the vineyard report-20091013-pge

Paolo Gemma Cod.Fisc. GMMPLA69A11F952W ● P.IVA 02953630981

25057 Sale Marasino (BS) Italy ● Via Provinciale, 19 ● tel./ph. +39 030 9824471 ● fax +39 030 9824471 e-mail: [email protected] ● web site: www.paologemma.com

THE VINEYARD

BUSINESS PLAN

WINE TRADING PLAN

2010‐2011

File “The Vineyard Report‐20091013‐pge.docx” dated 13/10/2009

(rif./ref.:commessa/job ….)

Prepared on 13/10/2009 2 of 25

CONFIDENTIAL

This Report (herewith called “Report”) has been issued by Paolo Gemma (herewith called “Paolo Gemma” or “Gemma”) with the aim to provide the basic outlines of an international business project to the potential investors.

Therefore this Report cannot be distributed to others or reproduced even partially in any official documents without the preventive written authorization of Paolo Gemma.

.


INDEX OF THE CONTENTS 1. PREMISES 4

1.1. GENERAL DRAFTING PRINCIPLES 5

2. CORE BUSINESS 6 2.1. ORIGIN & KIND OF THE BUSINESS 7

2.2. MARKET STRUCTURE 7

2.2.1. Size 7

2.2.2. Growth rate 7

2.2.3. Known factors influencing growth rate 7

2.3. COMPETITIVE ENVIRONMENT 8

2.3.1. Major players in the market 8

2.3.2. Marketing strategies 9

2.3.3. Distribution channels 10

2.4. Pricing 11

2.5. REGULATORY OVERVIEW 12

2.5.1. Duties/taxes 12

2.5.2. Licensing and registration requirements 12

2.5.3. Labelling requirements 12

2.5.4. Quotas 12

2.6. WINE OFFER 12

2.7. COMPANY’S STRUCTURE 14

2.8. INVESTORS 14

2.9. FINANCIAL REQUIREMENTS 14

3. INCOME BUDGET 2010-2011 15 3.1. DRAFTING PRINCIPLES 16

3.2. TURNOVER 17

3.2.1. Price Fixing 17

3.3. PURCHASING COSTS 18

3.3.1. Purchases 18

3.3.2. Freight & Duties 19

3.4. LOGISTIC & SELLING COSTS 20

3.5. ADMINISTRATIVE COSTS 22

3.6. COMMERCIAL COSTS 22

3.7. GENERAL COSTS 22

3.8. FINANCIAL COSTS 23

3.9. DEPRECIATION & AMORTIZATION 23

3.10. INCOME TAX 23

3.11. PROFIT 23

4. FINANCIAL BUDGET 2010-2011 24 4.1. DRAFTING PRINCIPLES 25

4.2. REMARKS 25


1. PREMISES


1.1. GENERAL DRAFTING PRINCIPLES Present Business Plan has been drafted applying a fundamental principle whose application wholly affected it.

Each single event forecasted in the plan has been actually evaluated using a prudential principle, reducing the turnover estimation and increasing those costs that weren’t absolutely sure.

We feel that such an approach is useful particularly for startup companies to check the effectiveness of the business and the adequacy of the totality of the forecasted productive, commercial, financial and economic elements.

The prudential approach we adopted brought eventually to analyze the different components of the project as much minutely as possible in order to limit the risk of eventual gaps and inaccuracies.


2. CORE BUSINESS


2.1. ORIGIN & KIND OF THE BUSINESS The business idea originated from a group of businessmen experienced in the Asian market who saw in these recent years a fast growing request and consumption of wine in the whole area, especially in Hong Kong and in China.

This observation, together with profitable retail prices and a convenient tax and custom regulation system, push them to go into this kind of business.

The project provides to be focused on the importation and sale of Argentine and Italian wines on the Asian market, starting first from the Hong Kong market to expand lately to China, Macau and the neighbourhood countries such as Singapore, Thailand, India and Korea.

Therefore it’s a business idea that foresees the incorporation of a Hong Kong Company that will directly trade and sell wines.

Details of such a business are disclosed in the present business plan.

2.2. MARKET STRUCTURE

2.2.1. Size The population of Hong Kong is seven million comprising 95 percent of Chinese descent, four percent ‘other Asian’ and one percent European. Wine consumers in Hong Kong are more likely to be local Chinese familiar with western food and beverage products, Europeans and expatriates.

Hong Kong does not produce any wine due to land constraints and the high cost of production hence the market is dependent on imports. Similar to other Asian countries, Hong Kong is primarily a red wine market. In the 2008, Hong Kong imported approximately 27,000,000 liters of wine of which 78 percent was red wine.

2.2.2. Growth rate Total 2008 wine imports by volume increased by 31 percent over 2007. The growth rate for red wine was 34.5 percent and white wine 10.5 percent.

2.2.3. Known factors influencing growth rate Until recently, the import duty was a key constraint to the growth of wine consumption in Hong Kong. Prior to February 2007, the rate was 80 percent ad valorem which is high compared with most other Asian markets. As a result wine was expensive in Hong Kong. In February 2007 the Hong Kong SAR government reduced the import duty to 40 percent and in February 2008 the government waived the duty altogether in a move to establish Hong Kong as a regional fine wine hub. Prices have reduced to more acceptable levels for consumers, which has encouraged stronger market growth.

Local economic performance also impacts on wine sales. The increase in wine imports into Hong Kong in recent years was boosted by the recovery of the local economy following SARS in 2003. Consumers are usually more willing to spend on luxury items when the economy is strong. However, in a slowdown, businesses tend to cut their entertainment budgets and people dine out less frequently which affects the growth rate for most alcoholic beverages. According to importers, the current global economic downturn is already starting to have an impact on wine consumption in Hong Kong.

Another growth driver is the increase in wine consumption amongst younger Chinese consumers. Living in an international city like Hong Kong, Chinese consumers are exposed to a variety of


western food and cultures. They view wine as a stylish and trendy product and choose to enjoy it with friends. However, the growth of wine consumption amongst younger people in Hong Kong may decline over time as Hong Kong’s birth rate is currently amongst the lowest in the world.

Hong Kong officially slid into recession in November 2008.The territory's GDP fell by 0.5 percent in the third quarter of 2008, after a contraction of 1.4% in the second quarter. The International Monetary Fund forecasts a low 2 percent growth rate for 2009. The Hong Kong economy is increasingly facing challenges of rising unemployment, increased competition from mainland China and an ageing population.

A global survey called Nielsen Consumer Confidence Index found that of the 46 countries surveyed consumers in Hong Kong are the 6th most concerned about the economy and that consumer confidence is continuing to decline.

The continued growth in mainland China’s economy is to some degree supporting the territory's economy. Although much slower than in recent years, China's GDP is expected to rise by 6 percent.

2.3. COMPETITIVE ENVIRONMENT

2.3.1. Major players in the market France is the largest supplier of wine to Hong Kong accounting for approximately 32 percent of red wine imports and 25 percent of white wine imports by volume. France’s share of the red wine market continues to increase and increased by 4.7 percent in 2008.

Australia is the second largest source of red and white wine with approximately 21 percent and 19 percent respective market share by volume. In 2008 Australia’s market share decreased by 1.25 percent.

In 2008 Chile was the third largest source for red wine and white wine in Hong Kong with 14 percent and 12 percent market share respectively by volume. The USA (13 percent) and Spain (six percent) were the fourth and fifth largest players for red wine in Hong Kong while New Zealand and Italy were the fourth and fifth largest suppliers of white wine.

In volume terms, the top three suppliers of red wine achieved double digit growth in 2008 – France by 26 percent, Australia by 18 percent and Chile by 50 percent.

Of the top ten countries, only five countries recorded growth by volume for white wine in 2008. The growth rates for those five were France by 36.5 percent, Australia by 3.7 percent, New Zealand by 10.5 percent, Spain 11.7 percent and Germany 35.7 percent. The other five countries in the top 10 experience negative growth, Chile (‐10.3 percent), Italy (‐1 percent), United States (‐2.7 percent) South Africa (‐27.4 percent) and Argentina (‐27 percent).

Further information is contained in the following tables.


Hong Kong – Imports 2007–2008 22042191 Red Wine, In Containers Holding 2 Litres Or Less Quantity (Litre)

Source: World Trade Atlas

Hong Kong – Imports 2007–2008 22042192 White Wine, In Containers Holding 2 Litres Or Less Quantity (Litre)

Source: World Trade Atlas

2.3.2. Marketing strategies French wine is well received in the market due to its long established reputation. Most wine importers in Hong Kong maintain French wine as their main business line with “New World” wines added to their portfolio for diversification.

The Australians, French, Chileans, Californians and Italians are considered the most active players in the market. Their wine promotion organizations and governments undertake a lot of promotional activities into both the retail and HRI (hotel, restaurant and institutional) channels in Hong Kong. A few Australian and South African brands targeting the retail sector are regularly advertised in newspapers and magazines.

Importers targeting the HRI sector usually run wine tasting activities to promote their products to clients. Retailers communicate with their customers via the internet, e‐mail or direct mail outs. They also run wine tasting activities in their stores.

Country 2007 2008 2008 Market

Share (%) 07/08 Difference

(%)

Total Imports 17,536,220 23,599,034 100.0 34.57

1 France 5,906,889 7,460,471 31.6 26.30 2 Australia 4,275,555 5,058,045 21.4 18.30

3 Chile 2,219,007 33,24,293 14.0 49.81

4 United States 1,596,977 3,301,613 13.9 106.74 5 Spain 1,187,784 1,458,931 6.2 22.83

6 Italy 6,55,809 675,569 2.8 3.01

7 Argentina 6,130,70 455,071 1.9 -25.77 8 South Africa 2,576,79 366,490 1.5 42.23

9 United Kingdom 1,966,30 284,733 1.2 44.81

10 New Zealand 1,532,23 278,454 1.2 81.73 11 Others 473,597 935,364 3.96 97.50

Country 2007 2008 2008 Market

Share (%) 07/08 Difference

%

0 Total Imports 3,058,360 3,379,225 100 10.49

1 France 611,081 833,941 24.7 36.47

2 Australia 625,757 648,904 19.2 3.7 3 Chile 456,364 409,350 12.1 -10.3

4 New Zealand 324,466 358,232 10.6 10.41

5 Italy 284,627 281,729 8.3 -1.02 6 United States 250,504 243,775 7.2 -2.69

7 Spain 153,117 170,990 5.0 11.67

8 Germany 113,767 154,439 4.6 35.75 9 South Africa 123,415 89,558 2.6 -27.43

10 Argentina 54,297 39,593 1.2 -27.08

11 Others 60,965 148,714 4.4 68.0

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2.3.3. Distribution channels Wine distribution in Hong Kong is relatively straightforward. The following illustrates typical distribution channels for Hong Kong.

Re‐export Macau and China

HRI customers

Importers Consumers

Exporters

Retailers

Retail sector

Wine retailing in Hong Kong is mainly through supermarket chains and specialty wine shops. There are approximately 500 supermarket outlets and 80 wine shops. Supermarkets tend to stock more low‐price products and popular labels, while wine shops carry a mix of boutique wines, popular labels and fine wines.

Less experienced wine consumers usually buy their wines from supermarkets and base their purchase decisions on price. Wine connoisseurs predominantly purchase from wine shops due to the wider selection of varieties, sources and labels. As premium fine wines are mostly sold in the retail sector it retains the greater market share by value.

Hotel Restaurant Institutional Sector

There are approximately 11,000 eating establishments in Hong Kong. Consumers are more likely to drink wine at functions, business dinners and wedding banquets. They also like to order wine when they dine out. The HRI sector consumes more wine by volume than the retail sector but less by value as restaurants tend to pour cheaper wines as their house wines.

Wine is available in both European and Chinese restaurants. Fine dining and high end Chinese restaurants tend to feature mid to premium range wines while family and casual restaurants offer low to mid range products.

Macau

Macau wine distributors source wines from wineries as well as Hong Kong importers. They may import directly from wineries if the label is popular and is targeted at the mainstream market. Distributors tend to import boutique wines via Hong Kong importers as it is more cost effective to purchase a selection of different wine labels and varieties. More importantly, they do not need to commit a large volume of stock from a single winery. The timeframe to ship wines from Hong Kong to Macau is half a day.

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Portuguese wines are very popular in Macau, especially in the retail sector, as Portugal has played a key role in Macau’s history. Wines from other countries are largely distributed to the hotel, restaurant and institutional sector as hotel guests are more familiar with wines from different countries.

Macau is a small market. The population is 551,900 people4 with over two million tourist arrivals every month. The gaming sector contributed MOP31.9 billion (US$3.99 billion) or 64 percent of the gross tax revenue to the Macau Special Administrative Region Government in 2007.

The wine market in Macau has benefited from the entry of large hotel and casino operators since the gaming sector was opened to foreign competition in 2002. Wine sales started to build in 2002 and experienced dramatic growth following the completion of major hotel and casino projects in 2006. In August 2008 the Macau Special Administrative Region Government waived the import duty for wines and the market is expected to grow further.

In 2007, Macau imported 1,708,436 litres of red wine representing a 28 percent increase over 2006 and 248,996 litres of white wine, an increase of 52 percent over 2006. Just like other Asian countries, Macau is predominately a red wine market. The ratio of consumption between red wine and white wine is approximately 100:15.

Macau was a Portuguese colony until 1999 hence Portugal has a significant influence over local consumers’ selection of food and wine. Portugal was the largest red wine and white wine supplier to Macau in 2007 accounting for 38 percent and 46 percent market share respectively. Wines imported from Portugal tend to be at the lower end of the market with import prices averaging between MOP30 (US$3.75) and MOP40 (US$5) per bottle.

France was the second and the third largest supplier to Macau for red wine and white wine respectively in 2007, accounting for 31 percent market share for red wine and 16 percent market share for white wine. French wines imported into Macau were mostly the premium fine wines and the average import price was MOP679 (US$84.88) and MOP392 (US$49) per bottle for red wine and white wine respectively.

Australia is an important wine supplier to Macau. In 2007 Australia supplied 10 percent of the red wine market and 17 percent of the white wine market. Australian wines imported into Macau were primarily low to mid range with an average import price per bottle of MOP93 (US$11.63) for red wine and MOP53 (US$6.63) for white wine.

China

Hong Kong is a gateway to China. With the long trading history between Hong Kong and China, some wine importers in Hong Kong have already established operations in China.

As China has different labelling requirements, wines in the low to medium price band tend to be imported directly into China rather than re‐exported from Hong Kong as label compliance is labour intensive and costly. Wine shipped from Hong Kong to China will attract all the usual charges levied upon entry into China such as duty, VAT and consumption tax.

2.4. Pricing Wine consumers in Hong Kong are more likely to be westernized Chinese, European or expatriates. French wine is the most popular, followed by Australian wine. Middle aged Chinese tend to favour French wine, especially red, due to its established reputation. Europeans,

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expatriates and the younger or more westernized Chinese tend to drink New World wines, either because they know the wines, or they perceive wine to be a fashionable product.

The younger generation of Chinese generally has limited disposable income to spend on luxury products such as wine so they are more inclined to consume wines under HK$100 (equivalent to $13 or below). Chilean and Australian labels are strong at this end of the market so tend to be popular with these consumers.

Most expatriates and people who are well exposed to the western dining culture enjoy wine and know how to recognize and appreciate quality wines. They tend to be executives with reasonable incomes. This group is more inclined to spend between HK$100 and HK$350 per bottle (equivalent to $13 to $45). The wines consumed by this group are more diverse in terms of varieties and countries of origin.

The high income middle aged group has a higher disposable income to spend on wine. Labels, perceived quality and the prestige factor are far more important to these consumers than price per bottle. This group will pay HK$350+ per bottle (equivalent to $45+) for wines they like, usually the more premium French wines.

Profit margins for importers and retailers are approximately 30‐40 percent and 30‐50 percent respectively in Hong Kong.

2.5. REGULATORY OVERVIEW

2.5.1. Duties/taxes Hong Kong is a free port. Duties are only levied on four groups of commodities – hydrocarbon oil, liquors, methyl alcohol and tobacco, irrespective of whether the product concerned is locally manufactured or imported. It is duty free to import wines into Hong Kong.

2.5.2. Licensing and registration requirements Import licenses, issued by the Hong Kong Customs and Excise Department, are required for alcoholic liquors with an alcoholic strength above 30% by volume measured at a temperature of 20°C. As the alcoholic strength of grape wines is below 30%, a license is not required to import them into Hong Kong.

2.5.3. Labelling requirements Labelling requirements for wine, liqueur wines, sparkling wines, aromatized wines, fruit wines, sparkling fruit wines and other drinks with an alcoholic strength by volume of 10% or more as determined under section 53 of the Dutiable Commodities Ordinance (Cap 109)

(L.N. 85 of 2004; L.N. 139 of 2004) are exempted from Schedule 3 of the Food and Drugs (Composition and Labelling) Regulations, except paragraph 3 (see details on the website (www.cfs.gov.hk/english/food_leg/food_leg_cl.html#6)

2.5.4. Quotas No quota systems exist for products imported into Hong Kong.

2.6. WINE OFFER Here below we listed some Argentine and Italian wines offered by local retailer/wholesaler.

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Prices are expressed in HKD currency. Price is intended for a 750ml bottle

Brand Origin Type Grape Year Price

Cabernet‐Sangiovese, Bodega Uno

Mendoza, Argentina Red Cabert Sauvignon, Sangioves HK$38

Nieto Senetiner Cabernet Shiraz Reserva 2005

Mendoza, Argentina Red 50% Cabernet Sauvignon, 50% Shiraz 2005 HK$110

Nieto Malbec Reserva 2005 Mendoza, Argentina Red 100% Malbec 2005 HK$110

Cascina Bruni Nebbiolo d'Alba "Valmaggiore" 2005

Piedmont, Italy Red Nebbiolo 2005 HK$113

Dona Paula Cabernet Sauvignon 2007

Mendoza, Argentina Red Cabernet Sauvignon 2007 HK$129

La Morandina Barbera d'Asti 5 Vignes DOC 2007

Piedmont, Italy Red 100% Barbera 2007 HK$139

Finca El Retiro Argentina Red Cabernet Sauvignon 2005 HK$140

Clos de los Siete 2007 Argentina Red 48% Malbec , 28% Merlot , 12% Syrah and 12% Cabernet Sauvignon

2007 HK$160

Tittarelli Tempranillo Family Reserve 2005

Mendoza, Argentina Red 2005 HK$160

Santa Margherita, Shiraz Sicilia

Sicily, Italy Red 2006 HK$168

Marchesi de Frescobaldi Tenuta di Castiglioni Chianti DOCG 2007

Tuscany, Italy Red 85% Sangiovese , 15% Merlot 2007 HK$169

Finca El Retiro Tempranillo Special Reserve 2004

Mendoza, Argentina Red 2004 HK$185

Casa Emma Classico DOCG Tuscany, Italy Red 90% Sangiovese, 5% Canaiolo, 5% Black Malvasia

2004 HK$230

Garofoli "Agontano" Rosso Conero D.O.C. Riserva 2003

Marches, Italy Red 100% Montepulciano 2003 HK$269

Leonardo Brunello di Montalcino DOCG 2001

Tuscany, Italy Red Sangiovese 2001 HK$399

Bodega Chacra Cincuenta y Cinco

Argentina Red 2006 HK$550

Bodega Chacra Trenta y Dos Argentina Red 2006 HK$690

White Wine ‐ Bodega Uno Mendoza, Argentina White Torrontes, Chardonnay HK$30

Tittarelli Tocai White Wine Mendoza, Argentina White Tocai 2005 HK$70

Tittarelli Chardonnay 2007 Mendoza, Argentina White Chardonnay 2007 HK$80

Cascina Bruni Gavi di Gavi "A Michela" 2006

Piedmont, Italy White Gavi 2006 HK$110

Tittarelli Torrontes Reserve 2007

Mendoza, Argentina White Torrontes 2007 HK$120

La Morandina Moscato d'Asti DOCG 2008

Piedmont, Italy White 100% Moscato 2008 HK$149

Tenuta La Parrina Vermentino IGT 2008

Tuscany, Italy White Vermentino 2008 HK$179

Kettmeir Muller Thurgau ,Alto Adige

Trentino, Italy White 2006 HK$198

Roero Arneis Vigna Tabaria Docg 2006

Piedmont, Italy White 2006 HK$225

Bellavista Franciacorta Lombardia, Italy Sparkling HK$260

Ca 'Del Bosco Cuvee Prestige Brut

Lombardia, Italy Sparkling HK$358

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2.7. COMPANY’S STRUCTURE The Company will be incorporated as a Private Limited Company.

No requirements are requested for capital, object and number of shareholders.

According to the financial budget shown at the end of the report, we suggested to contribute an initial capital of USD 100,000. The cost of incorporation is about USD 1,100 including incorporation fees, business registration tax for the first year, company and governmental documents, chops, company secretary service for the first year, printed CPA documents for opening a bank account.

2.8. INVESTORS This business plan is addressed to the following kind of investors:

Wine Producers

Wine Traders

Business Angels

2.9. FINANCIAL REQUIREMENTS Financial requirements are forecasted in USD 100,000 cash in order to support the initial purchases of assets and the current activities.

Such requirements can be both achieved by a wholly capital contribution or by a partial capital contribution and by loans for the leftover part.

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3. INCOME BUDGET 20102011

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3.1. DRAFTING PRINCIPLES Profit and Loss Budget has been drafted for years 2010‐2011.

Cost groups have been estimated as follow:

Turnover: estimation is based on the market potential.

Trading and Sale Costs: they’ve been estimated mainly according to quotations obtained by specialized company after an accurate market research.

Fixed Costs: they’ve been estimated according to quotations, comparisons, etc…

As we already said, each estimation has been calculated considering a prudential principle.

All figures are expressed in USD currency

2010 2011

Turnover 392.052 100,0% 588.000 100,0%

Cost of Sales 204.422 52,1% 300.904 51,2%

Gross Margin 187.630 47,9% 287.174 48,8%

Administrative Expenses 56.900 14,5% 57.600 9,8%

Commercial Expenses 72.500 18,5% 105.300 17,9%

General Expenses 2.300 0,6% 2.620 0,5%

Financial Expenses 200 0,1% 400 0,1%

Cash Flow 55.730 14,2% 121.254 20,6%

Depreciation & Amortization 7.500 1,9% 1.200 0,2%

Income/Loss Before Taxes 48.230 12,3% 120.054 20,4%

Income Tax 7.958 2,0% 19.809 3,4%

Net Income/Loss 40.271 10,3% 100.245 17,1%

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3.2. TURNOVER Turnover has been estimated in USD 392 thousand for the year 2010 and USD 588 thousand for 2011 (income from delivery charges excluded). It has been calculated as follow.

2010

Sale of no.4 containers size 20” (1 container each 3 months)

Total quantity of bottles 75cc is around no.52.000 (no.13.000 bottles for each container)

Total quantity of cartons is no.8.664 (no.2.166 cartons for each container; 6 bottles each carton)

The target is therefore to sell monthly an average of no.4.332 bottles, equal to no.722 cartons.

2011

Sale of no.6 containers size 20” (1 container each 2 months)

Total quantity of bottles 75cc is around no.78.000 (no.13.000 bottles for each container)

Total quantity of cartons is no.13.000 (no.2.166 cartons for each container; 6 bottles each carton)

The target is therefore to sell monthly an average of no.6.500 bottles, equal to no.1.083 cartons.

Sale channels will be:

traditional direct contacts

online web shop.

The Company will address its offer to:

generic retailers

supermarkets

wine boutique shops

restaurants

hotels.

exporters

wholesalers

The minimum order quantity will be of no.1 carton (6 bottles).

3.2.1. Price Fixing Basically in the Hong Kong market we can find five range of prices:

1. Up to HKD 100 (USD 13) 2. HKD 100 – 150 (USD 13 – 19) 3. HKD 150 – 200 (USD 19 – 26) 4. HKD 200 – 300 (USD 26 – 38) 5. Higher than HKD 300 (USD 38)

According to that we identified our target in the first four ranges, focusing mostly on the first two of them. That’s where we think to concentrate the major quantity of our business.

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Starting from the final retail price our potential customers can apply to our wine bottles, we calculated that the Company should go to the market with a range of price from about USD 5 for the lower one to USD 15.50 for the higher one (HKD 40 to 120)

The summary sheet here below shows the details of costs and sale prices for the four ranges.

Table 1. Figures related to a 20” container

Indicators 1st range 2nd range 3rd range 4th range Total

Bottles Qty 5.328 5.328 1.800 540 12.996

6pcs Cartons Qty 888 888 300 90 2.166

Price/Bottle EX‐WORK usd 1,29USD 2,58USD 3,87USD 6,45USD 14,19USD

Price/Bottle EX‐WORK hkd 10,00HKD 20,00HKD 30,00HKD 50,00HKD 110,00HKD

Total Purchase Amount Ex‐Work usd 6.874,84USD 13.749,68USD 6.967,74USD 3.483,87USD 31.076,13USD

Total Purchase Amount Ex‐Work hkd 53.280,00HKD 106.560,00HKD 54.000,00HKD 27.000,00HKD 240.840,00HKD

Price/Bottle CIF usd 1,54USD 2,83USD 4,12USD 6,70USD 15,18USD

Price/Bottle CIF hkd 11,91HKD 21,91HKD 31,91HKD 51,91HKD 117,63HKD

Total Purchase Amount Cif usd 8.186,75USD 15.061,59USD 7.410,96USD 3.616,83USD 34.276,13USD

Total Purchase Amount Cif hkd 63.447,31HKD 116.727,31HKD 57.434,90HKD 28.030,47HKD 265.640,00HKD

Sale Price/Bottle usd 5,16USD 7,74USD 11,61USD 15,48USD 40,00USD

Sale Price/Bottle hkd 40,00HKD 60,00HKD 90,00HKD 120,00HKD 310,00HKD

Total Sale Amount usd 27.499,35USD 41.249,03USD 20.903,23USD 8.361,29USD 98.012,90USD

Total Sale Amount hkd 213.120,00HKD 319.680,00HKD 162.000,00HKD 64.800,00HKD 759.600,00HKD

Retail Price/Bottle usd 11,61USD 16,77USD 23,23USD 32,26USD 83,87USD

Retail Price/Bottle hkd 90,00HKD 130,00HKD 180,00HKD 250,00HKD 650,00HKD

3.3. PURCHASING COSTS

3.3.1. Purchases Purchasing price from wine producers (ex‐work price) should be between USD 1.30 to USD 6.45 (HKD 10.00 to 50.00), as shown in the table below where it’s possible to see the correspondence between ex‐work purchasing cost, cif purchasing cost, company’s sale price and final retail price.

Table 2

Indicators 1st range 2nd range 3rd range 4th range

Price/Bottle EX‐WORK usd 1,29USD 2,58USD 3,87USD 6,45USD

Price/Bottle EX‐WORK hkd 10,00HKD 20,00HKD 30,00HKD 50,00HKD

Sale Price/Bottle usd 5,16USD 7,74USD 11,61USD 15,48USD

Sale Price/Bottle hkd 40,00HKD 60,00HKD 90,00HKD 120,00HKD

Retail Price/Bottle usd 11,61USD 16,77USD 23,23USD 32,26USD

Retail Price/Bottle hkd 90,00HKD 130,00HKD 180,00HKD 250,00HKD

For each range we suggest that at least 75% should consist of red wine and the remaining 25% of white wine, according to the market preference.

Quantity for each range is as shown in the chart below, that’s to say 41% of the total quantity for 1st range and 2nd range respectively, 14% of the total quantity for the 3rd range and 4% of the total quantity for the 4th range.

Prepared on 13/10/2009 19 of 25

This subdivision could be obviously revised later on depending on the feedback of the market.

3.3.2. Freight & Duties According to the quotations freight costs from the purchasing place to Hong Kong Company’s warehouse can be estimated in USD 3,000 for a 20” reefer (refrigerated) container.

Moreover we estimated extra USD 200 for each shipment for eventual custom clearance expenses.

That’s to say that the freight cost for each bottle, independently from the single cost, is of USD 0.25.

The impact of freight costs on turnover is totally equal to 3,26% for year 2010 and 3,06% for year 2011.

Table 3

Indicators 1st range 2nd range 3rd range 4th range

Price/Bottle CIF usd 1,54USD 2,83USD 4,12USD 6,70USD

Price/Bottle CIF hkd 11,91HKD 21,91HKD 31,91HKD 51,91HKD

Sale Price/Bottle usd 5,16USD 7,74USD 11,61USD 15,48USD

Sale Price/Bottle hkd 40,00HKD 60,00HKD 90,00HKD 120,00HKD

Retail Price/Bottle usd 11,61USD 16,77USD 23,23USD 32,26USD

Retail Price/Bottle hkd 90,00HKD 130,00HKD 180,00HKD 250,00HKD

We want to point out that the estimation has been done with reference to a shipment from Italy. We opted for this solution mainly for two reason: the first one is that we had a very detailed quotation for a reefer container and the second one is that even if the quotation from Argentina is not so accurate it looks like it should be anyway cheaper therefore we preferred to use a prudential attitude.

41%

41%

14%

4%

Purchases' Composition

1st range 2nd range 3rd range 4th range

Prepared on 13/10/2009 20 of 25

Table 4. Sea Freight Cost Details From Italy to Hong Kong.

Description 20" Reefer Cntr Costs 40" Reefer Cntr Costs Reefer Cntr USD 1.200,00 USD 1.300,00 Baf/Teu USD 110,00 USD 110,00 Caf/Teu 8.86% USD 116,07 USD 124,93

USD 1.426,07 USD 1.534,93 Custom Operation per cntr USD 116,00 USD 116,00 BL Issue per shipment USD 65,25 USD 65,25 ISPS per cntr USD 29,00 USD 29,00 THC Origin per cntr USD 195,75 USD 195,75 Positioning to Genoa per cntr USD 725,00 USD 812,00 Port Refeer Staying per day USD 58,00 USD 58,00

USD 1.189,00 USD 1.276,00 USD 2.615,07 USD 2.810,93

All Risks Insurance 10,35% USD 270,66 USD 290,93 Total Cost USD 2.885,73 USD 3.101,86

3.4. LOGISTIC & SELLING COSTS Amongst these costs are included:

warehouse

handling in

handling out

final local delivery to customers

The impact of storage costs (warehouse) on turnover is equal to 2,3% for year 2010 and 1,5% for year 2011.

The impact of handling in costs on turnover is equal to 0,35% for year 2010 and 0,35% for year 2011.

The impact of handling out costs on turnover is equal to 14,3% for year 2010 and 14,3% for year 2011.

The impact of local delivery costs on turnover is equal to 41,4% for year 2010 and 41,4% for year 2011.

Delivery costs will be anyway charged back to the customers therefore their high amount won’t affect the profit and loss statement of the company.

All these services will be outsourced.

We identified a local logistic company that can provide us in Hong Kong warehouse space (refrigerated one) and all the above mentioned services.

We considered to rent a 30CBM reefer warehouse space and that every order/delivery will consist of no.1 carton.

Prepared on 13/10/2009 21 of 25

Details and quotation of the services are as follow:

1. Warehousing Services

1.2 Cargo Nature : General Cargo: Bottled Wine.

2. Physical Warehouse Management

2.1 Service Scope : In‐out handling of goods

Forklift operations when required

24 hour security cameras

2.2 Service Details : Supervision and monitoring of the physical operations in the warehouse.

3 Warehouse Rental Charges

Storage Charges Storage Charges : on Racks in Air Conditioned Area.

HK$195.00 per CBM per month, Minimum : 30 CBM.

Price Inclusive of management fee, electricity, Government Rent & Government Rates

4 Handling Charges Handling In: HK$88.00/CBM, minimum 1 CBM per lot.

Handling Out: HK$6.00/Carton, minimum HK$50 per Order.

5 Local Delivery Service Scope : The service charge covers:

The provision of van and labor to deliver the merchandise from our warehouse in Hong Kong.

Loading/ unloading of cargoes to/ from the lorry at our warehouse in Hong Kong.

Preparation of out slips by OLL to fulfill the delivery documentation.

Order cut off time of 15:00 for next day delivery.

Any parking fee, tunnel toll incurred are at the client’s account

5.1 Local Delivery Charges to

your customers door in Hong Kong area from our Warehouse and except Lantau and Outlying Island Areas.

: Local Delivery: HK$145.00 per delivery per Location. Up to 30 cases.

Greater 30 Boxes at HK$6.00 extra per case delivered

Urgent Order Or Same Day Delivery: Extra HK$250.00 per job

Terminal Delivery: Minimum HK$450.00 per job.

Evening Delivery before 9pm, Minimum HK$450.00 per job. After 9pm deliveries to be quoted on a case‐by‐case basis.

6. Transportation and Distribution Services

The service charge covers:

The provision of lorry and labor to deliver the cargoes from the warehouse the terminal

Loading/ unloading of cargoes to/ from the lorry.

Any parking fee, tunnel toll or gate charges incurred are at the client’s account

6.1 Drayage : HK$ 1,000.00 per 20’ FCL

6.2 Vanning/Devanning : Palletized: HK$1,000.00 per 20' FCL

Un‐Palletized: HK$1,500.00 per 20' FCL

Unloading/loading of third party vehicle if this is not done by your transportation company at HK$30.00 per CBM Minimum HK$300.00 per job.

Prepared on 13/10/2009 22 of 25

Costs have been estimated according to the quotation.

With reference to the handling out & local delivery costs this is obviously the worst case.

Their amount in fact will be surely less than estimated since it’s reasonably to believe that part of the deliveries will be composed by more than one carton.

Details of the costs are shown in table 5.

Table 5. Storage, Handling & Delivery Costs. Description 20" Reefer Cntr Costs

Storage Montlhy Fee 30CBM USD 754,84

Handling In HKD 88/CMB USD 340,65

Handling Out HKD 50/Order USD 13.974,19

Total Storage & Handling Cost USD 15.069,68

Local Delivery USD 40.525,16

Total Delivery Cost USD 40.525,16

Total Cost USD 55.594,84

3.5. ADMINISTRATIVE COSTS Administrative costs are equal to USD 56,900 for 2010 and USD 57,600 for 2011 and include:

Wage of an administrative employee in charge of the accounting and cashing activities (USD 24 thousands for 2010 and 2011)

Consulting fees for tax issues, cost control and general supervisory activities (USD 30 thousands for 2010 and 2011)

Other administrative expenses such as stationery, printing, internet fee, postal & phone costs, etc… (USD 2,900 for 2010 and 3,600 for 2011)

The impact on turnover is equal to 14,5% on 2010 and 9,79% on 2011.

3.6. COMMERCIAL COSTS Commercial costs are equal to USD 72,500 for 2010 and USD 105,300 for 2011 and include:

Wage of sale employees (1 for 2010, 2 for 2011) in charge of the marketing, sale and post sales activities (USD 24 thousands for 2010 and USD 48 thousands for 2011)

Consulting fees for organizing and managing the purchasing activities (USD 40 thousands for 2010 and 2011)

Other commercial expenses such as advertising, marketing, trips, free gifts and samples, entertainment expenses, etc… (USD 8,500 for 2010 and 17,300 for 2011)

The impact on turnover is equal to 18,5% on 2010 and 17,9% on 2011.

3.7. GENERAL COSTS General costs are equal to USD 2,300 for 2010 and USD 2,620 for 2011 and include:

Prepared on 13/10/2009 23 of 25

Office rent, considering that a single room will be enough to run the business (USD 1,200 for 2010 and 2011)

Other commercial expenses such as general maintenance & repair, utilities expenses, business registration annual fee (USD 1,100 for 2010 and 1,420 for 2011)

No remuneration has been considered for the Board of Directors.

The impact on turnover is low, equal to 0,6% on 2010 and 0,5% on 2011.

3.8. FINANCIAL COSTS Financial costs are equal to USD 200 for 2010 and USD 400 for 2011 and include only generic bank charges.

Since no loan has been considered there’s no interest expenses.


3.9. DEPRECIATION & AMORTIZATION Depreciation & Amortization costs equal to USD 7,500 for 2010 and USD 1,200 for 2011 and are related to the following fixed assets:

Office Machines & Equipments (computers, printer/fax, etc…) for USD 5,200

Software (accounting/erp software and web site creation) for USD 6,000

Startup Expenses (Incorporation Costs) for USD 1,100


3.10. INCOME TAX Income Taxi s 16,5% on gross profit and it’s been estimated in USD 7,958 for 2010 and USD 19,809 for 2011.

Please note that such estimation is obviously roughly made and therefore approximate.

3.11. PROFIT This very Profit and Loss Budget shows a net profit of USD 40,272 for 2010 (10,3% on turnover) and USD 100,245 for 2011 (17% on turnover).

THE VINEYARDIncome Budget 2010‐2011All figures are expressed in USD currency

INCOME STATEMENT

A1 Sales ‐ Wholesalers/Retailers 283.148,39 72,22% 392.051,61 66,67%

A2 Sales ‐ Online Store 108.903,23 27,78% 196.025,81 33,33%

TURNOVER 392.051,61 100,00% 588.077,42 100,00%

B1 Sales Expenses ‐ Handling Out 55.896,77 14,26% 83.845,16 14,26%

B2 Sales Expenses ‐ Delivery 162.100,65 41,35% 243.150,97 41,35%

A5 Sales ‐ Delivery Reimbursement ‐162.100,65 ‐41,35% ‐243.150,97 ‐41,35%

Variations on turnover 55.896,77 14,26% 83.845,16 14,26%

C4 Purchases 124.304,52 31,71% 186.456,77 31,71%

C8 Freight & duty purchase 12.800,00 3,26% 18.000,00 3,06%

C10 Packing 1.000,00 0,26% 1.500,00 0,26%

Consumption Costs 138.104,52 35,23% 205.956,77 35,02%

VALUE ADDED 198.050,32 50,52% 298.275,48 50,72%

D15 Warehousing 9.058,06 2,31% 9.058,06 1,54%

D16 Handling In 1.362,58 0,35% 2.043,87 0,35%

Production costs 10.420,65 2,66% 11.101,94 1,89%

COST OF SALES 204.421,94 52,14% 300.903,87 51,17%

GROSS MARGIN 187.629,68 47,86% 287.173,55 48,83%

E1 Labour & Benefits ‐ Regular Wage 24.000,00 6,12% 24.000,00 4,08%

E4 Consulting Fees 30.000,00 7,65% 30.000,00 5,10%

E9 Postal & phone costs 1.200,00 0,31% 1.500,00 0,26%

E10 Other administrative costs 200,00 0,05% 400,00 0,07%

E11 Stationery & printing 500,00 0,13% 700,00 0,12%

E12 Internet Fee (internet, Hosting, etc.) 1.000,00 0,26% 1.000,00 0,17%

Administrative expenses 56.900,00 14,51% 57.600,00 9,79%

F1 Advertising & Marketing costs 5.000,00 1,28% 10.000,00 1,70%

F2 Labour & benefits 24.000,00 6,12% 48.000,00 8,16%

F3 Trips & tolls costs 2.000,00 0,51% 5.000,00 0,85%

F4 Free gifts & samples 500,00 0,13% 800,00 0,14%

F8 Entertainment expenses 1.000,00 0,26% 1.500,00 0,26%

F14 Commercial consultancies 40.000,00 10,20% 40.000,00 6,80%

Commercial expenses 72.500,00 18,49% 105.300,00 17,91%

G1 Building rents (office) 1.200,00 0,31% 1.200,00 0,20%

G10 General maintenance & repair 500,00 0,13% 500,00 0,09%

G11 Withholding tax 0,00 0,00% 320,00 0,05%

G12 Water & Electricity 600,00 0,15% 600,00 0,10%

J1 Board of Directors remuneration 0,00 0,00% 0,00 0,00%

General expenses 2.300,00 0,59% 2.620,00 0,45%

31st December 2010 31st December 2011

INCOME STATEMENT 31st December 2010 31st December 2011

H1 Financial income 0,00 0,00% 0,00 0,00%

H4 Bank charges 200,00 0,05% 400,00 0,07%

Financial income/expenses 200,00 0,05% 400,00 0,07%

CASH FLOW 55.729,68 14,21% 121.253,55 20,62%

M1 Depreciation on General & Administra 7.500,00 1,91% 1.200,00 0,20%

Depreciation & Amortization 7.500,00 1,91% 1.200,00 0,20%

INCOME/LOSS BEFORE TAXES 48.229,68 12,30% 120.053,55 20,41%

O1 Income taxes 7.957,90 2,03% 19.808,84 3,37%

P1 NET INCOME/LOSS 40.271,78 10,27% 100.244,71 17,05%

THE VINEYARDMONTHLY BUDGET FOR SALES AND DIRECT COSTS 2008-2010

YEAR 2010 Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10 Total

Sales ‐ Wholesalers/Retailers 32.671 32.671 21.781 21.781 21.781 21.781 21.781 21.781 21.781 21.781 21.781 21.781 283.148

Sales ‐ Delivery Reimbursement 18.165 18.165 12.110 12.110 12.110 12.110 12.110 12.110 12.110 12.110 12.110 12.110 157.431

Sales ‐ Online Store ‐ ‐ 10.890 10.890 10.890 10.890 10.890 10.890 10.890 10.890 10.890 10.890 108.903

Sales ‐ Delivery Reimbursement ‐ ‐ 6.055 6.055 6.055 6.055 6.055 6.055 6.055 6.055 6.055 6.055 60.550

TOTAL 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 549.482

Sales Cashing 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 392.052

Cashing Month ‐ Wholesalers/Retailers Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10 Jan‐11

Cashing Month ‐ Online Store Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10

Transport Costs (payment at 30 days)

Transports 3.000 3.000 3.000 3.000 12.000

Custom Clearance 200 200 200 200 800

Paying Month Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10

Purchasing Costs (payment at sight)

Wine Purchases 31.076 31.076 31.076 31.076 124.305


Costs Paying 31.076 ‐ ‐ 31.076 ‐ ‐ 31.076 ‐ ‐ 31.076 ‐ ‐ 124.305

Paying Month Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10 Jan‐11

Sale Costs (payment at 30 days)

Packing 83 83 83 83 83 83 83 83 83 83 83 83 1.000

Storage 755 755 755 755 755 755 755 755 755 755 755 755 9.058

Handling In 341 ‐ ‐ 341 ‐ ‐ 341 ‐ ‐ 341 ‐ ‐ 1.363

Handling Out 4.658 4.658 4.658 4.658 4.658 4.658 4.658 4.658 4.658 4.658 4.658 4.658 55.897

Delivery 18.165 18.165 18.165 18.165 18.165 18.165 18.165 18.165 18.165 18.165 18.165 18.165 217.981

Costs Paying 19.344 19.003 19.003 19.344 19.003 19.003 19.344 19.003 19.003 19.344 19.003 19.003 229.401


YEAR 2011 Jan‐11 Feb‐11 Mar‐11 Apr‐11 May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11 Total

Sales ‐ Wholesalers/Retailers 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 32.671 392.052


Sales ‐ Online Store 16.335 16.335 16.335 16.335 16.335 16.335 16.335 16.335 16.335 16.335 16.335 16.335 196.026


TOTAL 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 806.058

Sales Cashing 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 49.006 588.077

Cashing Month ‐ Wholesalers/Retailers Feb‐11 Mar‐11 Apr‐11 May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11 Jan‐12

Cashing Month ‐ Online Store Jan‐11 Feb‐11 Mar‐11 Apr‐11 May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11

Transport Costs (payment at 30 days)

Transports 3.000 3.000 3.000 3.000 3.000 3.000 18.000

Custom Clearance 200 200 200 200 200 200 1.200


Purchasing Costs (payment at sight)

Wine Purchases 31.076 31.076 31.076 31.076 31.076 31.076 186.457


Sale Costs (payment at 30 days)

Packing 125 125 125 125 125 125 125 125 125 125 125 125 1.500

Storage 755 755 755 755 755 755 755 755 755 755 755 755 9.058

Handling In 341 ‐ 341 ‐ 341 ‐ 341 ‐ 341 ‐ 341 ‐ 2.044

Handling Out 6.987 6.987 6.987 6.987 6.987 6.987 6.987 6.987 6.987 6.987 6.987 6.987 83.845

Delivery 27.248 27.248 27.248 27.248 27.248 27.248 27.248 27.248 27.248 27.248 27.248 27.248 326.971

Costs Paying 28.468 28.127 28.468 28.127 28.468 28.127 28.468 28.127 28.468 28.127 28.468 28.127 339.573


THE VINEYARDFixed Costs ‐ Budget 2010‐2011

2010 2011

Administrative Expenses 32.900,00 33.600,00

Monthly Average 2.741,67 2.800,00

Commercial Expenses 48.500,00 57.300,00


General Expenses 2.300,00 2.620,00

Monthly Average 191,67 218,33

Financial Expenses 200,00 400,00

Monthly Average 16,67 33,33

83.900,00 93.920,00

2010 2011

Sale Staff 24.000,00 48.000,00

Accounting Staff 24.000,00 24.000,00


THE VINEYARDFixed Assets Register

Office Machines & Equipments

Jan‐10 Computer 100% 3.000,00 3.000,00 3.000,00 0,00 0,00 3.000,00 0,00 0,00 3.000,00 0,00

Jan‐10 Printer/Fax 100% 1.000,00 1.000,00 1.000,00 0,00 0,00 1.000,00 0,00 0,00 1.000,00 0,00

Jan‐10 Photocopier 100% 700,00 700,00 700,00 0,00 0,00 700,00 0,00 0,00 700,00 0,00

Jan‐10 Phone 100% 500,00 500,00 500,00 0,00 0,00 500,00 0,00 0,00 500,00 0,00

5.200,00 5.200,00 5.200,00 0,00 0,00 5.200,00 0,00 0,00 5.200,00 0,00

Software

Jan‐10 Web Site 20% 5.000,00 1.000,00 1.000,00 4.000,00 1.000,00 2.000,00 3.000,00 1.000,00 3.000,00 2.000,00

Jan‐10 Accounting Software 20% 1.000,00 200,00 200,00 800,00 200,00 400,00 600,00 200,00 600,00 400,00

6.000,00 1.200,00 1.200,00 4.800,00 1.200,00 2.400,00 3.600,00 1.200,00 3.600,00 2.400,00

Startup

Dec‐09 Incorporation Expenses 100% 1.100,00 1.100,00 1.100,00 0,00 0,00 1.100,00 0,00 0,00 1.100,00 0,00

1.100,00 1.100,00 1.100,00 0,00 0,00 1.100,00 0,00 0,00 1.100,00 0,00

Office Machines & Equipments 5.200,00 5.200,00 5.200,00 0,00 0,00 5.200,00 0,00 0,00 5.200,00 0,00

Software 6.000,00 1.200,00 1.200,00 4.800,00 1.200,00 2.400,00 3.600,00 1.200,00 3.600,00 2.400,00

Incorporation Expenses 1.100,00 1.100,00 1.100,00 0,00 0,00 1.100,00 0,00 0,00 1.100,00 0,0012.300,00 7.500,00 7.500,00 4.800,00 1.200,00 8.700,00 3.600,00 1.200,00 9.900,00 2.400,00

SUMMARY Fund 2012Net Book

Value 2012

Net Book

Value 2012

Purchasing

Cost

Depreciation

2010Fund 2010

Net Book

Value 2010

Depreciation

2011Fund 2011

Net Book

Value 2011

Depreciation

2012

Net Book

Value 2010

Depreciation

2011Fund 2011

Net Book

Value 2011

Depreciation

2012Fund 2012

Purchasing

DateDescription Depr. %

Purchasing

Cost

Depreciation

2010Fund 2010

Pagina 1 di 1

Prepared on 13/10/2009 24 of 25

4. FINANCIAL BUDGET 20102011

Prepared on 13/10/2009 25 of 25

4.1. DRAFTING PRINCIPLES The following financial budget has been draft on the basis of the economic figures shown in the profit and loss budget and of the foreseen assets.

The following specifications are also necessary:

a) Cashing period has been calculated at 30 days for the sales occurring by the normal channels

b) Cashing period has been calculated on order for the sales occurring by the company’s web site

c) Payment to wine suppliers has been calculated on delivery (Hong Kong port)

d) Payment to other suppliers has been calculated at 30 days

e) An advance deposit has been calculated for the warehouse

f) Wages will be paid at the beginning of the following month.

Obviously this is the worst option, financially speaking, and better payment and cashing conditions would improve the budget.

4.2. REMARKS

Analyzing the cash flows it comes out that the company is able to face its financial obligations without any particular effort.

At the end of 2010 the Company has a positive balance of about USD 142 thousands and at the end of 2011 the positive balance is equal to USD 252 thousands.

The financial budget confirms the capacity of the Company to generate cash flow, as appears from the Profit and Loss Budget (about USD 56 thousand in 2010, about USD 121 thousand in 2011).

THE VINEYARD Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10 Balance

Financial Budget 2010‐2011

Capital Contribution 100.000 100.000

Cash Position 0

Turnover cashing 0 50.836 67.781 50.836 50.836 50.836 50.836 50.836 50.836 50.836 50.836 50.836 576.142

Wine Purchases ‐31.076 0 0 ‐31.076 0 0 ‐31.076 0 0 ‐31.076 0 0 ‐124.305

Transports ‐3.000 0 0 ‐3.000 0 0 ‐3.000 0 0 ‐3.000 0 0 ‐12.000

Custom Clearance ‐200 0 0 ‐200 0 0 ‐200 0 0 ‐200 0 0 ‐800

Warehouse ‐1.510 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐9.813

Handling In ‐341 0 0 ‐341 0 0 ‐341 0 0 ‐341 0 ‐1.363

Handling Out ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐4.658 ‐51.239

Deliveries ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐18.165 ‐199.816

Packing ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐83 ‐916

Salaries ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐3.692 ‐7.385 ‐44.308

Administrative Costs ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐2.742 ‐30.158

Commercial Costs ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐4.042 ‐44.458

General Expenses ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐192 ‐2.108

Financial Expenses ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐17 ‐200

Fixed Assets ‐11.200 ‐11.200

Incorporation Costs ‐1.100 ‐1.100

Profit Tax 0

0

0

Monthly Balance 87.700 ‐35.802 16.150 33.436 ‐17.785 16.150 16.491 ‐17.785 16.150 16.491 ‐17.785 16.150 12.798 142.358

Cumulative Balance 87.700 51.898 68.048 101.484 83.698 99.849 116.339 98.554 114.704 131.195 113.410 129.560 142.358

Total Cash Out ‐12.300 ‐35.802 ‐34.686 ‐34.345 ‐68.621 ‐34.686 ‐34.345 ‐68.621 ‐34.686 ‐34.345 ‐68.621 ‐34.686 ‐38.038 ‐533.783

Total Cash In 100.000 0 50.836 67.781 50.836 50.836 50.836 50.836 50.836 50.836 50.836 50.836 50.836 676.142

THE VINEYARD Jan‐11 Feb‐11 Mar‐11 Apr‐11 May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11 Balance

Financial Budget 2010‐2011

Capital Contribution 0

Cash Position 0

Turnover cashing 59.309 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 898.103

Wine Purchases ‐31.076 0 ‐31.076 0 ‐31.076 0 ‐31.076 0 ‐31.076 0 ‐31.076 0 ‐186.457

Transports ‐3.000 0 ‐3.000 0 ‐3.000 0 ‐3.000 0 ‐3.000 0 ‐3.000 0 ‐18.000

Custom Clearance ‐200 0 ‐200 0 ‐200 0 ‐200 0 ‐200 0 ‐200 0 ‐1.200

Warehouse ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐755 ‐9.058

Handling In 0 ‐341 0 ‐341 0 ‐341 0 ‐341 0 ‐341 0 ‐341 ‐2.044

Handling Out ‐4.658 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐6.987 ‐81.516

Deliveries ‐18.165 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐27.248 ‐317.889

Packing ‐83 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐125 ‐1.458

Salaries ‐3.692 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐5.538 ‐11.077 ‐70.154

Administrative Costs ‐2.742 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐2.800 ‐33.542

Commercial Costs ‐4.042 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐4.775 ‐56.567

General Expenses ‐192 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐218 ‐2.593

Financial Expenses ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐33 ‐400

Fixed Assets 0

Incorporation Costs 0

Profit Tax ‐7.958 ‐7.958

0

0

Monthly Balance ‐9.329 27.434 ‐6.502 27.434 ‐14.460 27.434 ‐6.502 27.434 ‐6.502 27.434 ‐6.502 21.895 109.268

Cumulative Balance 133.029 160.463 153.961 181.395 166.935 194.369 187.867 215.301 208.799 236.233 229.731 251.627 251.627

Total Cash Out ‐63.980 ‐41.833 ‐75.769 ‐41.833 ‐83.727 ‐41.833 ‐75.769 ‐41.833 ‐75.769 ‐41.833 ‐75.769 ‐47.372 ‐707.319

Total Cash Out 59.309 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 76.254 898.103

100.000

150.000

200.000

250.000

300.000

Monthly and Cumulative Financial Flows

‐100.000

‐50.000

0

50.000

100.000

150.000

200.000

250.000

300.000

Initial Balan

ce

Jan‐10

Feb‐10

Mar‐10

Apr‐10

May‐10

Jun‐10

Jul‐10

Aug‐10

Sep‐10

Oct‐10

Nov‐10

Dec‐10

Jan‐11

Feb‐11

Mar‐11

Apr‐11

May‐11

Jun‐11

Jul‐11

Aug‐11

Sep‐11

Oct‐11

Nov‐11

Dec‐11

Temporal Axis 2010‐2011

Monthly and Cumulative Financial Flows

Cumulative Balance Monthly Balance

the vineyard report-20091013-pge

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