We were also lauded by Forbes as an Industry Benchmark for Sustainable Development Industrial Enterprises in China. We extend our heartfelt gratitude to all Mideans for your going ever onwards. With determination and calmness, we have been pushing our way through the thick mud of all the difficulties. Extraordinary dedication even in the most ordinary positions and a deep-rooted entrepreneurial spirit have been the cornerstone of Midea's continuing vitality for generations, warming every corner of Midea like sunshine every single day. Appreciation also goes to all of our shareholders for your steadfast support through thick and thin. Your trust has been the driving force and bedrock of our unremitting pursuit of long-term growth and sustained shareholder returns.

We stand at a new juncture, where we can view the vast world from a fresh perspective. In the past, our business journey resembled a mountaineering expedition, relying solely on our capabilities for success. However, running a business today is more akin to surfing the waves, navigating through rippling uncertainties. We are often caught off guard by the sudden decline of once glorious corporations and rapid falls of new-money. Even industry giants are adapting swiftly. Corporate succession has accelerated, with reshuffles and phaseouts happening every day. The rules of the game are being rewritten, and business paradigms are shifting, leaving every sector and individual facing similar challenges, as we find ourselves in uncharted territory. It's time to bid farewell to illusions and the past cycle, breaking free from outdated thinking and embarking on a journey of reflecting on and challenging ourselves. In this process, resilience and determination are crucial.

In the face of sluggish global growth, how does Midea secure its growth? How does Midea cultivate new competitive strengths amidst waves of technological advancements and shifting business models? With formidable challenges overseas, how do we expedite our global business distribution? In the face of anxieties over economic restructuring and shifts in growth models, how do we navigate through the cycles?

These challenges test our corporate governance, compliance, operational systems, and agility. In this world, there's no room for pessimism or optimism; only realism. As Game of Thrones, a popular TV drama, aptly put, "Chaos isn't a pit. Chaos is a ladder”. Our choices, not fate, determine our path. In this ever-evolving era, our success depends solely on how we define ourselves. What is certainty? To be certain is to ascend beyond time and space, and to summarize common sense knowledge and methods. To achieve industrial upgrades from basic to premium offerings and from low to high added value, it is essential to harness the cost-efficiency strengths and the force of technological advancement. In essence, innovation and creativity play a pivotal role in this process. The greatness of a company lies in taking common sense to the utmost level, doing the right things, upholding principles, and weathering any storm with resilience. It's not time or circumstances that trap us, but our mindset. We must reflect on ourselves, confront challenges head-on, and brave the waves. Guided by our common sense knowledge and courage as a compass, we are ready to confront storms and sail into uncharted territory.

In 2024, Midea will focus on enhancing value chain-wide efficiency alongside structural growth through upgrades. Several economic crises occurred in the world’s history. Maintaining ample liquidity, high-performance operations with low cost and high efficiency, and competitiveness of core business operations is key to navigating economic crises and market downturns. Hence, Midea must stay committed to business model upgrades, structural upgrades, and industrial upgrades and navigate the ever-evolving environment and changes with strategic certainty.

Business model upgrades: Midea will adhere to the “Chinese Market DTC (Direct To Customer), Overseas OBM Priority” strategy. The essence of the DTC strategy is customer-oriented retailing. Meanwhile, global breakthroughs are critical at this time. A truly globalized company is localized. With an internationalized headquarters, we aim to make ourselves at home across the world. To this end, we will resolutely strengthen overseas infrastructure for after-sales services, logistics, branding, etc.

Structural upgrades: Upholding a customer-oriented principle, we will redouble our efforts to enhance our "Three Generations" capabilities across research, reserves, and development. We will recruit high-calibre professionals worldwide, including top global talent, experts, and scientists, to drive technological advancement and innovation. Seizing opportunities brought by structural upgrades, Midea aims to establish itself in this era as a pioneering enterprise.

Industrial upgrades: We will continue to balance ToC and ToB business development. We are fully aware that the development of ToB business involves longer cycles and additional time. To that end, we will exhibit strategic patience and persistence and continue to invest, gradually laying the groundwork for developing capabilities of overcoming challenges.

There are no friends of times, only friends of trends. The end of an era inevitably heralds the dawn of another. In the ebb and flow of industries and in every economic crisis, only a select few enterprises emerge victorious. This is a constant process where new businesses rise and old ones fall. To be a friend of trends in this era full of uncertainties, we must surmount confusion and foster courage. Over the past 55 years, Midea has adeptly navigated changing times, remaining steadfast in the face of challenges. What has propelled Midea forward amidst these ever-shifting tides? It's the entrepreneurial spirit deeply ingrained in our core, driving vitality for generations and fostering sustained growth and progress. This spirit is Midea's legacy. We are dedicated to fostering an environment where every individual is valued, irrespective of their background, and where the entrepreneurial spirit thrives for generations to come. We will seek out those bold sailors bound for all ports in the world. With an extensive business portfolio comprising the smart home business and the commercial and industrial solutions, Midea boldly embraces evolution, braving the waves to explore broader business prospects.

While no one can precisely predict Midea's future, just as in 2014, we couldn't foresee our development in 2024, nor anticipate the profound changes in 2023 when we were at the end of 2022. Yet, Midea's future lies ahead, filled with unexplored markets, regions, and countries, as well as with undeveloped business, waiting for us to deliver better and better business results. Together, they constitute the unwritten chapters of Midea's future. As stated in Blossom Shanghai, a blockbuster TV series in China, running a business is like navigating an ocean; we must row steadfastly until we reach our destination. Midea must brave the waves and forge ahead towards our goal. When the horizon widens and the water turns azure in front of us, we will know that we’ve arrived at the ocean of endless possibilities.

We look forward to continuing this journey with our shareholders. Let’s witness Midea’s power to flourish!

Board of Directors, Midea Group

March 2024