Corporate Presentation 2012 Interim Results

August 2012

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• The presentation is prepared by Dynasty Fine Wines Group Limited (the “Group”) and is solely for the purpose of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to solicit an offer to buy or to form any basis of investment decision for any class of securities of the Group in any jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a brief summary in nature and do not purport to be a complete description of the Group, its business, its current or historical operating results or its future business prospects.

• This presentation is provided without any warranty or representation of any kind, either expressed or implied. The Group specifically disclaim all responsibilities in respect of any use or reliance of any information, whether financial or otherwise, contained in this presentation.

Disclaimer

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Agenda

Financial Highlights

Business Review

Prospects & Strategies

Q & A

Financial Highlights

Financial Highlights

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HKD ’000

Gross profit

Gross profit margin

(Loss)/Profit attributable to owners

Net profit margin

1H2012

44%

246,700

(4,697)

-1%

Basic (loss)/earnings per share (HK cents) (0.4)

Revenue 556,439

1H2011

42%

329,286

52,652

7%

4.2

790,686

Net Profit

Profitability

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HKD million HKD million

The drop in revenue was the result of a decrease in sales volume despite the increase

in average ex-winery sales price

Sales of red wines remained as the primary revenue, representing 85% of the revenue

Net profit decreased was due to the drop in sales volume resulting from the reform of

sales and distribution model

The loss in 1H2012 has clearly recovered to a certain

extent when compared to the loss in 2H2011

Revenue

791

556

0

200

400

600

800

1,000

1H2011 1H2012

53

-48

-4.7

-60

-40

-20

0

20

40

60

1H2011

2H2011 1H2012

- 30% -109%

- 90%

Gross Profit Margin

Cost and Margin Analysis

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68%

19%

13%

Breakdown of Cost of Sales

1H2011

63% 25%

12%

Raw materials

Manufacturing overheads

Consumption tax and other taxes

1H2012

42% 44%

44% 47%

33% 26%

0%

10%

20%

30%

40%

50%

1H2011 1H2012

Overall gross profit margin

Gross margin of red wine products

Gross margin of white wine products

Increase of gross profit margin was mainly a

result of gradual improvement in product

mix with a higher margin partially offset by

the impact of increase in unit cost of

manufacturing overheads due to lower

utilization rate of production capacity

*

Include grapes and grape juice, yeast and additives,

packaging materials and others *

Expense Analysis

1H2011

%

Revenue

Cost of sales

Gross profit

Distribution costs

Administrative expenses

Net profit

1H2012

%

100

(56)

44

(33)

(12)

-1

Distribution costs increased slightly because the decrease in revenue was more than the

decrease in distribution costs in terms of percentage points

Percentage of advertising and market promotion expenses was stable since focus on

marketing has slightly shifted from brand promotion to sales promotion activities which

better enhance sales

8

100

(58)

42

(27)

(8)

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Advertising and market promotion expenses (18) (18)

Business Review

Reform on Sales & Distribution Model

Measures Goals

Co-operate with distributors to

strengthen the control on retail

price structure

Enhance the effective management

in monitoring and controlling sales

and marketing spending

Streamline the existing multi-

layered sales and distribution

system

Strengthen direct control over

the sales channels

Lead to sustainable growth by

creating a business model that will

mutually benefit both the Group and

the distributors in the long run

Enhance efficiency and

effectiveness

Maximize sales revenue

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Integrated less efficient

distributors and support

committed distributors

Be closely monitored and

adjusted in a flexible way if and

when needed

Sales Analysis

The decrease in sales volume was due to the impact of the reform of the sales and

distribution model , weaker demand of domestic wine products amidst the slower economic

growth in the PRC and the impact of imported wines

Sales volume of premium wines and imported products in 1H2012 was higher than that in

2H2011

Average ex-winery sales price of red and white wine products was higher than 2011‟s

HK$27.8 per bottle (750ml), due to shifting the sales mix further to the high end segment

by launching more high end products such as a cask collection of premium wines

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Bottles (million)

Total number of bottles of wine sold

30.9

16.9

0

10

20

30

40

1H2011 1H2012

- 45.3%

Sales Network

Domestic market remained as the primary focus

Sales from Huadong region decreased as the reform progress comparatively slower

Extended the sales network to other regional markets such as the south-western region,

and sales in those markets also grew

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Sales network all over China

Distributors

Dynasty

Club

Retails

Shops

Online

Sales

Sales

Channels

Expanded sales network through

various sales channels

Sales by Region Sales Channels

Sales Channels

Targets the high-end market with an aim to

cultivate a group of loyal and sophisticated

customers

Offers a stylish wine tasting venue as well

as spacious wine storage area to top-tier

customers in Shanghai

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Cater for different needs and preferences

of customers

Sale of both Dynasty wines and imported

wines in retail shops, attracting people to

the grape wine culture and lead the trend

of wine consumption

Self-operated retail shops: 2 in Tianjin & 1

in Shanghai

Amongst the best vehicles

to convey brand image and

messages

Better understand and

quickly respond to

developments in the external

environment

Dynasty Club

Retail Shops

Sale of both Dynasty wines and imported wines

100 franchised retail shops opened as of 1H2012

Non-productive shops to be eliminated

Targets to establish approximately 200 franchised retail shops by the end of 2012

As at the date of this presentation

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Sales Channels

Region No. of Franchised Retail Shops

South-Central region 38

Southern region 26

Eastern region 16

North-West region 1

North-East region 2

Northern region 17

Total 100

Franchised Retail Shops

Effective way to attract on-line

users to enlarge customer base

Serves as an additional

marketing and promotion

channel

Relatively low operating cost

enables higher gross profit

margin on e-commerce business

Running smoothly and recording

a steady income

Be further exploited

internationally following the

successful e-commerce model in

overseas

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Sales Channels

Online Sales - www.i9wang.com 王朝愛酒網

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Product Mix “Dynasty” Brand

Imported Wines

Produces a wide range of more

than 100 wine products under

the „„Dynasty‟‟ brand

Targets medium to high end

customers

Premium Dynasty wines

frequently exposed in leading

wine magazines and high

profile exhibition

Vinexpo 2012, HK

Carries approximately 420 imported

products under 90 brands

Introduces classic “old world” and

“new world” varietals to cater for a

market niche preferring the taste of

foreign premium wines

According to a Vinexpo survey, China

may become the second biggest

grape wine importer in 2015

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Brands Alliance

In Alliance with Renowned Foreign Brands

Premium Products

Chateau Dynasty-

Grand Wine 2005

Premium “Jue” Cask Collection

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Further Upgrade Product Mix and Enhance Product Portfolio

Annual production capacity of

70,000 tonnes, equivalent to

approximately 93.3 million bottles

Production Capacity

Tianjin

Shandong

Hebei

Ningxia

Xinjiang

Suppliers Production Facilities

More than 10 major grape

juice suppliers with long-term

relationships

Work with vignerons to enlarge

their vineyards in order to enjoy

better economies of scale

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Overseas

Awards & Recognitions

Major Accolades Newly Garnered

“The Asset Triple A – China‟s Most Promising

Companies” in the food and beverages industry

category by The Asset magazine

“Prime Awards for the Best Brand Enterprise in

Greater China 2012” by metroBox magazine

Dynasty VSOP Brandy won Gold Medal in the sixth Yantai

International Wine Competition

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Chateau Dynasty

Chateau Dynasty inside view

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Ticket-based hot

tourist spot

Membership-based red

wine club

Wedding photography

and ceremony venue

Function rooms for

meetings and other

events

Increases Dynasty

brand awareness

Prospects & Strategies

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Prospects

Challenges

Opportunities

Transformation of China‟s economy from

investment-driven expansion to consumption-

driven growth

The average consumption of grape wine in China

is still well below developed countries

New industry policies which favour high-end

industry leaders

Competition remains intense

The pressure of costs will persist

Threat of imported wines

The Grape Wine Industry is Expected to Maintain

a Steady Overall Growth and is Full of Opportunities

Strategies

Supply & product

Sales & marketing

M&A opportunities

Expedite the completion of the new sales & distribution model

Continue systematic and in-depth negotiation with distributors on the new terms of distributorship

Expand sales network through various sales channels

Focus of marketing shift from brand promotion to sales promotion activities

Make good use of Chateau Dynasty and Dynasty club to enhance the distinctive high brand image

Evaluate appropriate

M&A opportunities and

distributorships for

foreign brand wines

In discussion with a

target boutique wine

company in New

Zealand

Keep identifying new suppliers to optimise supply network

Enhance the supply of high quality grape juice

Improve product development and quality control system

Upgrade product mix to high end products

Increase the proportion of imported wine sales

Raise ex-winery sales price of wines in 2H2012

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China’s Premier Winemaker