Hangzhou Hikvision Digital Technology Co., Ltd.
2019 Annual Report
April 25
th
2020
To shareholdersAs a technology-driven company, technological innovation has been the major approach tooperations for the Company’s sustainable development. Over the past two years, in response totechnological advancements and changes in the external environment, the R&D expenses ratioof the Company has risen from 7.62% in 2017 to 8.99% in 2018, and further to 9.51% in 2019.The Company will continue to make further R&D investments to address increasinguncertainties, create value for customers, provide platforms for employees, and drive returns forthe Company’s shareholders. We will maintain our commitment to technological innovationregardless of macro-economic conditions.In the domestic market, the Company has completed the initiative to integrate its businessinto Public Business Group (PBG), Enterprise Business Group (EBG) and Small and MediumEnterprise Business Group (SMBG). The three BGs focus on their respective target markets andleverage various technologies, such as artificial intelligence, big data and cloud computing etc.,to help customers connect the physical and information worlds, and achieve the fusion of dataof the Internet of Things with the Information Network. In our overseas markets, we have largelycompleted the construction of country-specific marketing and service systems, enabling therendering of better service to local markets. After five years of cultivation, the innovativebusinesses have also made satisfactory progress. In our 2017 annual report, we disclosed thesingle-line revenue of the EZVIZ (smart home) business, and this year, we disclosed the single-line revenue of the robotic business. We expect to see more growth of our innovative businessesin the future and look forward to better development of these particular businesses.In 2020, the external environment is currently undergoing significant changes. Similarly,the security industry is also seeing many changes. Taken together, these twin dynamics havecreated increased uncertainties in the Company’s operation. The Company’s management team
is committed to taking various risk-mitigation measures and adapting to environmental andindustrial changes to ensure the continued healthy development of the Company. The Companywill continue to optimize its operations and management, enhancing its operational effectivenessand efficiency. The Company, along with its leadership team, is confident in its ability to calmlyaddress and navigate the current unique challenges it faces. As always, the Company willcontinue to be honest, transparent, and open in all its affairs with an eye towards earning the trustof all parties and stakeholders.Last but not the least, we would like to extend our sincere gratitude to all shareholders fortheir trust and confidence in the Company’s management team.
See far, go further!
Hangzhou Hikvision Digital Technology Co., Ltd.
Board of Directors
2020.04
Section I Important Notes, Contents and DefinitionsThe Board of Directors, Board of Supervisors, directors, supervisors and senior management ofHangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as the “Company”) herebyguarantee that the information presented in this report shall be together be wholly liable for thetruthfulness, accuracy and completeness of its contents and free of any false records, misleadingstatements or material omissions, and will undertake individual and joint legal liabilities.
Chen Zongnian, the Company's legal representative, Jin Yan, the person in charge of theaccounting work, and Zhan Junhua, the person in charge of accounting department (accountingsupervisor) hereby declare and warrant that the financial statements in this report are authentic,accurate and complete.All directors of the Company have attended the board meeting to review this report.The profit distribution proposal passed upon deliberation at the meeting of the Board of Directorsis set out as follows: Based on the Company’s current total share capital of 9,345,010,696 shares, theCompany proposed to distribute cash dividend of RMB 7 (tax inclusive) per each 10 shares to allshareholders, bonus share and share distribution from capital reserve is nil.
Note:
This document is a translated version of the Chinese version 2019 Annual Report (“2019年年度报告”), and the published announcements in the Chinese version shall prevail. The complete publishedChinese 2019 Annual Report may be obtained at www.cninfo.com.cn.
Please read the annual report and pay particular attention to the following risk factors:
1) Global COVID-19 epidemic risk: Amidst the sustained transmission of COVID-19 epidemic around the
world, and the heightened uncertainties in economic development, the Company will maintain its businessstrategy focusing on stable and healthy development and closely monitor the impact of the epidemic. Ifthe epidemic leads to further deterioration of the domestic and overseas economies, the adverse impacton the Company’s business will escalate accordingly.
2) Global business risks: The Company operates in more than 150 countries and regions around the world.As the potential risks of pandemic, debt issues, political conflicts, and exchange rate fluctuations invarious countries around the world are difficult to eliminate, the Company’s overseas business operationsmay be adversely affected.
3) Legal and compliance risk: The world's multilateral trading system is facing an impact. The local lawsand regulations that business activities need to comply with are very complicated. The worldwide dataprotection regulations are stricter, which require higher compliance requirements. If the Company'scompliance ability cannot keep up with the situation, it will bring risks to the Company's operations.
4) Risk of exchange rate fluctuation: The Company carries out operations in various countries and regionswith different currencies, mainly settled in non-RMB currency (mainly in USD). Exchange ratefluctuations could have impact on foreign exchange exposures arising out of sales, purchase and financing,which can likely affect the profitability level of the Company.
5) Supply chain risks: The global supply system is suffering from an array of adverse impacts. The
Company has been making efforts to enhance arrangements for our supply chain and optimize inventoryadjustments and controls. However, if systemic risks arise in the global supply chain, the Company’soperating capabilities may be affected.
6) Risk of technology upgrade: Technologies such as artificial intelligence (AI), big data, cloud computing,and edge computing are developing rapidly, with technology diffusion seeing the most rapid developments.If the Company is unable to adapt to the changes in cutting-edge technologies, or fails to quickly realizebusiness innovation, the risks of ongoing uncertainties will increase.
7) Risk of internal management: The continual expansion of business scale, the continuous increase ofnew products and new businesses, the continuous growth in total number of employees, and the significantrise of internal management complexity have posed challenges to the Company’s management work and
raised higher requirements on the Company's management system. The Company’s sustainabledevelopment will face certain risks if the management level fails to proportionally address the Company’sbusiness expansion.
8) Capital risk arising from the decline in customers’ ability to pay: The liquidity of different businesslinks is subject to economic conditions. Despite the cash reserves accumulated from the Company’shistorically healthy operation and low financing costs, accounts receivable of the Company will beadversely affected once liquidity risks increase.
9) Risk of cybersecurity: The Company has always attached importance and taken active measures toenhance cybersecurity performance of our products and systems, However, in the context of Internetapplications, there is still a possibility of deliberate attempts，including computer viruses, malicioussoftware, hacker and others to intentionally attack our systems or products, causing cybersecurity issues.10) Risk of intellectual property (IP) rights: The Company continues to maintain a relatively large scale ofR&D investment, and produces considerable technical milestones. At the same time, the Companyimplements well-organized intellectual property right (IPR) protection measures. However, the risk ofintellectual property disputes and the risk of intellectual property rights violations still exist.
The above notices might not be all-inclusive of all other potential risks. Please pay attention to potential investmentrisks
CONTENTS
To shareholders ...... 1
Section I Important Notes, Contents and Definitions ...... 3
Section II Corporate Profile & Key Financial Data ...... 9
Section III Corporate Business Summary ...... 14
Section IV Discussion and Analysis on Business Operation ...... 74
Section V Significant Events ...... 98
Section VI Changes in Shares and Information about Shareholders ...... 124
Section VII Information of Preferred Shares ...... 139
Section VIII Information about Convertible Corporate Bonds ...... 140
Section IX Information about Directors, Supervisors, Senior Management ...... 141
Section X Corporate Governance ...... 161
Section XI Corporate Bonds ...... 173
Section XII Financial Report ...... 174
Section XIII Documents Available for Reference ...... 311
Definitions
| Term | Definition |
| Reporting Period | From January 1st 2019 to December 31th 2019 |
| Articles of Associations | Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd |
| Hikvision, our Company, the Company | Hangzhou Hikvision Digital Technology Co., Ltd |
| CETC | China Electronics Technology Group Ltd. is the actual controller of the company |
| CETHIK | CETHIK Group Co., Ltd. Controlling Shareholder of the Company |
| Innovative Co-investment Partnership | Hangzhou Hikvision Equity Investment Partnership (Limited Partnership) |
| EZVIZ, EZVIZ Network | Hangzhou Ezviz Network Ltd. (According to the context, also refers to the corresponding business) |
| HikRobot | Hangzhou Hikrobot Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikAuto | Hangzhou HikAuto Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikMicro | Hangzhou Hikmicro Sensing Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikSemi | Wuhan Hikstorage Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikImaging | Hangzhou Hikmed Imaging Technology Ltd. (According to the context, also refers to the corresponding business) |
| HikFire, HikSafety | Hangzhou Hikfire Technology Ltd. (According to the context, also refers to the corresponding business) |
| Rayin | Hangzhou Rayin Technology Ltd. |
| Hangzhou Innovation Industrial Base | Located in Binjiang District, Hangzhou, Zhejiang Province, the planned use is for R&D, office space and supporting facilities. It was first disclosed in the Company's Announcement on Investment and Construction of Hangzhou Innovation Industrial Base Project in Hangzhou (No: 2017-034). |
| Chengdu Science and Technology Park | Located in Chengdu, Sichuan Province, the planned use is for R&D, office space and supporting facilities. It was first disclosed in the Company's Announcement on Investment and Construction of Chengdu Science and Technology Park Project in Chengdu (No: 2017-033). |
| Chongqing Science and Technology Park | Located in Chongqing, the planned use is for production plants, warehouses and supporting facilities. It was first disclosed in the Company's Announcement on Investment and Construction of Chongqing Science and Technology Park Project in Chongqing (No. 2017-035). |
| Chongqing Manufacture Base | Located in Chongqing, purposes for manufacturing facility, initially disclosed in Announcement about Resolution of the 20th Meeting of the 3rd Session Board（No：2016-068） |
| Term | Definition |
| Xi’an Science and Technology Park | Located in Xi'an, Shaanxi Province, the planned use is for R&D, office space and supporting facilities. It was first disclosed in the Company's Announcement on Investment and Construction of Xi'an Science and Technology Park Project in Xi'an (No: 2017-031). |
| Wuhan Science and Technology Park | Located in Wuhan, Hubei Province, the planned use is for R&D, office space and supporting facilities. It was first disclosed in the Company's Announcement on Investment and Construction of Wuhan Science and Technology Park Project in Wuhan (No. 2017-032). |
| Wuhan Intelligence Industry Park | Located in Wuhan, Hubei Province, the planned use is for production plants, warehouses and supporting facilities. First disclosed in the Company's Announcement on Investment and Construction of Wuhan Intelligence Industry Park Project in Wuhan (No. 2017-036). |
| Innovative Business | A long investment cycle, business prospects uncertain, has the high risk and uncertainty, in need for direct or indirect investment in exploration, in order for the Company to timely enter into new areas of business. Initially disclosed in Announcement about Management Measures for Core Staff Investment in Innovative Business (《核心员工跟投创新业务管理办法》) (www.cninfo.com.cn). In this report, innovative business also refers to EZVIZ, HikvisionRobot, HikAuto, HikMicro, HikSemi, HikImaging, HikFire, Rayin and their related business or products. |
Section II Corporate Profile & Key Financial DataI. Corporate Information
| Stock abbreviation | HIKVISION | Stock code | 002415 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese (if any) | 杭州海康威视数字技术股份有限公司 | ||
| Abbr. of the Company name in Chinese | 海康威视 | ||
| Name of the Company in English (if any) | HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD | ||
| Abbr. of the Company name in English (if any) | HIKVISION | ||
| Legal representative | Chen Zongnian | ||
| Registered address | No. 555 Qianmo Road, Binjiang District, Hangzhou | ||
| Postal code of Registered address | 310051 | ||
| Business address | No. 518 WuLianWang Street, Binjiang District, Hangzhou | ||
| Postal code of Business address | 310051 | ||
| Company website | www.hikvision.com | ||
| market@hikvision.com; ir@hikvision.com | |||
| Board Secretary | Securities Affairs Representative | |
| Name | Huang Fanghong | |
| Address | No. 518 WuLianWang Street, Binjiang District, Hangzhou | |
| Tel. | 0571-88075998; 0571-89710492 | |
| Fax | 0571-89986895 | |
| hikvision@hikvision.com |
| Newspaper designated by the Company for information disclosure | Securities Times, Shanghai Securities Journal |
| Website specified by CSRC for release of the Annual Report | www.cninfo.com.cn |
| Place where the Annual Report is available for inspection | Office of the Board of Directors of the Company |
IV. Company Registration and Alteration
| Organization code | 91330000733796106P |
| Changes in principle business activities since the Company was listed (if any) | During the reporting period, the Company operating range newly added R&D and production of electronic products (transmission and display equipment), big data and Internet of Things hardware and software products, intelligent equipment and intelligent systems, real-time communication systems, servers and supporting hardware and software products. After the change, the Company's business scope is: research and development (R&D) and production of electronic products (including explosion-proof electrical products, communication equipment and related ancillary equipment, multimedia equipment, transmission and display equipment), fire protection products, big data and Internet of Things hardware and software products aircrafts, robots, intelligent equipment and intelligent systems, real-time communication systems, auto parts and accessories, automotive electrical signal equipment, servers and supporting hardware and software products; Sales of self-produced products; provide technical services, electronic technology consulting service, training service (excluding the organizational training), electronic equipment installation; electrical engineering, design, construction and maintenance of intelligent system projects. (except country prohibited and restricted items, relating to the specific mandatory license certificate) (subject to ratification in accordance with the project, approved by the relevant departments to operate) |
| Changes of controlling shareholders of the Company (if any) | No change during the reporting period |
| Name of the accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Business address of the accounting firm | 30F Bund Center 222 Yan An Road East Shanghai |
| Name of accountants for writing signature | Tang Lianjiong, Zhang Shushu |
VI. Key accounting data and Financial IndicatorsWhether the Company performed a retrospective adjustment or restatement of previous accounting data
√Yes □No
Retrospective adjustment or restatement reasons: business merger under the common control
Unit: RMB
| 2019 | 2018 | YoY Change (%) | 2017 | |||
| Before adjustments | After adjustments | After adjustments | Before adjustments | After adjustments | ||
| Operating income (RMB) | 57,658,110,065.22 | 49,837,132,481.61 | 49,837,132,481.61 | 15.69% | 41,905,476,572.07 | 41,905,476,572.07 |
| Net profits attributable to shareholders of the Company (RMB) | 12,414,587,690.45 | 11,352,869,241.32 | 11,352,132,255.21 | 9.36% | 9,410,855,084.82 | 9,410,855,084.82 |
| Net profits attributable to shareholders of the Company excluding non-recurring gains and losses (RMB) | 12,037,518,321.42 | 10,983,228,170.60 | 10,983,228,170.60 | 9.60% | 9,177,116,964.06 | 9,177,116,964.06 |
| Net cash flows from operating activities (RMB) | 7,767,720,171.14 | 9,114,013,286.06 | 9,113,286,027.76 | -14.76% | 7,373,160,250.68 | 7,373,160,250.68 |
| Basic earnings per share (RMB/share) | 1.343 | 1.240 | 1.240 | 8.31% | 1.030 | 1.030 |
| Diluted earnings per share (RMB/share) | 1.343 | 1.234 | 1.234 | 8.83% | 1.024 | 1.024 |
| Weighted average ROE | 30.53% | 33.99% | 33.99% | -3.46% | 34.96% | 34.96% |
| At December 31st 2019 | At December 31st 2018 | YoY Change (%) | At December 31st 2017 | |||
| Before adjustments | After adjustments | After adjustments | Before adjustments | After adjustments | ||
| Total assets (RMB) | 75,358,000,240.29 | 63,484,352,233.42 | 63,491,508,747.79 | 18.69% | 51,570,963,466.61 | 51,570,963,466.61 |
| Net assets attributable to shareholders of the Company (RMB) | 44,904,033,876.83 | 37,590,154,638.46 | 37,589,417,652.35 | 19.46% | 30,358,072,874.22 | 30,358,072,874.22 |
| The total share capital of the Company as of the previous trading day of the annual report disclosure (share) | 9,345,010,696 |
| Fully diluted earnings per share (RMB/share) calculated with the latest share capital | 1.328 |
Whether there is a corporate bond:
□ Yes √ No
Whether the Company has continuous losses in the last two years
□ Yes √ No □ Not applicable
VII. Differences in Accounting Data between Domestic and Overseas Accounting Standards
1. Difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards and China Accounting Standards
□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards (IFRS) and China Accounting Standards in the reporting period.
2. Difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards
□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards in the reporting period.
3. Explanation of the differences in accounting data under domestic and overseas accounting standards
□ Applicable √ Inapplicable
VIII. Key Quarterly Financial Indicators
Unit：RMB
Whether there is significant difference between the above individual or aggregate financial indicators and that ofwhat disclosed in the quarterly report, half-year report
□ Yes √ No
IV. Items and Amounts of Non-recurring Gains and Losses
√ Applicable □ Inapplicable
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Operating income | 9,942,448,619.42 | 13,980,824,805.08 | 15,915,642,804.35 | 17,819,193,836.37 |
| Net profit attributable to shareholders of the Company | 1,536,118,222.96 | 2,680,636,987.28 | 3,810,578,954.89 | 4,387,253,525.32 |
| Net profit attributable to shareholders of the Company excluding non-recurring gains and losses | 1,482,828,488.96 | 2,639,367,040.07 | 3,667,114,061.94 | 4,248,208,730.45 |
| Net cash flows from operating activities | -3,038,198,689.80 | 2,607,134,896.62 | 555,379,028.58 | 7,643,404,935.74 |
Unit：RMB
| Item | 2019 | 2018 | 2017 |
| Profit or loss from disposal of non-current assets (including the write-off for the impairment provision of assets) | -2,053,875.22 | 4,975,825.83 | 1,585,222.50 |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based on standard quota or quantitative continuous application according to the state industrial policy.) | 413,790,429.84 | 319,304,315.50 | 184,557,043.27 |
| Net gains and losses from beginning of the reporting period to the merge date for the subsidiary merged involving enterprises under common control | -885,138.65 | -736,986.11 | -42,070.90 |
| Profits and losses attributed to change in fair value for held-for-trading financial assets, derivative financial assets, held-for-trading financial liabilities, and derivative financial liabilities; and investment income from disposal of held-for-trading financial assets, derivative financial assets, held-for-trading financial liabilities, derivative financial liabilities and other debt investments, excluding the effective hedging business related to the regular business operation of the Company. | 26,872,639.66 | 62,153,461.82 | 86,740,196.23 |
| Other non-operating income and expenditures except the items mentioned above | 52,155,026.79 | 94,651,413.78 | 30,044,820.52 |
| Less: Impact of income tax | 86,193,406.35 | 84,510,487.85 | 50,405,620.44 |
| Impact of the minority interests (after tax) | 26,616,307.04 | 26,933,458.36 | 18,741,470.42 |
| Total | 377,069,369.03 | 368,904,084.61 | 233,738,120.76 |
Section III Corporate Business Summary
1. Business scope and status
Hikvision is a video-centered intelligent IoT solutions and big data services provider, whose businesses arefocused on comprehensive security, big data services and intelligent business. It builds open cooperation ecosystems,serves the users in public service sectors, enterprises and public institutions and medium/small enterprises andstrives to build smart city and digitized enterprises with cloud-edge fusion, IoT-information network fusion and bigdata-AI fusion.In the field of comprehensive security, as reported by Omdia
, Hikvision has ranked first in the world in thevideo surveillance industry for eight consecutive years and owns 24.1%
share of the video surveillance market. Inthe "World's Top 50 Security Companies" list published by a&s Automation and Security, Hikvision has rankedfirst for four consecutive years.In the field of big data services, Hikvision has created the IoT-information network fusion data platform toprovide multiple industries with "multi-network aggregation and cross-domain fusion" big data aggregation,governance and mining services.In the field of intelligent business, Hikvision is deeply dedicated to the development of industrial intelligentbusiness and supporting smart city, safe city, smart transportation, digital enterprise, and smart communityinitiatives.
2. Technological accumulation and innovation
Since its founding, Hikvision has always viewed technological innovation as the driving force for enterprisedevelopment. This is represented by a number of factors, including the increasing nature of its R&D input, theexpansion of its R&D team, and the consistent results produced by various R&D initiatives. Hikvision implementsthe "Cloud-Edge Fusion" concept throughout its security business. This has immensely pushed fusion applicationof edge computing and cloud computing. Further, Hikvision has proposed the "IoT-Information Network Fusion"
Omdia is a global science and technology industry consulting firm. This brand is comprised of the consulting firms (Ovum, HeavyReading and Tractica) owned by Informa Tech and the scientific research team of IHS Markit which was purchased in 2019.
This report is based on the global video surveillance market report published by Omdia (then known as IHS Markit) in June 2019and uses statistics from 2018.
architecture, which enables fusion of the IoT data and information system data to multiply the capability of dataplatforms. Hikvision adheres to the "Big Data-AI Fusion" concept, which integrates AI and perception big data toachieve perceptive intelligence. It also integrates AI and multi-dimensional big data to achieve cognitive intelligence.Hikvision also pursues "software-hardware fusion" and strives to produce the best hardware products, and thesoftware products that is best compatible with hardware products, to establish solution advantages with suchhardware and software products.
2.1 Cloud-Edge integration, intelligent IoT supported by perceptive technology innovationIn October 2017, Hikvision launched the AI Cloud and proposed the "Cloud-Edge Fusion" computingarchitecture which was technologically characterized with "edge perception, on-demand (data) convergence, multi-layered cognition, multi-tier application" and has become the intelligent IoT architecture universally accepted in theindustry.
Cloud-edge fusion computing architecture of AI Cloud consists of edge node, edge domain and cloud center.Edge node emphasizes the collection and front-end intelligent processing of multi-dimensional perception data.Edge domain emphasizes the convergence, storage, processing and intelligent application of perception data. Cloudcenter emphasizes the fusion of business data and multi-dimensional analysis and application of big data. AI Cloud
series products include " Two Pools, One Library and Four Platforms "
, i.e. computing resource pool, data resourcepool, algorithm warehouse, management and scheduling platform, data resource platform, intelligent applicationplatform and maintenance service platform.Based on AI, the AI Cloud solves problems in front-end intelligent collection of perception data. Centered ondata, it solves the problems in on-demand data convergence among the different edge nodes. Oriented for application,it solves the problems in intelligent applications across various scenarios. Supported by maintenance service, itsolves the problems in integrated operation and maintenance in large complex IoT perceptive network environments.Through the AI Cloud concept and the launch of relevant products and extensive applications in relevantindustries, Hikvision has evolved from a single sensor (video) to multi-dimensional sensors, from non-intelligentsensor to intelligent sensor, and from products of sensors to three-layered architecture intelligent IoT. It has alsoevolved from a video surveillance products manufacturer to an intelligent IoT products and solutions provider.
2.2 IoT-information network fusion, data services supported by data technology innovationIn March 2019, Hikvision proposed the "IoT-information network fusion" data architecture based on big dataand AI technologies, first set forth the path and method for large-scale systematic data fusion between intelligentIoT and information network, and launched the AI Cloud Data Fusion Platform.
The IoT-information network fusion data platform provides the governance capability for perceptive resources.By drawing on years of technological achievements in the field of IoT, Hikvision has established the evaluation
Refers to “Computing Resource Pool, Data Resource Pool, Algorithm Warehouse, Data Resource Platform, Intelligent ApplicationPlatform, Resource Scheduling Platform, Operation and Service Platform.
index system for IoT perceptive resources development and provided the perceptive resources governance andevaluation tools to enhance the quality of perceptive data through source governance and provides crucial supportto industrial users for building and upgrading their perceptive systems.The IoT-information network fusion data platform provides the capability in multi-source data convergence.Access and intelligent processing of multiple types of perception data firstly enables the fusion of multi-dimensionalperception data; tools for collection of information network data are available, supporting expandable data types,data formats and data interfaces; finally, intensive fusion of perception data and information network data is enabledthrough combination, integration and aggregation.
IoT-information network fusion data platform provides governance capability in the fusion data. Over 30components, such as data standard, unified certification, data authority, resources management center, strategycenter, operation center and data security etc., constitute the data governance toolset for IoT-information networkfusion, to adapt to the data governance scenarios of different projects as needed. In order to support implementationof data governance projects, the Company has organized professional data engineers, data analysts, and dataapplication R&D team; the headquarters and regional divisions work together on data business application research,data investigation, access solution design, data fusion implementation, data governance implementation, data modelbuilding and general data applications implementation, etc.IoT-information network fusion data platform provides data service capability. By providing standardinterfaces oriented for the application layer, it enables unified configuration, publishing and management of dataservice interfaces; it has over 420 preset general interfaces to be directly called by third-party developers. It alsosupports development of new data service interfaces. This platform provides core functions such as centralizedresources request, allocation and control etc., and adapts to Hikvision big data intelligent storage and computingplatform HBP, open-source Hadoop and third-party PaaS open platforms.
Hikvision intensively explores the value of data resources. The Company has established internal normalizeddata models contests and data application innovation appraisal mechanism, and has created a range of city-level andindustry-level big data applications. Currently, the data projects cover 29 domestic provinces and cities and someforeign regions. By the end of 2019, there were over 100 large data projects already.
Through the IoT-information network fusion data platform, Hikvision has evolved from merely providing datacollection services to providing data governance and application services, and from merely providing intelligentIoT data services to providing data services across intelligent IoT and information network, and has become a bigdata services provider with independent technological advantages.
2.3 Big Data-AI fusion, intelligent business supported by AI innovation
Entering 2020, Hikvision proposed the concept of "Big Data-AI Fusion Base" of smart city, integrating yearsof technological achievements in AI and big data into a unified technological base for building intelligent industriesand smart cities.
Hikvision builds intelligent perception capability. The perceptive intelligence platform, including intelligentanalysis platform, AI open platform, algorithm warehouse and algorithms scheduling platform, provides users withfull-stack capabilities of algorithm training, storage, analysis and scheduling. In 2019, Hikvision continuouslyiterates the capability of AI open platform to help users develop the intelligent algorithms for their own industriesin a simple and quick way, solving the problems of scenario variations and fragmentation in the process of industrialintelligentization. The AI open platform is open to all partners for free, which significantly reduces the barrier andcost of medium/small/micro enterprises and developers participating in AI development. The AI open platformcurrently offers over 40 general functions and is on average accessed approximately 35,000,000+ times per day; ithas accumulatively trained over 10,000 models, where the fragmented scenario models of vertical industries accountfor over 95% of all models. The Company has organized over 30 training and certification activities, continuouslydeveloped and cultivated the industrial ecosystem, trained over 5,000 technicians and helped the industrialdevelopers quickly master the development skills; it has made significant progress in building the ecosystem in tensof sectors such as transparent kitchen, properties management, unmanned retailing, work safety, production aid andpark management, etc.
Hikvision builds the capability in intelligent cognition. The intelligent cognition platform, includingknowledge mapping, machine learning and space-time engine, provides users with the data mining service capabilitybased on big data and AI. Through management, classification and association of information based on theknowledge structure, the large volume of unorganized information is further mined and analyzed to becomeorganized and correlated knowledge, to finally create the intelligent cognition service system centered on knowledgeand solve the problems such as inaccuracy of traffic congestion prediction, inability to identify potential customerbase in marketing, and inability to provide early warning on default risks in financial risk control.
The technical framework of "Big Data-AI Fusion Base" signifies the combination of perception data and AIand the combination of fusion big data and AI expansion based on Hikvision’s capability in intelligent IoT solutionsand big data services. Extending from focusing on products to focusing on systems, from focusing on technologiesto focusing on businesses development, from focusing on single business to focusing on businesses across multipleindustries, Hikvision has built a cooperative ecosystem through its open platform to provide users with completeintelligent industry and smart city solutions.
2.4 Software-hardware fusion, products innovation supported by unified R&D system
Since its establishment, Hikvision has created an industry-leading hardware R&D, manufacture and salessystem, which enables the Company to maintain its competitive advantage across industries. Since 2016, Hikvisionhas emphasized hardware-software fusion and synergetic development; oriented by meeting market demands andbased on the component-based development mode, it has created the unified software R&D system intended formultiple industries and multiple R&D teams. The core of the unified software R&D system is the Company's unifiedsoftware technology architecture. In 2019, the advantages of the unified software technology architecture started tomanifest, where it supported quick development and iteration of industrial applications, materialized the value ofsoftware reuse and improved the compatibility of software.
2.4.1 Unified R&D system
Hikvision uses componentized software technology to solve the problem in mass production of software andhas established the software products development and management standards to maintain software consistency.Within the unified software architecture, R&D teams can conduct back-to-back synergized development, so that thesoftware stays consistent in terms of platform, interface and style and can be quickly integrated.
Under the unified R&D system, Hikvision uses the "architecture + components = products" model to createsoftware products. A component is defined as a software unit that is able to independently complete a technologicalor business task. Software components are designed to be separable for the purpose of reusability. The source ofcomponents can be self-developed, third parties or open sourced. Component types include basic environmentalcomponent, general service component, common business component and industrial business component.Hikvision's number of components increased from 275 in 2018 to 1,644 in 2019. The reusable basic environmentalcomponents, general service components and common business components have passed field operation verificationof over 24,000 delivered software products. The architecture is the fundamental environment in which thecomponents are integrated and operated. The Hikvision iSee and Hikvision iFar are two big architectures thatsupport various business scenarios. These two designs are gradually maturing and have supported development ofmany software products and customized applications. Under the development mode of unified software technologyarchitecture, the reuse rate of the component in software products is up to 93%, where each product averagely needsonly 5 new components.
Under the unified R&D system, Hikvision has created a trinity of integration development environment,
integration management environment and integration operation environment. The integration developmentenvironment provides the development-oriented online software production line, provides a complete standardizedprocess of production, circulation and management; by solidifying standards and automatic execution of key stepsto ensure that software production specifications are integrated into various management processes throughout theentire lifecycle of software planning, development, testing, and release. The integration management environmentprovides the software market that oriented for marketing, aggregates the all stages information of the software fromplanning to releasing and provides support for the scenarios such as pre-sale consultation and exhibition, solutionsevaluation, technical data acquisition, after-sale services and maintenance, and etc. The integration operationenvironment provides the operation and maintenance management environment oriented for project siteoperation/maintenance personnel, and implements comprehensive maintenance of the software at project site.
Under the unified R&D system, Hikvision has established the software R&D teams that operate in the domesticprovincial-level business centers and certain foreign regions. All R&D teams use the unified technologicalarchitecture and reusable components, and share the software development, management and operation environmentas well as the configuration management strategies, to enable large-scale synergized software production.Under the unified R&D system, design and production of software and hardware can proceed with bettersynergy and fusion. Many software and hardware products are synergized in design, development and deployment.The hardware design already takes into account the software access driver development and application functionsdevelopment, and application software development is meant to support the relevant hardware, thus avoiding thesituation of "hardware waiting for software" or "software waiting for hardware".
2.4.2 Software product family
In 2019, Hikvision continued using the unified software architecture to restructure the software products andgained large amount software achievements in the software assets library; the AI Cloud products continuedimproving, over 60 industrial application software products were restructured and successfully released, and allproducts were generated from the unified architecture. These software products were mutually compatible andsynergized, to minimize the costs of integrating and synergizing different systems.
Hikvision's software product family consists of two categories, one is the common software platform productsand the other is the industrial application software products.
The general software platform products exist in the computing storage resources pool and the data resourcespool, and include AI open platform, algorithm warehouse, big data basic platform (HBP), resources managementand scheduling platform, AI Cloud data fusion platform, big data mining service platform, maintenance serviceplatform, intelligent application platform, general comprehensive security platform and Internet operation basicplatform.
The industrial application software products include industrial comprehensive security products and also theapplication software oriented for various industries such as public security, traffic and travel, governmental service,social dynamics, commerce, wealth growth, better life and natural resources, etc.
2.4.3 Hardware product family
In 2019, by drawing on the AI Cloud architecture, Hikvision integrated AI into more products, continuedimproving the product strategy in edge node, edge domain and cloud center, and continued its market-leadingposition through technological innovation and product innovation.
Rapid development of AI technology launched a new chapter of intelligent products. Hikvision's intelligentproducts represented by DarkFighterX, ColorVu, and Multi-Sensor series of intelligent cameras, the full analysisintelligent server, Hikvision DeepinMind Series AI NVR, Capture Cameras, Environmental Protection and Radar-Assisted series of intelligent traffic products, and "MinMoe" series short distance ID recognition access controlproducts have been extensively applied in government market, enterprise market and consumer market.Front end products
With rapid development of AI, big data, cloud computing, Industrial Internet and IoT technologies, camerashave evolved from the traditional video surveillance terminals to the most important intelligent sensor in the IoT.
With continuous implementation of AI scenarios, the single-sensor technology cannot meet the intelligentapplication requirements such as balance of overall situation and details analysis and association of trajectories formultiple targets. Hikvision's multi-sensor camera is defined by the scenario. One device with multiple lenses thatare linked and coordinated can meet the requirements of different view angles, different parameters and differentfunctions. The edge node integrates multiple deep learning algorithms that are designed for complex scenarios andcan associate the time-space relationship with target characteristics, so a single scenario is derived into the time-
space scenario, which enables the fusion and analysis of data from multiple scenarios.
Hikvision will continue exploring the low-light imaging technology system to enable the colored effect in bothday and night, to make night just as colorful as day time. The intelligent DarkFighterX products have developedinto a full-series product family that covers medium-end, low-end and high-end business requirements. Theseproducts are designed in the new hardware architecture with low power consumption and high performance. Theperformance of DarkFighterX products are enhanced through hybrid supplementary lighting, multi-lens multi-sensor fusion and high resolution etc. The Company continues increasing input in the products for subdividedapplications, where products are defined by the scenario demands, solving the problem in business adaptability ofproducts under special environment and special conditions; In the trend of opening and fusion development, theCompany has created the open products system, accelerated implementation of fragmented AI and continuedlaunching series of end-to-end product solutions for the vertical sectors such as work safety, intelligent power grid,intelligent agriculture, remote education, emergency management, and etc.
MNR noise reduction: Multilateral Noise Reduction enables noise reduction in various data domains (raw domain or YUVdomain), to improve the noise reduction effect.MSD pixel-level decomposition: Multi-Scale Decomposition decomposes image into multiple frequency components.NDG nondestructive noise reduction: Nondestructive Digital Gain causes less noise compared with traditional digital gain and iseffective at noise suppression.SMDE Smart De-noise: Smart De-noise is a smart noise reduction technology which can automatically adjust the control parametersaccording to the illuminance in the scenario and the properties of noise points.
Edge domain and data center productsAmong the edge domain products, the intelligent products represented by Hikvision DeepinMind have enteredthe 2.0 era. AI computing power has been significantly enhanced to meet the increasing edge computing powerrequirements. For the fragmented intelligent application requirements, the Company has launched the domain-endfull series DeepinMind products and DeepinMind products dedicated for AI open platform to meet users'personalized and customized algorithm requirements and support efficient deployment of intelligent applications inthe edge domain.
Hikvision's data center products are generated from an architecture capable of intelligent image full analysis,full compatibility in computing resources and full opening of engine and data. For central analysis products, theCompany has created more diverse high-performance intelligent servers with the highest computing power,including the mainstream high-performance AI hardware platforms; further enhance the effects of algorithms,enable associated application of multiple algorithms and create the industry-leading algorithm ecosystem; enhanceintelligentization and visualization of big data, to serve city-level and industry-level big data application andgovernance. For the full series of IoT central storage, it could meet the requirements of intelligent IoT storage,computing and application integration, and it uses fusion of multi-dimensional intelligence, data, application andstorage to continuously create value for users; By drawing on the technological advantages in direct streamingstorage and intelligent fusion storage, the Company’s storage products maintains the leading position in the domestic
IP storage business.Display and control products
Hikvision continues expanding the central display products, where diverse display modes such as seamlesscontiguity, transparency, curved surface, touch control and holographic display can enable interactive informationacquisition, information intelligent placement and big data integrated presentation. Hikvision's fine-pitch LEDproducts realize ultrahigh contrast and ultrahigh definition seamless contiguity display and have been extensivelyapplied in monitoring center, command center and other scenarios.
Hikvision's LCD Display, based on the independently developed chip-level algorithm, realizes uniform colorof entire video wall and multi-scenario display mode. It has also launched the Mini/Micro LED display product,which has been extensively applied in the scenarios that have high requirements for image quality.
The control products, based on technologies in audio/video processing, multimedia data fusion, ultrahighresolution, AI, and concentrated and distributed structure etc., empowered decoder, splicing controller, videointegrated platform and other classic products, which diversified the applications in monitoring center and commandcenter and has maintained the industry-leading position.Access control intercom products
For MinMoe series short distance ID recognition access control products, the new generation multi-modal IDrecognition access control system was launched. This series does not only contain Hikvision's advantageous visualtechnologies such as high-accuracy ID recognition, fast pass, excellent dim light effect and freedom from whitelight contamination, but also supports voice interaction functions such as device activation and talkback; on-screencard swiping and thin body offer upgrade experience.
The access control intercom products also provide users with all-round support services covering products,product portfolio solutions and system solutions; the access control products have substantially enhanced systemsecurity and convenience in many projects such as intelligent community, construction site ID identification system,campus ID recognition pass, enterprise campus construction, office building renovation, tourist attraction, andstation ticket checking, etc. Video intercom product, as an important product created by the Company for residenceand real estate projects, integrates AI community and whole-house intelligence, to provide users with betterintelligent life experience.Intelligent traffic productsIn the field of intelligent traffic, the Company has integrated the video and multi-dimensional perceptiontechnologies to create the edge domain fusion product package comprised of intelligent traffic cameras + roadintelligent terminals. The Environmental Protection Checkpoint Capture Product Family, together with the sameseries products such as Environmental Protection Intersection Violation Capture System, Environmental ProtectionMicro Checkpoint/Smart Surveillance Capture System etc. have solved a problem that has vexed the industry forover a decade—the light pollution induced by white light sharp-flash, making contribution to eliminating lightpollution. For comprehensive control of road traffic, the new business applications such as high beam light detection,warning of pedestrian running the red light, reminder of courtliness to pedestrians, whistling capture system andblack smoke vehicle detection have been deeply integrated into urban civilization.
Through the deep fusion of millimeter wave radar and video technologies, the Company has launched theRadar-Assisted Series Product, which are capable of all-weather, multi-scenario, multi-target, multi-lane, high-accuracy and high-speed traffic information detection. They have overcome the technological bottleneck of thetraditional one-dimensional video perception and enabled the implementation of applications such as traffic safetypre-warning, event detection and road scenario multi-dimensional information perception etc. In the field of trafficsignals control, the Company enabled storage and analysis of multi-dimensional traffic big data at the platform endbased on AI Cloud technological framework. Front-loading and optimization of signal control algorithms haveenhanced stability, timeliness and reliability of the system and also are able to support more complex regionalcoordination and arterial coordination.
In the field of static traffic, the Company has integrated AI and RF technologies into the system, and launchedthe new-generation parking products and solutions which could improve parking management efficiency, thuscreating value for customers. The radar detection products integrate the multi-dimensional IoT perceptivetechnology, without the need for ground induction coil, are able to simplify construction and maintenance processof projects, protect personnel and vehicles, and improve user experience. In the field of mobile law enforcement,Hikvision launched the independently designed dual-system intelligent collection station, which applies theembedded Linux + Android dual-system design and has substantially improved the system stability and guaranteedusability.Transmission products
At the edge node, various security terminal products are connected through the transmission products such as
Smart Switch, Fiber Converter, Wireless Bridge and etc., to constitute a Smart Video Transmission System. Throughthe measures of Visualized Network Topology and Integrated Network Management, this system integrates thesecurity system and network system into one system, ease the requirements for maintenance personnel's ability andimprove the efficiency of problem detecting, problem positioning and problem analysis.
For edge domain and cloud center, Hikvision has launched the new generation data center level core switchproduct, which uses the CLOS architecture
to separate data control hardware from transmission hardware andimprove the reliability of core network. This product can support a project that maximally has 10,000 videochannels.Alarm productsHikvision's alarm products have continuously upgraded the key technologies such as wireless RF transmission,passive infrared detection, microwave detection and pet detection etc., constantly improving multi-dimensionalperception capability; based on AI technology, ID recognition and other intelligent technologies are applied inIntrusion Alarm Products and Public Alarm Products. Further integrating with the related technologies such as video,access control, intercom and thermal imaging, the alarm products and business management products have evolvedfrom localized products to cloud-based portable products, in order to enable the online management, alarm cloudmanagement, and help improve service provider's comprehensive operation and service capability, due to theopportunities in cloud business development.
CLOS architecture: this is a multilevel circuit switching architecture for frame type switches and can separate control hardware fromretransmission hardware to enhance the reliability of the whole machine.
The Intrusion Alarm Products have strengthened the advantage of wireless RF technology, and the HybridControl Panel Products have been launched, further expanding into the low-end alarm market and enriching theproduct series. The Public Alarm Products have evolved from single emergency alarm to integrated productapplications including emergency distress call, emergency response, rescue equipment/facilities management andmedical assistance; with the fusion of various AI technologies, the Public Alarm Products enable the fast recognition,response and action.Interactive flat panel displays (IFPD)The Company's conference system offers the full-process solution that integrates conference doorplate, videoconference, interactive flat panel display, and conference management system. Before conference: the systemprovides online appointment, data sharing, conference notification, non-inductive sign-in and doorplatesynchronization. During conference: the system provides wireless screen projection, white board writing, interactivecoordination, and voice minutes of meetings. After conference: the system provides centralized equipment control,statistical analysis of data, and sharing of minutes of meetings. Together, it offers users safe, intelligent and highlyefficient conference experience.
The new IFPD products use high-accuracy infrared touch control/capacitive touch control technology to offerbetter touch control experience; the built-in 4K camera and 8-microphone array support voice recognition; the cloudconference system has been created, to make the video conference and coordinated cooperative office work moreintelligent, more efficient, more convenient and safer.To solve the problems of scenario variations and fragmentation of applications, Hikvision uses its abundantR&D resources, efficient and stable supply chain system, ample market channels and diversified productdevelopment to offer customers and users the optimal solutions and boost the trend of intelligentization. TheCompany will continue exploring technological researches on hardware, software, system, maintenance, securityand other aspects, to gradually build the AI ecosystem of intelligent business and expand the fragmented AIapplication market.
3. Steady upgrade of core business
Hikvision has been offering various solutions since 2009, which cover more than 40 sub-industriesencompassing seven major vertical industries, i.e. public security, transportation, law enforcement, finance, culture,education and healthcare, energy and buildings, driving the rapid growth of the Company’s business and leadingthe security industry into the solution-oriented era. In order to better adapt to the market demand of the industry andenhance the Company’s internal operating efficiency, Hikvision initiated the restructuring for its business structurein 2018, adjusted the allocation of business resources, and divided its domestic businesses into three business groups:
Public Business Group (PBG), Enterprise Business Group (EBG) and Small and Medium Enterprise Business Group
(SMBG). Under the new business structure and based on three different business models, the Company exploresfurther into market demands, coordinates company resources, and strengthens capacity in order to empower publicservices, help enterprises create value, and shape an industrial Internet.
3.1 Public Business Group (PBG): Empowering Public Service Optimization
3.1.1 Business Overview
With the continued deepening of and advancement in smart services for cities and various industries, such assmart cities, smart police, smart transportation, and smart urban management, especially as demand for moderngovernance of the urban areas continues to grow, public service has entered into the crucial stage of transition from“Internet +” era to “smart +” era. The typical business model of the “Internet +” era is “connectivity”, while that ofthe “intelligence+” era is “empowerment”. Undoubtedly, practitioners will opt to empower the public serviceoptimization process by making full use of the Internet of Things (IoT), artificial intelligence, big data and othertechnologies.
As part of its proactive efforts to seize the market opportunities in the industry generated from the optimizationand upgrading of public services, Hikvision PBG provides government and governmental enterprise users with city-scale comprehensive solutions combining “perception + data + cognition” features to build the Big Data-AI FusionBase for smart city and establish big data operation and maintenance centers and the operation and managementcenters for cities, offering data and application open-source capabilities, and supporting smart services in variousaspects such as public security, transportation, precise governance, natural resources and ecological and
environmental protection and etc.
3.1.2 Core technologies: building a Big Data-AI Fusion Base to facilitate the intelligence of public services
Under the development model based on unified Big Data-AI Fusion Base, the smart industries and smart citydevelopment complement each other. The smart industries will be benefited from the development towardsintelligent operation of a city, while smart city will be the inevitable outcome of the development towardsintelligence of various industries.Hikvision’s smart city Big Data-AI Fusion Base consists a Shared Infrastructure Platform, an Intelligent IoTPerception Platform, an AI Cloud Data Fusion Platform, the Urban Space Operation Environment, and an IntelligentApplication Open Platform.
Shared Infrastructure Platform
By coordinating the cloud-edge computing facilities and transmission & storage facilities, we aim to build aunified resource management and scheduling platform, which is equipped with the capabilities of unified operationand maintenance management and resources integration for hardware resources, including computing resources,storage resources, network resources and security equipment, thus establishing capabilities of unified cloud platformmanagement, integrated cloud storage, unified deployment of AI computing, etc.
Intelligent IoT Perception Platform
The platform provides the access of multi-dimensional perception data and the analysis capabilities of video
and image intelligent in order to achieve structured processing for video and image data. It also offers the AI OpenPlatform to realize the barrier-free training capabilities for users’ scenario-based intelligent algorithms. Existingalgorithms and algorithms created through training can be stored in the algorithm warehouse in a unified manner.In addition, the platform provides intelligent algorithm management and deployment capabilities, facilitatingmanagement and deployment of multiple types of intelligent analysis algorithms based on the standardizedalgorithm warehouse to achieve the optimal use of resources.
AI Cloud Data Fusion PlatformBy integrating IoT perception data and governmental information data, the platform provides the capabilitiesin optimizing points governance and deployment plan of IoT perception resources, deepens capabilities in datagovernance and value mining, and provides users with unified management, convergence on demand, efficientgovernance, and data services of data resources, as well as data mining service capabilities based on knowledgemaps and machine learning.
Urban Space Operation Environment
Based on geographic information services, offering formalized description capabilities in respective of tentypes of elements involved in urban governance, such as areas, roads, places, buildings, facilities, network,environment, personnel, organizations, events etc. All elements can be connected with the spatiotemporalbenchmark, thus creating public operating environment of a smart city, and serving as the technical basis forcollaboration of urban business.
Intelligent Applications Open Platform
The Intelligent Applications Open Platform Provides a unified application framework, a series of businesscomponents, shields the difference between the underlying data model and artificial intelligence algorithms,provides an open interface for various capabilities, and supports the development of upper-layer businessapplications. It offers various capabilities such as unified authentication, access management, application forresources, application management as well as opening of capabilities etc.
3.1.3 Realizing industry value
Building on the basis of continuously deepened understanding of public security, urban governance,transportation, natural resources and other fields of business, Hikvision PBG is committed to developing solutionsfor a wide range of scenarios in various industries engaging in public service, and aspires to deliver saferenvironment, more precise service, more convenient transportation, and more habitable ecological environment.Safer EnvironmentHikvision provides security event monitoring and early warning as well as security protection capabilitiestailored for public security, traffic safety, production safety and emergency management of natural disasters, withthe goal to create a safer environment.
Hikvision provides industry solutions for public security. It provides a comprehensive application platform forpublic security videos and images, and provides a three-dimensional security prevention and control system fortypical application scenarios such as street patrol, community security, prevention and control in securitycheckpoints, security management and control in entertainment facilities and for special industries, security ofspecial service routes, while assisting public security officers and the police to carry out investigation and controlat circle or layer levels, unit security and control, as well as element management and control, aggregating differentkinds of security prevention and control data into a unified data platform, and conducting early warning, predictionand prevention of security risks through intelligence analysis and judgment, thus facilitating the creation of a safeand harmonious social security environment.
Hikvision provides industry solutions for traffic safety. It provides intelligent detection of road trafficviolations, such as running red lights, opposite direction traffic, overloading, speeding, detection of platediscrepancy and driving non-permitted models, as well as capabilities such as off-site law enforcement, analysis ofroot causes of traffic accidents, control of disqualified drivers, investigation and control for highways, managementof black points of road traffic violations, thus facilitating the creation of a safe and intelligent traffic safetyenvironment.
Hikvision provides industry solutions for production safety. It provides various capabilities coveringmonitoring and early warning for safety production of enterprises engaging in production of hazardous chemicalproducts, small and micro enterprise, coal mines, non-coal mines, tailings ponds, fireworks and firecrackers etc. Italso offers capabilities such as smoke detection, fire point detection, recognition of obstruction of indoor and
outdoor fire passages, detection of uniforms compliance, detection of personnel on duty and absence from duty etc.,with the aim of building a safe and efficient safe production environment.Hikvision provides industry solutions for natural disasters. It provides capabilities such as comprehensivemonitoring of natural disasters, early warning of disasters, comprehensive risk assessment of disasters, intelligentanalysis, consultation, research and judgment on the evolution of disasters, etc., with the goal to build an emergencysecurity environment to reduce disaster risks.More precise services
Hikvision provides intelligent conditions detection and refined management service capabilities for urbanmanagement and comprehensive governance of public security such as urban landscape & appearance, street order,construction works, public facilities, landscaping, housing and land, etc., thus facilitating the provision of moreprecise services.
Hikvision provides industrial solutions for urban municipal management. Such solutions include: intelligentmanagement applications for urban landscape, public facilities, housing and land, etc.; intelligent monitoringcapabilities for the status of public facilities such as manhole covers, trash cans, etc.; landscape monitoringcapabilities for inclination and falling down of ancient trees; intelligent monitoring capabilities for various types ofroad facilities; intelligent detection capabilities for various behaviors, such as illegal roadside stalls , operationsoutside the defined store boundaries, piling and storage of sundry items, road occupation for operation, illegalparking, etc.; intelligent identification capabilities for events having negative influence on the appearance of cities,such as identification of temporary roadblock incidents, detection of road congestion, detection of wateraccumulation on road, with the goal to build precise urban and municipal management service capabilities.
Hikvision provides industrial solutions for comprehensive management of social security. It provides eventmonitoring and early warning capabilities such as detection of crowd density in public places and early warning fortrampling events, public security events, regional intrusions, and crossing warning lines, etc., with the aim ofbuilding capability of precise and comprehensive management of social security.More convenient transportation
Hikvision provides smart service support capabilities for urban transportation, such as smart road networks,smart traffic management, smart public transportation and smart parking etc. , with the aim of making transportation
more convenient.
Hikvision provides industrial solutions for transportation networks. Such solutions include: intelligent supportcapabilities for road network facilities, e.g. expressways, roads, railways, rail transit and urban roads, including roadnetwork entrance and exit control, urban road intersection control, traffic safety intelligent monitoring, intelligentanalysis of traffic conditions, intelligent detection of traffic flow, as well as optimization of traffic signal controlbased on the analysis of traffic big data; intelligent construction support capabilities for transportation hubs, suchas ports, passenger and freight stations, airports and railway stations etc., with the aim of building “smart roads”.Hikvision provides industrial solutions for traffic management. Such solutions include: dynamic lanemanagement capabilities, e.g. variable lanes, tidal lanes and bus lanes etc.; key road management capabilities suchas early event warning on key road sections, early behavior warning on dangerous driving behavior, examination oftraffic parameters; key vehicles Management and control capabilities, such as key vehicle enterprises managementand key vehicle traffic management; road traffic safety early warning and analysis capabilities such as early warningon road rights conflict, intersection safety scoring, real-time monitoring of road conditions, analysis in respect ofeffectiveness of early warning, etc.; traffic police patrol, AR real-world command, security of special service routes,green-light traffic of special service routes, with the goal to facilitate “smart traffic management”.
Hikvision provides industrial solutions for public transportation. Such solutions include: bus management anddeployment capabilities, including preparation of bus schedules, vehicle deployment, vehicle operation deploymentand statistical reports on bus deployment; safety management capabilities for public transportation, such as vehiclepositioning, driver attendance, vehicle video inspection, operation and maintenance of vehicle terminals, activemonitoring of driver safety as well as road risk management etc.; capabilities such as comprehensive managementof bus station, electronic bus-stop board management, bus passenger flow data analysis, and etc.; taxi operationsupervision capabilities; bus supervision data analysis capabilities, with an aim of shaping “smart publictransportation”.
Hikvision provides industrial solutions for urban parking. It provides convenient parking fee payment channelsthat support human-free parking lots, provides automatic detection and recording of parking processes, integratesurban parking networks, unifies management of integrated operations, aggregates parking space data, establishesurban parking data centers, organizes and synthesizes data, in order to offer convenient and diversified vehicleowner service capabilities such as parking space searching, reservation, routes navigation, electronic payment,monthly parking package and bill query etc., with the goal to achieve “smart parking”.
More habitable ecological environmentHikvision provides intelligent monitoring management and service capabilities for monitoring andmanagement of natural resources, water resources and water services, and ecological environment, with the aim ofcreating a more habitable ecological environment.Hikvision provides industrial solutions for monitoring and management of natural resources. Such solutionsinclude: forest and grass fire intelligent monitoring and management capabilities such as early warning andpositioning of fire risks, research and judgment on early warning of fire risks, analysis of fire spreading, firemanagement, management of documents on fire accidents etc.; smart territory monitoring capabilities such asproviding video-based inspection for law enforcement on unauthorized construction on the territory, lawenforcement supervision with satellite images, intelligent analysis and alarm on unauthorized construction,collection of event clues, research and judgment on alarming events, etc.; natural conservation area monitoring andmanagement capabilities such as animal monitoring, disease and pest control, patrol and management, biodiversitymonitoring, and etc.; national park big data service capabilities such as evaluation on survey & monitoring,regulatory decision analysis, emergency planning for geological disaster, service for forestry industry etc., with theaim of materializing intelligent supervision of natural resources.Hikvision provides industrial solutions for monitoring and management of water resources and water services.Such solutions include: rivers and lakes intelligent supervision capabilities such as river and lake cleaningmanagement, sand mining management, water area shoreline intelligent management, etc.; intelligent supervisioncapabilities for water conservancy project such as safety supervision of water projects under construction, visualtransportation management of water engineering; water disaster prevention and supervision capabilities such aswater and rain monitoring and early warning, visual operation and management of flood dispatching; cloudmanagement platform for large- and small-scale water conservancy projects for the purposes of dam safetymonitoring, water project inspection and supervision, etc., with the aim of achieving intelligent supervision of waterresources and water services.
Hikvision provides industrial solutions for ecological environment monitoring and management. Suchsolutions include: intelligent monitoring capabilities for air pollution, such as management and control of smokyvehicles on road, monitoring of burning in open space, vehicle control under heavy polluted weather conditions,dust control of construction sites, etc.; enterprise pollution management capacities, such as monitoring ofunauthorized discharge of sewage and waste gas, pollution source station management, and etc.; ecologicalenvironment big data analysis capabilities, such as water environment analysis, atmospheric environment analysis,
pollution source census analysis and etc., with the aim of achieving intelligent supervision of ecologicalenvironment.
3.2 Enterprise Business Group (EBG): Facilitating Value Enhancement of Enterprises
3.2.1 Business overview
The age of digital economy has arrived. Digital transformation has accelerated the creation and transmissionefficiency of information, and driven profound changes in organizational structure and management mechanisms.Hikvision EBG makes proactive efforts in riding the wave of digitalization in the industry, and is committed tobecoming a digital transformation partner for IoT scenarios and AI applications for industrial users.
In 2019, building on the AI Cloud architecture, Hikvision EBG business relied on the technology capabilitiesin respect of intelligent IoT and the fusion of IoT and information networks to develop a digital enterprise solutionthat integrates conventional information systems, devices and facilities IoT, and intelligent scenarios IoT. Theseefforts have helped enterprises build digital transformation and gain insights into development opportunities, as wellas enable them to extensively engage in scenarios of enterprise campus, production and manufacturing, healthycommunities, smart construction sites, coal mining and metallurgy, petroleum and petrochemical, retail chains,education and teaching, financial services, cultural and tourism, medical and geriatric care, etc.
3.2.2 Core technology: establishing intelligent scenario IoT and developing digital enterprise applications
Intelligent Scenario IoT is a new type of infrastructure in the digital era, laying the foundation for realizing the
fusion of IoT and information networks and digitalization. Based on technologies such as visual perception, machinevision, thermal imaging, millimeter wave radar, Hikvision focuses on intelligent scenarios IoT and devices andfacilities IoT, and carries out research on industry business application. Utilizing the AI Open Platform, IVSIndustry Integrated Application Platform and the “One Core and Two Wings” strategy of Cloud Visualized PublicCloud Platform, it realizes intelligent scenarios IoT under the single-domain and multi-domain governanceframework of enterprises, in a bid to support enterprises to realize the digitalization of scenario elements based onthe environment, people, behavior etc., and offer digitalized comprehensive solutions for industry users.
(1) AI Open Platform: making continued efforts in developing the visual perception engineLeveraging on the AI Open Platform as the visual perception engine, Hikvision EBG continues to improve itsone-stop AI algorithm customization and application system tailored for industrial fragmentated scenarios. A seriesof automation components and tools are designed to integrate the full chain of AI development and application andachieve seamless integration with enterprises’ existing systems, making the AI technology more accessible andaffordable to enterprises, and achieving remarkable results in innovative practice across various industries.Leveraging on the AI Open Platform, Hikvision EBG supports biopharmaceutical enterprises to realizeinnovation approaches in GMP
（Good Manufacturing Practice） compliance management, through which suchenterprises conduct intelligent analysis and give pre-warning on the personnel behavior, material placement andfacility operation status in crucial production lines, promoting the visualization of management throughout thepharmaceutical production process and improving QA (Quality Assurance) inspection efficiency by 50%. HikvisionEBG cooperates with energy enterprises to set up the intelligent system in coal mines, which forms an efficientclosed-loop business process consisting of real-time pre-warning, handling and verification of events regarding thepotential safety hazards arising from behaviors of underground personnel, equipment and facility status andenvironment parameters etc. An AI livestock asset stock-taking system was developed by Hikvision EBG throughcooperation with livestock and poultry farming enterprises. The system enables intelligent statistics analysis on thenumber of pigs, which satisfies the urgent demands for asset stock-taking and surveillance on diseases and reducescomprehensive costs by 15% for enterprises.
Good Manufacturing Practices. GMP is a set of compulsory standards applicable to pharmaceutical, food and other industries. Itrequires enterprises to meet hygienic quality requirements from raw materials, personnel, facilities and equipment, productionprocesses, packaging and transportation, and quality control in accordance with relevant national regulations, in order to form a set ofoperable operation specifications to help enterprises improve the enterprise's sanitation environment, and timely find and improve theproblems in the production process.
(2) IVS Industrial Application Platform: extensive connectivity to support the digital applications forenterprisesRelying on the Unified Software Technology Architecture of Hikvision, the IVS Industrial ApplicationPlatform has put in place a variety of intelligent IoT basic service capabilities, including IoT access, device control,video online connectivity, data resource management etc. By taking advantage of the service-based architecture andcomponent-based development technologies, Hikvision EBG has established the capabilities to drive the rapid shiftfrom common business services to sub-sector applications, and provided enterprises with digital applicationsoftwares tailored for different sub-sectors, such as:
Digital operation and command center of enterprises: It integrates intelligent IOT technology, data analysisand 3D modeling etc. to realize the overall digitalization for enterprise campuses, manufacturing plants and logisticparks. Targeting at production management, park management and energy consumption management, etc., it aimsto help enterprises to achieve transparent management of accurate perception and smart decision-making.Safety production management platform: Targeting the production and operating activities of power grid,petroleum and petrochemical, steel metallurgy, coal mining, energy and chemical industry, it adopts video-centeredIoT technology, together with the AI technology such as intelligent behavior analysis, to offer effective personnelmanagement, operation control, safety supervision, equipment inspection, danger source detection, infraredtemperature measurement, and etc., thus assisting management and decision-making, effectively preventingaccidents, dangers and other harmful factors, safeguarding the safety and health of staff and avoiding damages toequipment, facilities and environment.Intelligent logistics park platform: Targeting managers of logistics parks, taking into account the overallinternal operation of the parks, it effectively manages the access of personnel and vehicles and the records and filesthrough intelligent technological methods, and realizes the unified scheduling management of the internal platformsof the parks.
Intelligent construction site management platform: It aims to help the construction companies realize thesupervision on personnel, materials, environment, and safety operations. It improves the refined management of theconstruction sites, through a multi-dimension perception and analysis of construction sites management based onthe real name registration system of personnel management, access control data, environment surveillance data,helmet use data, and boundary crossing data in dangerous areas.
Smart community management platform: Business applications, such as inspection and assessment, care
for property owners, payment and repair services, are provided for property management service companies withefficient management tools to improve the quality of property services and build up a healthy community.Upholding the concept of openness and convergence, the IVS Industrial Application Platform provides a plentyof OpenAPI services to achieve full opening of product capabilities and help partners to integrate intelligent IoTapplications in a fast, convenient and secure way, and to jointly empower enterprises in digital transformation.
(3) Cloud Visualized Management Platform: enterprise-level SaaS application with Video + AI as its CoreAs a public cloud application service portal based on scenario intelligence, Cloud Visualized ManagementPlatform relies on the device access management of EZVIZ cloud to provide SaaS cloud services for chain business,community, general education, logistics and other sub-sectors, lowering the digital transformation threshold forenterprises.In the retail chain industry, based on video-based remote inspection applications, Cloud VisualizedManagement Platform integrates the capabilities of AI Open Platform to apply scenario-based algorithms to thedaily store inspections, which are widely used in aspects such as out-of-stock reminder, shelf inspection,obstructions in fire exit routes and regulations on staff clothing, and etc. In general education campuses, CloudVisualized electronic class tablet is used in class attendance, class supervision, class evaluation, cultural display,information dissemination, inquiry about curriculum, home-school interaction and distribution of third-partyapplication etc., reducing costs of education management for schools and building a bridge for home-schoolinteraction. Within enterprises, in conjunction with the series products under DeepinGo, Cloud VisualizedManagement Platform achieves touch-free ID authorization/recognition access control and working time attendanceto help enterprise enhance digital management.
In 2019, Cloud Visualized Management Platform continued to see fast growth both in the number of users itserved and the number of devices it connected with, and created greater value through sustained applicationinnovation in sub-sectors to increase customer loyalty. Through a more extensive and convenient connectivity withthe external systems through open platform, Cloud Visualized Management Platform can connect with mainstreamapplication software in the target market of enterprises, realizing the shift from purely “being integrated” to “multi-application interconnectivity” and “integrating third-party applications/services” to achieve opening andinterconnectivity and integration into SaaS ecosystem.
3.2.3 Realization of industry value
Based on its industry insight and business knowledge, Hikvision EBG continues to specialize in five industrysectors: energy and metallurgy, culture, education and health, intelligent buildings, industrial and commercialenterprises, and financial services. Relying on the digital solution system of the industry, concerned and driven bythe demand for user value, Hikvision EBG builds a value business system oriented to “narrow the management gap,enhance business efficiency, regulate operation practices and prevent potential security hazards” with the aim ofachieving user value.Narrowing the management gapLeveraging on the video-centered IoT perception and connectivity capabilities, users can achieve holisticcontrol and realize the change from “on-site management and decentralized management” to “center-basedmanagement and centralized management”, thus reducing the distance between enterprise managers at all levelsand production scenarios to mitigate management anxiety.For senior management of enterprises, the Company offers three technical approaches: AR real command,digital command view and data dashboard, enabling users to achieve holistic control and get insight into details atthe same time. For example, in the field of enterprise production bases, we build digital command map forproduction base to realize management of factory on-site, personnel, equipment and facilities as well as energyconsumption in a 3D digital world. The Company also created data dashboard to provide real-time feedback on theoperation status of production bases and manufacturing workshops through detailed indicator system, meeting theneeds of precise management scheduling as well as research and decision-making application.In terms of front-line management, we have developed video + AI technology to facilitate people-in-charge inimplementing environmental and safety inspections, remote monitoring and supervision and closed-looprectification of production operations and related equipment, assisting enterprises to achieve standardized servicesor standardized operation management. For example, in the field of quality control for smart community, throughtransformation on intelligent patrol, we realize intelligent supervision and automatic pre-warning of variousscenarios such as community boundaries, fire protection management, obstructions in fire exit routes, code ofconduct for property management, reducing a lot of labor cost for community supports. In addition, AI remoteinspection is also widely used in SOP
(standard operating procedure) inspection of production workshops, retail
Standard Operating Procedure. Refers to describing the standard operating procedures and requirements of an event in a uniform
chain stores inspection, substation inspection and many other fields.
For scenarios where the government has imposed regulatory requirements, the Company provides efficientvisualized online monitoring approaches to carry out enforcement inspections, conduct compliance inspections, riskidentification and real-time quantitative assessment, and early risk warning for entities subject to regulation, so asto achieve unified management, collaborative scheduling and enhance service capabilities. In the field of generaleducation, Hikvision facilitates the education authorities to carry out inspection and safety supervision of hiddenissues in schools and develop the benchmark of informatization in education. In the field of food and drugsupervision, Hikvision helps users build up a catering supervision platform to ensure food safety in food preparationareas of kitchens and enhance efficiency of supervision.Improving operational efficiency
Production results, time and manpower are the three elements of operational efficiency. Through the integrationof AI and intelligent IoT technologies, Hikvision helps various businesses to drive the automation, online operationand standardization of process, and promote operational efficiency across various areas such as production, logistics,education, people’s livelihood: improving the quality of production and level of service to achieve improvement inthe quality of deliveries; optimizing business processes and enhancing production capacity to achieve reduction intime consumed; reducing manpower input and labor costs to achieve optimization of staffing.
format, in order to guide and standardize daily work. The SOP of each process on the production line stipulates the operation detailsand order standards of the workers assigned to this process. The assigned workers’ operations according to the SOP is the basis toassure the product quality and production efficiency. Workshop SOP inspection refers to inspecting whether the workers at each keystation are operating according to the SOP requirements of this process.
Improving quality of production: By integrating machine vision into production process, Hikvision helpsusers build intelligent production lines, which assist users with defect detection and volume measurement in theproduction process, and improve inspection efficiency to enhance yield rate and the overall quality of production.For example, in the field of electrical and electronic equipment manufacturing, Hikvision helps users to realizefully-automatic supervision of the status of the material port on the production line, which significantly improvesthe quality of order delivery; in the field of coal mining and metallurgy, Hikvision helps users to carry out automaticinspection of the material blockage, runout and coal loading at the belt transfer point to avoid production accidentsand reduce energy consumption.Enhancement of service: In the cultural tourism and education sectors, the Company realized online,transparent and intelligent business operation through video networking technology and facilitated the enhancementin service quality. In the field of general education, we work together with general education users to create the newform of intelligent campus that integrates classroom teaching, book lending, dormitory management, on-campusmedical treatment and other functions, thus realizing their mission of servicing and educating students.Optimizing business processes: In the on-site logistics scenario, Hikvision has created a digital platform andenhance the efficiency of on-site logistics synergy. As part of these efforts, the Company works together with usersin the logistics industry to build intelligent logistics parks, realizing seamless connection, intelligent perception andoptimization in collaborative interaction of people, vehicles and platforms through identification on digitalplatforms, which results in enhancement of the platform resource utilization rate by more than 30%.
Reducing labor costs: In the field of financial services, Hikvision created the staff-free vault by takingadvantage of human-machine collaboration. Through the integration of AGV, robotic arm, machine vision, etc.,
automated transportation, sorting and storage of the goods in the vault are realized, thus reducing labor intensity,releasing staffing configuration, and improving operational efficiency.Standardizing operating behaviors
Based on the conventional management approaches of human supervision and training & education, theCompany integrated AI scenario-based perception technologies and business informatization management tostrengthen the visualization of supervision approaches and the awareness of standardized operation, providingefficient assistance to establish standardized management of process operation and scenario-based operationbehaviors.
In process-based production scenarios such as energy metallurgy, industrial manufacturing, equipmentmanufacturing, electronic appliances as well as food and drug and FMCG (fast-moving consumer goods), the AIscenario-based perception and operation management system can be integrated to enhance operator awareness ofstandardized operation, and strengthen safety monitoring through intelligent supervision of the operation process,and to enhance intrinsic safety based on data insight. For example, in the power sector, the Company works withgrid users to build an on-site safety operation control platform for a holistic operation plan management and safetyinspection and management for transmission lines, power distribution, power network for agricultural purposes,technical retrofitting, comprehensive governance and infrastructure projects.
Based on customized AI-perceptual technology, the status of operational elements and behavioral norms inproduction scenarios are analyzed and combined with management needs to achieve effective monitoring. In theequipment manufacturing scenario, Hikvision assisted users engaged in tire manufacturing to achieve intelligentmanagement of compliance behavior on tire appearance quality inspection, resulting in a decrease of over 30% in
QA resource investment.
Through IoT sensing technologies such as intelligent perception, outdoor 3D positioning and etc., Hikvisionhelps meet the two-way supervision needs of construction companies and owner units using intelligent constructionsite visualized supervision that integrates site personnel operation management, real name management of staff,environmental management as well as mechanical management. In 2019, the Company assisted users to implementa large-scale real name attendance system, achieving intelligent comprehensive management covering attendance,access and behavior monitoring.In the financial outlet scenario, intelligent supervision is carried out on the process of hand-over of deposit boxat the outlet, enabling timely detection of abnormalities and ensuring the smooth progress of escort operation. Thisis achieved through multi-level authentication of vehicle plates and personnel as well as automatic matching withthe escort schedule.Preventing potential safety hazardsWith full coverage of business activities and the combination of intelligent perception and fire prevention, theCompany created a three-in-one enterprise safety prevention system integrating intelligent personnel safetymanagement, intelligent equipment and facilities safety monitoring, and intelligent environmental safety perception,thus establishing a “full coverage, multi-dimensional” fire protection monitoring network. The Company alsocreated innovative fire technical prevention, promoting the transformation in fire protection management from post-event accountability investigation to precautionary warning, improving emergency handling capacity, and reducingthe work pressure of fire safety management personnel.The Company integrates AI technologies to create a security management system for business managementpersonnel and front-line staff. In typical high-risk production sites such as construction sites, oil fields and coalmines, Hikvision deploys intelligent monitoring systems for a series of activities such as Hot Work
, ascendingoperations, personnel leaving the post, and safety uniforms and etc., to achieve active early warning of abnormalitiesand violations, and to reduce the occurrence of production accidents.
Hot Work refers to welding and cutting operations in the no-fire area and the use of blowtorches, electric drills, grinding wheels,etc. in flammable and explosive places for temporary operations that may generate flames, sparks, and hot surfaces.
With the use of an intelligent technical prevention system, in retail stores, real-time monitoring of thetransaction process is implemented, enabling management staff to effectively focus on abnormal orders forretrospective accountability, and to reduce losses caused by internal theft. For example, the Company helped asupermarket chain build an intelligent loss prevention system in 500 branch stores, enabling efficient and accuraterecognition of habitual thieves, resulting in reduction of 13.7% in single-store loss.By integrating various intelligent perception approaches such as video AI and thermal imaging and etc.,Hikvision provided early hidden danger warning and asset hidden danger detection in high-risk scenarios includingsubstations, transmission lines, pipelines, steel metallurgy production and manufacturing, ensuring stableproduction operations. In the metallurgical industry, Hikvision helped a user in the copper industry implement real-time temperature measurement and pre-alert of electrolytic devices, which effectively avoids the potential hiddentrouble of excessive power consumption and reduced product quality, reducing inspection costs by 75%.Based on the intelligent IoT and firefighting linkage, the Company combined intelligent fire alarm, gas leakalarm, water, electricity safety monitoring, and AI video integrated “security and fire protection integration. It hasbeen widely applied in more than 10 industries such as enterprise campus, finance, education, hospitals, culturaland historic sites, etc. In addition, a project of integrated security and fire protection achieved the unifiedmanagement of 373 high-rise buildings and 108 key units. Since the completion of the project, there has been asignificant increase in the intact rate of firefighting facilities and an overall decrease of 35% in the number of alarms.
Digital transformation will become a prioritized strategy for every enterprise, driving a new stage of rapiddevelopment of the digital economy and accelerating the transformation of the industrial value chain, iterativeupgrading of new business models and new business formats. “Business online, intelligent IoT, fusion of IoT andinformation networks” is the digital evolution path promoted by Hikvision EBG. In 2020, Hikvision EBG willcontinue to take advantage of profound technology accumulation and enterprise service experience to promote thevigorous development of industrial digital transformation.Openness and cooperation represent the new normal state in the digital age. Hikvision EBG continues to upholdthe philosophy of full openness, division of labor and collaboration, and win-win cooperation, while activelyworking with users and partners to create dynamic solution application ecosystems, facilitating the digitaltransformation of various industries.
3.3 Small and Medium Business Group (SMBG): Building Industrial Internet
With the progress in the digital wave as well as the change and enrichment of business forms, the digitalizationcapacity of SMBs has now become a key productivity factor for them to seize opportunities and evolve. With afocus on the fast-growing SMB group and building on Hikvision’s leading intelligence, big data, Internet and servicecapabilities, Hikvision SMBG strives to create an integrated security industry Internet covering mall transactions,communities, programs, content, services, and tools. The goal is to reach millions of security practitioners and users,helping partner companies throughout the full chain of operations, strengthen industrial collaboration and realizingoptimal allocation of resources. Hikvision SMBG endeavors to become a preferred one-stop product and serviceprovider trusted by users. Through community-based service operation and intelligent visualization management,Hikvision SMBG helps SMBs reduce costs and increase efficiency, while enhancing their business competitivenessamidst a rapidly changing market environment.
Effective synergy of distribution channels is the foundation of a well-performing SMB business. HikvisionSMBG has built the Hikvision SMBG E-commerce Platform, an industrial Internet platform, which supports officialmall transactions, cloud services and SaaS applications, provides users with a professional solution library andknowledge learning library, and optimizes the ordering tools to upgrade the service experience, in order to create amore valuable industrial business form. In 2019, Hikvision SMBG E-commerce Platform exceeded 3 milliondownloads, covering over 400,000 security practitioners.
Hikvision SMBG will connect online and offline experience stores through Internet tools, and empower offlinestores and shopping guides through various channels such as delivery of promotional materials, pre-sales, training,certification, cases, and information to realize offline experiences and online purchases, thereby creating a consistentuser experience between online and offline. Thanks to these capabilities, Hikvision SMBG is able to consolidatechannel partners and service stores across China, upgrade and optimize the service operation system at the provincial,municipal and county levels, and provide users with localized, community-based and grid-based operation services.By building a one-stop engineering platform, Hikvision SMBG creates a valuable security product saleecosystem for customers, strives to create value for customers, and becomes a trusted partner for customers.Hikvision continues to enrich ways to help customers improve their business capabilities. It also unites with a widerange of security practitioners in a deeper market to enhance the coverage of user-oriented grid-based services,helping establish more connections between distributor customers and users. At the same time, to help distributorcustomers better serve their users, the Company provides convenient and intelligent applications and managementtools to help improve localization services and improve installers’ efficiency in project operation and maintenance.Hikvision SMBG connects consumers and service providers through online and offline connections, andprovides users with customized design solutions to facilitate the linkage between supply and demand. Supported bythe huge channel resources of Hikvision across China and the increasingly enhanced platform tools, SMB users caneasily experience and purchase Hikvision’s products and services through a variety of business portals such as theofficial website, customer service 400, E-commerce Platform, WeChat-stores, distributors and service flagship
stores. Users can create demand online through cloud commerce, e-commerce and new retail stores, and can alsoplace orders through the nearest offline store; offline experience stores provide 1V1 services such as consultation,survey, solution design, installation, after-sales service and evaluation etc.
The SMB market is a typical long-tail market, characterized by individualized and scattered user demand.These demands are minimal from an individual perspective, however, the cumulative effect of scale is relativelylarge due to the huge overall quantity and extensive scope. Hikvision SMBG materializes the digital operation ofmultiple industries by continuously building industrial Internet platforms as well as linking and empowering channelcustomers; it also builds open and shared, win-win industrial Internet platforms by relying on first- and second-tierdistributors and collaborating with players in the security industry, third-party ecology and SMB users. HikvisionSMBG will gradually implement the strategic blueprint of “Refined Operation, Change of Model, Leading ScaleAdvantage, Data Value”, play a leading role in guiding the transition to refined operation of the industry at theSMB-end, transform the offline module into the combination of online and offline, thus helping partners to developbusiness and promote market integration. While creating value by combining Hikvision’s experience in big dataand AI application, the Company will continuously build new distribution management systems and models, createcustomer cooperation ecology and facilitate the digital transformation of SMBs.4．Innovative Businesses FlourishingHikvision's business developments constantly generate new technologies. In addition to intelligent IoTsolutions and big data services represented by security and protection, the new businesses based on videotechnologies such as EZVIZ Network, HikRobot, HikAuto, HikSemi, HikMicro, HikFire are gradually makingbreakthroughs and growing and they are effectively synergized with the traditional main businesses to provide morediverse supporting applications for customers and users' scenarios. Besides, a new technological highland has been
established, to offer new impetus for long-term sustainable development of the Company.
4.1 Innovative business-EZVIZ Network
The core of EZVIZ's Internet businesses is based on intelligent video and visual technologies. It uses Internetcloud computing, AI, machine vision and control technologies to create reliable, safe, and intelligent householdproducts and IoT platform, to provide families, individuals and small and micro enterprises with intelligent productsand high-quality services.In 2019, EZVIZ proposed creating the "1+4+N" smart home IoT eco-system: centered on the EZVIZ Cloud,deploying four independently developed products—smart security, smart home entry, smart control and companionrobot—that are open to and connect to environmental control, intelligent audio and video and other subsystems, toachieve full intelligentization of households, offices, shops, schools, hotels and other premises.Four intelligent products: realizing full intelligentization
In the field of smart security, EZVIZ has redefined Smart Home Camera (SHC), which is characterized byeasy installation, easy storage, two-way voice, privacy protection, low power consumption and linkage withhouseholds. In 2019, EZVIZ launched the product series that support AI tracking, quadruple zooming and colorednight vision. It has now established a diverse product system comprised of colored products, multi-ocular products,AI products and battery products.
In the field of smart home entry, EZVIZ has launched the Smart Visualized Fingerprint Lock and SmartVisualized Lookout. Through linkage with the whole intelligent household system products, visualized managementof home entry control is enabled, to enhance the user's proactive defense ability and convenience in the home entries.
In the field of smart control, EZVIZ has launched the intelligent switch panel, intelligent outlet and etc.Additionally, EZVIZ continues improving the system solutions centered on intelligent central control, integratinginto smart community applications, and has achieved the integrated intelligent solutions that cover smart communityand smart household.
In the field of companion robot, EZVIZ has enhanced the core video and AI technologies, iterated the productsand extended to new smart robot products and launched the first RS1 Intelligent Vision Robot Vacuum and theEZVIZ Smart Safety Watch with Built-in HD Camera for Kids, enriching the product portfolio of environmentalsafety and children safety products.
By drawing on the EZVIZ Cloud platform and the four independently developed products, together withecological products, EZVIZ Internet can offer diverse scenario solutions including intelligent household, intelligentapartment and intelligent office, to provide families, individuals and small and micro enterprises with high-qualityservices.
1+4+N Business Ecosystem Map and EZVIZ Cloud Platform Capabilities Chart
EZVIZ Cloud platform: transforming from a video cloud platform to an IoT cloud platform to build anecosystemEZVIZ uses intelligent hardware products, cloud services, AI and robotic technologies to create intelligentizedlife, work and education environments for users. Besides, EZVIZ uses its open platform to share with partners thecloud service capabilities bolstered by intelligent video, to co-create the IoT cloud ecosystem. EZVIZ Cloud nowhas tens of millions of household users, is able to sustain billion-level message-processing and is capable of hundred-million-level equipment operation and maintenance and financial-level information security and encryption.
As the interface to experience EZVIZ intelligent household ecosystem, EZVIZ Cloud video APP is connectedto the EZVIZ intelligent terminal products. With products portfolio diversification, AI capabilities expansion andparticipation of the ecosystem partners, the EZVIZ Cloud video APP upgraded to Version 5.0 in 2019, moving itsbusiness from client side to higher-class business platforms. EZVIZ Cloud is currently supported by iOS, Android,and PC, with tens of millions of active users every day.
The EZVIZ Open Platform is characterized by low development cost, high professional level, high stabilityand easy access. The extraordinary algorithms and technologies for, ID authorization/recognition, vehicle analysisand body detection enable the developers and ecosystem partners to constantly share the business opportunitiesengendered by technological iteration. So far, 60,000+ partners have joined EZVIZ Cloud.
In order to further open the EZVIZ hardware products, cloud AI and cloud video capabilities, EZVIZ SaaSecosystem platform provides IoT components such as access control management, smart lock management, smart
control and smart sensing, the visualized management components such as video surveillance, video sharing andaudio/video interaction, and also AI training platform service. The EZVIZ SaaS ecosystem platform helps industrialpartners including Hikvision quickly complete application development and project implementation, e.g. theaudio/video interaction components used for the Double Teacher Classroom, remote court trial, and remote medical;the video sharing components used for the industrial projects such as Virtual Classroom, Transparent Bidding,Scenery Live, Live Traffic and Visible Kitchen; the access control management and smart lock managementcomponents used for smart construction site, smart office, smart apartment and smart hotel. Collaboration withpartners has engendered more diverse, safer and smarter scenario solutions.Internet information security management and control systemIn security governance, to achieve the information security and data protection strategy goals of “solidtechnology, independent supervision, user trust”, EZVIZ has established the information security and complianceteam and data protection team. Through training, publicity and education, every individual's information securityresponsibility is clarified. The overall security and data protection capability development is focused on"precaution". Precautionary security standards and protection mechanism are in place to enable closed-loopcontinuity management and dynamic optimization.In technical risks control, EZVIZ possessed the professional technical security capability since it was founded.Such capability is mainly responsible for identifying, assessing and handling the technical risk closely related toEZVIZ's business, continuously improving, and developing the relevant capabilities; EZVIZ has introduced externalcapabilities such as external consultation, public test and reward for identification of vulnerabilities, to solve generalsecurity issues. Well-proven solutions are introduced to enhance EZVIZ's baseline security and data protectioncapability.
In security compliance, EZVIZ has obtained Cloud Security International Certification (CSA-STAR) andISO/IEC 27001:2013 certification, integrated into the global security standards under the ISO27001 framework andoptimized the internal and external security management systems, to enable it to continuously improve organizationsecurity; EZVIZ has obtained the information system security-level protection registration certificate (Class 3), asa technical requirement in line with Cyber Security Law, thus EZVIZ has the basic capability to support customersin undertaking major projects; Through ISO / IEC29151: 2017 certification, the standard covers the requirementsof the EU's General Data Protection Regulation GDPR, and also meets the requirements of personal data securityprotection, EZVIZ Cloud is able to comply with international information security standards.
By drawing on its algorithmic abilities in ID authorization/recognition, vehicle analysis and body detectionanalysis, and characterized by safe, easy-to-use, stability and convenience, EZVIZ Cloud achieved rapid growth in2019: the image anomaly detection service cumulatively completed 80 million inspections and detected 10 millionanomalies; night-time shop guard service handles 200,000 alarms per day; combined with AI technology, it providesmore accurate intelligent alarm, reducing false alarms by 43%.EZVIZ will continue to input resources to maintain its advantageous position in intelligent video technologyand create high-end intelligent IoT cloud platform. The three-dimensional intelligent service system enables productadaptability in many scenarios and provides families, individuals and small and micro enterprises with refined andconvenient services.
4.2 Innovative business-Robotics (HikRobot)
By drawing on HikRobot’s leading-edge algorithmic techniques, strong capability of software/hardwaredevelopment, and complete marketing system, HikRobot focuses on intelligent manufacturing and continues itsexploration and investment in mobile robot, machine vision and industrial UAV (unmanned aerial vehicles).Mobile robot: focused on internal logistics to promote intelligent internal logistics of factories
The mobile robot business started from the LMR (Latent Mobile Robot) and has developed into four productlines including LMR, Forklift Mobile Robot, Conveyer Mobile Robot and Heavy-Duty Mobile Robot series, whichare applicable to various sorting, handling and shuttling scenarios, and has extended its capabilities to research ofcore modules and components.
In 2019, the third-generation products of the LMR series started mass production, and the products withstronger carrying capacity and the ones with smaller size were also launched. The LMR series has spawned foursub-series, which can cover the application requirements from 5kg to 2,000kg.
Forklift Mobile Robot series launches products for carrying cargos to you and Forklift product for carrying,lifting, and stacking cargos, which have been successfully applied in multiple applications. The highlight is theinnovative variant of omnidirectional forklift, which can substantially reduce passage width and increase theutilization rate of warehouse. The Conveyer Mobile Robot and Heavy-Duty Mobile Robot series also have launchedimportant products.
In the factory internal logistics scenario, the LMR series and Forklift Mobile Robot series are mostly used for
warehousing of raw materials and finished products; where the LMR series can substantially improve sortingefficiency and the Forklift Mobile Robot series can adequately utilize the space and increase warehouse capacity;the Conveyer Mobile Robot series is mostly used for moving materials inside manufacturing workshops, where aspecific actuator can be configured to automatically interface with the automated equipment, thus the originalseparate equipment can be systemized to achieve overall automation of the workshop. The Heavy-Duty MobileRobot series is mostly used for manufacturing processes that handle large and heavy articles. The product portfoliosof these four series can provide customers with integrated intelligent logistics solutions that cover raw materialsmanagement, production distribution and finished products management.
With the growth and technological improvement of product families, the application scope for Mobile Robothas also be expanded. In addition to expanded applications in 3C manufacturing, new energy, automobile parts, E-commerce logistics etc., the products have also found market in the front-line joint venture automotive OEMs in thedomestic market. HikRobot has also increased input in the core technologies such as robot sensing, control andplanning, and R&D of the key components such as motor controller and sensors and made breakthroughs in severalkey areas. The independently developed motor controllers are in massive application in all series of products. Thevisual-based V-SLAM
navigation technology has been successfully applied in multiple products.Machine vision: focused on industrial sensing to promote production digitalization and intelligentization
Machine vision, as the core of industrial sensing, is the key technology to build the industrial Internet anddigital factory sensing network and plays an increasingly important role in intelligent manufacturing. In 2019,
Vision-Simultaneous Localization And Mapping, vision-based simultaneous positioning and map construction。
HikRobot continued diversifying and optimizing the machine vision products, strengthened its position as a visionproducts provider and explored solutions, to better meet fragmented industrial scenario application demands.In the area of industrial cameras, HikRobot launched the 151 million pixels ultrahigh resolution camera and65 million pixels and 25 million pixels high resolution cameras, further expanding its influence in the mid-to-highend cameras market; it also launched 4K and 8K CL Line Scan Camera, breaking the market monopoly of theforeign brands. In ID products, it continued optimizing logistics code reading technology oriented for LogisticVision Solutions, launched the 20MP Smart Code Reader and 8K Line Scan Smart Code Reader and launched theSix-sided Code Reading System and Multi-sided DWS System
, to propel the intelligent logistics industry; for theindustrial code reading applications, it launched the miniaturized products and the subseries that support auto-focusing, substantially strengthening the competitiveness of industrial code readers.
In terms of AI technology investment, HikRobot vigorously promoted application of deep learning in machinevision and launched a series of algorithm module products based on AI technology, including the AI-based codereading, OCR
, defect detection and object classification algorithms; it vigorously promoted hardwareproductization of AI technology and launched the intelligent cameras and vision control products that support deeplearning, immensely reducing the application costs of AI technology. In terms of algorithm platform, it continues
Dimension Weight Scanning, integrated system for automatic volume measurement, weighing and multi- IDauthorization/recognition code reading.
Optical Character Recognition
diversifying the vision tools platform, continues improving performance and usability of software, provides thecustomers with "machine vision brain" that has better processing power, builds the machine vision ecosystemcentered on the vision tools platform and helps the partners efficiently implement vision applications.In the area of intelligent manufacturing, the value of mobile robot and machine vision has been universallyrecognized by the industry. With continuous technological enhancement and cost optimization, the applicationscope will continue expanding. HikRobot will continue increasing investments to make breakthroughs in coretechnologies, continuously develop new product lines, prioritize optimizing product development and deliveryprocesses, to provide industrial customers with more competitive products and solutions and propel the developmentof global intelligent manufacturing.UAV, as one of the product types in the robotics business, successfully achieved innovation, utilized itsabundant technological achievements to implementing intensive integration of multiple technologies and focusedon the area of security and protection. In 2019, HikRobot continued optimizing flight control technologies, opticaland functional mounted products, and the defense system that defends the safety of low-altitude airspace. It launchedthe defense products such as the second version of Quadrotors UAV, and other defense products such asreconnaissance devices and handheld jammers. By now, Unmanned Aerial Vehicle (UAV) products cover all seriesin the high, middle, and low markets and its defense products form a complete reconnaissance and processing system.HikRobot uses diverse products to provide customers with solutions with industrial characteristics, which have beenapplied in emergency rescue, 5G live broadcast, environmental monitoring, rapid detection of public interestlitigation and protection of important places. HikRobot will continuously adapt to the changes of industrial demandsand explored new robotic product forms.
4.3 Innovative business-Automotive Electronics (HikAuto)
HikAuto focuses on the field of intelligent driving, with video sensors as the core, combined with radar, AIand video analysis and processing technologies, to provide independent software and hardware system solutions forthe OEMs of passenger vehicles and commercial vehicles, distributors and operators, and also consumers.Technology R&D: promote video AI to enable intelligent drivingWith functional enhancement and deep integration of sensors such as video camera, ultrasonic radar, andmillimeter wave radar etc., HikAuto launched product series such as: Around View Camera, Blind Spot Detection
and Warning, Fatigue Driving Detection, and Parking Assist etc. It also started exploring the automatic parkingsystem, automatic driving data recording system, and etc. In light of the development trend of intelligent connectedvehicles, HikAuto is further expanding its business in digital cockpit and smart driving.HikAuto continued increasing input in software system and hardware facilities to meet the requirements ofmainstream international automotive enterprises: fully promoting synergized implementation of MES(Manufacturing Execution System), intelligent warehousing and PLM (Product Lifecycle Management), andbuilding digitalized intelligent factory; it independently developed the six-axis precision focusing, fully automaticimage testing and other core devices, and multiple fully automatic HD camera production lines started massproduction; it obtained ISO26262 functional safety management system certification and possessed the preliminarycapability of designing and manufacturing the products that meet the international functional safety standards.
In 2019, HikAuto continued promoting AI applications in vehicle scenario: HikAuto and Chang’an OuShangjointly launched the first mass-produced passenger car in the domestic market that supports unlocking by faceidentification and driver status monitoring; HikAuto has developed the products that deeply integrate millimeterwave radar and video sensor; it expanded from driving assistant (system) to autonomous driving (system) and hasdelivered the first low-speed automatic driving version of passenger car L3 collaboration project; with increase in5G coverage, for the business scenarios such as logistics, transportation and public security, HikAuto initiated the
PDC: Parking Distance Control.USS: UltraSonic Sensor.
pilot projects on low-speed automatic driving solutions within specific areas.Passenger vehicle: provide competitive intelligent video parts
In recent years, there have been significantly more demands from passenger vehicle owners on DVR (DrivingVideo Recording) and Around View Monitor, and there are universal demands on driving video recording, injuredfeigning prevention, parking view assist and rear-end collision evidence. For the Consumer market, HikAutoElectronics launched the 360° HD panoramic image system, which uses vehicle-specific design and covers 23vehicle models of three major vehicle series. This system is in a leading position in the industry in terms of imagesharpness, night visibility, seamless interfacing, ultra-low delay, reliability and other key indicators. In addition, bythe end of the year, HikAuto launched the industry-leading 5 million pixels F1.6 ultra-large aperture HD and night-view driving video recorder, with built-in AI chip and supporting 4G networking, and this product has became thetop-selling product among the similar new products during the Double Eleven period.Currently, HikAuto has delivered mass-produced products for mainstream domestic automatic enterprises suchas SAIC Motor Passenger Vehicle Corporation, Geely Automobile, Shanghai General Motors, Great WallAutomobile, Chang’an Automobile and SGMW, and continued expanding collaboration on products andtechnologies. Besides, it explored international business and successfully joined a targeted global project of aninternational automotive enterprise. Over 80 new targeted projects were secured throughout the year.Commercial vehicle: provide comprehensive solutions for reducing accident rate and casualty rateIn the commercial vehicle market, the quantity of commercial vehicles in the country is over 20 million,including approximately 800,000 long-distance passenger vehicles, 300,000 hazardous chemicals trucks, 700,000urban public buses, 1.4 million taxis, over 1 million online service taxis and approximately 16 million freightvehicles. Outside aviation, railway and waterborne transportation, commercial vehicles carry massive amount ofpassengers and goods and are closely related to people's life and work. However, traffic accidents, casualties andgoods loss always occur, causing losses to government, enterprises and people.
Since 2003, the traffic management departments of all levels of government have paid intensive attention totraffic safety, taken stringent measures to curb speeding, fatigue driving and dangerous driving and constantlyimproved traffic safety equipment. The time period 2003-2009 was the first stage, during which GPS monitoringwas the core technology. The second stage was 2009-2017, where video evidence collection was implemented inaddition to GPS monitoring. Starting in 2018, ADAS (advanced aided driving system) began commercial operation,
where traffic safety management evolved from post-accident evidence collection to early pre-event warning, whichfurther reduced accident and casualty rates, and enabled expansion of intelligent video applications in commercialvehicles. It is estimated that intelligent equipment will increase from RMB 5 billion to 10 billion during 2020-2022.In 2019, HikAuto launched the second generation ADAS for the commercial vehicle market. The new systemintegrated technologies including in-vehicle monitoring, video-radar fusion, forward collision warning, lanedeparture warning, pedestrian collision warning, blind spot detection, fatigue driving warning, driver behavioranalysis and driver/passenger ID authorization/recognition. HikAuto Electronics' intelligent video systems havebeen extensively applied in domestic commercial vehicles. As of 2019, over 170,000 systems had been installedand commissioned, with a 252% compound growth rate during 2017-2019. HikAuto offers comprehensive solutionsfor commercial vehicles that are based on video monitoring and centered on advanced aided driving technology,that integrate radar, thermal imaging, positioning and other multi-dimensional sensors, and that extend to intelligentanalysis on specific application scenarios.Growth of the automotive industry generally stagnated in the recent years, but HikAuto is a new entrant mostlyfocused on the opportunities in the industrial revolution engendered by intelligent and networking technologies. Inthe past three years, HikAuto continued investments in the key technologies and high-standard quality system andproduction capacity and gained its advantage in the integration of video, AI and multiple sensors. In the commercialvehicle industry and market, the input-to-output cycle is relatively short, facilitating the ability to use advantageoustechnologies, brand and channels and accelerate planning and implementation of technologies and solutions, inorder to become the leader in the commercial vehicle industry and market, and to lay the foundation for short-termand medium-term automotive electronics businesses. In the passenger vehicle industry and market, in spite of thelarge market scale, the input-to-output cycle is long, so HikAuto makes its foothold in serving the main domesticautomotive enterprises, providing customers with solutions that have independent technological advantages and thatmeet the customized demands domestically. HikAuto will also continue investments to meet the standards of theglobal mainstream automotive enterprises, build competitive technological reserve and international operationalcapacity, expand medium-term and long-term business development space, and strive to become one of the globalinfluential suppliers.
4.4 Innovative business-—Smart Storage (HikSemi）
HikSemi is dedicated to providing customers with professional products and data storage solutions. It has
launched a variety of product types--such as the intelligent memory card, solid state disk (SSD), and private cloudstorage etc.--supporting wide temperature range, power failure protection, video streaming balance algorithms,read-write-intensive requirements and other functions. Products are applied in various fields such as terminalconsumption, rail transit, industrial control, video surveillance and so on.
For industrial SSD, HikSemi launched new products with high reliability and wide temperature range in 2019,to meet vehicle-mounted application requirements under harsher conditions, e.g. -40~85℃ temperature variationand the working environment requiring protection against dust, mist and corrosion. For enterprise SSD, HikSemiupgraded the durability and adapted to the read-write balance application scenarios, and the products have beenapplied in various servers. HikSemi has also made major breakthroughs in PCIe
and launched C/E seriesconsumer PCIe products. During 11.11 and 12.12 Global Shopping Festivals, HikSemi was ranked among the topfive enterprises in terms of sales volume, becoming a domestically well-known storage brand.
For memory card products, in addition to the advanced video monitoring card, HikSemi launched the productswith higher cost performance, which are capable of stable read-write and multiple protections and are applicable tothe video monitoring application scenarios with continuous large-volume data writing. It also launched consumer(storage) cards with high cost performance and high compatibility, which are extensively applicable to mobilephones, cameras, tablet PC and other products. In the future, HikSemi will implement targeted innovations forvarious storage products in various application scenarios such as consumer cameras and driving recorder etc.,
PCI-Express (PCI- Peripheral Component Interconnect Express), is a high-speed serial computer expansion bus standard
leading the establishment of the industrial standards, expanding market channels and intensifying online businessstrategy.For flash memory products, HikSemi has launched multiple new portable SSD products, and has alsoinnovatively developed and launched safe, fast and portable fingerprint-activated SSD, providing users with moreefficient and safer solutions in data transfer and backup scenarios.
For personal data storage products, HikSemi provides the private PC family cloud storage system solutionswith mobile phone as the control terminal, where the users can use mobile APP to remotely access personal datastorage equipment, view and access data online; data can be previewed in multi formats and one-click data sharingis enabled as needed. Collaborating with Baidu Cloud Storage, HikSemi has launched products based on itsindependently developed software system, enabled the bidirectional backup function of Baidu Cloud Storage andthe personal private cloud storage, which provides users with safe and convenient data management services andachieves integration of public cloud and personal data center.
With gradual optimization of 3D flash memory stacking technology, products iteration has accelerated andtechnological innovation substantially reduces the raw material cost of flash memory, which further makes SolidState Disk products more consumer-friendly and the price more compatible with Hard Disk Drive. Starting fromthe vision of "storage keeps good things and intelligence changes life" and relying on the two R&D centers inWuhan and Hangzhou, extraordinary R&D, sales and after-sales service teams, HikSemi hopes to become adomestically leading flash memory solution provider and strives to provide people with better data recording andsharing experience.
4.5 Innovative Business – Infrad Sensor (HikMicro)
HikMicro focuses on the field of uncooled infrared thermal imaging, and is committed to product R&D andindustrialization of uncooled infrared thermal imaging sensors. The infrared thermal imaging industry has alwaysbeen constrained by the high price of key components, which limits the scale of application. HikMicro is committedto address this challenge and bring infrared thermal imaging products from niche to mass market.
HikMicro has built an 8-inch MEMS
（Micro-electromechanical Systems）production line with a purification
Micro Electro Mechanical Systems, Microelectromechanical system is an industrial technology that combines microelectronictechnology and mechanical engineering. Its operating range is generally in the micrometer range; this technology involves manydisciplines such as microelectronics, materials, mechanics, chemistry, and mechanics. The products made with it are miniaturized,
level of 10 and a high-vacuum packaging line, and possesses the first-class teams dedicated in integrated circuitdesign, MEMS design, and MEMS/package testing process development and manufacturing. Currently, HikMicroproducts are widely used in security monitoring, ADAS, disaster prevention, medical quarantine, smart building,industrial and human body temperature measurement and other industries. In the future, HikMicro will continue totake the market-oriented approach, continue to break through technical bottlenecks, and be committed to promotingindustrialization.
HikMicro MEMS and packaging production lineTo date, HikMicro has launched 9 products in 17um and 12um platforms for mass production, including twotypes of vacuum packaging: ceramic packaging
and wafer-level packaging
(WLP). All products are designedwith vanadium oxide thermal materials and are TEC
-free. The performance indicators and level of advancementof the process technology platform have reached the world-class level.In terms of product technologies, HikMicro will break through the technical bottleneck of smaller pixels,conduct R&D on 10um pixel series products, build corresponding process technology platforms, reduce productsize without impacting product performance, and further reduce optical costs during product integration, and
intelligent, multifunctional, highly integrated, and suitable for mass production.
A form of semiconductor packaging that uses ceramic materials as the main packaging material
A form of semiconductor packaging, most or all of the packaging and testing procedures are performed on the wafer, and then cutinto individual components.
Thermal Electric Cooler, thermoelectric cooler is a device that uses semiconductor thermo-electric effect to produce coolingcapacity
ultimately reduce the cost of thermal imaging end products. Meanwhile, HikMicro will continue to promote theR&D and application of WLP packaging technology in different products. As compared with ceramic packagingtechnology, WLP packaging technology will contribute to the significant reduction in the consumption of packagingmaterials and make products more cost-effective; and as compared with CLP packaging technology, WLPpackaging technology can simplify packaging operations and improve packaging yield, thereby further reducingproduct costs. Therefore, it is the ideal packaging model for mass production.In 2019, HikMicro launched 160*120 resolution flagship products. Benefited from the application of thecutting-edge wafer-level packaging (WLP) technology, consumption of packaging materials that account for a largeproportion of product costs is reduced, thus greatly reducing the costs and selling prices of sensors. It ushered in the“thousand-RMB era” of the thermal imaging industry with the introduction of “thermal imaging product atthousand-RMB price range”. For thermal imaging products, the effect of resolution is mainly reflected in the sizeof the field of view and the width of images, while having no effect on the precision of temperature measurement.With its 17um pixel size, built-in AD full digital output, the product is offered with superior performance indicators,and its NETD
(one of the key indicators) is less than 40mk, enabling high-precision temperature measurementand high-quality imaging. With good performance and affordable price, this product series has satisfied the marketdemands, especially in body temperature measurement in designated areas, temperature measurement at urbantraffic security entrance, handheld temperature measurement, access control integration, as well as fire prevention,boundaries protection, etc., contributing greatly to the enhancement in social benefits with technological progress.Currently, the thermal imaging industry chain in China is undergoing rapid development, and the dramaticdecline in the costs of key components has brought new opportunities in the industry. As a result of the gradualdecline in price, thermal imaging products are no longer a niche market. In the era of Internet of Everything, infraredthermal imaging, featured by its key functions of “night vision” and “non-contact temperature measurement”, willdefinitely become an integral part of “multi-dimensional perception”, and be more widely applied to variousindustry-purpose and even consumer products. HikMicro will continue to consolidate its product-side technicaladvantages by taking advantage of its capability of independent supply of key components, explore more applicationscenarios, and promote thermal imaging to the mass market for the benefits of various industries.
Noise Equivalent Temperature Difference, the smallest temperature difference that infrared sensors can detect, is one of the mainindicators to measure the performance of infrared sensors.
4.6 Innovative business-Fire Protection (HikFire)
HikFire is dedicated to R&D, production, sale and operation of integrated solutions for fire protection. Takingthe opportunities engendered by the reform in fire protection and law enforcement systems, opening-up of fireprotection market and gradual modification of technical standards and norms, HikFire quickly implements itsstrategies in intelligent fire protection, traditional fire protection and fire protection operation.Based on the technological accumulation in multi-dimensional sensing, AI, big data, cloud computing, thermalimaging and image identification, HikFire has successfully applied various AI algorithms in fire securitymanagement, such as firefighting access occupation detection, fire/smoke identification, fire extinguisheridentification, firefighting equipment status identification and fire control room personnel on-duty/off-dutyidentification, and has satisfactorily improved the fire risk warning mode, which has been universally recognizedby the industrial customers.HikFire is dedicated to integrated innovative application in security and fire protection, has tactfully integratedthe security technologies into fire protection and has launched a series of security-fire integrated products. Inaddition, based on the unified technical architecture software platform, HikFire achieved security-fire integrationon the software level by modularizing the fire protection applications. Besides, by drawing on EZVIZ Cloud's IoTconnectivity, HikFire has created its fire protection operation cloud platform, launched the fire protection operationbusiness and offered security-fire integrated solutions applicable to multiple scenarios. These solutions have beenextensively applied in many sectors such as communities, schools, hospitals, financial institutions, cultural andhistorical sites and buildings, energy, nine small places
and intelligent buildings, to improve overall fire securitymanagement.Three major business sectors
In 2019, HikFire established a complete fire protection business line, launched multiple sets of solutions fortraditional fire protection, intelligent fire protection and fire protection operation, and created a preliminary fireprotection ecosystem framework that covers multi-dimensional sensing, early warning, information push, fire alarm,emergency evacuation, fire rescue, operation service and firefighting training, and etc.In the field of intelligent fire protection, HikFire has integrated the IoT and low power consumption
Nine small places refer to small schools or kindergartens, small hospitals, small stores, small restaurants, small hotels, smallrecreational bars and clubs, small Internet bars, small beauty salons or bathhouses, and small production and processing enterprises.
technologies to develop products related to smoke, gas, water supply, electricity and user data transmission, and hasobtained the CCCF
fire protection certificate. By drawing on the technological achievements of imageidentification, AI, thermal imaging, cloud platform and big data and integrating the multi-dimensional sensingtechnologies, HikFire has launched the innovative products such as video smoke detector, intelligent security andfire protection cameras, fire image analysis, image fire detector and security-fire integrated platform software; ithas launched the security-fire integrated solutions customized for the industrial applications, to improvemanagement efficiency and reduce construction cost.
In the field of traditional fire protection, HikFire has independently developed and manufactured the two-bus
fire alarm system and obtained the CCCF certificate; it has launched the products such as fire alarm/controllinkage controller, smoke detector, temperature sensor, manual fire alarm button, fire hydrant button, fire displaypanel, sound-light alarm, and input/output modules; it has also launched the fire control room graphic display toenable remote verification of fire alarm and improve management efficiency.
China Certification Center for Fire Products, CCCF is a type of CCC certification and is a 3C certification for fire protectionproducts
The two buses are a technology that combines the power supply line and the signal line into one, compared to the four-wiresystem (two power supply lines and two communication lines), and realizes the technology that the signal and power supply shareone bus. The two buses save construction and cable costs, and bring great convenience to on-site construction and later periodmaintenance. It is widely used in fire protection, instrumentation, sensors, industrial control and other fields. Typical two-bustechnology includes M-BUS, fire bus etc.
Fire protection operation service is the backbone on which HikFire builds its market operation system in thefire industry. Efficient operation and data service can help quickly integrate the upstream and downstream resourcesof the industry chain. In December 2019, HikFire unveiled the HikFire National Operation Center in Jiangshan,Quzhou, to conduct fire protection operation, firefighting training, engineering maintenance and labor assignmentservice and etc. HikFire explored the insurance business to create a fire protection ecosystem. Meanwhile, HikFirelaunched the fire protection cloud platform, to enable it to conduct fire safety management custodian, mall andonline labor assignment, and other businesses.
Outlook of fire protection business
According to the data publicized by Prospective Industrial Research Institute, the overall market size ofintelligent fire protection was approx. RMB 3.5 billion in 2019. China has 800,000 key entities, 50 million ordinaryentities and 110 million Nine Small Places. Based on the progress of intelligent city construction, it is estimated thatthe intelligent fire protection investment in China will maintain a growth rate of approximately 15%. Based on thedata previously publicized by HC Fire Network, it is estimated that the traditional firefighting equipment market in
China could reach RMB 70 billion. Based on the data of Grand View Research, the global firefighting equipmentmarket could reach nearly USD 60 billion.
HikFire is dedicated to IoT-based security-fire integrated applications and offering one-stop fire safetysolutions and one-stop fire protection operation and management solutions. Through constant integration of newtechnologies, it strives to reduce fire risks, improve fire protection management efficiency and make theenvironment safer and life better.
II. Significant changes in main assets
1. Major Changes in Main Assets
| Major assets | Explanation on Major Changes |
| Equity Assets | The increase of 24.28% was mainly due to investments in Hangzhou Haikang Intelligent Industrial Equity Investment Fund Partnership, Daishan Hailai Yunzhi Technology Ltd., Jiaxing HaiShiJiaAn Zhicheng Technology Ltd., Qinghai Qingtang Big Data Ltd. and other companies. |
| Fixed Assets | No significant change |
| Intangible Assets | Increased by 20.26%, mainly due to increase in intangible asseets for the acquisition of land in the second phase of Chongqing Science and Technology Park and Hangzhou Innovation Industry Base |
| Construction in Progress | Increased by 51.78%, mainly due to increased investment in the construction of Chengdu Science and Technology Park, Hangzhou Innovation Industry Base, and Chongqing Science and Technology Park |
prudence and stability, professionalism and solidification, and take advantage of the driving force deriving fromtechnological innovation.
1. Continued investment in R&D to strengthen competitiveness in R&D of software and hardwareand underlying technologiesSince its foundation, Hikvision has established a leading system for R&D, production and sales of hardwareproducts, building the competitive advantage in the industry for the Company at the product level. Currently, thehardware product system of Hikvision has covered video collection, transmission, storage, central analysis, big dataserver, mobile traffic, alarm, display and control, video intercom, entrance control and access, conference tablet andother categories. This diversified portfolio of hardware products provides strong support for developing a widerange of fragmented scenario solutions.
Since 2016, Hikvision has focused on the integration of software and hardware as well as their coordinateddevelopment. As steered by the rapid transformation of market demands and based on the component-baseddevelopment model, it has established unified software R&D system for multiple industries and multiple R&Dteams across the Company. The core of the unified software development system lies in the Company’s unifiedsoftware technology architecture. In 2019, the advantages of unified software technology architecture becomeapparent, which supports the rapid development and iteration of industry applications, realizes the value of softwarereusability, and improves the compatibility among software. As a result of its dedicated efforts over the years, theCompany has successfully brought its capabilities of software development to a new level.In addition, the Company continues to invest in R&D in the fields of sensors and detectors, laying thefoundation for the fusion application of multi-dimensional perception technology at the level of hardware products;the long-term and continuous investment in underlying, common and key technologies underpins the long-term andcontinuous technological innovation of the Company. Hikvision has completed the transformation and upgradedfrom single sensor to multi-dimensional sensors, from non-intelligent sensor to intelligent sensor, and from sensorproduct to intelligent IoT system.
2. Continuous optimization and improvement to build independent and controllable supply capacity withflexibility
Fragmented market demand has resulted in diverse product categories and models, as well as the small volumeand multiple batches of orders, posing enormous challenges to manufacturing of products. The ever-changinginternational environment also gives rise to significant uncertainties in terms of continuous and stable supply of raw
materials along the supply chain. Sustainable, stable and reliable supply chains have become the strategic resourcesfor the steady development of the Company’s business. After years of large-scale investment and continuousimprovement, the Company has built a supply chain system in line with its own business, including the supplycapacity with a combination of independent production and outsourced production, to strike a balance betweendelivery flexibility and production efficiency. The Company also emphasizes high-level operational coordinationmechanism and IT system management, with a view to achieve efficient and accurate forecasting and managementof materials, as well as flexible and effective planning coordination and production scheduling. Tailor-made,independent and controllable are the key elements for Hikvision’s supply chain system to adapt to the Company’schanging business needs and enhanced efficiency.Currently, Hikvision has three manufacturing bases in Hangzhou, Tonglu and Chongqing, and has proceededwith the expansion plans in Tonglu, Wuhan and Chongqing, while establishing local factories in India and Brazil,in order to ensure steady and rapid development of the Company’s business.
3. Focusing on business changes and improve organizational capabilities in line with business developmentIn order to better adapt to the needs of users and improve internal operating efficiency, the Company kickedoff the transformation and reorganization of the domestic business structure in 2018, forming three business groupsnamely PBG, EBG and SMBG, which serve respective types of markets and customers. Each focuses on theirrespective target market, and provides services to users in the public service sector, users in big enterprises, andusers in small and medium-sized enterprises, respectively.In order to better serve our customers, Hikvision has built a city-focused marketing and service system in China,which is supplemented by the investment in SMBG. Through Hikvision SMBG E-commerce Platform and relyingon the large offline partner system, the Company strengthened the unified online and offline support of distributorsand opens up service channels for partners. In terms of overseas business, Hikvision has built a country-focusedmarketing and service system, established distribution channels in major countries and regions around the world,consolidated and expanded the scope of business by optimizing the distributors’ team, in order to provide betterservices to different countries and regions as well as various industries and users.In order to better develop our innovative business, the Company has continuously established subsidiariesengaging in innovative businesses since 2016. All subsidiaries operate independently and are responsible for theirown profits and losses. The innovative business teams work hard in their respective business scenarios to obtainrecognition from the market and users.As part of its efforts to adapt to changes in the environment and business, the Company constantly adjusts
and optimizes its business organization in order to stay in line with different business markets and different userdemands. The continuous progress of internal changes not only reflects the Company’s operating vitality, but alsoconstitutes the base of competitiveness of its business.
4. Continuous optimization and improvement on enhancing capabilities in talent development
Talent is the most vital source of competitiveness of an enterprise. Upholding the employment concept of“talent-focused, growing together”, the Company has established a dual career development path consisting ofmanagement sequence and professional sequence, established a professional qualification evaluation system and atalent assessment system, and implemented a multi-level training mechanism, while making constant investmentsfor the consolidation and upgrade of backbone talents as well as the reservation and development of backup talentsof the Company. The Company constantly improves the performance evaluation mechanism, integrating talentsrecruitment, promotion and downgrading, training and development as well as salaries and benefits, to boost themorale and creativity of employees. Through a variety of activities such as “Face-to-Face with Executives”,“Dialogue with Managers”, “Humanities Lecture Hall”, “Reading Club” etc., it has created an equal, open-mindedand positive organizational atmosphere to help employees gain a sense of achievement and belonging.
5. Continuously developing standards and improving systematic protection capabilities
To empower its business development, Hikvision continues to invest resources to strengthen and optimize thequality management system, R&D management system for product safety, as well as compliance system etc. TheCompany strictly complies with the laws and regulations and related requirements applicable to its operations indifferent countries and regions. In 2019, Hikvision established a global compliance department to promote theinternationalization of its corporate governance system as well as risk management and control capabilities, whileencouraging supervision from various parties to strive for continuous progress.
Section IV Discussion and Analysis on Business OperationI. Overview
In 2019, the US-China trade war had tremendous impact on globalization. During the reporting period, thesection 889 of FY2019 National Defense Authorization Act (NDAA) of the United States partially came into effectand Hikvision was included on the Entity List of U.S. Department of Commerce. Being added on the Entity Listchallenged the Company’s capability in long-term stable and continuous raw materials supply, the Company’sadaptability and flexibility of the R&D system, and the Company's ability to sustain businesses in the variouscountries and regions globally, impacting the Company's businesses in the short run. The domestic macroeconomicdownturn resulted in decreased demand in the industry which also significantly impacted the Company'sperformance in 2019. Thanks to the concerted efforts of all employees of the Company and the upstream anddownstream partners, the Company has appropriately coped with these impacts. Oriented by customer demand anddriven by technological innovation, the Company continued progressing with sound and healthy operation. Duringthe reporting period, the Company achieved total business revenue of RMB 57.66 billion, with YoY growth of
15.69%; the net profit attributable to shareholders of the Company was RMB 12.41 billion, with YoY growth of
9.36%. The gross profit margin of the Company in 2019 was 45.99%, an increase of 1.14% comparing to the prioryear.II. Core business analysis
1. Overview
(1) Increasing input in R&D and consolidating basic capabilities to cope with external uncertainties
In 2019, the Company's R&D input was RMB 5.48 billion, which was equivalent to 9.51% of the total salesamount. The Company had over 19,000 R&D and technical service personnel and maintained enormous R&Dinvestments.
For hardware products, with the R&D advantages in the existing hardware products, the Company continuedintensifying research into perceptive technologies, optimized computing and storage technologies and continuedimproving the design capability of products system; by drawing on technologies such as AI, IoT, cloud computingand big data etc., the Company upgraded its product package solutions and established overall competitiveness of
the products. Besides, the Company continued expanding the non-video businesses and made substantialbreakthroughs in non-security businesses.For software R&D, the Company continues to implement the unified software technology architecture andestablish the capability to support large scale system software. During the reporting period, the advantages of theunified software architecture started to manifest, where it supported quick development and iteration of industrialapplications, materialized the value of software reuse and improved the compatibility among software. The R&Dteams in different regions shared the software development, management, operation environment, and configurationmanagement strategies, to enable large-scale synergized software development.In light of the increasingly uncertain geopolitical situation and the escalation of the trade conflict, the Companyhas focused on more diversified supply plans for parts of the key components in 2019. After being added on theEntity List in October 2019, the Company rapidly implemented components substitution for most of the directlyreplaceable products or applied new product design to maintain consistent product performance. For a few products’components that could not be replaced quickly, we have stocked up material inventory to maintain stable delivery.We will continue to strengthen supply chain risk management, continue to make new product designs and alsoincrease R&D efforts in fundamental areas. The Company is confident with its business continuity plan to ensureour supply chain sustainability.
(2) Stabilization and progress in comprehensive security, big data and intelligent businessesBenefited by the Company's diverse security products, intelligent security products and comprehensive securitysolutions and constant technological innovation, the comprehensive security business continued its sounddevelopment as a traditional business sector of the Company. In comprehensive security, Hikvision has ranked No.1 globally in the video surveillance industry for 8 consecutive years.In 2019, the Company proposed the "IoT-information network fusion" data architecture based on big data andAI technologies, set forth the path and method for large-scale systematic data fusion between intelligent IoT andinformation network, and launched the AI Cloud Data Fusion Platform. Through this platform, the Company hasevolved from merely providing data collection services to providing data governance and application services andfrom merely providing intelligent IoT data services to providing data services across intelligent IoT and informationnetwork, and has become a big data services provider with independent technological advantages. By drawing onthis platform, Hikvision provides multiple industries with "multi-network aggregation and cross-domain fusion" big
data aggregation, governance and mining services.The Company put forward the "big data-AI fusion" concept, which integrates AI and perceptive big data toachieve perceptive intelligence, and integrates AI and multi-dimensional big data to achieve cognitive intelligence;it expands from focus on products to focus on systems, from focus on technologies to focus on businesses expansion,from focus on single business to focus on businesses across multiple industries; in the cooperation ecosystem builtthrough the open platform, it provides users with complete intelligent industry and smart city solutions. In intelligentbusiness, Hikvision is deeply dedicated to industrial intelligent business and provides services for smart city, safecity, smart transportation, digital enterprise, smart community, and etc.
(3) Promoting development of innovative businesses
In 2019, the smart home business achieved sales revenue of RMB 2.59 billion, and the robotic business achievedsales revenue of RMB 814 million; the Automotive Electronics, HikSemi and HikMicro etc. also madebreakthroughs. Their products and business modes withstood the tests in their respective business scenarios andgradually established their own industrial influence and market position. In 2019, the Company founded theinnovative businesses HikFire (fire protection) and Rayin (security check), which added new elements in theinnovative businesses. The innovative businesses development echelon has been preliminarily formed.The employees of the innovative businesses dedicated themselves to the businesses with the spirit ofentrepreneurship and commitment. Synergy has been established between the Company's employee teams and theinnovative business teams and also between the traditional businesses and innovative businesses, where they aremutually complementary and synergized to open up new space for the Company's future growth. Rapid developmentof the innovative businesses also enabled the employees to gain enhanced value from their investments in theinnovative business co-investment platform, which converged the interests of the Company and that of theemployees, laying the foundation for long-term development of the Company.
(4) Adjusting raw materials strategy to cope with uncertainties in supply systemIn 2019, due to the risk of being added on the U.S. Commerce Department Entity List, the Company increased itsinventory level of U.S.-origin materials. By the end of 2019, Hikvision's raw materials inventory level was 200percent higher than at the end of 2018. After being added on the Entity List, the upstream suppliers offered greatsupport to Hikvision and immensely assisted in the stable business development of the Company. Aftercorresponding adjustment for half a year, the Company’s supply chain has strengthened its ability to cope withexternal uncertainties.
(5) Adjusting expenditure strategy to improve internal operation efficiencyIn 2019, the Company adjusted its expenditure strategy by contracting its expansion strategy and intensifyingexpenditure control and optimization, to improve the internal operation efficiency. The Company will continueinternal optimization and adjustment and consolidate resources input, to further increase output.
2. Operating incomes and operating costs
1) Operating income structure
Unit：RMB
| 2019 | 2018 | YoY Change (%) | |||
| Amount | Proportion to operating income | Amount | Proportion to operating income | ||
| Total operating income | 57,658,110,065.22 | 100.00% | 49,837,132,481.61 | 100.00% | 15.69% |
| Classified by industry | |||||
| Video products and video services | 57,658,110,065.22 | 100.00% | 49,837,132,481.61 | 100.00% | 15.69% |
| Classified by product | |||||
| Front-end equipment | 27,175,127,832.29 | 47.13% | 24,083,382,887.01 | 48.32% | 12.84% |
| Back-end equipment | 7,519,825,167.90 | 13.04% | 6,779,290,973.76 | 13.60% | 10.92% |
| Central control equipment | 8,822,675,802.63 | 15.30% | 7,323,448,788.51 | 14.70% | 20.47% |
| Construction contracts | 1,091,421,819.86 | 1.89% | 2,285,061,427.63 | 4.59% | -52.24% |
| Others | 8,612,324,560.21 | 14.94% | 6,561,947,057.15 | 13.17% | 31.25% |
| Subtotal | 53,221,375,182.89 | 92.30% | 47,033,131,134.06 | 94.38% | 13.16% |
| Smart home business | 2,592,271,750.14 | 4.50% | 1,636,697,390.22 | 3.28% | 58.38% |
| Robotic business | 813,993,602.43 | 1.41% | 657,068,840.55 | 1.32% | 23.88% |
| Other innovative businesses1 | 1,030,469,529.76 | 1.79% | 510,235,116.78 | 1.02% | 101.96% |
| Subtotal | 4,436,734,882.33 | 7.70% | 2,804,001,347.55 | 5.62% | 58.23% |
| Classified by region | |||||
| Domestic | 41,419,508,094.09 | 71.84% | 35,646,435,049.93 | 71.53% | 16.20% |
Other innovative businesses include products of the corresponding businesses of the innovative business subsidiary HikAuto,HikMicro, HikSemi, HikMed, HikFire, Rayin and others. Same below.
| 2019 | 2018 | YoY Change (%) | |||
| Amount | Proportion to operating income | Amount | Proportion to operating income | ||
| Overseas | 16,238,601,971.13 | 28.16% | 14,190,697,431.68 | 28.47% | 14.43% |
| 2019 | 2018 | YoY Change (%) | |
| PBG | 155.86 | 149.73 | 4.09% |
| EBG | 125.91 | 101.64 | 23.88% |
| SMBG | 93.56 | 75.83 | 23.38% |
| Total | 375.33 | 327.20 | 14.71% |
| Operating income | Operating cost | Gross margin | YoY Change (%) of operating income | YoY Change (%) of operating cost | YoY Change (%) of gross margin | |
| Classified by industry | ||||||
| Video products and video services | 57,658,110,065.22 | 31,140,176,777.12 | 45.99% | 15.69% | 13.31% | 1.14% |
| Classified by product | ||||||
| Front-end equipment | 27,175,127,832.29 | 13,018,006,201.14 | 52.10% | 12.84% | 8.00% | 2.15% |
| Back-end equipment | 7,519,825,167.90 | 3,700,043,734.49 | 50.80% | 10.92% | 2.68% | 3.95% |
| Central control equipment | 8,822,675,802.63 | 4,289,265,345.53 | 51.38% | 20.47% | 26.88% | -2.46% |
| Construction contracts | 1,091,421,819.86 | 844,074,602.62 | 22.66% | -52.24% | -57.96% | 10.54% |
| Others | 8,612,324,560.21 | 6,479,665,731.95 | 24.76% | 31.25% | 35.83% | -2.54% |
| Subtotal | 53,221,375,182.89 | 28,331,055,615.73 | 46.77% | 13.16% | 9.74% | 1.66% |
| Smart home business | 2,592,271,750.14 | 1,574,835,597.99 | 39.25% | 58.38% | 57.85% | 0.21% |
| Robotic business | 813,993,602.43 | 380,163,028.57 | 53.30% | 23.88% | 37.33% | -4.57% |
| Other innovative businesses | 1,030,469,529.76 | 854,122,534.83 | 17.11% | 101.96% | 117.75% | -6.01% |
Some innovative business products rely on the sales of the three major business groups. The sales statistics of the business groupsare divided by the sales responsible unit, but the sales statistics of the product / innovation business are divided by product forms.
| Operating income | Operating cost | Gross margin | YoY Change (%) of operating income | YoY Change (%) of operating cost | YoY Change (%) of gross margin | |
| Subtotal | 4,436,734,882.33 | 2,809,121,161.39 | 36.68% | 58.23% | 68.54% | -3.88% |
| Classified by region | ||||||
| Domestic | 41,419,508,094.09 | 22,351,037,586.32 | 46.04% | 16.20% | 13.70% | 1.19% |
| Overseas | 16,238,601,971.13 | 8,789,139,190.80 | 45.88% | 14.43% | 12.32% | 1.02% |
| Industry | Item | Unit | 2019 | 2018 | YoY Change (%) |
| Video products and video services | Sales volume | Per unit | 141,859,538 | 126,356,788 | 12.27% |
| Output volume | Per unit | 148,141,909 | 128,068,306 | 15.67% |
| Industry | Item | 2019 | 2018 | Increase/ decrease over previous year | ||
| Amount | Proportion to operating cost | Amount | Proportion to operating cost | |||
| Video products and video services | Operating cost | 31,140,176,777.12 | 100% | 27,483,469,555.24 | 100% | 13.31% |
| Product | Item | 2019 | 2018 | Increase/ decrease over previous year | ||
| Amount | Proportion to operating cost | Amount | Proportion to operating cost | |||
| Front-end equipment | Operating cost | 13,018,006,201.14 | 41.80% | 12,054,070,919.03 | 43.86% | 8.00% |
| Back-end equipment | Operating cost | 3,700,043,734.49 | 11.88% | 3,603,440,284.98 | 13.11% | 2.68% |
| Product | Item | 2019 | 2018 | Increase/ decrease over previous year | ||
| Amount | Proportion to operating cost | Amount | Proportion to operating cost | |||
| Central control equipment | Operating cost | 4,289,265,345.53 | 13.78% | 3,380,634,705.16 | 12.30% | 26.88% |
| Construction contracts | Operating cost | 844,074,602.62 | 2.71% | 2,008,019,572.05 | 7.31% | -57.96% |
| Others | Operating cost | 6,479,665,731.95 | 20.81% | 4,770,561,559.60 | 17.36% | 35.83% |
| Subtotal | Operating cost | 28,331,055,615.73 | 90.98% | 25,816,727,040.82 | 93.94% | 9.74% |
| Smart home business | Operating cost | 1,574,835,597.99 | 5.06% | 997,681,210.62 | 3.63% | 57.85% |
| Robotic business | Operating cost | 380,163,028.57 | 1.22% | 276,817,693.44 | 1.01% | 37.33% |
| Other innovative businesses | Operating cost | 854,122,534.83 | 2.74% | 392,243,610.36 | 1.42% | 117.75% |
| Subtotal | Operating cost | 2,809,121,161.39 | 9.02% | 1,666,742,514.42 | 6.06% | 68.54% |
| Sales to top five customers (RMB) | 2,002,048,873.96 |
| Total sales to top five customers as a percentage of the total sales for the year (%) | 3.47% |
| Total sales to the related parties in top five customers as a percentage of the total sales of the year (%) | 0.39% |
Information on top five customers
| No. | Name of Customer | Sales Amount (RMB) | Percentage of total sales for the year |
| 1 | First | 964,023,537.74 | 1.67% |
| 2 | Second | 344,067,070.24 | 0.60% |
| 3 | Third | 243,885,275.51 | 0.42% |
| 4 | Fourth (related party) | 227,168,169.17 | 0.39% |
| 5 | Fifth | 222,904,821.30 | 0.39% |
| Total | -- | 2,002,048,873.96 | 3.47% |
| Total purchases from top five suppliers (RMB) | 8,582,960,481.78 |
| Total purchases from top five suppliers as a percentage of the total purchases for the year | 22.50% |
| Total purchases from the related parties in the top five suppliers as a percentage of the total purchases for the year | 0.00% |
| No. | Supplier Name | Purchase Amount (RMB) | Percentage of total purchase for the year |
| 1 | First | 4,440,973,440.63 | 11.64% |
| 2 | Second | 1,372,813,705.21 | 3.60% |
| 3 | Third | 1,108,483,523.43 | 2.91% |
| 4 | Fourth | 839,318,275.91 | 2.20% |
| 5 | Fifth | 821,371,536.60 | 2.15% |
| Total | -- | 8,582,960,481.78 | 22.50% |
| 2019 | 2018 | Increase/decrease over previous year | Note of significant change | |
| Sales expenses | 7,256,781,486.68 | 5,892,500,406.52 | 23.15% | The company continues to increase investment in domestic and overseas marketing networks |
| Administrative expenses | 1,822,464,442.07 | 1,377,244,870.14 | 32.33% | Increase as the Company's business scale expands and number of employees |
| 2019 | 2018 | Increase/decrease over previous year | Note of significant change | |
| grows | ||||
| Financial expenses | -640,068,177.19 | -424,263,559.64 | -50.87% | Affected by exchange rate fluctuations, foreign exchange gains increased during the period |
| R&D expenses | 5,483,811,698.36 | 4,482,780,693.41 | 22.33% | Continue to increase R&D investments |
| 2019 | 2018 | Change Percentage | |
| Number of Engineers (ppl) | 19,065 | 16,010 | 19.08% |
| Engineers as percentage of Total headcount | 47.19% | 46.55% | 0.64% |
| Amount of R&D expenses (RMB) | 5,483,811,698.36 | 4,482,780,693.41 | 22.33% |
| R&D investment as a percentage of operating income | 9.51% | 8.99% | 0.52% |
| Capitalized R&D expenses (RMB) | 0.00 | 0.00 | 0.00% |
| Capitalized R&D expenses as a percentage of R&D expenses | 0.00% | 0.00% | 0.00% |
| Item | 2019 | 2018 | Increase/decrease over previous year |
| Subtotal of cash inflows from operating activities | 64,478,744,263.94 | 57,332,151,092.45 | 12.47% |
| Item | 2019 | 2018 | Increase/decrease over previous year |
| Subtotal of cash outflows from operating activities | 56,711,024,092.80 | 48,218,865,064.69 | 17.61% |
| Net cash flows from operating activities | 7,767,720,171.14 | 9,113,286,027.76 | -14.76% |
| Subtotal of cash inflows from investing activities | 668,070,675.20 | 10,894,117,243.97 | -93.87% |
| Subtotal of cash outflows from investing activities | 2,591,059,148.00 | 9,443,396,961.92 | -72.56% |
| Net cash flows from investing activities | -1,922,988,472.80 | 1,450,720,282.05 | -232.55% |
| Subtotal of cash inflows from financing activities | 9,615,811,861.82 | 12,501,552,609.39 | -23.08% |
| Subtotal of cash outflows from financing activities | 15,087,164,151.74 | 13,298,915,018.82 | 13.45% |
| Net cash flows from financing activities | -5,471,352,289.92 | -797,362,409.43 | -586.18% |
| Net increase in cash and cash equivalents | 484,656,274.51 | 10,001,826,464.72 | -95.15% |
IV. Analysis of assets and liabilities
1. Material changes of asset items
Unit：RMB
| December 31st 2019 | January 1st 2019 | YoY Change (%) | Note of significant change | |||
| Amount | Percentage of total assets | Amount | Percentage of total assets | |||
| Cash and bank balances | 27,071,948,919.78 | 35.92% | 26,559,675,452.93 | 41.83% | -5.91% | No significant change |
| Accounts receivable | 21,307,927,200.28 | 28.28% | 16,619,441,281.18 | 26.18% | 2.10% | Increase as sales revenue grows |
| Inventory | 11,267,986,843.11 | 14.95% | 5,725,104,153.41 | 9.02% | 5.93% | Inventory increases caused by increase in stocking due to incrase in sales and production scale |
| Long-term equity investment | 252,165,321.49 | 0.33% | 163,301,844.56 | 0.26% | 0.07% | Increased investment in associates and joint ventures |
| Fixed assets | 5,791,218,720.87 | 7.68% | 5,082,415,160.10 | 8.00% | -0.32% | No significant change |
| Construction in process | 631,555,479.06 | 0.84% | 416,092,413.42 | 0.66% | 0.18% | Increase in construction investment on Chengdu Science and Technology Base, Hangzhou Innovation Industry Base and Chongqing Science and Technology Base Phase 2 |
| Short-term loans | 2,640,082,485.15 | 3.50% | 3,465,655,688.29 | 5.46% | -1.96% | Increase in demands for temporary capital turnover |
| Long-term loans | 4,604,168,571.43 | 6.11% | 440,000,000.00 | 0.69% | 5.42% | Increase in project borrowings |
| Non-current liabilities due within one year | 86,123,154.06 | 0.11% | 3,178,171,147.16 | 5.01% | -4.90% | |
2. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
Unit: RMB
| Item | Opening balance | Profit or loss from change in fair value during the period | Difference on translation of financial statements dominated in foreign currency | Provision for decline in value during the current period | Newly added during the period | Sales during the period | Other changes | Closing balance |
| Financial assets | ||||||||
| 1. Derivative financial assets | 1,860,050.59 | -1,863,915.06 | 4,046.23 | 181.76 | ||||
| 2. Other non-current financial assets | 290,966,813.00 | 17,547,234.44 | 3,884,220.00 | 312,398,267.44 | ||||
| 3. Receivables for financing | 2,273,846,399.85 | -1,016,461,346.83 | 1,257,385,053.02 | |||||
| Subtotal of financial assets | 2,566,673,263.44 | 15,683,319.38 | 4,046.23 | 3,884,220.00 | -1,016,461,346.83 | 1,569,783,502.22 | ||
| Financial Liabilities | 290,998.43 | -361,429.75 | 652,428.18 | |||||
| Item | Closing Book Value (RMB) | Reasons for being restricted |
| Monetary fund | 556,280,911.38 | Various cash deposits and other restricted funds |
| Notes receivable | 329,309,522.17 | Endorsed to suppliers |
| Notes receivable | 3,454,753.01 | Pledge for issuance of bank acceptance |
| Receivables for financing | 272,663,613.54 | Pledge for issuance of bank acceptance |
| Fixed assets | 61,877,730.05 | Sale and leaseback of fixed assets |
| Long-term receivables | 968,205,409.44 | Pledge for long-term debts |
| Total | 2,191,791,939.59 |
V. Analysis of Investments
1. Overview
√Applicable □ Inapplicable
| Investment during 2019 (RMB) | Investment during 2018 (RMB) | Fluctuation (%) |
| 2,214,804,834.61 | 2,070,774,031.12 | 6.96% |
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| Hangzhou Innovation Industry Base | Self-built | YES | Video product and video service | 62,698,117.75 | 113,538,634.58 | Specific Loan | 11.07% | 无 | September 23rd 2017 | Announcement on Investment and Construction of Hangzhou Innovation Industry Base Project in Hangzhou (No. 2017-034) |
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| Chengdu Science and Technology Park Project | Self-built | YES | Video product and video service | 236,354,100.92 | 242,931,547.66 | Self-fund | 12.34% | None | September 23rd 2017 | Announcement on Investment and Construction of Chengdu Science and Technology Base Project in Chengdu (No. 2017-033) |
| Chongqing Science and Technology Park Project-phase 2 | Self-built | YES | Video product and video service | 108,809,026.93 | 111,066,438.98 | Self-fund | 14.58% | None | September 23rd 2017 | Announcement on Investment and Construction of Chongqing Science and Technology Base in Chongqing (No. 2017-035) |
| Xi’an Science and Technology Park Project | Self-built | YES | Video product and video service | 4,507,504.22 | 6,171,571.90 | Self-fund | 0.27% | None | September 23rd 2017 | Announcement on Investment and Construction of Xi’an Science and Technology Base in Xi’an（2017-031） |
| Wuhan Science and Technology Park Project | Self-built | YES | Video product and video service | 2,698,113.21 | 4,339,622.64 | Self-fund | 0.15% | None | September 23rd 2017 | Announcement on Investment and Construction of Wuhan Science and Technology Base in Wuhan (2017-032) |
| Wuhan Intelligence Industry Park Project | Self-built | YES | Video product and video service | 1,435,710.38 | 2,370,546.89 | Self-fund | 0.10% | None | September 23rd 2017 | Announcement on Investment and Construction of Wuhan Intelligence Industry Base in Wuhan (2017-036) |
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of reporting period | Source of funds | Project schedule | Reasons for not reaching planned progress and expected benefits | Disclosure Date (if applicable) | Disclosure Index (if applicable) |
| Total | -- | -- | -- | 416,502,573.41 | 480,418,362.65 | -- | -- |
| Category | Initial investment cost | Current profits or losses on the changes in fair value | Accumulated fair value changes included in equity | Purchase during the reporting period | Amount sold during the reporting period | Cumulative investment income | Closing balance | Source of funds |
| Derivative instruments | 1,013,306,062.25 | -1,863,915.06 | 1,407,674,787.60 | 11,550,750.03 | 984,893,221.62 | Company's own funds | ||
| Other non-current financial assets | 290,966,813.00 | 17,547,234.44 | 3,884,220.00 | 312,398,267.44 | Company's own funds | |||
| Receivables for financing | 2,273,846,399.85 | 1,257,385,053.02 | Company's own funds | |||||
| Total | 3,578,119,275.10 | 15,683,319.38 | - | 1,411,559,007.60 | - | 11,550,750.03 | 2,554,676,542.08 | -- |
5. Use of raised funds
□ Applicable √ Inapplicable
During the reporting period, there was no use of raised fund
VI. Disposal of significant assets and equity
1. Disposal of significant assets:
□ Applicable √ Inapplicable
During the reporting period, there was no disposal of significant assets
2. Sale of significant equity:
□ Applicable √ Inapplicable
VII. Analysis of major subsidiaries and investeesInformation about major subsidiaries, and investees that contribute above 10% of the Company’s Net Profit
Unit：RMB
| Company name | Company type | Principal business | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Hangzhou Hikvision System Technology. Co., Ltd. | Subsidiary | Manufacturing: video surveillance system; Technology development and service: computer system integration, electronic product, communication product, transmission and display equipment, big data and IoT software and hardware products, intelligent systems, real-time communication systems, servers and supporting software and hardware products; Service: the installation of electric security engineering; steel structure engineering contracting and construction; the design, construction and maintenance of mechanical and electrical engineering, construction engineering, electronic engineering and intelligent system (based on qualification for operation), parking management; sales of its self-produced products, import and export goods and technology. | 600 million | 3,761,583,508.72 | 1,615,897,147.18 | 1,679,095,072.24 | 111,387,698.75 | 100,838,514.08 |
| Hangzhou Hikvision Science and Technology Co. Ltd. | Subsidiary | Technology development, technology consulting, results transferring; computer software, electronic product, communication product, digital security product, fire-control products; production and sales: security electronic product and its auxiliary equipment, intelligent hardware electronic product, explosion-proof electrics, security electronic product and its auxiliary equipment, intelligent hardware electronic product, explosion-proof electrics, fire-control products, IC card and IC card RW device, mobile phone, cordless phone, handheld wireless police terminal, hand held mobile police terminal; labor protection articles (including special labor protection articles); import or export of goods or technology | 1000 million | 38,997,577,410.70 | 3,710,944,828.05 | 54,014,771,449.42 | 1,320,326,843.48 | 1,017,503,089.22 |
Information about obtaining and disposal of subsidiaries during the reporting period
√ Applicable □ Inapplicable
| Company name | Equity acquisition and disposal method during the reporting period | Impact on overall production results |
| Hangzhou Kuangxin Technology Ltd. | Equity transfer by cash | Business development |
| Hangzhou EZVIZ Technology Ltd. | Entrusted management agreement | Business development |
| Zhengzhou Hikvision Digital Technology Ltd. | Cash contribution | Business development |
| Zhenping County Haikang Juxin Digital Technology Ltd. | Cash contribution | Business development |
| Zhejiang Hikvision Fire Control Technology Ltd. | Cash contribution | Business development |
| Tianjin Hikvision Information Technology Ltd | Cash contribution | Business development |
| Shijiazhuang Hikvision Science and Technology Ltd. | Cash contribution | Business development |
| Ning Guo Hikvision City Operation Service Ltd. | Cash contribution | Business development |
| Ningbo Haikang Parking System Operation Ltd. | Cash contribution | Business development |
| Nanchang Hikvision Digital Technology Ltd. | Cash contribution | Business development |
| Hefei Hikvision Digital Technology Ltd | Cash contribution | Business development |
| Hangzhou Hikfire Technology Ltd. | Cash contribution | Business development |
| Hikvision Digital Technology (Shanghai) Ltd. | Cash contribution | Business development |
| Guangzhou Hikvision Technology Ltd. | Cash contribution | Business development |
| Fuzhou Hikvision Digital Technology Ltd. | Cash contribution | Business development |
| PT. Hikvision Technology Indonesia | Cash contribution | Expand overseas sales channels |
| Hikvision West Africa Limited | Cash contribution | Expand overseas sales channels |
| Hikvision Technology Egypt JSC | Cash contribution | Expand overseas sales channels |
| Hikvision Technologies S.R.L., | Cash contribution | Expand overseas sales channels |
| Hikvision Japan K.K. | Cash contribution | Expand overseas sales channels |
| Hikvision IOT (Thailand) CO.,LTD | Cash contribution | Expand overseas sales channels |
| Hikvision Central America S.A. | Cash contribution | Expand overseas sales channels |
| Hikvision Azerbaijan Limited Liability | Cash contribution | Expand overseas sales channels |
| Hikvision Argentina S.R.L. | Cash contribution | Expand overseas sales |
| channels | ||
| Ezviz International Limited | Cash contribution | Expand overseas sales channels |
| Beijing Brainaire Storage Technology Ltd. | Liquidation and Cancellation | Adjustments of organizational framework |
| Tianjin Hikvision System Technology Ltd. | Liquidation and Cancellation | Adjustments of organizational framework |
2. The Company's development strategy
Hikvision is a provider of Intelligent IoT solutions and big data services with video as its core competence. TheCompany adheres to the business philosophy of "professionalism, honesty, and integrity” and the core corporatevalues of “dedicated to customers’ continual success, adding value to companies and communities, acting withhonesty and integrity, pursuing excellence in every endeavor.” Through continuous innovation, it provides globalcustomers with high-quality products and services and creates value for customers.With the corporate mission “to explore innovative ways to better perceive and understand the world, to empowervision for decision-makers and practitioners, and work together to enhance safety and advance sustainabledevelopment around the world,” the Company is committed to empower vision for the security and growth of theworld.
3. Key Operation Priorities in 2020
(1) Under the premise of discriminating business environment and business sustainability, conduct businessesjudiciously and seize worthwhile market opportunities.
(2) Continue promoting the market strategy centering on urban areas, continue progressing with differentiateddeployment in overseas markets, maintain synergy between headquarters and regional marketing systems, andcontinue increasing resources input in frontline businesses to enhance value for customers.
(3) Continue increasing input in fundamental R&D capability, further consolidate the fundamental technologiesand accumulate innovative capabilities.
(4) Put more focus on capital security and emphasize business quality, to guarantee efficiency and profitability ofbusiness activities.
(5) Continue developing innovative businesses and seize market opportunities.X. Reception of activities including research, communication and interviews during the report period
√ Applicable □ Inapplicable
(1) Reception of research activities during the reporting period.
| Time of reception | Location of reception | Method of reception | Type of reception object | Index of basic situation of the research |
| From January 1st 2019 to January 11th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From January 1st 2019 to January 11th 2019 |
| Time of reception | Location of reception | Method of reception | Type of reception object | Index of basic situation of the research |
| From January 14th 2019 to January 31st 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From January 14th 2019 to January 31st 2019 |
| From February 15th 2019 to March 1st 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From February 15th 2019 to March 1st 2019 |
| From March 4th 2019 to March 19th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From March 4th 2019 to March 19th 2019 |
| April 20th 2019 | Headquarters meeting room of the Company | Performance result conference call | Institutional investors; individuals | CNINF, Investor Relations Activity Record: April 20th 2019 |
| May 10th 2019 | Headquarters meeting room of the Company | Site Research | Institutional investors; individuals | CNINF, Investor Relations Activity Record: May 10th 2019 |
| April 22nd 2019 to May 17th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From April 22nd 2019 to May 17th 2019 |
| May 20th 2019 to June 3rd 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From May 20th 2019 to June 3rd 2019 |
| June 4th 2019 to June 21st 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From June 4th 2019 to June 21st 2019 |
| July 20th 2019 | Headquarters meeting room of the Company | Performance Result-Conference Call | Institutional and individual investors | CNINF, Investor Relations Activity Record: July 20th 2019 |
| From July 22nd 2019 to August 2nd 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From July 22nd 2019 to August 2nd 2019 |
| From August 5th 2019 to August 16th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From August 5th 2019 to August 16th 2019 |
| From August 19th 2019 to September 9th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From August 19th 2019 to September 9th 2019 |
| From September 10th | Headquarters | Site Research and | Institutional | CNINF, Investor Relations Activity Record: From |
| Time of reception | Location of reception | Method of reception | Type of reception object | Index of basic situation of the research |
| 2019 to September 23rd 2019 | meeting room of the Company | telephone communication | investors | September 10th 2019 to September 23rd 2019 |
| October 19th 2019 | Headquarters meeting room of the Company | Performance Result-Conference Call | Institutional and individual investors | CNINF, Investor Relations Activity Record: October 19th 2019 |
| From October 21st 2019 to November 1st 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From October 21st 2019 to November 1st 2019 |
| From November 4th 2019 to November 15th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From November 4th 2019 to November 15th 2019 |
| From November 18th 2019 to November 29th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From November 18th 2019 to November 29th 2019 |
| From December 2nd 2019 to Demceber 20th 2019 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From December 2nd 2019 to Demceber 20th 2019 |
| December 23rd 2019 to January 3rd 2020 | Headquarters meeting room of the Company | Site Research and telephone communication | Institutional investors | CNINF, Investor Relations Activity Record: From December 23rd 2019 to January 3rd 2020 |
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| January 2019 | Shanghai | UBS 19th Greater China Conference 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2019 | Beijing | Morgan Stanley 2019 China New Economy Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2019 | Shenzhen | 17th Annual dbAccess China Conference 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| February 2019 | Hongkong | Macquarie A-Share Technology Stock Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| March 2019 | Taibei | Bank of America Merrill Lynch Asia TMT Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| April 2019 | Hangzhou | Haitong Securities 2019 Spring Corporate Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| May 2019 | Shenzhen | GuoTaiJunAn 2019 Mid-Year Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Shenzhen | HSBC 6th China Annual China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Shenzhen | CICC High-Technology Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Hongkong | Goldman Sachs Technet Conference Asia Pacific 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Shanghai | Guojin Securities 2019 Mid-Year Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Shanghai | Huatai Securities 2019 Mid-Year Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Singapore | Nomura Investment Forum Asia 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2019 | Beijing | Morgan Stanley’s Fifth China Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| June 2019 | London-Edinburgh | 2019 United Kingdom NDR-Via CLSA | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| June 2019 | Shanghai | Merchants Securities 2019 Capital Market Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| July 2019 | Tokyo | Daiwa Hong Kong China Investment Seminar Tokyo 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| July 2019 | Shanghai | Guotai Junan Information Industry Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| July 2019 | Hongkong-Taiwan | Hongkong Taiwan NDR-via HSBC | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2019 | Taipei | Credit Suisse Asian Technology Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2019 | Paris-Stockholm | Europe NDR-Via CICC | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2019 | London | CICC Forum (UK) 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2019 | Suzhou | Citic Securities Thematic Investment Forum--Looking for Core Assets | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| October 2019 | Singapore | NDR-Via Jefferies | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| October 2019 | Shanghia | NDR-Via CICC | All kinds of | One-on-One, One-on-multi, small |
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| investors | group Meetings, and etc. | |||
| October 2019 | Hongkong | NDR-Via Credit Suisee | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| October 2019 | Zhuhai | GuoTaiJunAn 2020 Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Beijing | NDR- Citic Securities | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Beijing | CICC Annual Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Shenzhen | Goldman Sachs 2019 China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Shenzhen | Credit Suisee 10th Credit Suisse China Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Macao | CITI China Investor Conference 2019 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Shenzhen | Citic Securities 2020 Capital Market Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2019 | Hongkong | NDR-Via HSBC | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| December 2019 | Wuhan | ShenWanHongYuan 2020 Capital Market Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| Number of daily research received (On-site and telephone conference, times) | 231 |
| Number of institutional investors received (ppl) | 4299 |
| Number of individual investors received (ppl) | 317 |
| Number of investor relations conference participated | 23 |
Section V Significant EventsI. Profit distribution of ordinary shares and capitalization of capital reserves
Profit distribution policy of ordinary shares in the reporting period, especially the formulation, implementationand adjustment of cash dividend policy
□ Applicable √ Inapplicable
Profit distribution policy (proposal) and capitalizing of capital reserves policy (proposal) in last three years(including the current reporting period)
(1) Profit distribution for the year 2017：Based on the Company’s total share capital of 9,227,270,473
shares on the date of equity registration when the Company implements the distribution plan, theCompany distributed cash dividend of RMB 5 (tax inclusive) per each 10 shares to all shareholders,bonus share and share distribution from capital reserve is nil.
(2) Profit distribution for the year 2018：Based on the Company’s total share capital of 9,348,465,931
shares on the date of equity registration when the Company implements the distribution plan, theCompany distributed cash dividend of RMB 6 (tax inclusive) per each 10 shares to all shareholders,bonus share and share distribution from capital reserve is nil.
(3) Profit distribution proposal for the year 2019：Based on the Company’s current total share capital of
9,345,010,696 shares, the Company proposed to distribute cash dividend of RMB 7 (tax inclusive)per each 10 shares to all shareholders, bonus share and share distribution from capital reserve is nil.Cash dividend of ordinary shares in last 3 years (including the current reporting period)
Unit: RMB
| Year | Cash dividends (including tax) | Net profit attributable to shareholders of listed Company in consolidated statements | Ratio of net profit attributable to shareholder of Company in consolidated financial statements (%) | Amount of cash dividends in other methods | Ratio of cash dividends in other methods |
| 2019 | 6,541,507,487.20 | 12,414,587,690.45 | 52.69% | 0.00 | 0.00% |
| 2018 | 5,609,079,558.60 | 11,352,869,241.32 | 49.41% | 0.00 | 0.00% |
| 2017 | 4,613,635,236.50 | 9,410,855,084.82 | 49.02% | 0.00 | 0.00% |
II. Profit distribution and capitalizing of capital Reserves proposal for the current reporting period
| Bonus issue per 10 shares (share) | 0 |
| Cash dividend per 10 shares (RMB) (tax inclusive) | 7.00 |
| Additional shares converted from capital reserves for 10 shares (share) | 0 |
| Total capital shares as the basis for the distribution proposal (share) | 9,345,010,696 |
| Total cash dividend (RMB) (tax inclusive) | 6,541,507,487.20 |
| Distributable profits (RMB) | 25,196,894,651.27 |
| Percentage of cash dividends in the total distributed profit (%) | 25.96% |
| Cash dividend policy: | |
| The Company is in the development stage and has a substantial plan of cash expenditure. In the current profit distribution, cash dividends shall account for at least 20%. | |
| Details about the plan for profit distribution and capitalizing capital reserves into share capital | |
| As audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, in 2019, the parent company of the Company realized net profit of RMB 11,682,416,010.01，after deducting the statutory surplus reserve of RMB 211,792,989.55, adding the undistributed profit of the parent company at the beginning of the year of RMB 19,327,533,457.91, deducting the cash dividends of RMB 5,609,079,558.60 in 2018, adding back RMB 7,817,731.50 of the unpaid dividends for the repurchased restricted shares, as of December 31st 2019, the profits attributable to shareholders of the parent company amounted to RMB 25,196,894,651.27. As of December 31st 2019, the profits attributable to shareholders in the consolidated statement were RMB 28,961,389,145.22 (consolidated). To sum up, according to the principle of “whichever is lower”, the profits attributable to shareholders this year was RMB 25,196,894,651.27. Based on the Company’s total share capital of 9,345,010,696 shares, the Company proposed to distribute cash dividend of RMB 7 (tax inclusive) per each 10 shares to all shareholders, bonus share and share distribution from capital reserve is nil. The above scheme will distribute a total cash dividend of RMB 6,541,507,487.20, and the remaining undistributed profits will be transferred to the next year. | |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Commitments in offering documents or shareholding alterations | CETHIK Group Co., Ltd. | 1. Commitments in non-competition within the industry: In the period as controlling shareholders of the Hikvision, CETHIK and its controlling subsidiaries (excluding Hikvision and its subsidiaries, the same below) will not be engaged in such business that is competitive to Hikvision and its subsidiaries directly or indirectly. 2. Commitments in decrease and regulation of transactions with related party: Zhejiang Haikang Group Co., Ltd (hereinafter referred to as Haikang Group or actual controller) as the controlling shareholders of Hangzhou Hikvision Digital Technology Co., Ltd (hereinafter referred to as "Hikvision" or "Listed Company") are commited as below for the transactions with Hikvsion: (1) Haikang Group will not make use of the controlling power to offer more favorable conditions to Hikvision than those to any independent third party in any fair market transactions in the cooperation with Hikvision. (2) Haikang Group will not make use of the controlling power to obtain the prior right to complete the transaction with Hikvision. (3) Haikang Group will not deal with Hikvsion in not fair terms comparing to the market prices to prejudice the Company’s interests. For unavoidable related transactions, the Company will observe the principles of justice and fairness to deterimine prices according to the market on the basis of equality, voluntarily. The Company will obey the Articles of Association and other regulatory documents related to the avoiding of issues about related transactions. The related transactions will go through approval procedures in accordance with related rules and complete legal procedures, fulfilling the information disclosure obligations in respect to the related transactions 3. Commitment to the maintenance of the independence of the listed Company 3.1 Commitment to Personnel | October 29th 2013 | Long-term | Strict performance |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Independence of the listed Company (1) Commitment that our general manager, deputy general manager, chief financial officer, secretary of the board and other members of senior management shall not assume any positions other than directors and supervisors or get any remuneration in CETHIK and/or any of its controlled entities; (2) Commitment in keeping the management of labor, human resources and issues related to remuneration of the listed Company independent from that of CETHIK; 3.2 Commitment to the independence of the asset of the listed Company (1) Commitment to independent and complete asset of the listed Company (2) Commitment free of unlawful use of cash and asset of the listed Company by the controlling shareholders 3.3 Commitment to financial independence of the listed Company (1) Commitment to an independent finance department with a team and accounting system; (2) Commitment to a regulated, independent accounting system and financial management system of the branches and subsidiaries (3) Commitment to maintaining accounts with banks independently of and not sharing any bank account with our controlling shareholders (4) Commitment that the financial staff shall not assume any positions in CETHIK (5) Commitment to paying taxes independently according to the law; (6) Commitment to implementing financial decisions independently 3.4 The Company has set up an independent organizational structure which maintains its independent operations which is independent from that of CETHIK. 3.5 Commitment to business Independence of the listed Company (1) The Company has the asset, personnel, aptitude and management capability for independent and complete business operation. The |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Company has the ability to operate independently in the market. (2) Commitment in independence in both business and operations 4. Regarding plans for the development and relevant commitment for the listed Company, Haikang Group has committed as below for the subsequent development of Hikvsion according to the Securities Acts and relevant laws and rules, 4.1 Currently the Company has no plan to change or make significant adjustments for principal business in the next 12 months; 4.2 Currently the Company has no plan to sell, merge or operate with another Company for the assets and business of the listed Company or its subsidiaries in the next 12 months. 4.3 Currently the Company has no plan to alter the Board of the Directors and senior management and no agreement with other shareholders about the appointment and removal of the directors or senior management. The team of Board of Directors and senior management will remain unchanged for the foreseeable future. 4.4 Currently the Company has no plan to make significant changes to the Articles of Association for the listed Company. 4.5 Currently the Company has no plan to make significant changes to the existing employee recruitment for the listed Company. 4.6 Currently the Company has no plan to make significant changes for the dividend distribution plan for the listed Company. 4.7 Currently the Company has no plan |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| to make significant changes for business and organizational structure for the listed Company. | |||||
| Commitments in Initial Public Offering or re-financing | Hangzhou Weixun Investment Management Limited Partnership（later renamed as Xinjiang Weixun Investment Management Limited Partnership） | During Hu Yangzhong, Wu Weiqi, JiangHaiqing, Zhou Zhiping, Xu Lirong, Cai Dingguo, He Hongli, Zheng Yibo, Hu Dan,、Jiang Yufeng, Liu Xiang, Wang Ruihong, Chen Junke’s tenure of the Company’s board of directors, supervisors and senior management personnel, the annual transfer of Hikvision’s total shares should not exceed 25% of total number of shares held under Weixun; within 6 months after abovementioned personnel’s dimission, should not transfer Hikvision’s shares held under Weixun. | May 17th 2010 | Long term | Strict performance |
| Hangzhou Pukang Investment Limited Partnership（later renamed as Xinjiang Pukang Investment Limited Partnership） | During Hu Yangzhong, Wu Weiqi, Gong Hongjia’s tenure of the Company’s board of directors, supervisors and senior management personne, the annual transfer of Hikvision’s total shares should not exceed 25% of total number of shares held under Pukang; whithin 6 months after abovementioned personnel’s dimission, should not transfer Hikvision’s shares held under Pukang. | May 17th 2010 | Long term | Strict performance | |
| The Company's directors, supervisors and executive: HuYangzhong,Wu Weiqi, Jiang Haiqing, Zhou Zhiping，Xu Lirong, Cai Dingguo, He Hongli, Zheng Yibo, Hu Dan, Jiang Yufeng, Liu Xiang, Wang Ruihong, Chen Junke | During their tenure of the Company’s board of directors, supervisors and senior management personnel, the annual shares transfer should not exceed 25% of total number of shares held under Weixun; whthin 6 months after their dimission, they should not transfer their shares held under Weixun. | May 17th 2010 | Long term | Strict performance | |
| Directors, executive officers of the Company: Hu Yangzhong, Wu Weiqi | During their tenure of the Company’s board of directors, supervisors and senior management personnel, the | May 17th 2010 | Long term | Strict performance |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| annual shares transfer should not exceed 25% of total number of shares held under Pukang; whthin 6 months after their dimission, they should not transfer their shares held under Pukang. | |||||
| The Company’s director Gong Hongjia’s spouse, Chen Chunmei | During Gong Hongjia’s tenure of the Company’s board of directors, supervisors and senior management personnel, Chen’s annual shares transfer should not exceed 25% of total number of shares held under Pukang; whthin 6 months after the dimission of Gong Hongjia,Chen should not transfer her shares held under Pukang. | May 17th 2010 | Long-term | Strict performance | |
| China Electronics Technology Group Corporation（later renamed as China Electronics Technology Group Co., Ltd.） | To avoid any loss of the Company and other shareholders arising from any competing business, China Electronics Technology Group Corporation, the actual controller of the Company, issued Letters of non-competition on 18 September, 2008. | September 18th 2008 | Long term | Strict performance | |
| Gong Hongjia； Hangzhou Weixun Investment Management Limited Partnership（later renamed as Xinjiang Weixun Investment Management Limited Partnership）； Hangzhou Pukang Investment Limited Partnership（later renamed as Xinjiang Pukang Investment Limited Partnership）；ZheJiang Orient Holdings Co., Ltd. | To avoid any loss of the Company and other shareholders arising from any competing business, Gong Hongjia, Hangzhou WeiXun Investment Management Limited Partnership, ZheJiang Orient Holdings Co., Ltd and Hangzhou KangPu Investment Management Limited Partnership, the promoters of the Company, issued Commitment Letters of non-competition in the same industry on 10 July, 2008. | July 10th 2008 | Long term | Strict performance | |
| Other commitments to the Company's minority shareholders | CETC Investment Holdin Co.,Ltd (CETCIH).; The 52nd Research Institute at China Electronics Technology Group Corporation; China Electronics Technology | During the effective period of the implementation of CETCIH’s plan to increase the holding of Hikvision (within 6 months from October 23rd 2019) and the statutory period, CETCIH will not reduce its shareholdings of Hikvision | October 23rd 2018 | Within 6 months from October 23rd 2018 | Completed |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Group Co., Ltd. | |||||
| CETC Investment Holdin Co.,Ltd (CETCIH).; The 52nd Research Institute at China Electronics Technology Group Corporation; China Electronics Technology Group Co., Ltd. | Within six months from the date of completion of the implementation of increasing shareholding of Hikvision plan, CETCIH will not reduce its shareholdings of Hikvision. | April 24th 2019 | Within 6 months from April 24th 2019 | Completed | |
| Whether the commitments is fulfilled in time | Yes | ||||
to as “New Standards for Financial Instruments”) revised in 2017 by the Ministry of Finance, effective from January
st2019.
In the classification and measurement of financial assets, the New Standards for Financial Instruments require theclassification of financial assets based on their characteristics of contractual cash flows and the business models formanagement of such assets by enterprises into the three main categories of “financial assets measured at amortizedcost”, “financial assets at fair value through other comprehensive income” and “financial assets at fair value throughprofit and loss of current period”, and cancel the categories of loans and receivables, investment held to maturityand available-for-sale financial assets in the former standards for financial instruments. Investments in equityinstruments are generally classified into financial assets at fair value through profit and loss of current period, andinvestments in equity instruments for non-trading purpose are also allowed to be designated as financial assets atfair value through other comprehensive income, but such designation is irrevocable, and at the time of disposal, theaccumulated amount of fair value changes previously included in other comprehensive income must not betransferred to profit and loss of current period.
In respect of value impairment, the New Standards for Financial Instruments relating to impairment requirementsare applicable to financial assets measured at amortized cost, financial assets at fair value through othercomprehensive income, receivables for financing and financial guarantee contracts. The New Standards forFinancial Instruments require the adoption of the expected credit loss model to recognize the provision for creditloss for replacing the former model of credit loss occurred. The new impairment model adopts a three-stage modeldepending on whether credit risk of the relevant project has increased significantly after initial recognition, provisionfor credit loss is made according to the expected credit loss within 12 months or the expected credit loss during theentire subsisting period. Company measures the loss provision for the accounts receivable formed by transactionsregulated by the income standard based on the amount equivalent to the expected credit loss throughout the lifetime.
Recognition and measurement of financial instruments prior to January 1
st
2019 were inconsistent with the NewStandards for Financial Instruments, the Company has made retrospective adjustments according to therequirements of the New Standards for Financial Instruments. The Company will not adjust the data involved infinancial statements for comparison in preceding periods which are not consistent with the requirements of the NewStandards for Financial Instruments. The difference between the original book value of financial instruments andthe new book value on the date of implementation of the New Standards for Financial Instruments will be accountedunder retained earnings or other comprehensive income on January 1
st2019. For details on the effects of adoptionof the New Standards for Financial Instruments by the Company on January 1
st
2019, please refer to FinancialReport Notes (III) 28.2.
The Company prepared the 2019 Financial Statement in accordance with the Notice on Amending the 2019 AnnualFinancial Statements of General Enterprises (Accounting Council (2019) No. 6, hereinafter referred to as "FinancialAccounting No. 6 Document") issued by the Ministry of Finance on April 30th 2019. Financial Accounting No. 6Document revised the presentation items on the balance sheet and income statement, and split the "Notes Receivableand Accounts Receivable" item into "Notes Receivable" and "Accounts Receivable" and the "Notes Payable andAccounts Payable" item into "Notes Payable" and "Accounts Payable" items; it also specified or revised the contentsof “Non-current Assets due Within One Year”, “Deferred Income”, "Other Equity Instruments", "Research andDevelopment (R&D) Expenses", "Interest Income " under “Financial Expenses”, "Other Income", "Asset Disposal
Income", "Non-operating Income" and "Non-operating Expenses"; it adjusted the position of "Impairment Lossesof Assets" and specified the contents of "Invested capital of other equity instrument holder". In light of the aforesaidchanged items, the Company made retrospective adjustment of the comparative data of the previous year. Thechanges of accounting policy will not affect the consolidated net profits, the Company's net profits or owner's equity.
Besides, as a result of the implementation of the New Financial Instrument Standards and as per Notice onAmending the 2019 Annual Financial Statements of General Enterprises (Accounting Council [2019] No. 6), the"interests receivable" in "other receivables" is changed to the interests that are due and receivable for the relevantfinancial instruments but not yet received as of balance sheet date (the interests of the financial instruments assessedby the effective interest method is included in the book balance of the financial instruments); "interests payable" in"other payables" is changed to the interests that are due and payable for the relevant financial instruments but notyet paid as of balance sheet date (the interests of the financial instruments assessed by the effective interest methodis included in the book balance of the financial instruments). Based on the provisions of the New FinancialInstrument Standards, no retrospective adjustment of the comparative data had been done.VII. Explanation for retrospective restatement of major accounting errors during the reportingperiod
□ Applicable √ Inapplicable
No such case during the reporting period.
VIII. Explanation for changes in scope of the consolidated financial statements as compared to thefinancial report for the prior year
√ Applicable □ Inapplicable
During the reporting period, the Company has newly set up twenty wholly-owned subsidiaries and threeholding subsidiaries, acquired one subsidiary, actually controlled one subsidiary through an entrusted managementagreement, and cancelled two companies, which have caused the change in consolidation scope. For more details,please refer to Financial Report Note (VI) “Changes in consolidation scope” of the financial statement.
IV. Engagement and disengagement of the CPA firmCPA firm engaged at present
| Name of the domestic CPA firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Remuneration for the domestic CPA firm (RMB’0000) | 330 |
| Consecutive years of the audit service provided by the domestic CPA firm | 4 |
| Name of the certified public accountants from the domestic CPA firm | Tang Lianjiong, Zhang Shushu |
| Consecutive years of the audit service provided by the certified public accountants from the domestic CPA firm | Tang Lianjiong has provided audit service for 1 consecutive year; Zhang Shushu has provided audit service for 3 consecutive years. |
for the 2014 Restricted Share Incentive Schemes and the Resolution for the Third Repurchase and Cancelationof the Locked shares that Already Granted for 2014 Restricted Share Incentive Schemes were approved by the
th
meeting of the fourth Board. Authorized by the first extraordinary general meeting for 2014, a total of33,422,536 restricted shares of 1055 grantees were vested and circulated on January 8
th2019. Meanwhile,509,625 restricted shares held by a portion of grantees not fulfilling the incentive conditions were repurchasedand cancelled. On June 26
th2019, repurchase and cancelation process of the restricted shares was complete.For details, please refer to in the Indicative Notice of Listing the Unlocked Shares during the Third UnlockingPeriod of 2014 Restricted Share Incentive Schemes (No. 2019-002) and the Notice of the Completion of ThirdRepurchase and Cancelation of Locked Shares that Already Granted for 2014 Restricted Share IncentiveSchemes (No. 2019-035) issued on January 7
th 2019 and June 27
th
2019 respectively.
2. During the reporting period, the Company has completed the grants of 2018 Restricted Share IncentiveSchemeOn December 20
th2018, Resolution for Granting Restricted Shares to Planned Grantees for 2018 RestrictedShares Incentive Scheme was approved by the 8
thMeeting of the fourth board. According to the Listed CompanyEquity Incentive Measures and other administration or relevant laws, regulations and departmental rules andregulated documents, as well as 2018 Restricted Shares Incentive Scheme (edited draft) and authorizationsapproved by the 2018 2
ndextraordinary general meeting, the Company has completed granting and registrationof 2018 Restriced Shares Incentive Sheme, with 6095 granted personnel, and 121,195,458 granted shares whichwere listed on January 18
th2019.For details, please refer to Indicative Notice of Completion of Granting of 2018 Restricted Share IncentiveSchemes (No. 2019-004) issued on January 17
th2019.
3. During the reporting period, the Company completed the first time unlocking, repurchasing and
cancelling shares for 2016 Restricted Share Incentive Scheme.On December 26
th
2018, Resolution for the Fulfillment of the Unlocking Conditions of the First Unlock Periodfor the 2016 Restricted Share Incentive Schemes was approved by the 9
thmeeting of the fourth Board.Authorized by the second extraordinary general meeting for 2016, a total of 30,140,165 restricted shares of2822 grantees were vested and circulated on January 21
st2019. Meanwhile, 2,945,610 restricted shares held bya portion of grantees not fulfilling the incentive conditions were repurchased and cancelled. On September 3
rd
2019, repurchase and cancelation process of the restricted shares was complete.
For details, please refer to in the Indicative Notice of Listing the Unlocked Shares during the First UnlockingPeriod of 2016 Restricted Share Incentive Schemes (No. 2019-007) and the Notice of the Completion of theFirst Repurchase and Cancelation of Locked Shares that Already Granted for 2016 Restricted ShareIncentive Schemes (No. 2019-044) issued on January 18
th
2019 and September 5
th2019 respectively.
By the end of the reporting period, the Company has a total of 166,599,970 granted and restricted shares,accounts for 1.78% of the Company’s total share capital
The Company followed the Accounting Standard for Business Enterprises No. 11 – Share-based Payment andother accounting standards in relation to accounting treatment for Restricted Share Incentive Schemes. Costs inrelation to the shares granted under 2014 Restricted Share Incentive Schemes, 2016 Restricted Share IncentiveSchemes and 2018 Restricted Share Incentive Schemes are amortized over the waiting period for vesting.During the reporting period, costs amortized in relation to the shares granted under the 2014 Restricted ShareIncentive Schemes, shares granted under the 2016 Restricted Share Incentive Schemes and shares granted under2018 Restricted Share Incentive Schemes of the Company have no material impact on the financial position andoperating results of the Company. For details, please refer to Note (XI) - Share-based Payments.
XVI. Significant related-party transaction
1. Related-party transactions arising from routine operation
| Related party | Relationship | Type of related transaction | Content of related transaction | Valuation | Trading Amount （0’000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0’000 RMB） | Whether above approved quota | Settlement method | Disclosure date | Disclosure reference |
| Subsidiaries or research institutes of CETC | Under the common control of the Company’s actual controller. | Procurement | Procurement, receiving services | Reference market price; Agreed on price | 38,546 | 1.01% | 60,000 | No | Payment on delivery | April 20th 2019 | Announcement on projections on 2019 related-party transactions (No：2019-020） |
| Shanghai Fullhan Micro | The Company’s director, Gong Hongjia is the director of the related party | Procurement | Procurement, receiving services | Reference market price; Agreed on price | 36,658 | 0.96% | 45,000 | No | Payment on delivery | ||
| Wuhu Sensor Technology | A joint venture affiliated business held by the Company | Procurement | Procurement, receiving services | Reference market price; Agreed on price | 6,326 | 0.17% | 10,000 | No | Payment on delivery | ||
| Maxio Technology and its subsidiaries | A joint venture affiliated business held by the Company | Procurement | Procurement, receiving services | Reference market price; Agreed on price | 4,919 | 0.13% | 10,000 | No | Payment on delivery | ||
| Subsidiaries or research | Under the common | Sales | Providing | Reference | 48,142 | 0.83% | 70,000 | No | Payment |
| institutes of CETC | control of the Company’s actual controller. | services, selling products, commercial goods | market price; Agreed on price | on delivery | |||||
| Zhiguang Hailian Big Data Technology Ltd. | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 410 | 0.01% | 2,000 | No | Payment on delivery |
| Zhejiang Tuxun | The Company's prior senior executive left his post from the Company in March 2018; it has been 12 months after Zheng left his post, therefore, Zhejiang Tuxun will no longer be a related party of the Company from April 2019. | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 45 | 0.00% | 500 | No | Payment on delivery |
| Wuhu Sensor Technology | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial | Reference market price; Agreed on price | 413 | 0.01% | 2,500 | No | Payment on delivery |
| goods | |||||||||
| Hangzhou Comfirmware | The Company’s prior senior executive, Jia Yonghua, is the director of the related party. Jia Yonghua resigned in October 2019. He was still a related party of the Company because he left office less than 12 months ago. | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 11 | 0.00% | 200 | No | Payment on delivery |
| Maxio Technology (Hangzhou) Ltd. and its subsidiaries | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 16 | 0.00% | 200 | No | Payment on delivery |
| Sanmenxia Xiaoyun Vision Technology Ltd. | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 801 | 0.01% | 0 | No | Payment on delivery |
| Jiaxin Haishi JiaAn Zhicheng Technology Ltd. | A joint venture affiliated business held by the | Sales | Providing services, selling | Reference market price; Agreed on | 49 | 0.00% | 0 | No | Payment on |
| Company | products, commercial goods | price | delivery | ||||||||
| Total | -- | 136,336 | -- | 200,400 | -- | -- | -- | -- | |||
| Details on significant sales return | None | ||||||||||
| The amount of related party transactions with Jiaxin Haishi JiaAn Zhicheng Technology Ltd. and Sanmenxia Xiaoyun Vision Technology Ltd. has been approved by the chairman of the board according to the Company's Related-Party Transaction Management System. | |
| Reasons on significant difference between trading price and market referencing price (if applicable) | Not applicable |
2. Related-party transactions regarding purchase and disposal of assets or equity
□Applicable √Inapplicable
No such case in the reporting period.
3. Significant related-party transactions arising from joint investments on external parties
□Applicable √Inapplicable
No such case in the reporting period.
4. Related credit and debt transactions
□ Applicable √Inapplicable
No related-parties’ creditor’s rights or debts during the reporting period.
5. Other significant related party transactions
√Applicable □Inapplicable
On December 3
rd2018, the Resolution on the Commencement of Financial Leasing Related-Party Transactionsbetween Controlled Subsidiaries of Innovative Business and China Electronics Technology Leasing Co. Ltd. wasconsidered and approved by the Company at the seventh meeting of the fourth session of the Board, pursuant towhich consent was given to subsidiaries of innovative business controlled by the Company (including HangzhouEZVIZ Network Co., Ltd., Hangzhou Hikrobot Technology Co., Ltd., Hangzhou HIK Automobile Technology Co.,Ltd., Hangzhou Hikmicro Sensing Technology Co., Ltd., Wuhan HIK Storage Technology Co., Ltd. and HangzhouHikmed Imaging Technology Co., Ltd.) to commence financial leasing related-party transactions with ChinaElectronics Technology Leasing Co., Ltd. (CETL) in 2019, which mainly covered financial leasing business formachinery and equipment of the Company, and the expected annual total amount would be capped at RMB 200million (excluding tax). Hangzhou Hikmicro Sensing Technology Co., Ltd., a subsidiary of the Company engagingin innovative business, entered into a financial leasing contract with China Electronics Technology Leasing Co. Ltd.to conduct sale and lease back business with CETL on some of its self-owned equipment, the financing amount wasRMB 70 million, the leasing term was 48 months, and the leasing interest rate was 3.8% per annum.
On April 19
th2019, China Electronics Technology HIK Group Co., Ltd. (CETHIK), the parent company of theCompany, entered into an Entrusted Management Agreement with Hangzhou EZVIZ Network Co., Ltd., asubsidiary of the Company. Pursuant to the agreement, CETHIK entrusted EZVIZ Network to exercise de facto
operation and management rights in EZVIZ Technology to fully oversee the production, operation and managementof EZVIZ Science and Technology. EZVIZ Network would not collect any fixed amount of entrusted managementfees from CETHIK, but EZVIZ Network would be entitled to 100% distributable profit of EZVIZ Science andTechnology under the entrusted management relationship. At the same time, EZVIZ Network would pay an amountof capital occupation costs to CETHIK according to a certain fee rate for capital occupation based on the amount ofpaid-up capital in EZVIZ Science and Technology (up to a maximum of RMB 20 million). Thus, EZVIZ Networkbecame the de facto controller of EZVIZ Science and Technology.
On October 18
th 2019, the 12
th
meeting of the 4th Board of Directors passed the Proposal on Extension of theFinancial Services Agreement with CETC Finance Ltd. and authorized the Company to extend the FinancialServices Agreement (the Agreement) with the associated legal person CETC Finance Ltd. (the Finance Company)(the Agreement was first signed on December 29
th2016, with validity period of three years). Both parties agreed tocooperate on deposits, settlement, comprehensive credit line and other financial services. It was agreed that thebalance of the fund deposited by Hikvision and its controlled subsidiaries at the Finance Company shall not exceed20% (inclusive) of the owners' equity reported in the company's consolidated statements of the previous year, therevolving line of credit shall not exceed the amount equivalent to RMB 3 billion (inclusive), and the fund may beused for the purposes including but not limited to loan, bill acceptance, bill discounting, letter of guarantee, letterof credit, insurance claim settlement, and finance leasing. The term of the Agreement is three years and the matterin question needs deliberation of the Board of Directors.
On October 18
th2019, the 12th meeting of the 4th Board of Directors passed the Proposal on Investment inand Establishment of Industrial Investment Fund Partnership and the Related Transactions and authorized thecompany to work with the associated legal persons CLP Electronic Information Industry Investment Fund (Tianjin)Partnership (L.P.) (CLP Fund), CETHIK Group Ltd. (CETHIK) and China Power Fund Management (Tianjin) Co.,Ltd. (China Power Management) and also the non-associated legal person Hangzhou High-tech Venture Capital Co.,Ltd (Hangzhou High-tech) to co-invest in and establish the Hangzhou Haikang Intelligent Industrial InvestmentFund Partnership (L.P.) (tentative name, Hikvision Intelligent Fund). Hikvision Intelligent Fund is a limitedpartnership, with investment of RMB 1,000,010,000. China Power Management as the fund manager and the generalpartners contributed RMB 10,000 and hold 0.0010% shares. Hikvision, Hangzhou High-tech, CLP Fund and
CETHIK as limited partners contributed RMB 600 million, 200 million, 100 million and 100 million respectivelyand hold 59.9994%, 19.9998%, 9.9999% and 9.9999% shares. The fund is the company’s own capital.
On December 9
th2019, the 13th meeting of the 4th Board of Directors passed the Proposal on Adjusting Someof the Fund Providers of Hangzhou Haikang Intelligent Industrial Investment Fund Partnership (L.P.). TheCompany was authorized to adjust some of the fund providers in the Hangzhou Haikang Intelligent IndustrialInvestment Fund Partnership (L.P.) Establishment Plan, i.e. the limited partner CLP Fund in the original plan waschanged to CETC (Tianjin) Investment Management Partnership (L.P.), but the other elements of the plan remainedunchanged.
On December 9
th
2019, the 13th meeting of the 4th Board of Directors passed the Proposal on Investment inand Establishment of Hangzhou Hikfire Technology Ltd. (tentative name) and the Related Transactions andauthorized Hikvision and the associated legal persons to work with the co-investment partners to co-invest RMB100,000,000 in establishing Hangzhou Hikfire Technology Ltd. (HikFire). Hikvision contributed RMB 60 millionin cash, holding 60% of the equity of HikFire. The co-investment partners contributed RMB 40 million in cash,holding 40% of the equity of HikFire. This Company was registered at the Bureau of Industry and Commerce onDecember 18
th2019.
Disclosure website for provisional reports on significant related-party transactions:
| Title of provisional repo/rts | Disclosure date | Disclosure website |
| Announcement on the Commencement of Financial Leasing Related-Party Transactions between Controlled Subsidiaries of Innovative Business and China Electronics Technology Leasing Co. Ltd. (No. 2018-062) | December 4th 2018 | www.cninfo.com.cn |
| Announcement on signing the Entrusted Management Agreement and related-party transactions with the controlling shareholder (Announcement No. 2019-026) | April 19th 2019 | www.cninfo.com.cn |
| Announcement on Extension of the Financial Services Agreement with CETC Finance Ltd. (Announcemnt No. 2019-051) | October 19th 2019 | www.cninfo.com.cn |
| Announcement on Investment in and Establishment of Industrial Investment Fund Partnership and the Related Transactions (Announcemnt No. 2019-052) | October 19th 2019 | www.cninfo.com.cn |
| Title of provisional repo/rts | Disclosure date | Disclosure website |
| Announcement on Investment and Establishment of Innovative Business Subsidiaries and Related Transactions (Announcement 2019-059) | December 10th 2019 | www.cninfo.com.cn |
| Announcement on Adjusting Some of the Fund Providers of Hangzhou Haikang Intelligent Industrial Investment Fund Partnership (L.P.) and the Related Transactions (Announcement No. 2019-060) | December 10th 2019 | www.cninfo.com.cn |
2. Significant guarantees
√Applicable □ Inapplicable
(1) Details of guarantees
Unit: RMB’0000
| Guarantees provided by the Company for subsidiaries | ||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee Cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Hangzhou Hikvision Science and Technology Ltd. | April 20th 2019 | 787,500 | January 18th 2019 | 91,202.14 | Joint guarantee | 2019.1.18-2021.01.18 | No | Yes |
| HIKVISION INTERNATIONAL CO.，LTD. | April 20th 2019 | 462,500 | December 20th 2017 | 29,336.41 | Joint guarantee | 2017.12.20-2020.12.20 | No | Yes |
| Chongqing Hikvision Science and Technologies Ltd. | April 20th 2019 | 135,000 | July 5th 2019 | 30,000.00 | Joint guarantee | 2019.07.05-2020.08.08 | No | Yes |
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. | April 20th 2019 | 30,000 | March 26th 2019 | 8,000.00 | Joint guarantee | 2019.03.26-2034.03.26 | No | Yes |
| Urumchi HaiShi Xin’An Electronic Technology Ltd. | April 20th 2019 | 50,000 | March 29th 2019 | 15,162.29 | Joint guarantee | 2019.03.29-2028.06.20 | No | Yes |
| Pi Shan Hai Shi Yong An Electronic Technology Ltd. | April 20th 2019 | 35,000 | March 26th 2019 | 21,600.00 | Joint guarantee | 2019.03.26-2040.03.26 | No | Yes |
| Luo Pu Hai Shi Ding Xin Electronic Science and Technology Ltd. | April 20th 2019 | 30,000 | March 26th 2019 | 14,400.00 | Joint guarantee | 2019.03.26-2035.03.26 | No | Yes |
| Mo Yu Hai Shi Electronic Technology Ltd. | April 20th 2019 | 30,000 | March 26th 2019 | 18,560.00 | Joint guarantee | 2019.03.26-2035.03.26 | No | Yes |
| Guarantees provided by the Company for subsidiaries | ||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee Cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Hangzhou Hikvision Electronics Ltd. | April 20th 2019 | 587,500 | Not happened during the reporting period | |||||
| Hangzhou Hikvision System Technology Ltd | April 20th 2019 | 80,000 | Not happened during the reporting period | |||||
| Chongqing Hikvision System Technology Ltd. | April 20th 2019 | 60,000 | Not happened during the reporting period | |||||
| Chengdu Hikvision Digital Technology Ltd. | April 20th 2019 | 50,000 | Not happened during the reporting period | |||||
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | April 20th 2019 | 10,000 | Not happened during the reporting period | |||||
| Wuhan Hikvision Technology Ltd. | April 20th 2019 | 50,000 | Not happened during the reporting period | |||||
| Wuhan Hikvision Science and Technology Ltd. | April 20th 2019 | 50,000 | Not happened during the reporting period | |||||
| Hikvision Xi’an Xueliang Construction Project Management Ltd. | April 20th 2019 | 67,000 | Not happened during the reporting period | |||||
| Xi’An Hikvision Digital Technology Ltd. | April 20th 2019 | 30,000 | Not happened during the reporting period | |||||
| Pyronix Limited | April 20th 2019 | 10,082 | Not happened during the reporting period | |||||
| Total guarantee cap for subsidiaries approved during the reporting period(B1) | 2,554,582.00 | Total actual guarantee amount for subsidiaries during the reporting period(B2) | 504,065.11 | |||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period(B3) | 2,554,582.00 | Total actual guarantee balance for subsidiaries at the end of the reporting period(B4) | 228,260.84 | |||||
| Total guarantee amount provided by the Company (total of the above-mentioned 3 kinds of guarantees) (During the reporting period, there was no such case as guarantee provided for external parties, or guarantees between subsidiaries, therefore, there is only item B, item A or C is nil) | ||||||||
| Total guarantee cap approved during the reporting period（A1+B1+C1） | 2,554,582.00 | Total actual guarantee amount during the reporting period（A2+B2+C2） | 504,065.11 | |||||
| Total approved guarantee cap at the end of reporting period（A3+B3+C3） | 2,554,582.00 | Total actual guarantee balance at the end of the reporting period（A4+B4+C4） | 228,260.84 | |||||
| Guarantees provided by the Company for subsidiaries | |||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee Cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not | |
| Portion of the total actual guarantee (A4+B4+C4) amount in net assets of the Company | 5.02% | ||||||||
| Of which | |||||||||
| The balance of guarantee for shareholders, actual controllers and their affiliates. (D) | 0 | ||||||||
| Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset ratio over 70% (E) | 220,260.84 | ||||||||
| Total amount of guarantee exceeding 50% of net assets (F) | 0 | ||||||||
| Total guarantee amount of the above-mentioned 3 kinds of guarantees (D+E+F) | 220,260.84 | ||||||||
(2) Illegal provision of guarantees for external parties
□ Applicable √ Inapplicable
No such case in the reporting period.
3. Entrusting others to execute any cash asset management
(1) Entrusted finances
□Applicable √Inapplicable
No entrusted finance during the reporting period
(2) Entrusted loans
□ Applicable √ Inapplicable
No such case in the reporting period.
4. Other significant contracts
□ Applicable √ Inapplicable
No such case in the reporting period.XVIII. Social responsibility1．Fulfillment of social responsibilitiesWhile seeking for economic benefits and protecting shareholders’ interests, Hikvision proactively fulfilled corporatesocial responsibilities by treating suppliers, customers and consumers in good faith, caring employees’ remunerationbenefits, professional development and other legal rights, and actively engaging in environment protection andaffairs for public welfare, in order to make contribution to the sustainable development of society, economy andenvironment.For details, please refer to the Company’s 2019 Annual Social Responsibility Report disclosed on CNINFO(www.cninfo.com.cn)
2. Fulfillment of the social responsibility of targeted poverty alleviation
(1) Plan on targeted poverty alleviation
Hikvision is committed to sharing development with society, solving more practical problems for society
through innovation and collaboration, and always remember to fulfill social responsibilities.
(2) Annual Targeted Poverty Alleviation Overview
a member of the poverty alleviation group of China Intelligent Transportation Management IndustryAlliance, Hikvision actively responds to the call of the Party and the Country for precise poverty alleviation.During the reporting period, the Company followed the China Intelligent Transportation Management IndustryAlliance Poverty Alleviation Group to Cottage Village, Pu'an County, Guizhou Province to carry out povertyalleviation work. The Company and other members of the poverty alleviation group jointly donated money to theCotton Village to repair roads and improve transportation. At the same time, the poverty alleviation teamconducted in-depth exchanges with various functional departments of the Pu'an County Government through on-site investigations to discuss strategies for poverty alleviation.
(3) Effects of targeted poverty alleviation
| Indicator | Unit of measurement | Quantity/development status |
| 1.Overall situation | —— | —— |
| Including: (1) Fund | RMB | 100,000 |
| (2) The amount of goods and materials converted | RMB | |
| (3)Help the registered poor people out of poverty | Headcount |
Section VI Changes in Shares and Information about ShareholdersI. Changes in Share Capital
1. Table of changes in share capital
Unit: Share
| Before the change | Changes in the period (+, -) | After the change | |||||||
| Shares | Ratio | New Shares Issued | Bonus share | Share transferred from capital reserve | Others | Sub-total | Shares | Ratio | |
| 1. Shares subject to conditional restriction(s) | 1,313,073,005 | 14.23% | 121,195,458 | -157,566,502 | -36,371,044 | 1,276,701,961 | 13.66% | ||
| 1)State holdings | |||||||||
| 2)Shares held by State-owned corporate | |||||||||
| 3) Other domestic shares | 274,212,680 | 2.97% | 120,971,358 | -60,039,382 | 60,931,976 | 335,144,656 | 3.59% | ||
| Including: held by domestic corporates | |||||||||
| held by domestic natural person | 274,212,680 | 2.97% | 120,971,358 | -60,039,382 | 60,931,976 | 335,144,656 | 3.59% | ||
| 4) Foreign shares | 1,038,860,325 | 11.26% | 224,100 | -97,527,120 | -97,303,020 | 941,557,305 | 10.07% | ||
| Including:held by overseas corporates | |||||||||
| held by overseas natural person | 1,038,860,325 | 11.26% | 224,100 | -97,527,120 | -97,303,020 | 941,557,305 | 10.07% | ||
| 2. Shares without restriction | 7,914,197,468 | 85.77% | 154,111,267 | 154,111,267 | 8,068,308,735 | 86.34% | |||
| 1) RMB ordinary shares | 7,914,197,468 | 85.77% | 154,111,267 | 154,111,267 | 8,068,308,735 | 86.34% | |||
| 2) Domestically listed foreign shares | |||||||||
| 3) Foreign shares listed overseas | |||||||||
| 4) Others | |||||||||
| 3. Total | 9,227,270,473 | 100.00% | 121,195,458 | -3,455,235 | 117,740,223 | 9,345,010,696 | 100.00% |
On December 3
rd2018, Resolution for the Third Repurchase and Cancelation of the Restricted Shares that Already Granted for 2014 Restricted Share IncentiveSchemes was approved by the 7
thmeeting of the fourth Board. Authorized by the first extraordinary general meeting for 2014, the board agreed to repurchase andcancel a total of 509,625 restricted shares held by a portion of grantees not fulfilling the stock incentive conditions. On June 26
th2019, repurchase and cancelationprocess of the restricted shares was complete. The Company’s total share capital decreased by 509,625 shares from 9,348,465,931 shares to 9,347,956,306 shares.
(3) The first time repurchasing and cancelling shares for 2016 Restricted Share Incentive Scheme:
On December 26
th2018, Resolution for the First Repurchase and Cancelation of the Restricted Shares that Already Granted for 2016 Restricted Share IncentiveSchemes was approved by the 9
thmeeting of the fourth Board. Authorized by the second extraordinary general meeting for 2016, the board agreed to repurchase andcancel a total of 2,945,610 restricted shares held by a portion of grantees not fulfilling the stock incentive conditions. On May 10
th2019, Resolution for the FirstRepurchase and Cancelation of the Restricted Shares that Already Granted for 2016 Restricted Share Incentive Schemes was reviewed and approved by the 2018annual general meeting. On September 3
rd2019, repurchase and cancelation process of the restricted shares was complete. The Company’s total share capital decreasedby 2,945,610 shares from 9,347,956,306 shares to 9,345,010,696 shares.
Approval for changes in share capital
√ Applicable □ Inapplicable
(1) Grants of 2018 Restricted Share Incentive Scheme
On December 20
th
2018, Resolution for Granting Restricted Shares to Planned Grantees for 2018 Restricted Shares Incentive Scheme was approved by the 8
th
meeting of the fourth board. Authorized by the 2018 2
ndextraordinary general meeting, the board agreed to grant 126,518,281 shares to 6,341 grantees as planned in2018 Restricted Shares Incentive Scheme, the granting date was December 20
th
2018. In the payment process of capital, part of the grantees partially or completelyrenounce the subscription of the incentive shares due to personal reasons, resulted in an actual grantees of 6,095 personnels for the Company’s 2018 restricted shares,
with 121,195,458 actual granted shares.
(2) The third time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme:
On December 3
rd
2018, Resolution for the Third Repurchase and Cancelation of the Locked Shares that Already Granted for 2014 Restricted Share IncentiveSchemes was approved by the 7
thmeeting of the fourth Board. Authorized by the first extraordinary general meeting for 2014, the board of directors agreed torepurchase and cancel 509,625 restricted shares held by a portion of grantees not fulfilling the stock incentive conditions.
(3) The first time repurchasing and cancelling shares for 2016 Restricted Share Incentive Scheme:
On December 26th 2018, Resolution for the First Repurchase and Cancelation of the Restricted Shares that Already Granted for 2016 Restricted Share IncentiveSchemes was approved by the 9
thmeeting of the fourth Board. Authorized by the second extraordinary general meeting for 2016, the board agreed to repurchase andcancel a total of 2,945,610 restricted shares held by a portion of grantees not fulfilling the stock incentive conditions. On May 10
th2019, Resolution for the FirstRepurchase and Cancelation of the Restricted Shares that Already Granted for 2016 Restricted Share Incentive Schemes was reviewed and approved by the 2018annual general meeting.
Transfer for changes in share capital
√ Applicable □ Inapplicable
(1) Grants of 2018 Restricted Share Incentive Scheme
2018 granted restricted incentive shares were listed on January 18
th2019. The Company’s total capital shares were increased by 121,195,458 shares from9,227,270,473 shares to 9,348,465,931 shares.
(2) The third time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme:
On June 26
th2019, the process of the third time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme was complete. The Company’s
total share capital decreased by 509,625 shares from 9,348,465,931 shares to 9,347,956,306 shares.
(3) The first time repurchasing and cancelling shares for 2016 Restricted Share Incentive Scheme:
On September 3
rd2019, repurchase and cancelation process of the restricted shares was complete. The Company’s total share capital decreased by 2,945,610shares from 9,347,956,306 shares to 9,345,010,696 shares.
Information about the implementation of share repurchase
□Applicable √Inapplicable
The implementation progress of reducing and repurchasing shares by centralized bidding
□Applicable √Inapplicable
Effects of changes in share capital on the basic earnings per share ("EPS"), diluted EPS, net assets per share attributable to common shareholders of the Company,and other financial indexes over the last year and last period
□Applicable √Inapplicable
Other contents that the Company considers necessary or required by the securities regulatory authorities to disclose
□ Applicable √ Inapplicable
2. Changes in restricted shares
√ Applicable □ Inapplicable
Unit: Share
| Name of shareholder | Opening restricted shares | Increased in current period | Vested in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Gong Hongjia | 1,038,792,525 | 0 | 97,500,000 | 941,292,525 | Executives locked shares | According to the relevant provisions of executives shares management |
| Hu Yangzhong | 136,391,608 | 151,950 | 0 | 136,543,558 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | According to the relevant provisions of executives shares management |
| Grantees of restricted share incentive plan (consolidated) | 112,422,448 | 121,195,458 | 63,562,701 | 166,599,970 | Equity Incentive Restricted Shares + Equity incentive restricted Shares formed by the listing of granted shares under 2018 Restricted Stock Scheme | January 8th 2019/ January 20th 2019 |
| Jiang Haiqing | 8,352,661 | 2964,421 | 0 | 11,317,082 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | According to the relevant provisions of executives shares management |
| Wu Weiqi | 8,301,742 | 137,700 | 0 | 8,439,442 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Jia Yonghua | 4,166,433 | 1,469,111 | 0 | 5,635,544 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Li Pan | 4,165,551 | 1,468,817 | 0 | 5,634,368 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Huang Fanghong | 145,125 | 74,250 | 0 | 219,375 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Fu Baijun | 135,450 | 136,650 | 0 | 272,100 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Jiang Yufeng | 60,375 | 109,950 | 0 | 170,325 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares |
| Name of shareholder | Opening restricted shares | Increased in current period | Vested in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Xu Lirong | 59,700 | 101,850 | 0 | 161,550 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| He Hongli | 52,575 | 113,250 | 0 | 165,825 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Wang Qiuchao | 15,000 | 11,250 | 0 | 26,250 | Executives locked shares | |
| Qu Liyang | 11,812 | 0 | 0 | 11,812 | Executives locked shares | |
| Pu Shiliang | 0 | 130,785 | 0 | 130,785 | Partial of the unlocked restricted shares turning into executives locked shares | |
| Jin Duo | 0 | 16,425 | 0 | 16,425 | Partial of the unlocked restricted shares turning into executives locked shares | |
| Cai Changyang | 0 | 16,425 | 0 | 16,425 | Partial of the unlocked restricted shares turning into executives locked shares | |
| Bi Huijuan | 0 | 22,500 | 0 | 22,500 | Partial of the unlocked restricted shares turning into executives locked shares | |
| Jin Yan | 0 | 26,100 | 0 | 26,100 | Partial of the unlocked restricted shares turning into executives locked shares | |
| Total | 1,313,073,005 | 128,146,892 | 161,062,701 | 1,276,701,961 | -- |
II. Issuance and listing of securities
1. Securities (exclude preferred share) issued during the reporting period
√Applicable □Inapplicable
| Stock and the name of its drivatives | Issuance date | Issuance price (or interest rate) | Issuance amount | Date of listing | Amount that approved for listings | Date of transaction termination |
| Restricted shares | January 18th 2019 | 16.98 RMB/share | 121,195,458 shares | January 18th 2019 | 121,195,458 shares | -- |
121,195,458 shares from 9,227,270,473 shares to 9,348,465,931 shares; the Company completed the third repurchasing and cancelling shares for 2014 Restricted ShareIncentive Scheme, the total capital shares were decreased by 509,625 shares from 9,348,465,931 shares to 9,347,956,306 shares; the Company completed the firstrepurchasing and cancelling shares for 2016 Restricted Share Incentive Scheme, the total capital shares were decreased by 2,945,610 shares from 9,347,956,306 sharesto 9,345,010,696 shares. The structure of shareholder structure, assets and liabilities of the Company did not change significantly after completing the above mentioneditems.
3. Existent shares held by internal staff of the Company
□ Applicable √ Inapplicable
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholdings
Unit: Share
| Total number of common shareholders at the end of the reporting period | 237,895 | The total number of common shareholders at the end of the previous month before the disclosure of the annual report | 312,557 |
| Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them | ||||||||
| Name of shareholder | Nature of shareholder | Share- holding percentage (%) | Total shares held at the end of the reporting period | Increase/ decrease during the reporting period | The number of common shares held with trading restrictions | The number of shares held without trading restrictions | Pledged or frozen | |
| Status | Amount | |||||||
| China Electronics Technology HIK Group Co., Ltd. | State-owned corporation | 38.88% | 3,632,897,256 | -20,777,70022 | - | 3,632,897,256 | Pledged | 50,000,000 |
| Gong Hongjia | Overseas individual | 13.43% | 1,255,056,700 | - | 941,292,525 | 313,764,175 | Pledged | 545,030,000 |
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | Overseas corporation | 6.30% | 588,594,190 | -224,298,307 | - | 588,594,190 | ||
| Xinjiang Weixun Investment Management Limited Partnership | Domestic non-state- owned corporation | 4.82% | 450,795,176 | - | - | 450,795,176 | Pledged | 162,227,000 |
| Xinjiang Pukang Investment Limited Partnership | Domestic non-state- owned corporation | 1.95% | 182,510,174 | - | - | 182,510,174 | Pledged | 48,000,000 |
| Hu Yangzhong | Domestic Individual | 1.95% | 182,186,477 | - | 136,639,858 | 45,546,619 | Pledged | 46,400,000 |
| The 52nd Research Institute at China Electronics Technology Group Corporation | State-owned corporation | 1.93% | 180,775,044 | - | - | 180,775,044 | ||
| CITIC Securities Company Limited | Domestic non-state- owned corporation | 1.03% | 96,598,063 | 15,084,403 | - | 96,598,063 | ||
It is transferred by state-owned shareholders, free of charge. For details, please refer to the announcement of Completion of Free Transfer of Partial State-owned Equity disclosed on
www.cninfo.com.cn (No.2019-057).
| Central Huijin Investment Ltd. | State-owned corporation | 0.70% | 65,818,800 | - | - | 65,818,800 | |||||
| Guo Minfang | Domestic Individual | 0.42% | 39,474,700 | 2,712,500 | - | 39,474,700 | |||||
| Explanation on associated relationship or concerted actions among the above-mentioned shareholders: | China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd.. Ms. Chen Chunmei, limited partner of Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment Limited Partnership. Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Measures for Management of the Disclosure of the Shareholding Changes of Shareholders of the Listed Company. | ||||||||||
| Particulars about shares held by the Top 10 common shareholders holding shares that are not subject to trading restriction(s) | |||||||||||
| Name of shareholder | Number of common shares without trading restrictions held at the period-end | Type of shares | |||||||||
| Type | Number | ||||||||||
| China Electronics Technology HIK Group Co., Ltd. | 3,632,897,256 | RMB ordinary shares | 3,632,897,256 | ||||||||
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | 588,594,190 | RMB ordinary shares | 588,594,190 | ||||||||
| Xinjiang Weixun Investment Management Limited Partnership | 450,795,176 | RMB ordinary shares | 450,795,176 | ||||||||
| Gong Hongjia | 313,764,175 | RMB ordinary shares | 313,764,175 | ||||||||
| Xinjiang Pukang Investment Limited Partnership | 182,510,174 | RMB ordinary shares | 182,510,174 | ||||||||
| The 52nd Research Institute at China Electronics Technology Group Co. Ltd. | 180,775,044 | RMB ordinary shares | 180,775,044 | ||||||||
| CITIC Securities Company Limited | 96,598,063 | RMB ordinary shares | 96,598,063 | ||||||||
| Central Huijin Investment Ltd. | 65,818,800 | RMB ordinary shares | 65,818,800 | ||||||||
| Hu Yangzhong | 45,546,619 | RMB ordinary shares | 45,546,619 |
| Guo Minfang | 39,474,700 | RMB ordinary shares | 39,474,700 |
| Explanation on associated relationship and concerted actions among top ten common shareholders without trading restrictions, and among top ten common shareholders and top ten common shareholders without trading restrictions | China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd. Ms. Chen Chunmei, limited partner of Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment Limited Partnership. Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Measures for Management of the Disclosure of the Shareholding Changes of Shareholders of the Listed Company. | ||
2. Particulars about controlling shareholder of the Company
Nature of the controlling shareholder: Central State-ownedType of the actual controller: Corporation
| Name of controlling shareholder | Legal Representative /People in charge | Date of establishment | Organization code | Business scope |
| China Electronics Technology HIK Group Co., Ltd. | Chen Zongnian | November 29th, 2002 | 9133000014306073XD | Industrial investment; R&D of environmental protection products, network products, intelligent products and electronic products; technology transfer, technical services, manufacturing and sales; business consulting services, rental services of self-owned real estate; import and export businesses. |
| Shares held by the controlling shareholder in other listed companies through controlling or holding during the reporting period | Indirect control of domestic listed company Phoenix Optical Co. Ltd., | |||
| Name of the actual controller | Legal Representative /People in charge | Date of establishment | Organization code | Business scope |
| China Electronics Technology Group Ltd. | Xiong Qunli | February 25th 2002 | 91110000710929498G | The Company is responsible for the development and manufacturing of military electronic equipment and systems integration, electronic equipment for weapon platform, military software and electronic basic products; and the construction of national defense electronic information infrastructure and safeguard conditions; construction of national major electronic information system; the research, development, production and sales of civil electronic information software, materials, components, equipment and system integration and related common technology; self-operated and agent import and export business of various commodities and technologies (except for goods and technologies that are restricted or restricted by the state-limited company); |
| Name of the actual controller | Legal Representative /People in charge | Date of establishment | Organization code | Business scope |
| operating feed processing and "three comes one supplement" business; operating counter trade and entrepot trade; Industrial investment; asset management; engaged in e-commerce information services; organization of enterprises in the industry to go abroad, participate in exhibitions. | ||||
| Shares held by the actual controlling shareholder in other listed companies through controlling or holding during the reporting period | China Electronics Technology Group Ltd is the actual controller of nine domestic listed companies including An’hui Sun Create Electronic Co., Ltd, Shanghai East China Computer Co., Ltd, Chengdu Westone Information Industry Co., Ltd., GCI Science & Technology Co., Ltd., Tai’ji Computer Corporation Limited, GLARUN Technology Co., Ltd. , Phoenix Optics Co., Ltd., Chengdu Tianao Electronic Co., Ltd. and CETC Energy Co., Ltd., and etc. | |||
4. Particulars about other corporate shareholders with shareholding proportion over 10%
□ Applicable √ Inapplicable
5. Particulars on shareholding decrease restrictions for the controlling shareholders, actual controller,restructurer or other committing parties
□ Applicable √ Inapplicable
Section VII Information of Preferred Shares
□ Applicable √ Inapplicable
There is no preferred share existed for the Company during the current reporting period.
Section VIII Information about Convertible Corporate Bonds
□ Applicable √ Inapplicable
There is no convertible corporate bond existed for the Company during the current reporting period.
Section IX Information about Directors, Supervisors, Senior ManagementI. Shareholding changes of directors, supervisors, senior management personnel
√Applicable □ Inapplicable
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Chen Zongnian | Chairman | Incumbent | Male | 55 | June 19th 2008 | 0 | 0 | 0 | 0 | |
| Gong Hongjia | Vice Chairman | Incumbent | Male | 55 | June 19th 2008 | 1,255,056,700 | 0 | 0 | 1,255,056,700 | |
| Qu Liyang | Director | Incumbent | Male | 56 | March 7th 2018 | 15,750 | 0 | 0 | 15,750 | |
| Hu Yangzhong | Director, General Manager (CEO) | Incumbent | Male | 55 | December 28th 2001 | 182,186,477 | 0 | 0 | 182,186,477 | |
| Wu Weiqi | Director, Standing Deputy General Manager | Incumbent | Male | 56 | March 1st 2003 | 11,371,389 | 0 | 0 | 11,371,389 | |
| Cheng Tianzong | Independent Director | Incumbent | Male | 68 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Lu Jianzhong | Independent Director | Incumbent | Male | 66 | March 6th 2015 | 0 | 0 | 0 | 0 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Wang Zhidong | Independent Director | Incumbent | Male | 53 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Hong Tianfeng | Independent Director | Incumbent | Male | 54 | December 22nd 2016 | 0 | 0 | 0 | 0 | |
| Cheng Huifang | Supervisor Chairman | Incumbent | Female | 67 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Wang Qiuchao | Supervisor | Incumbent | Male | 69 | March 6th 2015 | 20,000 | 15,000 | 0 | 35,000 | |
| Xu Lirong | Supervisor; person in charge of internal audit | Incumbent | Male | 57 | March 21st 2018 | 303,000 | 0 | 0 | 303,000 | |
| Jiang Haiqing | Senior Deputy General Manager | Incumbent | Male | 51 | March 1st 2003 | October 25th 2019 | 11,390,882 | 0 | 0 | 11,390,882 |
| Jia Yonghua | Senior Deputy General Manager | Incumbent | Male | 43 | July 22nd 2015 | October 25th 2019 | 5,701,244 | 0 | 0 | 5,701,244 |
| Li Pan | Senior Deputy General Manager | Incumbent | Male | 42 | July 22nd 2015 | October 25th 2019 | 5,700,068 | 0 | 0 | 5,700,068 |
| He Hongli | Senior Deputy General Manager | Incumbent | Female | 47 | December 18th 2005 | 331,500 | 0 | 0 | 331,500 | |
| Fu Baijun | Senior Deputy General Manager | Incumbent | Male | 48 | January 20th 2009 | 390,000 | 105,000 | 0 | 495,000 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Cai Changyang | Senior Deputy General Manager | Incumbent | Male | 49 | April 8th 2016 | 109,500 | 0 | 0 | 109,500 | |
| Xu Ximing | Senior Deputy General Manager | Incumbent | Male | 47 | October 11th 2016 | 0 | 197,000 | 0 | 197,000 | |
| Bi Huijuan | Senior Deputy General Manager | Incumbent | Female | 49 | October 11th 2016 | 150,000 | 123,000 | 0 | 273,000 | |
| Jiang Yufeng | Senior Deputy General Manager | Incumbent | Male | 49 | December 18th 2005 | 325,500 | 0 | 0 | 325,500 | |
| Pu Shiliang | Senior Deputy General Manager | Incumbent | Male | 43 | March 21st 2018 | 293,900 | 100,000 | 0 | 393,900 | |
| Jin Duo | Senior Deputy General Manager | Incumbent | Male | 55 | March 10th 2015 | 109,500 | 0 | 0 | 109,500 | |
| Jin Yan | Senior Deputy General Manager, Person in charge of finance | Incumbent | Female | 41 | July 22nd 2015 | 174,000 | 110,000 | 0 | 284,000 | |
| Huang Fanghong | Senior Deputy General Manager, Board Secretary | Incumbent | Female | 38 | April 8th 2016 | 292,500 | 110,000 | 0 | 402,500 | |
| Chen Junke | Senior Deputy General Manager | Incumbent | Male | 49 | March 21st 2018 | 0 | 0 | 0 | 0 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Total | -- | -- | 1,473,921,910 | 760,000 | 0 | 1,474,681,910 |
| Name | Position | Type | Date | Reasons |
| Jiang Haiqing | Senior Deputy General Manager | Leave the post | October 25th 2019 | Adjustments on the Company’s business management |
| Jia Yonghua | Senior Deputy General Manager | Leave the post | October 25th 2019 | Adjustments on the Company’s business management |
| Li Pan | Senior Deputy General Manager | Leave the post | October 25th 2019 | Adjustments on the Company’s business management |
1. Directors
Mr Chen Zongnian (陈宗年): Born in 1965, Chen holds a PhD of business administration and has served as deputygeneral manager Shenzhen Gao Ke Run Electronics, director and general manager of Zhejiang Haikang InformationTechnology Co., Ltd. and Zhejiang Haikang Group Co., Ltd. He also served as an assistant of the head, deputy head,and the head of 52
nd Research Institute at China Electronics Technology Group Corporation (52
ndResearch Institute).Chen currently serves as the chairman of China Electronics Technology HIK Group Co., Ltd. (CETHIK), thechairman of Phoenix Optics Co., Ltd. and the chairman of the Company.
Mr. Gong Hongjia (龚虹嘉): Born in 1965, Hong Kong permanent resident. Gong holds a bachelor degree ofengineering, technology entrepreneur, and angel investor. He has established and invested over 10 enterprisesincluding TECSUN Co. Ltd., AsiaInfo Dekang, Funian Technology, and Woqi Data, and etc. He took part in theestablishment of the Company in November 2001 and served as a director and vice chairman of the Company. Gongcurrently serves as a vice chairman of the Company.
Mr. Qu Liyang (屈力扬): Born in 1964, bachelor degree of engineering, researcher-level senior engineer. Heserved as the director, deputy director, party secretary and deputy director of the 52
ndResearch Institute, andchairman of the board of supervisors of CETHIK. He is currently the deputy director of the Reform andDevelopment Committee of CETC’s Strategy Committee, and serves as a director of the Company.
Mr. Hu Yangzhong (胡扬忠): Born in 1965, master degree of engineering, senior research engineer. He served asan engineer of the 52
ndResearch Institute from June 1989 to December 2001. He has been appointed as a directorof the Company and general manager of the company since January 2002. Hu currently serves as a director and thegeneral manager of the Company.
Mr. Wu Weiqi (邬伟琪): Born in 1964, bachelor degree of engineering, senior engineer. Wu held various positionsat the 52
ndResearch Institute, including technician, engineer associate, engineer and senior engineer, from July 1986to December 2001. Since November 2001, He has been appointed as a deputy general manager, a standing deputygeneral manager, and a director of Hikvision. Wu currently serves as a director and standing deputy general managerof the Company.
Mr. Cheng Tianzong (程天纵): Born in 1952, Taiwanese, master degree in business administration. Cheng servedas president and a director of Hewlett-Packard Development Company, L.P. (China) from 1992 to 1997; served asthe president of the Asia Pacific of Texas Instruments Incorporated (德州仪器) from 1997 to 2007; served as a vice-president of Hon Hai Corporation (鸿海集团) from July 2007 to 2012, and the chief executive officer of FIH MobileLimited, a subsidiary of Hon Hai Corporation (鸿海集团), a company listed on the Hong Kong Stock Exchange in2011. He retired in June 2012 and devoted himself to China Maker Campaign (中国创客运动) to help and guidethose start-up companies in September 2013. Cheng currently serves as an independent director of the Company.
Mr. Lu Jianzhong (陆建忠): Born in 1954, holds bachelor degree in economics and CPA certificate. Lu served asa lecturer and an associate professor of finance and accounting department at Shanghai Maritime University (上海海事大学) from September 1986 to September 1997; he was a CPA and a partner of the auditing department of
PricewaterhouseCoopers, from October 1997 to June 2012; he was a chartered accountant of Shanghai De’anCertified Public Accountants LLP (上海德安会计师事务所) from July 2012 to July 2013; he was a charteredaccountant of the Shanghai branch of PKF Daxin Certified Public Accountants LLP (大信会计师事务所上海分所), from August 2013 to July 2014；He was a partner and a chartered accountant and a partner of ZhongxinghuaCertificated Public Accountants LLP (中兴华会计师事务所) from August 2014 to January 2016. Lu currentlyserves as a chartered accountant of Dahua Certificated Public Accountants LLP (大华会计师事务所),MPAcc/Maud Enterprise Mentor of Antai College of Economics & Management,Shanghai Jiao Tong University(上海交通大学安泰管理学院), and an independent director of Hikvision.
Mr. Wang Zhidong (王志东): Born in 1967, Hong Kong permanent resident, bachelor degree of science. He servedas a deputy general manager and chief engineer of Beijing Haidian District Suntendy Electronic TechnologyResearch Institute (北京新天地电子信息技术研究所) from April 1992 to August 1993; He served as a generalmanager of Beijing Richwin Information Technology Co., Ltd. (四通利方信息技术有限公司), and served as chiefexecutive officer and a director of SINA Corporation (新浪网) from December 1993 to June 2001; He served aschairman and chief executive officer of Beijing Dianji Technology, Ltd. (北京点击科技有限公司) from December2001 to July 2013. Mr. Wang currently serves as chairman and chief executive officer of Beijing YilianyishengTechonology Co. Ltd.(北京易连忆生科技有限公司), and an independent director of the Company.
Mr. Hong Tianfeng (洪天峰): Born in 1966, master degree in engineering. Hong was an engineer in NanjingUniversity of Posts and Telecommunication (南京邮电大学) from July 1990 to June 1993; He served as anexecutive deputy general manager, chief executive of Operation and Delivery, chairman of investment decisioncommittee, and vice chairman of Huawei Technologies Co., Ltd. (华为技术有限公司) from July 1993 to September2011；Hong currently serves as a managing partner of Suzhou Fangguang Venture Investment Management(Limited Partnership)(苏州方广创业投资管理合伙企业（有限合伙）), an executive director of ShanghaiFangguang Venture Investment Management Co., Ltd. (上海方广创业投资管理有限公司), and an independentdirector of the Company.
2. Supervisors
Ms. Cheng Huifang (程惠芳): Born in 1953, PhD in international finance. She was a member of the 8
th
and 9th
Zhejiang CPPCC (浙江省政协). Cheng currenly serve as dean of the Global Development Research Institute ofZhejiang Businesses under Zhejiang University of Technology (浙江工业大学全球浙商发展研究院), professor(level II), president of Zhejiang Yangtze River Delta of the Institute of Innovation Management (浙江长三角创新管理研究院), president of the Zhejiang Financial Engineering Society (浙江省金融工程学会), and a supervisorof the Company.
Mr. Wang Qiuchao (王秋潮): Born in 1951, master degree in law. Wang served as director of Zhejiang TianceLaw Firm (浙江天册律师事务所), chairman of the Zhejiang Lawyers Association (浙江省律师协会) and vice-president of the Zhejiang Law Society (浙江省法学会). Wang currently serves as honorary partner of ZhejiangTiance Law Firm, arbitrator of the China International Economic and Trade Arbitration Commission (中国国际经济贸易仲裁委员会, “CIETAC”) , an arbitrator of Shanghai International Arbitration Center (上海国际仲裁中心)and Shenzhen International Economic and Trade Arbitration Commission (深圳国际仲裁中心), and a supervisorof the Company.
Mr. Xu Lirong (徐礼荣): Born in 1963, master degree of engineering, senior engineer. In January 2002, he joinedHikvision and served as manager of development division under the R&D center, secretary of the board of directorsand deputy general manager of the Company. He is currently the employee representative supervisor and the personin charge of internal audit of the Company.
3. Senior management personnel
Mr. Hu Yangzhong (胡扬忠): Please refer to his profile in preceding part of the report.
Mr Wu Weiqi (邬伟琪): Please refer to his profile in preceding part of the report.
Mr. Jiang Haiqing (蒋海清): Born in 1969, bachelor degree in engineering, a senior engineer. He joined theCompany in November 2001 and served as an assistant of the general manager, a deputy general manager, and asenior deputy general manager of the Company. (On October 25
th2019, Jiang resigned from the Company's seniordeputy general manager due to the adjustments of the Company's business management)
Mr. Jia Yonghua (贾永华): born in 1977, bachelor degree in engineering, a senior engineer. He joined Hikvisionin January 2002 and held various positions at the Company, including director of Image Process and AnalysisDivision under the R&D Center, director of Strategy and Marketing Division, a deputy general manager of theSupply Chain Management Center, a deputy general manager of the Company. Mr. Jia currently serves as, and asenior deputy general manager of the Company. (On October 25
th2019, Jia resigned from the Company's seniordeputy general manager due to the adjustments of the Company's business management)
Mr. Li Pan (礼攀): born in 1978, master degree in engineering, and is a senior engineer. He served as an engineerof the 52
ndResearch Institute from August 2000 to December 2001. He joined Hikvision in December 2001 andheld various positions at the Company, including engineer, product manager, R&D manager, the general managerof the Transportation Division, the general manager of Hangzhou Branch, a deputy general manager of the Company,and a deputy general manager of the Company. (On October 25
th2019, Li resigned from the Company's seniordeputy general manager due to the adjustments of the Company's business management)
Ms. He Hongli (何虹丽): Born in 1973, master degree in business administration. She joined Hikvision inDecember 2001 and served as an assistant to the general manager and a deputy general manager. Ms. He currentlyserves as a senior deputy general manager of the Company.
Mr. Fu Baijun (傅柏军): Born in 1972, bachelor degree in economics, Chinese Certificated Public Accountant,professor-level senior accountant. He served as an accountant of the accounting division of the 52
nd
ResearchInstitute and a deputy general manager of Zhejiang Haikang Information Co. Ltd. (浙江海康信息技术股份有限公司) from July 1996 to December 2008. He joined Hikvision in January 2009, and served as a deputy generalmanager and the person in charge of finance and accounting department, and a deputy general maanger. Mr. Fucurrently serves as a senior deputy general manager of the Company.
Mr. Cai Changyang (蔡昶阳): born in 1971, bachelor degree in engineering. He joined Hikvision in 2004, and
held various positions of the Company, including general manager of Beijing branch, director for government andenterprise corporation department, director of investment department, director of strategy and marketing department,and a deputy general manager of the Company. Mr. Cai currently serves as senior deputy general manager of theCompany.
Mr. Xu Ximing (徐习明): born in 1973, bachelor degree in engineering. From July 1996 to September 2016, heheld various positions in IBM, including engineer, department manager, director，partner of consulting service,senior partner of consulting service, and a vice president. He joined Hikvision in September 2016, and served as adeputy general manager of the Company. Mr. Xu currently serves as a senior deputy general manager of theCompany.
Ms. Bi Huijuan (毕会娟): born in 1971, PhD in engineering, senior research engineer. From April 1999 to August2016, she held various positions in the 15
thResearch Institute at China Electronics Technology Group Corporation(CETC), including engineer, senior engineer, senior research engineer, head of R&D department, vice chiefengineer, and deputy director. She joined Hikvision in August 2016, and served as a deputy general manager of theCompany. Ms. Bi currently serves as a senior deputy general manager of the Company.
Mr. Jiang Yufeng (蒋玉峰): born in 1971, bachelor degree of engineering, an engineer. He joined Hikvision inJanuary 2005 and held various positions in the Company, including general manager of Beijing branch, marketingdirector, assistant to general manager, deputy general manager and marketing director, and deputy general manager.Mr Jiang currently serves as a senior deputy general manager of the Company.
Mr. Pu Shiliang (浦世亮): born in 1977, doctor of engineering, a senior engineer. He joined Hikvision in April2006 and held various positions in the Company, including R&D engineer, R&D manager, R&D director, dean ofthe R&D institute, and chief expert. He currently serves as a senior deputy general manager of the Company.
Mr. Jin Duo (金铎): born in 1965, bachelor degree in engineering, a senior engineer. He served as a technician,assistant to engineers, an engineer and a senior engineer of the 52
nd
Research Institute from July 1986 to June 2004.He joined Hikvision in July 2004 and served as general manager of Hangzhou Branch, and a deputy general managerof the Company. Mr. Jin currently serves as a senior deputy general manager of the Company.
Ms. Jin Yan (金艳): born in 1979, master degree in management, an accountant. She joined Hikvision in 2004 andheld various positions at the Company, including financial manager, the general manager of the FinancialManagement Center, and a deputy general manager and the person in charge of finance and accounting. Ms. Jincurrently serves as a senior deputy general manager and the person in charge of finance and accounting of theCompany.
Ms. Huang Fanghong (黄方红): born in 1982, master degree in law. She joined Hikvision in June 2009 and heldvarious positions at the Company including legal department manager, internal audit manager, internal controldirector, and a deputy general manager and the board secretary. Ms. Huang currently serves as a senior deputygeneral manager, and board secretary of the Company.
Mr. Chen Junke (陈军科): Born in 1971, bachelor degree in engineering, senior engineer. Chen held variouspositions in the 52nd Research Institute from 1994 to 2001, including assistant engineer, engineer and senior
engineer. He joined the Company in 2001 and served as the technology director of the Digital Video Recorder (DVR)Division of the Technology Management Center, general manager of supply chain management center, employeerepresentative supervisor. Chen currently serves as senior deputy general manager of the Company.
Position held in shareholders’ entities
√Applicable □ Inapplicable
| Name | Shareholder's entity | Position in shareholders’ entities | Commencement of the term | Termination of the term | Compensation and allowance from the shareholders' entity |
| Chen Zongnian | China Electronics Technology HIK Group Ltd. | Chairman, Secretary of party committee | November 2013 | Y | |
| Hu Yangzhong | China Electronics Technology HIK Group Ltd. | Director | December 2013 | N | |
| Xu Lirong | China Electronics Technology HIK Group Ltd. | Supervisor, Member of Commission for Discipline Inspection | December 2013 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Cheng Zongnian | Zhejiang Intelligent IoT Technology Magazine | Legal Representative | February 2004 | N | |
| Cheng Zongnian | CETC Finance Ltd. | Director | December 2012 | N | |
| Cheng Zongnian | Phoenix Optics Co., Ltd. | Chaiman | Demcember 2019 | N | |
| Cheng Zongnian | Zhejiang Wuzhen Street Technology Ltd. | Chairman | May 2016 | February 2019 | N |
| Gong Hongjia | Furong Technology Ltd. | Director | October 1999 | N | |
| Gong Hongjia | Hangzhou FunVio Ltd. | Chairman | February 2004 | N | |
| Gong Hongjia | Funian Technology Ltd. | Chairman of the Board | October 2007 | N | |
| Gong Hongjia | Beijing Funian Technology Ltd. | Legal Representative | November 2011 | N | |
| Gong Hongjia | Shanghai Fullhan Microelectronics Co., Ltd. | Director | April 2013 | N | |
| Gong Hongjia | Shenzhen Innovation Valley Investment Management Ltd. | Director | July 2014 | N | |
| Gong Hongjia | Shanghai Pukun Information Technology Ltd. | Director | September 2014 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Gong Hongjia | FuCe Holdings Ltd. | Director | October 2014 | N | |
| Gong Hongjia | Chuangjia Venture Capital Investment Ltd | Director | October 2014 | N | |
| Gong Hongjia | Shenzhen Jiadao Valley Investment Management Ltd. | Legal Representative | October 2014 | Y | |
| Gong Hongjia | Shenzhen Jiadao Gongcheng Equity Investment Fund (Limited Partnership) | Executive Partner & delegate | November 2014 | N | |
| Gong Hongjia | JiuBaYi Health Technology Ltd. | Director | November 2014 | N | |
| Gong Hongjia | Beijing JiaBoWen Biotechnology Ltd. | Director | March 2015 | N | |
| Gong Hongjia | Wuhan YouXin Technology Co., Ltd. | Director | January 2016 | N | |
| Gong Hongjia | QingKe Management Consulting Group Ltd. | Director | February 2017 | N | |
| Gong Hongjia | Shenzhen JiadaoFangzhi Education Industry Investment Enterprise (Limited Partnership) | Executive Partner & delegate | June 2017 | N | |
| Gong Hongjia | Shenzhen Jiadao Successful Investment Enterprise (Limited Partnership) | Executive Partner & delegate | August 2017 | N | |
| Gong Hongjia | Shanghai AoYuan Medical Supplies Ltd. | Chairman | September 2017 | N | |
| Gong Hongjia | Sichuan JiaDao BoWen Ecological Technology Ltd. | Chairman | December 2017 | N | |
| Gong Hongjia | Beijing JiaDaoGu Management Consulting Ltd. | Supervisor | April 2018 | N | |
| Gong Hongjia | Core Microelectronics (Shanghai) Co., Ltd. | Director | October 2018 | November 2019 | N |
| Gong Hongjia | Sichuan Five-Plus-One Ecological Agriculture | Chairman | November 2018 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Technology Service Ltd. | |||||
| Gong Hongjia | Sichuan JiaBoWen Biological Technology Ltd. | Chairman | November 2018 | N | |
| Gong Hongjia | Shenzhen Zhongke Science and Technology Achievements Transformation Equity Investment Fund Management Ltd. | Chairman | December 2018 | December 2019 | N |
| Gong Hongjia | Shenzhen Zhongke Science and Technology Achievements Transformation Equity Investment Fund Management Ltd. | Director | December 2019 | N | |
| Gong Hongjia | ZhongYuan Concord Cell Genetic Engineering Co., Ltd. | Legal Representative Chairman | December 2018 | N | |
| Gong Hongjia | Shenzhen Guotai Data Technology Ltd. | Chairman | April 2019 | N | |
| Gong Hongjia | Tianjin Deyuan Investment Development Ltd. | Director | July 2019 | N | |
| Gong Hongjia | Yong Tai Hong Kan Holding Group Ltd. | Vice Chairman | October 2019 | N | |
| Qu Liyang | Zhejiang Haikang Technology Ltd. | Director | April 2009 | December 2019 | N |
| Qu Liyang | Zhejiang YiBo High Technology Ltd. | Director | August 2009 | September 2019 | N |
| Wu Weiqi | Xinjiang Pukang Investment Management Limited Partnership | Executive Partner | May 2011 | N | |
| Wu Weiqi | Wuhu Sensor Tech Intelligent Technology Ltd. | Director | January 2017 | N | |
| Wu Weiqi | Maxio Technology (Hangzhou) Ltd. | Director | May 2017 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Wang Zhidong | Beijing YiLianSheng Science and Technology Ltd. | Chaiman and CEO | October 2013 | Y | |
| Cheng Tianzong | Hechun Technology Co., Ltd. | Director | June 2014 | Y | |
| Cheng Tianzong | Zuozhen Co., Ltd. | Director | January 2015 | Y | |
| Cheng Tianzong | Wenhui Technology Co., Ltd. | Independent Director | June 2016 | Y | |
| Lu Jianzhong | Shanghai Jiao Tong University- Antai College of Management, | Mentor for enterprises | December 2013 | N | |
| Lu Jianzhong | Dahua Certificated Public Accountants LLP | Chartered Accountant | January 2016 | N | |
| Lu Jianzhong | ChangShu FengFan Electric Power Equipment Co., Ltd. | Independent Director | September 2015 | Y | |
| Lu Jianzhong | Ningbo Lehui International Construction Equipment Co., Ltd. | Independent Director | March 2016 | Y | |
| Lu Jianzhong | COSCO Maritime Transport Development Co., Ltd. | Independent Director | January 2018 | Y | |
| Lu Jianzhong | Shanghai Xinnanyang Angli Education Technology Co., Ltd. | Independent Director | January 2019 | Y | |
| Hong Tianfeng | Shanghai Fangguang Investment Management Ltd. | Executive Director | February 2012 | Y | |
| Hong Tianfeng | Shanghai Fangguang Venture Investment Management Partnership Enterprise (Limited Partnership) | Managing Partner | February 2012 | N | |
| Hong Tianfeng | Shanghai Fangguang Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | August 2012 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Hong Tianfeng | Shanghai Fangguang Erqi Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | September 2016 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Management Partnership Enterprise (Limited Partnership) | Managing Partner | September 2012 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | September 2012 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Phase 2 Partnership Enterprise (Limited Partnership) | Managing Partner | July 2016 | N | |
| Hong Tianfeng | Shenzhen Pengfenghui Venture Investment Ltd. | Executive Director & General Manager | June 2014 | N | |
| Hong Tianfeng | Shenzhen Fangguang Enterprise Management Consulting Ltd. | Executive Director & General Manager | May 2016 | N | |
| Hong Tianfeng | Sannuo Biology Sensor Co., Ltd. | Director | September 2013 | Y | |
| Hong Tianfeng | Shenzhen YunZhiXun Network Technology Ltd. | Director | May 2014 | N | |
| Hong Tianfeng | Jiangsu JiTaiKe Electrics Co., Ltd. | Director | July 2015 | N | |
| Hong Tianfeng | Zhongwei Dahe Cloud Connection Network Technology Ltd. | Director | November 2016 | N | |
| Hong Tianfeng | Shenzhen DongFengMingTu Enterprise Management Ltd. | Supervisor | August 2016 | N | |
| Hong Tianfeng | CETC Huayun Information Technology Ltd. | Director | March 2017 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Hong Tianfeng | Beijing ZhiZhangYi Sicence and Technology Ltd. | Director | December 2016 | N | |
| Hong Tianfeng | Guangzhou Smart Software Ltd. | Director | March 2018 | N | |
| Hong Tianfeng | Shanghai Daxian Intelligent Science and Technology Ltd. | Director | June 2018 | N | |
| Hong Tianfeng | Shenzhen Chip and Semi-conductor Technology Ltd. | Director | Feburary 2018 | N | |
| Hong Tianfeng | Shenzhen YingFeiYuan Technology Ltd. | Director | October 2017 | N | |
| Hong Tianfeng | Shenzhen BiYi Micro-electronics Ltd. | Director | September 2019 | N | |
| Cheng Huifang | Zhejiang FuRun Co., Ltd | Independent Director | April 2014 | Y | |
| Cheng Huifang | Hangzhou Oxygenerator Group Co., Ltd. | Independent Director | January 2016 | Y | |
| Cheng Huifang | Zhejiang HuaCe Media Co., Ltd. | Independent Director | February 2016 | Y | |
| Cheng Huifang | Zhejiang Commercial Bank Co., Ltd. | External Supervisor | June 2016 | Y | |
| Cheng Huifang | Quzhou NanGaoFeng Chemical Co., Ltd. | Independent Director | March 2017 | Y | |
| Wang Qiuchao | Zhejiang T&C Law Firm | Partner | August 1993 | Y | |
| Wang Qiuchao | Zhejiang JingSheng Mechanical & Electrical Co.,ltd | Independent Director | April 2015 | December 2019 | Y |
| Wang Qiuchao | Zhejiang KaiShan Compressor Co., Ltd. | Independent Director | May 2015 | Y | |
| Wang Qiuchao | Hanjia Design Group Co., Ltd. | Independent Director | July 2015 | March 2019 | Y |
| Jia Yonghua | Hangzhou Confirmware Technology Co., Ltd. | Director | November 2016 | N | |
| Xu Ximing | Shenzhen Wangyu Security Service Science | Director | November 2019 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| and Technology Ltd. | |||||
| Fu Baijun | Shenzhen Hikvision City Service and Operation Ltd. | Director | Demceber 2019 | N | |
| Description of the status of employment in other units | Jia Yonghua resigned from his position as a senior deputy general manager of the company on October 25th 2019 | ||||
| Name | Title | Gender | Age | Tenure status | Total remuneration from the Company (RMB'0,000) | Remuneration from related parties (Y/N) |
| Chen Zongnian | Chairman | M | 55 | Incumbent | 0 | Y |
| Gong Hongjia | Vice Chairman | M | 55 | Incumbent | 0 | Y |
| Qu Liyang | Director | M | 56 | Incumbent | 0 | Y |
| Hu Yangzhong | Director, General Manager | M | 55 | Incumbent | 308.90 | N |
| Wu Weiqi | Director, Standing Deputy General Manager | M | 56 | Incumbent | 293.88 | N |
| Cheng Tianzong | Independent Director | M | 68 | Incumbent | 30.00 | N |
| Lu Jianzhong | Independent Director | M | 66 | Incumbent | 30.00 | N |
| Wang Zhidong | Independent Director | M | 53 | Incumbent | 30.00 | N |
| Name | Title | Gender | Age | Tenure status | Total remuneration from the Company (RMB'0,000) | Remuneration from related parties (Y/N) |
| Hong Tianfeng | Independent Director | M | 54 | Incumbent | 30.00 | N |
| Cheng Huifang | Supervisor Chairman | F | 67 | Incumbent | 20.00 | N |
| Wang Qiuchao | External Supervisor | M | 69 | Incumbent | 20.00 | N |
| Xu Lirong | Employee Supervisor, Person in charge of internal audit | M | 57 | Incumbent | 158.88 | N |
| He Hongli | Senior Deputy General Manager | F | 47 | Incumbent | 278.90 | N |
| Fu Baijun | Senior Deputy General Manager | F | 48 | Incumbent | 240.90 | N |
| Cai Changyang | Senior Deputy General Manager | M | 49 | Incumbent | 242.29 | N |
| Xu Ximing | Senior Deputy General Manager | M | 47 | Incumbent | 418.67 | N |
| Bi Huijuan | Senior Deputy General Manager | F | 49 | Incumbent | 401.29 | N |
| Jiang Yufeng | Senior Deputy General Manager | M | 49 | Incumbent | 240.88 | N |
| Pu Shiliang | Senior Deputy General Manager | M | 43 | Incumbent | 278.90 | N |
| Jin duo | Senior Deputy General Manager | M | 55 | Incumbent | 248.90 | N |
| Chen Junke | Senior Deputy General Manager | M | 49 | Incumbent | 238.88 | N |
| Jin Yan | Senior Deputy General Manager, person in charge of finance and accounting | F | 41 | Incumbent | 248.90 | N |
| Huang Fanghong | Senior Deputy General Manager Board Secretary Internal audit director | F | 38 | Incumbent | 248.90 | N |
| Jiang Haiqing | Senior Deputy General Manager | M | 51 | Left the post | 207.41 | N |
| Jia Yonghua | Senior Deputy General Manager | M | 43 | Left the post | 199.07 | N |
| Li Pan | Senior Deputy General Manager | M | 42 | Left the post | 192.40 | N |
| Name | Title | Gender | Age | Tenure status | Total remuneration from the Company (RMB'0,000) | Remuneration from related parties (Y/N) |
| Total | -- | -- | -- | -- | 4,607.95 | -- |
| Name | Title | Restricted Shares held at the beginning of the period | Shares vested in the current period | Shares newly granted in the current period | Price for restricted shares granted (RMB per share) | Restricted Shares held at period-end |
| Hu Yangzhong | Director, General Manager | 248,250 | 151,950 | 96,300 | ||
| Wu Weiqi | Director, Standing Deputy General Manager | 226,800 | 137,700 | 89,100 | ||
| Jiang Haiqing | Senior Deputy General Manager (resigned) | 190,500 | 116,700 | 73,800 | ||
| He Hongli | Senior Deputy General Manager | 196,050 | 113,250 | 82,800 | ||
| Fu Baijun | Senior Deputy General Manager | 254,550 | 136,650 | 105,000 | 16.98 | 222,900 |
| Xu Lirong | Supervisor, person in charge of internal audit | 167,550 | 101,850 | 65,700 | ||
| Jiang Yufen | Senior Deputy General Manager | 183,750 | 109,950 | 73,800 | ||
| Jin Duo | Senior Deputy General Manager | 109,500 | 43,800 | 65,700 | ||
| Jin Yan | Senior Deputy General Manager, person in charge of finance | 174,000 | 69,600 | 110,000 | 16.98 | 214,400 |
| Jia Yonghua | Senior Deputy General Manager (resigned) | 109,500 | 43,800 | 65,700 | ||
| Li Pan | Senior Deputy General Manager (resigned) | 109,500 | 43,800 | 65,700 | ||
| Cai Changyang | Senior Deputy General Manager | 109,500 | 43,800 | 65,700 | ||
| Bi Huijuan | Senior Deputy General Manager | 150,000 | 60,000 | 123,000 | 16.98 | 213,000 |
| Name | Title | Restricted Shares held at the beginning of the period | Shares vested in the current period | Shares newly granted in the current period | Price for restricted shares granted (RMB per share) | Restricted Shares held at period-end |
| Pu Shiliang | Senior Deputy General Manager | 243,900 | 154,260 | 100,000 | 16.98 | 189,640 |
| Huang Fanghong | Senior Deputy General Manager, Secretary of the board | 74,250 | 74,250 | 110,000 | 16.98 | 110,000 |
| Xu Ximing | Senior Deputy General Manager | 0 | 0 | 197,000 | 16.98 | 197,000 |
| Chen Junke | Senior Deputy General Manager | 0 | 0 | 0 | ||
| Zheng Yibo | Deputy General Manager (resigned) | 60,750 | 60,750 | 0 | ||
| Cai Dingguo | Senior Deputy General Manager (resigned) | 170,250 | 104,550 | 65,700 | ||
| Zhou Zhiping | Deputy General Manager (resigned) | 167,550 | 101,850 | 65,700 | ||
| Total | -- | 2,946,150 | 1,668,510 | 745,000 | 2,022,640 |
| Number of incumbent employees in the parent Company | 18,641 | |
| Number of incumbent employees in major subsidiaries | 21,762 | |
| Number of incumbent employees | 40,403 | |
| Number of employees receiving salaries in current period | 40,403 | |
| Number of retired employees requiring the parent Company and its subsidiaries to bear costs | 0 | |
| Professional structure | ||
| Tier | Number of employees | |
| Managerial personnel | 580 |
| Production staff | 11,176 |
| Sales staff | 8,129 |
| Engineers | 19,065 |
| Financial staff | 310 |
| Administrative Staff | 1,143 |
| Total | 40,403 |
| Educational background | |
| Education background | Number of employees |
| Master and/or doctor/or above | 6,957 |
| Bachelor | 21,331 |
| Junior College (professional training) | 2,379 |
| Other | 9,736 |
| Total | 40,403 |
development and capabilities, clarified the capability requirements and enabling courses for the internal trainers interms of "demand analysis, course design, course development, lecturing and course evaluation", and completed theSOP process for internal trainers certification. The company provides standardized certification procedure coveringapplication, qualification review, selection, certification and employment and will further improve certificationefficiency by implementing online management.
The Human Resources Department interacts with the front-line business personnel and assists the businessexperts in gleaning in-organization experiences to design and implement large-scale training-practice programs. Weare striving to better facilitate ability enhancement of the employees in critical positions during businesstransformation and thoroughly implement the concept of "learning in practice".In 2020, the Company will continue working on the goal of business development and talent development andcontinue optimizing the systems and resources, to facilitate strategic transformation and prepare the talent pool andenhance their abilities for the critical activities during business development.
4. Labor outsourcing
□ Applicable √ Inapplicable
Section X Corporate GovernanceI. Basic situation of corporate governanceDuring the reporting period, the Company strictly abided by the Company Law, Securities Law, Code ofCorporate Governance for Listed Companies in China, Stock Listing Rules of the Shenzhen Stock Exchange,Guidelines of the Shenzhen Stock Exchange for the Standard Operation of Listed Companies and other applicablelaws and regulations and also the regulator authority's regulations and norms, and all employees fulfilled theirresponsibilities in standard operation based on the actual conditions of the Company and through the corporategovernance structure comprised of general meeting of stockholders , board of directors, board of supervisors andsenior executives. We optimized the internal control system and comprehensively improving managementefficiency. We improved investor relationship management and fulfilled information disclosure obligations.Through systemized and normalized efforts, we further standardized the Company's operations and continued toimprove corporate governance, to ensure healthy and sustainable development.During the reporting period, the corporate governance was improved in the following aspects:
1. Continued improvement of internal management: Based on the current business development, the Companyhas optimized the internal management systems by modifying the Performance Management System andimplementing Excellent Performance Management Standard, to support refinement and implementation of theCompany's strategic goals and enhance individual and organizational performance. The Company has modified theCode of Business Conduct of Employees and publicized the Global Anti-bribery and Anti-corruption Manual andCode of Anti-monopoly Compliance, to intensify standardizing employees' business conduct and create an impartialand orderly internal/external operation environment. We have modified the Job Qualification System and InternalRecommendation Management Standard, to improve the position system and further help building the talantworkforce. We have modified the Fund Payment and Settlement System and Foreign Exchange Hedging System, toimprove fund efficiency and effectively control costs and risks. We have publicized the External InvestmentsManagement Measures and Post-investment Management Measures, to normalize investment management andcontrol investment risks. In order to better support sustainability of the corporate business globally, we have furtherintegrated our resources and established the Legal and Compliance Department, to continuously optimize thecompliance system.
2. Further implementation of process management and informatized management. During the reporting period,the Company publicized the criteria for assessing sophistication degree of processes and streamlined the processstructure and organizational configuration, to create high-efficiency process platforms and enable structuredmanagement of business processes. We established a safe and highly efficient computer information managementsystem and an information-based customer-centered end-to-end business process governance system, to enhanceoperation and management competency, boost business innovation and support operational excellence.
3. Improvement of the social responsibility management system. We established and improved the socialresponsibility management system in accordance with SA8000 international standard, publicized the SocialResponsibility Management Manual and enacted the social responsibility policy for the purpose of "building an eco-friendly, safe, harmonious and responsible corporate image". We conducted a multitude of social responsibilitymanagement activities to fulfill our social responsibilities as a company and to make all possible contributions tothe sustainability of social economy and environment.
4. Maintain good investor relations management. After each periodic financial report disclosure, the Companytook the initiative to hold a public performance briefing (including conference call, Web-meeting), hosted periodicinvestor receptions; actively listened to investors' opinions and suggestions to form good interactions between theCompany and investors, forming a positive interaction and communication. After the above events, the Companyalso timely released Investor Relations Activity Record Form to ensure that all investors have fair access to theCompany’s information. In routine duties, the company also communicates with investors through various channelssuch as telephone, email and interactive platform in order to maintain long-term trust relationship between investorsand Company.
The Company's information disclosure was approved by the regulatory authorities: the Company has beenawarded the A-level evaluation of the information disclosure of small-and-medium sized listed companies by theShenzhen Stock Exchange for 9 consecutive years. The Company has also gained recognition in the capital market:
the company is included among the "Best 10 of the Top 50 High-value Small and Medium-sized Listed Companies"rated by the 13th Appraisal of the Value of Listed Companies of China of Securities Times and also among the "Top10 Best Management Teams of Small and Medium-sized Listed Companies of China"; the Company was rated byCNR as the "Listed Company Most Trusted by Investors in 2019" and was rated as "One-star Enterprise of FairWealth 2019" of College of Management of Fudan University.
Any significant incompliance for the relevant regulatory documents issued by China Securities RegulatoryCommission in respect of corporate governance:
□ Yes √ No
II. Company’s Independence in Businesses, Management, Assets, Institutions and Finance fromControlling ShareholdersThe Company is completely independent in business, management, assets, organization, and finance from itsshareholders. The Company has established a sound internal control system, being capable of operatingindependently with its complete and independent business.
(1) Business independence: The Company has its own production, purchases and sales systems, which
are completely independent from controlling shareholders. Therefore, there is no competition amongthe Company, controlling shareholders, and related parties.
(2) Personnel independence: The Company has independent personnel. The management has set up
various independent departments, including R&D, production, administration, finance and operationmanagement divisions, etc., and established complete management methods for labor, personnel, andsalary management. Personnel of the Company are independent from controlling shareholders, e.g.the Chairman is elected through the general meetings of the Board. In addition, the General Manager,Senior Deputy General Managers, the Secretary of the Board, CFO, and other senior managementpersonnel of the Company are only employed and remunerated by the Company, and do not hold anyposition in controlling shareholders and is not remunerated by controlling shareholders. Directors,Supervisors and Senior Management Personnel are appointed through legal procedures strictly inaccordance with relevant regulations stipulated in Company Law and Articles of Association. There isno controlling shareholder intervention in the Company’s personnel decisions in general meetings ofthe Board or shareholders.
(3) Asset Completeness: The property rights of assets are explicitly between the Company and the
controlling shareholders, and no assets, funds, or other resources owned by the Company are illegallyand irregularly occupied or controlled by the controlling shareholders. Assets of the Company areintegrated, including complete property rights of fixed assets for production, supporting assets forproduction, and intangible assets of patents, etc. The Company has the full control and ownership ofall assets.
(4) Independence in organizations: The Company’s Board, Supervisor Committee, Management and
other internal organizations operates independently, and each functional department is independentfrom controlling shareholders in duty and personnel. There is no superior-subordinate relation
between functional departments of controlling shareholders and those of the Company, which wouldhave an impact on the Company’s independent operations.
(5) Financial Independence: The Company has established an independent financial department, as well
as a sound and independent financial and accounting system. The Company makes financial decisionsindependently. There is no controlling shareholder intervention in the Company’s financial andaccounting activities. The Company has maintained accounts with banks independently of and do notshare any bank account with our Controlling Shareholders. The Company has undertaken independenttax registration in accordance with applicable laws, and paid tax independently.III. Horizontal competition
□ Applicable √ Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings convened during the ReportingPeriod
1. Annual General Meeting convened during the reporting period
| Meeting | Nature | Proportion of participating investors | Convened Date | Disclosure Date | Disclosure Index |
| 2018 Annual General Meeting | Annual General Meeting | 74.61% | May 10th 2019 | May 11th 2019 | Public Announcement: No. 2019-032 |
| Attendance of independent directors in board meetings and general meetings | |||||||
| Name of Independent Director | Board meeting presence required in the reporting period (times) | Board meeting presence on site (times) | Board meeting presence by telecom- communication (times) | Board meeting presence through a proxy (times) | Board meeting absence (times) | Board meeting not attend in person for two consecutive times | Presence of independent directors in general meetings |
| (times) | |||||||
| Cheng Tianzong | 5 | 0 | 4 | 1 | 0 | N | 0 |
| Lu Jianzhong | 5 | 1 | 4 | 0 | 0 | N | 0 |
| Wang Zhidong | 5 | 1 | 4 | 0 | 0 | N | 1 |
| Hong Tianfeng | 5 | 0 | 4 | 1 | 0 | N | 0 |
with strategic insights.
2. Audit Committee
The Audit Committee mainly maintains communication between internal auditors and external auditors andalso inspects and supervises audits. During the reporting period, the Audit Committee listened to the reports of theinternal audit department, deliberated on the annual audit summary reports of the external auditors, and offeredsuggestions and insights on recruitment of external auditors. They carefully investigated implementation of theCompany's accounting system and standards and reviewed the Company's financial report. They conducted routineon-spot inspection on the audits of the Company's overseas subsidiaries and its domestic branches and subsidiaries,thoroughly learned their operation, management and internal control and offered professional insights for guidance.They examined and supervised the rationality, reasonability and efficiency of the Company's internal control system.Besides, the Audit Committee convened special work conferences to learn and track implementation of the majormatters of the Finance Center and Internal Control Department and clarified the requirements for internal control ofthe Company.
3. Nomination Committee
The primary responsibility of the Nomination Committee is to examine and audit the criteria and procedure forselecting directors, senior managerial staff and other personnel and offer suggestions. During the reporting period,the Nomination Committee carefully investigated the criteria and procedure for selecting the Company's directorsand senior managerial staff, communicated with the relevant departments, cautiously audited the resume andqualification of directors and senior managerial staffs, thus practically fulfilling the Nomination Committee'sresponsibility.
4. Remuneration and Appraisal Committee
During the reporting period, the Remuneration and Appraisal Committee prudently examined the remunerationfor the senior managerial staffs and the overall remuneration policy and scheme of the Company and offeredprofessional suggestions on the appraisal criteria for the aforesaid personnels. They deliberated on the 2019Remuneration and Performance Appraisal Plan of the Company and also tracked and supervised implementation ofthis plan. They deliberated on the matters concerning the second unlocking of the 2016 restricted incentive shares
and offered guidance.VII. Performance of duties by the Supervisory CommitteeWere there any risks to the Company identified by Supervisory Committee when performing its duties during theReporting Period?
□ Yes √ No
The Supervisory Committee of the Company will strictly abide by provisions of the Company Law, StandardOperation Guidelines on Enterprises Listed on SMEs Board at Shenzhen Stock Exchange, Articles of Association,Rules of Procedures of Supervisory Committee, and relevant laws, regulations and rules, diligently perform its duties,supervise the legalization and standardization of the corporate finance and directors and senior managementpersonnel when executing their positions, and practically safeguard the legitimate rights and interests of theCompany, staff and shareholders.
In 2019, the Company's Board of Supervisors convoked a total of 4 meetings, and reviewed a total of 18proposals which mainly involved in aspects of the Company’s daily operation, financial information and itsdisclosure, and vesting of restricted incentive share plan, and etc., for details or Supervisory Committee resolutions,please refer to www.cninfo.com.cn. Meanwhile, the Company’s Supervisory Committee also organized on-sitespecial working meetings, listened to the senior management’s report on the operation and development of eachmodule of the Company, deeply understood the measures of Company's operational and financial situation, theestablishment and implementation of internal control system, and protection of employees’ rights and interests, etc.Supervisory Committee’s opinions on relevant matters in 2019:
1. Normative Operation Conditions of the Company
During the reporting period, the Supervisory Committee members have supervised the Company's dailyoperation situation by various means of attending the board meeting and the shareholders' meeting, and listening toand review special report. The Board of Supervisors believes that the Company has established a fairly sophisticatedinternal control system, all significant decisions are scientific and reasonable, and decision-making processes arelegal. Directors and senior management personnel of the Company are diligent and responsible when executingduties; and behaviors of violating laws and regulations, damaging interests of the Company and legitimate rightsand interests of shareholders were not found.
2. Checking the financial situation of the Company
During the reporting period, the Supervisory Committee carefully listened to reports of annual financial worksby person in charge of finance and accounting, understood audit work arrangement of external auditors, and theSupervisory Committee believes that preparation and deliberation procedure of the Company's periodic reportconforms to provisions of laws, administrative regulations and CSRC (China Securities Regulatory Commission)regulations, the report contents truly, correctly and completely reflects actual conditions of the Company, and isfree of any false record, misleading statement or significant omission. There is no behavior violating confidentialityprovisions founded for personnel who participated in preparation and deliberation procedure of periodic reports.
3. Self-evaluation report about internal control of year 2018
During the reporting period, the Supervisory Committee has listened to reports regarding construction andimplementation situations for the internal control system of the Company and its branches and subsidiaries byInternal Audit Department, R&D Management Department and other relevant departments. After a careful studyand discussion, the Supervisory Committee believes that the Company has established a fairly sophisticated internalcontrol system which conforms to relevant national laws and regulations and fulfills the actual demand of theCompany's production and operation management, obtained effective implementation, and has played a role in riskprevention and control effect on each section of the Company's production and operation management. The Boardof Directors’ 2019 self-evaluation report about internal control can truthfully and objectively reflect the internalcontrol system construction and operation conditions of the Company.
4. External Guarantee Situation of the Company
During the reporting period, the Supervisory Committee has carefully listened to the reports by the person incharge of finance and accounting, understood about demand of guarantees items and relevant implementationsituations of the Company and its subsidiaries, and researched and reviewed relevant proposals regarding guaranteesprovided for subsidiaries by the Company. The Supervisory Committee believes that: The Company providesguarantees for subsidiaries, which fully meets fund demand for its production and management, and is beneficial tofurther improve its production and operation abilities. The financial risk of the guarantee provided by the Companyis in the controllable scope of the Company, and has no significant impact on normal operation of the Company.For guarantees provided to subsidiaries not wholly-owned by the Company, the minority shareholders will notprovide proportional guarantees, however, those subsidiaries all have good business prospects and the Companyhas control power on the subsidiaries’ operation and finance, So there's basically no risk in providing a guarantee.There is no contravention between relevant provisions of CSRC and Articles of Association. The guarantee conforms
to interests of the Company and general shareholders, and won't have any adverse effect on the Company.
5. Related-party transactions of the Company
During the reporting period, the Supervisory Committee has supervised decision-making process and follow-up performance of daily related-party transactions of the Company by means of attending board meetings andinterviewing the senior management personnel. The Supervisory Committee believes that related-party transactionshappened to the Company are subject to the principles of voluntariness, fairness and reasonableness, and consensusof the transaction parties, and conform to relevant laws and regulations and provisions of Articles of Association.The Board of Directors reviewed related-party transactions according to legal procedures, related directors avoidvotes; and the decision-making processes of related-party transactions are legal and compliant. There is no situationdamaging interests of the Company and medium and small shareholders.
6. Implementation of resolutions of shareholders' meeting
During the reporting period, the Supervisory Committee has carefully reviewed each proposal of theshareholders' meeting submitted by the Board of Directors, and further inspected practical implementation of eachproposal. The Supervisory Committee believes that the Company's Board of Directors can diligently performrelevant resolutions of the Shareholders' Meeting.
7. Restricted share plan of the Company
Status of the Company's restricted incentive stock plan: During the reporting period, the Board of Supervisorsexamined and audited the proposal on second unlocking of the 2016 Restricted Incentive Stock Plan. The Board ofSupervisors believed that, according to the relevant provisions of 2016 Restricted Incentive Stock Plan, theunlocking conditions were fulfilled for the second unlocking period of the plan and agreed to proceed with thematters of the second unlocking period of 2016 Restricted Incentvie Stock Plan according to the relevant provisionsof this plan. The Board of Supervisors examined the reason for repurchasing and deregistering restricted stock andthe quantity and price thereof. They believed that, according to the relevant provisions of 2016 Restricted IncentiveStock Plan and due to dimission of some of the incentive objects and the subpar results of 2018 individualperformance appraisal, the Company's decision to partially or fully repurchase and deregister the 1,593,506 sharesof the restricted stock that were not unlocked conformed to 2016 Restricted Stock Plan and the applicable laws andregulations, and repurchasing and deregistering the restricted stock was legal and valid. Besides, the Board ofSupervisors conducted special review of the List of Incentive Grantees that could be Unlocked for the SecondUnlocking Period of 2016 Restricted Incentive Stock Plan. They believed that unlocking qualification of 2726
incentive grantees of the Company was legal and valid and fulfilled the conditions for the second unlocking periodof 2016 Restricted Incentive Stock Plan and authorized the Company to complete the unlocking procedures for theincentive grantees.During the Reporting Period, the Company strictly followed relevant rules and regulations, strengthenedregistration management of information insiders and inside information confidentiality management in preparationof periodic reports, resolution and disclosure, and planning, implementation and announcement of significant affairs,and other matters related to the Company’s inside information. The Company truthfully filled in and submitted theRegistration Form for Information Insiders, and reported to Shenzhen Stock Exchange Place in a timely manner.
VIII. Assessment and incentive mechanism for the senior managementThe Company has established a fairly sophisticated mechanism on employees’ evaluation and incentiverestraint, and has established a fair and transparent appraisal and incentive mechanism on senior managementpersonnel and other various level management personnel and employees. The Company’s board of directors hascarried out annual appraisals of senior management members mainly based on annual target achievement index.The Board is responsible for appraisals of the general manager on the general manager’s duty, capacity andperformance of operation; and the general manager carried out appraisals of other senior management members ontheir operational management and implementation of relevant assignments. In 2019, senior management personnelcarried out their duties diligently with good performance, and fairly completed their objectives and missions set outat the beginning of the year.
IX. Evaluation report on internal control
1. Any significant internal control deficiencies during the reporting period
□ Yes √ No
2. Self-evaluation report on internal control
| Disclosure date of full text of self-evaluation report on internal control | April 25th 2020 | ||
| Disclosure index of full text of self-evaluation report on internal control | www.cninfo.com.cn | ||
| Proportion of assets evaluated in total assets | 100.00% | ||
| Proportion of revenue evaluated in total revenue per consolidated financial statement | 100.00% | ||
| Recognition standard of deficiencies | |||
| Nature | Financial report level | Non-financial report level | |
| Qualitative criteria | Significant deficiency: A deficiency or a combination of deficiencies in internal control may prevent significant errors in financial reports from being identified or prevented, e.g.: A. Invalid internal control environment; B. Fraud of directors, supervisors and senior management personnel on the financial report ; C. Significant errors identified by external auditors but not identified during the Company is operating; D. Invalid supervision of audit committee and internal audit system; E. Other deficiencies that may lead to the wrong judgement of financial statement reporter. Important deficiency: A deficiency or a combination of deficiencies in internal control may prevent errors in financial report from being identified or prevented, although such deficiency is not significant, but require attention of the Board and Management, e.g.: A. Application of accounting policies does not follow the enterprise accounting standard; B. No internal control systems for fraud; C. No control systems or system not effective for unusual or special transactions or no compensatory relevant control; D. One or more deficiencies which prevent the preparation of true and fair financial statements. Normal deficiency: Not significant and not important deficiency. | Internal control deficiencies at non-financial report level are mainly identified by the likelihood of occurrence and the extent of impacts on operating effective in business. Significant deficiency: the high likelihood leading to significant reduction of working efficiency, or significant increase of uncertainty, or significant deviation from the expected target; Important deficiency: a higher likelihood leading to remarkable reduction of working efficiency, or remarkable increase of uncertainty, or remarkable deviation from the expected target; Normal deficiency: a low likelihood leading to reduction of working efficiency, or increase of uncertainty, or deviation from the expected target; | |
| Quantitative criteria | Significant deficiency | potential errors 5% or more of total profits | direct losses of assets is 5% or more of total profits |
| Important deficiency: | potential errors 2% or more but below 5% of total profits | direct losses of assets is over 2% but below 5% of total profits | |
| Normal deficiency: | potential errors is 2% or less of total profits | direct losses of assets is below 2% of total profits | |
| Number of significant deficiencies in financial report level | 0 | ||
| Number of significant deficiencies in non-financial report level | 0 | ||
| Number of important deficiencies in financial report level | 0 | ||
| Number of important deficiencies in non-financial report level | 0 | ||
| Comments of Internal Control Audit Report | |
| We believe that, as of December 31th 2019, Hangzhou Hikvision Digital Technology Co., Ltd. had maintained effective internal control over financial reporting in all major matters in accordance with Basic Norms of Enterprise Internal Control and other relevant regulations. | |
| Disclosure of internal control audit report | Disclosure |
| Date of full disclosure of internal control audit report | April 25th 2020 |
| Index of full disclosure of internal control audit report | CNINF: 2019 Internal Audit Report |
| Types of opinions of internal control audit report | Unmodified unqualified opinions |
| Major defects in non-financial report or not | No |
Section XI Corporate BondsWhether the Company has publicly issued corporate bonds on stock exchange place, which has not terminated orterminated but fail to collect the full payment before the half year report authorized disclosure date.
□Yes √No
Section XII Financial Report
I. Audit report
| Audit Opinion | Unmodified unqualified audit opinion |
| Audit Report sign-off Date | April 23rd 2019 |
| Audit Institution Name | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Audit Report Number | Deloitte Auditors’ Report (Audit) No. 20- P02717 |
| Certified Public Accounts Name | Tang Lianjiong, Zhang Shushu |
(I) Recognition of Sales Revenues
Description:
As shown in Note (V) (42) and Note (XIV) (1), the operating revenue in 2019 in the consolidated financialstatements of the Group for the year ended December 31
st2019 is RMB 57,658,110,065.22. The productsales revenue, a key performance indicator, reaches RMB 56,566,688,245.36, accounting for 98.11% ofthe operating revenue, which is a significant amount and has a significant influence on results of operations.The product sales revenue models include product domestic sales and product export sales by domesticcompanies, and sales abroad by overseas subsidiaries; The domestic sales of products by domesticcompanies and the overseas sales of overseas subsidiaries are based on the time when the products aresigned by customers as the time for the transfer of risks and rewards in the ownership of the goods, whilethe export of products of domestic companies is based on the port of shipment specified in the contractand the loading of the goods on the vessel designated by the customer within the specified time limit. Thetiming of the transfer of risk and reward is different under each income model, and there may be risksassociated with revenue recognition. Therefore, we regard the occurrence of sales revenue as a key auditmatter.
Audit Measures:
Main audit procedures that we perform for the aforesaid key audit matters include:
(1) Understanding and evaluating design and implementation of key internal control in relation to revenue
recognition, and testing the effectiveness of its operation;
(2) For revenues under different sales models, selecting a sample to check a sales contract, reviewing its
main transaction terms, evaluating whether revenue recognition complies with requirements ofaccounting policies of the Group and the Accounting Standards for Business Enterprises; conducting abackground investigation of important customers to check whether there is any indication of existenceof abnormal customers.
(3) Analyzing revenues and gross profits, based on product types, to understand whether there are
abnormal fluctuations in the revenues and gross profits for the year, and conducting a test of details foridentified specific transactions, through systematic analysis of revenue data, and reviewing relevantsupporting documents;
(4) Selecting sample(s) from product sales revenues recorded for the year, checking invoices, salescontracts or orders, shipping orders, signature forms, and other supporting documents; for the sample(s)of income under the export model of the selected domestic companies, additional inspections will bemade to the customs declaration record and shipment record.
(II) Provision for Decline in Value of Inventories
Description:
As shown in Note (V) (8), as of December 31
st2019, the carrying amount of inventories, excludingcompleted and unsettled assets formed by construction contracts, in the consolidated financial statementsof the Group is RMB 11,197,875,576.92, and the provision for diminution in value of inventories is RMB441,847,984.51. The carrying value of the Group’s inventories is relatively high, so the provision fordiminution in value of inventories has a relatively significant influence on the financial statements. As
shown in Note (III) 12.3 and Note (III) 27 to the financial statements, inventories are measured at the lowerof cost and net realizable value, on the balance sheet date. The provision for impairment of inventories ismade when the net realizable value is lower than the cost. Net realizable value is the estimated selling pricefor inventories less estimated costs of completion to be incurred, estimated costs to make the sale andrelevant taxes. As the management needs to use critical accounting estimates in determining the netrealizable value of inventories and the amount is significant, we treat the provision for diminution in valueof inventories as a key audit matter.
Audit Measures
Main audit procedures that we perform for the aforesaid key audit matters include:
(1) Understanding and evaluating design and implementation of key internal control in relation toprovision for diminution in value of inventories by the Group’s management, and testing theeffectiveness of its operation;
(2) Understanding the Group’s accounting policies for the provision for diminution in value of inventories,
and evaluate the rationality of the methods and assumptions used by the management of the Group toestimate the provision for diminution in value of inventories;
(3) Performing the supervision and selective examination procedure for inventory-taking of the Group,with focus on defective, obsoleted or slow-moving inventories, and checking whether there areinventories with an indication of impairment which are not provided for diminution in value ofinventories.
(4) Selecting sample(s) from inventories to test the net realizable value. For the finished product selectedas a sample, comparing the book cost of the finished product and the sum of sales expenses and relatedtaxes and fees that will occur, with recent or subsequent actual selling price, and evaluating thereasonableness of the estimated sales expenses and related taxes; for the selected raw material samples,the book cost of the raw material is compared with the actual purchase price of the latest or later period;for the selected unfinished product samples, comparing the book cost of the unfinished product withthe actual selling price of the most recent period or the later period for the finished goods aftersubtracting the estimated cost of the same kind of products from the current period to completion,estimated sales expenses and related taxes, and evaluating the reasonableness of the estimated costs,sales expenses and related taxes and fees that will occur until completion.
IV. Other Information
Management of Hikvision shall be responsible for other information. Other information includes theinformation covered in the annual report, excluding the financial statements and our audit report.
Our audit opinion on the financial statements does not cover other information and we do not express anyform of authentication conclusion on other information.
In connection with our audit of the financial statements, our responsibility is to read other information andto consider whether other information is significantly misstated or materially inconsistent with the financialstatements or the information we learned during the audit.
Based on the works we have performed, if we determine that there is a material misstatement in otherinformation, we should report the fact. In this respect, we have nothing to report.
V. Responsibility of the Management and Governance for the Financial Statements
The management of Hikvision is responsible for the preparation of financial statements in accordance withAccounting Standards for Business Enterprises to achieve fair presentation, and design, implementationand maintenance of necessary internal control to enable the financial statements are free from materialmisstatement, whether due to fraud or error.
When preparing the financial statements, the management is responsible for assessing the going-concernability of Hikvision, disclosing issues related to going-concern as applicable, and applying going-concernassumptions, unless the management plans to liquidate Hikvision, terminate operation or has no otherrealistic choice.
The governance is responsible for supervising financial reporting processes of Hikvision.
VI. Responsibility of Certified Public Accountants on Audit of the Financial Statements
Our objective is to obtain reasonable assurance as to whether the overall financial statements are free frommaterial misstatement, whether due to fraud or error, and to issue audit report that contain audit opinions.Reasonable assurance is a high level of assurance, but could not guarantee that an audit performed inaccordance with the Auditing Standards can always figure out any existing material misstatements.Misstatements may be caused by fraud or error. Misstatement is generally considered to be material if it isreasonably expected that the misstatement, alone or aggregated, may affect the users’ financial decisionsbased on the financial statements.
In performing the audit in accordance with the Auditing Standards, we applied professional judgment andmaintained professional skepticism. Meanwhile, we also perform the following duties:
(1) Identify and evaluate the risk of material misstatement of financial statements due to fraud or error;design and implement audit procedures to cope with these risks, and obtain adequate andappropriate audit evidence as the basis for expressing audit opinions. As fraud may involvecollusion, forgery, willful omission, misrepresentation or override of internal control, the risk ofnot discovering a material misstatement due to fraud is higher than the risk of not discovering amaterial misstatement due to error.
(2) Understand the internal control related to auditing as a way to design appropriate audit procedures.
(3) Evaluate the properness of accounting policy selected by the management and the rationality of
accounting estimate and related disclosure.
(4) Reach a conclusion on whether the going concern assumption adopted by the management is
appropriate. Meanwhile, based on the audit evidence obtained, reach a conclusion on whetherthere are material uncertainties in the events or conditions that may cast significant doubts onHikvision's ability to continue as a going concern. If we reach a conclusion that there is a materialuncertainty, the Auditing Standards require us to call the attention of the users of the report to therelevant disclosures in the financial statements in the audit report. If the disclosure is insufficient,we should issue modified audit opinions. Our conclusion is based on the information available upto the date of the audit report. However, future events or conditions may result in the failure ofHikvision to continue as a going concern.
(5) Evaluate the overall presentation (including the disclosure), structure and content of the financial
statements and evaluate whether the financial statements fairly reflect the related transactions andevents.
(6) Obtain adequate and appropriate audit evidence on the financial information of entity or businessactivities of Hikvision so as to express audit opinions on the financial statements. We areresponsible for directing, supervising and executing the audit on the Group, and assume fullresponsibility for the audit opinions.
We communicated with the governance about the scope of the audit, the schedule and major audit findings,including the notable shortcomings of internal control identified during the auditing.
We also provide statement to the governance on the independence-related work ethics we follow, andcommunicate with the governance on all relations and other matters that might be reasonably deemed toinfluence our independence as well as relevant precautionary measures (as applicable).
We determine which of the matters we communicated with the governance are of the greatest importanceto the audit of financial statements of the current period so as to make them key matters. We describe thematters in the audit report. We decide not to communicate on such matters in the audit report unless thelaws and regulations forbid the public disclosure of such matters, or, in rare circumstances, if the negativeconsequence of communication of matters in the audit report is reasonably expected to exceed the benefitof the public interest.
At December 31
st2019
Consolidated Balance Sheet
Unit: RMB
| Item | Notes | Closing balance | Opening balance (restated) |
| Current Assets: | |||
| Cash and bank balances | (V)1 | 27,071,948,919.78 | 26,559,675,452.93 |
| Held-for-trading financial assets | (V)2 | 181.76 | |
| Financial assets measured at fair value through current profit and loss | 1,860,050.59 | ||
| Notes receivable | (V)3 | 973,236,789.02 | 2,569,445,189.92 |
| Accounts receivable | (V)4 | 21,307,927,200.28 | 16,619,441,281.18 |
| Receivables for financing | (V)5 | 1,257,385,053.02 | |
| Prepayments | (V)6 | 309,685,733.32 | 460,304,219.65 |
| Other receivables | (V)7 | 555,246,545.48 | 586,594,721.43 |
| Inventories | (V)8 | 11,267,986,843.11 | 5,725,104,153.41 |
| Non-current assets due within one year | (V)9 | 528,469,701.75 | 380,795,020.47 |
| Other current assets | (V)10 | 754,456,821.72 | 730,720,129.59 |
| Total Current Assets | 64,026,343,789.24 | 53,633,940,219.17 | |
| Non-current Assets: | |||
| Available-for-sale financial assets | 290,966,813.00 | ||
| Long-term receivables | (V)11 | 1,382,536,761.22 | 705,512,368.17 |
| Long-term equity investment | (V)12 | 252,165,321.49 | 163,301,844.56 |
| Other non-current financial assets | (V)13 | 312,398,267.44 | |
| Fixed assets | (V)14 | 5,791,218,720.87 | 5,082,415,160.10 |
| Construction in progress | (V)15 | 631,555,479.06 | 416,092,413.42 |
| Intangible assets | (V)16 | 1,046,122,507.64 | 869,913,050.09 |
| Goodwill | (V)17 | 273,611,961.96 | 212,269,337.23 |
| Long-term deferred expenses | (V)18 | 87,611,490.75 | - |
| Deferred tax assets | (V)19 | 688,849,263.70 | 534,346,941.25 |
| Other non-current assets | (V)20 | 865,586,676.92 | 1,582,750,600.80 |
| Total Non-current Assets | 11,331,656,451.05 | 9,857,568,528.62 | |
| Total Assets | 75,358,000,240.29 | 63,491,508,747.79 | |
| Current Liabilities: | |||
| Short-term borrowings | (V)21 | 2,640,082,485.15 | 3,465,655,688.29 |
| Held-for-trading financial liabilities | (V)22 | 652,428.18 |
At December 31
st2019
Consolidated Balance Sheet-continued
Unit: RMB
| Item | Notes | Closing balance | Opening balance (restated) |
| Current Liabilities:-continued | |||
| Financial liabilities measured at fair value through current profit and loss | 290,998.43 | ||
| Notes payable | (V)23 | 1,239,584,016.70 | 463,479,760.54 |
| Accounts payable | (V)24 | 12,700,075,307.70 | 10,301,665,725.20 |
| Receipts in advance | (V)25 | 1,020,989,460.61 | 641,430,490.22 |
| Payroll payable | (V)26 | 2,359,674,640.12 | 1,921,741,131.63 |
| Taxes payable | (V)27 | 991,342,805.91 | 1,418,921,664.57 |
| Other payables | (V)28 | 1,568,744,599.94 | 2,953,454,987.95 |
| Non-current liabilities due within one year | (V)29 | 86,123,154.06 | 3,178,171,147.16 |
| Other current liabilities | (V)30 | 913,534,538.26 | 364,984,759.94 |
| Total Current Liabilities | 23,520,803,436.63 | 24,709,796,353.93 | |
| Non-current Liabilities: | |||
| Long-term borrowings | (V)31 | 4,604,168,571.43 | 440,000,000.00 |
| Long-term payables | (V)32 | 50,181,416.72 | 8,000,000.00 |
| Provisions | (V)33 | 90,570,669.01 | 77,625,238.49 |
| Deferred income | (V)34 | 333,589,831.30 | 293,179,089.13 |
| Deferred tax liabilities | (V)19 | 51,088,103.96 | - |
| Other non-current liabilitie | (V)35 | 1,234,739,326.10 | - |
| Total non-current liabilities | 6,364,337,918.52 | 818,804,327.62 | |
| Total liabilities | 29,885,141,355.15 | 25,528,600,681.55 | |
| Owners’ Equity | |||
| Share capital | (V)36 | 9,345,010,696.00 | 9,227,270,473.00 |
| Capital reserves | (V)37 | 4,126,943,698.96 | 1,956,139,660.52 |
| Less: Treasury shares | (V)38 | 2,148,273,864.36 | 364,984,759.94 |
| Other comprehensive income | (V)39 | (53,541,146.99) | (49,576,351.10) |
| Surplus reserves | (V)40 | 4,672,505,348.00 | 4,460,712,358.45 |
| Retained earnings | (V)41 | 28,961,389,145.22 | 22,359,856,271.42 |
| Total owners' equity attributable to owner of the Company | 44,904,033,876.83 | 37,589,417,652.35 | |
| Minority equity | 568,825,008.31 | 373,490,413.89 | |
| Total owners' equity | 45,472,858,885.14 | 37,962,908,066.24 | |
| Total liabilities and owners' equity | 75,358,000,240.29 | 63,491,508,747.79 |
At December 31
st2019
Balance sheet of the parent company
Unit: RMB
| Item | Notes | Closing balance | Opening balance (restated) |
| Current Assets: | |||
| Cash and bank balances | 16,851,590,525.05 | 19,192,461,228.22 | |
| Notes receivable | 149,703,073.98 | 351,793,632.24 | |
| Accounts receivable | (XV)1 | 25,107,965,925.08 | 15,204,519,161.71 |
| Receivables for financing | 84,839,695.67 | ||
| Prepayments | 160,688,588.99 | 132,344,929.55 | |
| Other receivables | (XV)2 | 921,275,388.15 | 522,987,955.34 |
| Inventories | 171,243,815.97 | 168,885,723.93 | |
| Non-current assets due within one year | 4,513,795.81 | - | |
| Other current assets | 23,117,398.50 | 93,661,315.14 | |
| Total Current Assets | 43,474,938,207.20 | 35,666,653,946.13 | |
| Non-current Assets: | |||
| Available-for-sale financial assets | 290,956,813.00 | ||
| Other non-current financial assets | 309,504,047.44 | ||
| Long-term accounts receivable | 681,568.43 | - | |
| Long-term equity investment | (XV)3 | 5,074,018,030.44 | 4,361,147,395.90 |
| Fixed assets | 2,831,295,145.61 | 2,844,176,300.34 | |
| Construction in progress | 153,416,054.28 | 65,156,482.70 | |
| Intangible assets | 188,362,883.75 | 197,147,608.73 | |
| Long-term prepaid expenses for amortization | 34,199,446.06 | - | |
| Deferred tax assets | 126,357,792.34 | 221,779,547.02 | |
| Other non-current assets | 21,619,464.07 | 14,601,579.55 | |
| Total Non-current Assets | 8,739,454,432.42 | 7,994,965,727.24 | |
| Total Assets | 52,214,392,639.62 | 43,661,619,673.37 |
At December 31st 2019
Balance sheet of the company - continued
Unit: RMB
| Item | Notes | Closing balance | Opening balance (restated) |
| Current Liabilities: | |||
| Short-term borrowings | 2,001,781,388.89 | - | |
| Accounts payable | 450,983,270.08 | 356,787,605.91 | |
| Receipts in advance | 227,242,328.23 | 204,337,524.21 | |
| Payroll payable | 1,564,304,003.49 | 1,272,626,004.95 | |
| Taxes payable | 796,890,945.83 | 987,057,652.70 | |
| Other payables | 533,325,191.05 | 2,529,600,057.31 | |
| Non-current liabilities due within one year | 9,539,251.98 | 3,172,727,888.37 | |
| Other current liabilities | 913,534,538.26 | 364,984,759.94 | |
| Total Current Liabilities | 6,497,600,917.81 | 8,888,121,493.39 | |
| Non-current Liabilities: | |||
| Long-term borrowings | 3,126,200,000.00 | - | |
| Provisions | 62,863,096.83 | 52,956,535.09 | |
| Deferred Income | 162,018,728.45 | 186,747,708.01 | |
| Other non-current liabilities | 1,234,739,326.10 | - | |
| Total non-current liabilities | 4,585,821,151.38 | 239,704,243.10 | |
| Total liabilities | 11,083,422,069.19 | 9,127,825,736.49 | |
| Owners’ Equity | |||
| Share capital | 9,345,010,696.00 | 9,227,270,473.00 | |
| Capital reserves | 4,064,833,739.52 | 1,883,262,407.46 | |
| Less: Treasury shares | 2,148,273,864.36 | 364,984,759.94 | |
| Surplus reserves | 4,672,505,348.00 | 4,460,712,358.45 | |
| Retained earnings | 25,196,894,651.27 | 19,327,533,457.91 | |
| Total owners' equity | 41,130,970,570.43 | 34,533,793,936.88 | |
| Total liabilities and owners' equity | 52,214,392,639.62 | 43,661,619,673.37 |
For the reporting period from January 1
st 2019 to December 31
st
2019
Consolidated Income Statement
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Total operating income | (V)42 | 57,658,110,065.22 | 49,837,132,481.61 |
| Less：Total operating costs | (V)42 | 31,140,176,777.12 | 27,483,469,555.24 |
| Business taxes and surcharges | (V)43 | 417,318,543.55 | 418,325,053.64 |
| Selling expenses | (V)44 | 7,256,781,486.68 | 5,892,500,406.52 |
| Administrative expenses | (V)45 | 1,822,464,442.07 | 1,377,244,870.14 |
| Research and Development (R&D) expenses | (V)46 | 5,483,811,698.36 | 4,482,780,693.41 |
| Financial expenses | (V)47 | (640,068,177.19) | (424,263,559.64) |
| Including：Interest expenses | 192,739,975.98 | 154,599,429.03 | |
| Interest income | 699,779,882.35 | 444,987,461.93 | |
| Add: Other Income | (V)48 | 1,892,323,306.29 | 2,083,997,067.37 |
| Investment income | (V)49 | 36,649,237.09 | 51,929,640.63 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | 7,743,476.93 | (9,072,889.02) | |
| Gains from changes in fair values | (V)50 | 15,321,889.63 | 13,406,932.17 |
| Credit impairment losses | (V)51 | (222,009,426.18) | |
| Impairment losses of assets | (V)52 | (197,891,311.27) | (426,949,808.76) |
| Asset disposal income | 5,535,663.32 | 4,975,825.83 | |
| II. Operating profit | 13,707,554,653.51 | 12,334,435,119.54 | |
| Add: Non-operating income | (V)53 | 65,032,501.54 | 111,362,918.34 |
| Less: Non-operating expenses | (V)54 | 17,124,407.28 | 8,593,484.58 |
| III. Total profit | 13,755,462,747.77 | 12,437,204,553.30 | |
| Less: Income tax expenses | (V)55 | 1,290,278,445.12 | 1,056,739,998.82 |
| IV. Net profit | 12,465,184,302.65 | 11,380,464,554.48 | |
| 4.1 Classification by continuous operation | |||
| (a) Net profit on continuous operation | 12,465,184,302.65 | 11,380,464,554.48 | |
| (b) Net loss on terminated operation | - | - | |
| 4.2 Classification by attribution of ownership | |||
| (a) Profit or loss attributable to minority shareholders | 50,596,612.20 | 28,332,299.27 | |
| (b) Net profit attributable to owners of parent company | 12,414,587,690.45 | 11,352,132,255.21 | |
| V. Other comprehensive income, net of income tax | (V)39 | (4,658,993.77) | (24,062,992.06) |
| Other comprehensive income attributable to owners of the Company, net of tax | (3,964,795.89) | (21,898,411.75) |
For the reporting period from January 1
st
2019 to December 31
st
2019
Consolidated Income Statement-continued
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| (I) Items that will not be reclassified subsequently to profit or loss | - | - | |
| (II) Other comprehensive income to be reclassified to profit or loss in subsequent periods | (3,964,795.89) | (21,898,411.75) | |
| 1. Exchange differences arising on conversion of financial statements denominated in foreign currencies | (3,964,795.89) | (21,898,411.75) | |
| Other comprehensive income attributable to minority interests, net of tax | (694,197.88) | (2,164,580.31) | |
| VI. Total comprehensive income | 12,460,525,308.88 | 11,356,401,562.42 | |
| Total comprehensive income attributable to owners of the parent company | 12,410,622,894.56 | 11,330,233,843.46 | |
| Total comprehensive income attributable to minority shareholders | 49,902,414.32 | 26,167,718.96 | |
| VII. Earnings per share | |||
| (I) Basic earnings per share | (XVI)2 | 1.343 | 1.240 |
| (II) Diluted earnings per share | (XVI)2 | 1.343 | 1.234 |
For the reporting period from January 1
st
2019 to December 31
st
2019
Income statement of the parent company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Total operating income | (XV)4 | 25,712,466,601.80 | 22,288,214,116.66 |
| Less: Total operating Cost | (XV)4 | 7,728,486,855.67 | 6,599,669,485.30 |
| Business taxes and surcharges | 274,273,500.24 | 284,413,700.01 | |
| Selling expenses | 3,101,749,832.98 | 2,758,483,789.96 | |
| Administrative expenses | 725,281,640.65 | 625,098,237.96 | |
| Research and Development (R&D) expenses | 4,012,212,610.85 | 3,502,168,162.60 | |
| Financial expenses | (506,021,681.46) | (180,009,521.00) | |
| Including : Interest expenses | 107,400,998.19 | 92,955,424.65 | |
| Interest income | 579,879,330.28 | 394,158,854.37 | |
| Add: Other income | 1,542,338,077.01 | 1,814,462,323.26 | |
| Investment income | (XV)5 | 25,026,089.44 | 82,844,595.18 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | 5,089,008.14 | (4,200,612.39) | |
| Gains from changes in fair values | 17,547,234.44 | - | |
| Credit impairment gains | 656,135,180.29 | ||
| Impairment gains (losses) of assets | 51,593,292.77 | (226,183,330.78) | |
| Asset disposal income | 4,072,096.18 | 4,138,938.48 | |
| II. Operating profit | 12,673,195,813.00 | 10,373,652,787.97 | |
| Add: Non-operating income | 17,287,915.50 | 56,661,310.97 | |
| Less: Non-operating expenses | 8,974,800.59 | 1,444,733.80 | |
| III. Total profit | 12,681,508,927.91 | 10,428,869,365.14 | |
| Less: Income tax expenses | 999,092,917.90 | 659,174,965.95 | |
| IV. Net profit | 11,682,416,010.01 | 9,769,694,399.19 | |
| V. Other comprehensive income, net of income tax | - | - | |
| VI. Total comprehensive income | 11,682,416,010.01 | 9,769,694,399.19 |
For the reporting period from January 1
st 2019 to December 31
st
2019
Consolidated Cash Flow Statement
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods or rendering of services | 59,405,106,132.63 | 51,986,564,929.24 | |
| Receipts of tax refunds | 3,084,090,410.43 | 3,721,596,390.15 | |
| Other cash receipts relating to operating activities | (V)56(1) | 1,989,547,720.88 | 1,623,989,773.06 |
| Sub-total of cash inflows from operating activities | 64,478,744,263.94 | 57,332,151,092.45 | |
| Cash payments for goods purchased and services received | 37,422,764,103.72 | 32,254,846,787.67 | |
| Cash paid to and on behalf of employees | 8,934,696,624.52 | 7,091,469,370.06 | |
| Payments of various types of taxes | 5,192,433,698.75 | 4,362,695,466.89 | |
| Other cash payments relating to operating activities | (V)56(2) | 5,161,129,665.81 | 4,509,853,440.07 |
| Sub-total of cash outflows from operating activities | 56,711,024,092.80 | 48,218,865,064.69 | |
| Net Cash flows from Operating Activities | (V)57(1) | 7,767,720,171.14 | 9,113,286,027.76 |
| II. Cash flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 548,141,227.41 | 10,684,968,183.97 | |
| Cash receipts from investment income | 17,355,010.13 | 101,672,000.39 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 85,339,813.21 | 17,971,830.99 | |
| Other cash receipts relating to investing activities | (V)56(3) | 17,234,624.45 | 89,505,228.62 |
| Sub-total of cash inflows from investing activities | 668,070,675.20 | 10,894,117,243.97 | |
| Net cash paid to aquire subsidiaries and other business units | 16,095,782.07 | - | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 1,927,278,918.86 | 2,055,859,307.21 | |
| Cash paid to acquire investments | 644,715,663.25 | 7,367,537,654.71 | |
| Other cash payments relating to investing activities | (V)56(4) | 2,968,783.82 | 20,000,000.00 |
| Sub-total of cash outflows from investing activities | 2,591,059,148.00 | 9,443,396,961.92 | |
| Net cash flows from Investing Activities | (1,922,988,472.80) | 1,450,720,282.05 | |
| III. Cash flows from financing activities: | |||
| Cash receipts from capital contributions | 123,530,000.00 | 97,509,000.00 | |
| Including: cash receipts from capital contributions from minority owners of subsidiaries | 123,530,000.00 | 97,509,000.00 | |
| Cash receipts from borrowings | 9,492,281,861.82 | 10,346,144,732.55 | |
| Other cash receipts relating to financing activities | (V)56(5) | - | 2,057,898,876.84 |
| Sub-total of cash inflows from financing activities | 9,615,811,861.82 | 12,501,552,609.39 | |
| Cash repayments of borrowings | 9,305,661,321.88 | 8,590,620,738.17 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 5,754,605,713.66 | 4,701,738,534.32 | |
| Including : Dividends and profits paid by subsidiaries to minority shareholders | 2,100,000.00 | - | |
| Other cash payments relating to financing activities | (V)52(6) | 26,897,116.20 | 6,555,746.33 |
| Sub-total of cash outflows from financing activities | 15,087,164,151.74 | 13,298,915,018.82 | |
| Net cash flows from Financing Activities | (5,471,352,289.92) | (797,362,409.43) | |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 111,276,866.09 | 235,182,564.34 | |
| V. Net Increase in Cash and Cash Equivalents | (V)57(1) | 484,656,274.51 | 10,001,826,464.72 |
| Add: Opening balance of Cash and Cash Equivalents | (V)57(1) | 26,031,011,733.89 | 16,029,185,269.17 |
| VI. Closing Balance of Cash and Cash Equivalents | (V)57(3) | 26,515,668,008.40 | 26,031,011,733.89 |
For the reporting period from January 1
st 2019 to December 31
st2019
Cash Flow Statements of the parent company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Cash flows from Operating Activities:: | |||
| Cash receipts from the sale of goods and the rendering of services | 20,043,914,998.81 | 22,847,371,972.05 | |
| Receipts of tax refunds | 1,364,269,467.87 | 1,651,607,032.63 | |
| Other cash receipts relating to operating activities | 880,611,125.32 | 796,433,730.94 | |
| Sub-total of cash inflows from operating activities | 22,288,795,592.00 | 25,295,412,735.62 | |
| Cash payments for goods acquired and services received | 8,911,851,425.42 | 7,541,359,566.51 | |
| Cash payments to and on behalf of employees | 4,809,105,203.79 | 3,610,460,282.38 | |
| Payments of various types of taxes | 3,547,737,881.19 | 3,556,689,194.01 | |
| Other cash payments relating to operating activities | 2,273,874,546.47 | 2,871,618,240.21 | |
| Sub-total of cash outflows from operating activities | 19,542,569,056.87 | 17,580,127,283.11 | |
| Net Cash flows from Operating Activities | (XV)8(1) | 2,746,226,535.13 | 7,715,285,452.51 |
| II. Cash flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 33,241,636.07 | 4,350,005,971.53 | |
| Cash receipts from investment income | 18,757,220.31 | 97,039,236.04 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 92,098,125.61 | 13,852,133.88 | |
| Other cash receipts relating to investing activities | 16,718,160,478.21 | 15,536,557,642.39 | |
| Sub-total of cash inflows from investing activities | 16,862,257,460.20 | 19,997,454,983.84 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 513,878,473.24 | 604,984,875.82 | |
| Cash payments to acquire investments | 633,438,441.87 | 2,131,183,014.00 | |
| Other cash payments relating to investing activities | 17,142,547,258.27 | 15,385,247,510.53 | |
| Sub-total of cash outflows from investing activities | 18,289,864,173.38 | 18,121,415,400.35 | |
| Net Cash flows from Investing Activities | (1,427,606,713.18) | 1,876,039,583.49 | |
| III. Cash flows from Financing Activities | |||
| Cash receipts from borrowings | 7,279,240,000.00 | 700,000,000.00 | |
| Other cash receipts relating to financing activities | 7,534,930,948.45 | 4,988,766,432.46 | |
| Sub-total of cash inflows from financing activities | 14,814,170,948.45 | 5,688,766,432.46 | |
| Cash repayments of borrowings | 5,372,727,888.37 | 700,000,000.00 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 5,679,184,068.78 | 4,640,094,529.94 | |
| Other cash payments relating to financing activities | 7,471,674,598.52 | 3,422,541,181.42 | |
| Sub-total of cash outflows from financing activities | 18,523,586,555.67 | 8,762,635,711.36 | |
| Net Cash flows from Financing Activities | (3,709,415,607.22) | (3,073,869,278.90) | |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 47,889,908.40 | 177,395,997.38 | |
| V. Net increase in cash and cash equivalents | (XV)8(1) | (2,342,905,876.87) | 6,694,851,754.48 |
| Add: Beginning balance of cash and cash equivalents | (XV)8(1) | 18,998,934,287.59 | 12,304,082,533.11 |
| VI. Closing Balance of Cash and Cash Equivalents | (XV)8(2) | 16,656,028,410.72 | 18,998,934,287.59 |
For the reporting period from January 1
st
2019 to December 31
st2019
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
| Item | Amount for the 2019 | |||||||
| Owner’s Equity Attributable to owners of the Company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Closing balance of the preceding period | 9,227,270,473.00 | 1,956,139,660.52 | 364,984,759.94 | (49,576,351.10) | 4,460,712,358.45 | 22,360,593,257.53 | 373,981,737.96 | 37,964,136,376.42 |
| Add:Business merger under common control | - | - | - | - | - | (736,986.11) | (491,324.07) | (1,228,310.18) |
| II. Opening balance of the current period | 9,227,270,473.00 | 1,956,139,660.52 | 364,984,759.94 | (49,576,351.10) | 4,460,712,358.45 | 22,359,856,271.42 | 373,490,413.89 | 37,962,908,066.24 |
| III. Increase or decrease in the current period | 117,740,223.00 | 2,170,804,038.44 | 1,783,289,104.42 | (3,964,795.89) | 211,792,989.55 | 6,601,532,873.80 | 195,334,594.42 | 7,509,950,818.90 |
| (I) Total comprehensive income | - | - | - | (3,964,795.89) | - | 12,414,587,690.45 | 49,902,414.32 | 12,460,525,308.88 |
| (II) Owners’ contributions and reduction in capital | 117,740,223.00 | 2,170,804,038.44 | 1,885,322,227.42 | - | - | - | 147,532,180.10 | 550,754,214.12 |
| 1. Capital contribution from shareholders | 121,195,458.00 | 1,936,703,418.84 | 2,057,898,876.84 | - | - | - | 123,530,000.00 | 123,530,000.00 |
| 2. Share-based payment recognized in owners’ equity | - | 257,542,500.80 | - | - | - | - | 10,767,293.62 | 268,309,794.42 |
| 3. Amount formed by business combination not under the common control | - | - | - | - | - | - | 13,234,886.48 | 13,234,886.48 |
| 4. Others | (3,455,235.00) | (23,441,881.20) | (172,576,649.42) | - | - | - | - | 145,679,533.22 |
| (III) Profit distribution | - | - | (102,033,123.00) | - | 211,792,989.55 | (5,813,054,816.65) | (2,100,000.00) | (5,501,328,704.10) |
| 1. Transfer to surplus reserves | - | - | - | - | 211,792,989.55 | (211,792,989.55) | - | - |
| 2. Distributions to shareholders | - | - | (102,033,123.00) | - | - | (5,601,261,827.10) | (2,100,000.00) | (5,501,328,704.10) |
| 3. Others | - | - | - | - | - | - | - | - |
| IV. Closing balance of the current period | 9,345,010,696.00 | 4,126,943,698.96 | 2,148,273,864.36 | (53,541,146.99) | 4,672,505,348.00 | 28,961,389,145.22 | 568,825,008.31 | 45,472,858,885.14 |
For the reporting period from January 1
st 2019 to December 31
st2019
Consolidated Statement of Changes in Owners' Equity-continued
Unit: RMB
| Item | Amount for 2018 | |||||||
| Owner’s Equity Attributable to owners of the Company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Opening balance of the current period | 9,228,865,114.00 | 1,819,397,715.63 | 744,583,627.22 | (27,677,939.35) | 3,483,742,918.53 | 16,598,328,692.63 | 246,048,563.87 | 30,604,121,438.09 |
| II. Increase or decrease in the current period (restated) | (1,594,641.00) | 136,741,944.89 | (379,598,867.28) | (21,898,411.75) | 976,969,439.92 | 5,761,527,578.79 | 127,441,850.02 | 7,358,786,628.15 |
| (I) Total comprehensive income (restated) | - | - | - | (21,898,411.75) | - | 11,352,132,255.21 | 26,167,718.96 | 11,356,401,562.42 |
| (II) Owners’ contributions and reduction in capital | (1,594,641.00) | 136,741,944.89 | (323,387,643.28) | - | - | - | 101,274,131.06 | 559,809,078.23 |
| 1. Capital contribution from shareholders | - | - | - | - | - | - | 97,509,000.00 | 97,509,000.00 |
| 2. Share-based payment recognized in owners’ equity | - | 141,703,050.22 | - | - | - | - | 3,765,131.06 | 145,468,181.28 |
| 3. Others | (1,594,641.00) | (4,961,105.33) | (323,387,643.28) | - | - | - | - | 316,831,896.95 |
| (III) Profit distribution | - | - | (56,211,224.00) | - | 976,969,439.92 | (5,590,604,676.42) | - | (4,557,424,012.50) |
| 1. Transfer to surplus reserves | - | - | - | - | 976,969,439.92 | (976,969,439.92) | - | - |
| 2. Distributions to shareholders | - | - | (56,211,224.00) | - | - | (4,613,635,236.50) | - | (4,557,424,012.50) |
| 3. Others | - | - | - | - | - | - | - | - |
| III. Closing balance of the current period (restated) | 9,227,270,473.00 | 1,956,139,660.52 | 364,984,759.94 | (49,576,351.10) | 4,460,712,358.45 | 22,359,856,271.42 | 373,490,413.89 | 37,962,908,066.24 |
For the reporting period from January 1
st
2019 to December 31
st
2019
Statement of Changes in Owners' Equity of the parent company
Unit: RMB
| Item | Amount for 2019 | |||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained profits | Total owners' equity | |
| I. Closing balance of the preceding period | 9,227,270,473.00 | 1,883,262,407.46 | 364,984,759.94 | 4,460,712,358.45 | 19,327,533,457.91 | 34,533,793,936.88 |
| II. Increase or decrease in the current period | 117,740,223.00 | 2,181,571,332.06 | 1,783,289,104.42 | 211,792,989.55 | 5,869,361,193.36 | 6,597,176,633.55 |
| (I) Total comprehensive income | - | - | - | - | 11,682,416,010.01 | 11,682,416,010.01 |
| (II) Owners’ contributions and reduction in capital | 117,740,223.00 | 2,181,571,332.06 | 1,885,322,227.42 | - | - | 413,989,327.64 |
| 1. Capital contribution from shareholders | 121,195,458.00 | 1,936,703,418.84 | 2,057,898,876.84 | - | - | - |
| 2. Share-based payment recognized in owners’ equity | - | 268,309,794.42 | - | - | - | 268,309,794.42 |
| 3. Others | (3,455,235.00) | (23,441,881.20) | (172,576,649.42) | - | - | 145,679,533.22 |
| (III) Profit distribution | - | - | (102,033,123.00) | 211,792,989.55 | (5,813,054,816.65) | (5,499,228,704.10) |
| 1.Transfer to surplus reserve | - | - | - | 211,792,989.55 | (211,792,989.55) | - |
| 2.Distributions to shareholders | - | - | (102,033,123.00) | - | (5,601,261,827.10) | (5,499,228,704.10) |
| 3. Others | - | - | - | - | - | - |
| III. Closing balance of the current period | 9,345,010,696.00 | 4,064,833,739.52 | 2,148,273,864.36 | 4,672,505,348.00 | 25,196,894,651.27 | 41,130,970,570.43 |
For the reporting period from January 1
st 2019 to December 31
st
2019
Statement of Changes in Owners' Equity of the parent company-continued
Unit: RMB
| Item | Amount for 2018 | |||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained profits | Total owners' equity | |
| I. Opening balance of the current period | 9,228,865,114.00 | 1,742,755,331.51 | 744,583,627.22 | 3,483,742,918.53 | 15,148,443,735.14 | 28,859,223,471.96 |
| II. Increase or decrease in the current period | (1,594,641.00) | 140,507,075.95 | (379,598,867.28) | 976,969,439.92 | 4,179,089,722.77 | 5,674,570,464.92 |
| (I) Total comprehensive income | - | - | - | - | 9,769,694,399.19 | 9,769,694,399.19 |
| (II) Owners’ contributions and reduction in capital | (1,594,641.00) | 140,507,075.95 | (323,387,643.28) | - | - | 462,300,078.23 |
| 1. Capital contribution from shareholders | - | - | - | - | - | - |
| 2. Share-based payment recognized in owners’ equity | - | 145,468,181.28 | - | - | - | 145,468,181.28 |
| 3. Others | (1,594,641.00) | (4,961,105.33) | (323,387,643.28) | - | - | 316,831,896.95 |
| (III) Profit distribution | - | - | (56,211,224.00) | 976,969,439.92 | (5,590,604,676.42) | (4,557,424,012.50) |
| 1.Transfer to surplus reserve | - | - | - | 976,969,439.92 | (976,969,439.92) | - |
| 2. Distributions to shareholders | - | - | (56,211,224.00) | - | (4,613,635,236.50) | (4,557,424,012.50) |
| 3. Others | - | - | - | - | - | - |
| III. Closing balance of the current period | 9,227,270,473.00 | 1,883,262,407.46 | 364,984,759.94 | 4,460,712,358.45 | 19,327,533,457.91 | 34,533,793,936.88 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
I. Basic Information about the CompanyHangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as "Company" or "the Company" or“Hikvision”), is a Sino-foreign equity joint venture company, formerly known as "Hangzhou Hikvision DigitalTechnology Ltd", established on November 30
th2001 in Hangzhou upon the approval letter of Hangzhou High-tech No.604 [2001] issued by Hangzhou High-tech Industrial Development Zone Management Committee. On June 25
th2008,with approval of document No. 598 [2008] issued by the MOFCOM (The Ministry of Commerce of the People'sRepublic of China), the company was renamed as “Hangzhou Hikvision Digital Technology Co., Ltd.”, headquartered inHangzhou, and obtained the business license of enterprise No.91330000733796106P. On May 28
th2010, the Companywas listed on the Shenzhen Stock Exchange.
On March 27
th2018, according to the authorization of the Company's first extraordinary shareholders meeting in2014, the Company completed the procedures of repurchase and cancellation of some of the 1,594,641 restricted stocksthat did not meet the incentive conditions, and the share capital of the Company was changed to 9,227,270,473 shares.
On December 20
th 2018, pursuant to the Articles of Association of the Company revised by the resolution of 8
th
Meeting of the fourth session Board of Directors authorized by the 2
ndextraordinary general meeting in 2018, the companywas approved to issue additional 126,518,281 shares of RMB common stock (adjusted to 121,195,458 shares) to 6,341(adjusted to 6,095) incentive personnels. The Company completed the registration of shares on January 17
th2019, adjustedthe Company’s total capital share to 9,348,465,931 shares.
On June 26
th2019, authorized by the Company’s first Extraordinary General Meeting in 2014, the Companycompleted procedures of repurchase and cancellation of some of the 509,625 restricted stocks that did not meet theincentive conditions, and the total share capital of the Company was adjusted to 9,347,956,306 shares.
On September 3
rd
2019, authorized by the Company’s second Extraordinary General Meeting in 2016, the Companycompleted procedures of repurchase and cancellation of some of the 2,945,610 restricted stocks that did not meet theincentive conditions, and the total share capital of the Company was adjusted to 9,345,010,696 shares. Please refer to Note(V)-36 for share capital details.
As of December 31
st
2019, the Company’s total registered capital is RMB 9,345,010,696, with total capital shares of9,345,010,696 shares (face value RMB 1 per share), of which restricted A-shares were 1,276,701,961 shares, A-shareswithout restriction are 8,068,308,735 shares.
The Company is engaged in other electronic equipment manufacturing business under electronics industry. Businessscope of the Company includes development and production of electronic products (including explosion-proof electricalproducts, tele-communication equipment and its ancillary equipment, multimedia equipment), transmission and displayequipment, fire protection products, big data and IoT software and hardware products, aircraft, robot, intelligent equipmentand intelligent system, real-time communication system, auto parts and accessories, and electrical signal equipment for
Notes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
vehicle, and servers and supporting hardware and software products ; sales of self-manufactured products; technicalservice, electronic technology consulting service, training service (excluding class training), electronic equipmentinstallation, electronic engineering, and design, construction and maintenance of intelligent systems. For details aboutbusiness scope of the Company and its subsidiaries, please refer to Note (VII) 1.
The Company’s and consolidated financial reports were approved for issuance by the 17
th
meeting of the fourthsession Board of Directors of the Company on April 23
rd2020.
For consolidation scope of the financial statements of the current reporting period, please refer to Note (VII) “Interestin other entities”. For changes in consolidation scope of the financial statements during the current reporting period, pleaserefer to “changes in the consolidation scope” in Note (VI).
II. Basis of preparation of financial statementsBasis of preparation of financial statementsThe Company and its subsidiaries (hereinafter referred to as "the Group") have adopted the Accounting Standards forBusiness Enterprises ("ASBE") and relevant provisions issued by the Ministry of Finance ("MoF"). In addition, the Grouphas disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules forCompanies Offering Securities to the Public No. 15－General Provisions on Financial Reporting (revised in 2014).
Going concernThe Group has evaluated its going concern for 12 months going forward starting from December 31
st2019, and there isno factor that may cast significant doubt on the entity's ability to continue as a going concern. Therefore, the financialstatements have been prepared on a going concern basis.
Bookkeeping base and valuation principlesThe Group measures the accounting elements in accordance with the accrual accounting basis. Except certain financialinstruments are measured by fair value, these financial statements are prepared in accordance with the measurements basisof historical costs. If the asset decreases in value, the provision for impairment of assets should be made according torelevant regulations.
According to the historical cost measurement, the assets shall be measured as per the amount of cash or cash equivalentpaid at the time of purchase, or the fair value of consideration paid for the purchase of such assets. The liabilities shall bemeasured in accordance with the amount of funds or assets actually received when undertaking current obligations, or thecontract amount when undertaking the current obligations, or the amount of cash or cash equivalents required for payingback the debts in daily activities.
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
The fair value is a price received by the market participants from selling asset or transferring liability during orderlytransaction at the measurement date. No matter the fair value is observable or estimated by using valuation technique, themeasured and disclosed fair value in the financial statement shall be determined on this basis.
When measuring non-financial assets at fair value, the assets shall be measured considering the ability of marketparticipants to use the assets for optimal use to generate economic benefits, or to sell the assets to other market participantsto use the assets for optimal use to generate economic benefits.
For the financial assets measured with transaction price at the initial recognition, and the use of valuation techniquesinvolving unobservable inputs in the subsequent fair value measurement, the valuation technique is corrected in thevaluation process in order to make the initial recognition results confirmed by valuation techniques equal to the transactionprice.
Based on the observable extent of the input value of the fair value, and the importance of such input value to the fair valuemeasurement, the fair value measurement is divided into three levels:
? Level 1: The input value is the unadjusted offer of the same assets or liabilities on active market acquired on measurementdate;? Level 2: The input value is the input value of relevant assets or liabilities observable directly or indirectly in addition tolevel 1 input value;? Level 3: The input value is the non-observable input value of relevant assets or liabilities.
III. Significant accounting policies and accounting estimates
1. Statement for Compliance with Accounting Standards for Business Enterprises (ASBE)The financial statements of the Company have been prepared in accordance with ASBE, and present truly and completely,the Company's and consolidated financial position as of December 31
st
2019; and the Company's and consolidated resultsof operations, the Company’s and consolidated changes in shareholders' equity, and the Company’s and consolidated cashflows for the year of 2019.
2. Accounting Period
The Group has adopted the calendar year as its accounting year from January 1
st to December 31
st
each year.
3. Business Cycle
The business cycle refers to the period from purchase of assets used for processing to realization of cash or cash equivalents.The Group business cycle is usually 12 months.
4. Functional currency
Renminbi (“RMB”) is the currency in the primary economic environments in which the Company and its domesticsubsidiaries are operated. The Company and its domestic subsidiaries take RMB as their functional currency. Overseas
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
subsidiaries of the Company determine their functional currency on the basis of the primary economic environment inwhich it operates. For functional currency of overseas subsidiaries of the Company, see Note (V) 59. The Group adoptsRMB to prepare its financial statements.
5. The accounting treatment of business combinations involving enterprises under common control and businesscombinations not involving enterprises under common controlBusiness combinations are classified into business combinations involving enterprises under common control and businesscombinations not involving enterprises under common control.
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of thecombining enterprises are ultimately controlled by the same party or parties both before and after the combination, andthat control is not transitory.
Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entitiesat the date of the combination. The difference between the carrying amount of the net assets obtained and the carryingamount of the consideration paid for the combination is adjusted to the share premium in capital reserve. If the sharepremium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred.
5.2 Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination in which all of thecombining enterprises are not ultimately controlled by the same party or parties before and after the combination.The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurredor assumed, and equity securities issued by the acquirer in exchange for control of the acquiree. If a business combinationnot under the common control is realized step by step through multiple transactions, the cost of the combination is the sumof the consideration paid on the purchase date and the fair value of the equity of the purchasee already held before thepurchase date on the purchase date. The intermediary expenses incurred by the acquirer in respect of auditing, legalservices, valuation and consultancy services, etc. and other associated administrative expenses attributable to the businesscombination are recognized in profit or loss when they are incurred.
The acquiree’s identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in a business combination,that meet the recognition criteria shall be measured at fair value at the acquisition date.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, thedifference is treated as an asset and recognized as goodwill, which is measured at cost on initial recognition. Where thecost of combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirerfirstly reassesses the measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilitiesand measurement of the cost of combination. If after that reassessment, the cost of combination is still less than theacquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer recognizes the remaining differenceimmediately into profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is presentedseparately in the consolidated financial statements.
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
6. Preparation method of consolidated financial statements
6.1 Preparation method of consolidated financial statements
The scope of consolidated financial statements shall be confirmed based on the control. Control right means that aninvestor may control an investee; the investor may participate in relevant activities of the investee to obtain variablerewards and also be able to use the control rights for the investee to influence its amount of returns. The Group will re-evaluate, if the change of the relevant facts and circumstances leading to the change of the relevant elements involved inthe above definition of control.
The merger of subsidiary starts from the Group obtaining the control power of the subsidiary, and terminates when theGroup loses the control power of the subsidiary.
As for subsidiaries disposed by the Group, operating results and cash flows prior to the disposal date (the date of losingcontrol right) have been properly included in the consolidated profit statement and consolidated cash flow statement.
For a subsidiary acquired through a business combination not involving enterprises under common control, the operatingresults and cash flows from the acquisition date (the date when control is obtained) are included in the consolidated incomestatement and consolidated statement of cash flows.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through a businesscombination involving enterprises under common control are included in the Group's scope of consolidation as if they hadbeen included in the scope of consolidation from the date when they first came under the common control of the ultimatecontrolling party. Their operating results and cash flows from the beginning of the earliest reporting period are includedin the consolidated income statement and consolidated statement of cash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on theuniform accounting policies and accounting periods set out by the Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interests and presented as"minority equity" in the consolidated balance sheet. The portion of net profits or losses of subsidiaries for the periodattributable to minority interests is presented as "minority interests" in the consolidated income statement below the "netprofit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount are still allocatedagainst minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of control over thesubsidiary is accounted for as equity transactions. The carrying amounts of the total owners' equity attributable to ownerof the Company and minority equity are adjusted to reflect the changes in their relative interests in the subsidiary. Thedifference between the amount by which the minority interests are adjusted and the fair value of the consideration paid orreceived is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference,the excess is adjusted against retained earnings.
Notes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
In the case that the equity of the acquiree is obtained through multiple deals step by step to finally form the businesscombination not under the common control, the business combination shall be handled differently based on whether it is"package deal": where it is package deal, the Company accounts each deal as a deal to obtain the control. If the deal is nota "package deal", a deal where the control is obtained on the acquisition date will be subject to accounting. The acquiree'sequity held before the acquisition date will be remeasured based on the fair value of the equity on the acquisition date andthe difference between the fair value and book value will be included in the profit or loss in the current period. If theacquiree's equity held before the acquisition date involves any changes in the other comprehensive income or in any otherowner's equity accounted by the equity method, such equity changes will be converted into the profit or loss in the currentperiod on the acquisition date.
7. Joint arrangement classification and joint operation accounting
Joint arrangements include joint operation and joint ventures. Such classification is defined based on the rights andobligations of the joint parties in the joint arrangement, taking into account the structure and legal form of sucharrangement and also the contractual provisions. Joint operation refers to a joint arrangement where the joint venture isentitled to assets related to this arrangement and bear liabilities related to this arrangement. Joint ventures mean that jointventure parties are merely entitled to joint venture arrangements of net assets of such arrangements.
The Groups investment in any joint venture is accounted by the equity method. See the details in Note (III) "13.3.2 Long-term equity investment accounted under the equity method".
The Group confirms its assets held separately according to the arrangement of joint operation and those held jointly inproportion to the Group's share; confirms its liabilities held separately and those held jointly in proportion to the Group'sshare ; confirms its revenue from the sale of its share of the output arising from the joint operation; confirms its share ofthe revenue from the sale of the output by the joint operation; confirms the expenses incurred by the Group alone and theexpenses incurred by the joint operation corresponding to the share of the Group therein. The assets, liabilities, revenuesand expenses related to the joint operation are accounted and confirmed by the Group in accordance with the regulationsapplicable to specific assets, liabilities, revenues, and expenses.
8. Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group'sshort-term (Generally refers to due within three months from the purchase date), highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
9. Conversion of transactions and financial statements denominated in foreign currencies.
9.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate that approximates theactual spot exchange rate on the date of transaction; The exchange rate that approximates the actual spot exchange rate onthe date of transaction is calculated according to the middle price of market exchange rate at the beginning of the monthin which the transaction happened.
At the balance sheet date, foreign currency monetary items are translated into [RMB] using the spot exchange rates at thebalance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at thebalance sheet date and those on initial recognition or at the previous balance sheet date are recognized in profit or loss forthe period, except for exchange differences related to a specific-purpose borrowing denominated in foreign currency thatqualify for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
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When the consolidated financial statements include foreign operation(s), if there is foreign currency monetary itemconstituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates arerecognized as "exchange differences arising on conversion of financial statements denominated in foreign currencies " inother comprehensive income, and in profit and loss for the period upon disposal of the foreign operation.
Foreign currency non-monetary items measured at historical cost are converted to the amounts in functional currency atthe spot exchange rates on the dates of the transactions. Foreign currency non-monetary items measured at fair value arere-converted at the spot exchange rate on the date the fair value is determined. Difference between the re-convertedfunctional currency amount and the original functional currency amount is treated as changes in fair value (includingchanges of exchange rate) and is recognized in profit and loss or as other comprehensive income.
9.2 Conversion of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation areconverted from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet aretranslated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items are converted at thespot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflectingthe distribution of profits are translated at exchange rates that approximate the actual spot exchange rates on the dates ofthe transactions; The difference between the converted assets and the aggregate of liabilities and shareholders' equity itemsis recognized into other comprehensive income and shareholders’ equity.
The foreign currency cash flows and cash flows of overseas subsidiaries adopt the exchange rate similar to the spot rate atthe date of cash flows for conversion. The affected amount of cash and cash equivalents due to the change of exchangerate, as an adjustment item, shall be separately listed as "the impact of cash and cash equivalents due to the change ofexchange rate" in the cash flow statement.
The opening balances and the comparative figures of previous year are presented at the converted amounts of the previousyear's financial statements.
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operation due todisposal of certain interest in it or other reasons, the Group transfers the accumulated exchange differences arising onconversion of financial statements of this foreign operation attributable to the owners' equity of the Company and presentedunder shareholders' equity, to profit or loss in the period in which the disposal occurs.
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, but only adecrease in proportion of overseas business interests, the proportionate share of accumulated exchange differences arisingon conversion of financial statements are re-attributed to minority interests and are not recognized in profit and loss undercurrent period. For partial disposals of equity interests in foreign operations, which are associates or joint ventures, theproportionate shares of the accumulated exchange differences arising on conversion of financial statements of foreignoperations is reclassified to profit or loss under current period.
10. Financial Instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to a contract of financial instrument.
For the purchase or sale of a financial asset in conventional manner, the asset to be received and the liability to be assumedwill be recognized on the trading day, or the asset sold will be derecognized on the trading day.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
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Financial assets and financial liabilities are measured by fair value upon initial recognition. For financial assets andfinancial liabilities at fair value through profit and loss, the relevant trading costs will be directly charged to profit and lossof the current period. For other types of financial assets and financial liabilities, the relevant trading costs will be bookedinto the initial recognition amount. Upon initial recognition of accounts receivable which have no material financingcomponents or have not taken into consideration the financing components in contracts with a term not exceeding oneyear according to Accounting Standards for Business Enterprise No. 14 – Revenue (“Revenue Standard”), such initialamount is measured by the transaction price as defined under the Revenue Standard.
Effective interest rate method refers to the method of calculating the amortized cost of financial asset or financial liabilityand apportioning interest income or interest expenses to each accounting period.
Effective interest rate refers to the interest rate used for discounting the estimated future cash flows of a financial asset ora financial liability for an expected subsisting period into the balance of book value of the financial asset or the amortizedcost of the financial liability. When determining the effective interest rate, the expected cash flows are estimated on thebasis of considering all contractual terms of the financial asset or financial liability (such as early repayment, extendedterm, call option or other similar option) but without considering the expected credit loss.
The amortized cost of a financial asset or a financial liability refers to the initial recognition amount of such financial assetor financial liability, less the repaid amount of principal, plus or minus the accrued amortized amount calculated byamortization of the difference between the initial recognition amount and the amount on maturity by using the effectiveinterest rate method, and then deducts the accrued provision for losses (only applicable to financial assets).
10.1 Classification and Measurement of Financial Assets
After initial recognition, the Group will adopt amortized cost, fair value through other comprehensive income, or fair valuethrough profit and loss for subsequent measurement depending on different categories of financial assets.
The Group will classify a financial asset into a financial asset measured at amortized cost if the contractual terms of thefinancial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principalamount outstanding and the financial asset is held within a business model whose objective is to hold financial assets inorder to collect contractual cash flows. Financial assets classified by the Group as financial asset measured by amortizedcost include cash and cash equivalents, notes receivables and accounts receivable, some of the other receivables and long-term receivables.
The Group will classify a financial asset into a financial asset measured by fair value through other comprehensive incomeif the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principaland interest on the principal amount outstanding, and the financial asset is held within a business model whose objectiveis achieved by both collecting contractual cash flows and selling the financial assets. This category of financial assetsmainly includes financial assets with a maturity of more than one year from the date of acquisition and which are presentedunder other debt investments, financial assets maturing within one year (inclusive) from the balance sheet date and whichare presented under non-current assets maturing within one year, as well as the accounts receivable and notes receivableclassified as fair value at the time of acquisition and their changes are included in other comprehensive income are listedin the receivables for financing, and for those have acquisition period within one year (including one year) are listed inother current assets.
At the time of initial recognition, the Group may, on the basis of a single financial asset, irrevocably designate aninvestment in an equity instrument held for non-trading purpose recognized or without consideration in a business mergernot under common control as a financial asset at fair value through other comprehensive income. This type of financialassets is presented as investment in other equity instruments.
Financial assets which have satisfied one of the following conditions indicate that such financial assets are held for tradingpurpose by the Group:
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
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? The purpose of acquiring the relevant financial asset is mainly for sale in recent period.? At the time of initial recognition, the relevant financial asset is a part of an identifiable portfolio of financialinstruments under collective management, and there is objective evidence showing a recent and actual existence of short-term profitable mode.
? The relevant financial assets are derivatives, excluding derivatives which satisfy the definition under financialguarantee contracts and derivatives which are designated as effective hedging instruments.
Financial assets at fair value through profit and loss include financial assets which are classified as financial assets at fairvalue through profit and loss and financial assets designated at fair value through profit and loss:
? Financial assets which do not satisfy the conditions of being classified as financial assets measured at amortized costor as financial assets at fair value through other comprehensive income, they will be classified as financial assets at fairvalue through profit and loss.
? At the time of initial recognition, in order to eliminate or substantially reduce mismatch in accounting, the Groupmay irrevocably designate a financial asset as a financial asset measured at fair value with changes through profit and loss.
Financial assets at fair value through profit and loss will be presented as held-for-trading financial assets. If such financialassets have a maturity of more than one year from the balance sheet date (or without a fixed maturity) and which areexpected to be held for more than one year, they will be presented under other non-current financial assets.
10.1.1 Financial assets measured at amortized cost
Financial assets measured at amortized cost adopt the effective interest rate method for subsequent measurement accordingto amortized cost, the profit or loss when impairment occurs or upon derecognition will be accounted in profit and loss ofthe current period.
The Group recognizes interest income by using effective interest rate method for financial assets measured at amortizedcost. The Group determines interest income by multiplying the balance of book value of financial assets with the effectiveinterest rate except under the following circumstances:
? For acquired or generated financial assets which incurred credit impairment already, their interest income will bedetermined by using the amortized cost of such financial asset calculated with the credit adjusted effective interest rate.
? For acquired or generated financial assets which have not incurred credit impairment but incur credit impairment inthe subsequent period, the Group will determine their interest income by using the amortized cost of such financial assetsmultiplied with the effective interest rate in the subsequent period. If such financial asset ceases to have credit impairmentdue to improvement in credit risk in the subsequent period, then the Group should change to multiply the effective interestrate with the balance of book value of such financial asset instead to determine the interest income.
10.1.2 Financial asset at fair value through other comprehensive income
The impairment loss or profit, or interest income calculated by using the effective interest rate method, relating to financialasset at fair value through other comprehensive income should be accounted in the profit and loss of the current period,and other changes in fair value of such financial assets will be accounted in other comprehensive income. The amountcharged by such financial asset to the profit and loss of each period is deemed to be equal to the amount which has beenmeasured by amortized cost and charged to the profit and loss of each period. Upon derecognition of such financial asset,the accumulated profit or loss previously charged to other comprehensive income will be reversed from othercomprehensive income and charged to profit and loss of the current period.
For non-trading equity instrument investment designated at fair value through other comprehensive income, its changesin fair value will be recognized in other comprehensive income. Upon derecognition of such financial asset, theaccumulated profit or loss charged to other comprehensive income will be reversed from other comprehensive income andcharged to retained earnings. During the period when such investment in equity instruments for non-trading purpose areheld by the Group, the right to receive dividends by the Group has been established, and economic benefits related todividends are likely to flow into the Group, and if the amount of dividends may be measured reliably, the dividend income
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
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is recognized and accounted in the profit and loss of the current period.
10.1.3 Financial asset at fair value through profit and loss
For financial asset at fair value through profit and loss, subsequent measurement will be calculated at fair value, the profitor loss arising from changes in fair value and the dividend and interest income relating to such financial asset will beaccounted in the profit and loss of the current period.
10.2 Impairment of Financial Assets
For financial assets measured at amortized cost and classified as financial asset at fair value through other comprehensiveincome, the Group will handle impairment on the basis of expected credit loss and recognize loss provision.
For the receivables in the contracts that are generated by the transactions governed by revenue standards and that do notcontain any major financial components or the financial components in the contracts that are valid for more than one year,the loss reserve will be measured based on the amount of the expected credit loss in the entire life.
For other financial instruments, other than acquired or generated financial assets which have incurred credit impairmentalready, the Group will assess on each balance sheet date the changes in credit risk of the relevant financial instrumentssince initial recognition. If the credit risk of such financial asset has significantly increased after initial recognition, theGroup will calculate its loss provision based on the amount equivalent to the expected credit loss for the entire subsistingperiod. If the credit risk of such financial asset since initial recognition has not increased significantly, the Group willcalculate its loss provision according to the expected credit loss amount of such financial asset for the next 12 months.The amount of increase or reversal in the provision for credit loss, apart from financial assets classified as financial assetat fair value through other comprehensive income, is accounted in the profit and loss of the current period. For financialasset classified as measured at fair value through other comprehensive income, the Group will recognize its credit lossprovision in other comprehensive income and charged the impairment loss or gain to the profit and loss of the currentperiod, and will not decrease the book value of such financial asset presented in the balance sheet.
The Group has calculated the loss provision equivalent to the expected credit loss amount for the entire subsisting periodof the financial instrument in the preceding accounting period, but at the balance sheet date of the current period, suchfinancial instrument is no longer under the condition of significant increase in credit risk since initial recognition, theGroup calculates the loss provision for such financial instrument on the balance sheet date of the current period accordingto an amount equivalent to the expected credit loss for the next 12 months, and the resulting loss provision reversal amountwill be counted as impairment gain and booked into the profit and loss of the current period.
10.2.1 Significant increase in credit risk
The Group uses available and reasonable forward-looking information with justification, by comparing the default risk ofthe financial instrument at the balance sheet date with the default risk on the initial recognition date, to confirm whetherthe credit risk of the financial instrument has significantly increased after initial recognition. When using the financialinstrument impairment rules for loan commitment and financial guarantee contracts, the date when the Group becomes aparty of an irrevocable commitment is deemed as the initial recognition date.
The Group considers the following factors when assessing whether the credit risk has significantly increased:
(1) Whether a significant change has been caused to the internal price indicator due to changes in credit risk.
(2) Whether the external credit rating of financial instrument has actual or expected significant changes.
(3) Whether the actual or expected internal credit rating of the debtor has been downgraded.
(4) Whether adverse changes have occurred in the business, finance or economic conditions which are expected to causesignificant changes in the capability of the debtor to perform debt repayment obligations.
(5) Whether actual or expected significant changes have occurred in the operating results of the debtor.
(6) Whether significant adverse changes have occurred in the supervision, economic or technical environment in whichthe debtor operates.
(7) Whether significant changes have occurred in the value of security pledged for the debt or the quality of guaranteeor credit enhancement provided by third parties. Such changes are expected to reduce the debtor’s economic
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
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2019
motivation of repayment according to contractual term or influence the probability of default.
(8) Whether significant changes have occurred in the economic motivation which will lower the expectation ofrepayment by the borrower according to the contractual term.
(9) Whether significant changes have occurred in the expected performance and repayment behavior of the debtor.
Whether or not the credit risks increase significantly after the foregoing assessments, the Group Managementcomprehensively assesses the payment cycles of the customer base and the transaction practices traditionally formed. Ifany contractual payment for any financial instrument is overdue for over (including) 30 days, it indicates the credit risksof that financial instrument have increased significantly.
On the balance sheet date, if the Group determines that the financial instrument only carries low credit risks, then it assumesthat the credit risks of the financial instrument have not increased significantly since the initial recognition. If the risk ofdefault on financial instruments is low, the borrower is highly able to perform its contractual cash flow obligations in theshort term, and even if the economic situation and operating environment are adversely changed over a long period of timebut not necessarily reducing the borrower’s performance of its contractual cash obligations, the financial instrument isconsidered as having a lower credit risk.
10.2.2 Financial assets which have incurred credit impairment already
When one or more events which will have adverse effect on the expected future cash flows from the financial asset of theGroup have occurred, such financial asset will become a financial asset which have incurred credit impairment already.The evidence of credit impairment occurred in a financial asset includes the following observable information:
(1) Material financial difficulties have occurred in the issuer or debtor;
(2) Breach of contract by the debtor, such as default or overdue in the payment of interest or repayment of principal;
(3) Due to economic or contractual considerations relating to financial difficulties of the debtor, the creditor has grantedconcession to the debtor under no other circumstances;
(4) The debtor is likely to go bankrupt or carry out other financial restructuring;
(5) The financial difficulties of the issuer or debtor have caused the disappearance of the active market for the financialasset;
(6) The purchase or generation of a financial asset at a large discount, such discount reflects the fact of occurrence of creditloss.
10.2.3 Confirmation of expected credit loss
The Group uses the impairment matrix to identify the credit losses of the financial instruments on a portfolio basis ofaccounts receivable, other receivables and long-term receivables; and the Group determines credit losses by assessing theirprobability of breach and loss given default based on their credit rating on a portfolio basis of notes receivable andreceivables. On the basis of common risk characteristics, the Group places financial instruments in different groups. Thecommon credit risk characteristics adopted by the Group include: financial instrument type, credit risk rating, initialrecognition date, remaining contract period, industry of debtor, geographic location of debtor, and etc.
The Group confirms the expected credit loss of the relevant financial instrument according to the following method:
? In respect of a financial asset, the credit loss is the present value of the difference between the contractual cashflows receivable and the cash flows expected to receive by the Group.? In respect of a financial guarantee contrac (for specific accounting policies, please refer to Note (3), 10.4.1.2.1),the credit loss is the present value of the difference between Group’s expected payment amount for thecompensation made to the contract holder due to the occurrence of credit loss and the amount expected to bereceived by the Group from such contract holder, debtor or any other parties.? In respect of financial assets with credit impairment on the balance sheet date but they are not acquired orgenerated financial assets with credit impairment, the credit loss represents the difference between the balanceof the book value of such financial asset and the present value of the estimated future cash flows discounted bythe original effective interest rate.
The factors reflected by the method used for calculating expected credit loss of financial instruments by the Group include:
an unbiased weighted average amount determined by assessing a series of probable outcomes; time value of currency;
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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reasonable and justifiable information relating to past events, prevailing conditions and forecast of future economicconditions obtained on the balance sheet date without incurring unnecessary additional cost or effort.
10.2.4 Write-off on financial asset
When the Group ceases to have reasonable expectation on the possible collection of all or part of the contractual cashflows from the financial asset, the balance of book value of such financial asset will be written off directly. Such a write-off constitutes a de-recognition of the relevant financial asset.
10.3 Transfer of financial asset
A financial asset that fulfills one of the following conditions will be de-recognized: (1) termination of contractual rightsto receive cash flows from the financial asset; (2) upon transfer of such financial asset and transfer of substantially all therisks and rewards in respect of the ownership of such financial asset to the transferee; (3) upon transfer of such financialasset, though the Group has not transferred nor retained substantially all the risks and rewards in respect of the ownershipof such financial asset, yet it has not retained the control over such financial asset.
If the Group has not transferred nor retained substantially all the risks and rewards in respect of the ownership of suchfinancial asset, and has retained the control over such financial asset, then such transferred financial asset will continue tobe recognized, and the relevant liabilities will continue to be recognized, according to the level of the Group’s continuousinvolvement in such transferred financial asset. The relevant liabilities will be measured by the Group according to thefollowing method:
? If the transferred financial asset is measured by amortized cost, the book value of the relevant liabilities is equivalentto the book value of the transferred asset of continuous involvement less the amortized cost of the rights retained by theGroup (if the Group has retained the relevant rights due to transfer of the financial asset) and plus the amortized cost ofthe obligations undertaken by the Group (if the Group has undertaken the relevant obligations due to transfer of thefinancial asset), and the relevant liabilities are not designated as financial liabilities at fair value through profit and loss ofthe current period.
? If the transferred financial asset is measured by fair value, the book value of the relevant liabilities is equivalent tothe book value of the transferred asset of continuous involvement less the fair value of the rights retained by the Group (ifthe Group has retained the relevant rights due to transfer of the financial asset) and plus the fair value of the obligationsundertaken by the Group (if the Group has undertaken the relevant obligations due to transfer of the financial asset), andthe fair value of the rights and obligations shall be measured at the fair value on a separate basis.
For full transfer, which satisfies the conditions of derecognition, of the financial assets, the difference between the sum ofthe book value of the transferred financial assets as at the date of derecognition and the consideration received from suchtransfer and the accumulated amount of change in fair value originally included in other comprehensive income, whichcorresponds to the amount in respect of derecognition, shall be recognized in the profit and loss for the current period. Ifthe transfer of the financial assets by the Group is designated as investment in equity instrument held for non-tradingpurpose measured at fair value through other comprehensive income, the accumulated gains or losses previously includedin other comprehensive income shall be transferred out from other comprehensive income and be included in retainedearnings.
For transfer in part, which satisfies the conditions of derecognition, of the financial assets, the book value of the entirefinancial assets before the transfer shall be shared between the derecognized portion and the continuous recognition portionat their respective relative fair value on the date of transfer, and the difference between the sum of the considerationreceived from derecognition and the accumulated amount of change in fair value originally included in othercomprehensive income, which corresponds to the amount in respect of derecognition, and the book value of thederecognized portion as at the date of derecognition shall be included in the profit and loss of the current period. If thetransfer of the financial assets by the Group is designated as investment in equity instrument for non-trading purposemeasured at fair value through other comprehensive income, the accumulated gains or losses previously included in othercomprehensive income shall be transferred out from other comprehensive income and be included in retained earnings.
For full transfer, which does not satisfy the conditions of derecognition, of the financial assets, the Group will continue torecognize the entire financial assets transferred and the consideration received as a result of the asset transfer is recognizedas a liability when received.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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10.4 Classification and measurement of financial liabilities and equity instruments
Pursuant to the contractual terms of the issued financial instruments and the substantive economic condition as reflected,but not in legal terms only, combined with the definitions of financial liabilities and equity instruments, the Group hasclassified such financial instruments or the components thereof as financial liabilities or equity instruments upon initialrecognition.
10.4.1 Classification and measurement of financial liabilities
Financial liabilities are classified into financial liabilities at fair value through profit and loss of the current period andother financial liabilities upon initial recognition.
10.4.1.1 Financial liabilities at fair value through profit and loss of the current period
Financial liabilities at fair value through profit and loss of the current period comprise of financial liabilities held fortrading purpose (including derivatives of financial liabilities) and financial liabilities designated as measured at fair valuethrough profit and loss of the current period. Except for derivatives of financial liabilities, which are presented separately,financial liabilities at fair value through profit and loss of the current period are presented as financial liabilities held fortrading.
Financial liabilities that fulfill one of the following conditions suggest that the Group assumes such financial liabilities fortrading purpose:
? Assumption of the relevant financial liabilities is mainly for the purpose of the recent repurchases.? The relevant financial liabilities, upon initial recognition, are part of a portfolio of identifiable financial instruments
under centralized management, and available objective evidence shows the recent and actual existence of a short-term profit-making model.? The relevant financial liabilities are derivatives, except derivatives which satisfy the definition of financial guarantee
contract and derivatives designated as effective hedging instruments.
Financial liabilities can be designated, upon initial recognition, by the Group as financial liabilities at fair value throughprofit and loss of the current period, provided that they have satisfied one of the following conditions: (1) such designationcan eliminate or substantially reduce accounting mismatches; (2) managing and evaluating the performance of portfoliosof financial liabilities, or portfolios of financial assets and financial liabilities, on fair value basis and reporting internallyto key personnel of the Group on this basis in accordance with the risk management or investment strategies specified informal written documents of the Group; (3) hybrid contracts, with embedded derivatives, have satisfied the conditions.
Financial liabilities held for trading purpose use fair value for subsequent measurement, gains or losses arise from changesin fair value and the dividends or interest expenses relating to such financial liabilities are accounted in the profit and lossof the current period.
For financial liabilities designated at fair value through profit and loss of the current period, changes in fair value of suchfinancial liabilities caused by changes in the Group’s own credit risks shall be included in other comprehensive income,and other changes in fair value shall be included in the profit and loss of the current period. On derecognition of suchfinancial liabilities, the accumulated amount of changes in fair value as a result of changes in our own credit risk includedpreviously in other comprehensive income shall be transferred to retained earnings. Dividends or interest expenses relatingto such financial liabilities shall be included in the profit and loss of the current period. If handling the effect of changesin credit risk of such financial liabilities according to the aforesaid method would cause or magnify the accountingmismatches in profit and loss, the Group will include all gains or losses of those financial liabilities (including the amountaffected by changes in their own credit risk) in the profit and losses of the current period.
10.4.1.2 Other financial liabilities
Excluding transfer of financial assets not complying with derecognition conditions, or financial liabilities as a result ofcontinuous involvement in transferred financial assets, the other financial liabilities will be classified as financial liabilitiesmeasured at amortized cost, subsequent measurement will be based on amortized cost, gains or losses on derecognition oramortization will be accounted in the profit and loss of the current period.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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st2019
If the Group and the counterparty have revised or renegotiated the contract, this has not resulted in the derecognition offinancial liabilities measured at amortized cost for subsequent measurement, but has caused changes in the contractualcash flows, then the Group should recalculate the book value of such financial liabilities, and the relevant gains or lossesshall be accounted in the profit and loss of the current period. The recalculated book value of such financial liabilities willbe determined by the Group by discounting the cash flows from the renegotiated or revised contract with the original effectinterest rate of the financial liabilities. All costs or expenses incurred in the revision or renegotiation of the contract willbe reflected in the adjusted book value of financial liabilities after such revision, and will be amortized during theremaining period of the revised financial liabilities.
10.4.1.2.1 Financial guarantee contract
Financial guarantee contract refers to a contract that requests the issuer to provide a specific amount of compensation tothe contract holder who suffers losses when a specific debtor fails to repay the debt on due date according to the initial orrevised terms of the debt instrument. In respect of financial liabilities which are not designated at fair value through profitand loss of the current period, or in respect of financial guarantee contract for financial liabilities arising from transfer offinancial assets not complying with derecognition conditions or continuous involvement in the transferred financial assets,the measurement after initial recognition will be based on the amount of provision for losses, or the balance of initialrecognized amount after deducting the accumulated amortized amount confirmed in accordance with the relevantprovisions of the Revenue Standard, whichever the higher.
10.4.2 Derecognition of financial liabilities
When the existing obligations of a financial liability have been wholly or partially discharged, such financial liability orsuch part of it will be derecognized. When the Group (as borrower) and the lender enter into an agreement to undertakenew financial liabilities for replacing the original financial liabilities, if substantive difference exists in the contractualterms between the new financial liabilities and the original financial liabilities, the Group should derecognize the originalfinancial liabilities while at the same time recognizes the new financial liabilities.
When a financial liability is wholly or partially derecognized, the difference between the book value of the derecognizedportion and the consideration paid (including non-cash asset transferred out or new financial liabilities undertaken) willbe accounted in the profit and loss of the current period.
10.4.3 Equity instrument
Equity instrument refers to a contract which can prove the ownership of remainder interest in assets after deducting allliabilities of the Group. The Group issues (including refinances), repurchases, sells or cancels equity instruments fortreatment of changes in equity. The Group will not recognize changes in the fair value of equity instruments. Tradingexpenses relating to equity transactions will be deducted from equity.
The Group’s distribution to holder of equity instrument is treated as profit distribution, the share dividends paid out willnot affect the total equity of shareholders.
10.5 Derivatives and embedded derivatives
Derivatives include foreign exchange forward contract, currency exchange rate swap contract, and foreign exchange optioncontract, etc. Derivatives are measured at fair value initially on the date of signing the relevant contract and will bemeasured at fair value for subsequent measurement.
For a hybrid contract constituted by an embedded derivative and a master contract, if the master contract is in respect of afinancial asset, the Group will not split the embedded derivative from the hybrid contract, but will consider such hybridcontract as a whole unit to which the accounting standards and rules for classification of financial assets are applicable.
If the master contract included in the hybrid contract is not in respect of a financial asset, and fulfills the followingconditions at the same time, the Group will split the embedded derivative from the hybrid contract to be treated as aseparate subsisting derivative.
(1) The economic characteristics and risks of the embedded derivative are not closely connected to the economic
characteristics and risks of the master contract.
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(2) A separate instrument containing the same terms as the embedded derivative fits the definition of a derivative.
(3) The hybrid contract is not measured at fair value and changes in fair value are accounted through profit and loss ofthe current period.
If an embedded derivative is split from the hybrid contract, the accounting treatment adopted by the Group for the mastercontract within the hybrid contract will be in accordance with the applicable accounting standards and rules. If the Groupis unable to measure the fair value of the embedded derivative reliably according to the terms and conditions of theembedded derivative, the fair value of such embedded derivative will be determined by the difference between the fairvalue of the hybrid contract and the fair value of the master contract. After adoption of the above method, if the fair valueof such embedded derivative is still unable to be measured separately on the acquisition date or subsequent balance sheetdate, the Group will designate the entire hybrid contract as a financial instrument measured at fair value through profit andloss of the current period.
10.6 Offsetting between financial assets and financial liabilities
When the Group has legal right to offset the recognized financial assets and financial liabilities, and such legal right isenforceable currently, while at the same time the Group plans to perform netting settlement, or to liquidate the financialasset and repay the financial liability at the same time, the amount after offsetting between the financial asset and financialliability will be presented in the balance sheet. Save as said above, the financial asset and financial liability are presentedseparately in the balance sheet without offsetting each other.
11. Receivables for financing
Among the notes receivable measured at fair value through other comprehensive income, the ones with a term of less than(including) one year since they are acquired will be listed as receivables for financing; the ones with a term of more than(including) one year since they are acquired will be listed as other debt investment. The relevant accounting policy isexplained in Note (III), 10.1, 10.2 and 10.3.
12. Inventories
12.1 Categories of inventories
The Group's inventories mainly include finished goods or commodities held for sale in the daily activities, completedoutstanding assets formed in the construction contract, products in the production process, materials and supplies used inthe production process or in the process of proving labor service. Inventories are initially measured at cost. Cost ofinventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventoriesto their present location and condition.
12.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the moving weighted average method.
12.3 Basis for determining net realizable value of inventories
The inventory is measured according to cost and net realizable value, whichever is lower, on the date of balance sheet.When the net realizable value is lower than cost, withdraw inventory impairment reserves.
The net realizable value refers to the amount derived by deducting the potential cost, estimated selling expense and relativetaxes to the completion date from the estimated sales price of inventory in daily activities. When determining net realizablevalue of inventories, take the obtained conclusive evidence as basis and consider the purposes of holding inventories andinfluence of events after the balance sheet date.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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For the low-price stocks in large quantity, provision for the inventory price drops will be made based on the categories ofstocks; for the stocks that are related to the products manufactured and sold in the same region, that have identical orsimilar ultimate use or purpose and that are hard to separate from other items when being measured, they are consolidatedfor provision for the inventory price drops; for other stocks, the provision for the inventory price drops will be made basedon the cost of a single stock item in excess of the net realizable value.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down of inventoryimpairment have disappeared and causing the net realizable value higher than its book value, such inventory impairmentprovision are recovered and reversed, and the reversed amount recorded in profits and losses of the current period.
12.4 Inventory count system
The perpetual inventory system is maintained for stock system.
12.5 Amortization method for low cost and short-lived consumable items and packaging materials
Packaging materials and low cost and short-lived consumable items are amortized using the immediate write-off method.
13. Long-term Equity Investment
13.1 Basis for determining joint control and significant influence over investee
Control is the power to govern an entity through participating in relevant activities of the investee; the investor is able toobtain variable benefits from its activities, and at same time, to use the control rights on the investee to influence theamount of returns. Joint control means that joint control for certain arrangement in accordance with relevant agreements;activities relevant to the arrangement cannot be decided until obtaining the unanimous consent of parties sharing controlright. Significant influence is the power to participate in the financial and operating policy decisions of the investee but isnot control or joint control over those policies. When determining whether an investing enterprise is able to exercisecontrol or significant influence over an investee, the effect of potential voting rights of the investee, such as currentconvertible debts, current executable warrants, etc., held by the investing enterprises or other parties shall be considered.
13.2 Determination of initial investment cost
For a long-term equity, investment acquired through a business combination involving enterprises under common control,the shares of merged party's book value of owners' equity in the final controlling party consolidated financial statementsobtained on the merger date shall be considered as the initial investment cost of long-term equity investment. Thedifferences between the initial investment cost of long-term equity investment and the paid cash, the transferred non-cashassets and the book value of the assumed debts are adjusted against the capital surplus; if the capital surplus is not sufficientto be offset, the remaining balance is adjusted against retained earnings. In the case of issued equity securities treated asconsolidation consideration, share of book value of owner's equity of merged party in the final controlling partyconsolidated financial statements is regarded as initial investment cost of long-term equity investments on the date ofconsolidation; capital reserve shall be adjusted in accordance with taking total nominal value of issued share as capitalshare, the difference between the initial investment cost of long-term equity investments and total book value of issuedshares; In case the capital reserve is not enough for writing down, the retained earnings shall be adjusted.
For a long-term equity investment acquired through business combination not involving enterprises under common control,and the merging cost confirmed on the purchased date are regarded as the initial investment cost. In the case that the equityof the acquiree is obtained through multiple deals step by step to finally form the business combination not under the
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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common control, the business combination shall be handled differently based on whether it is a "package deal": where itis a package deal, the Company accounts each deal as a deal to obtain the control. Otherwise, the Group shall measure theinitial investment cost of long-term equity investment accounted using cost method at the sum of book value of equityinvestment of the combined part originally held and investment cost additionally paid.
The intermediate expenses made by the combining party or purchaser for audit, legal service, assessment and othermanagement related expenses during the business merger should be included into the current profit and loss as it happens.
Conduct initial measurement according the cost for other equity investment other than the long-term equity investmentformed in business merger. In case that the investor may post a significant impact on the investee or execute joint controlbut not constitute the control right, long-term equity investment cost is the sum of fair value of original-held equityinvestment plus newly-added investment cost in accordance with No. 22 Accounting Standards for Business Enterprises----Recognition and Measure of the Financial Instruments.
13.3 Subsequent measurement and recognition of profit or loss
13.3.1 Long-term equity investment accounted for using the cost method
Long-term equity investments in subsidiaries are accounted for using the cost method in the Company's financialstatements. A subsidiary is an investee that is controlled by the Group.
The long-term equity investment accounted by the cost method shall be measured at its initial investment cost. If there areadditional investments or disinvestments, the long-term equity investment cost shall be adjusted. Income from theinvestment in the current period shall be recognized in accordance with the cash dividends or profits declared and issuedby the investee.
13.3.2 Long-term equity investment accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An associate is an entityover which the Group has significant influence and a joint venture is an entity over which the Group can only exercisejoint control along with other investors on the investee’s net assets.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group’s share ofthe fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment is made to the initialinvestment cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’sidentifiable net assets at the time of acquisition, the difference is recognized in profit or loss for the period, and the cost ofthe long-term equity investment is adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of theinvestee for the period as investment income or loss and comprehensive income for the period, meanwhile, the book valueof the long-term equity investment shall be adjusted; The Group shall accordingly reduce the book value of the long-termequity investment in terms of the part that shall be enjoyed according to the profit or cash dividends declared by theinvested unit to be distributed; For other changes in the owners' equity of the invested unit other than net profits and losses,other comprehensive incomes and the profit distribution, the book value of long-term equity investment shall be adjustedand be included into the capital reserves. The Group shall, on the ground of the fair value of all identifiable assets of theinvested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the investedentity after it adjusts the net profits of the invested entity. If the accounting policies and accounting periods adopted by theinvested unit are different from those adopted by the Group, the adjustment shall be made for the financial statements ofthe invested unit in accordance with the accounting policies and accounting periods of the Group to recognize the
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
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investment income and other comprehensive incomes. For the transaction incurred between the group and associatedenterprises and joint ventures, invested or sold assets don't constitute a business, the part that doesn't achieve internaltransaction profit or loss or belongs to the Group calculated according to the enjoyed ratio will be offset, and the profit orloss on investment will be confirmed on this basis. But for the unrealized loss arising from the internal transaction betweenthe Group and the invested unit, if such transaction loss is defined as the impairment loss of the transferred asset, theycannot be offset.
When the Group determines the net loss of the invested unit that shall be shared, it is necessary to write-down the bookvalue of the long-term equity investment and other long-term equities substantially constituting the net investment of theinvested unit to zero as a limit. Besides, if the Group is obliged to bear extra loss for the invested unit, it shall be necessaryto determine provisions and record them to current investment loss in compliance with obligations expected to be assumed.If the invested unit realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsetsits attributable share of the un-confirmed losses, resume recognizing its attributable share of profits.
13.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually received and the carryingamount is recognized in profit or loss for the period.
14. Fixed Assets
14.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others,or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized onlywhen it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can bemeasured reliably. Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable thateconomic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measuredreliably. Meanwhile the carrying amount of the replaced part is derecognized. Other subsequent expenditures arerecognized in profit or loss in the period in which they are incurred.
14.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one inwhich it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of eachcategory of fixed assets are as follows:
| Class | Depreciation period (years) | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings and Constructions | 20 years | 10 | 4.5 |
| General-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Special-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Means of transportation | 5 years | 10 | 18.0 |
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Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposalof the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the conditionexpected at the end of its useful life.
14.3 Identification basis and valuation methods for fixed assets acquired under finance leases
On the commencement date of the lease term, record the lower of the fair value of the leasing asset or the present value ofthe minimum lease payments on the lease commencement date as the entry book value of the leased asset, and book theamount of the minimum lease payments as the entry book value of long-term account payable, and recognize the differencebetween the entry value of the leased asset and that of the long-term account payables as unrecognized financing expenses.In addition, the initial direct costs directly attributable to the leased item incurred during the process of negotiating thelease and signing the leasing agreement shall be included into the value of the leased assets.
The Group adopts a depreciation policy for a fixed asset held under a finance lease which is consistent with that for itsowned fixed asset. If there is reasonable certainty that the Group will obtain ownership of the leased asset at the end of thelease term, the leased asset is depreciated over its useful life. If there is no reasonable certainty that the Group will obtainownership of the leased asset at the end of the lease term, the leased asset is depreciated over the shorter of the lease termand its useful life.
14.4 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, thefixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds ondisposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied atleast once at each financial year-end, and account for any change as a change in an accounting estimate.
15. Construction in Process
Construction in progress is measured at its actual costs. The actual costs include various construction expenditures duringthe construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs.Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready forintended use.
16. Borrowing Costs
Borrowing costs directly attributable to the acquisition & construction or production of assets eligible for capitalizationshall be capitalized when assets expenditure, borrowing costs and necessary construction or production for bringing assetsto expected conditions for use or marketing have taken place; when construction or production of assets ready forcapitalization reach to expected conditions for use or marketing, capitalization shall be ceased. Other borrowing expensesare recognized as expenses in the current period.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interestexpense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds beforebeing used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowedunder general-purpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings byapplying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the
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amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable tothe general-purpose borrowings. During the capitalization period, exchange differences related to a specific-purposeborrowing denominated in foreign currency are all capitalized. Exchange differences in connection with general-purposeborrowings are recognized in profit or loss in the period in which they are incurred.
17. Intangible Assets
17.1 Intangible Assets Valuation Method and Service Life
Intangible assets include land use right, intellectual property (IP) and application software, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available for use, itsoriginal cost is amortized over its estimated useful life using the straight-line method. The useful life and predicted netresidual value of various intangible assets are shown as follows:
| Class | Service life (year) | Salvage value rate (%) |
| Land use right | 40 or 50 years | - |
| IP Right | 10 Years | - |
| Application Software | 5-10 years | - |
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If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes allof them in profit or loss for the period. The costs of the intangible assets generated by internal development activities onlyinclude the total expenditure incurred from the time point when the capitalization conditions are available to the pointwhen the intangible assets are used for their intended purposes; for the expenditure that already becomes an expenditurein the profit and loss statement before the capitalization conditions are available during development of the same intangibleasset, no adjustment will be made.
18. Long-term Assets Impairment
The Group assesses at each balance sheet date whether there is any indication that the long-term equity investment, fixedassets, construction in process and intangible assets with a finite useful life may be impaired. If there is any indication thatsuch assets may be impaired, recoverable amounts are estimated for such assets. Intangible assets with indefinite usefullife and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is anyindication that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount of anindividual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. The recoverableamount is determined by the higher of 1) net amount of fair value of the asset or asset group deducted by the disposalexpenses; or 2) the present value of the expected future cash flows of the asset or asset group.
If the recoverable amount of an asset or an asset group is less than its carrying amount, the deficit is accounted as animpairment provision and is recognized in profit or loss for the period.
Goodwill impairment test shall be conducted at the end of each year at least. Goodwill impairment test shall be conductedin accordance with the concerned asset group or asset portfolio. That is to allocate the book value of goodwill to the assetgroup or asset portfolio that is expected to benefit from the synergies of the combination in a reasonable way from the dateof purchasing. When recoverable amount of apportion-included asset group or asset portfolio of goodwill is less than bookvalue of goodwill, impairment loss shall be recognized. Firstly, amount of impairment loss shall be apportioned to thebook value of goodwill of the said asset group or asset portfolio, and then book value of other assets, except for goodwill,in asset group or asset portfolio shall be abated in proportion.
Once the impairment loss of such assets is recognized, it can not be reversed in any subsequent period.
19. Long-term unamortized expenses
Long-term unamortized expenses are the expenses that are already incurred but will be shared in the current year and laterperiod with amortization term of more than one year, including the expenses on betterment of leased fixed assets. Long-term unamortized expenses are evenly amortized in installments in three years during the expected benefit period.
20. Employee compensation
20.1 Accountant Arrangement Method of Short-term Remuneration
During accounting period when the Group's employees provide services, actual short-term remuneration shall berecognized as the liabilities and current profit and loss or relevant asset cost. The Group’s employee benefits and welfareare included into current profit and loss or relevant asset cost according to actual amount occurred during the period. Ifthe employee benefits and welfare is non-monetary, it shall be measured according to its fair value.
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During the accounting period that the employees service the Group, the Group pays social insurance premiums such asmedical insurance premium, industrial injury insurance premium, maternity insurance premium and housing accumulationfund for its employees, as well as labor union expenditure and employee education expenses calculated and withdrawnaccording to the regulations, corresponding employee remuneration amount shall be calculated and determined inaccordance with specified calculation and withdrawal basis and proportion to recognize corresponding liabilities andincluded into the current profit and loss or relevant asset cost.
20.2 Accountant Arrangement Method of Post-employment Benefits
All post-employment benefits shall be considered as the defined contribution plan.
In the accounting period when the employee serves for the Group, the deposited amount calculated based on definedcontribution plan shall be recognized as liabilities and included in the current profit and loss or relevant asset cost.
20.3 Accountant Arrangement Method of the Termination Benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by such termination benefitswill be determined as the following date, whichever is earlier, and will be included in the current profit and loss: 1) Whenthe Group cannot unilaterally withdraw the termination benefits provided due to labor relation cancellation plan oremployee lay-off suggestion; or 2）when the Group determines costs or expenses in relation with the restructuring of thepaid termination benefits.
21. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency such as products qualityassurance, etc. And it is probable that an outflow of economic benefits will be required to settle the obligation, and theamount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation atthe balance sheet date, taking into account factors pertaining to a contingency such as the risks, uncertainties and timevalue of money. Where the effect of the time value of money is material, the amount of the provision is determined bydiscounting the related future cash outflows.
22. Share-based Payment
Share-based payment refers to a transaction in which the Group grants the equity instruments or undertakes the equity-instrument-based liabilities in return for services from employees. The Group's share-based payment is an equity-settledshare-based payment.
A share-based payment is a transaction which the Group grants equity instruments, or incurs liabilities for amounts thatare determined based on the price of equity instruments, in return for services rendered by employees. The Group's share-based payments are equity-settled share-based payments.
22.1 Equity-settled share-based payments
Grants to employees are equity-settled share-based payments.
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Equity-settled share-based payments in exchange for services rendered by employees are measured at the fair value of theequity instruments granted to employees at the grant date. Such amount is recognized as related costs or expenses on astraight-line basis over the vesting period, with a corresponding increase in capital reserve.
At each balance sheet date during the vesting period, the Group makes the best estimate according to the subsequent latestinformation of change in the number of employees who are granted with options that may vest, etc. and revises the numberof equity instruments expected to vest. The effect of the above estimate is recognized as related costs or expenses, with acorresponding adjustment to capital reserve.
22.2. Accounting treatment related to implementation, modification and termination of share-based payment arrangement
In case the Group modifies a share-based payment arrangement, if the modification increases the fair value of the equityinstruments granted, the Group will include the incremental fair value of the equity instruments granted in the measurementof the amount recognized for services received. If the modification increases the number of the equity instruments granted,the Group will include the fair value of additional equity instruments granted in the measurement of the amount recognizedfor services received. The increase in the fair value of the equity instruments granted is the difference between fair valueof the equity instruments before and after the modification on the date of the modification. If the Group modifies the termsor conditions of the share-based payment arrangement in a manner that reduces the total fair value of the share-basedpayment arrangement, or is not otherwise beneficial to the employee, the Group will continue to account for the servicesreceived as if that modification had not occurred, other than a cancellation of some or all the equity instruments granted.
If cancellation of the equity instruments granted occurs during the vesting period, the Group will account for thecancellation of the equity instruments granted as an acceleration of vesting, and recognize immediately the amount thatotherwise would have been recognized over the remainder of the vesting period in profit or loss for the period, with acorresponding recognition in capital reserve. When the employee or counterparty can choose whether to meet the non-vesting condition but the condition is not met during the vesting period, the Group treats it as a cancellation of the equityinstruments granted.
23. Revenue
23.1 Revenue from sale of goods
Revenue from sale of goods is recognized when the Group has transferred to the buyer the significant risks and rewardsof ownership of the goods, the Group retains neither continuing managerial involvement to the degree usually associatedwith ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probablethat the associated economic benefits will flow to the Group; and the associated costs incurred or to be incurred can bemeasured reliably.
23.2 Revenue from rendering of services
Revenue from rendering of services is recognized when the amount of revenue can be measured reliably; it is probablethat the associated economic benefits will flow to the Group; the stage of completion of the transaction can be determinedreliably; and the associated costs incurred or to be incurred can be measured reliably. Revenue from rendering of servicesis recognized using the percentage of completion method at the balance sheet date. The stage of completion of a transactionfor rendering for services is determined based on the proportion that costs incurred to date bear to the estimated total costsof the transaction.
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When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue isrecognized only to the extent of the costs incurred that will be recoverable, and the costs incurred are recognized asexpenses for the period. When it is not probable that the costs incurred will be recovered, revenue is not recognized.
23.3 Construction Contract
Where the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognized usingthe percentage of completion method at the balance sheet date.
The stage of completion of a contract is determined using the proportion that completed contract work bears to theestimated total contract work.
Where the outcome of a construction contract cannot be estimated reliably, (1) if contract costs are expected to berecoverable, contract revenue is recognized to the extent of contract costs that are expected to be recoverable; and contractcosts are recognized as expenses in the period in which they are incurred; (2) if contract costs are not expected to berecoverable, they are recognized as expenses immediately when incurred and contract revenue is not recognized. Whenthe uncertainties that prevented the outcome of the construction contract from being estimated reliably no longer exist,revenue and expenses associated with the construction contract are recognized using the percentage of completion method.
If the estimated total contract costs exceed total contract revenue, the expected loss is recognized immediately as anexpense for the period.
The cumulative costs incurred and cumulative gross profits (or losses) recognized for contracts in progress and the progressbillings are offset and the net amount is presented in the balance sheet. Where the aggregate of cumulative costs incurredand cumulative gross profits (or losses) recognized exceed the progress billings for contracts in progress, the surplus isshown as inventory. Where the progress billings for contracts in progress exceed the aggregate of cumulative costs incurredand cumulative gross profits (or losses) recognized, the surplus is shown as receipts in advance.
For participation in public infrastructure construction using the Build-Operate-Transfer (BOT) model, the Grouprecognizes revenue and expenses associated with the construction services rendered during the construction period inaccordance with Accounting Standard for Business Enterprises No.15 – Construction Contracts. When the constructionof the public infrastructure is completed, the Group recognizes revenue and expenses associated with subsequentoperations and services in accordance with Accounting Standard for Business Enterprises No. 14 – Revenue.
24. Governmental Subsidy
24.1 Judgment basis and Accountant treatment of government subsidy related to assets
The government subsidies for Chongqing Manufacture Base construction and etc. are used for constructions and formslong-term assets, and therefore are categorized as government subsidy related to assets.
A government grant related to an asset is recognized as deferred income, and it should be evenly amortized to profit orloss over the useful life of the related asset.
24.2 Judgment basis and accountant treatment of government subsidy related to incomeThe Group receives government subsidies including subsidies for Core Electronic Devices, High-end Universal Chip andBasic Software Product Projects, Value-Added-Tax rebate (VAT rebate), subsidies for special projects, and tax refunds,
Notes to Financial StatementsFor the reporting period from January 1
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etc., which are not used for constructions and forms long-term assets in other ways, and therefore are categorized asgovernment subsidy related to income.
For a government grant related to income, for example subsidy for Core Electronic Devices, High-end Universal Chip andBasic Software Product Projects, since the subsidy is a compensation for related expenses or losses to be incurred insubsequent periods, it is recognized as deferred income, and recognized in profit or loss over the periods in which therelated costs or losses are recognized; If the subsidy, such as VAT Rebate, is a compensation for related expenses or lossesalready incurred, it is recognized immediately in profit or loss for the period.
For government subsidies related to the Group’s daily operations shall be booked into other income; for those not relatedto the Group’s daily operations, shall be booked into non-operating income/expense.
For the policy-backed preferential subsidized loan, if the Ministry of Finance will appropriate the subsidy amount to thelending bank, who will grant the loan to the Group at the policy-backed preferential interest rate, the actually receivedloan amount will be the entry value of the loan and the loan-related expenses will be calculated based on the loan principaland policy-backed preferential interest rate.
25. Deferred Income Tax Assets / Deferred Income Tax Liabilities
The income tax expenses include current income tax and deferred income tax.
25.1. Current Income Tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at theamount expected to be paid (or recovered) according to the requirements of tax laws.
25.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between thenil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determinedaccording to tax laws, deferred tax assets and liabilities are recognized through the balance sheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible temporary differencesare recognized to the extent that it is probable that taxable profits will be available against which the deductible temporarydifferences can be utilized. However, for temporary differences associated with the initial recognition of goodwill and theinitial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither theaccounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability isrecognized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it isprobable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, exceptwhere the Group is able to control the timing of the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporarydifferences associated with such investments are only recognized to the extent that it is probable that there will be taxable
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profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeablefuture.
On the balance sheet date, the deferred income tax assets and deferred income tax liabilities are measured at the applicabletax rates in the period in which the related assets are recovered or the related liabilities are recovered in accordance withthe tax laws.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when they arise fromtransactions or events that are directly recognized in other comprehensive income or in shareholders' equity, in which casethey are recognized in other comprehensive income or in shareholders' equity; and when they arise from businesscombinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probablethat sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Suchreduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.
25.3 Offset of Income Tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assetsand settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets anddeferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity ordifferent taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realize the assetsand liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities areexpected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
26. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases.
26.1 Accounting treatment of operating Lease
26.1.1 The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either includedin the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit orloss for the period. Contingent rents are charged to profit or loss in the period in which they are actually incurred.
26.1.2 The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevantlease. Initial direct costs with more than an insignificant amount are capitalized when incurred, and are recognized in profitor loss on the same basis as rental income over the lease term. Other initial direct costs with an insignificant amount are
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
charged to profit or loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the periodin which they actually arise.
26.2. Accounting treatment of the finance lease
26.2.1 The Group as lessee under finance leases
For relevant accounting treatment, refer to Note (III) 14.3 Identification basis, valuation and depreciation method offinance lease of fixed assets.
Unrecognized finance charges are recognized as finance charge for the period using the effective interest method over thelease term. Contingent rents are credited to profit or loss in the period in which they are actually incurred. The net amountof minimum lease payments less unrecognized finance charges is separated into long-term liabilities and the portion oflong-term liabilities due within one year for presentation.
26.2.2 The Group as lessor under finance leases
At the commencement of the lease term, the aggregate of the minimum lease receivable at the inception of the lease andthe initial direct costs is recognized as a finance lease receivable, and the unguaranteed residual value is recorded at thesame time. The difference between the aggregate of the minimum lease receivable, the initial direct costs and theunguaranteed residual value, and the aggregate of their present values is recognized as unearned finance income.
Unearned finance income is recognized as finance income for the period using the effective interest method over the leaseterm. Contingent rents are credited to profit or loss in the period in which they are actually incurred.
The net amount of financial lease receivables less unearned finance income is separated into long-term debts receivableand the portion of long-term debts receivable due within one year for presentation.
27. Important judgments while applying accounting policy, and key assumptions and uncertainty factors appliedfor accounting estimate
During the process of using accounting policy described in note (III), due to the uncertainty in operation activities, thegroup should judge, estimate and assume the book value of the report items which may not be metered reliably. Thesejudgments, estimates and assumptions are based on the historical experience of the Group's management and other relatedfactors. Differences may exist between the actual results and the Group’s estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis of continuous operation. Ifthe changes of accounting estimate only influence current period, the influence amount will be affirmed during thechanging period; if it influences the current period and subsequent periods, the influence amount will be recognized in thecurrent period and future period.
- Key assumptions and uncertainties used in accounting estimateOn balance sheet date, key assumptions and uncertainties for performing accounting estimates on book value of assets andliabilities in subsequent future periods are:
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
Impairment provision for inventories
Inventories are measured at the lower of cost and net realizable value. For raw materials, the latest actual purchase priceis used as the basis for determining the net realizable value; for in-process products, the estimated selling price of thefinished product minus the estimated cost to be incurred to completion, estimated sales expenses and related taxes is usedas the basis for determining the net realizable value; for the finished product, the estimated selling price minus theestimated sales expenses and related taxes is used as the basis for determining the net realizable value. The Group willregularly conduct a comprehensive stocktaking to review the impairment circumstances on defective, obsoleted or slow-moving inventory if any; in addition, the Group's management will regularly review the impairment circumstance ofinventory with long storage time according to the inventory aging list. The review procedure includes the comparisonbetween book value of defective, obsoleted or slow-moving inventories and inventory with long storage time and itscorresponding net realizable value in order to determine whether to withdraw provisions on the defective, obsoleted orslow-moving inventory and inventory with long storage time. Based on the above procedure, the Group's managementdeems that the full provision amounts have been withdrawn for inventory.
Impairment of accounts receivables
The Group uses the impairment matrix to determine the provision for expected credit loss of accounts receivable. Byconsidering the historical loss rates, the Group will determine the proportions in the provision for loss for the accountsreceivable with similar risk characteristics. The impairment matrix is determined based on the Group's historical overdueratio and default situation, and considers reasonable and forward-looking industry information. As of December 31
st
2019,the Group had reassessed the observable proportion of historical overdue assets while taking into account the changes ofprospective information. The amount of the provision for expected credit losses will change as the estimation of the Group.The details on the provision for expected credit losses of the accounts receivable of the Group are given in Note (V). 4.
Useful life and predicted net residual value of fixed asset
The Group's estimation of fixed assets useful life is based on the historical experience of actual usable term of fixed assetswith similar properties and functions, the estimation of predicted net residual value is the amount obtained currently bythe Group from the assets after deducting the anticipated disposal expense based on the anticipated status assuming theconditions that fixed assets' predicted useful life expires and fixed assets are at the end of useful life. The Group shallconduct the review on the predicted service life and predicted net residual value of fixed assets at least annually. For thecurrent reporting period, the Group's management did not see signs either indicating a shortened or extended useful life ofthe Group’s fixed asset or indicating a change in predicted net residual value.
Accrued liabilities of product quality warranty
Accrued liabilities of product quality assurance are an estimation made by the Group according to the predicted repair andreplacement cost of relevant products. The estimation considers the product claim rate trend, historic defect rate, industrypractice and other major estimations. The management deems that the current estimation on accrued liabilities of productquality warranty is reasonable, however, the Group will continue to review the conditions of product repairs, and willconduct adjustment if any sign indicating the need to make adjustments on accounting estimates.
Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities are measured at the applicable income tax rate during theperiod when the asset is expected to be recovered or the debt is paid off. The expected applicable income tax rate isdetermined according to the relevant current tax regulations and the actual situation of the Group. If the estimated incometax rate is different from the original estimate, the management of the Group will adjust it.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
The realization of deferred income tax assets mainly depends on the actual future profits and the effective tax rate oftemporary difference in the future applicable years. If the actual profit in the future is less than the estimation, or actualtax rate is lower than the estimation, then the confirmed deferred income tax assets will be reversed and confirmed in theincome statement during the corresponding period. If the actual profit in the future is more than the estimation, or actualtax rate is higher than the estimation, then the corresponding deferred income tax assets will be adjusted and confirmed inthe income statement during the corresponding period.
Goodwill impairment
When performing impairment test on goodwill, the predicted present value of future cash flows of relevant asset group orasset group portfolio included the goodwill need to be calculated, the future cash flows of relevant asset group or assetgroup portfolio need to be estimated, and the proper pretax rate that fairly reflects the current market time value of moneyand specific asset risk need to be determined. When the future actual result is different from the original estimation, thegoodwill impairment loss will alter.
Fair value measurement and valuation process
Held-for-trading financial assets, receivables for financing, and other non-current financial assets of the Group aremeasured at fair value in the financial statement. When valuating the fair value of these assets, the Group preferably usesobtainable and observable market data. If no observable data is available, the Group will organize an internal evaluationpanel or hire qualified third-party valuers to conduct valuation. The Finance Department and evaluation panel of the Groupwill work closely with the hired valuers to determine appropriate valuation techniques and the input values of the valuationmodel. The valuation techniques and input values used for valuating the fair value of various assets are disclosed in Note(IX).
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
28. Significant alternation in accounting policy and accounting estimations
28.1 Significant changes in accounting policies
| Changes in accounting policies and reasons | Approval Procedures | Notes |
| New Standards for Financial Instruments The Group has implemented the Accounting Standards for Business Enterprise No. 22 – Recognition and Measurement of Financial Instruments, the Accounting Standards for Business Enterprise No. 23 – Transfer of Financial Assets, the Accounting Standards for Business Enterprise No. 24 – Hedging Accounting and the Accounting Standards for Business Enterprise No. 37 – Presentation of Financial Instruments (hereinafter referred to as “New Standards for Financial Instruments”) revised in 2017 by the Ministry of Finance, effective from January 1st 2019. In the classification and measurement of financial assets, the New Standards for Financial Instruments require the classification of financial assets based on their characteristics of contractual cash flows and the business models for management of such assets by enterprises into the three main categories of “financial assets measured at amortized cost”, “financial assets at fair value through other comprehensive income” and “financial assets at fair value through profit and loss of current period”, and cancel the categories of loans and receivables, investment held to maturity and available-for-sale financial assets in the former standards for financial instruments. Investments in equity instruments are generally classified into financial assets at fair value through profit and loss of current period, and investments in equity instruments for non-trading purpose are also allowed to be designated as financial assets at fair value through other comprehensive income, but such designation is irrevocable, and at the time of disposal, the accumulated amount of fair value changes previously included in other comprehensive income must not be transferred to profit and loss of current period. In respect of value impairment, the New Standards for Financial Instruments relating to impairment requirements are applicable to financial assets measured at amortized cost, financial assets at fair value through other comprehensive income, receivables for financing and financial guarantee contracts. The New Standards for Financial Instruments require the adoption of the expected credit loss model to recognize the provision for credit loss for replacing the former model of credit loss occurred. The new impairment model adopts a three-stage model depending on whether credit risk of the relevant project has increased significantly after initial recognition, provision for credit loss is made according to the expected credit loss within 12 months or the expected credit loss during the entire subsisting period. The Group measures the loss provision for the accounts receivable formed by transactions regulated by the income standard based on the amount equivalent to the expected credit loss throughout the lifetime. Recognition and measurement of financial instruments prior to January 1st 2019 were inconsistent with the New Standards for Financial Instruments, the Group has made retrospective adjustments according to the requirements of the New Standards for Financial Instruments. The Group will not adjust the data involved in financial statements for comparison in preceding periods which are not consistent with the requirements of the New Standards for Financial Instruments. The difference between the original book value of financial instruments and the new book value on the date of implementation of the New Standards for Financial Instruments will be accounted under retained earnings or other comprehensive income on January 1st 2019. For details on the effects of adoption of the New Standards for Financial Instruments by the Group on January 1st 2019, please refer to Notes (III) 28.2. Amendments to the format of financial statements The Group prepared the 2019 Financial Statement in accordance with the Notice on Amending the 2019 Annual Financial Statements of General Enterprises (Accounting Council (2019) No. | Such alternations in accounting policy were approved by the Group at board of director general meeting. | None |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
6, hereinafter referred to as "Financial Accounting No. 6 Document") issued by the Ministry ofFinance on April 30
th2019. Financial Accounting No. 6 Document revised the presentationitems on the balance sheet and income statement, and split the "Notes Receivable and AccountsReceivable" item into "Notes Receivable" and "Accounts Receivable" and the "Notes Payableand Accounts Payable" item into "Notes Payable" and "Accounts Payable" items; it alsospecified or revised the contents of “Non-current Assets due Within One Year”, “DeferredIncome”, "Other Equity Instruments", "Research and Development (R&D) Expenses", "InterestIncome " under “Financial Expenses”, "Other Income", "Asset Disposal Income", "Non-operating Income" and "Non-operating Expenses"; it adjusted the position of "ImpairmentLosses of Assets" and specified the contents of "Invested capital of other equity instrumentholder". In light of the aforesaid changed items, the Group made retrospective adjustment of thecomparative data of the previous year. The changes of accounting policy will not affect theconsolidated net profits, the Company's net profits or owner's equity.
Besides, as a result of the implementation of the New Financial Instrument Standards and as perNotice on Amending the 2019 Annual Financial Statements of General Enterprises (AccountingCouncil [2019] No. 6), the "interests receivable" in "other receivables" is changed to the intereststhat are due and receivable for the relevant financial instruments but not yet received as ofbalance sheet date (the interests of the financial instruments assessed by the effective interestmethod is included in the book balance of the financial instruments); "interests payable" in "otherpayables" is changed to the interests that are due and payable for the relevant financialinstruments but not yet paid as of balance sheet date (the interests of the financial instrumentsassessed by the effective interest method is included in the book balance of the financialinstruments). Based on the provisions of the New Financial Instrument Standards, noretrospective adjustment of the comparative data had been done.
28.2. Adjustment to relevant items in financial statement at the beginning of the year of first implementation uponfirst implementation of the New Standards for Financial Instruments
Consolidated Balance Sheet
Unit: RMB
| Consolidated Report Items | December 31st 2018 | January 1st 2019 | Adjusted amounts |
| Current Aseets: | |||
| Held-for-trading financial assets | - | 1,860,050.59 | 1,860,050.59 |
| Financial assets measured at fair value through current profit and loss | 1,860,050.59 | - | (1,860,050.59) |
| Notes receivable | 2,569,445,189.92 | 295,598,790.07 | (2,273,846,399.85) |
| Receivables for financing | - | 2,273,846,399.85 | 2,273,846,399.85 |
| Non-current Assets： | |||
| Available-for-sale financial assets | 290,966,813.00 | - | (290,966,813.00) |
| Other non-current financial assets | - | 290,966,813.00 | 290,966,813.00 |
| Current Liabilities: | |||
| Held-for-trading financial liabilities | - | 290,998.43 | 290,998.43 |
| Financial liabilities measured at fair value through current profit and loss | 290,998.43 | - | (290,998.43) |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Explanation of the adjustment of each item:
A summary of the impact of the first implementation of the new financial instrument standards on January 1
th2019:
Unit: RMB
| Itmes | Book value as stated under the original standard December 31st 2018 | Impact of the first implementation of the new financial instrument standards | Book value as stated under the new standard January 1st 2019 | ||
| Reclassified | |||||
| Transfer from financial assets originally classified as loans and receivables (Note 1) | Transfer from items that originally classified as available-for-sale financial assets (Note 2) | Transfer from itmes that originally classified as financial assets / liabilities measured at fair value through current profit and loss (Note 3) | |||
| Assets： | |||||
| Held-for-trading financial assets | - | - | - | 1,860,050.59 | 1,860,050.59 |
| Financial assets measured at fair value through current profit and loss | 1,860,050.59 | - | - | (1,860,050.59) | - |
| Notes receivable | 2,569,445,189.92 | (2,273,846,399.85) | - | - | 295,598,790.07 |
| Receivables for financing | - | 2,273,846,399.85 | - | - | 2,273,846,399.85 |
| Available-for-sale financial assets | 290,966,813.00 | - | (290,966,813.00) | - | - |
| Other non-current financial assets | - | - | 290,966,813.00 | - | 290,966,813.00 |
| Liabilities： | - | ||||
| Held-for-trading financial liabilities | - | - | - | 290,998.43 | 290,998.43 |
| Financial liabilities measured at fair value through current profit and loss | 290,998.43 | - | - | (290,998.43) | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Note 1: carried over from the financial assets originally classified as loans and receivables:
During liquidity management, the Group completes discount or endorsement transfer before due date of some receivablenotes. Due to the fact that the Group has transferred almost all risks and benefits to the counterparties, the Group will stoprecognition of the discounted or endorsed receivable notes. The business mode by which the Group manages receivablenotes is aimed at both collecting contract cash flow and selling such financial asset, therefore as of January 1
st2019, thereceivable notes of RMB 2,273,846,399.85 were no longer classified as "loans and receivables" financial assets and werereclassified as "financial assets at fair value through other comprehensive income" and were included in receivables. Thereceivable notes originally measured at amortized costs were reclassified as measured at fair value, which had little impacton the book value of the receivables items, so the Group will not adjust the retained earnings.
Note 2: carried over from the original available-for-sale financial assets:
As of January 1
st2019, the RMB 290,966,813.00 available-for-sale financial assets held by the Group were reclassified asfinancial assets at fair value through the current period profits or losses and were included in the other non-current financialassets. The aforesaid available-for-sale financial assets were the equity instrument investments that were not quoted in anyactive market and whose fair value could not be reliably measured, so these assets were measured at cost as per the originalfinancial instrument standards in the previous period. These equity investments were measured at fair value and had littleimpact on the book value of the other non-current financial assets, so the Group did not adjust the retained earnings.
Note 3: carried over from the assets originally classified as financial assets/liabilities at fair value through profit or loss:
As of January 1
st2019, the RMB 1,860,050.59 derivative financial assets held by the Group were reclassified as financialassets at fair value through the current period profits or losses as per the New Financial Instrument Standards and theywere included in held-for-trading financial assets; the RMB 290,998.43 derivative financial liabilities were reclassified asfinancial assets at fair value through profit or loss as per the New Financial Instrument Standards and were included inheld-for-trading financial liabilities. The derivative financial instruments held by the Group include forward exchangecontracts and foreign exchange options, not designated as hedging instruments. The gains or losses due to changes in fairvalue is directly included in the current period profits and losses.
Balance Sheet of Parent Company
Unit: RMB
| Items on the Parent Company’s report | December 31st 2018 | January 1st 2019 | Adjusted amounts |
| Current Aseets: | |||
| Notes receivable | 351,793,632.24 | 121,404,793.77 | (230,388,838.47) |
| Receivables for financing | - | 230,388,838.47 | 230,388,838.47 |
| Non-current Assets： | |||
| Available-for-sale financial assets | 290,956,813.00 | - | (290,956,813.00) |
| Other non-current financial assets | - | 290,956,813.00 | 290,956,813.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Explanation of the adjustment of each item:
Unit: RMB
| Itmes | Book value as stated under the original standard December 31st 2018 | Impact of the first implementation of the new financial instrument standards | Book value as stated under the new standard January 1st 2019 | |
| Reclassified | ||||
| Transfer from financial assets originally classified as loans and receivables (Note 1) | Transfer from items that originally classified as available-for-sale financial assets (Note 2) | |||
| Assets： | ||||
| Notes receivable | 351,793,632.24 | (230,388,838.47) | - | 121,404,793.77 |
| Receivables for financing | - | 230,388,838.47 | - | 230,388,838.47 |
| Available-for-sale financial assets | 290,956,813.00 | - | (290,956,813.00) | - |
| Other non-current financial assets | - | - | 290,956,813.00 | 290,956,813.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
IV. Taxes
1. Major categories of taxes and tax rates
| Category of tax | Basis of tax computation | Tax rate |
| Enterprise income tax | Taxable income | 25% (Note 1) |
| VAT | For the taxable product sales revenue or taxable labor revenue, the Company and its domestic subsidiaries are ordinary Value-added Tax payers; the VAT payable is the balance of input tax after deducting the deductible output tax. | 6%, 9%, 10%, 11%, 13%, 16%, 17% and simple collection rate of 5%, 3% (Note 2) |
| City maintenance and construction tax | Actual payable turnover tax | 7% |
| Education surcharges | Actual payable turnover tax | 3% |
| Local education surcharges | Actual payable turnover tax | 2% |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
(5) In accordance with Finance and Taxation [2011] No. 58 Document of Ministry of Finance, State Administration ofTaxation (SAT) and General Administration of Customs, the wholly-owned subsidiaries, Chongqing HikvisionScience and Technology Co., Ltd. and Chongqing Hikvision System Technology Co., Ltd., are qualified to enjoy thewest development preferential tax policy from 2011 to 2020, therefore, the enterprise income rate shall be calculatedand paid on the basis of a reduced tax rate of 15% in the current reporting period. (2018:15%)
(6) In accordance with the Replies on Publishing the List of First Batch of identified High-tech Enterprises of Zhejiang
Province in 2018 (GuoKeHuoZi [2019] No. 70) issued by the leading group office of Zhejiang high-tech enterpriseidentification management work on February 20
th2019, the Company’s joint venture subsidiary, Hangzhou FuyangBaotai Security Technology Service Ltd. (Fuyang Baotai), was recognized as a high-tech enterprise and was valid for3 years from 2018 to 2020. Therefore, the enterprise income rate shall be calculated and paid on the basis of a reducedtax rate of 15% in the current reporting period. (2018:15%)
(7) In accordance with the Replies on Publishing identified High-tech Enterprises of Zhejiang Province in 2019(GuoKeHuoZi [2020] No. 32) issued by the leading group office of Zhejiang high-tech enterprise identificationmanagement work on January 20
th2020, the Company’s wholly-owned subsidiary, Hangzhou Hikvision SystemTechnology Ltd. (Hangzhou System), was recognized as a high-tech enterprise and was valid for 3 years from 2019to 2022. Therefore, the enterprise income rate shall be calculated and paid on the basis of a tax rate of 15% in thecurrent 2019 reporting year. (2018:15%)
(8) In accordance with the Replies on Publishing identified High-tech Enterprises of Zhejiang Province in 2019
(GuoKeHuoZi [2020] No. 32) issued by the leading group office of Zhejiang high-tech enterprise identificationmanagement work on January 20
th2020, the Company’s joint venture subsidiary, Hangzhou HikMicro SensingTechnology Ltd. (Hangzhou Hikmicro), was recognized as a high-tech enterprise and was valid for 3 years from 2019to 2022. Therefore, Hangzhou HikMicro’s income tax rate shall be calculated and paid on the basis of a tax rate of15% in the current 2019 reporting year. (2018:25%)
According to the Notice of State Administration of Taxation and Ministry of Finance on the Corporate Income Policyfor Further Incentivizing Software Industry and Integrated Circuit Industry (Finance and Taxation [2012] No. 27) andNotice on Issues Related to Enterprise Income Tax Preferential Policies for Software and Integrated Circuit Industry(Finance and Taxation [2016] No. 49), HikMicro is an integrated circuit manufacturer that was founded beforeDecember 31
st2017 and has not made profit and that produces the integrated circuit with line width <0.8 micrometers(incl.), so it is exempted from corporate income tax in the first and second years after start of profiting and payscorporate income tax at half of the 25% statutory tax rate in the third to fifth years until the preferential treatmentexpires. As of the approval date of this report, HikMicro had not profited in 2019.
Note 2: In accordance with the Notice on Software Product Value-added Tax Policy (Finance and Taxation [2011] No.100) of Ministry of Finance and State Administration of Taxation (SAT), as for the self-developed software productsales of the Company, Hangzhou System, the Company’s joint-venture subsidiaries such as EZVIZ Network,Hangzhou HikRobot Technology, Hangzhou HikAuto Software, Hangzhou Eziviz Software, Wuhan HIKStorage, andHangzhou Hikmed Imaging, the VAT shall be calculated and paid with tax rate of 17% at first, then the portion withactual tax bearing excess 3% shall be refunded after State Administration of Taxation (SAT) reviews.
According to Finance and Tax [2018] No. 32, since May 1
st
2018, taxpayers are subject to VAT taxable sales orimported goods, and the VAT rates have been adjusted from 17%, 11% and 6% to 16%, 10% and 6% respectively.
According to the State Administration of Taxation Announcement No. 39 of 2019, since April 1
st
2019, taxpayers aresubject to VAT taxable sales or imported goods, and the VAT rates have been adjusted from 16%, 10% and 6% to 13%,9%, and 6%, respectively.
The Group chooses to apply a simple collection rate of 5% for part of taxable service income.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
| Closing Balance | Opening Balance (Restated) | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Cash： | ||||||
| RMB | - | - | 26,573.64 | - | - | 79,737.43 |
| INR | 2,522,598.05 | 0.0975 | 245,953.31 | 2,000,830.71 | 0.0980 | 196,081.41 |
| USD | 18,379.06 | 6.9762 | 128,216.03 | 24,087.34 | 6.8632 | 165,316.26 |
| EUR | 9,121.04 | 7.8155 | 71,285.50 | 9,765.86 | 7.8473 | 76,635.60 |
| GBP | 6,402.60 | 9.1501 | 58,584.43 | 8,927.97 | 8.6762 | 77,460.86 |
| BRL | 8,697.30 | 1.7312 | 15,056.77 | 8,697.30 | 1.7569 | 15,280.29 |
| ZAR | 17,028.89 | 0.4943 | 8,417.38 | 17,034.95 | 0.4735 | 8,066.05 |
| RUB | 13,849.47 | 0.1126 | 1,559.45 | 13,899.49 | 0.0986 | 1,370.49 |
| AED | 586.09 | 1.8992 | 1,113.11 | 585.76 | 1.8688 | 1,094.68 |
| HKD | 748.00 | 0.8958 | 670.06 | 697.90 | 0.8762 | 611.50 |
| Bank balance： | ||||||
| RMB | - | - | 18,788,528,237.06 | - | - | 20,225,134,883.25 |
| USD | 961,564,878.01 | 6.9762 | 6,708,068,901.97 | 707,524,091.98 | 6.8632 | 4,855,879,348.05 |
| EUR | 52,283,961.33 | 7.8155 | 408,625,299.77 | 51,833,430.49 | 7.8473 | 406,752,479.11 |
| INR | 1,970,579,846.87 | 0.0975 | 192,131,535.07 | 3,438,377,221.94 | 0.0980 | 336,960,967.75 |
| GBP | 10,626,622.96 | 9.1501 | 97,234,662.71 | 4,918,810.45 | 8.6762 | 42,676,583.25 |
| RUB | 620,006,016.25 | 0.1126 | 69,812,677.43 | 534,613,774.24 | 0.0986 | 52,712,918.14 |
| PLN | 38,087,521.72 | 1.8324 | 69,791,574.80 | 489,691.46 | 1.8269 | 894,617.32 |
| BRL | 19,927,461.93 | 1.7312 | 34,498,422.09 | 8,376,095.19 | 1.7569 | 14,715,961.64 |
| ZAR | 30,300,402.08 | 0.4943 | 14,977,488.75 | 22,340,466.04 | 0.4735 | 10,578,210.66 |
| AED | 6,881,653.06 | 1.8992 | 13,069,635.49 | 7,944,928.08 | 1.8688 | 14,847,550.81 |
| AUD | 1,809,291.16 | 4.8843 | 8,837,120.83 | 1,821,443.30 | 4.8250 | 8,788,463.91 |
| KRW | 1,047,156,352.79 | 0.0060 | 6,316,447.12 | 845,397,940.00 | 0.0061 | 5,178,062.38 |
| PEN | 2,961,257.66 | 2.0983 | 6,213,606.95 | - | - | - |
| MYR | 2,902,467.91 | 1.6986 | 4,930,131.99 | 337,537.88 | 1.6479 | 556,228.67 |
| SGD | 733,721.55 | 5.1739 | 3,796,201.94 | 102,603.21 | 5.0062 | 513,652.19 |
| THB | 15,437,877.88 | 0.2328 | 3,593,937.97 | 13,527,107.82 | 0.2110 | 2,854,219.75 |
| IDR | 6,911,687,584.70 | 0.0005 | 3,468,284.83 | 4,324,868,647.85 | 0.0005 | 2,037,445.62 |
| PHP | 951,599.13 | 0.1374 | 130,749.72 | 7,098,709.59 | 0.1304 | 925,671.73 |
| COP | 1,118,447,390.03 | 0.0021 | 2,369,766.33 | 441,460,035.46 | 0.0021 | 921,371.24 |
| MXN | 6,193,268.73 | 0.3684 | 2,281,600.20 | - | - | - |
| KZT | 95,820,928.57 | 0.0182 | 1,743,940.90 | 25,306,904.92 | 0.0183 | 463,116.36 |
| RON | 1,000,000.00 | 1.6336 | 1,633,600.00 | - | - | - |
| VND | 5,105,443,812.38 | 0.0003 | 1,534,696.41 | 2,400,000,000.00 | 0.0003 | 706,800.00 |
| NZD | 299,760.04 | 4.6973 | 1,408,062.84 | 77,267.45 | 4.5954 | 355,074.84 |
| ILS | 389,225.72 | 2.0142 | 783,978.45 | - | - | - |
| UZS | 176,266,816.82 | 0.0007 | 129,133.07 | 330,724,362.57 | 0.0008 | 271,094.76 |
| HKD | 414,424.94 | 0.8958 | 371,241.86 | 1,837,365.44 | 0.8762 | 1,609,899.60 |
| CAD | 55,723.62 | 5.3421 | 297,681.15 | 828,274.50 | 5.0381 | 4,172,929.76 |
| CZK | 827,767.54 | 0.3071 | 254,207.41 | 245,451.93 | 0.3029 | 74,347.39 |
| TRY | 213,239.57 | 1.1729 | 250,108.69 | 371.19 | 1.2962 | 481.14 |
| QAR | 120,808.09 | 1.9119 | 230,972.99 | 92,830.45 | 1.8378 | 170,603.80 |
| KES | 1,892,762.74 | 0.0687 | 130,032.80 | 923,936.07 | 0.0671 | 61,996.11 |
| HUF | 2,310,411.27 | 0.0236 | 54,548.81 | 2,372,916.62 | 0.0244 | 57,888.25 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
| Closing Balance | Opening Balance (Restated) | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| PKR | 221,503.56 | 0.0449 | 9,945.51 | - | - | - |
| JPY | - | - | - | 407.98 | 0.0619 | 25.25 |
| Other currency funds: | ||||||
| RMB | - | - | 552,442,631.48 | - | - | 530,958,544.17 |
| USD | 9,370,708.66 | 6.9762 | 65,371,937.73 | 5,130,938.50 | 6.8632 | 35,214,593.87 |
| EUR | 601,625.37 | 7.8155 | 4,702,003.07 | 140,937.52 | 7.8473 | 1,105,979.01 |
| GBP | 67,710.77 | 9.1501 | 619,560.32 | - | - | - |
| BRL | 271,326.91 | 1.7312 | 469,721.15 | 498,949.67 | 1.7569 | 876,604.67 |
| NZD | 56,516.00 | 4.6973 | 265,472.61 | - | - | - |
| INR | 120,305.95 | 0.0975 | 11,729.83 | 119,281.00 | 0.0980 | 11,689.54 |
| ZAR | - | - | - | 28,499.20 | 0.4735 | 13,494.37 |
| Total | 27,071,948,919.78 | 26,559,675,452.93 | ||||
| Including: deposited in overseas banks | 1,045,878,239.66 | 1,071,979,704.80 | ||||
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Details of other currency funds:
| Closing Balance | Opening Balance | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Capitals with limitations： | ||||||
| Bank acceptance bill | - | - | 121,763,423.06 | - | - | 52,522,279.43 |
| Deposits for letter of guarantee | - | - | 60,758,739.37 | - | - | 41,428,996.22 |
| Deposits for letter of Credit in BRL | 271,326.91 | 1.7312 | 469,721.15 | 498,949.67 | 1.7569 | 876,604.67 |
| Tax Operation Margin for India | 120,306.05 | 0.0975 | 11,729.83 | 119,281.00 | 0.0980 | 11,689.54 |
| Deposits for letter of Credit in RMB | - | - | - | - | - | 60,199,342.63 |
| Deposits for letter of Credit in EUR | - | - | - | 137,209.86 | 7.8473 | 1,076,726.94 |
| Deposits for letter of Credit in USD | - | - | - | 5,133.88 | 6.8632 | 35,234.78 |
| Other security deposit | - | - | 505,730.42 | - | - | 504,195.08 |
| Other capitals with limitations | - | - | 372,771,567.55 | - | - | 372,008,649.75 |
| Subtotal | 556,280,911.38 | 528,663,719.04 | ||||
| Capitals without limitations: | ||||||
| Deposit in Alipay, Tenpay, etc. | - | - | 65,519,585.97 | - | - | 4,280,539.59 |
| Other currency funds in USD | 298,523.39 | 6.9762 | 2,082,558.84 | 5,127,923.38 | 6.8632 | 35,193,900.56 |
| Other currency funds in ZAR | - | - | 28,499.20 | 0.4735 | 13,494.37 | |
| Other currency funds in EUR | - | - | 3,727.66 | 7.8473 | 29,252.07 | |
| Subtotal | 67,602,144.81 | 39,517,186.59 | ||||
| Total | 623,883,056.19 | 568,180,905.63 | ||||
| Item | Closing Balance | Opening Balance |
| Financial assets measured at fair value through current gain and loss | 181.76 | 1,860,050.59 |
| Including: derivative financial assets | 181.76 | 1,860,050.59 |
| Total | 181.76 | 1,860,050.59 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
3. Notes receivable
3.1 Categories of notes receivable
Unit：RMB
| Category | Closing Balance | Opening Balance |
| Bank acceptance bill | 696,453,713.94 | - |
| Commercial acceptance bill | 276,783,075.08 | 295,598,790.07 |
| Total | 973,236,789.02 | 295,598,790.07 |
| Category | Pledged amount at the end of the current reporting period |
| Bank acceptance bill | 3,454,753.01 |
| Total | 3,454,753.01 |
| Category | Derecognized amount by December 31st 2019 | Amount not derecognized by December 31st 2019 |
| Bank acceptance bill Note (V)-28.3 | - | 329,309,522.17 |
| Total | - | 329,309,522.17 |
| Category | Amounts transferred into accounts receivable by December 31st 2019 |
| Bank acceptance bill | 233,400,000.00 |
| Total | 233,400,000.00 |
| Item | Closing Balance | ||
| Accounts receivable | Bad debt provision | Proportion (%) | |
| Not overdue | 13,883,024,166.77 | 62,378,767.07 | 0.45 |
| Within 1 year after the overdue | 6,925,070,235.21 | 425,516,820.36 | 6.14 |
| 1-2 years after the overdue | 1,333,460,975.05 | 466,858,499.60 | 35.01 |
| 2-3 years after the overdue | 382,722,637.19 | 274,378,672.18 | 71.69 |
| 3-4 years after the overdue | 122,304,521.49 | 109,522,576.22 | 89.55 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| Item | Closing Balance | ||
| Accounts receivable | Bad debt provision | Proportion (%) | |
| Over 4 years after the overdue | 93,844,102.54 | 93,844,102.54 | 100.00 |
| Subtotal | 22,740,426,638.25 | 1,432,499,437.97 | 6.30 |
| Category | Closing Balance | ||||
| Carrying amount | Bad debt provision | Book Value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for bad debts on a single basis | - | - | - | - | - |
| Provision for bad debts by portfolios | 22,740,426,638.25 | 100.00 | 1,432,499,437.97 | 6.30 | 21,307,927,200.28 |
| Total | 22,740,426,638.25 | 100.00 | 1,432,499,437.97 | 6.30 | 21,307,927,200.28 |
| Category | Beginning Balance | ||||
| Carrying amount | Bad debt provision | Book Value | |||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| Provision for bad debts on a single basis | - | - | - | - | - |
| Provision for bad debts by portfolios | 17,878,831,244.30 | 100.00 | 1,259,389,963.12 | 7.04 | 16,619,441,281.18 |
| Total | 17,878,831,244.30 | 100.00 | 1,259,389,963.12 | 7.04 | 16,619,441,281.18 |
| Customer | Closing balance | ||
| Carrying amount | Bad debt provision | Proportion (%) | |
| Portfolio A | 3,691,656,308.59 | 73,233,901.26 | 1.98 |
| Portfolio B | 13,783,886,973.45 | 1,204,204,754.02 | 8.74 |
| Portfolio C | 5,264,883,356.21 | 155,060,782.69 | 2.95 |
| Total | 22,740,426,638.25 | 1,432,499,437.97 | 6.30 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Description of accounts receivable for bad debt provision by portfolios
As part of the Group's credit risk management, the Group uses the ageing of accounts receivable to assess the expected credit losses of accounts receivable formed by domestic andoverseas sales business, and divides the risk characteristics into portfolio A, portfolio B and portfolio C, according to the business area and object. These three types of business involvea large number of customers with the same risk characteristics. Aging information is able to reflect the solvency of these three types of customers when the accounts receivable are due.
As of December 31
st
2019 and January 1
st2019, the credit risk and expected credit losses of accounts receivable from portfolio A are as follows:
| Age | Closing balance | Beginning balance | ||||||
| Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | |
| Not overdue | 0.02 | 3,012,605,457.25 | 597,158.52 | 3,012,008,298.73 | 0.02 | 2,214,641,313.02 | 495,123.73 | 2,214,146,189.29 |
| Within 1 year after the overdue | 6.11 | 624,571,039.13 | 38,185,783.11 | 586,385,256.02 | 0.94 | 595,949,030.15 | 5,609,712.65 | 590,339,317.50 |
| 1-2 years after the overdue | 52.96 | 42,580,562.72 | 22,551,710.14 | 20,028,852.58 | 51.57 | 25,702,640.73 | 13,254,324.49 | 12,448,316.24 |
| 2-3 years after the overdue | 100.00 | 10,567,300.34 | 10,567,300.34 | - | 100.00 | 734,171.72 | 734,171.72 | - |
| 3-4 years after the overdue | 100.00 | 361,945.19 | 361,945.19 | - | 100.00 | 2,219,552.46 | 2,219,552.46 | - |
| Over 4 years after the overdue | 100.00 | 970,003.96 | 970,003.96 | - | 100.00 | 935,460.71 | 935,460.71 | - |
| Total | 1.98 | 3,691,656,308.59 | 73,233,901.26 | 3,618,422,407.33 | 0.82 | 2,840,182,168.79 | 23,248,345.76 | 2,816,933,823.03 |
| Age | Closing balance | Beginning balance | ||||||
| Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | |
| Not overdue | 0.79 | 6,328,262,502.43 | 50,248,953.36 | 6,278,013,549.07 | 0.80 | 3,694,711,482.57 | 29,563,253.80 | 3,665,148,228.77 |
| Within 1 year after the overdue | 5.56 | 5,693,144,197.77 | 316,684,963.73 | 5,376,459,234.04 | 5.41 | 5,243,601,841.04 | 283,612,815.06 | 4,959,989,025.98 |
| 1-2 years after the overdue | 33.24 | 1,204,463,575.15 | 400,380,049.11 | 804,083,526.04 | 24.23 | 1,155,732,341.13 | 280,029,650.29 | 875,702,690.84 |
| 2-3 years after the overdue | 69.87 | 359,638,419.88 | 251,294,454.87 | 108,343,965.01 | 65.04 | 333,435,912.72 | 216,876,428.82 | 116,559,483.90 |
| 3-4 years after the overdue | 88.54 | 111,524,139.09 | 98,742,193.82 | 12,781,945.27 | 86.22 | 212,124,156.03 | 182,899,482.95 | 29,224,673.08 |
| Over 4 years after the overdue | 100.00 | 86,854,139.13 | 86,854,139.13 | - | 100.00 | 131,813,671.22 | 131,813,671.22 | - |
| Total | 8.74 | 13,783,886,973.45 | 1,204,204,754.02 | 12,579,682,219.43 | 10.44 | 10,771,419,404.71 | 1,124,795,302.14 | 9,646,624,102.57 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
As of December 31
st 2019 and January 1
st
2019, the credit risk and expected credit losses of accounts receivable from portfolio C are as follows:
| Age | Closing balance | Beginning balance | ||||||
| Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | Estimated average loss rate (%) | Carrying value (RMB) | Bad debt provision (RMB) | Book value (RMB) | |
| Not overdue | 0.25 | 4,542,156,207.09 | 11,532,655.19 | 4,530,623,551.90 | 0.25 | 3,585,534,235.10 | 8,956,015.87 | 3,576,578,219.23 |
| Within 1 year after the overdue | 11.63 | 607,354,998.31 | 70,646,073.52 | 536,708,924.79 | 11.45 | 644,707,255.43 | 73,846,118.36 | 570,861,137.07 |
| 1-2 years after the overdue | 50.83 | 86,416,837.18 | 43,926,740.35 | 42,490,096.83 | 49.18 | 16,615,994.95 | 8,171,995.67 | 8,443,999.28 |
| 2-3 years after the overdue | 100 | 12,516,916.97 | 12,516,916.97 | - | 100.00 | 11,979,265.68 | 11,979,265.68 | - |
| 3-4 years after the overdue | 100 | 10,418,437.21 | 10,418,437.21 | - | 100.00 | 7,925,477.55 | 7,925,477.55 | - |
| Over 4 years after the overdue | 100 | 6,019,959.45 | 6,019,959.45 | - | 100.00 | 467,442.09 | 467,442.09 | - |
| Total | 2.95 | 5,264,883,356.21 | 155,060,782.69 | 5,109,822,573.52 | 2.61 | 4,267,229,670.80 | 111,346,315.22 | 4,155,883,355.58 |
| Bed debt provision | Expected credit losses for the entire duration (No credit impairment occurred) | Expected credit losses for the entire duration (Credit impairment has occurred) | Total |
| Balance on January 1st 2019 | 402,083,039.47 | 857,306,923.65 | 1,259,389,963.12 |
| The book balance of accounts receivable on January 1st 2019 is in the current reporting period | |||
| -- Transfer into credit impairment that has occurred | (124,882,400.91) | 124,882,400.91 | - |
| Provision during the current reporting period | 202,855,091.00 | - | 202,855,091.00 |
| Derecognition of financial assets (including direct write-downs) and transfer out | - | (37,585,474.02) | (37,585,474.02) |
| Other changes | 7,839,857.87 | - | 7,839,857.87 |
| Balance on December 31st 2019 | 487,895,587.43 | 944,603,850.54 | 1,432,499,437.97 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
In the current reporting period, the Group recorded a bad debt allowance of RMB 202,855,091.00, including an increaseof bad debt allowance amount of RMB 7,839,857.87 due to conversion of financial reports prepared in foreign currency;no reversal of bad debts during the current reporting period.
Actual write-off of account receivable during current reporting period:
In the current reporting period, the amount of actual accounts receivable write-off is RMB 38,078,073.02, and RMB492,599.00 was recollected after writing-off.
4.4 Top five debtors based on corresponding closing balance of account receivables
Unit: RMB
| Name of the Party | Relationship with the Company | Book value balance of accounts receivable | Closing balance for bad debt provision | Proportion (%) |
| Related party A | Related Party | 525,556,063.34 | 41,363,245.59 | 2.27 |
| Company A | Third party | 254,869,313.93 | 653,316.99 | 1.19 |
| Company B | Third party | 162,150,980.47 | 446,954.88 | 0.76 |
| Company C | Third party | 102,489,174.15 | 8,828,723.30 | 0.44 |
| Company D | Third party | 68,662,039.94 | 6,693,925.99 | 0.29 |
| Total | 1,113,727,571.83 | 57,986,166.75 | 4.95 |
| Item | Closing Balance | Opening Balance |
| Bank acceptance bill | 1,257,385,053.02 | 2,273,846,399.85 |
| Total- | 1,257,385,053.02 | 2,273,846,399.85 |
| Item | Pledged amounts at the end of the reporting period |
| Bank acceptance bill | 272,663,613.54 |
| Total- | 272,663,613.54 |
| Item | Derecognized amount at December 31st 2019 (note) | Amount not derecognized at December 31st 2019 |
| Bank acceptance bill | 1,601,320,610.86 | - |
| Total- | 1,601,320,610.86 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
or endorsed to the bank or suppliers. The maximum risk exposure of the Group continues to be involved in for theseendorsed or discounted receivable notes is equivalent to their book value. The Group Management believes that thereceivable notes which the Group has stopped recognizing but continues to be involved in do not have significant fairvalue.
5.4 The Group believes that the acceptance bank's credit rating of the bank acceptance bill held is high, and there is nosignificant credit risk, so no loss provision is made.
6. Prepayments
6.1 Prepayments by aging analysis
Unit: RMB
| Aging | Closing Balance | Opening Balance | ||
| Carrying amount | Proportion (%) | Carrying amount | Proportion (%) | |
| Within 1 year | 288,005,514.00 | 93.00 | 371,339,135.76 | 80.67 |
| 1-2 years | 15,571,671.02 | 5.03 | 87,446,891.75 | 19.00 |
| 2-3 years | 5,931,322.30 | 1.92 | 1,219,965.56 | 0.27 |
| Over 3 years | 177,226.00 | 0.05 | 298,226.58 | 0.06 |
| Total | 309,685,733.32 | 100.00 | 460,304,219.65 | 100.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
7. Other receivables
7.1 Summary of other receivables
Unit: RMB
| Closing Balance | Opening Balance (restated) | |
| Other receivables | 555,246,545.48 | 586,594,721.43 |
| Total | 555,246,545.48 | 586,594,721.43 |
| Item | Closing Balance | ||
| Other receivables | Bad debt provision | Proportion (%) | |
| Not overdue | 403,835,258.92 | 1,212,041.34 | 0.30 |
| Within 1 year after the overdue | 95,161,160.07 | 4,892,634.45 | 5.14 |
| 1-2 years after the overdue | 45,420,674.00 | 4,831,692.03 | 10.64 |
| 2-3 years after the overdue | 28,604,782.86 | 8,935,352.32 | 31.24 |
| 3-4 years after the overdue | 4,312,671.82 | 2,216,282.05 | 51.39 |
| Over 4 years after the overdue | 3,892,644.00 | 3,892,644.00 | 100.00 |
| Subtotal | 581,227,191.67 | 25,980,646.19 | 4.47 |
| Item | Closing Balance | Opening Balance (restated) |
| Temporary payments for receivables | 289,318,820.48 | 354,225,077.10 |
| Guarantee deposits | 189,230,714.51 | 185,672,767.89 |
| Tax rebates | 63,470,351.07 | 30,189,439.56 |
| Investment intention fund | 2,968,783.82 | 20,000,000.00 |
| Others | 36,238,521.79 | 66,275,172.78 |
| Total | 581,227,191.67 | 656,362,457.33 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
(3) Provision for bed debts
Unit: RMB
| Category | Opening balance (restated) | Amount of changes in the current reporting period | Difference resulted from foreign currency statements Conversion | Closing balance | ||
| Provision | Recollect or reverse | Resell or write off | ||||
| Other receivables | 69,767,735.90 | - | 44,488,527.79 | - | 701,438.08 | 25,980,646.19 |
| Total | 69,767,735.90 | - | 44,488,527.79 | - | 701,438.08 | 25,980,646.19 |
| bed debts allowance | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit losses in the next 12 months | Expected credit loss for the entire duration (credit impairment has not incurred) | Expected credit loss for the entire duration (credit impairment has occurred) | ||
| Balance on January 1st 2019 | 18,073,466.44 | 21,735,040.33 | 29,959,229.13 | 69,767,735.90 |
| Reversal during the current reporting period | (17,562,863.18) | (16,842,405.88) | (10,083,258.73) | (44,488,527.79) |
| Other changes | 701,438.08 | - | - | 701,438.08 |
| Balance on December 31st 2019 | 1,212,041.34 | 4,892,634.45 | 19,875,970.40 | 25,980,646.19 |
| Entities | Relationship with the Company | Nature | Closing balance | Aging | Proportion of total (%) | Closing balance for bad debt provision |
| Third party A | Third party | Temporary payments for receivables | 15,111,760.00 | Not overdue | 2.70 | 95,204.09 |
| Third party B | Third party | Guarantee deposits | 8,895,785.00 | Within 4 years after overdue | 1.53 | 403,654.94 |
| Third party C | Third party | Guarantee deposits | 6,985,642.16 | Within 1 year after overdue | 1.19 | 388,401.70 |
| Third party D | Third party | Guarantee deposits | 6,158,813.80 | Within 1 years after overdue | 0.75 | 1,971,436.30 |
| Third party E | Third party | Temporary payments for receivables | 5,996,878.80 | Within 3 years after overdue | 0.73 | 1,919,600.90 |
| Total | 43,148,879.76 | 6.91 | 4,778,297.93 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(6) As of December 31
st2019, the Group does not have other receivables related to government subsidies.
(7) As of December 31
st
2019, there is no termination of other receivables booking due to transfer of a financial asset.
(8) As of December 31
st
2019, the Group has no assets/liabilities booked due to any transferred other receivable that the Group continues to be involved in.
8. Inventories
(1) Categories of inventories
Unit: RMB
| Category | Closing Balance | Opening Balance | ||||
| Carrying amount | Provision for decline in value of inventories | Book value | Carrying amount | Provision for decline in value of inventories | Book value | |
| Raw materials | 4,900,229,585.04 | 36,718,275.26 | 4,863,511,309.78 | 1,558,519,309.65 | 4,736,249.82 | 1,553,783,059.83 |
| Work-in-progress | 280,637,734.52 | - | 280,637,734.52 | 415,593,344.57 | - | 415,593,344.57 |
| Finished goods | 6,017,008,257.36 | 405,129,709.25 | 5,611,878,548.11 | 3,868,735,444.19 | 316,870,213.78 | 3,551,865,230.41 |
| Completed but unsettled assets formed by construction contracts | 511,959,250.70 | - | 511,959,250.70 | 203,862,518.60 | - | 203,862,518.60 |
| Total | 11,709,834,827.62 | 441,847,984.51 | 11,267,986,843.11 | 6,046,710,617.01 | 321,606,463.60 | 5,725,104,153.41 |
| Category | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Effect of foreign currency exchange difference | Closing Balance | |
| Reversals | Write-off | |||||
| Raw materials | 4,736,249.82 | 39,361,473.79 | - | 7,379,448.35 | - | 36,718,275.26 |
| Finished goods | 316,870,213.78 | 158,529,837.48 | - | 72,286,203.95 | 2,015,861.94 | 405,129,709.25 |
| Subtotal | 321,606,463.60 | 197,891,311.27 | - | 79,665,652.30 | 2,015,861.94 | 441,847,984.51 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(3) Completed but unsettled assets formed by construction contracts at December 31
st2019
Unit: RMB
| Item | Amount |
| Accumulated occurred costs of construction | 4,105,738,847.21 |
| Accumulated booked gross profit margin | 353,958,485.57 |
| Less: estimated losses | - |
| Settled amounts | 3,196,280,342.64 |
| Completed but unsettled assets formed by construction contracts | 1,263,416,990.14 |
| Including: booked in other non-current assets (Note (V) 20) | 751,457,739.44 |
| Booked in inventories | 511,959,250.70 |
| Item | Closing Balance | Opening Balance |
| Long-term receivables due within one year (Note (V) 11) | 528,469,701.75 | 380,795,020.47 |
| Total | 528,469,701.75 | 380,795,020.47 |
| Item | Closing balance | Opening balance |
| Deductible VAT input | 616,239,842.99 | 608,169,769.69 |
| Prepaid corporate income tax | 80,344,406.42 | 31,542,797.57 |
| Prepaid tariff | 16,702,795.64 | 12,880,594.90 |
| Others | 41,169,776.67 | 78,126,967.43 |
| Total | 754,456,821.72 | 730,720,129.59 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
11. Long-term receivables
(1) Details of long-term receivables
Unit: RMB
| Item | Closing balance | Opening balance | Range of discount rate | ||||
| Carrying amount | Provision for decline in value | Book value | Carrying amount | Provision for decline in value | Book value | ||
| Financial leases receivables | 361,658,264.68 | 16,387,726.08 | 345,270,538.60 | 100,574,420.65 | - | 100,574,420.65 | 0.54%-6.05% |
| Including: Unrealized income from financing | 17,093,256.64 | - | 17,093,256.64 | 4,218,121.83 | - | 4,218,121.83 | - |
| Installments for selling goods | 1,612,991,061.26 | 47,255,136.89 | 1,565,735,924.37 | 985,732,967.99 | - | 985,732,967.99 | 4.24%-6.45% |
| Including: Unrealized income from financing | 399,492,567.10 | - | 399,492,567.10 | 167,871,990.88 | - | 167,871,990.88 | - |
| Less: Non-current assets due within one year (Note (V) 9) | 580,682,032.92 | 52,212,331.17 | 528,469,701.75 | 380,795,020.47 | - | 380,795,020.47 | - |
| Total | 1,393,967,293.02 | 11,430,531.80 | 1,382,536,761.22 | 705,512,368.17 | - | 705,512,368.17 | - |
| Age | Closing balance | ||
| Amounts | Bed debt provision | Estimated average loss rate (%) | |
| Not overdue | 1,704,687,388.74 | 13,978,436.59 | 0.82 |
| Within 1 year after the overdue | 193,232,814.09 | 10,724,421.18 | 5.55 |
| 1-2 years after the overdue | 41,870,017.58 | 10,413,073.37 | 24.87 |
| 2-3 years after the overdue | 13,985,763.77 | 9,335,497.32 | 66.75 |
| 3-4 years after the overdue | 14,599,889.33 | 12,917,982.08 | 88.48 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
| Over 4 years after the overdue | 6,273,452.43 | 6,273,452.43 | 100 |
| Total | 1,974,649,325.94 | 63,642,862.97 | 3.22 |
| Bed debt provision | Stage 1 | Stage 2 | Stage 3 | Total |
| Expected credit losses in the next 12 months | Expected credit losses for the entire duration (No credit impairment occurred) | Expected credit losses for the entire duration (Credit impairment has occurred) | ||
| Balance on January 1st 2019 | - | - | - | - |
| Provision during the current reporting period | 13,978,436.59 | 10,724,421.18 | 38,940,005.20 | 63,642,862.97 |
| Balance on December 31st 2019 | 13,978,436.59 | 10,724,421.18 | 38,940,005.20 | 63,642,862.97 |
| The invested entity | Opening Balance | Increase/Decrease in the current reporting period | Closing Balance | Closing balance for impairment provision | |||||||
| Additional Investments | Investment reduction | Investment Profit (Loss) recognized under the equity Method | Adjustment: Other comprehensive income | Other Changes in equity | Declaration of cash dividends or profit distribution | Impairment provision | others | ||||
| 1. Joint venture companies | |||||||||||
| Hangzhou Haikang Intelligent Industrial Investment Fund Partnership (L.P.) (Note 1) | - | 50,000,000.00 | - | - | - | - | - | - | - | 50,000,000.00 | - |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| The invested entity | Opening Balance | Increase/Decrease in the current reporting period | Closing Balance | Closing balance for impairment provision | |||||||
| Additional Investments | Investment reduction | Investment Profit (Loss) recognized under the equity Method | Adjustment: Other comprehensive income | Other Changes in equity | Declaration of cash dividends or profit distribution | Impairment provision | others | ||||
| Daishan Hailai Yunzhi Technology Ltd. (Note 2) | - | 13,320,000.00 | - | - | - | - | - | - | - | 13,320,000.00 | - |
| Subtotal | - | 63,320,000.00 | - | - | - | - | - | - | - | 63,320,000.00 | - |
| 2. Associated Companies | |||||||||||
| Wuhu Sensor Technology Ltd. | 41,771,440.45 | - | - | 6,649,526.01 | - | - | - | - | - | 48,420,966.46 | - |
| Maxio Technology (Hangzhou) Ltd. | 106,651,173.63 | - | - | 3,278,558.46 | - | - | - | - | - | 109,929,732.09 | - |
| Zhiguang Hailian Big Data Technology Ltd. | 10,000,000.00 | - | - | (1,315,140.73) | - | - | - | - | - | 8,684,859.27 | - |
| Sanmenxia Xiaoyun Vision Technology Ltd. | 4,879,230.48 | - | - | (562,073.30) | - | - | - | - | - | 4,317,157.18 | - |
| Jiaxin HaiShi JiaAn Zhicheng Technology Ltd. (Note 3) | - | 8,000,000.00 | - | (300,988.80) | - | - | - | - | - | 7,699,011.20 | - |
| Qinghai Qingtang Big Data Ltd. (Note 4) | - | 9,800,000.00 | - | (6,404.71) | - | - | - | - | - | 9,793,595.29 | - |
| Subtotal | 163,301,844.56 | 17,800,000.00 | - | 7,743,476.93 | - | - | - | - | - | 188,845,321.49 | - |
| Total | 163,301,844.56 | 81,120,000.00 | - | 7,743,476.93 | - | - | - | - | - | 252,165,321.49 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Note 1: As approved according to the Proposal on Investment in and Establishment of Industrial Investment Fund Partnership and the Related Transactions passed by the 12
thConferenceof the 4
th Board of Director held on October 18
th2019 and the Proposal on Adjusting Some of the Fund Providers of Hangzhou Haikang Intelligent Industrial Investment Fund Partnership(L.P.) passed by 13th Conference of the 4
th
Board of Director held on December 9
th 2019, the Group and the CET Fund Management (Tianjin) Ltd. (CET Management), Hangzhou High-tech Venture Capital Ltd. (Hangzhou High-tech), CET(Tianjin)Investment Management Partnership (L.P.) (CET Partnership) and CETHIK Group Ltd. (CETHIK) signed the PartnershipAgreement for Hangzhou Hikvision Intelligent Industrial Equity Investment Fund Partnership (L.P.) and, on December 10
th2019, founded the Hangzhou Haikang Intelligent IndustrialEquity Investment Fund Partnership (L.P.) (Haikang Intelligent Fund) under joint contribution. Haikang Intelligent Fund is a limited partnership, with subscribed capital contribution ofRMB 1,000,010,000, and completed registration at Asset Management Association of China (AMAC) on February 5
th2020. CET Management as the fund manager and the generalpartner contributes RMB 10,000 and holds 0.0010% shares. The Group, Hangzhou High-tech, CET Partnership and CETHIK, as limited partners, have respectively contributed RMB600 million, RMB 200 million, RMB 100 million and RMB 100 million in currency and their shareholding ratios are respectively 59.9994%, 19.9998%, 9.9999% and 9.9999%. As ofthe end of the year, the Group has paid in RMB 50.00 million. Over half of the representatives of the Investment Decision Committee are assigned by the Company and the related partyCET Partnership has one-vote veto power over any resolution of the Investment Decision Committee of Haikang Intelligent Fund, therefore the Company and the related party CETPartnership jointly control Haikang Intelligent Fund.
Note 2: The Group and the independent third party Penglai National Assets Investment Group Ltd. (PNAI) of Zhoushan Archipelago New Area have signed the agreement for jointlyestablishing the Daishan Hailai Yunzhi Technology Ltd. (Daishan Hailai). The Group contributes RMB 13,320,000, which has been paid in as of the end of the year, and controls 66.6%of equity, which is commensurate with the Group's voting power in the board of shareholders of Daishan Hailai. According to the Articles of Association of Daishan Hailai, any issuesrelated to the company's development strategy and long-term planning are subject to approval of over 2/3 of the voting members of the board of shareholders. The board of directors ofDaishan Hailai consists of 5 directors, 3 of whom are assigned by the Group. According to the Articles of Association of Daishan Hailai, any major issues related to operation decisionsare subject to approval of over 2/3 of the members of the board of directors. Therefore the Group and PNAI jointly control Daishan Hailai.
Note 3: The Group and the independent third party Jiaxing Urban Investment and Development Group Ltd. have signed the agreement for jointly establishing Jiaxing HaiShiJiaAnZhicheng Technology Ltd. (Haishi Jia’an). The subsidiary Hangzhou Hikvision System Technology Ltd. (Hangzhou System) contributes RMB 8 million, which had been paid in as ofthe end of the year, and controls 40% of the equity. The board of directors of Haishi Jia’an consists of 3 directors, 1 of whom is assigned by Hangzhou System and has significant influenceover Haishi Jia’an.
Note 4: The Group and the independent third party Xining Big Data Ltd have signed the agreement for jointly establishing the Qinghai Qingtang Big Data Ltd. (Qingtang Big Data). TheGroup contributes RMB 9.8 million, which had been paid in as of the end of the year, and controls 49% of equity. The board of directors of Qingtang Big Data consists of 3 directors, 1of whom is assigned by the Group and has significant influence over Qingtang Big Data.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
13. Other non-current financial assets
Unit: RMB
| Invested Entity (Note 1) | Shareholding % | Opening balance | Additional investment during the current reporting period | Investment recovery during the current reporting period | Changes in fair value during the current reporting period | Closing balance |
| CETC Finance Ltd. (Note 2) | 3.83% | 227,792,500.00 | - | - | 19,516,406.45 | 247,308,906.45 |
| Hangzhou Confirmware Technology Co., Ltd. | 9.52% | 26,629,200.00 | - | - | 2,102,809.18 | 28,732,009.18 |
| Zhejiang Tuxun Technology Co.,Ltd. (Zhejiang Tuxun) | 8.13% | 32,430,800.00 | - | - | (4,071,981.19) | 28,358,818.81 |
| Zhengzhou Guokong Smart City Technology Ltd. | 7.00% | 3,500,000.00 | - | - | - | 3,500,000.00 |
| Guangxi Jilian Haibao Technical Service Ltd. | 10.00% | - | 2,884,220.00 | - | - | 2,884,220.00 |
| Shenzhen Wanyu Security Service Technology Ltd. | 5.00% | - | 1,000,000.00 | - | - | 1,000,000.00 |
| Nanwang Information Industry Group Ltd. | 0.25% | 604,313.00 | - | - | - | 604,313.00 |
| Hangzhou Hikvision Equity Investment Partnership (Limited Partnership) | 0.0017% | 10,000.00 | - | - | - | 10,000.00 |
| Total | 290,966,813.00 | 3,884,220.00 | - | 17,547,234.44 | 312,398,267.44 |
| Items | Building and construction | General-purpose equipment | Special-purpose equipment | Transportation vehicles | Total |
| Total original carrying amount | |||||
| 1. Opening balance | 4,657,871,649.90 | 480,490,219.61 | 1,093,093,470.72 | 78,724,224.02 | 6,310,179,564.25 |
| 2. Increase in the current reporting period | 168,487,344.15 | 312,928,376.51 | 804,150,453.15 | 20,275,855.85 | 1,305,842,029.66 |
| 1) purchase | 19,050,132.93 | 311,407,058.27 | 619,765,484.62 | 19,792,834.21 | 970,015,510.03 |
| 2) transferred from construction in progress | 149,437,211.22 | 845,232.96 | 184,384,968.53 | 308,089.76 | 334,975,502.47 |
| 3) business merger not under common control | - | 676,085.28 | - | 174,931.88 | 851,017.16 |
| 3.Decrease in the current reporting period | 13,419,519.43 | 22,349,743.16 | 41,504,059.05 | 7,633,133.42 | 84,906,455.06 |
| 1) disposal or write-off | 13,419,519.43 | 22,349,743.16 | 41,504,059.05 | 7,633,133.42 | 84,906,455.06 |
| 4. Effect of foreign currency exchange difference | 3,149,330.33 | 1,951,829.51 | 1,996,519.76 | 119,418.09 | 7,217,097.69 |
| 5.Closing Balance | 4,816,088,804.95 | 773,020,682.47 | 1,857,736,384.58 | 91,486,364.54 | 7,538,332,236.54 |
| Accumulated depreciation |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| 1. Opening balance | 549,468,936.19 | 131,087,047.49 | 504,998,831.89 | 42,209,588.58 | 1,227,764,404.15 |
| 2. Increase in the current reporting period | 218,094,036.88 | 111,657,490.28 | 220,305,287.54 | 9,831,771.61 | 559,888,586.31 |
| (1) accrual | 218,094,036.88 | 111,657,490.28 | 220,305,287.54 | 9,831,771.61 | 559,888,586.31 |
| 3.Decrease in the current reporting period | 4,326,558.81 | 19,520,081.31 | 13,211,316.06 | 6,209,375.05 | 43,267,331.23 |
| (1) disposal or write- off | 4,326,558.81 | 19,520,081.31 | 13,211,316.06 | 6,209,375.05 | 43,267,331.23 |
| 4. Effect of foreign currency exchange difference | 432,214.00 | 1,144,827.09 | 1,074,978.66 | 75,836.69 | 2,727,856.44 |
| 5.Closing balance | 763,668,628.26 | 224,369,283.55 | 713,167,782.03 | 45,907,821.83 | 1,747,113,515.67 |
| Provision for decline in value | |||||
| 1.Opening balance | - | - | - | - | - |
| 2.Increase in the current reporting period | - | - | - | - | - |
| 3. Decrease in the current reporting period | - | - | - | - | - |
| 4.Closing balance | - | - | - | - | - |
| Total book value | |||||
| Closing balance on book value | 4,052,420,176.69 | 548,651,398.92 | 1,144,568,602.55 | 45,578,542.71 | 5,791,218,720.87 |
| Opening balance on book value | 4,108,402,713.71 | 349,403,172.12 | 588,094,638.83 | 36,514,635.44 | 5,082,415,160.10 |
| Item | Original book value | Accumulated depreciation | Provision for impairment | Carrying value |
| Fixed assets | 76,842,631.49 | 14,964,901.44 | - | 61,877,730.05 |
| Item | Carrying amount | Reason for certificates of title not granted |
| Office building for branches | 23,067,253.22 | In the process of obtaining the real estate certificates |
| Chongqing Production Base-Phase 1 plant | 277,289,173.62 | In the process of obtaining the real estate certificates after transferred to fixed assets |
| Total | 300,356,426.84 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
15. Construction in progress
(1) Details of construction in progress
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Public Security Monitoring Site Project | 29,514,953.03 | - | 29,514,953.03 | 291,404,089.32 | - | 291,404,089.32 |
| Hangzhou Innovation Industry Base | 113,538,634.58 | - | 113,538,634.58 | 50,840,516.83 | - | 50,840,516.83 |
| Chengdu Science and Technology Base Project | 242,931,547.66 | - | 242,931,547.66 | 6,577,446.74 | - | 6,577,446.74 |
| Chongqing Science and Technology Base Phase II Project | 111,066,438.98 | - | 111,066,438.98 | 2,257,412.05 | - | 2,257,412.05 |
| Others | 134,503,904.81 | - | 134,503,904.81 | 65,012,948.48 | - | 65,012,948.48 |
| Total | 631,555,479.06 | - | 631,555,479.06 | 416,092,413.42 | - | 416,092,413.42 |
| Item | Budget (RMB 0,000) | Opening balance | Increase in the current reporting period | Transferred to fixed assets during the current reporting period | Effect of foreign currency exchange difference | Other Reductions (Note 1) | Closing balance | Amount invested as a proportion of budget amount (%) | Construction in Progress (%) | Accumulated capitalized interest and profit/loss on exchange (Note 2) | Including: capitalized interest and profit/loss on exchange for the current reporting period | Capitalization rate for interest in the current reporting period (%) | Source of funds |
| Chengdu Science and Technology Base Project | 196,900.00 | 6,577,446.74 | 236,354,100.92 | - | - | - | 242,931,547.66 | 12.34% | 12.34% | - | - | - | Self- financing |
| Hangzhou Innovation Industry Base | 102,600.00 | 50,840,516.83 | 62,698,117.75 | - | - | - | 113,538,634.58 | 11.07% | 11.07% | (5,198,732.06) | (5,198,732.06) | 0.85% | Special loan |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Note 1: The other reductions in the current reporting period was that the assets of the financial leasing project that were completed and transferred to long-term receivables.
Note 2: This amount is calculated by interest expense for specific foreign currency borrowings, less interest income for unused borrowing fund and profit/loss on exchange rate difference.
As of December 31
st2019, the Group did not have any sign of impairment of projects under construction; therefore, no provision for impairment loss was booked.
| Item | Budget (RMB 0,000) | Opening balance | Increase in the current reporting period | Transferred to fixed assets during the current reporting period | Effect of foreign currency exchange difference | Other Reductions (Note 1) | Closing balance | Amount invested as a proportion of budget amount (%) | Construction in Progress (%) | Accumulated capitalized interest and profit/loss on exchange (Note 2) | Including: capitalized interest and profit/loss on exchange for the current reporting period | Capitalization rate for interest in the current reporting period (%) | Source of funds |
| Chongqing Science and Technology Base project- phase 2 | 76,200.00 | 2,257,412.05 | 108,809,026.93 | - | - | - | 111,066,438.98 | 14.58% | 14.58% | - | - | - | Self- financing |
| Xi’an Science and Technology Base project | 227,800.00 | 1,664,067.68 | 4,507,504.22 | - | - | - | 6,171,571.90 | 0.27% | 0.27% | - | - | - | Self- financing |
| Wuhan Science and Technology Base project | 280,600.00 | 1,641,509.43 | 2,698,113.21 | - | - | - | 4,339,622.64 | 0.15% | 0.15% | - | - | - | Self- financing |
| Wuhan Intelligent Industry Base project | 238,700.00 | 934,836.51 | 1,435,710.38 | - | - | - | 2,370,546.89 | 0.10% | 0.10% | - | - | - | Self- financing |
| Others | - | 352,176,624.18 | 414,051,500.25 | 334,975,502.47 | 429,290.26 | 280,544,795.81 | 151,137,116.41 | - | - | - | - | - | Self- financing |
| Total | 1,122,800.00 | 416,092,413.42 | 830,554,073.66 | 334,975,502.47 | 429,290.26 | 280,544,795.81 | 631,555,479.06 | - | - | (5,198,732.06) | (5,198,732.06) |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
16. Intangible assets
(1) Details of Intangible assets
Unit: RMB
| Item | Land use right | Intellectual property right | Application Software | Total |
| Total original carrying amount | ||||
| 1.Opening balance | 775,589,326.13 | 39,270,797.88 | 233,126,120.86 | 1,047,986,244.87 |
| 2. Increased | 230,414,127.57 | 29,122,756.48 | 69,694,146.87 | 329,231,030.92 |
| (1) Purchase | 230,414,127.57 | 29,122,756.48 | 69,694,146.87 | 329,231,030.92 |
| 3.Decreased | 32,960,000.00 | 1,411,729.58 | 22,124,419.38 | 56,496,148.96 |
| (1)Disposal or write-off | 32,960,000.00 | 1,411,729.58 | 22,124,419.38 | 56,496,148.96 |
| 4.Effect of foreign currency exchange difference | - | 11,610.73 | 200,787.59 | 212,398.32 |
| 5.Closing balance | 973,043,453.70 | 66,993,435.51 | 280,896,635.94 | 1,320,933,525.15 |
| Total accumulated amortization | ||||
| 1.Opening balance | 34,866,723.64 | 19,201,069.47 | 124,005,401.67 | 178,073,194.78 |
| 2.Increased | 19,468,074.60 | 33,477,784.12 | 61,955,697.53 | 114,901,556.25 |
| (1)Accrual | 19,468,074.60 | 33,477,784.12 | 61,955,697.53 | 114,901,556.25 |
| 3.Decreased | 1,043,733.34 | 1,161,028.83 | 16,126,360.73 | 18,331,122.90 |
| (1)Disposal or write-off | 1,043,733.34 | 1,161,028.83 | 16,126,360.73 | 18,331,122.90 |
| 4.Effect of foreign currency exchange difference | 14,365.39 | 153,023.99 | 167,389.38 | |
| 5. Closing balance | 53,291,064.90 | 51,532,190.15 | 169,987,762.46 | 274,811,017.51 |
| Provision for decline in value | ||||
| 1.Opening balance | - | - | - | - |
| 2.Increased | - | - | - | - |
| 3. Decreased | - | - | - | - |
| 4.Closing balance | - | - | - | - |
| Total book value | ||||
| Closing balance on book value | 919,752,388.80 | 15,461,245.36 | 110,908,873.48 | 1,046,122,507.64 |
| Opening balance on book value | 740,722,602.49 | 20,069,728.41 | 109,120,719.19 | 869,913,050.09 |
| The invested entity | Opening balance | Increased | Decreased | Effect of foreign currency exchange difference | Closing balance |
| Business combination not involving enterprises under common control | Liquidation & cancellation | ||||
| Secure Holdings Limited (SHL) | 137,092,136.66 | - | - | 2,282,170.67 | 139,374,307.33 |
| Henan HuaAn Baoquan Intelligence Development Ltd. and its subsidiaries | 61,322,871.63 | - | - | - | 61,322,871.63 |
| Hangzhou Kuangxin Technology Ltd. | - | 59,060,454.06 | - | - | 59,060,454.06 |
| Hundure Technology (Shanghai) Ltd. | 13,774,405.88 | - | - | - | 13,774,405.88 |
| ZAO Hikvision | 67,349.64 | - | - | - | 67,349.64 |
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | 12,573.42 | - | - | - | 12,573.42 |
| Beijing Brainaire Storage Technology Ltd. | 42,695,573.44 | - | 42,695,573.44 | - | - |
| Total | 254,964,910.67 | 59,060,454.06 | 42,695,573.44 | 2,282,170.67 | 273,611,961.96 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
(2) Provision of impairment in goodwill
Unit: RMB
| Invested Company | Opening balance | Increased | Decrease | Effect of foreign currency exchange difference | Closing Balance |
| Provision | Liquidation & cancellation | ||||
| Beijing Bangnuo Storage Technology Ltd. | 42,695,573.44 | - | 42,695,573.44 | - | - |
| Total | 42,695,573.44 | - | 42,695,573.44 | - | - |
| Invested unit | Opening Balance | Increased | Amortized | Difference of foreign currency translation | Closing balance |
| Improvement expenditure for leased fixed asset | - | 111,407,214.80 | 24,002,044.87 | 206,320.82 | 87,611,490.75 |
| Total | - | 111,407,214.80 | 24,002,044.87 | 206,320.82 | 87,611,490.75 |
| Item | Closing balance | Opening balance | ||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Provision for impairment losses of assets | 272,015,493.85 | 72,480,367.65 | 1,364,242,526.16 | 322,143,179.09 |
| Provision for credit loss | 1,409,847,170.59 | 292,275,236.58 | ||
| Payroll payables | 353,810,837.41 | 55,990,855.40 | 220,173,893.79 | 33,026,084.07 |
| Share-based payment | 273,114,847.21 | 43,340,918.66 | 115,893,666.94 | 18,240,425.31 |
| Provisions | 78,353,085.64 | 15,477,040.83 | 52,956,535.09 | 7,943,480.27 |
| Expenditure without invoice | 228,359,902.54 | 52,419,606.75 | 113,835,410.80 | 17,075,311.62 |
| Unrealized profit from inter-group transactions | 1,157,820,970.68 | 187,268,546.98 | 892,163,728.04 | 133,824,559.21 |
| Changes in the fair value of derivative financial instruments | 652,428.18 | 163,107.05 | 275,080.00 | 68,770.00 |
| Deferred income | 288,449,840.21 | 51,155,882.21 | 186,747,708.01 | 28,012,156.20 |
| Total | 4,062,424,576.31 | 770,571,562.11 | 2,946,288,548.83 | 560,333,965.77 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
(2) Deferred tax liabilities that are not presented on net off basis
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Difference in fixed asset depreciation | 680,837,730.59 | 129,970,264.62 | 170,081,176.39 | 25,512,176.46 |
| Difference in amortization of intangible assets | 1,386,714.30 | 208,007.14 | 695,043.70 | 104,256.55 |
| Changes in the fair value of derivative financial instruments | 181.76 | 45.44 | 1,482,366.03 | 370,591.51 |
| Changes in fair value of other non-current financial assets | 17,547,234.44 | 2,632,085.17 | ||
| Total | 699,771,861.09 | 132,810,402.37 | 172,258,586.12 | 25,987,024.52 |
| Item | Closing balance | Opening balance | ||
| Offset amount at the end of the reporting period | Deferred tax assets or liabilities at the net amount after offset | Offset amount at the beginning of the reporting period | Deferred tax assets or liabilities at the net amount after offset | |
| Deferred tax assets | 81,722,298.41 | 688,849,263.70 | 25,987,024.52 | 534,346,941.25 |
| Deferred tax liabilities | 81,722,298.41 | 51,088,103.96 | 25,987,024.52 | - |
| Item | Closing balance | Opening balance |
| Deductible temporary difference | 306,240,573.47 | 811,602,394.93 |
| Deductible losses | 2,630,277,858.25 | 935,162,077.25 |
| Total | 2,936,518,431.72 | 1,746,764,472.18 |
| Year | Closing balance | Opening balance |
| 2019 | - | 5,645,442.54 |
| 2020 | 3,636,058.38 | 3,636,058.38 |
| 2021 | 90,274,644.51 | 103,268,429.06 |
| 2022 | 331,787,605.27 | 331,787,605.27 |
| 2023 | 490,824,542.00 | 490,824,542.00 |
| 2024 | 1,713,755,008.09 | - |
| Total | 2,630,277,858.25 | 935,162,077.25 |
| Item | Closing balance | Opening balance |
| Completed but unsettled assets formed by construction contracts (Note (V) 8) | 751,457,739.44 | 1,253,407,742.28 |
| Prepayments for equipment | 85,573,983.95 | 196,992,554.09 |
| Prepayments for infrastructure | 13,942,203.53 | 32,759,311.95 |
| Prepayments for equity investment | 13,794,550.00 | - |
| Prepayments for acquisition of land | 818,200.00 | 98,000,000.05 |
| Prepayments for purchase of property | - | 1,590,992.43 |
| Total | 865,586,676.92 | 1,582,750,600.80 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
21. Short-term borrowings
(1) Categories of short-term borrowings
Unit: RMB
| Item | Closing balance | Opening balance |
| Fiduciary loan-principal | 2,637,513,739.48 | 247,000,100.00 |
| Fiduciary loan-interest | 2,568,745.67 | - |
| Guaranteed loans | - | 3,166,655,588.29 |
| Pledged loans | - | 52,000,000.00 |
| Total | 2,640,082,485.15 | 3,465,655,688.29 |
| Item | Closing balance | Opening balance |
| Financial liabilities measured at fair value through current profits and losses | 652,428.18 | 290,998.43 |
| Including: derivative financial liabilities | 652,428.18 | 290,998.43 |
| total | 652,428.18 | 290,998.43 |
| Item | Closing balance | Opening balance |
| Bank acceptance Bill | 1,239,584,016.70 | 463,479,760.54 |
| Total | 1,239,584,016.70 | 463,479,760.54 |
| Item | Closing balance | Opening balance |
| Payments for goods | 12,526,135,911.98 | 10,208,299,054.08 |
| Payables on equipment | 173,939,395.72 | 93,366,671.12 |
| Total | 12,700,075,307.70 | 10,301,665,725.20 |
| Item | Closing balance | Opening balance |
| Advanced receipts from sales of goods | 535,145,418.68 | 449,150,259.60 |
| Advanced receipts from construction contracts | 485,844,041.93 | 192,280,230.62 |
| Total | 1,020,989,460.61 | 641,430,490.22 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(2) As of December 31
st
2019, the Group did not have any significant receipts in advance with aging above one year.
(3) The settlement of unfinished projects formed by the construction contract at the end of the reporting period
Unit: RMB
| Item | Amounts |
| Accumulated costs | 1,132,647,291.15 |
| Accumulated gross profit | 153,579,374.20 |
| Less: estimated loss | - |
| Amount settled | 1,426,801,186.34 |
| Settled amount of unfinished projects formed by the construction contract | 140,574,520.99 |
| Item | Opening balance (restated) | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1.Short-term remuneration | 1,915,387,271.72 | 8,903,496,913.06 | 8,468,657,875.40 | 2,350,226,309.38 |
| 2. Termination benefits – defined contribution scheme | 6,353,859.91 | 469,133,219.95 | 466,038,749.12 | 9,448,330.74 |
| Total | 1,921,741,131.63 | 9,372,630,133.01 | 8,934,696,624.52 | 2,359,674,640.12 |
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1.Wages or salaries, bonuses, allowances and subsidies | 1,794,117,599.34 | 7,859,572,302.82 | 7,459,150,963.03 | 2,194,538,939.13 |
| 2.Staff welfare | 893,122.46 | 210,311,263.80 | 211,130,101.54 | 74,284.72 |
| 3.Social insurance contributions | 3,234,424.54 | 298,765,224.54 | 301,252,922.65 | 746,726.43 |
| Including: medical insurance | 2,987,488.56 | 263,382,471.95 | 265,698,720.43 | 671,240.08 |
| Injury insurance | 57,403.50 | 9,678,213.78 | 9,710,979.96 | 24,637.32 |
| Maternity insurance | 189,532.48 | 25,704,538.81 | 25,843,222.26 | 50,849.03 |
| 4.Housing funds | 47,610.40 | 386,357,199.69 | 386,271,900.09 | 132,910.00 |
| 5.Labor union and education fund | 117,094,514.98 | 148,490,922.21 | 110,851,988.09 | 154,733,449.10 |
| Subtotal | 1,915,387,271.72 | 8,903,496,913.06 | 8,468,657,875.40 | 2,350,226,309.38 |
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| 1.Basic pension insurance | 6,270,825.40 | 451,708,456.17 | 448,969,976.72 | 9,009,304.85 |
| 2.Unemployment insurance | 83,034.51 | 17,424,763.78 | 17,068,772.40 | 439,025.89 |
| Subtotal | 6,353,859.91 | 469,133,219.95 | 466,038,749.12 | 9,448,330.74 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
schemes to fund the benefits. The Group has no other material obligation for the payment of pension benefits beyond thecontributions described above, and corresponding expenses were booked into profits and losses of related assets duringthe current period.
The Group shall pay a total of RMB 451,708,456.17 and RMB 17,424,763.78 (2018: RMB 442,866,778.48 and RMB15,361,837.44) to the pension insurance and unemployment insurance schemes respectively. On December 31
st2019, theGroup still had RMB 9,009,304.85 and RMB 439,025.89 (December 31
st2018: RMB 6,270,825.40 and RMB 83,034.51)payable expenses for pension insurance and unemployment insurance plans that were due during the current reportingperiod but were not paid. The relevant dues have been paid off after the reporting period.
27. Taxes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Enterprise income tax | 553,486,554.42 | 1,085,546,102.66 |
| Value-added tax | 331,490,538.56 | 242,237,174.61 |
| City construction and maintenance tax | 21,992,627.00 | 26,667,741.79 |
| Education surcharges | 9,283,542.86 | 11,563,769.42 |
| Local education surcharges | 6,385,473.76 | 7,686,512.17 |
| Others | 68,704,069.31 | 45,220,363.92 |
| Total | 991,342,805.91 | 1,418,921,664.57 |
| Item | Closing balance | Opening balance (restated) |
| Dividend payable | 108,129,385.24 | 119,917,640.92 |
| Other payables | 1,460,615,214.70 | 2,833,537,347.03 |
| Total | 1,568,744,599.94 | 2,953,454,987.95 |
| Item | Closing balance | Opening balance |
| Dividends of restricted shares | 105,679,385.24 | 117,467,640.92 |
| Dividends of ordinary shares | 2,450,000.00 | 2,450,000.00 |
| Total | 108,129,385.24 | 119,917,640.92 |
| Item | Closing balance | Opening balance |
| Accrued expenses | 608,136,188.75 | 298,013,859.39 |
| Unexpired commercial acceptance bills that were endorsed (Note (V)-3) | 329,309,522.17 | 94,097,879.36 |
| Guarantee and deposit fees | 240,507,892.79 | 212,959,951.64 |
| Collection and payment on behalf | 220,858,972.11 | 124,202,099.26 |
| Investment payable | 12,400,000.00 | - |
| Other expense payable | 49,402,638.88 | 46,364,680.54 |
| Share incentive funds (Note) | - | 2,057,898,876.84 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Total
| Total | 1,460,615,214.70 | 2,833,537,347.03 |
| Item | Closing balance | Opening balance |
| Long-term borrowings due within one year (Note (V) 31) | 69,893,081.33 | 2,984,575.25 |
| Long-term payables due within one year (Note (V) 32) | 16,230,072.73 | 2,458,683.54 |
| Bonds Payable due within one year | - | 3,172,727,888.37 |
| Total | 86,123,154.06 | 3,178,171,147.16 |
| Item | Closing balance | Opening balance |
| Subscription payment of restricted shares | 913,534,538.26 | 364,984,759.94 |
| Total | 913,534,538.26 | 364,984,759.94 |
| Item | Closing balance | Opening balance |
| Pledged loan (Note 1) | 1,348,034,851.48 | 251,000,000.00 |
| Fiduciary loan (Note 2) | 3,136,026,801.28 | 1,984,575.25 |
| Other borrowing (Note 3) | 190,000,000.00 | 190,000,000.00 |
| Less：Long-term loans due within one year (Note (V) 29) | 69,893,081.33 | 2,984,575.25 |
| Total | 4,604,168,571.43 | 440,000,000.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
RMB 569,000,000.00 of the pledged loan (2018: RMB 251,000,000.00) was obtained by the Group with all the rights andbenefits pledged under the Xi'an Public Security Video Surveillance Construction Network Application Construction--Public-Private Partnership (PPP) Project Agreement; the maturity date is November 5
th2031, the annual interest rate is
4.445%.
As of December 31
st2018, the pledged loan was obtained by the Group with all the rights and benefits pledged under theXi'an Public Security Video Surveillance Construction Network Application Construction--Public-Private Partnership(PPP) Project Agreement; the maturity date is November 5
th2031. Among them, the annual interest rate of RMB250,000,000.00 loan is 4.445%, and the annual interest rate of RMB 1,000,000.00 loan is 4.900%.
Note 2: As of December 31
st2019, the credit loan with a book value of RMB 3,126,200,000.00 was 400 million euros incredit loans, which was mainly used for the investment and construction of the Company's Hangzhou Innovation IndustrialBase project and Xi'an Science and Technology Base project, the maturity date is December 14
th
2021, and the interestrate is 0.85%.
Note 3: During 2016, the Group entered into an agreement with CDB Development Fund Ltd.(CDBDF) to jointly injectcapital into Hikvision Electronics Co., Ltd. ("Hangzhou Electronics"), a subsidiary of the Group. Pursuant to the capitalinjection agreement, CDBDF would not participate in senior management personnel such as directors, and it would eithertake part in decision-making or make significant influence on Hangzhou Electronics. The Group shall pay a 1.2%annualized return to CDBDF through dividends or interest payments, and the Group is required to redeem the CDBDF'sequity investment in the current reporting period by installments each year from 2021 to 2024. Therefore, the capitalinjection by CDBDF is treated as a long-term loan. As of December 31
st2019, CDBDF has aggregately invested RMB190 million (December 31
st2018: RMB 190 million).
32. Long-term payables
Unit: RMB
| Item | Closing balance | Opening balance (restated) |
| Payables for financial leasing | 42,181,416.72 | - |
| Borrowing | 8,000,000.00 | 8,000,000.00 |
| Total | 50,181,416.72 | 8,000,000.00 |
| Details of financial lease payables in long-term payables | Closing balance | Opening balance |
| 1st year after the balance sheet date | 19,265,287.22 | - |
| 2nd year after the balance sheet date | 21,387,869.19 | - |
| 3rd year after the balance sheet date | 14,137,481.89 | - |
| Future years | 10,420,815.85 | - |
| Total minimum lease payments | 65,211,454.15 | - |
| Unrecognized financing costs | 6,799,964.70 | - |
| Finance lease payable | 58,411,489.45 | - |
| Including: Finance lease payable due within 1 year | 16,230,072.73 | - |
| Finance lease payable due after 1 year | 42,181,416.72 | - |
| Item | Closing balance | Opening balance |
| Product warranty | 90,570,669.01 | 77,625,238.49 |
| Total | 90,570,669.01 | 77,625,238.49 |
Notes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
34. Deferred income
Unit: RMB
| Item | Opening balance | Increase in current reporting period | Decrease in current reporting period | Closing balance | Details |
| Cloud storage service income | 58,690,626.37 | 228,696,492.06 | 180,137,571.43 | 107,249,547.00 | Note 1 |
| Government Subsidies | 234,488,462.76 | 99,497,790.44 | 107,645,968.90 | 226,340,284.30 | Note 2 |
| Total | 293,179,089.13 | 328,194,282.50 | 287,783,540.33 | 333,589,831.30 |
| Liability Items | Opening Balance | Increase in current reporting period | Amounts booked into other income during the current reporting period | Other changes | Closing Balance | Related to assets/related to incomes |
| Chongqing Manufacture Base construction | 47,975,445.00 | 33,697,550.44 | 2,418,930.00 | - | 79,254,065.44 | Related to assets |
| Projects of core electronic devices, high-end universal chips and basic software products | 131,567,063.01 | - | 68,739,200.00 | - | 62,827,863.01 | Related to incomes |
| Other special subsidies | 22,976,603.81 | 29,750,000.00 | 9,260,088.72 | - | 43,466,515.09 | Related to assets |
| Other special subsidies | 31,969,350.94 | 36,050,240.00 | 27,227,750.18 | - | 40,791,840.76 | Related to incomes |
| Subtotal | 234,488,462.76 | 99,497,790.44 | 107,645,968.90 | - | 226,340,284.30 |
| Item | Closing balance | Opening balance |
| Subscription for restricted stocks | 1,234,739,326.10 | - |
| Total | 1,234,739,326.10 | - |
| Opening balance | Changes for the period | Closing balance | |||||
| New issue of shares (Note 1) | Bonus issue | Transfer from Capital Reserve (Note 2) | Others (Note 2) | Subtotal | |||
| 2019 | |||||||
| Total shares | 9,227,270,473.00 | 121,195,458.00 | - | -- | (3,455,235.00) | 117,740,223.00 | 9,345,010,696.00 |
| 2018 | |||||||
| Total shares | 9,228,865,114.00 | - | - | -- | (1,594,641.00) | (1,594,641.00) | 9,227,270,473.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Note 1: On December 20
th
2018, authorized by the Company's 2
ndextraordinary general meeting in 2018 and reviewedand decided by the 8
thmeeting of the fourth board of directors, the Company was approved to grant 126,518,281 sharesRMB common shares (121,195,458 shares after adjustments) to 6,341 grantees (6,095 grantees after adjustments), withface value of RMB 1.00 per share and issuing price of RMB 16.98 per share. The Company has completed the equityregistration on January 17
th
2019, which increased the paid-in capital of RMB 121,195,458.00 in 2019 and resulted incapital reserve of RMB 1,936,703,418.84.
Note 2：On December 26
th
2018, pursuant to the Articles of Association of the Company revised by the resolution of 9
th
General Meeting of fourth session Board of Directors authorized by the second Extraordinary General Meeting in 2016,the Company repurchased and cancelled 2,945,610 granted but restricted RMB treasury shares by cash, and the totalshare capital of the Company decreased by RMB 2,945,610, capital reserve decreased by RMB 21,856,426.20. Theprocedures for repurchase and cancellation were completed on September 3
rd2019.
On December 3
rd
2018, pursuant to the Articles of Association of the Company revised by the resolution of 7
th
GeneralMeeting of fourth session Board of Directors authorized by the first Extraordinary General Meeting in 2014, the Companyrepurchased and cancelled 509,625 granted but restricted RMB treasury shares by cash, and the total share capital of theCompany decreased by RMB 509,625, capital reserve decreased by RMB 1,585,455. The procedures for repurchase andcancellation were completed on June 26
th2019.
On December 15
th 2017, pursuant to the Articles of Association of the Company revised by the resolution of 26
th
GeneralMeeting of third session Board of Directors authorized by the first Extraordinary General Meeting in 2014, the Companyrepurchased and cancelled 1,594,641 granted but restricted RMB treasury shares by cash, and the total share capital of theCompany decreased by RMB 1,594,641.00, capital reserve decreased by RMB 4,961,105.33. The procedures forrepurchase and cancellation were completed on March 27
th
2018.
37. Capital reserves
Unit: RMB
| Item | Opening balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (note 2) | Closing balance |
| 2019 | ||||
| Share premium | 1,828,917,545.39 | 2,039,710,482.49 | 34,209,174.82 | 3,834,418,853.06 |
| Other capital reserves | 127,222,115.13 | 268,309,794.42 | 103,007,063.65 | 292,524,845.90 |
| Total | 1,956,139,660.52 | 2,308,020,276.91 | 137,216,238.47 | 4,126,943,698.96 |
| 2018 | ||||
| Share premium | 1,594,317,396.71 | 243,326,385.07 | 8,726,236.39 | 1,828,917,545.39 |
| Other capital reserves | 225,080,318.92 | 145,468,181.28 | 243,326,385.07 | 127,222,115.13 |
| Total | 1,819,397,715.63 | 388,794,566.35 | 252,052,621.46 | 1,956,139,660.52 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Note 2：The decrease of RMB 23,441,881.20 in share premium during the current year was due to the Company’srepurchase of 3,455,235 granted but restricted RMB treasury shares by cash, please refer to Note (V) 36-Note 2; Thedecrease of RMB 10,767,293.62 in share premium during the current year was due to share distributions by equitysettlements to minority shareholders.
The decrease of RMB 4,961,105.33 in share premium during the prior year was due to the Company’s repurchase of1,594,641 granted but restricted RMB treasury shares by cash, please refer to Note (V) 36-Note 2; The decrease of RMB3,765,131.06 in share premium during was due to share distributions by equity settlements to minority shareholders duringthe prior year.
38. Treasury shares
Unit: RMB
| Item | Opening Balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (Note 2) | Closing balance |
| 2019 | ||||
| Restricted shares incentive scheme | 364,984,759.94 | 2,057,898,876.84 | 274,609,772.42 | 2,148,273,864.36 |
| Total | 364,984,759.94 | 2,057,898,876.84 | 274,609,772.42 | 2,148,273,864.36 |
| 2018 | ||||
| Restricted shares incentive scheme | 744,583,627.22 | - | 379,598,867.28 | 364,984,759.94 |
| Total | 744,583,627.22 | - | 379,598,867.28 | 364,984,759.94 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
39. Other comprehensive income
Unit: RMB
| Item | Opening balance | Change for the current reporting period | Closing balance | ||||
| The before-income-tax amount incurred during the current reporting period | Less: transfer to current period P/L from previous other comprehensive income | Less: income tax expense | Attributable to the parent company (after tax) | Attributable to minority shareholders (after tax) | |||
| 2019 | |||||||
| Other incomes that may be reclassified subsequently to profit or loss | (49,576,351.10) | (4,658,993.77) | - | - | (3,964,795.89) | (694,197.88) | (53,541,146.99) |
| Included: Effect on conversion of financial statements denominated in foreign currencies | (49,576,351.10) | (4,658,993.77) | - | - | (3,964,795.89) | (694,197.88) | (53,541,146.99) |
| Other comprehensive income | (49,576,351.10) | (4,658,993.77) | - | - | (3,964,795.89) | (694,197.88) | (53,541,146.99) |
| 2018 | |||||||
| Other incomes that may be reclassified subsequently to profit or loss | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| Included: Effect on conversion of financial statements denominated in foreign currencies | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| Other comprehensive income | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 2019 | ||||
| Statutory surplus reserves (Note) | 4,460,712,358.45 | 211,792,989.55 | - | 4,672,505,348.00 |
| Total | 4,460,712,358.45 | 211,792,989.55 | - | 4,672,505,348.00 |
| 2018 | ||||
| Statutory surplus reserves (Note) | 3,483,742,918.53 | 976,969,439.92 | - | 4,460,712,358.45 |
| Total | 3,483,742,918.53 | 976,969,439.92 | - | 4,460,712,358.45 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
statutory surplus reserve of RMB 4,672,505,348.00, which has reached 50% of the Company's share capital at the end of2019, so no subsequent statutory surplus reserve will be accrued.
The statutory surplus reserve can be used to make up for losses or increase the share capital after approval.
41. Retained earnings
Unit: RMB
| Item | 2019 | 2018 (restated) |
| Retained Earnings at the close of the prior reporting period | 22,359,856,271.42 | 16,598,328,692.63 |
| Add: Net profit attributable to the parent company for the current reporting period | 12,414,587,690.45 | 11,352,132,255.21 |
| Less: Statutory surplus reserved | 211,792,989.55 | 976,969,439.92 |
| Dividends on ordinary shares payable (Note) | 5,601,261,827.10 | 4,613,635,236.50 |
| Retained earnings at the end of the current reporting period | 28,961,389,145.22 | 22,359,856,271.42 |
| Item | 2019 | 2018 | ||
| Revenue | Cost | Revenue | Cost | |
| Operating income | 57,080,710,049.95 | 30,823,984,977.93 | 49,295,187,751.22 | 27,196,229,537.02 |
| Other operating income | 577,400,015.27 | 316,191,799.19 | 541,944,730.39 | 287,240,018.22 |
| Total | 57,658,110,065.22 | 31,140,176,777.12 | 49,837,132,481.61 | 27,483,469,555.24 |
| Items | 2019 | 2018 |
| City construction and maintenance tax | 193,991,607.90 | 211,078,359.19 |
| Education surcharges | 83,931,204.13 | 90,741,825.21 |
| Local education surcharges | 56,338,987.32 | 60,416,824.31 |
| Stamp duty | 27,143,633.24 | 23,482,129.33 |
| Real estate tax | 36,404,025.90 | 22,533,688.75 |
| Tax on use of land | 5,196,493.82 | 5,802,424.47 |
| Vehicle and vessel tax | 171,445.08 | 230,511.99 |
| Others | 14,141,146.16 | 4,039,290.39 |
| Total | 417,318,543.55 | 418,325,053.64 |
| Items | 2019 | 2018 |
| Payroll | 3,887,374,487.37 | 3,042,017,625.28 |
| Marketing Expenses | 1,189,955,197.73 | 1,009,897,096.88 |
| Shipping, transportation, and vehicle expense | 743,840,798.66 | 615,804,479.82 |
| Travelling expenses | 419,804,042.73 | 361,180,853.78 |
| Office expenses | 209,868,651.76 | 169,194,478.31 |
| Business hospitality expenses | 209,295,672.81 | 160,025,004.46 |
| Rental expenses | 177,800,427.54 | 139,899,056.72 |
| Professional Intermediary expenses | 161,222,028.36 | 142,079,756.94 |
| Depreciation and amortization expenses | 74,726,169.24 | 79,460,744.36 |
| Others | 182,894,010.48 | 172,941,309.97 |
| Total | 7,256,781,486.68 | 5,892,500,406.52 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
45. Administrative Expenses
Unit：RMB
| Items | 2019 | 2018 |
| Payroll | 973,611,772.00 | 820,726,311.40 |
| Office expenses | 207,809,854.24 | 137,359,082.35 |
| Depreciation and amortization expenses | 124,598,148.82 | 91,425,634.46 |
| Professional Intermediary expenses | 72,435,016.26 | 43,200,317.09 |
| Travelling expenses | 59,312,055.12 | 64,067,674.29 |
| Shipping, transportation, utility expense | 56,959,599.18 | 46,011,849.69 |
| Rental expenses | 29,478,819.26 | 22,313,258.20 |
| Business hospitality expenses | 10,658,155.86 | 5,186,034.09 |
| Others | 287,601,021.33 | 146,954,708.57 |
| Total | 1,822,464,442.07 | 1,377,244,870.14 |
| Items | 2019 | 2018 |
| Payroll | 3,984,322,782.34 | 3,259,555,224.24 |
| Consumables and service fees | 563,641,365.06 | 455,302,393.17 |
| Depreciation and amortization expenses | 235,693,987.33 | 152,029,898.69 |
| Office expenses | 213,060,797.71 | 155,140,877.67 |
| Intermediate testing fees | 164,302,894.56 | 117,034,981.47 |
| Travelling expenses | 139,847,661.42 | 124,739,331.81 |
| New product design fees | 77,948,833.47 | 132,612,918.48 |
| Rental expenses | 9,242,161.63 | 26,312,384.22 |
| Others | 95,751,214.84 | 60,052,683.66 |
| Total | 5,483,811,698.36 | 4,482,780,693.41 |
| Items | 2019 | 2018(restated) |
| Interest expenses | 263,960,347.94 | 176,236,038.18 |
| Less：Interest income | 720,921,071.27 | 476,093,981.09 |
| Foreign exchange gains | (183,930,899.01) | (208,897,575.81) |
| Less﹕Capitalized specific loan interests and foreign exchange differences on specific loan | 28,013,146.25 | (63,082,765.25) |
| Others | 28,836,591.40 | 21,409,193.83 |
| Total | (640,068,177.19) | (424,263,559.64) |
| Item | 2019 | 2018 |
| VAT Rebates | 1,481,554,615.35 | 1,772,810,771.85 |
| Special subsidies | 405,744,665.57 | 295,650,812.88 |
| Tax refunds | 5,024,025.37 | 15,535,482.64 |
| Total | 1,892,323,306.29 | 2,083,997,067.37 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
49. Investment income
Details of investment income
Unit: RMB
| Item | 2019 | 2018 |
| Long-term equity investment gains (losses) based on equity method | 7,743,476.93 | (9,072,889.02) |
| Investment income (losses) on disposal of financial assets measured at fair value through profits and losses | (40,669,470.74) | |
| Investment incomes for available-for-sale financial assets during the holding period | 12,256,000.00 | |
| Investment income redeemed on matured financial products | 89,416,000.39 | |
| Investment income during the holding period of other non-current financial assets | 17,357,220.31 | |
| Investment income from disposal of held-for-trading financial assets | 11,550,750.03 | |
| Investment loss of derecognized financial assets measured at amortized cost | (2,210.18) | |
| Total | 36,649,237.09 | 51,929,640.63 |
| Sources of gains/losses from changes in fair values | 2019 | 2018 |
| Held-for-trading financial assets | (1,863,915.06) | |
| Including: Profits (losses) on the changes in fair value of derivative financial instruments | (1,863,915.06) | |
| Earnings from changes in fair value arising from other non-current financial assets | 17,547,234.44 | |
| Financial assets at fair value through profits and losses | (2,249,271.02) | |
| Including: losses on the changes in fair value of derivative financial instruments | (2,249,271.02) | |
| Held-for-trading financial liabilities | (361,429.75) | |
| Including: losses on the changes in fair value of derivative financial instruments | (361,429.75) | |
| Financial liabilities at fair value through profits and losses | 15,656,203.19 | |
| Including: losses on the changes in fair value of derivative financial instruments | 15,656,203.19 | |
| Total | 15,321,889.63 | 13,406,932.17 |
| Items | 2019 | 2018 |
| Credit bad debt losses of accounts receivable | (202,855,091.00) | |
| Gains on credit bad debt of other receivables | 44,488,527.79 | |
| Credit bad debt losses of long-term receivable | (63,642,862.97) | |
| Total | (222,009,426.18) | - |
| Items | 2019 | 2018 (restated) |
| Inventory devaluation | (197,891,311.27) | (231,501,431.17) |
| Bad debt | (152,752,804.15) | |
| Goodwill impairment | - | (42,695,573.44) |
| Total | (197,891,311.27) | (426,949,808.76) |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
53. Non-operating income
Unit: RMB
| Item | 2019 | 2018 | The amount booked into current period non-recurring profits and looses |
| Fines and confiscations | 48,610,859.46 | 88,125,508.92 | 48,610,859.46 |
| Special subsidies | 3,318,626.10 | 7,622,573.32 | 3,318,626.10 |
| Tax reduction | 23,979.90 | 495,446.66 | 23,979.90 |
| Others | 13,079,036.08 | 15,119,389.44 | 13,079,036.08 |
| Total | 65,032,501.54 | 111,362,918.34 | 65,032,501.54 |
| Item | 2019 | 2018 | Related to assets/Related to incomes |
| Other special subsidies | 3,318,626.10 | 7,622,573.32 | Related to incomes |
| Tax reduction | 23,979.90 | 495,446.66 | Related to incomes |
| Total | 3,342,606.00 | 8,118,019.98 |
| Item | 2019 | 2018 | The amount booked into current period non-recurring profits and looses |
| Losses from disposal of non-current asset | 7,589,538.54 | 922,828.20 | 7,589,538.54 |
| Local water conservancy construction fund | 842,983.10 | 755,016.33 | 842,983.10 |
| Others | 8,691,885.64 | 6,915,640.05 | 8,691,885.64 |
| Total | 17,124,407.28 | 8,593,484.58 | 17,124,407.28 |
| Item | 2019 | 2018 |
| Income tax for the current reporting period | 1,731,388,650.59 | 1,533,491,545.29 |
| Deferred income tax expenses | (103,112,225.43) | (55,276,291.76) |
| Differences in filing and payment of income tax in previous years | (337,997,980.04) | (421,475,254.71) |
| Total | 1,290,278,445.12 | 1,056,739,998.82 |
| Item | 2019 | 2018 (restated) |
| Total profit | 13,755,462,747.77 | 12,437,204,553.30 |
| Income tax expenses calculated at applicable tax rates of 15% | 2,063,319,412.17 | 1,865,580,683.00 |
| Impact of non-deductible costs, expenses and losses | 16,237,180.91 | 14,328,775.33 |
| Tax effect of non-taxable income | (2,603,583.05) | (3,329,287.02) |
| Impact of deductible temporary differences or deductible losses for which no deferred income tax assets is recognized for the current period | 270,139,191.78 | 113,230,724.57 |
| Impact of using deductible temporary differences or deductible losses for which no deferred income tax assets was recognized for the prior periods | (50,147,289.55) | (21,330,045.22) |
| Differences of income tax annual filing (Note) | (337,997,980.04) | (421,475,254.71) |
| Impact by different tax rates applicable to different subsidiaries | 169,030,658.26 | 129,320,046.84 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Item
| Item | 2019 | 2018 (restated) |
| Impact of additional deduction of R&D expenses | (597,165,564.68) | (474,764,267.90) |
| Others | (240,533,580.68) | (144,821,376.07) |
| Income tax expenses | 1,290,278,445.12 | 1,056,739,998.82 |
| Item | 2019 | 2018 (restated) |
| Interest income | 695,228,454.23 | 476,093,981.09 |
| Government subsidies | 397,596,487.11 | 475,057,090.12 |
| Others | 896,722,779.54 | 672,838,701.85 |
| Total | 1,989,547,720.88 | 1,623,989,773.06 |
| Item | 2019 | 2018 (restated) |
| Office expenses and business expenses | 1,194,981,715.54 | 983,305,464.34 |
| Advertising and Selling services | 1,012,053,513.83 | 760,259,932.32 |
| Shipping and transportation expense | 823,922,007.09 | 673,183,441.02 |
| R&D expense | 720,903,726.16 | 641,409,412.08 |
| Travelling expense | 618,963,759.27 | 515,750,188.76 |
| Outsourcing service fees, fees for hiring intermediaries, etc. | 410,388,242.46 | 421,095,361.96 |
| Rental expense | 216,521,408.43 | 188,524,699.14 |
| Deposits to restricted monetary funds | 109,697,678.52 | 276,503,897.11 |
| Others | 53,697,614.51 | 49,821,043.34 |
| Total | 5,161,129,665.81 | 4,509,853,440.07 |
| Item | 2019 | 2018 |
| Receipts of financing lease payments | 17,234,624.45 | 89,505,228.62 |
| Total | 17,234,624.45 | 89,505,228.62 |
| Item | 2019 | 2018 |
| Cash payments for investment intention funds | 2,968,783.82 | 20,000,000.00 |
| Total | 2,968,783.82 | 20,000,000.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(5) Other cash receipts relating to financing activities
Unit: RMB
| Item | 2019 | 2018 |
| Receipts of subscriptions for share incentives | - | 2,057,898,876.84 |
| Total | - | 2,057,898,876.84 |
| Item | 2019 | 2018 |
| Repurchase of restricted shares | 26,897,116.20 | 6,555,746.33 |
| Total | 26,897,116.20 | 6,555,746.33 |
| Supplementary information | 2019 | 2018 (restated) |
| 1. Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 12,465,184,302.65 | 11,380,464,554.48 |
| Add: Impairment of assets | 197,891,311.27 | 426,949,808.76 |
| Credit loss reserve | 222,009,426.18 | |
| Fixed assets depreciation | 559,888,586.31 | 417,518,901.58 |
| Amortization of intangible assets | 114,901,556.25 | 62,161,250.59 |
| Long-term deferred expenses amortization | 24,002,044.87 | - |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (5,535,663.32) | (4,975,825.83) |
| Gains from changes in fair value | (15,321,889.63) | (13,406,932.17) |
| Financial expenses | 174,491,026.21 | 81,142,249.58 |
| Investment income | (36,649,237.09) | (51,929,640.63) |
| Share-based payment based on equity settlement | 268,309,794.42 | 145,468,181.28 |
| Changes in restricted funds | (27,617,192.34) | (89,418,285.57) |
| Increase in deferred income tax assets | (154,200,329.39) | (55,276,291.76) |
| Increase in deferred income tax liabilities | 51,088,103.96 | - |
| Increase in inventories | (5,742,789,862.91) | (1,021,116,536.92) |
| Decrease (increase) in operating non-current assets | 501,950,002.84 | (765,228,940.29) |
| Increase in operating receivables | (4,673,231,938.92) | (2,355,805,692.65) |
| Increase in operating payables | 3,802,939,387.61 | 752,485,909.83 |
| Increase in deferred income | 40,410,742.17 | 204,253,317.48 |
| Net cash flows from operating activities | 7,767,720,171.14 | 9,113,286,027.76 |
| 2. Significant investing and financing activities not involving cash receipts and payments: | ||
| 3. Net changes in cash and cash equivalents: | ||
| Ending balance of cash | 26,515,668,008.40 | 26,031,011,733.89 |
| Less: Opening balance of cash | 26,031,011,733.89 | 16,029,185,269.17 |
| Add: Ending balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase in cash and cash equivalents | 484,656,274.51 | 10,001,826,464.72 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(2) Net cash paid for obtaining subsidiaries and other business units during the current yearThe current reporting period:
Unit: RMB
| Amounts | |
| Cash or cash equivalents paid for the business combination in this year | 79,600,000.00 |
| Incuding: Hangzhou Kuangxin Technology Ltd. | 79,600,000.00 |
| Less: Cash and cash equivalents held by the Company on the day of purchase | 63,504,217.93 |
| Incuding: Hangzhou Kuangxin Technology Ltd. | 63,504,217.93 |
| Plus: cash or cash equivalents paid in the prior year for business combinations that occurred in the prior year | - |
| Net cash paid for obtaining the subsidiary | 16,095,782.07 |
| Item | Closing balance | Opening balance |
| Cash | 26,515,668,008.40 | 26,031,011,733.89 |
| Including: Cash on hand | 557,429.68 | 621,654.57 |
| Bank deposit for payment at any time | 26,447,508,433.91 | 25,990,872,892.73 |
| Other monetary capital for payment at any time | 67,602,144.81 | 39,517,186.59 |
| Cash equivalents | - | - |
| Closing balance of cash and cash equivalents | 26,515,668,008.40 | 26,031,011,733.89 |
| Item | Book value at the end of the current reporting period | Cause of restriction |
| Monetary fund(s) | 556,280,911.38 | Various guarantee deposits and other restricted funds |
| Notes receivable | 329,309,522.17 | Endorsed to suppliers |
| Notes receivable | 3,454,753.01 | Pledged for issuing bank acceptance bills |
| Receivables for financing | 272,663,613.54 | Pledged for issuing bank acceptance bill |
| Fixed assets | 61,877,730.05 | Sale and leaseback of fixed assets |
| Long-term receivables | 968,205,409.44 | Pledged for long-term borrowings |
| Total | 2,191,791,939.59 |
| Item | Balance in foreign currency at the end of the reporting period | Exchange rate for conversion | Balance of RMB converted at the end of the reporting period |
| Monetary funds | |||
| Including: USD | 949,395,651.57 | 6.9762 | 6,623,173,944.49 |
| EUR | 44,997,253.10 | 7.8155 | 351,676,031.61 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Item
| Item | Balance in foreign currency at the end of the reporting period | Exchange rate for conversion | Balance of RMB converted at the end of the reporting period |
| PLN | 35,648,922.49 | 1.8324 | 65,323,085.57 |
| AED | 6,882,239.15 | 1.8992 | 13,070,748.60 |
| RUB | 97,180,418.38 | 0.1126 | 10,942,515.11 |
| AUD | 760,824.97 | 4.8843 | 3,716,097.42 |
| GBP | 161,911.15 | 9.1501 | 1,481,503.24 |
| ZAR | 8,460.21 | 0.4943 | 4,181.88 |
| TRY | 359.20 | 1.1729 | 421.31 |
| INR | 1,707.08 | 0.0975 | 166.44 |
| Accounts receivable | |||
| Including: USD | 339,387,367.43 | 6.9762 | 2,367,634,152.67 |
| EUR | 5,758,693.23 | 7.8155 | 45,007,066.94 |
| Short-term borrowing | |||
| Including: GBP | 9,564,000.00 | 9.1501 | 87,511,556.40 |
| Accounts Payable | |||
| Including: USD | 384,279,017.07 | 6.9762 | 2,680,807,278.88 |
| Long-term borrowings | |||
| Including: EUR | 401,220,555.55 | 7.8155 | 3,135,739,251.94 |
| Name of overseas subsidiaries | Main overseas operational office | Recording Currency | Basis of selection |
| HDT International Ltd. | Hongkong China | HKD | Selection based on local economic environment |
| Hikvision Europe BV | Netherlands | USD | Selection based on local economic environment |
| Prama Hikvision Indian Private Limited | India | INR | Selection based on local economic environment |
| Hikvision Uk Limited | UK | GBP | Selection based on local economic environment |
| Hikvision Italy (S.R.L.) | Italy | EUR | Selection based on local economic environment |
| Hikvision International Co., Limited | Hongkong China | USD | Selection based on local economic environment |
| Hikvision Australia PTY Ltd. | Australia | AUD | Selection based on local economic environment |
| Hikvision Spain, S.L. | Spain | EUR | Selection based on local economic environment |
| Hikvision France SAS | France | EUR | Selection based on local economic environment |
| Hikvision Singapore Pte. Ltd | Singapore | SGD | Selection based on local economic environment |
| Hikvision South Africa (Pty) Ltd. | South Africa | ZAR | Selection based on local economic environment |
| Hikvision FZE | Dubai | USD | Selection based on local economic environment |
| Hikvision Poland Spolka Z ograniczona Odpowiedzialnoscia. | Poland | PLN | Selection based on local economic environment |
| Hikivision do Brasil Comercio de Equipamentos de Seguran?a Ltda. | Brazil | BRL | Selection based on local economic environment |
| Hikvision LLC | Russia | RUB | Selection based on local economic environment |
| EZVIZ Inc. | USA | USD | Selection based on local economic environment |
| Cooperative Hikvision Europe U.A. | Netherlands | USD | Selection based on local economic environment |
| Hikvision Korea Limited | Korea | KRW | Selection based on local economic environment |
| Hikvision Colombia SAS | Columbia | COP | Selection based on local economic environment |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Name of overseas subsidiaries
| Name of overseas subsidiaries | Main overseas operational office | Recording Currency | Basis of selection |
| Hikvision Kazakhstan limited liability partnership | Kazakhstan | KZT | Selection based on local economic environment |
| Pyronix Ltd | UK | GBP | Selection based on local economic environment |
| Microwave Solutions Limited | UK | GBP | Selection based on local economic environment |
| Secure Holdings limited | UK | GBP | Selection based on local economic environment |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | Turkey | TRY | Selection based on local economic environment |
| ZAO Hikvision | Russia | RUB | Selection based on local economic environment |
| Hikvision Hungary Limited | Hungary | HUF | Selection based on local economic environment |
| Hikvision New Zealand Limited | New Zealand | NZD | Selection based on local economic environment |
| Hikvision Czech s.r.o. | Czech | CZK | Selection based on local economic environment |
| Hikvision Deutschland GmbH | Germany | EUR | Selection based on local economic environment |
| Hikvision Kenya (Pty) Ltd | Kenya | KES | Selection based on local economic environment |
| LLC Hikvision Tashkent | Uzbekistan | UZS | Selection based on local economic environment |
| Hikvision (Malaysia) SDN. BHD | Malaysia | MYR | Selection based on local economic environment |
| Hikvision USA,Inc. | USA | USD | Selection based on local economic environment |
| Hikvision Canada INC. | Canada | CAD | Selection based on local economic environment |
| Hikvision Mexico S.A.de C.V. | Mexico | MXN | Selection based on local economic environment |
| Hikvision Panama Commercial S.A. | Panama | USD | Selection based on local economic environment |
| Hikvision Pakistan (SMC-Private) Limited | Pakistan | PKR | Selection based on local economic environment |
| Hikvision Peru Closed Stock Company | Peru | PEN | Selection based on local economic environment |
| Hikvision Technology Israel Ltd. | Israel | ILS | Selection based on local economic environment |
| Hikvision Central America S.A. | Panama | USD | Selection based on local economic environment |
| Hikvision Technology Egypt JSC | Egypt | EGP | Selection based on local economic environment |
| PT. Hikvision Technology Indonesia | Indonesia | IDR | Selection based on local economic environment |
| Hikvision Technologies S.R.L., | Romania | RON | Selection based on local economic environment |
| Hikvision IOT (Thailand) CO.,LTD. | Thiland | THB | Selection based on local economic environment |
| Hikvision West Africa Limited | Nigeria | NGN | Selection based on local economic environment |
| Ezviz International Limited | Honkong China | HKD | Selection based on local economic environment |
| Hikvision Azerbaijan Limited Liability | Azerbaijan | AZN | Selection based on local economic environment |
| Hikvision Japan K.K. | Japan | JPY | Selection based on local economic environment |
| Hikvision Argentina S.R.L. | Argentina | ARS | Selection based on local economic environment |
| Category | Amount | Financial Report Items | Amount booked in current profit and loss |
| VAT Rebate | 1,481,554,615.35 | Other Income | 1,481,554,615.35 |
| Special subsidies | 635,403,575.97 | ||
| Including: other special subsidies | 422,163,517.52 | Deferred income / Other income/ Non-operating income | 337,905,161.67 |
| core electronic devices, high-end universal chip and basic software product projects | 131,567,063.01 | Deferred income / Other income | 68,739,200.00 |
| Chongqing Manufacture Base construction subsidies | 81,672,995.44 | Deferred income / Other income | 2,418,930.00 |
| Tax Refund/Reduction | 5,048,005.27 | Other income/ Non-operating income | 5,048,005.27 |
| Total | 2,122,006,196.59 | 1,895,665,912.29 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(2) There was no refund of government subsidies during the current reporting period.
VI. Changes in consolidation scope
1. Business mergers not involving enterprises under the common control
(1) Business mergers not involving enterprises under common control during the current reporting period
Hangzhou Kuangxin Technology Ltd. (“KuangxinTechnology”)
As of June 4
th
2019, the Company signed Equity Transfer and Capital Increase Agreement for Hangzhou Kuangxin Technology Ltd. with Kuangxin Technology, and agreedto acquire 68.89% equity of Kuangxin Technology in total held by 13 independent third parties for RMB 62 million. At the same time, the Company increased capital ofRMB 50 million to Kuangxin Technology. After the capital increase was completed, the Company holds 80% equity of Kuangxin Technology in total. The acquisition wascompleted on June 21
st 2019. As of December 31
st2019, the Company has paid RMB 49.6 million in equity transfer and RMB 50 million in capital increase.
Unit: RMB
| Name of the acquiree | Time of equity acquisition | Equity acquisition cost | Equity acquisition ratio (%) | Equity acquisition method | Date of acquisition | Basis for determining the acquisition date | Income of acquiree from acquisition data to the end of the reporting period | Net profit (loss) of acquiree from acquisition data to the end of the reporting period |
| Kuangxin Technology | June 2019 | 112,000,000.00 | 80.00 | Cash Payments | June 21st 2019 | Equity delivery date for obtaining control of the purchased party | 36,139,418.94 | 1,777,641.20 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(2) Cost of business merger and goodwill
Unit：RMB
| Cost of business merger | Kuangxin Technology |
| - Cash | 99,600,000.00 |
| - Other payable | 12,400,000.00 |
| Total cost of business merger | 112,000,000.00 |
| Less: The fair value share of identifiable net assets obtained | 52,939,545.94 |
| Goodwill | 59,060,454.06 |
| Kuangxin Technology | ||
| Fair value on the date of acquisition | Book value on the date of acquisition | |
| Aseets: | ||
| Cash and bank balances | 63,504,217.93 | 63,504,217.93 |
| Accounts receivable | 10,398,039.06 | 10,398,039.06 |
| Prepayments | 253,271.03 | 253,271.03 |
| Other receivables | 2,863,363.74 | 2,863,363.74 |
| Inventories | 12,701,841.10 | 12,701,841.10 |
| Other current assets | 300,000.00 | 300,000.00 |
| Fixed assets | 851,017.16 | 851,017.16 |
| Liabilities: | ||
| Accounts payable | 1,001,307.08 | 1,001,307.08 |
| Advance receipts | 2,611,594.30 | 2,611,594.30 |
| Tax payable | 808,638.58 | 808,638.58 |
| Other payables | 20,275,777.64 | 20,275,777.64 |
| Net assets | 66,174,432.42 | 66,174,432.42 |
| less：minority interests | 13,234,886.48 | 13,234,886.48 |
| Net assets acquired | 52,939,545.94 | 52,939,545.94 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
occupancy rate.EZVIZ Network has the right to unilaterally decide to extend or prematurely terminate the entrustedmanagement relationship. When the entrusted management relationship is terminated, EZVIZ Network can only handleit in one of the following two ways, and EZVIZ Network has the right to decide which method to choose: (1) Afterliquidation and cancellation of EZVIZ Science and Technology, the investment recovered by CETHIK is only theactual investment amount and the unpaid fund occupation fee payable; (2) If the equity of EZVIZ Science andTechnology is transferred to EZVIZ Network or a third party designated by EZVIZ Network, the equity purchase priceis only the actual investment amount and the unpaid fund occupation fee payable. Therefore, EZVIZ Network hasachieved control of EZVIZ Science and Technology. Since CETHIK is the controlling shareholder of the Companyand EZVIZ Science and Technology, and EZVIZ Network is the controlling subsidiary of the Company, this entrustedmanagement of EZVIZ Science and Technology constitutes a business combination under the common control.
Unit：RMB
| Name of the acquiree | Equity acquisition ratio (%) (Note) | Basis for Business merger under common control | Date of acquisition | Basis for determining date of acquisition | Income of acquiree from beginning of the year to the date of acquisition | Net loss of acquiree from beginning of the acquisition year to the date of acquisition | Income of acquiree from beginning of the prior year to the date of acquisition in prior comparative period | Net loss of acquiree from beginning of the prior year to the date of acquisition in prior comparative period |
| EZVIZ Science and Technology | 60% | Before and after the merger, the controlling shareholder of the Group and EZVIZ Science and Technology is HIKCET, and the control is not temporary. | April 19th 2019 | Effective date of entrusted management agreement | - | (885,138.65) | - | （1,228,310.18） |
| Cost of business merger | EZVIZ Science and Technology |
| - Long-term payables | 8,000,000.00 |
| EZVIZ Science and Technology | ||
| On the date of acquisition | December 31st 2018 | |
| Assets: | ||
| Cash and bank balances | 6,088,546.19 | 7,272,741.70 |
| Other receivable | 162,643.61 | 14,928.43 |
| Other assets | 68,499.44 | 37,316.45 |
| Liabilities: | ||
| Advance receipts | 53,287.00 | - |
| Payroll payable | 54,165.26 | 133,027.59 |
| Tax payable | 1,040.12 | - |
| Other payables | 324,645.69 | 420,269.17 |
| Net assets | 5,886,551.17 | 6,771,689.82 |
| less：minority interests | 2,354,620.47 | 2,708,675.93 |
| Net assets acquired | 3,531,930.70 | 4,063,013.89 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
(4) The Group has no contingent liabilities of the purchased entity that need to be assumed in this merger.
3. Changes of consolidation scope due to other causes
The subsidiaries newly established and incorporated in the consolidation scope during the current reporting period as follows:
| Company Name | Time of establishment | Registered capital | Amount of contribution of the Company | Ratio of contribution (%) |
| Hikvision Central America S.A. (Central American Commercial) | February 2019 | USD 120,000 | USD 120,000 | 100 |
| Hikvision Technology Egypt JSC (Egypt Subsidiary) | May 2019 | USD 100,000 | USD 100,000 | 100 |
| Zhengzhou Hikvision Digital Technology Ltd.(Zhengzhou Hikvision) (Note 1) | June 2019 | RMB 80 million | RMB 80 million | 100 |
| Nanchang Hikvision Digital Technology Ltd. (Nancang Hikvision) (Note 2) | July 2019 | RMB 80 million | RMB 80 million | 100 |
| Hikvision Digital Technology (Shanghai) Ltd. (Shanghai Hikvision) | July 2019 | RMB 80 million | RMB 80 million | 100 |
| Zhenping County Haikang Juxin Digital Technology Ltd. (Zhenping Haikang) (Note 3) | July 2019 | RMB 59,186,800 | RMB 53,268,100 | 90 |
| PT. Hikvision Technology Indonesia (Indonesian Subsidiary) | July 2019 | IDR 10 billion | IDR 10 billion | 100 |
| Hikvision Technologies S.R.L., (Romanian Subsidiary) | July 2019 | RON 1 million | RON 1 million | 100 |
| Hefei Hikvision Digital Technology Ltd. (Hefei Hikvision) (Note 4) | August 2019 | RMB 80 million | RMB 80 million | 100 |
| Tianjin Hikvision Information Technology Ltd. (Tianjin Hikvision) | September 2019 | RMB 50 million | RMB 50 million | 100 |
| Ningbo Haikang Parking Systematic Operation Ltd. (Ningbo Parking) (Note 5) | October 2019 | RMB 50 million | RMB 35 million | 70 |
| Ningguo Hikvision City Operation Service Ltd. (Ningguo City Operation) | October 2019 | RMB 18 million | RMB 18 million | 100 |
| Hikvision IOT (Thailand) CO.,LTD (Thailand Subsidiary) | November 2019 | THB 10 million | THB 10 million | 100 |
| Shijizhuang Hikvision Science and Technology Ltd. (Shijiazhuang Hikvision) (Note 6) | February 2019 | RMB 50 million | RMB 50 million | 100 |
| Zhejiang Hikvision Fire Control Technology Ltd. (Zhejiang Fire Control) (Note 6) | July 2019 | RMB 50 million | RMB 50 million | 100 |
| Fuzhou Hikvision Digital Technology Ltd. (Fuzhou Hikvision) (Note 6) | October 2019 | RMB 50 million | RMB 50 million | 100 |
| Guangzhou Hikvision Technology Ltd. (Guangzhou Hikvision) (Note 6) | November 2019 | RMB 200 million | RMB 200 million | 100 |
| Hangzhou Hikfire Technology Ltd. (Hangzhou Hikfire) (Note 6) | December 2019 | RMB 100 million | RMB 60 million | 60 |
| Hikvision West Africa Limited (Nigerian Subsidiary) (Note 6) | February 2019 | NGN 28.80 million | NGN 28.80 million | 100 |
| Ezviz International Limited (Hongkong EZVIZ) (Note 6) | July 2019 | HKD 10,000 | HKD 10,000 | 100 |
| Hikvision Azerbaijan Limited Liability (Azerbaijan Subsidiary) (Note 6) | November 2019 | AZN 400,000 | AZN 400,000 | 100 |
| Hikvision Japan K.K. (Japan Subsidiary) (Note 6) | December 2019 | JPY 38 million | JPY 38 million | 100 |
| Hikvision Argentina S.R.L. (Argentina Subsidiary) (Note 6) | December 2019 | ARS 12 million | ARS 12 million | 100 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Note 5: At the end of the reporting period, the actual paid-up capital of Ningbo Praking was RMB 50,000,000.00, amongthem, RMB 35,000,000.00 was paid by the Group and RMB 15,000,000.00 was invested by minority shareholdersXiangshan Digital TV Ltd.
Note 6: At the end of the reporting period, Shijiazhuang Hikvision, Zhejiang Fire Control, Fuzhou Hikvision, GuangzhouHikvision, Hangzhou Hikfire, Nigerian Subsidiary, Hongkong EZVIZ, Azerbaijan Subsidiary, Japan Subsidiary, andArgentina Subsidiary have not completed the actual capital contribution payment yet, so there is no paid-in capital.
The subsidiaries cancelled in the current reporting period and no longer included in the scope of consolidation are as follows:
| Company Name | Date of equity disposition | Proportion of shareholding (%) |
| Beijing Brainaire Storage Technology Ltd. | March 2019 | 100 |
| Tianjin Hikvision System Technology Ltd. | December 2019 | 100 |
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Hangzhou Hikvision System Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | System integration, Technology development | 100.00 | - | Establishment |
| Hangzhou Hikvision Science and Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | manufacture | 100.00 | - | Establishment |
| Hangzhou Hikvision Security Equipment Leasing Services Ltd. | Hangzhou | Hangzhou, Zhejiang | Finance lease | 100.00 | - | Establishment |
| Chongqing Hikvision System Technology Ltd. | Chongqing | Chongqing | System integration | 100.00 | - | Establishment |
| Hikvision USA, Inc. | USA | Los Angeles | Sales | 100.00 | - | Establishment |
| HDT International Ltd. | Hong Kong China | Hong Kong China | Sales | 95.00 | 5.00 | Establishment |
| Prama Hikvision Indian Private Limited | India | Mumbai | Sales | 58.00 | - | Business combination not involving enterprises under common control |
| Hikvision Europe BV | Europe | Amsterdam | Sales | - | 100.00 | Establishment |
| Hikvision FZE | Dubai | Dubai | Sales | 100.00 | - | Establishment |
| Hikvision Singapore Pte. Ltd | Singapore | Singapore | Sales | 100.00 | - | Establishment |
| Chongqing Hikvision Science and Technology Ltd. | Chongqing | Chongqing | Manufacture | 100.00 | - | Establishment |
| Hangzhou Fuyang Hik Baotai Security Technology Services Ltd. (Note 1) | Hangzhou | Hangzhou, Zhejiang | Construction | - | 51.00 | Establishment |
| Hikvision South Africa (Pty) Ltd. | South Africa | South Africa | Sales | 100.00 | - | Establishment |
| Hikvision Italy S.R.L. | Italy | Milan | Sales | - | 100.00 | Establishment |
| Hikvision do Brasil Comercio de Equipamentos de Seguran?a Ltda. | Brazil | Brazil | Sales | 95.00 | 5.00 | Establishment |
| Hikvision Australia PTY Ltd. | Australia | Australia | Sales | 100.00 | - | Establishment |
| Hikvision International Co., Limited | Hong Kong China | Hong Kong China | Sales | 100.00 | - | Establishment |
| Hikvision France SAS | France | France | Sales | - | 100.00 | Establishment |
| Hikvision Spain,S.L. | Spain | Spain | Sales | - | 100.00 | Establishment |
| Shanghai Goldway Intelligent Traffic | Shanghai | Shanghai | Manufacture | 100.00 | - | Business |
Notes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st2019
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| System Ltd. | combination not involving enterprises under common control | |||||
| ZAO Hikvision | Russia | St. Peterburg | Sales | - | 100.00 | Business combination not involving enterprises under common control |
| Beijing Brainaire Storage Technology Ltd. (Note 2) | Beijing | Beijing | Manufacture | 100.00 | - | Business combination not involving enterprises under common control |
| Henan Hua’an Intelligence Development Ltd. | Zhengzhou | Zhengzhou Henan | Construction | 51.00 | - | Business combination not involving enterprises under common control |
| Henan Hua’an Security Services Ltd. (Note 3) | Zhengzhou | Zhengzhou Henan | Services | - | 45.90 | Business combination not involving enterprises under common control |
| Hundure Technology (Shanghai) Ltd. | Shanghai | Shanghai | Manufacture | 100.00 | - | Business combination not involving enterprises under common control |
| Hikvision Uk Limited | UK | UK | Sales | - | 100.00 | Establishment |
| Hikvision Poland Spolka Z Ograniczona Odpowiedzialnoscia | Poland | Poland | Sales | - | 100.00 | Establishment |
| Hangzhou Hikvision Electronics Ltd.（Note 4） | Hangzhou | Hangzhou Zhejiang | Manufacture | 71.30 | - | Establishment |
| Cooperative Hikvision Europe U.A. | Netherlands | Netherlands | Sales | 99.00 | 1.00 | Establishment |
| Hikvision Canada Inc. | Canada | Canada | Sales | 100.00 | - | Establishment |
| Hikvision LLC | Moscow | Moscow | Sales | 100.00 | - | Establishment |
| Hikvision Korea Limited | Korea | Korea | Sales | 100.00 | - | Establishment |
| Hangzhou EZVIZ Network Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 60.00 | - | Establishment |
| EZVIZ Inc. | USA | Los Angeles | Sales | - | 60.00 | Establishment |
| Hangzhou Haikang Zhicheng Investment Development Ltd | Hangzhou | Hangzhou Zhejiang | System integration | 80.00 | - | Business combination not involving enterprises under common control |
| Hangzhou Hikvision Robtics Technology Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 60.00 | - | Establishment |
| Hangzhou Hikvision Investment Management Ltd. | Hangzhou | Hangzhou Zhejiang | Investment Management | 100.00 | - | Establishment |
| Hangzhou HikAuto Technology Co., Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 60.00 | - | Establishment |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Hangzhou Hikvision Communication Technology Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 70.00 | - | Establishment |
| Hangzhou Hikmicro Sensing Technology Co., Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 60.00 | - | Establishment |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | Turkey | Istanbul | Sales | 100.00 | - | Establishment |
| Hikvision Colombia SAS | Columbia | Santa Fe Bogota | Sales | 100.00 | - | Establishment |
| Hikvision Kazakhstan limited liability partnership | Kazakhstan | Astana | Sales | 100.00 | - | Establishment |
| Secure Holding Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Pyronix Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Microwave Solutions Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Tianjin Hikvision System Technology Ltd. (Note 5) | Tianjin | Tianjin | Construction | 100.00 | - | Establishment |
| Hikvision Hungary Limited | Hungary | Hungary | Sales | - | 100.00 | Establishment |
| Hikvision New Zealand Limited | New Zealand | Auckland | Sales | - | 100.00 | Establishment |
| Urumqi Hai Shi Xin An Electronic Technology Ltd. | Urumqi | Urumqi, Xinjiang | Construction | - | 90.00 | Establishment |
| Hangzhou Ximu Intelligent Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Manufacture | - | 60.00 | Business combination involving enterprises under common control |
| LLC Hikvision Tashkent | Uzbekistan | Tashkent | Sales | 100.00 | - | Establishment |
| Hikvision Kenya (Pty) Ltd | Kenya | Kenya | Sales | - | 100.00 | Establishment |
| Hangzhou HIKAuto Software Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology Development | - | 60.00 | Establishment |
| Hangzhou Intelligent Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology Development | - | 60.00 | Establishment |
| Wuhan HIK Storage Software Ltd. (Note 8) | Wuhan | Wuhan Hubei | Technology development | - | 60.00 | Establishment |
| Chengdu Hikvision Digital Technology Ltd. | Chengdu | Chengdu Sichuan | Technology development | 100.00 | - | Establishment |
| MoYuHaiShi Electronic Technology Ltd. | Hetian | Hetian Xinjiang | Construction | - | 85.00 | Establishment |
| Hangzhou EZVIZ Software Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | - | 60.00 | Establishment |
| PiShanHaiShi YongAn Electronic | Hetian | Hetian | System integration | - | 90.00 | Establishment |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Technology Ltd. | Xinjiang | |||||
| Henan Haikang Hua’anBaoQuan Electronics Ltd. | Zhengzhou | Zhengzhou Henan | Construction | 51.00 | - | Establishment |
| Hikvision Czech s.r.o. | Czech | Czech | Sales | - | 100.00 | Establishment |
| Hikvision (Malaysia) SDN. BHD | Malaysia | Malaysia | Sales | - | 100.00 | Establishment |
| Hikvision Deutschland GmbH | Germany | Germany | Sales | - | 100.00 | Establishment |
| Hikvision Xi’an Xueliang Construction Project Management Ltd. | Xi’an | Xi’an Shanxi | Construction | - | 99.00 | Establishment |
| Luo Pu District Hai Shi Ding Xin Electronic Technology Ltd. | Hetian | Hetian Xinjiang | System integration | - | 90 | Establishment |
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. | Hetian | Hetian Xinjiang | System integration | - | 98 | Establishment |
| Xi’An Hikvision Digital Technology Ltd. | Xi’An | Xi’an Shanxi | Technology development | 100.00 | - | Establishment |
| Wuhan Hikvision Technology Ltd. | Wuhan | Wuhan Hubei | Technology development | 100.00 | - | Establishment |
| Wuhan Hikvision Science and Technology Ltd. | Wuhan | Wuhan Hubei | Sales | 100.00 | - | Establishment |
| Wuhan Hikvision Fire Control Technology Ltd. | Wuhan | Wuhan Hubei | Sales | 100.00 | - | Establishment |
| Hainan Hikvision System Technology Ltd. | Hainan | Lingshui Hainan | System integration | 100.00 | - | Establishment |
| Hangzhou Hikmed Imaging Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | 60.00 | - | Establishment |
| Hikvision Mexico S.A.de C.V. | Mexico | Mexico | Sales | - | 100.00 | Establishment |
| Guizhou Hikvision Transportation Big Data Ltd. | Guiyang | Guiyang, Guizhou | Technology development | 55.00 | - | Establishment |
| Xinjiang CET Yihai Information Technology Ltd. | Urumqi | Urumqi, Xinjiang | System integration | 60.00 | - | Establishment |
| Hikvision Panama Commercial S.A | Panama | Panama | Sales | - | 100.00 | Establishment |
| Hikvision Pakistan (SMC-Private) Limited | Pakistan | Pakistan | Sales | - | 100.00 | Establishment |
| Hikvision Peru Closed Stock Company | Peru | Peru | Sales | 95.00 | 5.00 | Establishment |
| Hikvision Technology Israel Ltd. | Israel | Israel | Sales | - | 100.00 | Establishment |
| Nanjing Hikvision Digital Technology Ltd. | Nanjing | Nanjing, Jiangsu | Sales | 100.00 | - | Establishment |
| Shijiazhuang Hikvision Science and Technology Ltd. | Shijiazhuang | Shijiazhuang Hebei | Technology development | 100.00 | - | Establishment |
| Zhengzhou Hikvision Digital Technology Ltd. | Zhengzhou | Zhengzhou Henan | Sales | 100.00 | - | Establishment |
| Hikvision Central America S.A. | Panama | Panama | Sales | - | 100.00 | Establishment |
| Hikvision West Africa Limited | Nigeria | Nigeria | Sales | 94.00 | 6.00 | Establishment |
| Hikvision Technology Egypt JSC | Egypt | Egypt | Sales | - | 100.00 | Establishment |
| Hangzhou EZVIZ Science and Technology Ltd. (Note 6) | Hangzhou | Hangzhou Zhejiang | Sales | - | 60 | Business merger under the common control |
| Hangzhou Kuangxin Technology Ltd. (Note 7) | Hangzhou | Hangzhou Zhejiang | Technology development | 80.00 | - | Business merger not involving enterprises under the common control |
| Hikvision Digital Technologh (Shanghai) Ltd. | Shanghai | Shanghai | R&D, sales | 100.00 | - | Establishment |
| Nanchang Hikvision Digital Technology Ltd. | Nancang | Nancang Jiangxi | Technology development | 100.00 | - | Establishment |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Zhejiang Hikvision Fire Control Technology Ltd. | Jiangshan | Jiangshan Zhejiang | Technology development | 100.00 | - | Establishment |
| Zhenping County Haikang Juxin Digital Technology Ltd. | Zhenping | Zhenping Henan | System integration | - | 90.00 | Establishment |
| Hefei Hikvision Digital Technology Ltd. | Hefei | Hefei Anhui | Technology development | 100.00 | - | Establishment |
| Tianjin Hikvision Information Technology Ltd. | Tianjin | Tianjin | Technology development | 100.00 | - | Establishment |
| Fuzhou Hikvision Digital Technology Ltd. | Fuzhou | Fuzhou Fujian | System integration | 100.00 | - | Establishment |
| Ningguo Hikvision City Operation Service Ltd, | Xuancheng | Xuancheng Anhui | System integration | - | 100.00 | Establishment |
| Ningbo Haikang Parking System Operation Ltd. | Ningbo | Ningbo Zhejiang | Technology development | 70.00 | - | Establishment |
| Guangzhou Hikvision Technology Ltd. | Guangzhou | Guangzhou Guangdong | Technology development | 100.00 | - | Establishment |
| Hangzhou Hikfire Technology Ltd. | Hangzhou | Hangzhou Zhejiang | Technology development | 60.00 | - | Establishment |
| PT. Hikvision Technology Indonesia | Indonesia | Indonesia | Sales | - | 100.00 | Establishment |
| Ezviz International Limited | Hongkong | Hongkong China | Sales | - | 100.00 | Establishment |
| Hikvision Technologies S.R.L., | Romania | Romania | Sales | - | 100.00 | Establishment |
| Hikvision Azerbaijan Limited Liability | Azerbaijan | Azerbaijan | Sales | - | 100.00 | Establishment |
| Hikvision IOT (Thailand) CO.,LTD. | Thailand | Thailand | Sales | - | 100.00 | Establishment |
| Hikvision Japan K.K. | Japan | Japan | Sales | - | 100.00 | Establishment |
| Hikvision Argentina S.R.L. | Argentina | Argentina | Sales | 95.00 | 5.00 | Establishment |
| Hangzhou HikStorage Science and Technology Ltd. (Note 8) | Hangzhou | Hangzhou Zhejiang | Technology development | - | 60.00 | Establishment |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Note 8: Wuhan HikStorage Technology Ltd. has been renamed to Hangzhou HikStorage Science and Technology Ltd. in2019.
2. Equity in joint ventures or associates
(1) Aggregated financial information of insignificant joint-ventures and associates
Unit：RMB
| Closing balance / Amount for 2019 | Opening balance / Amount for 2018 | |
| Associates： | ||
| The aggregate carrying amount of investments in associates | 188,845,321.49 | 174,900,000.00 |
| The aggregate amount of the following items calculated based on the Company’s equity share percentage of the associates | ||
| --Net gains (losses) and total comprehensive gains (losses) | 7,743,476.93 | (11,598,155.44) |
| Joint Ventures: | ||
| Total investment book value | 63,320,000.00 | - |
| The sum of the following items calculated according to the shareholding ratio | ||
| - Net income (loss) and comprehensive income (loss) | - | - |
| Items | Ending balance of the current year | Ending balance of the prior year (restated) |
| Financial assets： | ||
| Measured at fair value through current profit and loss | ||
| Held –for-trading financial assets | 181.76 | |
| Financial assets measured at fair value through current profit and loss | 1,860,050.59 | |
| Other non-current financial assets | 312,398,267.44 | |
| Measured at fair value through other comprehensive income | ||
| Receivables for financing | 1,257,385,053.02 | |
| Measured at amortized cost | ||
| Cash and bank balances | 27,071,948,919.78 | 26,559,675,452.93 |
| Notes receivable | 973,236,789.02 | 2,569,445,189.92 |
| Accounts receivable | 21,307,927,200.28 | 16,619,441,281.18 |
| Other receivable | 491,776,194.41 | 556,405,281.87 |
| Long-term receivalbes | 1,382,536,761.22 | 705,512,368.17 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| Items | Ending balance of the current year | Ending balance of the prior year (restated) |
| Financial liabilities | ||
| Measured at fair value through current profit and loss | ||
| Held-for-trading financial liabilities | 652,428.18 | |
| Financial liabilities measured at fair value through current profit and loss | 290,998.43 | |
| Measured at amortized cost | ||
| Short-term borrowings | 2,640,082,485.15 | 3,465,655,688.29 |
| Notes payable | 1,239,584,016.70 | 463,479,760.54 |
| Accounts payable | 12,700,075,307.70 | 10,301,665,725.20 |
| Other payables | 1,568,744,599.94 | 2,953,454,987.95 |
| Non-current liabilities due within one year | 86,123,154.06 | 3,178,171,147.16 |
| Other current liabilities | 913,534,538.26 | 364,984,759.94 |
| Long-term debt | 4,604,168,571.43 | 440,000,000.00 |
| Long-term payables | 50,181,416.72 | 8,000,000.00 |
| Other non-current liabilities | 1,234,739,326.10 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
As of December 31
st2019, except for monetary items of foreign currencies set out in Note (V) 59, the Group mainlyadopted the functional currency of each of its subsidiary to present the balance of its assets and liabilities. The foreignexchange risks arising from assets and liabilities denominated in USD and EUR (which has been converted into RMB) asfollows may generate significant impact on the operating results of the Group.
Unit: RMB
| Currencies | Assets | Liabilities | ||
| Closing balance | Opening balance | Closing balance | Opening balance | |
| USD | 8,990,808,097.16 | 7,053,425,866.47 | 2,680,807,278.88 | 1,526,559,782.05 |
| EUR | 396,683,098.55 | 391,028,998.28 | 3,135,739,251.94 | 3,172,727,888.37 |
| Change in foreign exchange rates | 2019 | 2018 | ||
| Effect on profit | Effect on shareholders’ equity | Effect on profit | Effect on shareholders’ equity | |
| 5% appreciation of USD against functional currency | 315,500,040.91 | 315,500,040.91 | 276,343,304.22 | 276,343,304.22 |
| 5% depreciation of USD against functional currency | (315,500,040.91) | (315,500,040.91) | (276,343,304.22) | (276,343,304.22) |
| 5% appreciation of EUR against functional currency | (136,952,807.67) | (136,952,807.67) | (139,084,944.50) | (139,084,944.50) |
| 5% depreciation of EUR against functional currency | 136,952,807.67 | 136,952,807.67 | 139,084,944.50 | 139,084,944.50 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
2.1.3. Other price risks
The Group’s price risk mainly arises from investments in held-for-trading equity instruments and derivative financialinstruments. Held-for-trading equity instrument investments are all investments in unlisted held-for-trading equityinstruments.
The Group is exposed to price risk due to the holding of financial assets measured at fair value. The fair value of certainfinancial instruments is determined by the general pricing model based on discounted future cash flow method or othervaluation techniques, while the valuation techniques are based on certain valuation assumptions. Therefore, the valuationresults are highly sensitive to valuation assumptions. However, at the end of the year, the amount of investment in held-for-trading equity instruments and derivative financial instruments is not significant, and the risk exposure due to changesin price of financial instruments as a result of change in valuation assumptions is low, accordingly, no sensitivity analysisis conducted.
2.2 Credit Risk
As of December 31
st2019, the largest credit risk exposure that may result in financial losses of the Group is mainly due tothe loss of the Group’s financial assets arising from the failure of the counterparty to perform its obligations, including:
cash and bank balance (Note (V). 1), notes receivable (Note (5). 3), accounts receivable (Note (V). 4), receivables forfinancing (Note (V). 5), other receivables (Note (V). 7), non-current assets due within one year (Note (V). 9), long-termreceivables (Note (V). 11), etc., and derivative financial assets that are not included in the scope of impairment assessmentand are measured at fair value through current profit or loss (Note (V). 2). As of the balance sheet date, the book value ofthe Group’s financial assets represents its maximum credit risk exposure.
In order to reduce credit risk, the Group has formed a team to determine the credit limit, conduct credit approval, andimplement other monitoring procedures to ensure that necessary measures are taken to recover overdue debts. In addition,the Group reviews the recovery of financial assets on each balance sheet date to ensure that sufficient credit loss provisionsare made for relevant financial assets. Therefore, the management of the Group believes that the credit risk exposure ofthe Group has been reduced significantly.
The credit risk on cash and bank balances of the Group is low as they are deposited with banks with high credit ratings.
For accounts receivable and long-term receivables, the Group has put in place relevant policies to control credit riskexposure. The Group assesses credit quality of customers and sets corresponding credit period based on the customer’sfinancial status, the possibility of obtaining guarantees from third parties, credit history and other factors such as currentmarket conditions. The Group will regularly monitor the credit history of its customers. For customers with poor credithistory, the Group takes various measures, such as written payment reminders, shorten or cancel the credit period, to ensurethat the overall credit risk of the Group is maintained in a controllable range. For accounts receivable, the Group uses asimplified method, that is, to measure the loss provision based on the amount equivalent to the expected credit loss for theentire duration. For details of the relevant expected credit loss measurement, see (Note (V). 4). For long-term receivables,the Group calculates the expected credit losses based on the expected credit loss rate in the next 12 months or the entireduration based on the default risk exposure. For details of the related expected credit loss measurement, see (Note (V).
11).
The Group’s notes receivable and receivables for financing are mainly bank acceptance notes and commercial acceptancenotes with high credit ratings of the counterparties, which the Group does not consider to be subject to significant creditrisk and will not incur any material loss due to default by the counterparties.
For other receivables, the Group regularly monitors the debtor’s credit history. For debtors with poor credit history, theGroup takes various measures such as written payment reminders to ensure that the Group’s overall credit risk ismaintained in a controllable range. For other receivables, the Group calculates the expected credit loss based on theexpected credit loss ratio in the next 12 months or the entire duration based on the default risk exposure. For details of therelevant expected credit loss measurement, see (Note (V). 7).
The Group’s risk exposure is distributed among multiple contractors and multiple customers, so the Group has nosignificant credit concentration risk.
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
2.3. Liquidity risk
The Group maintains and monitors a level of cash and cash equivalents deemed adequate by the management to meet theoperation needs of the Group and to reduce the effect of cash flow movements when managing liquidity risk. Themanagement of the Group monitors the usage of bank borrowings, and ensures compliance with borrowing agreements.
According to the term to maturity of non-discounted and remaining contract obligations, the financial liabilities held bythe Group are analyzed as below:
Unit：RMB
| December 31st 2019 | ||||
| Within one year | 1-5 years | More than five years | Total | |
| Non-derivative financial liabilities | ||||
| Short-term borrowings | 2,698,970,098.62 | - | - | 2,698,970,098.62 |
| Notes payable | 1,239,584,016.70 | - | - | 1,239,584,016.70 |
| Accounts payable | 12,700,075,307.70 | - | - | 12,700,075,307.70 |
| Other payables | 1,568,744,599.94 | - | - | 1,568,744,599.94 |
| Other current liabilities | 913,534,538.26 | - | - | 913,534,538.26 |
| Other non-current liabilities | - | 1,234,739,326.10 | - | 1,234,739,326.10 |
| Long-term debt (including those due within one year) | 140,478,495.89 | 3,919,810,564.35 | 1,090,203,682.24 | 5,150,492,742.48 |
| Long-term payables (including those due within one year) | 19,265,287.22 | 45,946,166.93 | 8,000,000.00 | 73,211,454.15 |
| Derivative financial liabilities | ||||
| Forward foreign exchange contracts- settled in the gross amount | ||||
| - Cash inflow | 213,036,486.00 | - | - | 213,036,486.00 |
| - Cash outflow | 213,688,914.18 | - | - | 213,688,914.18 |
| - Net cash outflow | 652,428.18 | - | - | 652,428.18 |
| Items | Closing fair value | |||
| Level 1 | Level 2 | Level 3 | Total | |
| I. Continuous fair value measurement | ||||
| (I) Financial assets measured at fair value through profit and loss | ||||
| 1. Held-for-trading Financial Assets | ||||
| -- Derivative financial assets | - | 181.76 | - | 181.76 |
| 2. Other non-current financial assets | - | - | 312,398,267.44 | 312,398,267.44 |
| (II) Receivables for financing | - | 1,257,385,053.02 | - | 1,257,385,053.02 |
| Total assets measured continuously at fair value | - | 1,257,385,234.78 | 312,398,267.44 | 1,569,783,502.22 |
| (III) Financial liabilities measured at fair value through profit and loss | ||||
| 1. Held-for-trading Financial Liabilities | ||||
| - Derivative financial liabilities | - | 652,428.18 | - | 652,428.18 |
| Total liabilities measured continuously at fair value | - | 652,428.18 | - | 652,428.18 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
2. Information on the estimation technique and important parameters adopted as for continuous Level 2 fair
value measurement items
Unit: RMB
| Fair value at December 31st 2019 | Estimation technique | Inputs | |
| Forward Foreign Exchange Contracts (Assets) | 181.76 | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparty |
| Forward Foreign Exchange Contracts (Liabilities) | (652,428.18) | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparty |
| Receivables for financing | 1,257,385,053.02 | Discounted cash flow approach | Discounted rate that reflects the credit risk of counterparty |
| Items | Fair value at December 31st 2019 | Valuation techniques | Inputs |
| Other non-current financial assets-- Investment in equity instruments of private companies | 312,398,267.44 | Market approach /Income approach | Comparable public companies’ PB (price/book value) ratio within the same industry /Future cash flows, Discount rate |
| Other non-current financial assets | Amount |
| Book value on January 1st 2019 | 290,966,813.00 |
| Increase in the current reporting period | 3,884,220.00 |
| Decrease in the current reporting period | - |
| Changes in fair value booked into profit and loss during the current reporting period | 17,547,234.44 |
| Book value on December 31st 2019 | 312,398,267.44 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
X. Related parties and related-party transactions
1. Information on parent company of the Company
| Name | Place of registration | Nature of business | Registered capital | Shareholding ratio of parent company in the Company (%) | Percentage of voting rights of parent company to the Company (%) |
| China Electronics Technology HIK Group Co., Ltd. (CETHIK) | Hangzhou, Zhejiang | Industrial investment | RMB 660 million | 38.88 | 38.88 |
| Name of the associates | Relationship with the Company |
| Wuhu Sensor Technology Co., Ltd. (Wuhu SensorTech) | Associated company of the Group |
| Maxio Technology (Hangzhou) Ltd. and its subsidiaries (Maxio Technology and its subsidiaries) | Associated company of the Group |
| Zhiguang Hailian Big Data Technology Ltd. (Zhiguang Hailian) | Associated company of the Group |
| Sanmenxia Xiaoyun Vision Technology Ltd. (Xiaoyun Vision Technology) | Associated company of the Group |
| Jiaxin Haishi JiaAn Zhicheng Technology Ltd. (Haishi JiaAn) | Associated company of the Group |
| Name | Relationship |
| Gong Hongjia | Director of the company that holds more than 5% of the share of the Company |
| Shanghai Fullhan Microelectronics Co., Ltd. (Shanghai Fullhan Micro) | Gong Hongjia or his relative(s) serve(s) as the director(s) |
| Zhejiang Tuxun Technology Co.,Ltd. (Zhejiang Tuxun) | The Group’s senior management serve(s) as director(s) of this company (Note 1) |
| Confirmware Technology(Hangzhou) Co., Ltd. (Hangzhou Confirmware) | The Group’s senior management serve(s) as director(s) of this company (Note 2) |
| Subsidiaries of CETE (Note 3) | Under common control of the ultimate controlling party of the Company |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
5. Related party transactions
(1) Related party transactions regarding sales and purchases of goods, provision of services and receiving services
Purchase of commodities / receiving of services:
Unit: RMB
| Related party | Transaction type | Amount occurred in the 2019 | Amount occurred in 2018 |
| Subsidiaries of CETE | Purchase of materials and receiving of services | 385,462,257.69 | 300,540,055.04 |
| Shanghai Fullhan Micro | Purchase of materials and receiving of services | 366,576,874.81 | 268,000,337.28 |
| Wuhu SensorTech | Purchase of materials and receiving of services | 63,261,094.03 | 45,607,202.32 |
| Maxio Technology and its subsidiaries | Purchase of materials and receiving of services | 49,188,682.39 | 52,129,576.75 |
| Total | 864,488,908.92 | 666,277,171.39 |
| Related party | Transaction content | Amount occurred in the 2019 | Amount occurred in 2018 |
| Subsidiaries of CETE | Sales of products and rendering of services | 481,423,053.77 | 501,207,585.45 |
| Xiaoyun Vision Technology | Sales of products | 8,014,997.11 | - |
| Wuhu Sensor Tech | Sales of products | 4,130,770.44 | 2,934,921.28 |
| Zhiguang Hailian | Sales of products | 4,099,860.19 | 1,259,520.66 |
| Haishi JiaAn | Sales of products | 488,565.32 | - |
| Zhejiang Tuxun | Sales of products | 449,431.44 | 1,368,910.39 |
| Maxio Technology and its subsidiaries | Sales of products | 160,288.14 | 39,051.29 |
| Hangzhou Confirmware | Sales of products | 112,261.40 | 779,678.00 |
| Total | 498,879,227.81 | 507,589,667.07 |
| Related Party | Content of related party transaction | Amount occurred in the 2019 | Balance at the end of the current period | Amount occurred in 2018 | Opening Balance |
| Subsidiaries of CETE (Note) | Deposit into fixed deposits | - | 4,000,000,000.00 | 3,000,000,000.00 | 4,000,000,000.00 |
| Subsidiaries of CETE (Note) | Deposit into call deposits | - | - | (500,000,000.00) | - |
| Total | - | 4,000,000,000.00 | 2,500,000,000.00 | 4,000,000,000.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
(3) Remuneration of key management personnel
Unit: RMB
| Item | Amount for the current year | Amount for the prior year |
| Compensation of key management personnel | 44,518,667.00 | 45,672,000.00 |
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Bad debt provision | Carrying balance | Bad debt provision | ||
| Accounts receivable | Subsidiaries of CETE | 761,252,308.57 | 54,524,384.59 | 707,471,470.74 | 38,564,084.85 |
| Accounts receivable | Xiaoyun Vision Technology | 6,896,577.22 | 382,760.04 | - | - |
| Accounts receivable | Wuhu Sensor Tech | 4,486,674.99 | 249,010.46 | - | - |
| Accounts receivable | Zhiguang Hailian | 4,270,910.00 | 47,006.81 | 986,160.75 | 49,308.04 |
| Accounts receivable | Haishi JiaAn | 541,468.80 | 21,296.76 | - | - |
| Accounts receivable | Maxio Technology and its subsidiaries | 158,025.60 | 1,295.81 | - | - |
| Accounts receivable | Zhejiang Tuxun | 130,838.99 | 1,072.88 | 345,738.04 | 17,286.90 |
| Accounts receivable | Hangzhou Confirmware | - | - | 298,619.99 | 15,611.00 |
| Total | 777,736,804.17 | 55,226,827.35 | 709,101,989.52 | 38,646,290.79 | |
| Notes receivable | Subsidiaries of CETE (Note) | 162,553,909.93 | - | 60,983,163.83 | - |
| Notes receivable | Zhiguang Hailian | 244,719.00 | - | - | - |
| Notes receivable | Hangzhou Confirmware | - | - | 150,000.00 | - |
| Total | 162,798,628.93 | - | 61,133,163.83 | - | |
| Long-term receivables | Subsidiaries of CETE | 20,000,000.00 | 164,000.00 | - | - |
| Total | 20,000,000.00 | 164,000.00 | - | - | |
| Prepayments | Subsidiaries of CETE | 1,399,872.38 | - | 13,328,415.31 | - |
| Total | 1,399,872.38 | - | 13,328,415.31 | - | |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(1) Payables to related parties
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Accounts payable | Subsidiaries of CETE | 226,498,160.40 | 166,845,140.44 |
| Accounts payable | Shanghai Fullhan Micro | 143,284,053.29 | 106,744,509.28 |
| Accounts payable | Maxio Technology and its subsidiaries | 12,763,683.98 | - |
| Accounts payable | Wuhu Sensor Tech | 9,203,484.14 | 5,944,535.61 |
| Total | 391,749,381.81 | 279,534,185.33 | |
| Notes Payable | Subsidiaries of CETE | 13,054,828.27 | - |
| Notes Payable | Shanghai Fullhan Micro | 7,110,446.00 | 13,838,900.00 |
| Total | 20,165,274.27 | 13,838,900.00 | |
| Receipts in advance | Subsidiaries of CETE | 7,172,635.75 | 2,306,953.47 |
| Total | 7,172,635.75 | 2,306,953.47 | |
| Other payables | Subsidiaries of CETE | 56,022,589.40 | 63,683,807.94 |
| Other payables | Shanghai Fullhan Micro | 100,000.00 | 100,000.00 |
| Other payables | Wuhu Sensor Tech | 51,200.00 | 50,000.00 |
| Other payables | Zhejiang Tuxun | - | 9,290.00 |
| Total | 56,173,789.40 | 63,843,097.94 | |
| Non-current liabilities due within one year | Subsidiaries of CETE | 14,601,376.90 | - |
| Long-term payables | Subsidiaries of CETE | 41,213,376.82 | - |
| 55,814,753.72 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
The total number of subject Shares related to the Restricted Shares granted under the Scheme (excluding lapsed restrictedshares) and the total number of subject Shares related to other effective share incentive schemes of the Company (if any)in aggregate shall not exceed 10% of the total issued share capital of the Company. Unless approval is obtained at thegeneral meeting by way of special resolution, the total number of Restricted Shares granted or to be granted to anyParticipant under this Scheme or other effective share incentive schemes of the Company (if any) in aggregate shall notexceed 1% of the total issued share capital of the Company.
The grant price for restricted shares, being the purchase price by staff, shall be determined by the Board of Directors. Thegrant price shall not be lower than 50% of the following price, whichever is the highest:
(I) The closing price of the subject shares of the Company for one trading day prior to publication of the summary ShareIncentive Scheme draft;(II) The average closing price of the subject shares of the Company for 30 trading days prior to publication of the summaryShare Incentive Scheme draft;(III) The average price of the subject shares of the Company for 20 trading days prior to publication of the summary ShareIncentive Scheme draft; or(IV) The unit nominal value of the subject shares of the Company.
Each batch of restricted shares shall not be unlocked unless fulfilling, each time, by the Company its unlock performancecriteria (including net asset yield and operating income growth rate), and by grantees’ individual performance criteriasimultaneously. Where, during any year of the unlocking period, any one or more unlock criteria for the Company orindividuals is or are not fulfilled, such portion of subject shares shall be cancelled, and no grantees shall be entitled tomake another application for unlocking those subject shares in the future years. The cancelled restricted shares will berepurchased by the Company based on the grant price.
On October 24
th2014, after consideration and approval by the general meeting, the Company granted 52,910,082 restrictedshares to grantees at a grant price of RMB 9.25 per share (“2014 Share Incentive Scheme”). The Lock-up Period of theSubject Shares shall last for a period of 24 months commencing on the grant date, during which the Subject Shares grantedto grantees under the scheme shall be subject to lock-up and shall not be transferable. The Unlocking Period shall be the24 to 60 months following the grant of restricted shares (including Lock-up Period), during which grantees may, subjectto unlocking conditions stipulated by the scheme being satisfied, apply for unlocking in 3 tranches: the first unlockingperiod shall be the 24 to 36 months following the grant date and the number of shares to be unlocked shall be 40% of theaggregate number of the Subject Shares granted; the second unlocking period shall be the 36 to 48 months following thegrant date and the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted;the third unlocking period shall be the 48 to 60 months following the grant date and the number of shares to be unlockedshall be 30% of the aggregate number of the Subject Shares granted. As of December 31
st2019, the restricted stock grantedin 2014 has all vested.
On December 23
rd
2016, after consideration and approval by the general meeting, the Company granted 52,326,858restricted shares to grantees at a grant price of RMB 12.63 per share (“2016 Share Incentive Scheme”). The Lock-upPeriod of the Subject Shares shall last for a period of 24 months commencing on the grant date, during which the SubjectShares granted to grantees under the scheme shall be subject to lock-up and shall not be transferable. The Unlocking Periodshall be the 24 to 60 months following the grant of restricted shares (including Lock-up Period), during which granteesmay, subject to unlocking conditions stipulated by the scheme being satisfied, apply for unlocking in 3 tranches: the firstunlocking period shall be the 24 to 36 months following the grant date and the number of shares to be unlocked shall be40% of the aggregate number of the Subject Shares granted; the second unlocking period shall be the 36 to 48 monthsfollowing the grant date and the number of shares to be unlocked shall be 30% of the aggregate number of the SubjectShares granted; the third unlocking period shall be the 48 to 60 months following the grant date and the number of sharesto be unlocked shall be 30% of the aggregate number of the Subject Shares granted.
On December 20
th
2018, authorized by the 2
ndextraordinary general meeting of 2018 and reviewed by the board ofdirectors, the Company granted 121,195,458 restricted shares to grantees at a grant price of RMB 16.98 per share (“2018Share Incentive Scheme”). The Lock-up Period of the Subject Shares shall last for a period of 24 months commencing onthe grant date, during which the Subject Shares granted to grantees under the scheme shall be subject to lock-up and arenot transferable. The Unlocking Period shall be the 24 to 60 months following the grant of restricted shares (includingLock-up Period), during which grantees may, subject to unlocking conditions stipulated by the scheme being satisfied,apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months following the grant date and thenumber of shares to be unlocked shall be 40% of the aggregate number of the Subject Shares granted; the second unlockingperiod shall be the 36 to 48 months following the grant date and the number of shares to be unlocked shall be 30% of the
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
aggregate number of the Subject Shares granted; the third unlocking period shall be the 48 to 60 months following thegrant date and the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted.The Company has completed the equity registration work in January 2019.
Unit: share
| 2014 Share Incentive Scheme | 2019 | 2018 |
| Total of equity instruments outstanding at the beginning of the reporting period | - | 33,932,161 |
| Total of equity instruments granted during the current reporting period | - | - |
| Total of equity instruments vested during the current reporting period | - | 33,422,536 |
| Total of equity instruments forfeited during the current reporting period (Note) | - | 509,625 |
| Total of equity instruments outstanding at the end of the reporting period | - | - |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | - | - |
| 2016 Share Incentive Scheme | 2019 | 2018 |
| Total of equity instruments outstanding at the beginning of the reporting period | 45,404,512 | 78,490,287 |
| Total of equity instruments granted (share dividend) during the current reporting period | - | - |
| Total of equity instruments vested during the current reporting period | 21,836,266 | 30,140,165 |
| Total of equity instruments forfeited during the current reporting period (Note) | 1,593,506 | 2,945,610 |
| Total of equity instruments outstanding at the end of the reporting period | 21,974,740 | 45,404,512 |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | RMB 8.42 per share 24 months | RMB 8.42 per share 36 months |
| 2018 Share Incentive Scheme | 2019 | 2018 |
| Total of equity instruments outstanding at the beginning of the reporting period | 121,195,458 | - |
| Total of equity instruments granted (share dividend) during the current reporting period | - | 121,195,458 |
| Total of equity instruments vested during the current reporting period | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
2018 Share Incentive Scheme
| 2018 Share Incentive Scheme | 2019 | 2018 |
| Total of equity instruments forfeited during the current reporting period | - | - |
| Total of equity instruments outstanding at the end of the reporting period | 121,195,458 | 121,195,458 |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | RMB 16.98 per share and 48 months | RMB 16.98 per share and 60 months |
| 2014 Share Incentive Scheme | 2016 Share Incentive Scheme | 2018 Share Incentive Scheme | |
| Method of determine the fair value of equity instruments at the grant date | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period |
| Recognition basis of the number of the equity instruments qualified for vesting | Determined based on the results estimation of each vesting period | Determined based on the results estimation of each release period | Determined based on the results estimation of each release period |
| Reasons of the significant difference between the estimates of the current reporting period with that of the prior year | None | None | None |
| Accumulative amount of share-based payment through equity settlement and further included in the capital reserve | 363,191,911.52 | 321,076,594.80 | 211,031,591.24 |
| Total amount of the expenses recognized according to share-based payment through equity settlement in the current reporting period | - | 57,278,203.18 | 211,031,591.24 |
| Closing balance | Opening balance | |
| Contracted but not yet recognized in financial statements | ||
| - Commitment on construction of long-term assets | 10,905,300 | 10,420,984 |
| - Commitment on external investments | 550,000 | - |
| Total | 11,455,300 | 10,420,984 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Unit: RMB’000
| Closing balance | Opening balance | |
| Minimum lease payments under non-cancellable operating leases: | ||
| First year subsequent to the balance sheet date | 235,585 | 182,124 |
| Second year subsequent to the balance sheet date | 154,430 | 139,759 |
| Third year subsequent to the balance sheet date | 92,851 | 98,017 |
| Subsequent years | 129,063 | 117,099 |
| Total | 611,929 | 536,999 |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
XIV. Other significant events
1. Segment information
1.1 Report segment determining and accounting policy
According to the Group's internal organization structure, management requirements and internal report principles, theGroup has only one operating segment, which is the research and development, production and sales of video productsand video services.
1.2 Segment financial reporting
External revenue by product or business segments
Unit: RMB
| Item | 2019 | ||
| Operating income | Operating cost | ||
| Video Surveillance | Front-end equipment | 27,175,127,832.29 | 13,018,006,201.14 |
| Back-end equipment | 7,519,825,167.90 | 3,700,043,734.49 | |
| Central control equipment | 8,822,675,802.63 | 4,289,265,345.53 | |
| Construction contract | 1,091,421,819.86 | 844,074,602.62 | |
| Other | 8,612,324,560.21 | 6,479,665,731.95 | |
| Innovative Business | Smart home business | 2,592,271,750.14 | 1,574,835,597.99 |
| Robotic business | 813,993,602.43 | 380,163,028.57 | |
| Other innovative business | 1,030,469,529.76 | 854,122,534.83 | |
| Total | 57,658,110,065.22 | 31,140,176,777.12 | |
| Item | 2018 | ||
| Operating income | Operating cost | ||
| Video Surveillance | Front-end equipment | 24,083,382,887.01 | 12,054,070,919.03 |
| Back-end equipment | 6,779,290,973.76 | 3,603,440,284.98 | |
| Central control equipment | 7,323,448,788.51 | 3,380,634,705.16 | |
| Construction contract | 2,285,061,427.63 | 2,008,019,572.05 | |
| Other | 6,561,947,057.15 | 4,770,561,559.60 | |
| Innovative Business | Smart home business | 1,636,697,390.22 | 997,681,210.62 |
| Robotic business | 657,068,840.55 | 276,817,693.44 | |
| Other innovative business | 510,235,116.78 | 392,243,610.36 | |
| Total | 49,837,132,481.61 | 27,483,469,555.24 | |
| Item | 2019 | 2018 |
| External revenue generated in domestic area | 41,419,508,094.09 | 35,646,435,049.93 |
| External revenue generated in overseas area | 16,238,601,971.13 | 14,190,697,431.68 |
| Total | 57,658,110,065.22 | 49,837,132,481.61 |
| Item (Note) | At December 31st 2019 | At January 1st 2019 |
| Non-current assets in domestic area | 8,401,009,239.65 | 7,810,496,315.84 |
| Non-current assets in overseas area | 294,697,597.55 | 352,944,245.80 |
| Total | 8,695,706,837.20 | 8,163,440,561.64 |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
XV. Notes to major items of financial statements of the parent company
1. Accounts receivable
(1) Disclosure by age
Unit: RMB
| Aging | Closing Balance | ||
| Accounts receivable | Bad debt provision | Proportion (%) | |
| Not overdue | 9,691,331,173.29 | 13,403,713.21 | 0.14 |
| Within 1 year after the overdue | 15,265,380,820.50 | 96,817,338.63 | 0.63 |
| 1-2 years after the overdue | 301,509,638.74 | 74,985,447.15 | 24.87 |
| 2-3 years after the overdue | 91,281,703.85 | 60,930,537.32 | 66.75 |
| 3-4 years after the overdue | 39,927,719.04 | 35,328,094.03 | 88.48 |
| Over 4 years after the overdue | 65,309,887.98 | 65,309,887.98 | 100.00 |
| Subtotal | 25,454,740,943.40 | 346,775,018.32 | 1.36 |
| Category | Closing balance | Opening balance | ||||||||
| Carrying balance | Bad debt provision | Book value | Carrying balance | Bad debt provision | Book value | |||||
| Amount | Percentage (%) | Amount | Percentage (%) | Amount | Amount | Percentage (%) | Amount | Percentage (%) | Amount | |
| Provision for bad debts on a single basis | - | - | - | - | - | - | - | - | - | - |
| Provision for bad debts by portfolios | 25,454,740,943.40 | 100 | 346,775,018.32 | 1.36 | 25,107,965,925.08 | 16,178,600,865.87 | 100.00 | 974,081,704.16 | 6.02 | 15,204,519,161.71 |
| Total | 25,454,740,943.40 | 100 | 346,775,018.32 | 1.36 | 25,107,965,925.08 | 16,178,600,865.87 | 100.00 | 974,081,704.16 | 6.02 | 15,204,519,161.71 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Accounts receivable provision for bad debts by portfolios
Unit: RMB
| Customer | Closing balance | ||
| Carrying balance | Bad debt provision | Proportion (%) | |
| Subsidiaries’ customers | 21,576,057,911.97 | - | 0.00 |
| Portfolio A | 1,862,765.26 | 222,555.44 | 11.95 |
| Portfolio B | 3,876,600,006.61 | 346,332,203.32 | 8.93 |
| Portfolio C | 220,259.56 | 220,259.56 | 100.00 |
| Total | 25,454,740,943.40 | 346,775,018.32 | 1.36 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
(4) Top five debtors based on corresponding closing balance of account receivables
Unit: RMB
| Name of the Party | Relationship with the Company | Book value balance of accounts receivable | Closing balance for bad debt provision | Proportion (%) |
| Subsidiary A | Subsidiary | 22,167,698,884.32 | - | 88.29 |
| Company A | Related party | 162,750,631.54 | 4,722,123.62 | 0.63 |
| Company B | Third party | 62,420,946.31 | 883,694.33 | 0.25 |
| Company C | Third party | 60,846,279.53 | 739,405.20 | 0.24 |
| Company D | Third party | 39,929,510.12 | 517,742.96 | 0.16 |
| Total | 22,493,646,251.82 | 6,862,966.11 | 89.57 |
| Category | Closing balance | Opening Balance |
| Dividends receivable | 2,550,000.00 | 2,550,000.00 |
| Other receivables | 918,725,388.15 | 520,437,955.34 |
| Total | 921,275,388.15 | 522,987,955.34 |
| Invested company | Closing balance | Opening Balance |
| Subsidiaries of CETE | 2,550,000.00 | 2,550,000.00 |
| Total | 2,550,000.00 | 2,550,000.00 |
| Item | Closing Balance | ||
| Other receivables | Bad debt provision | Proportion (%) | |
| Not overdue | 870,056,394.13 | 536,574.53 | 0.06 |
| Within 1 year after the overdue | 26,734,499.38 | 1,479,004.45 | 5.53 |
| 1-2 years after the overdue | 19,872,855.16 | 2,114,471.79 | 10.64 |
| 2-3 years after the overdue | 7,419,283.89 | 2,336,500.77 | 31.49 |
| 3-4 years after the overdue | 2,281,232.52 | 1,172,325.39 | 51.39 |
| Over 4 years after the overdue | 2,157,562.18 | 2,157,562.18 | 100.00 |
| Subtotal | 928,521,827.26 | 9,796,439.11 | 1.06 |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
(2) Other receivables by nature of the payment
Unit: RMB
| Nature | Closing balance | Opening balance |
| Payments by related parties within the Group | 678,798,902.79 | 254,412,122.73 |
| Temporary payments for receivables | 196,954,698.49 | 235,499,619.96 |
| Guarantee deposit | 45,527,954.39 | 59,549,614.46 |
| Investment deposit | - | 20,000,000.00 |
| Others | 7,240,271.59 | 2,190,850.93 |
| Total | 928,521,827.26 | 571,652,208.08 |
| The name of entity | Relationship with the Company | Nature | Closing balance | Aging | Percentage to total other receivables (%) | Bad debt provision |
| Subsidiary B | Subsidiary | Internal Payment | 309,850,178.44 | Not overdue | 33.73 | - |
| Subsidiary C | Related party | Internal Payment | 85,862,309.68 | Not overdue | 9.35 | - |
| Subsidiary D | Third party | Internal Payment | 70,750,260.61 | Not overdue | 7.70 | - |
| Subsidiary E | Third party | Internal Payment | 39,149,174.89 | Not overdue | 4.26 | - |
| Subsidiary F | Third party | Internal Payment | 23,605,005.00 | Not overdue | 2.57 | - |
| Total | 529,216,928.62 | 57.61 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
3. Long-term equity investment
Unit: RMB
| Item | Closing Balance | Opening Balance | ||||
| Carrying Balance | Provisions | Book Value | Carrying Balance | Provisions | Book Value | |
| Investment in subsidiaries | 4,878,400,682.40 | - | 4,878,400,682.40 | 4,317,555,407.77 | 73,816,351.77 | 4,243,739,056.00 |
| Inestments in associated enterprises and joint ventures | 195,617,348.04 | - | 195,617,348.04 | 117,408,339.90 | - | 117,408,339.90 |
| Total | 5,074,018,030.44 | - | 5,074,018,030.44 | 4,434,963,747.67 | 73,816,351.77 | 4,361,147,395.90 |
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hangzhou Hikvision System Technology Ltd. | 745,219,821.80 | 31,056,690.61 | - | 776,276,512.41 | - | - |
| Hangzhou Hikvision Security Equipment Leasing Services Ltd. | 200,000,000.00 | - | - | 200,000,000.00 | - | - |
| Shanghai Goldway Intelligent Traffic System Ltd. | 23,000,000.00 | - | - | 23,000,000.00 | - | - |
| Chongqing Hikvision System Technology Ltd. | 700,000,000.00 | - | - | 700,000,000.00 | - | - |
| Hundure Technology (Shanghai) Ltd. | 37,247,790.28 | - | - | 37,247,790.28 | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name of investee
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hangzhou EZVIZ Network Ltd. | 6,641,675.60 | 2,508,559.95 | - | 9,150,235.55 | - | - |
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | 24,000,000.00 | - | - | 24,000,000.00 | - | - |
| Hangzhou Hikrobot Technology Co., Ltd. | 87,402,825.23 | 36,195,581.58 | - | 123,598,406.81 | - | - |
| Hangzhou Hikvision Investment Management Ltd. | 100,000.00 | - | - | 100,000.00 | - | - |
| Hangzhou HikAuto Technology Ltd. | 140,813,518.12 | 42,909,909.47 | - | 183,723,427.59 | - | - |
| Hangzhou Hikvision Communication Technology Ltd. | 7,000,000.00 | - | - | 7,000,000.00 | - | - |
| Hangzhou Hikmicro Sensing Technology Co., Ltd. | 60,000,000.00 | 60,513,668.74 | - | 120,513,668.74 | - | - |
| HDT International Ltd. | 87,786.14 | - | - | 87,786.14 | - | - |
| Prama Hikvision Indian Private Limited | 1,585,696.80 | - | - | 1,585,696.80 | - | - |
| Hikvision International Co., Limited | 79,423.52 | - | - | 79,423.52 | - | - |
| Hikvision Australia Pty Ltd. | 2,866,850.00 | - | - | 2,866,850.00 | - | - |
| Hikvision Singapore Pte. Ltd | 1,900,590.00 | - | - | 1,900,590.00 | - | - |
| Hikvision South Africa (Pty) Ltd. | 1,578,650.00 | - | - | 1,578,650.00 | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name of investee
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hikvision Dubai FZE | 1,870,351.40 | - | - | 1,870,351.40 | - | - |
| Hikvision Brazil Participacoes Ltda. | 4,579,750.50 | - | - | 4,579,750.50 | - | - |
| Hikvision Limited Liability Company | 647,249.19 | - | - | 647,249.19 | - | - |
| Co?peratief Hikvision Europe U.A. | 65,485.53 | - | - | 65,485.53 | - | - |
| Hikvision Korea Limited | 1,535,850.00 | - | - | 1,535,850.00 | - | - |
| Hikvision Colombia SAS | 1,337,440.00 | - | - | 1,337,440.00 | - | - |
| Hikvision Kazakhstan limited liability partnership | 4,758.69 | - | - | 4,758.69 | - | - |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | 1,148,115.83 | - | - | 1,148,115.83 | - | - |
| Chongqing Hikvision Science and Technology Ltd. | 100,000,000.00 | 541,006.38 | - | 100,541,006.38 | - | - |
| Hikvision USA, Inc. | 1,546,160.00 | - | - | 1,546,160.00 | - | - |
| Hikvision Canada, Inc. | 994,442.54 | - | - | 994,442.54 | - | - |
| Henan Hua’An Bao Quan Intelligent Development Ltd. | 67,475,000.00 | - | - | 67,475,000.00 | - | - |
| Henan Haikang Hua’An Bao Quan Electronics Ltd. | 510,000.00 | - | - | 510,000.00 | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st
2019 to December 31
st
2019
Name of investee
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hangzhou Hikvision Science and Technology Ltd. | 1,020,741,963.29 | 13,262,762.56 | - | 1,034,004,725.85 | - | - |
| Hangzhou Hikvision Electronics Ltd. | 397,745,645.00 | 3,346,665.36 | - | 401,092,310.36 | - | - |
| Beijing Brainaire Storage Ltd. | 95,878,126.85 | - | 95,878,126.85 | - | - | - |
| Tianjin Hikvision System Technology Ltd. | 10,000,000.00 | - | 10,000,000.00 | - | - | - |
| Wuhan Hik Storage Technology Ltd. | 60,000,000.00 | 869,464.15 | - | 60,869,464.15 | - | - |
| Chengdu Hikvision Digital Technology Ltd. | 300,000,000.00 | - | - | 300,000,000.00 | - | - |
| Hangzhou HikAuto Software Ltd. | 1,589,417.56 | 3,893,586.96 | - | 5,483,004.52 | - | - |
| Hangzhou Haikang Intelligent Technology Ltd | 438,438.67 | 2,287,576.67 | - | 2,726,015.34 | - | - |
| Hangzhou EZVIZ Software Ltd. | 3,739,571.23 | 8,796,187.08 | - | 12,535,758.31 | - | - |
| LLC Hikvision Tashkent | 833,014.00 | - | - | 833,014.00 | - | - |
| Xi’An Hikvision Digital Technology Ltd. | 50,000,000.00 | 25,000,000.00 | - | 75,000,000.00 | - | - |
| Wuhan Hikvision Technology Ltd. | 12,600,000.00 | - | - | 12,600,000.00 | - | - |
| Wuhan Hikvision Science and Technology Ltd. | 65,250,000.00 | - | - | 65,250,000.00 | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name of investee
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hangzhou Hikmed Technology Ltd. | 48,000,000.00 | 769,806.64 | - | 48,769,806.64 | - | - |
| Guizhou Haikang Transportation Big Data Ltd. | 5,500,000.00 | 11,000,000.00 | - | 16,500,000.00 | - | - |
| Xinjiang CET Yihai Information Technology Ltd. | 24,000,000.00 | - | - | 24,000,000.00 | - | - |
| Nanjing Hikvision Digital Technology Ltd.. | - | 35,000,000.00 | - | 35,000,000.00 | - | - |
| Hangzhou Kuangxin Technology Ltd. | - | 112,000,000.00 | - | 112,000,000.00 | - | - |
| Zhengzhou Hikvision Digital Technology Ltd. | - | 55,000,000.00 | - | 55,000,000.00 | - | - |
| Nanchang Hikvision Digital Technology Ltd. | - | 20,000,000.00 | - | 20,000,000.00 | - | - |
| Hikvision Digital Technology (Shanghai) Ltd. | - | 80,000,000.00 | - | 80,000,000.00 | - | - |
| Hefei Hikvision Digital Technology Ltd. | - | 35,000,000.00 | - | 35,000,000.00 | - | - |
| Tianjin Hikvision Information Technology Ltd. | - | 50,000,000.00 | - | 50,000,000.00 | - | - |
| Ningbo Hikvision Parking System Operation Ltd. | - | 35,000,000.00 | - | 35,000,000.00 | - | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Name of investee
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Write-off of impairment provision during the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hikvision Peru Closed Stock Company | - | 1,598,042.50 | - | 1,598,042.50 | - | - |
| Hangzhou HikStorage Technology Ltd. | - | 173,892.83 | - | 173,892.83 | - | - |
| Total | 4,317,555,407.77 | 666,723,401.48 | 105,878,126.85 | 4,878,400,682.40 | - | - |
| Name of investee | Opening balance | Increase/Decrease during the current reporting period | Closing Balance | Blance of impairment loss provision at the end of the current reporting period | |||||||
| Additional Investments | Reduce Investments | Investment income recognized under the equity method | Other comprehensive income adjustment | Other changes in equity | Declared cash dividends or profits | Provision for impairment | Others | ||||
| 1.Joint Ventures | |||||||||||
| Hangzhou Haikang Intelligent Industry Equity Investment Fund Partnership (Limited Partnership) | - | 50,000,000.00 | - | - | - | - | - | - | - | 50,000,000.00 | - |
| Daishan Hailai Yunzhi Technology Ltd. | - | 13,320,000.00 | - | - | - | - | - | - | - | 13,320,000.00 | - |
| Subtotal | - | 63,320,000.00 | - | - | - | - | - | - | - | 63,320,000.00 | - |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
Name of investee
| Name of investee | Opening balance | Increase/Decrease during the current reporting period | Closing Balance | Blance of impairment loss provision at the end of the current reporting period | |||||||
| Additional Investments | Reduce Investments | Investment income recognized under the equity method | Other comprehensive income adjustment | Other changes in equity | Declared cash dividends or profits | Provision for impairment | Others | ||||
| 2.Associated Enterprises | |||||||||||
| Wuhu Sensor Tech Intelligent Technology Ltd. | 41,771,440.45 | - | - | 6,649,526.01 | - | - | - | - | - | 48,420,966.46 | - |
| Maxio Technology (Hangzhou) Ltd. | 65,636,899.45 | - | - | (238,972.43) | - | - | - | - | - | 65,397,927.02 | - |
| Zhiguang Hailian Big Data Technology Ltd. | 10,000,000.00 | - | - | (1,315,140.73) | - | - | - | - | - | 8,684,859.27 | - |
| Qinghai Qingtang Big Data Ltd. | - | 9,800,000.00 | - | (6,404.71) | - | - | - | - | - | 9,793,595.29 | - |
| Subtotal | 117,408,339.90 | 9,800,000.00 | - | 5,089,008.14 | - | - | - | - | - | 132,297,348.04 | - |
| Total | 117,408,339.90 | 73,120,000.00 | - | 5,089,008.14 | - | - | - | - | - | 195,617,348.04 | - |
Notes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
4. Operating income and operating cost
Unit：RMB
| Item | 2019 | 2018 | ||
| Income | Cost | Income | Cost | |
| Operating income | 22,818,988,903.46 | 7,351,332,707.12 | 19,948,078,284.47 | 6,337,037,884.18 |
| Other operating income | 2,893,477,698.34 | 377,154,148.55 | 2,340,135,832.19 | 262,631,601.12 |
| Total | 25,712,466,601.80 | 7,728,486,855.67 | 22,288,214,116.66 | 6,599,669,485.30 |
| Item | 2019 | 2018 |
| Long-term equity investment income calculated by cost method | 1,400,000.00 | - |
| Long-term equity investment income (losses) measured by equity method | 5,089,008.14 | (4,200,612.39) |
| Investment income (loss) on disposal of long-term equity investment | 11,161.99 | (9,994,028.47) |
| Investment gains for available-for-sale financial assets during the holding period | 12,256,000.00 | |
| Investment income from redemption of bank finance products upon expiry | 84,783,236.04 | |
| Investment income of other non-current financial assets during the holding period | 17,357,220.31 | |
| Gain on disposal of held-for-trading financial assets | 1,168,699.00 | |
| Total | 25,026,089.44 | 82,844,595.18 |
| Related party | Transaction type | Amount for 2019 | Amount for 2018 |
| Subsidiaries of Hikvision (Note) | Purchase of materials and receiving of services | 5,671,591,849.30 | 7,361,353,668.93 |
| Maxio Technology and its subsidiaries | Purchase of materials and receiving of services | 4,192,107.01 | 51,914,266.05 |
| Subsidiaries of CETE | Purchase of materials and receiving of services | 39,607,756.46 | 261,945.55 |
| Shanghai Fullhan | Purchase of materials and receiving of services | 36,590,000.00 | - |
| Total | 5,751,981,712.77 | 7,413,529,880.53 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
Sales of goods/rendering of services:
Unit：RMB
| Related party | Transaction type | Amount for 2019 | Amount for 2018 |
| Subsidiaries of Hikvision | Sales of products and rendering of services | 17,597,924,722.59 | 15,251,464,800.88 |
| Subsidiaries of CETE | Sales of products | 251,053,117.23 | 103,277,524.19 |
| Xiaoyun Vision Technology | Sales of products | 7,709,012.16 | - |
| Zhiguang Hailian | Sales of products | 4,099,860.19 | 1,259,520.66 |
| Wuhu Sensor Tech | Sales of products | 74,446.30 | - |
| Total | 17,860,861,158.47 | 15,356,001,845.73 |
| Related Party | Content of related party transaction | Amount occurred during the current reporting period | Closing balance at the end of the current reporting period | Amount occurred during the prior reporting period | Opening Balance at the beginning of the current reporting period |
| Subsidiaries of CETE (Note) | Deposit into fixed deposits | - | 4,000,000,000.00 | 3,000,000,000.00 | 4,000,000,000.00 |
| Subsidiaries of CETE (Note) | Deposit into call deposits | - | - | (500,000,000.00) | - |
| Total | - | 4,000,000,000.00 | 2,500,000,000.00 | 4,000,000,000.00 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st
2019
7. Receivables from related parties and payables to related parties
(1) Receivables from related parties
Unit：RMB
| Item | Related party | Closing balance | Opening balance | ||
| Carrying balance | Bad debt provision | Carrying balance | Provision | ||
| Accounts receivable | Subsidiaries of Hikvision | 20,936,806,929.47 | - | 13,281,977,578.40 | 664,098,878.92 |
| Accounts receivable | Subsidiaries of CETE | 250,291,208.65 | 10,516,129.42 | 77,379,251.13 | 4,303,331.24 |
| Accounts receivable | Zhiguang Hailian | 4,270,910.00 | 47,006.81 | 986,160.75 | 49,308.04 |
| Accounts receivable | Xiaoyun Vision Technology | 6,550,814.22 | 363,570.19 | - | - |
| Total | 21,197,919,862.34 | 10,926,706.42 | 13,360,342,990.28 | 668,451,518.20 | |
| Notes receivable | Subsidiaries of CETE | - | - | 2,168,790.00 | - |
| Total | - | - | 2,168,790.00 | - | |
| Other receivables | Subsidiaries of Hikvision | 678,798,902.79 | 254,412,122.73 | 12,720,606.14 | |
| Total | 678,798,902.79 | 254,412,122.73 | 12,720,606.14 | ||
| Prepayments | Subsidiaries of Hikvision | 64,380,038.22 | - | 11,465,581.45 | - |
| Prepayments | Subsidiaries of CETE | 144,569.90 | - | 6,616,973.90 | - |
| Total | 64,524,608.12 | - | 18,082,555.35 | - | |
| Dividend receivables | Subsidiaries of Hikvision | 2,550,000.00 | - | 2,550,000.00 | - |
| Total | 2,550,000.00 | - | 2,550,000.00 | - | |
| Item | Related party | Closing balance | Opening balance |
| Accounts payable | Subsidiaries of Hikvision | 877,307,780.01 | 92,669,607.45 |
| Accounts payable | Subsidiaries of CETE | 1,653.61 | 168,726.74 |
| Accounts payable | Maxio Technology and its subsidiaries | 8,560,000.00 | - |
| Total | 885,869,433.62 | 92,838,334.19 | |
| Receipts in advance | Subsidiaries of Hikvision | 7,682,167.48 | 8,276,019.65 |
| Receipts in advance | Subsidiaries of CETE | 109,309.12 | 555,320.76 |
| Total | 7,791,476.60 | 8,831,340.41 |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| Item | Related party | Closing balance | Opening balance |
| Other payables | Subsidiaries of Hikvision | 219,301,627.42 | 127,168,684.42 |
| Other payables | Subsidiaries of CETE | 150,000.00 | 180,520.00 |
| Other payables | Shanghai Fullhan Micro | 100,000.00 | 100,000.00 |
| Other payables | Wuhu Sensor Tech | 1,200.00 | - |
| Other payables | Zhejiang Tuxun | - | 9,290.00 |
| Total | 219,552,827.42 | 127,458,494.42 |
| Supplementary information | 2019 | 2018 |
| 1. Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 11,682,416,010.01 | 9,769,694,399.19 |
| Add: Assets impairment provision | (51,593,292.77) | 226,183,330.78 |
| Credit loss provision | (656,135,180.29) | |
| Depreciation of fixed assets | 245,879,493.31 | 220,185,337.21 |
| Amortization of intangible assets | 82,358,499.02 | 36,076,412.59 |
| Amortization of long-term deferred expenses | 9,252,020.83 | - |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (4,072,096.18) | (4,138,938.48) |
| Gains from change in fair value | (17,547,234.44) | - |
| Financial expenses | 183,074,224.09 | 32,451,328.20 |
| Investment income | (25,026,089.44) | (82,844,595.18) |
| Share-based payment through equity settlement | 193,304,834.81 | 104,563,570.17 |
| Change in restricted funds | (2,035,173.70) | (193,518,759.75) |
| Decrease (Increase) in deferred income tax assets | 95,421,754.68 | (21,632,515.13) |
| Decrease of inventories | 49,235,200.73 | 199,234,551.87 |
| Increasein operating receivables | (9,018,892,651.51) | (2,909,749,021.26) |
| Increase in operating payables | 5,315,195.54 | 214,936,244.29 |
| Increase (Decrease) in deferred income | (24,728,979.56) | 123,844,108.01 |
| Net cash flow from operating activities | 2,746,226,535.13 | 7,715,285,452.51 |
| 2. Major investing and financing activities not involving cash receipt and payment: |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| Supplementary information | 2019 | 2018 |
| 3. Net change in cash and cash equivalents: | ||
| Closing balance of cash | 16,656,028,410.72 | 18,998,934,287.59 |
| Less: Opening balance of cash | 18,998,934,287.59 | 12,304,082,533.11 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase (decrease) in cash and cash equivalents | (2,342,905,876.87) | 6,694,851,754.48 |
| Item | Closing balance | Opening balance |
| I. Cash | 16,656,028,410.72 | 18,998,934,287.59 |
| Including: Cash on hand | 181,655.02 | 284,520.29 |
| Bank deposit for payment at any time | 16,654,913,925.73 | 18,997,620,001.15 |
| Other monetary funds for payment at any time | 932,829.97 | 1,029,766.15 |
| II. Cash equivalents | - | - |
| III. Closing balance of cash and cash equivalents | 16,656,028,410.72 | 18,998,934,287.59 |
| Item | Amount | Description |
| Profit or loss from disposal of non-current assets | (2,053,875.22) | / |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based on standard quota or quantitative continuous enjoyment according to the state industrial policy) | 413,790,429.84 | / |
| Net profit or loss of the subsidiary from the beginning of the reporting period to the merger date, for business combination involving enterprises under common control | (885,138.65) | / |
| Held- for-trading financial assets, profits and losses from change in fair value of held-for-trading financial liabilities, and investment income from disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets excluding the effective hedging business related to the regular business operation of the Company | 26,872,639.66 | / |
| Other non-operating income and expense except the items mentioned above | 52,155,026.79 | / |
| Impact of income tax | (86,193,406.35) | / |
Hikvision 2019 Annual ReportNotes to Financial StatementsFor the reporting period from January 1
st 2019 to December 31
st2019
| Item | Amount | Description |
| The impact of minority equity | (26,616,307.04) | / |
| Total | 377,069,369.03 | / |
| Profit for the reporting period | Weighted average return on net assets (%) | Earnings per share | |
| Basic earnings per share | Diluted earnings per share | ||
| Net profit attributable to ordinary shareholders of the Company | 30.53% | 1.343 | 1.343 |
| Net profit excluding non-recurring items of profit or loss attributable to ordinary shareholders of the Company | 29.60% | 1.302 | 1.302 |
Section XIII Documents Available for Reference
1. The financial report was signed by the Company's legal representative.
2. The financial report was signed and sealed by the person in charge of the Company, the person incharge of accounting work and person in charge of accounting organization.
3. Original copy of all the Company's documents and announcements were published on thenewspapers designated by CSRC within the reporting period.
The above documents are completely placed at the Company's board of directors’ office.
Hangzhou Hikvision Digital Technology Co., Ltd.Chairman: Chen ZongnianApril 25
th2020
Note:
This document is a translated version of the Chinese version 2019 Annual Report (“2019年年度报告”), and the published announcements in the Chinese version shall prevail. The complete publishedChinese 2019 Annual Report may be obtained at www.cninfo.com.cn.