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 2017.

In 2017, the global economy continued to be complicated and volatile. In the People's Republic of China (the "PRC", "Mainland China" or "China"), according to the National Bureau of Statistics of China, the growth rate of gross domestic product ("GDP") of 2017 grew by 6.9%, reversing a downward growth trend for the first time since 2010, well above the government annual target of around 6.5%. The total retail sales of consumer goods realised in urban area and rural area in 2017 grew at a rate of 10% and 11.8%, respectively, as compared to that of the previous year.

However, the operating environment of the retail sector, in particular the premium menswear industry, remained tough and sluggish in 2017. The premium menswear industry is facing intense competition. Due to the vast development of e-Commerce in China, more customers have switched their shopping behavior from traditional retail stores to online shopping. In 2017, the retail sales of apparel shoes, hats and knitwear amounted to RMB1.5 trillion, an increase of 7.8% over the same period of last year, an increase of 0.8 percentage points from the previous year and the first increase in seven years.

For the year ended 31 December 2017, the revenue of the Group decreased by 20.5% to RMB335,469,000. Overall gross profit margin increased from 56.6% to 61.6% for the year ended 31 December 2017 largely due to the implementation of various cost-saving measures and the closure of underperforming menswear stores and other rationalisation processes. The Group recorded a loss attributable to ordinary equity holders of the Company of RMB138,978,000 for the year ended 31 December 2017 (2016: a loss of RMB80,409,000). The loss was mainly attributable to the decrease in sales which led to a reduction in gross profit, foreign exchange loss, an increase in non-cash write-down of inventory provision for children's wear and an increase in tax expense due to the payment of withholding tax for the distribution of interim dividend in 2017.

As at 31 December 2017, the Group had a total of 151 menswear stores covering 26 provinces and autonomous regions, covering 90 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 20 new retail stores for menswear business in 2018, of which approximately 15 are self-operated stores and 5 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 had a portfolio of 10 international fashion brands of high-end children's wear and accessories products in Hong Kong and China. As at the date of this report, the Group had 4 retail stores and 6 Kissocool located in Hong Kong 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 industry 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 accessory 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 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, 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. As such, 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 brand portfolio and upgrading our ERP system and administrative support, in order to achieve a healthy and sustainable growth 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 our employees, shareholders, distributors, customers and suppliers of the Group for their confidence and continuous support to the Group.

Chan Yuk Ming

Hong Kong, 27 March 2018

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