Solid Foundation,Continued Innovation,
Renewed Outreach

TCL Corporation has weathered the storm of three years of globalization to finally achieve overall profitability, marking a first victory in the company’s campaign of international development, and demonstrating that the company has begun to get on track to healthy development. This has enormous strategic significance for the task of internationalizing TCL, and also for the future of TCL. Looking back at the past, we have survived this baptism of fire to live another day, and we should feel very proud of this achievement; looking forward to the future, while there is a long way to go and a lot of work to be done, we also have reason to be confident.

As profitability has grown, we have begun to win back public trust in the TCL brand, and at the same time, we have also strengthened our resolve to continue internationalizing TCL. We have always been convinced that internationalization is a necessary route for the future development of TCL and of Chinese businesses as a whole. TCL will continue to push forward its international strategy for sustained development to become "a respected and innovative leading global business".

Since international operations began three years ago, we have paid a considerable price, but have also accumulated a great deal of valuable experience and results, and the business has also achieved the core competitiveness that is required. We have created a global operational framework which guides the business; we have increased our capacity for independent product technical innovation; we have promoted a spirit of innovation based on the "Rebirth of the Eagle" strategy, reshaping the company culture; we have streamlined our asset structure; and we have increased the operational efficiency of the business. TCL Multimedia’s industrial deployment and channel frameworks are essentially fully formed in China, the newly emerging markets, Europe and North America. The European business has already achieved profitability using the innovative "borderless centralization" operational model; the North American and emerging markets businesses have continued to exhibit stable development; and our Chinese businesses continue to lead the domestic market. Our globalized operational structure has enabled us to compete with the leading global players in the audio-visual products field. TCL Communications’ overseas mobile phone sales have exceeded ten million units for two consecutive years while achieving profitability, with products selling strongly in European and Latin American markets, and the North American market beginning to develop. TCL Communications’ overseas market base and global industrial deployment are also improving rapidly. Air conditioning products have also shown sustained overseas growth, supporting the whole business’s return to profitability and health development.

Through international acquisitions and mergers, TCL has achieved a historic transformation from a Chinese business with domestic roots to an international corporation with the world in its sights. Today, we stand at the beginning of a new era in the company’s history: by looking toward the future, we will make TCL into a successful international business. If we look at the last three years as a stage of passive adjustment to the trials and challenges that globalization brings, then beginning from today, we have entered a new stage of actively planning the objectives and tasks of TCL’s future international development.

We first proposed the three step general strategy of "profitability, health and growth" in TCL’s international development three years ago, successfully formulating a "strategic roadmap" for the ultimate direction of TCL’s internationalization. By the end of last year, we had carried out a massive restructuring program, creating the four business groups of Multimedia, Communications, Appliances and Components, and the two tertiary business operations networks of Real Estate, Finance and Investments, and Logistics and Services. This "4+2" operational framework restructuring program streamlined the deployment of resources, clarifying the operational framework of the entire corporation, and built a strong business infrastructure for the healthy international development of the company. Over the next two to three years, we must build rock-solid foundations for the sustained future "growth" of the company in terms of the core capabilities of the core business, including areas such as strategy, branding, technology, manufacturing processes, procedures, personnel and culture.

To this end, we have developed our overall strategic thinking for the development of TCL in 2008 and the next two to three years. The key points of this thinking are strengthening foundations, continuing innovation and achieving new breakthroughs. "Strengthening foundations" means that we must consolidate our management base at the root level, and strengthen the foundations of our core capabilities, while "continuing innovation and achieving new breakthroughs" means we must raise operational and management standards to the new heights required by the company’s international development, through reforms and breakthroughs in terms of technology, processes and culture.

There is no even path to development, and there are no limits to innovation. We have already worked hard and pulled together to pass through the difficult times, and have achieved our first victory. Today, we stand at a new starting point, with a new set of challenges facing the development of the business. The 29th Summer Olympic Games will be held in Beijing in summer 2008, and this is a historic opportunity for Chinese businesses to display their individual images to the world. The rise of China’s economy depends on the strength of Chinese businesses; as one of the first Chinese businesses leading the way to "step outside" China, TCL must do justice to this clarion call. We will strive forward to take TCL to new heights by liberating our thinking, strengthening our resolve, building our confidence and using the most scientific methods. By working together, we will write a new chapter in the history of TCL and achieve new breakthroughs in TCL’s development!