DEAR SHAREHOLDERS, PARTNERS AND EMPLOYEES,

In 2022, Covid-19 pandemic continued, while unexpected events such as geopolitical conflicts, energy crisis and global inflation occurred, the trend and pattern of global economic development has undergone significant changes and the economic development of the PRC has also been subject to unprecedented challenges. At the same time, the transformation and upgrading of the domestic economic structure, the restructuring of the global industrial landscape and the increasing demand for digital intelligence from users have brought new development opportunities for the Group's smart devices and innovative business. In 2022, the Group actively seized the emerging industry opportunities and continued to promote transformation and innovation. We maintained our commitment to the leading development strategy of "Value Led by Brand with Relative Cost Advantage", comprehensively accelerated our global strategic deployment, bolstered our R&D capabilities, prioritised breakthroughs in the mid-to-high-end market and vigorously explored new tracks for innovative business. The efforts outlined above have strengthened the market position and increased profitability of the Group's core display business, and realised new breakthroughs in the development of innovative business.

In 2022, the Group's total revenue amounted to HK$71,351 million, revenue from innovative business increased by 22.2% year-on-year to HK$10,444 million, and revenue from its internet business grew by 24.3% year-on-year to HK$2,298 million. The Group remained dedicated to making breakthroughs in the mid-to-high-end market and expanding its global presence, which enhanced its operation quality and profitability. The overall gross profit rose by 4.6% year-on-year to HK$13,112 million, resulting in a gross profit margin improvement of 1.7 percentage points to 18.4% when compared to that of 2021. The profit attributable to owners of the parent was HK$447 million, while adjusted profit attributable to owners of the parent increased by 102.4% year-on-year to HK$704 million. To express our sincere gratitude to and reward our shareholders, the Board proposed a final dividend of HK12.70 cents per share, representing a payout ratio of 45.0% of the adjusted profit attributable to owners of the parent.

The Group has strengthened its leading position in the display business, delivering outstanding performance in both mid-to-high-end market strategy execution and cutting-edge technological R&D. In 2022, the Group saw its global shipment of TCL smart screens increased against the trend, reaching 23.78 million sets, propelling the Group's market share to rank second globally. The implementation of the "TCL + Falcon" dual-brand strategy in the PRC market contributed to a significant 21.3% year-on-year increase in TCL smart screens shipment. Moreover, the market share of the Group's TCL smart screens ranked among the top five in more than 20 major countries overseas, demonstrating a steady growth. The market share of TCL smart Android tablets ranked the fifth in the world. The market share of TCL mobile phones ranked the third and the fourth in Canada and the U.S., respectively. The Group's competitive advantage in the mid-to-high-end products was further reinforced, with shipment of TCL smart screens of 65 inches and above witnessing a remarkable 75.7% year-on-year increase, and its corresponding proportion of shipment increased by 8.2 percentage points to 19.3%. Additionally, the global shipment of TCL Mini LED smart screens grew by 26.8% year-on-year. Outstanding results in the mid-to-high-end market have contributed to the 2.1 percentage points year-on-year increase of the gross profit margin of the Group's large-sized display business, reaching 18.8%. Meanwhile, the Group continued to prioritise technological R&D and innovation, and increased its investment in display and intelligence fields. During the year, the Group's products received multiple awards, including the "Premium Mini LED TV 2022-2023" award, the German "Red Dot Award 2022", the "iF Design Award", and the "Mini LED Display Innovation of the Year Award", reflecting the industry's recognition of the Group's technological achievements. Moving forward, the Group will adhere to its globalisation strategic layout, solidify and expand its advantages in global supply chain deployment, optimise its channels and product structure, refine its technology and innovation capacity and continuously enhance its competitiveness in the international market.

The Group's global Internet business recorded a steady growth during the year, reflecting a year-on-year growth of 24.3% to HK$2,298 million in terms of revenue. In the PRC market, Falcon Network Technology Group's brand power has further advanced, as user loyalty and activeness have both elevated. Moreover, membership penetration rate has continued to improve, while the ARPU of Falcon Network Technology Group (Shenzhen Falcon Network Technology Co., Ltd. (a limited liability company established and subsisting under the laws of the PRC, a subsidiary of the Company) and its subsidiaries) has increased by 10.7% year-on-year to HK$85.1 in 2022, further strengthening its profit-generating capabilities. In the global market, the Group has maintained its close cooperation with major Internet giants such as Roku and Google, and expedited the commercial transformation of TCL Channel through the overseas business of Falcon Network Technology Group. As a result, revenue from the Group's international Internet business increased by 39.6% year-on-year to HK$501 million in 2022.

During 2022, the Group's innovative business sustained its high-growth momentum and achieved remarkable breakthroughs throughout the year. We have been actively deepening our global layout and robustly developing the market space for our all-category marketing business worldwide. During the year, the Group's all-category marketing business achieved a year-on-year revenue growth of 29.4% to HK$8,243 million, and the distribution gross margin rose by 2.1 percentage points year-on-year to 13.2%. Meanwhile, during this year, we successfully developed a new track of distributed photovoltaic business. The Group officially commenced its photovoltaic business in the second quarter of 2022. By the end of 2022, over 150 new distribution channels were developed and more than 120 commercial and industrial projects were entered into. As of the end of 2022, the Group's photovoltaic business had extended its coverage to nine provinces and cities in the PRC. In the future, we will further develop the global layout of our photovoltaic business to empower the Group's second growth curve in the long run. In addition, we released the new consumer-grade XR smart glasses, NXTWEAR AIR, and its upgraded version, NXTWEAR AIR 1S. NXTWEAR AIR was honored with "the VR/AR Innovation Award" at the 2022 World Conference on VR Industry, demonstrating continued market recognition of our product strength.

Looking ahead to 2023, the global economy remains uncertain due to factors including geopolitical challenges and high inflation. Nonetheless, there are growth prospects in emerging markets and recovery opportunities in the PRC market. Meanwhile, against the backdrop of the digitisation of the economy and society, as well as the shift towards clean energy, there is a strong momentum for consumption upgrades and industrial structure optimisation. This has given rise to new development opportunities in the development of new energy, new scenarios and new intelligent ecosystem, which will inject momentum into the development of smart devices and digital industries. The Group will maintain its strategic focus and pursue its development strategies of "Globalisation" and "Technology Transformation", with a particular emphasis on key regional development worldwide and core channel coverage. It will increase input in R&D to promote product transformation and upgrading, further improving product competitiveness and brand influence. These efforts will enable the Group to achieve all-round high-quality development. The Group will also keep a close eye on emerging trends, seize new opportunities, expand its business and service boundaries, and proactively develop new growth curves, all with the aim of achieving sustained performance growth and delivering greater returns to our shareholders.

On behalf of the Board, I would like to express my heartfelt appreciation to the global consumers for giving the Group the opportunity to provide our products and services. I would also like to extend my sincere gratitude for the unwavering support and trust from all our shareholders, investors, global customers and partners as well as the dedication and contribution of the Directors and the Group's management team and staff over the years.

DU Juan
Chairperson
10 March 2023