LETTER TO SHAREHOLDERS

While a heart-shaking fight against the pandemic is now on globally, this once-in-a-century “black swan” incident has casted tremendous changes to the lives of everyone. We sincerely hope everyone stays safe and healthy. And we have strong belief that the haze will eventually disappear and there will always be bright light.
 

In this nationwide operation, Midea was amongst the first companies to respond and participate in frequent support missions, reflecting the heritage of utmost importance from Midea's development history of 50 years—taking rapid actions amid crises and changes, bearing responsibilities amid challenges and chaos.

 

Now, as the world is faced with changes that have not been seen for a century, history-making global economic fluctuations and a continuous stream of uncertainties come thick and fast. In light of this unprecedented time, by committing to its unhesitating strategies and responsibilities, Midea has managed to maintain steady growth in business performance. In 2019, Midea achieved revenue of RMB279.381 billion, marking a year-on-year increase of 6.71%; and achieved RMB24.211 billion in net profit attributable to shareholders of the Company, recording a year-on-year increase of 19.68%. Midea was ranked 312th among Fortune Global 500 in 2019, moving up by 169 places since its debut in 2016. As for Fortune China 500, Midea was ranked 36th, topping the industry chart for 5 consecutive years. In addition, Midea was ranked 33rd among BrandZ™ Top 100 Most Valuable Chinese Brands in 2019 with an increase of brand value by 20%. Midea ranked 27th on the list of Brand Finance Tech 100 in 2019, moving up 16 places in comparison to the year before, leading its industry peers throughout the country.
 

2019 was yet another year that gave us the feeling that time flies. As market iteration cycles become more rapid, one may say this is a tempestuous era with so many tides. Things change drastically, yet vision, dreams, perspectives and ambitious setup will always persist. No one could stay young forever, but young people will always be there.

Companies decline and fall, but there are always some firms which are thriving. For us, nothing is more critical than upholding our long-term perspective mindset and adapting to external uncertainties with determined strategic focus.

We are devoted to the three strategic focuses of "Product Leadership, Efficiency Driven, Global Operations" to continue to set the stage for our business. Today, such three strategic focuses have already become our guidelines for daily business and operations. Business performance is, therefore, said to be continuously improving. Moreover, we increased investments in weaker product categories and made bold moves on new product categories and new business models in 2019. Whereas our international layout increases in clarity over time, we do look forward to business prosperity in the days to come.
 

We uphold our user-centric strategy and promote business reforms. We continued to break through stereotype in 2019 and placed interests and needs of users first in the top-down systematic and comprehensive business model reforms across the Group to enhance connections between our services and products and users.
 

We are committed to building future-oriented innovation capabilities and R&D scaling advantages. In 2019, we kicked off our plan to build a global R&D network of “4+2” , promoting the Shanghai Global Innovation Center, Midea America Research Center, Midea Germany Research Center and Midea Japan Research Center as comprehensive technology R&D centers, and Midea Milan Design Center as Industrial Design Center. We progressed in promoting global R&D resources integration and enhancing the world’s R&D layout plus innovation mechanisms.
 

We insist that human capital is the most essential component for an enterprise, taking further steps to strengthen employee rights and interests and invest in employee care. Over the past year, the core management and all employees have maintained an excellent fighting spirit, learning ability, as well as accountability. With rapid growth in the mid-level young managers and non-stop inflow of fresh blood, we have created a diverse internal culture that fuels the Company’s long-term development.
 

These long-term layouts and investments, together with the unwavering commitment to sticking to and promoting Midea’s culture, are all Midea's wealth of tomorrow. They also provide the confidence for us to believe in Midea’s achievement in long-term steady growth and safeguard the interests of our shareholders.
 

Actually it is not the changing world, but how we interpret the changing that affects us most. With merely past knowledge, we will never be able to reach further future. The manufacturing industry’s underlying logic for achieving growth from the past has been profoundly altered. The most active business pulse in the digitalization era is the speed and ability to create value.
 

Like the stirring melody in a grand and complex symphony, Midea will renew and refocus our strategies amidst the vast changing world. We will launch and strengthen the next round transformation of comprehensive digitalization and intellectualization. As we have learned from the past, every successful transformation requires the courage to risk life, through devotion, persistence and perseverance. By promoting comprehensive digitalization and intellectualization, Midea’s product models and business value chain are going to observe groundbreaking changes, whereas Midea will evolve from a hardware-based company to a data-driven innovative technology group that takes affirmative steps forward.
 

We shall strive to achieve changes in the format of products and thus transform our traditional business of simply selling hardware to a software-driven business, intensifying contents and services at the same time.
 

It is in our list to achieve changes in business methodology and promote reforms in research, production and sales. And with digitalization tools and approaches, we are going to promote online and offline integration, decentralization and flat management.
 

The goals are to foster changes in business models, achieve direct communication, direct contact and high-frequency interaction with users, in order to uncover user value and transform to an Internet mindset.
 

When the going gets tough, the tough get going. In the face of a series of challenges brought forth by the coronavirus epidemic, we shall remain true to our original aspiration and carry our dreams through long distances. Let us be prepared for strategic deployment, resource investments and team building efforts—all in the long term. They do not have to be magnificent fireworks that echo down in history but can still become the sparkling lights in our unique stories!
 

Future is defined by the path we’ve been through! At this moment, Midea is flourishing and the most shining Midea is still ahead of us and far from being achieved.
 

We hereby express our gratitude for all shareholders’ support all the way along.

Board of Directors, Midea Group

April 2020

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