are not overly dependent on Shanxi Jiajia because our business relationships are mutually beneficial, friendly and sustainable. Please see “- Sales and Distribution - Distributors - Distributor Relationships” below for further details. In addition to Shanxi, our other main sales markets in China are Fujian, Zhejiang, Henan, Hunan and Guangdong. We are also actively building and expanding our online sales capabilities through large-scale Chinese online platforms such as JD and Tmall. From time to time, we sell directly to end users who mainly undertake personal, corporate and commercial activities. Sales to distributors remained our main sales channel throughout the recording period and distributors were recorded as our customers in our financial statements.