Evergreen International Holdings Limited

Chairman's Message

Dear Shareholders,

I hereby present the annual results of Evergreen International Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2016.

In 2016, the global economy remained challenging and volatile. The economic recovery of the United States ("US") remained uncertain after the Federal Reserve of the US raised the interest rates in December 2016, which was just the second time in a decade that the Fed has raised rates while the economies of Europe and Asia remained complicated and lacked growth momentum. In the People's Republic of China (the "PRC", "Mainland China" or "China"), the economic growth has been undergoing a gradual slowdown from a persistent rapid expansion in the past decade. According to the National Bureau of Statistics of China, the growth rate of gross domestic product ("GDP") of 2016 moderated to 6.7%, which was the slowest pace of growth in 26 years, but well within the government's target range of 6.5% to 7%. The Chinese government continued to carry out various measures including cutting interest rate and lowering the reserve requirement so as to stimulate and restructure the economy. As a result of these stimulus measures, together with urbanisation and the continued increase in disposable income of consumers, the total retail sales of consumer goods realised in urban area and rural area in 2016 grew at a rate of 10.4% and 10.9%, respectively, as compared to that of previous year.

However, the operating environment of the retail sector, in particular the menswear industry, remained tough and sluggish in 2016. The industry was facing challenges of lack of sales momentum, downward pressure and weak consumer sentiment because of the Chinese government's continued anti-corruption campaign and the increasing concern on the slowdown of the economy. Though the total sales of garments, footwear, hats and knitwear in China increased by 7.0%, the growth rate of which was 2.8 percentage points lower than that in 2015 and hovering at a slowdown pace as compared to previous years.

For the year ended 31 December 2016, the revenue of the Group decreased by 6.6% to RMB421,839,000, as a result of the overall weak and continued sluggish retail market. Overall gross profits margin were pulled lower from 66.3% to 56.6% for the year ended 31 December 2016 due to more discounts granted to the customers in response to the weakening consumer sentiment. The Group recorded a loss attributable to ordinary equity holders of the Company of RMB80,409,000 for the year ended 31 December 2016 (2015: a loss of RMB75,575,000). The loss was mainly attributable to the decrease in gross profit, non-cash write-down of inventories, impairment of leasehold improvements, trade receivables and investment in an associate, and operating loss incurred in the investment stage for the Group's new high-end children's wear and accessories product segment.

As at 31 December 2016, the Group had a total of 189 menswear stores covering 26 provinces and autonomous regions, covering 105 cities in China. Given the intense competition in the retail market and weak consumer sentiment, the Group prudently adjusted the store opening plan in response to the challenging market condition and retail environment. The Group plans to open approximately 8 new retail stores for menswear business in 2017, of which approximately 5 are self-operated stores, 3 are franchised stores. On the other hand, the Group will continue to consolidate inefficient stores in order to improve the operating efficiency.

In order to improve brand image, the Group continued to conduct a series of advertising and promotional activities through various channels, e.g. advertisements in fashion magazines, promotional activities on the internet and mobile channels, and large advertising billboards in the airport and well-known department stores and fashion shows. Apart from routine advertising and promotional activities, corporate social responsibility is also one of the key values of the Group and the Group will continue to organise and participate in various charitable and social activities in the future.

In order to achieve a healthy and sustainable growth for the Group in the long run, seizing the growing potential opportunities from the full launch of two-child policy in China, the Group secured 9 international fashion brands' distribution rights of high-end children's wear and accessories product in Hong Kong, Macau and China. As at 31 December 2016, the Group had 11 retail stores and 6 Kissocool located in Hong Kong, Macau and China for the children's wear and accessories products of high-end international fashion brands. The Group believes that the new business segment of high-end children's wear and accessories will enable the Group to diversify its business, product and brand portfolio in the apparel and accessory product industries and will create synergy with the existing menswear business of the Group. The Group aspires to be a leading brand operator in the high-end children's wear and accessories product industry in China and considers that the new business segment is beneficial to the Group and its shareholders as a whole in the long run.

The Group jointly established an investment fund investing in lifestyle and related internet enterprises projects with Hangzhou Zhejiang Momentum Fund LLP, a subsidiary of Fosun International Limited ("Fosun International") (stock code of the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"): 656), Yadong Fosun Evergreen Investment Management Co., Ltd., Shenzhen Ellassay Fashion Co., Ltd. (stock code of the Main Board of A share market of the Shanghai Stock Exchange: 603808), and Dongguan Best Pacific Textiles Co., Ltd., a subsidiary of Best Pacific International Holdings Limited (stock code of the Main Board of the Stock Exchange: 2111) in March 2016. The Group will continue to look for other new investment opportunities in the apparel industry, accessory product industry and the online business industry for development and expansion.

Looking forward, despite the slowdown in business environment, the economy in China is still growing with continuously increasing disposable income of the consumers and market potentials in growing children populations under the government's reforming measures, the Group is confident in the long-term development of menswear and children's wear and accessories markets in China. The Group will continue to implement consistent and clear strategies, which include prudently enhancing its retail and distribution network and healthily expanding product offerings and design capabilities, enhancing product quality, consolidating brand equity of V.E. DELURE and TESTANTIN, enriching our brands portfolio and upgrading our ERP system and administrative support, in order to achieve a healthy and sustainable growth in the long run. Furthermore, the Group believes that the new business segment of high-end children's wear and accessories products will enable the Group to diversify its business, product and brand portfolio in the apparel and accessory product industries and will leverage the foundation of the existing menswear business of the Group. The Group strives to be the leading brand operator in the high-end children's wear and accessories product industry in China and therefore consider the new business is beneficial to the Group and its shareholders as a whole in the long run.

Finally, I would like to take this opportunity to express my sincere gratitude to the members of the board (the "Board") of directors (the "Directors") of the Company, for their valuable advice and support. On behalf of the Board, I would also like to thank employees, shareholders, distributors, customers and suppliers of the Group for their confidence and continuous support to the Group.


Chan Yuk Ming
Chairman

Hong Kong, 30 March 2017

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