About GRACEWINE Company

We are an award-winning and long-standing wine producer located in Shanxi under the “Yiyuan Winery” brand. We are committed to producing high-quality wines that meet the 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 our largest sales location was our headquarters in Shanxi. According to the Frost & Sullivan Report, in terms of 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 wine, which can be roughly 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 who have high consumption capacity and focus on quality when selecting wines, and (2) entry-level wine packages. The retail price is relatively reasonable. The retail price is RMB 125 or less per 750 ml bottle, which is aimed at the more price-sensitive mass market. During the track record period, the wine product mix varied between the high-end wine portfolio and the entry-level wine portfolio, and we made adjustments in response to customer preferences, the Chinese government's policies on alcohol consumption and expenditure, and the overall climate of the Chinese wine market. To cater to the diverse tastes and preferences of our customers, from time to time we also (1) produce white and sparkling wines, seasonal and specialty red wines, and (2) import small amounts of overseas wines. We began developing our business in Shanxi in 1997, and have now developed into a highly recognized wine producer in China, famous for its quality and cost performance. 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 “Top Brand in Shanxi” by the Shanxi Administration for Industry and Commerce. Our wine product portfolio has received numerous awards and recognition from the industry at home and abroad. For example, it won a gold medal in 2017 and was named “Best Value for Money” by “LareVueduVindeFrance” (Chinese version). This wine portfolio is also popular with wine tasters in mainland China and Hong Kong, China, and is available at many international luxury hotel chains. Details of our awards and industry recognitions can be found below under “- Our Wine Product Portfolio - Awards and Recognitions”. Our wine products are currently produced in our winery in Shanxi. The winery has a construction area of about 29,064.27 square meters and 125 wineries. During the FY15 and FY2016 winemaking seasons, it is estimated that the winemaking tanks were occupied by about 95.2% and 80.6% respectively. We believe that we are making full use of wineries in Shanxi as a whole and need more winemaking facilities to achieve future growth. During the 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 winemaking tanks by the end of 2018. We have also been cultivating and harvesting most of the grapes used in winemaking in the neighboring vineyards of the Shanxi winery and Ningxia winery during the green period, and 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 total amount of grapes used for winemaking. We believe that our wineries and wineries in Shanxi and Ningxia complement each other, so we can spread the risks caused by weather and other natural disasters that are harmful to winemaking and winemaking. From time to time, we also receive subsidies and other intangible support from the Ningxia Regional Government, which has invested a lot of energy and investment in the wine industry. Most of our wine products are mainly sold to mainland China through a network of 13 distributors, as well as to Hong Kong and other international markets. During the track record period, in terms of revenue, 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 more than 12 years. We believe we are not overly dependent on Shanxi Jiajia because our business relationships are mutually beneficial, friendly and sustainable. For further details, please refer to “- Sales and Distribution - Distributors - Relationships with Distributors” below. 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 individual, corporate and commercial activities. Throughout the track record period, sales to distributors remained our main sales channel and distributors were recorded as our customers in financial statements.