# Dear Shareholders,

“Focused on capital operation to achieve a high quality turnaround” (“以資金運營為中心 , 實現有質量的高週轉”) has always been the Redco Group’s business strategy. Thanks to the steady implementation of the strategy, the Group has been able to focus on both our “quality” and “quantity” development. In the past three years, the Group’s contract sales reached a compound growth rate of 80%. In 2017, the Group achieved a contract sales amount of RMB13.1968 billion and a net profit of RMB990.1 million. The quality land reserves of strong second-tier cities have increased steadily. While income diversified, our financial performance remained robust.

In 2017, the industry engaged in both de-leverage and de-inventory, tightened control of capital into the first and second tier cities, coupled with increased efforts in terms of classified control over hot-spot cities, resulted in an undoubtedly more difficult market environment, but the opportunities for development have never been far away. The urbanization rate in China is still under 60%. Compared with the past experience of developed countries, the process of rapid urbanization continues to be the main force supporting the development of the industry. Under the differentiated adjustment and control polices, we see more structured development opportunities, coupled with the combination of rigid demand of first houses, improvement in demand and the urban line, will bring more opportunities for the development of the Group; in the era of stockpiling of inventory, the explosion of diversified demands from customers for a “good living”, and the horizontal and vertical extension of the service will lead the industry onto the stage of mature development, which will further expand the scale of the industry in a broader term. For the Group, keeping abreast with the development of times and firmly grasping the opportunities within the industry, and furthering both our business scale and profits has been the direction of our consistent efforts. Large scale operations are thriving in

the era of scale orientation; yet the Group remains calm and rational when facing the market trend, and value both scale and profits, and develop both our quality and quantity. We are committed to creating exquisite products and enjoyable living. As a diversified community-living operator, we are committed to building a real estate-based business, supplemented by diversified development, actively responding to industry trends, and continuing to establish strategic layout, acquire high-quality land, capital, and talent to build our absolute advantage which will surely lead the Group to achieve rapid corner overtaking under the backdrop of the new era.

# BUSINESS REVIEW

# Market and Sales Performance

In 2017, the real estate policy adhered to the main principle of “Housing for residents and not speculators, and implement long-term effect mechanism” (“房 住 不 炒 , 長 效 機 制 ”), and expanded the supply-side reforms, optimized the supply structure, with the tight convergence between short-term control and long-term mechanisms, the effect of adjustment and control gradually emerged. Sales area of commercial houses continued to reach record highs throughout the year, but the differentiation between cities was obvious, with the transaction volume of major cities, especially first-tier cities, dropped significantly, while third- and fourth-tier cities have all recovered, driving up the sales area nationwide. While the amount of different types of land on the PRC market has increased, and the transaction volume has grown for the first time in four years, which has eased the supply pressure. However, high land prices still exert pressure on the industry.

The Group persist in implementing the investment layout strategy of “expansion into the first-tier cities and further development into the strategically targeted second-tier cities ( 大 力 拓 展 一 線 城 市 , 深 耕 已 進 入 的 強 二 線 城 市 )”, and adhere to the urban layout strategy of “3+N+1”, strategically focusing on the three core regions, namely the Greater Bay Area, the Yangtze River Delta region, and the Bohai Rim region, as well as actively develop multiple key urban nodality in the Mid-west, supplemented by overseas markets. We continued to focus on the core cities development, such as Shenzhen, Shanghai, Guangzhou, Hefei, Nanchang, Jinan and Tianjin with high growth potential and strong demand. The Group adhere to the principle of improving the living environment of home-buyers by constructing upgraded products for first-time purchasers and first-time upgraders. The operating principles consistently upheld by the Group has effectively resolved the pressure from the adjustment and control policies in 2017, and matches with the market development direction and demand, achieving a steady growth in terms of results performance of the Group.

During 2017, the Group achieved contracted sales of RMB13.1968 billion, representing a year-on-year increase of 30.2%; area of completed and delivered construction was 858,197 sq.m., representing a year-on-year increase of 32.5%.

# Financial Management

The Company continued to maintain a steady financial policy, and abide to its healthy and reasonable capital structure and debt level. The Group’s net gearing ratio remain low at 33.7% in 2017.