HANGZHOU HIKVISION DIGITAL
TECHNOLOGY CO., LTD.
2016 Annual Report
April 14th 2017
Hikvision 2016 Annual Report
To Shareholders
Dear Shareholders,
The security industry in 2016 was characterized by further consolidation and steady growth.
Despite continued volatility in the global economy and diverse competitive landscapes around the
world, Hangzhou Hikvision Digital Technology Co., Ltd. (the Company) made numerous effective
strategic adjustments. The Company’s focus on increasing its profitability resulted in a gross profit
margin of 41.58% in 2016, up from 40.10% in 2015. With increased investments, the Company
achieved balanced growth of 26.32% in operating revenue, 24.32% in operating profit, and 26.46%
in net profit, while continuing to maintain healthy overall development.
Interest in intelligent video surveillance solutions accelerated in 2016, driven by technology
innovations. The Company’s research and development in intelligent video surveillance based on
the modeling analysis technique of video content has been progressing slowly for the past decade,
and we have experienced commercial success notably in the car license plate identification market
segment. In 2015, based on advancements in GPU and deep learning technologies, the Company
launched its Artificial Intelligence (AI)-central product line: “Falcon” (猎鹰), a video structuring
server, and “Blade” (刀锋), a vehicle image structuring server, which received favorable market
recognition last year. Then, in 2016, based on further developments in GPU/VPU and deep learning
technologies, the Company launched “DeepInview”(深眸), a new series of intelligent video
cameras; “DeepInmind”(超脑) NVRs; “Divine Captor”(神捕), intelligent traffic products; and
“Hikface”(脸谱), facial analytics products. As a result, the Company now offers AI-edge devices
and AI-central products. AI-edge products include front-end and back-end products, along with
integrated AI-product applications tailored to vertical markets.
Hikvision 2016 Annual Report
As our mission “New Vision, New World” implies, we believe Hikvision is well-positioned to
provide compelling, state-of-the-art, and innovative intelligent video surveillance solutions to our
markets. As video surveillance digitization and networking did at the beginning of the millennium,
the Company believes AI and intelligent video surveillance solutions now present an outstanding
opportunity to increase our global market share and expand shareholder value, continue to provide
new technology that enables businesses across the globe to be more efficient and profitable, and to
make the world safer and more secure.
In 2016 the Company also saw the initial implementation of Management Measures for Core
Staff Co-investment in Innovative Business (核心员工跟投创新业务管理办法), along with three
new business ventures: 1) EZVIZ Network Company (萤石网络公司), converted to a Smart Home
business; 2) Robotics Technology Company launched, focusing on industrial automation; and 3)
Automotive Technology Company emerged, focused on intelligent automobile developments. These
three entrepreneurial innovative subsidiaries, co-founded by internal staffs, created exciting new
opportunities for further growth of the Company. Based on the long-term effective mechanism of
“risk-sharing and benefit-sharing” for internally co-founded innovative enterprises, the innovative
businesses are expected to drive the Company beyond the industrial life-cycle and maintain a
long-term sustainable healthy development of the Company.
As a global company, we are mindful of potential volatility in the market as the result of
political and economic pressures in various regions of the world. The Company’s executive
management team is dedicated to diligently performing its duties while adhering to the highest
ethical standards. We strive to improve our growth as a respectable world-class enterprise by
continually evaluating our performance and maintaining optimal productivity. To drive the
Hikvision 2016 Annual Report
Company’s growth, we will continue to enhance and optimize our processes with the goal of
providing outstanding value for our customers and generating long-term sustainable returns for our
shareholders.
In the year ahead, continuing uncertainty in global political and economic conditions combined
with a decline in domestic economic growth rate is expected. The Company will continue to
confront this new macro-economic reality with a steadfast focus on its values, and we are confident
that 2017 will be a year of solid and sound development for the Company.
We would like to express our sincere gratitude for the trust and support you place in the
executive management team of the Company.
Board of Directors
Hangzhou Hikvision Digital Technology Co., Ltd.
April 2017
Hikvision 2016 Annual Report
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior management
of Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as the “Company”)
hereby guarantee that the information presented in this report shall be together be wholly liable for
the truthfulness, accuracy and completeness of its contents and free of any false records, misleading
statements or material omissions.
Chen ZongNian, the Company's Chairman, Jin Yan, the head of accounting (Accounting
Officer) hereby declare and warrant that the financial statements in the Report are authentic,
accurate and complete.
Chen ZongNian, the Company’s Chairman, directors of the Company including Hu Yangzhong,
Wu weiqi, and independent directors of the Company, including Cheng Tianzong, Lu Jianzhong,
Wang Zhidong, and Hong Tianfeng attended the Board Meeting to review this Annual Report. Gong
Hongjia, the Company’s vice chairman did not attend the Board Meeting because of his trip oversea,
Director Hu Yangzhong was authorized to attend the board meeting on behalf of Gong Hongjia and
exercise Mr Gong’s voting rights instead.
The profit distribution proposal passed upon deliberation at the meeting of the Board of
Directors is set out as follows: Based on the total share capital on the actual date of record when
implementing the proposal, all shareholders will receive a cash dividend of RMB 6 (tax inclusive)
per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive) for each 10
ordinary shares; share distribution from capital reserve is nil.
Hikvision 2016 Annual Report
Please read the annual report and pay particular attention to the following risk factors:
1) Risk of technology upgrade: With the development of cloud computing, big data, artificial
intelligence, and other technologies, the demand and business models of the industry will
change accordingly. If the Company cannot follow the changes in the cutting-edge technologies,
or fail to realize the business innovation rapidly, the risks of future development uncertainties
will increase.
2) Risk of product information security: Although the Company has dedicated resources to
prevent the cybersecurity risk for our products, there is still a possibility of deliberate third-party
(including viruses, malicious software, hacker and similar disruptions) attempts to damage our
systems or products, causing the security issues for cybersecurity.
3) Risk of foreign exchange: The overseas sales ratio has increased continuously, and the
Company has to carry out operations in different countries with various currencies. Exporting
transactions are mostly settled in United States Dollars (\"USD\"), meanwhile, parts of the
imported raw materials are also mainly setteled in USD. Therefore, the fluctuation of the foreign
exchange rate has a potential to affect the profits of the Company.
4) Risk of management: the Company continues to expand business scale, innovative product and
business continues to increase, total number of employees also grows rapidly, which pose
challenges and higher requests to the Company's management. The sustainable development of
the company might face certain risk, if the management ability could not match up with the
Company’s business expansion.
The above notices might not be all-inclusive of all other potential risks, please pay attention to the
potential investment risk.
Hikvision 2016 Annual Report
Contents
Section I Important Notes and Definitions ...................................................................................... 4
Section II Corporate Profile and Substantial Financial Indicators .............................................. 8
Section III Corporate Business Summary ..................................................................................... 12
Section IV Management Discussion and Analysis ......................................................................... 27
Section V Significant Events ........................................................................................................... 47
Section VI Changes in Shares and Information about Shareholders.......................................... 63
Section VII Information on Preferred Shares ............................................................................... 72
Section VIII Information on Directors, Supervisors, Senior Management and Employees ..... 73
Section IX Corporate Governance ................................................................................................. 88
Section X Coporate Bonds ............................................................................................................... 99
Section XI Financial Report .......................................................................................................... 100
Section XII Documents Available for Reference ......................................................................... 206
Hikvision 2016 Annual Report
Definitions
Term Definition
Reporting Period From January 1st 2016 to December 31st,2016
Articles of Associations Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd
Hikvision, our Company, Company Hangzhou Hikvision Digital Technology Co., Ltd
Innovative Co-investment Partnership Hangzhou Hikvision Equity Investment Partnership (Limited Partneership)
Ezviz Network Inc. Hangzhou Ezviz Network Co., Ltd.
Hikvision Robotics Hangzhou Hikvision Robtics Technology Co., Ltd.
Hikvision Automotive Technology Hangzhou Hikvision Automotive Technology Co., Ltd.
Hikvision Weiying Hangzhou Hikvision Weiying Sensor Technology Co., Ltd.
Located in Tonglu economic development area, Hangzhou, Zhejiang province,
purposes for production factories, warehousing logistics center. Initially disclosed
in Announcement about the Company’s Investment in Tonglu to Set up Wholly
Hikvision Tonglu Security Industrial Base
Owned Subsidiary and New Hikvision Security Industry Base (Tonglu) Project(《关
于在桐庐投资设立全资子公司及新建海康威视安防产业基地（桐庐）项目的公
告》) (NO. 2014-044).
Located in Binjiang district, Hangzhou, Zhejiang province, purposes for the office
building. Initially disclosed in Announcement about the Company’s New
Internet Security Industry Base
Construction of Internet Security Industry Base Project (《关于新建海康威视互联
网安防产业基地项目的公告》)(NO. 2014-035).
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
Innovative Business (《核心员工跟投创新业务管理办法》) (www.cninfo.com)
In this report, innovative business also refers to Ezviz, Hikvision Robtics,
Hikvision Automotive Technology, Hikvision Weiying, and their related business or
products.
The Company publicly issued the bond with nominal value amounting to Euro 400
million; and the bond was settled, listed and traded on the Irish Stock Exchange on
Euro Bond
February 18th, 2016. For details, please refer to Announcement about Issuing
Foreign Currency Bond ( 关于境外发行外币债券的进展公告》 (NO. 2016-004)
Hikvision 2016 Annual Report
Section II Corporate Profile and Substantial Financial Indicators
I. Corporate Information
Stock abbreviation HIKVISION Stock code
Stock exchange where the shares of the Company
Shenzhen Stock Exchange
are listed
Name of the Company in Chinese 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
Business address No. 555 Qianmo Road, Binjiang District, Hangzhou
Postal code of Business address
Company website www.hikvision.com
E-mail market@hikvision.com
II. Contacts and contact information
Board Secretary Securities Affairs Representative
Name Huang Fanghong Li Yi
No. 555 Qianmo Road, Binjiang No. 555 Qianmo Road, Binjiang
Address
District, Hangzhou District, Hangzhou
Tel. 0571-89710492 0571-89710492
Fax 0571-89986895 0571-89986895
E-mail hikvision@hikvision.com hikvision@hikvision.com
III. Information disclosure and place of the report
Newspaper designated by the Company for
Securities Times, China Securities News and Securities Daily
information disclosure
Website specified by CSRC for release of the
www.cninfo.com
Annual Report
Place where the Annual Report is available for
Office of the Board of Directors of the Company
inspection
Hikvision 2016 Annual Report
IV. Company Registration and Alteration
Organization code 91330000733796106P
During the reporting period, the Company operating range newly added
research and development, production and sales of following categories:
explosion-proof electrical products, communications equipment and its
ancillary equipment, multimedia equipment, aircraft, robot and intelligent
equipment, auto parts and accessories, automotive electrical signal equipment.
After the change, the Company's business scope is: the electronic products
(including explosion-proof electrical products, communications equipment
Changes in principle business activities since the
and its ancillary equipment, multimedia equipment), aircraft, robot and
Company was listed (if any)
intelligent equipment, auto parts and accessories, automotive electrical signal
equipment research and development, production; Sales of self-produced
products; provide technical services, electronic equipment installation;
electrical engineering and intelligent systems engineering design, construction
and maintenance. (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
None
Company (if any)
V. Other Relevant Information
Accounting firm engaged by the Company
Name of the accounting firm Deloitte Touche Tohmatsu CPA LLP
Business address of the accounting firm 30F Bund Center 222 Yan An Road East Shanghai 200002,PRC
Name of accountants for writing signature Mou Zhenfei, Huang Yan
Sponsors/Financial advisors engaged by the Company to continuously perform its supervisory function during the
Reporting Period
□ Applicable √ Inapplicable
VI. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data due to changes of
accounting policies and correction of accounting errors
□ Yes √ No
2016 2015 YoY Change (%) 2014
Operating income (RMB) 31,924,020,872.44 25,271,390,273.42 26.32% 17,233,114,021.70
Net profits attributable to shareholders of the Company
7,422,261,983.16 5,869,049,646.23 26.46% 4,665,368,689.94
(RMB)
Net profits attributable to shareholders of the Company
7,270,742,762.47 5,604,890,259.09 29.72% 4,474,975,306.54
excluding non-recurring gains and losses (RMB)
Hikvision 2016 Annual Report
Net cash flows from operating activities (RMB) 6,213,692,160.56 3,216,722,169.17 93.17% 3,706,420,782.04
Basic earnings per share (RMB/share) 1.227 0.977 25.59% 0.777
Diluted earnings per share (RMB/share) 1.221 0.971 25.75% 0.776
Weighted average ROE 34.56% 35.28% -0.72% 36.27%
At the end of 2016 At the end of 2015 YoY Change (%) At the end of 2014
Total assets (RMB) 41,339,007,814.83 30,316,442,436.17 36.36% 21,290,520,311.29
Net assets attributable to shareholders of the Company
24,288,634,890.08 19,253,803,738.78 26.15% 14,842,243,666.05
(RMB)
Total captital shares by one day before the disclosure：
Total captital shares by one day before the
6,155,033,743
disclosure (share)
Diluted earnings per share calculated based on the
1.206
most updatedcapital shares（RMB/share）
Whether any corporate bond existed
□ Yes √ No
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 International
Accounting 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
International Financial 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 Overseas
Accounting 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 Overseas
Accounting Standards and China Accounting Standards in the reporting period.
VIII. Key Quarterly Financial Indicators
Hikvision 2016 Annual Report
Unit：RMB
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Operating income 5,199,710,391.90 7,348,488,334.22 8,588,270,242.70 10,787,551,903.62
Net profit attributable to shareholders of the
1,143,615,399.83 1,463,231,055.55 2,243,111,069.90 2,572,304,457.88
Company
Net profit attributable to shareholders of the
Company excluding non-recurring gains 1,133,528,590.60 1,440,674,330.49 2,143,368,877.17 2,553,170,964.21
and losses
Net cash flows from operating activities -1,432,111,768.75 1,829,919,025.23 1,556,206,067.43 4,259,678,836.65
Significant difference between the above financial indicators or sum of it with disclosed quarterly report, half-year
report
□ Yes √ No
IX. Items and Amounts of Non-recurring Gains and Losse
Unit：RMB
Item 2016 2015
Profit or loss from disposal of non-current assets (including the write-off
-736,149.02 1,715,423.04 -467,280.37
for the impairment of assets)
The government subsidies included in the current profits and losses
(excluding the government subsidy1closely related to regular course of
business of the Company and government subsidy based on standard 171,321,088.31 169,279,486.81 48,953,698.71
quota or quantitative continuous application according to the state
industrial policy.)
Held-to-maturity financial assets, profits and losses of fair value
held-for-trading financial liabilities, and investment income in disposal of
held-for-trading financial assets and liabilities and available-for sale 321,708.86 132,518,794.00 154,461,038.78
financial assets excluding the effective hedging business related to the
regular business operation of the Company.
Other non-operating income and expenditures except the items
18,276,871.38 15,481,300.69 9,898,857.59
mentioned above
Less: Impact of income tax 36,000,258.26 54,882,891.58 22,458,098.06
The impact of the minority interests (after tax) 1,664,040.58 -47,274.18 -5,166.75
Total 151,519,220.69 264,159,387.14 190,393,383.40
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in the , or classifies any non-recurring gain/loss item mentioned in the aforementioned note as a recurrent gain/loss item
□ Applicable √ Inapplicable
In the reporting period, the Company did not classify an item as a non-recurring gain/loss according to the definition in the
, or classifies any non-recurring gain/loss item mentioned in the aforementioned note as a recurrent gain/loss item
1
Please refer to Note (V) 47 for details about 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.
Hikvision 2016 Annual Report
Section III Corporate Business Summary
I. The principal business of the Company during the reporting period
1. Main business and position in the industry
As a provider of Internet of Things (IoT) solutions and data operation service based on the video, Hikvision
provides security, visual management and big data services to customers around the world. Hikvision has the core
technologies of audio and video encoding, video image processing, and audio and video data storage, as well as
forward-looking technologies such as cloud computing, big data, and deep learning. It provides professional
segmentation products, Intelligent Visual Management (IVM) solutions and big data services to industries,
including Public Security, Transportation, Judicial System, Education and Healthcare, Financial Institutions,
Energy, as well as Intelligent Building. In addition to the video surveillance industry, Hikvision extended its
business to smart home, industrial automation and automotive electronics industries based on video technology to
explore potential for sustainable development.
As the world's largest security manufacturer, Hikvision is the witness, practitioner and important promoter of
video surveillance’s revolutions of digitalization, networking, and intelligence. In 2016, Hikvision was granted
international credit rating of A-, A-, and A3 by Fitch, S&P, and Moody’s respectively and the rating outlooks are
stable, representing a leading position among the global enterprises.
2. Main products, services and applications
After engaging in the security industry for many years, the Company has rich experience in technologies,
products and solutions and possesses full range of products from the front end (perception), transmission, storage,
Hikvision 2016 Annual Report
and display control to the integrated management platform and provides \"one-stop\" overall solution for
multi-level security needs of governments, enterprises, families and individual users.
The multidimensional front-end (perception), all-weather, three-dimensional and intelligent features are
important elements of system efficiency. Front-end (perception) products have abundant categories in the
Company's product mix, which mainly comprises a full-range and full-format of optical cameras suitable for a
variety of scenarios, a full range of access control, all-purpose card, video intercom and burglary alarm products,
multi-series thermal imaging camera and sensor products, as well as multi-series industrial camera products. In
addition to the realization of video capture for visible light and thermal imaging, the Company currently has the
product layout of multi-dimensional capture for non-video information such as audio, switching value, Radio
Frequency Identification Devices (RFID), temperature and humidity, PM2.5, geographical coordinates, and
camera azimuth.
In 2016, the Company launched the Super-Defog (超级透雾), Darkfighter+2（星光+） and DarkfighterX3
(黑光) series cameras to meet the need for clear imaging in all-weather scenarios through innovative design of
camera image processing technology and image sensor architecture. In view of the three-dimensional perception
needs of different industries, the Company launched products including PanoVu 4 (鹰眼 ) camera series,
2
Darkfighter+ series camera, using sensors of large surface and leveraging Hikvision’s proprietary ISP image processing technology, which enables users to
capture clear and bright color image even in low-lighting environment without the help of supplemental lighting. It performs better than traditional Darkfighter
camera.
3
DarkfighterX series camera, using Hikvision’s proprietary SpecEX dual lighting fusion technology, which enables users to capture clearer, cleaner and
brighter color image than that of Darkfighter+ series camera in darker environment than Starlight.
4
PanoVu series camera, using Hikvision’s proprietary exposure simultaneous control technology and the technology of characteristic matching, the single
product can support 180 °and 360 °panoramic merging image, of which Dome-shaped PanoVu can be linked to close-up shots to capture details. [as shown in
the picture]
Hikvision 2016 Annual Report
professional Unmanned Aerial Vehicle （UAV） series, vehicle-mounted and handheld camera, vehicle entrances
and exits camera system, access portal camera system, electronic police camera system, traffic camera recording
system, and parking guidance camera system.
The Company’s transmission products mainly include a variety of optical transmission products including
video encoders, video decoders, video optical transceivers, network optical transceivers, as well as other network
switches.
As more than 99.9% of the information transmitted in the video sensor network is video information, to
achieve the quality and cost balance under the effective transmission, we must use the least data volume to
transmit better quality video images, and the key lies in the video coding and decoding performance. Video
coding and decoding technology is one of the core technologies invested by Hikvision for a long term.
In 2003, the Company pioneered the application of H.264 in video surveillance industry and achieved success
(after more than a decade of development, H.264 has become the industry standard). With maturing application
conditions for the new generation of video coding standard H.265, Hikvision launched the Smart 265 coding
technology which is independently researched and developed by the Company and it is fully compatible with
H.265. In the same image quality conditions, it reduced at least 30% of data volume compared to H.265 and 70%
compared to H.264. It greatly reduced the transmission and storage costs, making the Company's products and
solutions more competitive and laying a solid foundation for wide application of High Definition (HD) and Ultra
High Definition (UHD) equipment and preparation for the arrival of video big data era.
Hikvision 2016 Annual Report
The Company's storage products mainly include multi-series video storage products such as XVR (Hybrid
Video Recorder), NVR (Network Video Recorder), and CVR (Central Storage Video Recorder), cloud storage
system products for mass storage requirements, as well as central data storage product series based on NAS and
SAN architecture. To meet front-end storage needs, the Company also introduced other storage media products
such as SD memory card and Solid State Disk (SSD).
Storage products are mainly used to store video. Due to the particularity of video information, it is priority to
achieve the \"reliable storage and efficient retrieving\"; especially in the context of mass video information, under
which video storage products should have higher storage security and reading efficiency. The R&D team for
storage of Hikvision has focused on development of storage technology for years and took the lead in launching a
number of advanced technologies in the industry. The \"Active object mass storage systems and key technologies\"
(主动对象海量存储系统及关键技术) was granted the second place of National Technology Invention Award.
The cloud storage system of Hikvision applies the design idea for the user-oriented business applications and
integrates the technologies of cluster application, load balancing, virtualization, cloud structuring, discrete storage,
and disaster recovery backup. The Company provides users with high-performance, highly reliable and
uninterrupted video, picture data storage and business access services, which are suitable for mass PB-level video
and image data storage. Given that the hardware device scale and storage capacity continued to expand, the
performance and storage capacity of video cloud storage system maintained a linear growth, and this attribute laid
a foundation for the expansion of cloud services on the basis of video cloud storage.
Control and display products are usually located in the monitoring center and used for presentation of the
image and information in the monitoring center, mainly composed of the Multifunction Video Center（视频综合
平台）, LCD/DLP (splicing) large screen, small pitch LED large screen and large screen controller products,
controlling keyboard, and etc. The Multifunction Video Center is originated by Hikvision and integrates HD video
coding and decoder, display control, storage control, intelligent analysis, centralized control and other features to
greatly simplify the monitoring center deployment architecture. Since its first release in 2010, it has become a
classic device in the industry.
Hikvision 2016 Annual Report
The Comprehensive Management Platform (综合管理平台) is the platform software for the management of
the above-mentioned products/systems and helps users to integrate various resources of the system based on the
network, providing abundant security and application functions, so as to maximize the power of technical
protection and enhance the users’ ability to deal with various security incidents and risks.
Security business is the Company's core business and traditional pillar business, which is mainly to satisfy
the security protection needs of users. With the accumulation and innovation of techonologies, the Company used
a variety of new technical protection measures to help users to constantly enhance the response to a variety of
security risks and problems. At the same time, the Company is conducting another major business filed, the
management visualization (可视化管理), to meet the need of promoting business management capability,
adopting visualization technology to help users to expand their management methods, improve their management
capabilities, hereby enhancing business management efficiency. The visualization management solution oriented
on industry applications is an important part of Hikvision's business system.
Since Hikvision commenced the solution business in 2008, the Company's solution team has formed a
complete solution product system which continues to deepen the development through conducting in-depth
research on user business scenarios for customized needs of seven vertical industries including the Public Security,
Finance, Transportation, Judicial System, Energy, Intelligent Building, as well as Education and Healthcare and
hundreds of sub-sectors. In response to the core needs of industrial users to enhance business management
capabilities, the Company helped users build a complete perception network covering information collection,
Hikvision 2016 Annual Report
transmission, storage, analysis and application, with application of Intelligent Visual Management Software
(iVMS), to achieve the business management innovation model, so as to enhance the business management
efficiency.
Take the transportation industry as an example, Hikvision’s intelligent city transportation comprehensive
management solution integrates video surveillance system, monitoring point, electronic police, UAV, traffic
signals and many other means of perception and provides penalties for traffic violation acts, intersection control,
traffic guidance, special rectification, traffic information services and other functions based on intelligent analysis
and big data technology. It can meet the needs of various intelligent traffic management applications and
transform the video information into front-line productivity, shorten the decision-making time, reduce the labor
cost, improve the work efficiency, and promote transition of the urban traffic management to the
three-dimensional, visualized, and intelligent development.
Users’ needs to use visual means to enhance the business management ability have already existed in the
beginning of the appearance of video surveillance system. Due to the limitation of technology in the past, users
could only manually extract the key information in the video, therefore, the practical application is limited. In
recent years, with application of the computer vision-based video intelligent analysis technology, computers can
make elementary analysis and identification of certain specific objects and scenario characteristics, which solves
the problems of only relying on labor to some extent and helps users carry out some simple visual management
business applications. However, this application is still limited by insufficient computer analysis accuracy and
unsatisfied multi-dimensional information processing capabilities due to constraints such as computing
capabilities, data size, and so on.
As the deep learning algorithm gets mature, training data size expands and hardware computing capabilities
enhance, machines can do better than people in many aspects. This provides a broader room for the development
of visual management business. Compared with the traditional intelligent analysis algorithm, the deep learning
algorithm can advance the \"intelligence\" to higher accuracy, greater environmental adaptability and richer
identification of object types to tap the needs for deeper level of data value.
Hikvision paid much attention to the intelligent technology development in the computer vision field since its
inception. The Company started the research and development of intelligent analysis technology in 2006 and
made the technical layout of deep learning in 2013; it formally established Hikvision Research Institute (海康威
视研究院) in 2014, focusing on the research of perception, intelligent analysis, cloud storage, cloud computing
Hikvision 2016 Annual Report
and video big data. In 2015, the deep learning technology research team of Hikvision was ranked the world's first
in MOT Challenge5 Multi-Target Tracking Technology, KITTI6 Vehicle Detection and Vehicle Head Direction
Assessment Algorithm Evaluation. It also was ranked the world’s first in PASCAL VOC7 Target Detection and
ImageNet8 Scenario Classification in 2016. It won the championship in the text recognition tasks of three
competitions of ICDAR9 Robust Reading including “Web and Email Born-Digital Images”, the \"Focused Scene
Text\" and the \"Incidental Scene Text\" in March 2017, significantly surpassing other domestic and international
teams.
With the experience in video technology applications and the capabilities to integrate products and systems,
the Company quickly commercialized deep learning and video big data technology advantages into products,
forming an advanced intelligent product family from capturing to processing, embedded intelligent analysis
technology from the front-end to back-end products, and big data application platform.
5
MOT Challenge: an algorithm evaluation organization jointly founded by Adelaide University, Zurich Federal Institute of Technology and
Technical University of Darmstadt to evaluate the performance of multiple pedestrian object tracking technology in video surveillance environment.
MOT Challenge is the authority in the multi-target tracking technology evaluation.
6
KITTI: An algorithmic evaluation organization co-founded by the Karlsruhe Institute of Technology and the Toyota Institute of Technology in
Chicago to evaluate the object (motor vehicle, non-motor vehicle, pedestrian, etc.) detection, target tracking, etc.. KITTI is the authority in
automotive applications evaluation.
7
PASCAL VOC: A visual identification competition, jointly founded by Univerisity of Leeds, Zurich Federal Institute of Technologe, University of
Edinburg, Microsoft, Oxford University, contains the tasks such as object classification, target detection, image segmentation, and etc. PASCAL
VOC is the originator of visual identification competition, and has profound and great influence on the development of computer vision.
8 ImageNet Large Scale Visual Recognition Challenge is a computer vision competition sponsored by Stanford, Carnegie Mellon, North Carolina
and Michigan and other first-class schools. It guides the direction of the development of computer vision, and has attracted a lot of active top
research teams, academic schools and industrial giants. The results of each competition have an important and far-reaching impact on the
academic and industry.
9 ICDAR is known as the International Conference on Document Analysis and Recognition, hosted by the International Association for Pattern
Recognition (IAPR). Its document analysis and recognition competition is the world's most influential game in the current OCR (Optical Character
Recognition, image recognition) technology field. It has attracted 2367 teams from 82 countries to participate.
Hikvision 2016 Annual Report
Intelligent camera series such as \"DeepInview\", \"Divine Captor\", People and Identification Matching (人证
对比) ， and \"DeepInmind\" series intelligent NVR, with embedded deep learning algorithm, have more accurate
big data induction capabilities than human brains, and can extract multiple feature information of people, vehicles
and objects and detect events in complex environments;
Hikvision 2016 Annual Report
“Blade” vehicle feature structured server, \"Falcon\" video cloud structured server, \"Divine Captor\" traffic
incident detection server, \"Hikface\" face analysis server and other GPU array video cloud structured server
products enable efficient structured processing of massive video and image data;
Hikvision 2016 Annual Report
Hikvision big data server applies the high-speed data bus and memory computing framework, which is better
than the traditional Hadoop framework, combining with the video cloud structured server. It achieves
million-level message sending and receiving, 100 billion-level data searching in seconds, and billion-level image
searching by image in seconds, and the massive structured video data can be effectively applied to provide
efficient retrieval, and provides efficient retrieval, analysis, in-depth application, statistic and other big data
services.
Hikvision 2016 Annual Report
Video surveillance system is a natural IoT system, with the perception as the means and the application as
the core. The cameras work as the eyes of the machine, whose video capturing function has developed from
analog to digital, from standard definition to high-definition, achieving image from \"visible\" to \"clear\". If the
camera can \"understand\" and enable the machine to process video image content, it would be an intelligent
upgrade in the video technology field, and a leap progress in video applications. Hikvision now stands in the
forefront of industry reform and captures opportunities brought by deep learning for the industry, and integrates
video perception, deep learning, cloud computing, big data technology with users’ business needs, to give an new
connotation of the four levels of IoT-“pereption, transmission, understand and application” (感、传、知、用),
promotes the upgrade of the industry as a whole, and embraces the arrival of video artificial intelligence (AI) era.
3. Main sales model and performance drivers
The Company's marketing organization structure is mainly composed of the sales branches/subsidiaries by
regions, together with the matrix model of the vertical industry business divisions to sell products to end users,
mainly through integrators, engineering contractors and distributors and other partners.
The Company’s performance drivers are mainly derived from industry growth and technical expansion.
On the one hand, the increase of various instability factors has led to the increasing attention to security and
stability around the world as a comprehensive social problem. Enhancing the ability of security defense, public
security, and comprehensive management has become a prerequisite of the social development. The traditional
security industry gained constant growth due to increasing demands of governments, enterprises and families for
security products, as well as the upgrading demands from the existing market.
On the other hand, video-related technological innovation, cloud computing, big data, artificial intelligence,
and biological recognition technologies have been further upgraded, leading to innovative products with
fast-changing features, advanced shapes and innovative functions, as well as application demands that are
gradually subdivided and deepening. The traditional security industry is still undergoing the transition of network
and HD, and revolution of intelligence is on the way. The traditional security industry continues to expand
towards security, visualization and big data, and the future industry is not limited by the form of traditional
security. Under the progress of video image content recognition technology, video will gradually release the
potential power as the natural container of massive data and information and will be applied in many other
industries.
Hikvision 2016 Annual Report
II. Major Changes in Main Assets
1. Major Changes in Main Assets
√ Applicable □ Inapplicable
Major assets Explanation on Major Changes
Increased by 469.01%, mainly due to investment to CETC Finance Co., Ltd. and Wuhu Sensor
Equity Assets
Technology Co, Ltd.
Increased by 51.21%, mainly due to the completion of Phase 1 of Tonglu Security Industrial Base
Fixed Assets
project and its conversion into fixed assets
Intangible Assets No significant changes
Decreased by 62.53%, mainly due to the completion of Phase 1 of Tonglu Security Industrial Base
Construction in Progress
project and its conversion into fixed assets
2. Major Overseas Assets
□ Applicable √ Inapplicable
III. Core Competitiveness
As an industry leader, Hikvision builds a global comprehensive competitive advantage through continuous
improvement of internal management with strong R&D, production, sales, service integration capabilities and
software, hardware, system integration capabilities.
1. Layered R&D to ensure continuous supply and effective R&D of new technologies and new products
The Company has established a one-stop Hierarchical R&D system from research, design, development,
testing, technical support and service, centered in Hangzhou headquarter, covering R&D centers in Beijing,
Shanghai, Chongqing, Wuhan, and Montreal of Canada and Silicon Valley of United States. In the system, the
Hikvision Research Institute serves as the technology platform, the product R&D center serves as the product
platform, and the system business center serves as the solution platform. Hikvision Research Institute is
responsible for fundamental, forward-looking research, with the product R&D center responsible for the
development of embedded software and hardware, and the system business center responsible for the development
of platform software and system integration software for integrating industry products, enabling the technology,
products, solutions platforms to complement each other. After years of operation, the different sectors of R&D
systems of the Company independently and cooperatively work with each other to quickly meet users’ needs.
Hikvision 2016 Annual Report
Over the years, the Company's annual R&D investment accounted for about 7-8% of sales revenue. A
relatively high level of R&D investment allows the Company to maintain long-term investment of research and
development resources, while a good operating system not only allows the R&D team to continuously capture
cutting-edge technology and launch innovative products that pioneer the industry, but also adjust product focus
and enhance product features and performance based on market feedback and service summary, forming
market-oriented effective research and development.
2. Focusing on the industry segment and enhancing ability in understanding and commercializing the
business needs
The Company insists on \"creating value for users according to their needs\", leverages the deep
understanding of the needs of users and provides competitive tailored products based on the features of Public
Security, Transportation, Judicial System, Education and Healthcare, Finance, Energy, Intelligent Building and
major industries and different characteristics of market segments and business segments. The Company also helps
users achieve value by integrating systems, products, software and services through solutions.
In the ongoing cooperation in the industry segments, the Company has gained a lot of in-depth involvement
\"industry/business experience\", enabling the Company to deeply understand the needs of users and to improve the
synergy between product and software, and enhance the Company's system integration capabilities in the
continuous cycle of introducing, implementing and improving solutions. Such move thus enables the Company to
quickly meet users’ core management needs with the rapidly changing applicable solutions. The experience and
ability are accumulated over a long term across multiple dimensions, and was digged deeper with the continuous
changing of users’ needs, which cannot be directly copied and is also difficult to quickly obtained.
3. Global marketing service system contributing to the continued steady growth of the Company's business
The Company has established one of the most universal marketing networks in the industry, which comprises
35 branches and more than 200 liaison offices based on the branches throughout China mainland, which ensures
quick response to the needs of customers, users and partners. The Company has established 28 overseas sales
branches, forming a constantly improving marketing network covering more than 100 countries and regions
globally, with products being sold to more than 150 countries and regions carrying our own brand. Facing tens of
thousands of partners, such as engineering contractors, distributors and service outsourcing businesses, the
Company provides certification and training system for all areas and continuously enhances the professional
competence of its partners to better serve our customers.
Hikvision 2016 Annual Report
The Company has established a three-tier service system, which comprises Hangzhou Global Customer
Service Center, Subsidiary Customer Service Department and Authorized Customer Service Station. Through
linking Hangzhou headquarters, which has resources advantage, with more than 50 subsidiaries in major markets
and branches and partners around the world, and covering the pre-sales and after-sales including product delivery,
project delivery, software deployment, system operation and maintenance and other multi-dimensional services,
the Company has achieved localized comprehensive service system worldwide.
4. A good talent training system and a long-term incentive mechanism to ensure the sustainable and healthy
development of the Company
In the rapid development of the industry, the Company has always adhered to the concept of \"talent-focused,
growing together\". It has set up a dual career development path of management sequence and professional
sequence, created a learning organization, cared about the growth of employees, implemented a targeted
multi-level training system, established a professional qualification evaluation system and a talent assessment
system, and formed a complete talent reserve’s training mechanism, which continuously meets the Company’s
demand for core talents during the rapid growth stage.
The Company actively promotes the implementation of diversified incentive measures to maintain the
stability of core talents. In 2012, 2014 and 2016, the Company implemented three restrictive stock incentive
schemes, awarding a total of nearly 5,000 employees, covering the core talents team from the executive, middle,
to low-level management staffs and business backbones, focusing on business backbones as the main incentive
objects. In 2016, the Company has implemented an innovative business co-investment mechanism for the core
staffs to co-invest in the new business with the Company. The Innovative Co-investment Partnership established
by employees has become a shareholder of EZVIZ Network Inc., Hikvison Automotive Technology, Hikvision
Robotic Technology and other innovative businesses, and the majority of core employees has become business
partners sharing risk and benefits with the Company's innovative businesses, which has greatly stimulated the
enthusiasm of employees’ entrepreneurial spirits. The start of innovation business has brought new momentum for
the Company's sustainable development.
5. Sustained significant scale advantages
Over the years, the Company has insisted on maximizing its ability in the professional field. It has built the
industry's largest technology R&D platform and supply chain platform for lean productions, and has reduced costs
through scale operation. For internal operation and management, the Company has successively introduced SAP's
Hikvision 2016 Annual Report
ERP system R3, Oracle's CRM system Siebel, PTC's PDM/PLM system Windchill and Oracle's HCM system
Peoplesoft, and has introduced CMMI and IPD into R&D management system. The introduction and
implementation of these excellent management tools have further enhanced the Company's operational
management capabilities.
Hikvision 2016 Annual Report
Section IV Operation Discussion and Analysis
I. Overview
In 2016, the growth pattern of global developed economies becomes divided, and the uncertainty and
downside risks of emerging market economies increased after adjustment and transformation, and the security
industry worldwide was also affected by downside and unstable factors of the macro-economy. Affected by
declining growth rate in 2015, the performance growth rate of the Company in 2016 was low in the beginning and
high at the end, showing a rebound pattern. Based on different competition patterns in different regions, the
Company made many strategic adjustments and started to pay more attention to profitability growth than scale
growth.
The Company launched excellent new products through technological innovation, continuously improved
product performance through constant improvement, optimized practice through deep understanding of users’
demand and brought value to users by meeting continuously increasing demand on product application and
service appeal from the users so as to ensure the development and growth of the Company. During the reporting
period, the Company achieved total operating income of RMB 31.92 billion, increased by 26.32% on a
year-over-year basis; and net profit attributed to shareholders of the listed company of RMB 7.42 billion,
increased by 26.46% on a year-over-year basis. The profitability of the Company improved continuously, resulted
in an overall gross profit margin of 41.58% in 2016, increased by 1.48% on a year-on-year basis. The net
operating cash flow of the Company in 2016 was RMB 6.21 billion, increased by 93.17% on a year-on-year basis,
and the condition of excessive account receivables increase in 2015 was obviously improved during this reporting
period.
II. Main business analysis
1. Overview
(1) Continuous improvement of new technologies and products drives the development of the industry
In 2016, the R&D input of the Company was RMB 2.43 billion, accounting for 7.62% of its total sales
volume, remained the largest in the industry with R&D team exceeded 9,000 personnels. The Company kept its
leading position in technological innovation and product innovation through continuous inputs in technological
innovation, rapidly promoted the technologies and products to the market through the operation system integrating
Hikvision 2016 Annual Report
technologies, products and solutions and created benchmarking models in key vertical industry, which
continuously promoted the business development and laid the foundation for the steady increase of company
performance.
In 2016, the Company continued to promote AI products and launched “DeepInview” camera, “DeepInmind”
NVR, “Hikface” face analysis server and other series of products, which has initially formed the market coverage.
In aspect of product R&D, the Company constantly made innovations based on its deep understanding and
rich accumulated experience in video technology and continuously launched Darkfighter+, DarkfighterX, PanoVu
cameras and other high-end products of the industry. With these advanced products, the Company broke through
the homogeneous competition and continuously built new leading competitiveness to reinforce and enhance the
competitive advantage of the Company.
(2) Deep cultivation of application market to expand visual management business
In 2016, the Company continued to promote the business development strategy of “maximum extending the
industry vertically and expanding the business horizontally”, constantly proposed targeted vertical solutions based
on the profound understanding of various business scenarios and business demand, which promoted the
system-level competitiveness of the Company in gaining users/clients and achieved better vertical industry growth
performance.
With continuously deepened demand on video application of the users, traditional security manufacturers
integrated more functions to a single security product to ensure dual demands of security and business
management from massive application scenarios, and thus the border for security industry gradually became
blurred. Facing expanded scale of industry application system, increased complexity and extension trend of
traditional security demand to business management demand, the Company continued to focus on the security
industry, and has maintained a solid growth of the security business; meanwhile, it seized the upgrading
opportunity of users’ demand for video application and explored the visual management of urban fire control,
visual traceability for agricultural product process, visual supervision of constructional engineering, visual
integrated management of hotels, finance visualization and other business scopes based on the rich product line
and profound solution ability of the Company to promote the development of visual business.
(3) Continuous construction of marketing networks to improve marketing efficiency
For the domestic market, in light of the trend that users pay more attention to the application value of
products and further demand for enhanced service from manufacturers, the Company continued to promote the
Hikvision 2016 Annual Report
strategy of \"industry segmentation and regional expansion\", strengthened the investment on the user side and
implemented solution marketing and consultative marketing; at the same time, the Company focused on the needs
of users, improved the service ability, established a marketing network and a service system much closer to users.
In the aspect of domestic channel market, the Company absorbed excellent channel partners by continuously
promoting the standardization of products and market transparency, and standardized the channel market by
strengthening sales supervision, to promote well-organized competition and healthy development of the industry.
For overseas markets, the Company acquired British alarm company, SHL and its Pyronix brand, to
supplement the alarm business product line and obtained more sales channels. The Company established 3
overseas subsidiaries in Kazakhstan, Columbia and Turkey, and 3 new offices respectively in Thailand,
Indonesia and Dubai, totaled in 28 overseas branches, to further improve the overseas sales network. The
Company continued to implement the strategy of sales localization and technical support and service localization,
and penetrating into project market from the SMB market. In 2016, the Company's overseas sales revenue
continued to maintain at a leading position in the global security industry, but particular regions were impacted
by the sluggish economy.
In 2016, the Company introduced the profit index into the Company’s KPI system and considered the
improvement of marketing efficiency as an important measure for the improvement of marketing management.
The implementation of 2016 had represented a good effect on the stability of the Company's overall gross margin.
(4) Rapid takeoff of innovative businesses with promising prospects
For Internet video business, EZVIZ carried out continuous innovations, launched a series of products
meeting various needs of medium-to-small and micro enterprises, families and individuals, and actively promoted
an open platform based on the EZVIZ cloud business to provide stable and continuous integrated video services
for external partners and solve all kinds of integrated video-based application. By the end of 2016, EZVIZ cloud
platform had had 10 million-level of users, and a total of more than a thousand of EZVIZ O stores opened in more
than 500 cities in China, and has achieved good market results.
For robot business, taking the Automatic Guided Vehicle (AGV) as the carrier and relying on the core
technology maturely applied by “QIANMO”, the Company launched Automatic Guided Vehicle, intelligent
sorting robots and intelligent parking robots, among which, the intelligent parking robot was unveiled in Wuzhen
in November 2016 at the Third Session of the World Internet Conference and became the world's first application
case of robotic intelligent parking system. In addition, the professional products and solutions of Hikvision Robots
Hikvision 2016 Annual Report
also had a certain market effect in the field of machine vision and industrial UAV.
For automotive electronics business, the Company founded Hikvision Automotive Technology in the middle
of 2016 and had initially unveiled the automotive electronics business in October at the Beijing Security
Exhibition, new launched products including Dashcam, intelligent rearview mirrors and vehicle-mounted
monitoring camera and related accessories.
Based on the strategic deployment of upstream and downstream businesses in the industry and long-term
development considerations of the Company, the Company established the uncooled infrared sensor (Hangzhou
HIK Weiying Sensor Technology Co., Ltd.) and the solid state disk (SSD) storage technology as new innovative
businesses, in order to establish a strategic control point in new fields to form new growth momentum for the
Company.
(5) New Security Industry Base was put into production, upgraded manufacturing capacity
In the reporting period, Phase I of Tonglu Security Industry Base was completed and put into production,
became the most significant manufacturing base of the Company at present. Relying on the development of the
Hikvision robotic business, the Company applied the self-developed warehouse management system and more
than 600 \"QIANMO\" intelligent robots and fully implemented automated warehousing and internal logistics,
which had improved the efficiency of warehousing operations by 60%. In addition, Tonglu Base has constantly
promoted the automated production line project, introduced an automatic production line in every stage of
production, from the production of components to the completion of the whole equipment, improved the product
quality and production efficiency, established leading manufacturing ability and flexible customization ability in
the industry to ensure on-time high-quality product delivery to meet the needs from various business
developments.
(6) Promotion of management reform and improvement of internal efficiency
In 2016, the Company continued to promote the management reform, implemented strategic consulting
projects, corporate culture consulting projects, sales value chain projects, R&D IPD projects and projects for
building long-term mechanism for procedures, and continued to promote the implementation of LTC (from
business opportunity to payment) process optimization projects and solutions IPD projects. Through introducing
excellent management tools and management methodologies and learning from the best practice in the industry,
the Company enhanced the level of internal management and improved its efficiency.
Hikvision 2016 Annual Report
2. Operating incomes and operating costs
(1) Operating income structure
Unit: RMB
2016
Increase/ decrease
Proportion to Proportion to over previous year
Amount Amount
operating income operating income
Total operating
31,924,020,872.44 100.00% 25,271,390,273.42 100.00% 26.32%
income
Classified by industry
Video products and
31,924,020,872.44 100.00% 25,271,390,273.42 100.00% 26.32%
video content services
Classified by product
Front-end equipment 15,881,528,158.70 49.75% 13,317,160,183.14 52.70% 19.26%
Back-end equipment 5,197,388,761.80 16.28% 4,355,419,527.94 17.23% 19.33%
Central control
3,988,683,952.14 12.49% 2,355,593,484.09 9.32% 69.33%
equipment
Construction projects 1,451,424,275.00 4.55% 1,690,863,504.02 6.69% -14.16%
Innovative business 647,651,465.10 2.03% 221,928,671.32 0.88% 191.83%
Others 4,757,344,259.70 14.90% 3,330,424,902.91 13.18% 42.84%
Classified by region
Domestic 22,563,636,220.37 70.68% 18,614,982,772.42 73.66% 21.21%
Overseas 9,360,384,652.07 29.32% 6,656,407,501.00 26.34% 40.62%
Note: in the category classified by product, the \"innovative business\" will be listed separately from this reporting period, so the
category classified by product is adjusted with the same caliber from the same period of last year. The term \"innovative business\"
includes corresponding business products of innovative business subsidiaries - EZVIZ Network, Hikvision Robotics, and Hikvision
Automotive Technology. Similar hereinafter.
(2) Industries, products or regions accounting for more than 10% of the Company’s operating income or
operating profit
√ Applicable □ Inapplicable
Unit: RMB
Increase/
Increase/ decrease
Increase/ decrease decrease of
Gross of operating
Operating income Operating cost of operating cost gross margin
margin income over
over previous year over previous
previous year
year
Classified by industry
Video products
and video content 31,924,020,872.44 18,649,694,075.44 41.58% 26.32% 23.21% 1.48%
services
Hikvision 2016 Annual Report
Increase/
Increase/ decrease
Increase/ decrease decrease of
Gross of operating
Operating income Operating cost of operating cost gross margin
margin income over
over previous year over previous
previous year
year
Classified by product
Front-end
15,881,528,158.70 8,186,413,345.14 48.45% 19.26% 16.58% 1.18%
equipment
Back-end
5,197,388,761.80 2,705,461,109.51 47.95% 19.33% 14.51% 2.19%
equipment
Central control
3,988,683,952.14 2,069,135,295.77 48.12% 69.33% 68.21% 0.34%
equipment
Construction
1,451,424,275.00 1,328,601,510.98 8.46% -14.16% -16.38% 2.43%
projects
Innovative
647,651,465.10 394,446,839.95 39.10% 191.83% 135.74% 14.49%
business
Others 4,757,344,259.70 3,965,635,974.09 16.64% 42.84% 43.37% -0.31%
Classified by region
Domestic 22,563,636,220.37 13,744,528,947.19 39.09% 21.21% 20.05% 0.59%
Overseas 9,360,384,652.07 4,905,165,128.25 47.60% 40.62% 33.02% 2.99%
Adjusted statistics of principal business are based on the caliber at the end of the reporting period of last year, if the statistics caliber
of principal business has been changed during the reporting period
□ Applicable √ Inapplicable
(3) If revenue from physical products sales greater than revenue from providing services
√ Yes □ No
Increase/ decrease
Industry Item Unit 2016
over previous year
Sales volume Per unit 68,801,020 47,778,446 44.00%
Video products and
Output volume Per unit 70,402,646 48,643,670 38.15%
video content services
Inventory Per unit 5,024,772 3,423,146 46.79%
Explanation on why the related data varied by more than 30% on a YOY basis
√ Applicable □Inapplicable
During the reporting period, the Company’s sales volume, output volume and inventory grew with the increase of the operating
performance.
(4) Fulfillment of signed significant sales contracts by the reporting period
□ Applicable √ Inapplicable
(5) Operating cost structure
Classified by industry and products
Hikvision 2016 Annual Report
Unit: RMB
2016 2015 Increase/
Industry Item Proportion to Proportion to decrease over
Amount Amount
operating cost operating cost previous year
Video products
and video content Operating cost 18,649,694,075.44 100.00% 15,136,793,517.44 100.00% 23.21%
services
Unit: RMB
2016 2015 Increase/
Product Item Proportion to Proportion to decrease over
Amount Amount
operating cost operating cost previous year
Front-end
Operating cost 8,186,413,345.14 43.90% 7,021,910,915.24 46.39% 16.58%
equipment
Back-end
Operating cost 2,705,461,109.51 14.51% 2,362,654,134.89 15.61% 14.51%
equipment
Central control
Operating cost 2,069,135,295.77 11.09% 1,230,092,234.52 8.13% 68.21%
equipment
Construction
Operating cost 1,328,601,510.98 7.12% 1,588,821,153.01 10.50% -16.38%
projects
Innovative
Operating cost 394,446,839.95 2.12% 167,322,253.16 1.11% 135.74%
business
Others Operating cost 3,965,635,974.09 21.26% 2,765,992,826.62 18.27% 43.37%
(6) Any change in consolidation scope during the reporting period
√Yes □ No
During the reporting period, the Company has newly set up five wholly-owned subsidiaries, i.e., Hikvision
Kazakhstan Limited Liability Partnership, Hangzhou Hikvision Investment Management Co., Ltd., Hikvision
Colombia SAS, Hikvision Turkey Technology and Security Systems Commerce Corporation and Tianjin
Hikvision System Technology Co., Ltd., five holding subsidiaries, including Hangzhou Hikvision Robotics
Technology Co., Ltd., Hangzhou Hikvision Automotive Technology Co., Ltd., Hangzhou Hikvision
Communication Technology Co., Ltd., Hangzhou HIK Weiying Sensor Technology Co., Ltd. and Henan
Hikvision Huaan Secure Electronics Co., Ltd., and acquired two companies: Hangzhou Hikvision Zhicheng
Investment Development Co., Ltd., Secure Holdings Limited and its subsidiaries, which have caused the increase
of consolidation scope. For more details, please refer to note (VI) “Changes in consolidation scope” of the
financial statement.
(7) Significant change or adjustment of the Company’s business, products or services during the reporting
period:
□ Applicable √ Inapplicable
(8) Major customers and suppliers:
Sales to major customers of the Company
Sales to top five customers (RMB) 1,164,470,830.53
Total sales to top five customers as a percentage of the total sales for
3.64%
the year (%)
Total sales to the related parties in top five customers as a percentage
1.20%
of the total sales of the year (%)
Hikvision 2016 Annual Report
Information on top five customers
No. Name of Customer Sales Amount (RMB) Percentage of total sales for the year
1 First (related party) 383,212,609.06 1.20%
2 Second 256,048,950.53 0.80%
3 Third 194,822,374.32 0.61%
4 Fourth 181,997,469.43 0.57%
5 Fifth 148,389,427.19 0.46%
Total -- 1,164,470,830.53 3.64%
Other information of major customers
√ Applicable □ Inapplicable
The first customer is a related party of the Company: the subordinate research institute and company of China
Electronics Technology Group Corporation (CETC) (controlled by a same actual controller CETC, and
consolidated and listed as required).
Major suppliers of the Company
Total purchases from top five suppliers (RMB) 7,016,429,539.28
Total purchases from top five suppliers as a percentage of the total
33.43%
purchases for the year
Total purchases from the related parties in the top five suppliers as a
0.00%
percentage of the total purchases for the year
Information on top five suppliers of the Company
No. Supplier Name Purchase Amount (RMB) Percentage of total purchase for the year
1 First 3,399,273,169.12 18.40%
2 Second 1,076,252,752.97 5.83%
3 Third 682,569,996.73 3.69%
4 Fourth 549,680,099.36 2.98%
5 Fifth 468,217,191.75 2.53%
Total -- 6,175,993,209.93 33.43%
Other information on major suppliers
□ Applicable √ Inapplicable
3. Expense
Unit: RMB
Increase/decrease
2016 2015 over previous Note of significant change
year
Improve sales network, increase
Sales expense 2,991,273,819.81 2,179,045,314.71 37.27%
personnel contribution
Expansion of the scale of operation,
Administrative expense 3,106,761,432.94 2,211,221,871.15 40.50%
increase of R&D expense
Financial expense -226,063,754.62 -152,896,391.70 -47.85% Increase of exchange gains
Hikvision 2016 Annual Report
4. R&D Investment
Benefited from the professional intellectual property management system, the Company has newly applied for
907 patents (including 435 patents for invention, 139 utility models and 333 product design patents), and added
124 software copyrights. As of the end of 2016, the Company had accumulatively applied for 2530 patents, and
had been granted 1245 patents (including 286 invention patents, 317 utility models and 642 product design
patents), and owned 605 software copyrights.
During the reporting period, the Company invested RMB 2.43 billion in R&D, which accounted for 7.62% of the
operating income. Owing to the continuous high R&D investment and continuous innovation, the Company is
able to keep and enhance its technology leading position and rapidly transform technical advantage to product
superiority, so as to continually promote the growth of the Company’s performance.
R&D investment of the Company
2016 2015 Change Percentage
Number of R&D headcount 9,366 7,181 30.43%
Percentage of Total headcount 46.80% 47.18% -0.38%
Amount of R&D expenses (RMB) 2,433,400,645.23 1,722,638,163.98 41.26%
R&D investment as a percentage of
7.62% 6.82% 0.80%
operating income
Capitalized R&D expenses (RMB) 0.00 0.00 0.00%
Capitalized R&D expenses as a
0.00% 0.00% 0.00%
percentage of R&D expenses
Reason of significant change of total R&D expenses as a percentage of operating income as compared to last year
□ Applicable √ Inapplicable
Reason and explanation of its reasonableness of significant change of the capitalized R&D expenses
□ Applicable √ Inapplicable
5. Cash flow
Unit: RMB
Increase/decrease over
Item 2016
previous year
Subtotal of cash inflows from
35,741,107,180.68 25,304,603,442.59 41.24%
operating activities
Subtotal of cash outflows from
29,527,415,020.12 22,087,881,273.42 33.68%
operating activities
Net cash flows from operating
6,213,692,160.56 3,216,722,169.17 93.17%
activities
Subtotal cash inflows from investing
5,071,127,419.52 3,125,701,099.57 62.24%
activities
Subtotal of cash outflows from
8,454,271,190.61 3,200,901,506.74 164.12%
investing activities
Net cash flows from investing
-3,383,143,771.09 -75,200,407.17 -4,398.84%
activities
Subtotal of cash inflows from
8,480,182,623.37 2,794,211,998.69 203.49%
financing activities
Subtotal of cash outflows from
8,037,387,072.16 2,913,002,779.73 175.91%
financing activities
Net cash flows from financing
442,795,551.21 -118,790,781.04 472.75%
activities
Hikvision 2016 Annual Report
Increase/decrease over
Item 2016
previous year
Net increase in cash and cash
3,486,219,235.60 2,921,778,750.70 19.32%
equivalents
Explanation of why the related data varied significantly on a YOY basis
√ Applicable □ Inapplicable
The fluctuation of net cash flows from operating activities is mainly due to the increase in payment collection; the
fluctuation of net cash flows from investing activities is mainly due to the increase of investment in
principal-guaranteed financial products; the fluctuation of net cash flows from financing activities is mainly due to
the increase of euro bonds financing.
Explanation of reasons leading to the material difference between cash flow from operating activities during the reporting period and
net profit for the year
□ Applicable √ Inapplicable
III. Non-core business analysis:
□ Applicable √ Inapplicable
IV. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMB
End of 2016 End of 2015
Increase/D
Percentage Percentage Note of significant change
ecrease
Amount of total Amount of total
assets assets
Cash and bank Increase in sales payment
13,634,993,154.18 32.98% 10,106,500,588.53 33.34% -0.36%
balances collection
Accounts Increase follows the increase in
11,242,812,902.86 27.20% 8,125,932,742.98 26.80% 0.40%
receivable sales revenue
Inventory increases as sales
Inventory 3,825,159,212.28 9.25% 2,818,665,737.11 9.30% -0.05%
increase
Long-term equity Increase of investment in
35,000,000.00 0.08% 0.00 - 0.08%
investment associated companies
Increase of fixed assets & Decrease
Fixed assets 2,853,743,612.67 6.90% 1,887,240,766.08 6.23% 0.67%
of construction in progress due to
the completion of Hikvision
Construction in
316,482,522.36 0.77% 844,631,051.21 2.79% -2.02% Tonglu Security Industrial Base
process
Project Phase I
Balance decreased by bank loan
Short-term loans 32,291,324.85 0.08% 876,600,473.94 2.89% -2.81%
expiring reimbursements
Long-term loans 1,722,207,584.33 4.17% 675,753,935.00 2.23% 1.94% Increase of revolving loan
Hikvision 2016 Annual Report
2. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
Unit: RMB
Profit or loss Effect of foreign
Opening from change in currency Purchase during Sales during
Item Closing balance
balance fair value during exchange the period the period
the period difference
Financial assets
1.Financial assets measured
at their fair values and of
which the changes are
6,160,279.18 9,387,258.16 0 0 0 15,547,537.34
recorded into the current
profits and losses(exclude
derivative financial assets)
3.Available-for-sale
56,033,513.00 0 0 227,802,500.00 0 283,836,013.00
financial assets
Subtotal of financial assets 62,193,792.18 9,387,258.16 0 227,802,500.00 0 299,383,550.34
Financial Liabilities 19,281,989.69 -49,558,836.96 -948,676.32 0 0 69,789,502.97
Whether there were any material changes on the measurement attributes of major assets of the Company during
the Reporting Period:
□ Yes √ No
3. Assets right restrictions as of the end of reporting period
Item Closing Book Value Reasons for being restricted
Monetary fund 115,740,442.28 Various cash deposits and deposit pledge for long-term loan
Notes receivable 421,356,552.77 Pledge for issuance of bank acceptance
Accounts receivable 95,128,752.51 Pledge for long-term loan
Total 632,225,747.56
V. Analysis of Investments
1. Overview
Investment during the reporting Investment during the prior reporting
Fluctuation
period(RMB) period(RMB)
884,389,030.00 1,469,102,728.38 -39.80%
2. Significant equity investment during the reporting period:
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
3. Significant non-equity investment during the reporting period
√ Applicable □ Inapplicable
Unit: RMB
Cumulative
Investment
Fixed amount of
Invest assets during the Source of Project
Project name Project industry investment by the
method investment reporting funds schedule
or not end of reporting
period
period
Hikvision Tonglu Security Video product and Company’s
Self-built YES 34,070,087.02 635,259,705.43 88.00%
Industrial Base-Phase 1 service own funds
Hikvision Tonglu Security Video product and
Self-built YES 2,713,228.89 2,713,228.89 Bond 0.40%
Industrial Base-Phase 2 service
Video product and
Internet Security Industry Base Self-built YES 67,195,526.75 238,269,427.37 Bond 24.00%
service
Total -- -- -- 103,978,842.66 876,242,361.69 -- --
4. Financial assets measured at their fair values
Unit: RMB
Profits or losses Cumulative
Sales
on the fair value Cumulative
Initial investment Purchase during the during the Source of
Category changes in fair change investment Closing balance
cost reporting period reporting funds
value in this charged to income
period
period equity
Derivative Company's
1,701,837,006.10 -40,171,578.80 0.00 3,373,718,586.16 0.00 -8,280,159.82 2,485,985,565.37
instruments own funds
Total 1,701,837,006.10 -40,171,578.80 0.00 3,373,718,586.16 0.00 -8,280,159.82 2,485,985,565.37 --
5. Use of raised funds
□ Applicable √ Inapplicable
During the reporting period, there was no use of raised fund
Hikvision 2016 Annual Report
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 investees
√ Applicable □ Inapplicable
Major subsidiaries and investees accounts for 10% net profit or above
Unit: RMB
Company Company Registered Revenue from
Principal business Total assets Net assets Operating profit Net profit
name type capital operation
Technology development and service:
computer system integration, electronic
product, communication product;
Hangzhou
service: the installation of electric
Hikvision
security engineering, the design,
System Subsidiary 150 million 1,525,884,858.45 633,702,598.42 1,749,071,730.75 67,316,380.11 31,035,084.20
construction and maintenance of
Technology.
intelligent system; manufacturing:
Co., Ltd.
video surveillance system, selling its
own products, import and export its
own products and technology.
Manufacturing: security electronic
product, intelligent hardware products,
Hangzhou
explosion-proof electric products., IC
Hikvision
card and IC card RW device, mobile
Science and Subsidiary 100 million 16,058,562,853.55 548,487,159.53 30,128,507,312.77 190,957,553.33 118,923,073.97
phone, cordless phone, handheld
Technologies
wireless terminal, hand held mobile
Co. Ltd.
police terminal; import and export
business
The R&D, production, sale, technical
Chongqing service of electronic products and
Hikvision software; the installation of electronic
Science and Subsidiary devices, the design, construction and 100 million 593,799,194.36 157,217,223.41 916,464,419.74 31,706,591.55 26,145,794.81
Technologies maintenance of intelligent system;
Co., Ltd. import and export products and
technology.
Hikvision 2016 Annual Report
Acquisition and disposal of subsidiaries during the reporting period
Equity acquisition and disposal
Company name Impact on overall production results
mode
Hikvision Kazakhstan limited liability partnership Cash contribution Expand overseas sales channels
Hangzhou Hikvision Investment Management Co., Ltd. Cash contribution Business development
Hangzhou Hikvision Robotic Technology Co., Ltd. Cash contribution Business development
Hikvision Colombia SAS Cash contribution Expand overseas sales channels
Hikvision Turkey Technology And Security Systems Cash contribution
Expand overseas sales channels
Commerce Corporation
Tianjin Hikvision System Technology Co., Ltd. Cash contribution Business development
Hangzhou Hikvision Automotive Technology Co., Ltd. Cash contribution Business development
Hangzhou Hikvision Communication Technology Co., Cash contribution Business development
Ltd.
Hangzhou HIK Weiying Sensor Technology Co., Ltd. Cash contribution Business development
Henan HIK Hua’an Baoquan Electronics Co., Ltd. Cash contribution Business development
Hangzhou Haikang Zhicheng Investment and Business development
Equity Transfer settled by Cash
Development Co., Ltd.
Secure Holdings Limited Equity Transfer settled by Cash Expand overseas sales channels
VIII. Structural entities Controlled by the Company:
□ Applicable √ Inapplicable
IX. Outlook for the Future Development of the Company
1. Industry developing trends
(1) Stable growth in the traditional security business needs with increasing technical complexity
As video surveillance acts as important infrastructure and data sources of stability and security, along with
constant advancement of China's new urbanization, as well as sustainable construction of safe city and smart city,
the demand for traditional security business will continue to grow steadily. At the same time, the deep learning is
driving the technological reform. The computer's processing capacity of video content will greatly enhance the
efficiency of video data utilization. Combined with multi-dimensional means of perceptions, the security
protection and defense technology will be greatly improved.
Hikvision 2016 Annual Report
(2) Overseas security market competition is further intensified
The influence of Chinese manufacturers in the security industry continued to strengthen and the domestic
market competition was relatively stable. The competition of Chinese manufacturers for overseas market share
further intensified. Overseas competition between overseas high-end brand manufacturers and Chinese
manufacturers, as well as among Chinese manufacturers will further intensify.
(3) Video technology applications expanded the development capacity of the industry, leading to new
industrial landscape
Artificial intelligence will drive revolutions in the video technology industry and computer processing
technology for video images will greatly increase the efficiency and utilization of video. The function of image
capture by camera will not be limited to the purpose of security protection and the application of video technology
into business management will be further expanded.
2. Development strategy of the Company
As a provider of IoT solutions and data operations service based on the video, Hikvision continues to develop
video technology for serving human beings, adhering to the mission of \"new vision and new world\". It is
committed to \"becoming a respectable global enterprise\".
The Company adheres to the business philosophy of \"professionalism, honesty, and integrity\" and
implements the core values of \"customer success, value-orientation, integrity and practicability, and pursuit of
excellence\". It will provide high-quality products and services for global customers and create greater value for
customers worldwide through continuous innovation.
3. Key operation emphases in year 2017
(1) Continuous innovation and increasing investment in technology. The Company will continue to increase
R&D investment and maintain its leading position in key technologies of video image processing, structuring, big
data and intelligent analysis relying on the ability of Research Institutes and product R&D center. It will
continuously conduct research and development of excellent technologies and products to satisfy customer
demand.
(2) To accelerate the application of technology into products and continue to promote the performance
Hikvision 2016 Annual Report
growth. Through years of in-depth research on market segments and practical experience, the Company will focus
on the industry's intelligent application scenarios, make in-depth integration of intelligent products, software
technology and industry applications to introduce standardized products and solutions which are easy for
promotion to meet the intelligent application needs of the industry and continue to create new value for users.
(3) To expand the overseas project market for more breakthrough in regional coverage. The Company will
enrich its product line for overseas markets, optimize the user experience, and strengthen the local support ability
of overseas team to enhance the competitiveness of overseas products and solutions driven by advantageous
products.
(4) To strengthen the strategic guidance and continuously deepen management reform. The Company will
continue to learn from the world-class enterprises about the successful practical experience and continue to
deepen management reform through the adoption of BLM (business leading model) and IPD (integrated product
development). The Company also accelerates the decentralized flat organization construction and its transition
from the functional organization (职能化组织) to the procedure organization (流程化组织) to achieve the
strategic objectives.
(5) To constantly develop innovative business and cultivate the driving force for sustainable development.
The Company will continue to develop EZVIZ, robotics and automotive technology and other innovative
businesses and seize the development opportunities from extension of video technology to smart home, industrial
automation and automotive electronics. The Company will continue to make strategic layout into emerging
markets and emerging business with a promising prospect to offer a new impets into the sustainable development
of the Company in the future.
X. Reception of activities including research, communication and interviews
√ Applicable □ Inapplicable
1. Schedule for the reception of activities including research, communication and interviews during the
report period
Type of
Method of
Time of reception reception Basic situation of the research
reception
object
CNINF, Investor Relations Activity Record: From April 11th 2016 to
From April 11th 2016 to Site Research Institutional
April 15th2016
Hikvision 2016 Annual Report
Type of
Method of
Time of reception reception Basic situation of the research
reception
object
April 15th 2016 investors
From April 18th 2016 to Institutional CNINF, Investor Relations Activity Record: From April 18th 2016 to
Site Research
April 22nd 2016 investors April 22nd 2016
From April 25th 2016 to Institutional CNINF, Investor Relations Activity Record: From April 25th 2016 to
Site Research
April 29th 2016 investors April 29th 2016
Institutional
May 5th 2016 Site Research CNINF, Investor Relations Activity Record: May 5th 2016
investors
From May 9th 2016 to Institutional CNINF, Investor Relations Activity Record: From May 9th 2016 to May
th
Site Research
May 13 2016 investors 13th 2016
From May 16th 2016 to Institutional CNINF, Investor Relations Activity Record: From May 16th 2016 to
th
Site Research
May 20 2016 investors May 20th 2016
From May 31st 2016 to Institutional CNINF, Investor Relations Activity Record: From May 31st 2016 to
Site Research
June 3rd 2016 investors June 3rd 2016
From June 13th 2016 to Institutional CNINF, Investor Relations Activity Record: From June 13th 2016 to
Site Research
June 17th 2016 investors June 17th 2016
From June 20th 2016 to Institutional CNINF, Investor Relations Activity Record: From June 20th 2016 to
Site Research
July 1st 2016 investors July 1st 2016
From July 4th 2016 to July Institutional CNINF, Investor Relations Activity Record: From July 4th 2016 to July
Site Research
8th 2016 investors 8th 2016
From July 11th 2016 to Institutional CNINF, Investor Relations Activity Record: From July 11th 2016 to July
Site Research
July 15th 2016 investors 15th 2016
Telephone Institutional
July 27th 2016 CNINF, Investor Relations Activity Record: July 27th 2016
Communication investors
From July 28th 2016 to Institutional CNINF, Investor Relations Activity Record: From July 28th 2016 to
Site Research
August 5th 2016 investors August 5th 2016
From August 8th 2016 to Institutional CNINF, Investor Relations Activity Record: From August 8th 2016 to
Site Research
August 12th 2016 investors August 12th 2016
From August 15th 2016 to Institutional CNINF, Investor Relations Activity Record: From August 15th 2016 to
Site Research
August 19th 2016 investors August 19th 2016
From August 22nd 2016 to Institutional CNINF, Investor Relations Activity Record: From August 22nd 2016 to
Site Research
August 26th 2016 investors August 26th 2016
From August 29th 2016 to Institutional CNINF, Investor Relations Activity Record: From August 29th 2016 to
Site Research
September 1st 2016 investors September 1st 2016
From September 6th 2016 Institutional CNINF, Investor Relations Activity Record: From September 6th 2016
Site Research
to September 14th 2016 investors to September 14th 2016
From September 19th 2016 Site Research Institutional CNINF, Investor Relations Activity Record: From September 19th 2016
Hikvision 2016 Annual Report
Type of
Method of
Time of reception reception Basic situation of the research
reception
object
to September 23rd 2016 investors to September 23rd 2016
From September 26th 2016 Institutional CNINF, Investor Relations Activity Record: From September 26th 2016
Site Research
to September 30th 2016 investors to September 30th 2016
Telephone Institutional
October 14th 2016 CNINF, Investor Relations Activity Record: October 14th 2016
Communication investors
From October 17th 2016 to Institutional CNINF, Investor Relations Activity Record: From October 17th 2016 to
Site Research
October 21st 2016 investors October 21st 2016
From October 27th 2016 to Institutional CNINF, Investor Relations Activity Record: From October 27th 2016 to
th
Site Research
October 28 2016 investors October 28th 2016
From November 1st 2016 Institutional CNINF, Investor Relations Activity Record: From November 1st 2016 to
th
Site Research
to November 11 2016 investors November 11th 2016
From November 14th 2016 Institutional CNINF, Investor Relations Activity Record: From November 14th 2016
Site Research
to November 25th 2016 investors to November 25th 2016
From November 28th 2016 Institutional CNINF, Investor Relations Activity Record: From November 28th 2016
Site Research
to December 9th 2016 investors to December 9th 2016
From December 12th 2016 Institutional CNINF, Investor Relations Activity Record: From December 12th 2016
Site Research
to December 23rd 2016 investors to December 23rd 2016
From December 26th 2016 Institutional CNINF, Investor Relations Activity Record: From December 26th 2016
Site Research
to December 30th 2016 investors to December 30th 2016
2. Participation of conferences for investor relationship activities
Time of Type of reception
Location Conference Name Method of reception
conference object
Institutional and One-on-One, One-on-multi, small
January 2016 Shanghai UBS Great China Conference
individual investors group Meetings, and etc.
Goldman Sachs Shenzhen A-Share Institutional and One-on-One, One-on-multi, small
January 2016 Hongkong
Corporate Day individual investors group Meetings, and etc.
Haitong Securities A-Share Institutional and One-on-One, One-on-multi, small
April 2016 Hangzhou
Corporation Forum individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
May 2016 Shenzhen Macquarie Greater China Conference
individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
May 2016 Chengdu CLSA China Forum
individual investors group Meetings, and etc.
May 2016 BNP Paribas 7th Asia Pacific TMT Institutional and One-on-One, One-on-multi, small
Hongkong
Conference individual investors group Meetings, and etc.
Hikvision 2016 Annual Report
Time of Type of reception
Location Conference Name Method of reception
conference object
May 2016 Nomura China A/H TMT Corporate Institutional and One-on-One, One-on-multi, small
Hongkong
Day individual investors group Meetings, and etc.
May 2016 Institutional and One-on-One, One-on-multi, small
Shenzhen HSBC China Conference
individual investors group Meetings, and etc.
May 2016 Goldman Sachs Tech-net Conference Institutional and One-on-One, One-on-multi, small
Hongkong
Asia Pacific individual investors group Meetings, and etc.
Morgan Stanley Second Annual China Institutional and One-on-One, One-on-multi, small
May 2016 Beijing
Summit individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
June 2016 Shenzhen Credit Suisse A-shares Corporate Day
individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
June 2016 Beijing J.P. Morgan Global China Summit
individual investors group Meetings, and etc.
Huatai Securities 2016 Half Year Institutional and One-on-One, One-on-multi, small
June 2016 Shanghai
Conference individual investors group Meetings, and etc.
New York Institutional and One-on-One, One-on-multi, small
Boston individual investors group Meetings, and etc.
June 2016 US NDR Roadshow-via JP Morgan
San
Fransisco
China Merchants Securities 2016 Half Institutional and One-on-One, One-on-multi, small
June 2016 Beijing
Year Conference individual investors group Meetings, and etc.
China Galaxy Securities 2016 Half Institutional and One-on-One, One-on-multi, small
June 2016 Qingdao
Year Conference individual investors group Meetings, and etc.
September Institutional and One-on-One, One-on-multi, small
London Morgan Stanley China Corporate Day
2016 individual investors group Meetings, and etc.
September “China Feature” 4th CICC London Institutional and One-on-One, One-on-multi, small
London
2016 Forum individual investors group Meetings, and etc.
September Credit Suisse 17th Annual Asian Institutional and One-on-One, One-on-multi, small
Taibei
2016 Technology Conference individual investors group Meetings, and etc.
September Haitong Securities 2016 Fall A-share Institutional and One-on-One, One-on-multi, small
Hangzhou
2016 Corporation Forum individual investors group Meetings, and etc.
September Institutional and One-on-One, One-on-multi, small
New York CITI Asia Corporate Forum 2016
2016 individual investors group Meetings, and etc.
Jefferies 6th Annual Greater China Institutional and One-on-One, One-on-multi, small
October 2016 Hongkong
Summit individual investors group Meetings, and etc.
Shenwan Hongyuan Listed Company Institutional and One-on-One, One-on-multi, small
October 2016 Singapore
Forum individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
November 2016 Shenzhen CITI China Investor Conference 2016
individual investors group Meetings, and etc.
Hikvision 2016 Annual Report
Time of Type of reception
Location Conference Name Method of reception
conference object
Credit Suisse 7th Annual China Institutional and One-on-One, One-on-multi, small
November 2016 Shenzhen
Investment Conference individual investors group Meetings, and etc.
New York HSBC 8th Annual Asia Investor Institutional and One-on-One, One-on-multi, small
November 2016
Boston Forum individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
November 2016 Beijing CICC A-share Corporation Forum
individual investors group Meetings, and etc.
Bank of America Merrill Lynch 2016 Institutional and One-on-One, One-on-multi, small
November 2016 Beijing
China Conference individual investors group Meetings, and etc.
J.P. Morgan Global TMT Conference Institutional and One-on-One, One-on-multi, small
November 2016 Hongkong
in Asia 2016 individual investors group Meetings, and etc.
Institutional and One-on-One, One-on-multi, small
November 2016 Hongkong HK NDR Roadshow-via BNP Paribas
individual investors group Meetings, and etc.
Morgan Stanley Fifteenth Annual Asia Institutional and One-on-One, One-on-multi, small
November 2016 Singapore
Pacific Summit individual investors group Meetings, and etc.
Guosen Securities SZHKconnection Institutional and One-on-One, One-on-multi, small
November 2016 Hongkong
Forum individual investors group Meetings, and etc.
Fangzheng Securities Annual Investor Institutional and One-on-One, One-on-multi, small
December 2016 Hangzhou
Forum individual investors group Meetings, and etc.
December 2016 Hongkong Morgan Stanley China A Share Institutional and One-on-One, One-on-multi, small
Corporate Day individual investors group Meetings, and etc.
December 2016 Shenzhen China Merchants Securities Annual Institutional and One-on-One, One-on-multi, small
Investor Forum individual investors group Meetings, and etc.
December 2016 Shenzhen Institutional and One-on-One, One-on-multi, small
Huatai Annual Investor Forum
individual investors group Meetings, and etc.
December 2016 KGI Securities 2016 Q4 Investro Institutional and One-on-One, One-on-multi, small
Taibei
Forum individual investors group Meetings, and etc.
December 2016 2016 Guotai Securities Q4 Investor Institutional and One-on-One, One-on-multi, small
Taibei
Summit individual investors group Meetings, and etc.
December 2016 Hangzhou Caitong Securities Annual Investor Institutional and One-on-One, One-on-multi, small
Forum individual investors group Meetings, and etc.
3. Investor relations activity statistics during the reporting period
Number of daily research received (Site and telephone conference)
Number of institutional investors received (times)
Number of individual investors received (ppl)
Number of investor relations conference participated
Hikvision 2016 Annual Report
Section V Significant Events
I. Profit distribution of ordinary shares and capitalization of share premium
Profit distribution of ordinary shares in the reporting period, the formulation, implementation and adjustment of
cash dividend policy
□ Applicable √ Inapplicable
Profit Appropriation and Capitalizing of Capital Reserves Plan or Proposal in Last Three Years
(1) Profit distribution plan for the year 2014: Based on the total share capital of 4,069,128,026 shares at
the end of 2014, a final cash dividend of RMB 4 (tax inclusive) per 10 ordinary shares, bonus shares
is nil, share distribution from capital reserves is nil.
(2) Profit distribution plan for the year 2015: Based on the total share capital of 4,068,772,253 shares of
the Company at the end of 2015, all shareholders will be distributed a cash dividend of RMB 7 (tax
inclusive) per 10 ordinary shares. The Company proposed bonus issue of 3 shares (tax inclusive) for
each 10 ordinary shares to all shareholders by way of debiting retained profit and share distribution
of 2 shares for each 10 ordinary shares to all shareholders from capital reserves.
(3) Profit distribution plan for the year 2016：Based on the total share capital on the actual date of record
when implementing the proposal, all shareholders will receive a cash dividend of RMB 6 (tax
inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive)
for each 10 ordinary shares; share distribution from capital reserve is nil.
Cash dividend of ordinary shares in recent 3 years (including current reporting period)
Unit: RMB
Ratio of net profit Amount of cash
Net profit attributable Ratio of cash
attributable to
Cash dividends to shareholders of
Year shareholder of Company dividends in other dividends in
(including tax) listed Company in
in consolidated financial ways other ways
consolidated statements
statements (%)
2016 3,691,546,045.80 7,422,261,983.16 49.74% 0.00 0.00%
2015 2,848,140,577.10 5,869,049,646.23 48.53% 0.00 0.00%
2014 1,627,651,210.40 4,665,368,689.94 34.89% 0.00 0.00%
II. Profit distribution and Capitalizing of Capital Reserves Plan or Proposal for the reporting
period
Bonus issue per 10 shares (share)
Cash dividend per 10 shares (RMB) (tax
6.00
inclusive)
Additional shares converted from capital reserves
for every 10 shares (share)
Hikvision 2016 Annual Report
Total shares as the basis for the distribution plan
6,152,576,743
(share)
Total cash dividend (RMB) (tax inclusive) 3,691,546,045.80
Distributable profits (RMB) 14,138,569,341.95
Percentage of cash dividends in the total
54.55%
distributed profit (%)
Cash dividend policy:
The Company is in the development stage and has a substantial plan of cash expenditure. In 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 2016, the parent company of the Company recorded
net profit of RMB 7,203,768,180.57. After deducting the statutory surplus reserve of RMB 720,376,818.06, which was provided at
10%, plus the undistributed profit of the parent company at the beginning of the year of RMB 11,686,702,731.96, deducting the
cash dividends of RMB 2,810,893,076.52 in 2015, and the stock dividend of RMB 1,220,631,676.00, as of December 31, 2016, the
profits attributable to shareholders of the parent company amounted to RMB 14,138,569,341.95. As of December 31, 2016, the
profits attributable to shareholders in the consolidated statement were RMB 14,866,457,856.65 (consolidated). To sum up,
according to the principle of “whichever is lower”, the profits attributable to shareholders this year was RMB 14,138,569,341.95.
Based on the total share capital on the actual date of record when implementing the proposal (Note), all shareholders will receive a
cash dividend of RMB 6 (tax inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive)
for each 10 ordinary shares; share distribution from capital reserve is nil. The Company guaranteed, considering the future changes
in equity, the total expected distribution will not exceed the allocatable range in the financial statements. From the above proposal,
total cash dividend in 2016 is RMB 3,691,546,045.80. The remaining undistributed profit shall be carried forward to the following
year. Total bonus shares are 3,076,288,371, so the total share capital will be 9,228,865,114 shares from 6,152,576,743 shares
originally.
Note: the most updated total capital share of the Company is 6,155,033,743 shares, however, the procedure for the first repurchase
and cancelation of the 2014 Restricted Stocks Scheme is underway currently and 2,457,000 restricted shares should be repurchased
and cancelled before the date of record of the implementation of the future profit distribution. By that point of time, the total share
capital of the Company will be changed from 6,155,033,743 shares to 6,152,576,743 shares.
III. Performance of commitments
1. Complete and incomplete commitments of the Company, Shareholders, Actual Controller, Acquirer,
Directors, Supervisor, Senior Executives or other related parties
√ Applicable □ Inapplicable
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
1. Commitments in non-competition
Commitments in
within the industry: In the period as
offering
controlling shareholders of the 29 October, Strict
documents or CETHIK Group Co., Ltd. Long-term
Hikvision, CETHIK and its controlling 2013 performance
shareholding
subsidiaries (excluding Hikvision and
alterations
its subsidiaries, the same below) will
Hikvision 2016 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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
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
Hikvision 2016 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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 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
Hikvision 2016 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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
to make significant changes for business
and organizational structure for the
listed Company.
Commitments in Hangzhou Weixun During Hu Yangzhong, Wu Weiqi, Strict
17 May, 2010 Long term
Initial Public Investment Management JiangHaiqing, Zhou Zhiping, Xu performance
Hikvision 2016 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
Offering or Limited Partnership（later Lirong, Cai Dingguo, He Hongli, Zheng
re-financing
renamed as Xinjiang Weixun Yibo, Hu Dan,、Jiang Yufeng, Liu
Investment Management Xiang, Wang Ruihong, Chen Junke’s
Limited Partnership） 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.
During Hu Yangzhong, Wu Weiqi,
Gong Hongjia’s tenure of the
Company’s board of directors,
Hangzhou Pukang Investment supervisors and senior management
Limited Partnership（later personne, the annual transfer of
Strict
renamed as Xinjiang Pukang Hikvision’s total shares should not 17 May, 2010 Long term
performance
Investment Limited exceed 25% of total number of shares
Partnership） held under Pukang; whithin 6 months
after abovementioned personnel’s
dimission, should not transfer
hikvision’s shares held under Pukang.
The Company's directors,
During their tenure of the Company’s
supervisors and executive:
board of directors, supervisors and
HuYangzhong,Wu Weiqi,
senior management personnel, the
Jiang Haiqing, Zhou
annual shares transfer should not exceed Strict
Zhiping，Xu Lirong, Cai 17 May, 2010 Long term
25% of total number of shares held performance
Dingguo, He Hongli, Zheng
under Weixun; whthin 6 months after
Yibo, Hu Dan, Jiang Yufeng,
their dimission, they should not transfer
Liu Xiang, Wang Ruihong,
their shares held under Weixun.
Chen Junke
During their tenure of the Company’s
board of directors, supervisors and
senior management personnel, the
Directors, executive officers
annual shares transfer should not exceed Strict
of the Company: 17 May, 2010 Long term
25% of total number of shares held performance
Hu Yangzhong, Wu Weiqi
under Pukang; whthin 6 months after
their dimission, they should not transfer
their shares held under Pukang.
Hikvision 2016 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
During Gong Hongjia’s tenure of the
Company’s board of directors,
supervisors and senior management
The Company’s director personnel, Chen’s annual shares transfer
Strict
Gong Hongjia’s spouse, Chen should not exceed 25% of total number 17 May, 2010 Long-term
performance
Chunmei of shares held under Pukang; whthin 6
months after the dimission of Gong
Hongjia,Chen should not transfer her
shares held under Pukang.
To avoid any loss of the Company and
other shareholders arising from any
competing business, China Electronics 18
China Electronics Technology Strict
Technology Group Corporation, the September, Long term
Group Corporation performance
actual controller of the Company, issued 2008
Letters of non-competition on 18
September, 2008.
To avoid any loss of the Company and
other shareholders arising from any
Gong Hongjia；
competing business, Gong Hongjia,
XinJiang WeiXun Investment Hangzhou WeiXun Investment
Management Limited Management Limited Partnership,
Partnership；
ZheJiang Orient Holdings Co., Ltd and Strict
XinJiang KangPu Investment Hangzhou KangPu Investment 10 July, 2008 Long term performance
Management Limited Management Limited Partnership, the
promoters of the Company, issued
Partnership；ZheJiang Orient
Letters of non-competition on 10 July,
Holdings Co., Ltd. 2008.
Whether the
undertaking is Yes
fulfilled in time
2. Where any profit forecast was made for any of the Company’s assets or projects and the Reporting
Period is still within the forecast period, the Company shall explain whether the performance of the asset or
project reaches the profit forecast and why:
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
IV. The Company’s funds used by the controlling shareholder or its related parties for
non-operating purposes
□ Applicable √ Inapplicable
No such case in the reporting period.
V. Explanation given by the board of directors, supervisory committee and independent directors
(if applicable) regarding the “non-standard auditor’s report” issued by the CPA firm for the
reporting period
□ Applicable √ Inapplicable
VI. For changes in accounting policies, accounting estimates and accounting methods as compared
to the financial report for the prior year
□ Applicable √ Inapplicable
No such case in the reporting period.
VII. Reason for retrospective restatement of major accounting errors during the reporting period
□ Applicable √ Inapplicable
No such case in the reporting period.
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable □ Inapplicable
During the reporting period, the Company has newly set up five wholly-owned subsidiaries, i.e., Hikvision
Kazakhstan Limited Liability Partnership, Hangzhou Hikvision Investment Management Co., Ltd., Hikvision
Colombia SAS, Hikvision Turkey Technology and Security Systems Commerce Corporation and Tianjin
Hikvision System Technology Co., Ltd., five holding subsidiaries, including Hangzhou Hikvision Robotics
Technology Co., Ltd., Hangzhou Hikvision Automotive Technology Co., Ltd., Hangzhou Hikvision
Communication Technology Co., Ltd., Hangzhou HIK Weiying Sensor Technology Co., Ltd. and Henan
Hikvision Huaan Secure Electronics Co., Ltd., and acquired two companies: Hangzhou Hikvision Zhicheng
Hikvision 2016 Annual Report
Investment Development Co., Ltd., Secure Holdings Limited and its subsidiaries, which have caused the increase
of consolidation scope. For more details, please refer to note (VI) “Changes in consolidation scope” of the
financial statement.
IX. Engagement and disengagement of the CPA firm
CPA firm engaged at present
Name of the domestic CPA firm Deloitte Touche Tohmatsu CPA LLP
Remuneration for the domestic CPA firm
(RMB’0000)
Consecutive years of the audit service provided by
the domestic CPA firm
Name of the certified public accountants from the
Mou Zhengfei, Huang Yan
domestic CPA firm
Whether the CPA firm was changed in the current period
√ YES □NO
Whether the CPA firm was changed during the auditing period
□ YES √ NO
Whether the Change of CPA firm performed approval process
√ YES □NO
Details about changing CPA firm in the current period
On May 5, 2016, the Company's general meeting of shareholders for 2015 examined and approved the
Proposal on Engaging Certified Public Accountants in 2016, and agreed to appoint Deloitte Touche Tohmatsu
Certified Public Accountants LLP (Special General Partnership) as the auditor for 2016. For details, please refer
to the Announcement on Engaging Certified Public Accountants in 2016 issued by the Company on April 9, 2016
(Announcement No.: No. 2016-012).
Engagement of any CPA firm for internal control audit, financial advisor or sponsor
□ Applicable √ Inapplicable
X. Listing suspension and termination after disclosure of this annual report
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
XI. Bankruptcy and restructuring
□ Applicable √ Inapplicable
No such case in the reporting period.
XII. Material litigation and arbitration
□ Applicable √ Inapplicable
No such case in the reporting period.
XIII. Punishments and rectifications
□ Applicable √ Inapplicable
No such case in the reporting period.
XIV. Integrity of the Company and its controlling shareholders and actual controllers
□ Applicable √ Inapplicable
XV. The implementation of an Equity Incentive Plan, Employee Stock Ownership Plan, or other
incentive plan
√Applicable □Inapplicable
During the reporting period, the Company has for the third time unlocked, repurchased and cancelled shares
for the 2012 Restricted Share Incentive Scheme: On 29 August 2016, “Resolution for the fulfillment of the
unlocking conditions of the third unlock period for the first batch of Restricted Share Incentive Schemes” and the
“Resolution for the repurchase and cancelation of a portion of locked shares that already granted to personnel not
fulfilling the incentive conditions in the year” were approved by the fifteenth meeting of the third Board.
Authorized by the first special general meeting for 2012，a total of 7,620,714 restricted shares of 539 grantees was
vested and circulated on 13 September 2016. Meanwhile, 451,494 restricted shares held by a portion of grantees
not fulfilling the incentive conditions were repurchased and cancelled. On 16 November 2016, repurchase and
cancelation of restricted shares was completed. For details, please refer to in the “Indicative notice of the
unlocking conditions of the third unlock period for the first batch of Restricted Share Incentive Schemes” (No.
2016-045) and the “Notice of the completion of repurchase and cancelation of a portion of locked shares that
already granted to personnel not fulfilling the incentive conditions in the year” (No. 2016-057) issued on 9
Hikvision 2016 Annual Report
September 2016 and 17 November 2016 respectively.
During the reporting period, the restricted shares granted under the 2014 Restricted Share Incentive Scheme
of the Company were still in lockup period.
The Accounting Treatment in Relation to the Restricted Share Incentive Schemes is based on the Accounting
Standard for Business Enterprises No. 11 – Share-based Payment (企业会计准则第11号-股份支付）and other
accounting standards. Costs in relation to the shares granted under 2012 and 2014 Restricted Share Incentive
Schemes are amortized over the waiting period for vesting. During the reporting period, costs amortized in
relation to the Restricted Share Incentive Schemes of the Company have no material impact on the financial
position and operating results of the Company.
XVI. Significant related-party transaction
1. Related-party transactions arising from routine operation
□ Applicable √ Inapplicable
No such case in the reporting period.
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 with external parties
□ Applicable √ Inapplicable
No such case in the reporting period.
4. Related-parties’ creditor's rights and debts
□ Applicable √ Inapplicable
No such case in the reporting period.
Hikvision 2016 Annual Report
5. Other significant related party transactions
□ Applicable √ Inapplicable
No such case in the reporting period.
XVII. Significant contracts and their execution
1. Trusteeship, contracting and leasing
1.1 Trusteeship
□ Applicable √ Inapplicable
No such case in the reporting period.
1.2 Contracting
□ Applicable √ Inapplicable
No such case in the reporting period.
1.3 Leasing
□ Applicable √ Inapplicable
No such case in the reporting period.
2. Significant guarantees
2.1 Details of guarantees
Unit: RMB’0000
Guarantees provided by the Company for subsidiaries
Term of
Term of Term of Term of Term of Term of
Term of guarantee Term of guarantee Term of guarantee guarante
guarantee guarantee guarantee guarantee guarantee
e
Hangzhou
Hikvision Science October Joint 2015.12.15
and Technologies 21st 2016 850,000 December 25th 2015 200,036.88 NO YES
guarantee -2018.5.4
Co. Ltd.
Hangzhou
December
Hikvision Joint 2016.7.14-
23rd 170,000 July 14th 2016 370.17 NO YES
Electronics Co. guarantee 2017.3.31
Ltd.
Hikvision 2016 Annual Report
Chongqing
December
Hikvision Science
23rd 30,000 has not occurred during the reporting period
and Technologies
Co., Ltd
HIKVISION
October Joint 2016.9.8-
INTERNATIONA st
160,800 September 8th 2016 2,168.80 NO YES
21 2016 guarantee 2017.9.8
L CO., LTD.
Total actual guarantee
Total guarantee cap for
amount for subsidiaries
subsidiaries approved during 309,200 395,172.74
during the reporting
the reporting period(B1)
period(B2)
Total actual guarantee
Total approved guarantee cap
balance for subsidiaries at
for subsidiaries at the end of 1,210,800 202,575.85
the end of the reporting
the reporting period(B3)
period(B4)
Guarantees provided between subsidiaries
Announce
ment Guarante
date of Actual occurrence Actual e for a
Type of Term of Due or
Guaranteed party disclosure Guarantee date( date of guarantee related
guarantee guarantee not
of the agreement signing) amount party or
guarantee not
cap
COPERATIEF
April 9th Joint 2015.4.8-
HIKVISION 32,500 April 8th 2015 0 YES YES
2016 guarantee 2016.6.21
EUROPE U.A.
Total actual guarantee
Total guarantee cap for
amount for subsidiaries
subsidiaries approved during 26,050
during the reporting
the reporting period (C1)
period (C2)
Total actual guarantee
Total approved guarantee cap
balance for subsidiaries at
for subsidiaries at the end of 32,500
the end of the reporting
the reporting period (C3)
period (C4)
Total guarantee amount provided by the Company (total of the above-mentioned kinds of guarantees)
Total actual guarantee
Total guarantee cap approved
amount during the
during the reporting period 335,250 395,172.74
reporting period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total approved guarantee cap
balance at the end of the
at the end of reporting period 1,243,300 202,575.85
reporting period
(A3+B3+C3)
(A4+B4+C4)
Portion of the total actual guarantee amount (A4+B4+C4) in net assets
8.27%
of the Company
Of which
Amount of guarantees provided for shareholders, the actual controller
Hikvision 2016 Annual Report
and their related parties (D)
Amount of debt guarantees provided directly or indirectly for entities
202,205.68
with a liability-to-asset ratio over 70% (E)
Portion of the total guarantee amount in excess of 50% of net assets (F)
Total guarantee amount (D+E+F) 202,205.68
Illustration of compound method guarantee
As required by the project owner, China Electronics Technology Group Corporation has provided a joint
guarantee to responsibility and duties of 41 construction projects of “Safe Chongqing, Emergency Control System
Digital Construction Project,” signed by Chongqing Hikvision System Technology Co., Ltd. Meanwhile, the
Company provides a counter guarantee to China Electronics Technology Group Corporation.
2.2 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
3.1 Entrust finances
□ Applicable √ Inapplicable
No such case in the reporting period.
3.2 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 responsibility
1．Fulfillment of the social responsibility of targeted poverty alleviation
The Company did not conduct any targeted poverty alleviation during the reporting period and had no future
arrangement for targeted poverty alleviation.
Hikvision 2016 Annual Report
2．Fulfillment of other social responsibilities
While seeking for economic benefits and protecting shareholders’ interests, Hikvision proactively fulfilled
corporate social responsibilities by treating suppliers, customers and consumers in good faith, caring employees’
remuneration benefits, professional development and other legal rights and actively engaging in environment
protection and affairs for public welfare, in order to make contribution to the sustainable development of society,
economy and environment.
For details, please refer to its “Annual Social Responsibility Report 2016” disclosed in CNINFO
(www.cninfo.com.cn)
Whether the listed Company and its subsidiaries are critical pollutant enterprises regulated by national
environmental protection department
□ YES √ NO
Whether issued social responsibility report
□ YES √ NO
Corporate Social Responsibility Report
Whether included Standards of disclosure
Whether included Whether
Corporate
Nature environmental included social Overseas
Governance Domestic standards
information information standards
informatiom
Guidance on Corporate Social Responsibilities for
Listed Companies on Shenzhen Stock Exchange
Yes Yes Yes N/A
Other Place (《深圳证券交易所上市公司社会责任指
引》) and other relevant documents
Details
1. Whether the Company has obtained the Environmental Management
Yes
System Certification (ISO14001)
2. Annual investment and expenditure in respect of environment protection
263.48
(RMB’ 0000)
3. The Company’s performance in the emission of waste gas, waste In compliance with relevant emission requirements
water and waste residue of the state
4. The Company’s investment for improving employees’ knowledge
928.20
and skills to promote their professional development (RMB’ 0000)
5. The Company’s donation for public welfare (including money,
Hikvision 2016 Annual Report
material and free professional service) (RMB’ 0000)
XIX. Other significant events
□ Applicable √ Inapplicable
No such case in the reporting period.
XX. Significant events of subsidiaries
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
Section VI Changes in Shares and Information about
Shareholders
I. Changes in Share Capital
1. Table of changes in share capital
Unit: Share
Before the change Changes in the period (+, -) After the change
Shares Share
Bonus
Shares Ratio newly transferred Others Sub-total Shares Ratio
share
issued from reserve
1. Shares subject to
conditional 913,364,679 22.45% 276,368,829 184,245,886 43,946,639 504,561,354 1,417,926,033 23.23%
restriction(s)
(3) Other domestic
355,377,179 8.73% 108,972,579 72,648,386 43,946,639 225,567,604 580,944,783 9.52%
shares
Including: held by
domestic
296,885,625 7.30% 69,496,836 46,331,224 7,864,752 123,692,812 420,578,437 6.89%
nonstate-owned
enterprises
Including: held by
domestic natural 58,491,554 1.44% 39,475,743 26,317,162 36,081,887 101,874,792 160,366,346 2.63%
person
(4) Foreign shares 557,987,500 13.71% 167,396,250 111,597,500 0 278,993,750 836,981,250 13.71%
Including: held by
0 0.00% 0 0 0 0 0.00%
foreign enterpirses
Including: held by
557,987,500 13.71% 167,396,250 111,597,500 278,993,750 836,981,250 13.71%
foreign natural person
2. Shares without
3,155,407,574 77.55% 944,262,847 629,508,564 -44,398,133 1,529,373,278 4,684,780,852 76.77%
restriction
(1) RMB ordinary
3,155,407,574 77.55% 944,262,847 629,508,564 -44,398,133 1,529,373,278 4,684,780,852 76.77%
shares
3. Total 4,068,772,253 100.00% 1,220,631,676 813,754,450 -451,494 2,033,934,632 6,102,706,885 100.00%
Reason for the changes in share capital
√ Applicable □ Inapplicable
(1) Annual Implementation of Equity Distribution for 2015
The Company distributed the cash dividend of RMB 7 (tax included) for every 10 shares to all shareholders
Hikvision 2016 Annual Report
on the basis of the Company's total share capital of RMB 4,068,772,253 as at 31 December 2015 according to the
Company's annual profit distribution plan for 2015, and at the same time transferred capital reserve to all
shareholders for every 10 shares by 2 shares. The ex-dividend date was May 18, 2016, and the total share capital
of the Company increased by 2,034,386,126 shares from 4,068,772,253 shares to 6,103,158,379 shares.
(2) The Third Repurchase and Cancelation of the 2012 Restricted Share Incentive Scheme
On August 29th, 2016, at the 15th Session of the Third Board of Directors of the Company, the Board
reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were
already granted to personnel not fulfilling the incentive conditions in the year (关于回购注销部分已不符合激
励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the 1st Extraordinary General
Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the
participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme. On
November 16th, 2016, after the completion of cancelation procedures for 451,494 shares, the total share capital of
the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
Approval for changes in share capital
√ Applicable □ Inapplicable
(1) Annual Implementation of Profit Distribution for 2015
On April 8, 2016, the Tenth Meeting of the Third Board of Directors of the Company reviewed and approved
the Annual Profit Distribution Plan for 2015. On May 5, 2016, the Annual General Meeting of 2015 reviewed and
approved the Annual Profit Distribution Plan for 2015.
(2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
On August 29th, 2016, at the 15th Session of the Third Board of Directors of the Company, the Board
reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were
already granted to personnel not fulfilling the incentive conditions in the year (关于回购注销部分已不符合激
励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the 1st Extraordinary General
Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the
participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme.
Transfer for changes in share capital
√ Applicable □ Inapplicable
(1) Annual Implementation of Profit Distribution for 2015
May 18th 2016 was the ex-dividend date of Annual Implementation of Profit Distribution for 2015, the
total capital share of the company increased by 2,034,386,126 shares from 4,068,772,253 shares to
6,103,158,379 shares.
(2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
Hikvision 2016 Annual Report
On November 16th, 2016, after the completion of cancelation procedures of 451,494 shares, the total share
capital of the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
Effects of changes in share capital on the basic earning 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
Opening Unlocked in Increased in Closing restricted Reason for
Name of shareholder Date of unlocking
restricted shares current period current period shares unlocking
According to the
Executives relevant provisions
Gong Hongjia 836,831,250 0 0 836,831,250
locked shares of executives
shares management
Xinjiang Weixun Institution
Investment Management 336,780,000 12,375,000 0 324,405,000 restricted share April 25th 2016
Limited Partnership before IPO
Xinjiang Pukang Institution
Investment Limited 108,548,437 12,375,000 0 96,173,437 restricted share April 25th 2016
Partnership before IPO
Restricted
Targets of restricted share shares of September 13th
incentive plan (summary 87,437,331 7,620,714 0 79,365,123
equity
statistic)
incentive plan
According to the
Executives relevant provisions
Hu Yangzhong 0 0 61,166,741 61,166,741
locked shares of executives
shares management
According to the
Executives relevant provisions
Wu Weiqi 0 0 5,480,945 5,480,945
locked shares of executives
shares management
Executives According to the
Jiang Haiqing 0 0 5,481,442 5,481,442
locked shares relevant provisions
Hikvision 2016 Annual Report
of executives
shares management
According to the
Executives relevant provisions
Zhou Zhiping 0 0 3,550,938 3,550,938
locked shares of executives
shares management
According to the
Executives relevant provisions
Jia Yonghua 0 0 2,745,873 2,745,873
locked shares of executives
shares management
According to the
Executives relevant provisions
Li Pan 450,000 0 2,245,284 2,695,284
locked shares of executives
shares management
According to the
Executives relevant provisions
Huang Fanghong 0 0 30,000 30,000
locked shares of executives
shares management
Total 1,370,047,018 32,370,714 80,701,223 1,417,926,033 -- --
Note: In respect of changes in shares due to the implementation of equity distribution for 2015, the number of shares
with restrictions on sale lifted and increased at the beginning and in the current period has been adjusted accordingly.
II. Issuance and listing of securities
1. Securities (exclude preferred share) issued during the reporting period
□Applicable √Inapplicable
2. Explanation on changes in share capital & the structure of shareholders, the structure of assets and
liabilities
√ Applicable □ Inapplicable
(1) Annual Implementation of Equity Distribution for 2015
The Company distributed the cash dividend of RMB 7 (tax included) for every 10 shares to all shareholders
on the basis of the Company's total share capital of RMB 4,068,772,253 as at 31 December 2015 according to the
Company's annual profit distribution plan for 2015, and at the same time transferred capital reserve to all
shareholders for every 10 shares by 2 shares. The ex-dividend date was May 18, 2016, and the total share capital
of the Company increased by 2,034,386,126 shares from 4,068,772,253 shares to 6,103,158,379 shares.
Hikvision 2016 Annual Report
(2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
On August 29th, 2016, at the 15th Session of the Third Board of Directors of the Company, the Board
reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were
already granted to personnel not fulfilling the incentive conditions in the year (关于回购注销部分已不符合激
励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the 1st Extraordinary General
Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the
participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme. On
November 16th, 2016, after the completion of cancelation procedures for 451,494 shares, the total share capital of
the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
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 Total number of common shareholders at the end of
shareholders at the end of the 94,712 the previous month before the disclosure date of the 72,835
reporting period annual report
Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them
Increase/
Share-
Total shares decrease Number of Number of
Nature of holding
Name of shareholder held at the during the non-tradable tradable shares
shareholder percenta
period-end reporting shares held held
ge (%)
period
China Electronics Technology HIK Group State-owned
39.91% 2,435,783,304 0 0 2,435,783,304
Co., Ltd. corporation
Gong Hongjia Foreign individual 16.30% 994,500,000 -121,275,000 836,831,250 157,668,750
Domestic
Xinjiang Weixun Investment Management non-state-
6.38% 389,540,000 -43,000,000 324,405,000 65,135,000
Limited Partnership owned
corporation
Domestic
Xinjiang Pukang Investment Limited non-state-
2.10% 128,231,250 0 96,173,437 32,057,813
Partnership owned
corporation
Foreign
UBS AG 2.02% 123,315,671 - 0 123,315,671
corporation
Hikvision 2016 Annual Report
The 52nd Research Institute at China
State-owned
Electronics Technology 1.97% 120,516,696 0 0 120,516,696
corporation
Group Corporation
Domestic
Hu Yangzhong 1.34% 81,750,651 +81,750,651 20,388,910
Individual
JPMORGAN CHASE BANK, Foreign
0.90% 55,066,504 - 0 55,066,504
NATIONAL ASSOCIATION corporation
Domestic
non-state-
Citic Securities Co., Ltd. 0.74% 45,292,085 - 0 45,292,085
owned
corporation
Domestic
non-state-
Zhejiang Orient Holdings Co., Ltd. 0.74% 45,236,800 -31,367,132 0 45,236,800
owned
corporation
China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at
China Electronics Technology Group Corporation are all subject to control of China
Electronics Technology Group Corporation. Ms. Chen Chunmei, controlling shareholder
of Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia,
foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is
Explanation on associated relationship
holding shares in both Xinjiang Weixun Investment Management Limited Partnership
or/and persons acting in concert among
and Xinjiang Pukang Investment Limited Partnership.
the above-mentioned shareholders:
Except for these, the Company does not know whether the other shareholders are related
parties and whether they are acting-in-concert parties in accordance with the Measures
for Management of the Disclosure (《上市公司股东持股变动信息披露管理办法》) of
the Shareholding changes of shareholders of the listed Company.
Particulars about shares held by the Top 10 shareholders holding shares not subject to trading restriction(s)
Number of tradable shares held at the Type of shares
Name of shareholder
period-end Type Number
China Electronics Technology HIK Group
2,435,783,304 RMB ordinary shares 2,435,783,304
Co., Ltd.
Gong Hongjia 157,668,750 RMB ordinary shares 157,668,750
UBS AG 123,315,671 RMB ordinary shares 123,315,671
The 52nd Research Institute at China RMB ordinary shares
Electronics Technology Group 120,516,696 120,516,696
Corporation
Xinjiang Weixun Investment Management RMB ordinary shares
65,135,000 65,135,000
Limited Partnership
JPMORGAN CHASE BANK, RMB ordinary shares
55,066,504 55,066,504
NATIONAL ASSOCIATION
Citic Securities Co., Ltd. 45,292,085 RMB ordinary shares 45,292,085
Hikvision 2016 Annual Report
Zhejiang Orient Holdings Co., Ltd. 45,236,800 RMB ordinary shares 45,236,800
Central Huijin Investment Ltd. 43,879,200 RMB ordinary shares 43,879,200
GIC PRIVATE LIMITED 38,001,648 RMB ordinary shares 38,001,648
China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at
Explanation on associated relationship China Electronics Technology Group Corporation are all subject to control of China
or/and persons acting in concert among Electronics Technology Group Corporation.
the top ten tradable shareholders and Except for these, the Company does not know whether the other shareholders are related
between the top ten tradable shareholders parties and whether they are acting-in-concert parties in according to the Measures for
and the top ten shareholders Management of the Disclosure (《上市公司股东持股变动信息披露管理办法》) of the
Shareholding changes of shareholders of the listed Company.
Any of the Company’s top 10 common shareholders or top 10 non-restricted common shareholders conduct any
agreed buy-back in the reporting period?
□ Applicable √ Inapplicable
2. Particulars about the controlling shareholder
Nature of the controlling shareholder: Central State-owned
Type of the actual controller: Corporation
Legal
Representati
Name of controlling Date of
ve / Organization code Business scope
shareholder establishment
Company
Principal
Industrial investment, R&D of environmental protection
products, network products, intelligent products and
China Electronics
Chen November electronic products, technology transfer, technical
Technology HIK 9133000014306073XD
Zongnian 29th, 2002 services, manufacturing and sales, business consulting
Group Co., Ltd.
services, rentel services of own real estate, import and
export businesses.
Shares held by the controlling shareholder
Indirect control of Phoenix Optical Co. LTD., domestic
in other listed companies
listed companie
by controlling or holding during the reporting period
Change of the controlling shareholder during the reporting period
□ Applicable √ Inapplicable
3. Particulars about the actual controller
Nature of the actual controller: Central State-owned assets management agency
Type of the actual controller: Corporation
Hikvision 2016 Annual Report
Legal
Date of
Name of the actual Representative Organization
establishm Business scope
controller / Company code
ent
Principal
The Company is responsible for the military electronic
equipment and systems integration, the development and
manufacturing weapons platform electronic equipment,
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
China Electronics January
electronic information software, materials, components,
Technology Group Xiong Qunli 1st, 91110000710929498G
machine and system integration and related common
Corporation
technology; the self-management and agency of import
and export business of all types of goods and
technology; the operation of feed processing and
\"processing and compensation trades\"; the operation of
counterpart trade and re-export trade; industrial
investment; asset management; engages in e-commerce
information services; and organizes enterprises in the
industry to participate in and hold overseas exhibitions.
China Electronics Technology Group Corporation is the actual controller of a total of seven
Shares held by the actual
controlling shareholder in domestic listed companies including Anhui Sun Create Electronic Co., Ltd, Shanghai East
other listed companies by China Computer Co., Ltd, Chengdu Westone Information Industry Co., Ltd., GCI Science &
controlling or holding during the Technology Co., Ltd., Taiji Computer Corporation Limited, GLARUN Technology Co., Ltd.
reporting period and Phenix Optics Co., Ltd.
Change of the actual controller during the reporting period
□ Applicable √ Inapplicable
The ownership and controlling relationship between the actual controller of the Company and the Company is
detailed as follows:
Hikvision 2016 Annual Report
The actual controller controls the Company via trust or other ways of asset management
□ Applicable √ Inapplicable
4. Particulars about other corporate shareholders with shareholding proportion over 10%
□ Applicable √ Inapplicable
5. Particulars on shareholding decrease plan during the reporting period proposed or implemented by the
controlling shareholders, actual controller, restructurer or other parties
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
Section VII Information of Preferred Shares
□ Applicable √ Inapplicable
No such cases in the Reporting Period.
Hikvision 2016 Annual Report
Section VIII Information about Directors, Supervisors, Senior
Management and Employees
I. Shareholding changes of directors, supervisors, senior management personnel
Shares
Shares
Termination Shares held at decreased Other Shares held at
Tenure Commencement the beginning increased
Name Title Gender Age of term of during the changes the end of the
status of term of office of the Period during the
office Period （Shares） Period (Shares)
(Shares)
Period
(Shares)
Chen
Chairman Incumbent M 52 June 19th, 2008 0 0 0 0
Zongnian
Gong Vice
Incumbent M 52 June 19th, 2008 1,115,775,000 0 -121,275,000 0 994,500,000
Hongjia Chairman
Liu Xiang Director Incumbent M 45 May 24th, 2014 0 0 0 0
Director,
Hu December 28th,
General Incumbent M 52 195,000 81,555,651 0 0 81,750,651
Yangzhong
Manager
Director,
Standing
Wu Weiqi Deputy Incumbent M 53 March 1st, 2003 174,000 7,307,926 0 0 7,481,926
General
Manager
Cheng Independent
Incumbent M 65 March 6th, 2015 0 0 0 0
Tianzong Director
Lu Independent
Incumbent M 63 March 6th, 2015 0 0 0 0
Jianzhong Director
Wang Independent
Incumbent M 50 March 6th, 2015 0 0 0 0
Zhidong Director
Hong Independent December 22nd,
Incumbent M 51 - - - -
Tianfeng Director
Cheng Supervisor
Incumbent F 64 March 6th, 2015 0 0 0 0
Huifang Chairman
Wang
Supervisor Incumbent M 66 March 6th, 2015 0 0 0 0
Qiuchao
Hikvision 2016 Annual Report
Shares
Shares
Termination Shares held at decreased Other Shares held at
Tenure Commencement the beginning increased
Name Title Gender Age of term of during the changes the end of the
status of term of office of the Period during the
office Period （Shares） Period (Shares)
(Shares)
Period
(Shares)
Chen
Supervisor Incumbent M 46 June 19th, 2008 0 0 0 0
Junke
Deputy
Jiang
General Incumbent M 48 March 1st, 2003 150,000 7,308,588 0 0 7,458,588
Haiqing
Manager
Deputy
Zheng General
Incumbent M 55 June 3th,0 2004 135,000 0 0 0 135,000
Yibo Manager
Deputy December 18th,
Cai
General Incumbent M 50 135,000 0 0 0 135,000
Dingguo
Manager
Deputy December 18th,
He Hongli General Incumbent F 44 129,000 0 0 0 129,000
Manager
Deputy
January 20th,
Fu Baijun General Incumbent M 45 129,000 0 0 0 129,000
Manager
Deputy
Xu Lirong General Incumbent M 54 March 1st, 2007 129,000 0 0 0 129,000
Manager
Deputy December 18th,
Zhou
General Incumbent M 52 129,000 4,734,584 0 0 4,863,584
Zhiping
Manager
Deputy
Jiang December 18th,
General Incumbent M 46 135,000 0 0 0 135,000
Yufeng
Manager
Deputy
Jin Duo General Incumbent M 52 March 10th, 2015 0 0 0 0
Manager
Deputy
General
Jin Yan Manager, Incumbent F 38 July 22th, 2015 0 0 0 0
Chief
Finance
Deputy
Jia
General Incumbent M 40 July 22th, 2015 0 3,661,163 0 0 3,661,163
Yonghua
Manager
Deputy
Li Pan General Incumbent M 39 July 22th, 2015 600,000 2,993,712 0 0 3,593,712
Manager
Deputy
Cai
General Incumbent M 46 April 8th, 2016 - - - -
Changyang
Manager
Hikvision 2016 Annual Report
Shares
Shares
Termination Shares held at decreased Other Shares held at
Tenure Commencement the beginning increased
Name Title Gender Age of term of during the changes the end of the
status of term of office of the Period during the
office Period （Shares） Period (Shares)
(Shares)
Period
(Shares)
Deputy
General
Manager
Huang Board
Incumbent F 35 April 8th, 2016 - - -10,000 - 195,000
Fanghong Secretary
Internal
audit
director
Deputy
October 11th,
Xu Ximing General Incumbent M 44 - - - -
Manager
Deputy
October 11th,
Bi Huijuan General Incumbent F 46 - - - -
Manager
Total -- -- -- -- -- -- 1,117,815,000 107,561,624 -121,285,000 1,104,296,624
Note:
(1) Number of shares held by directors, supervisors, and seniormanagement personnel above are all shares directly held by them
accordingly.
(2) During the reporting period, number shares held at the beginning of the period, shares increased during the period, shares
decreased during the period for newly appointed executives are all calculated after their appointment.
(3) During the reporting period, in respect of changes in the number of shares due to the implementation of equity distribution for
2015, the number of shares at the beginning, increased, and reduced has been adjusted accordingly.
II. Changes of directors, supervisors and senior management personnel
□ Applicable √ Inapplicable
III. Positions of directors, supervisors and senior management personnel
1. Directors
Mr. Chen Zongnian (陈宗年), born in 1965, Chinese nationality with no overseas residence permission, PhD
in management, senior engineer, served as a assistant to the head of 52nd Research Institute at China Electronics
Technology Group Corporation (中国电子科技集团公司第五十二所, the 52nd Institute), a deputy head of the
52nd Institute. Chen currently serves as the head of 52nd Institute, the chairman and the Communist Party
Hikvision 2016 Annual Report
secretary of China Electronics Technology HIK Group Co., Ltd. (中电海康集团, CETHIK) and chairman of the
Company.
Mr. Gong Hongjia (龚虹嘉), foreign shareholder of the Company, permanent resident of HKSAR of
People’s Republic of China, took part in the establishment of the Company in 2011 and served as a director and
vice chairman of Hikvision. Gong currently serves as a vice chairman of the Company.
Mr. Liu Xiang (刘翔), Chinese nationality with no overseas residence permission, master of management,
economist, served as a deputy general manager, secretary of the board and finance chief of Hikvision since June
2007. Liu has been appointed as a director of the Company since May 2015, and currently serves as Chairman of
Phenix Optical CO.,LTD, a director of the Company, and a deputy general manager of CETHIK.
Mr. Hu Yangzhong (胡扬忠), Chinese nationality with no overseas residence permission, master of
engineering, senior engineer with institute grade, served as an engineer and a head engineer of the 52nd Institute
from June 1989 to December 2001. He has been appointed as a director of the Company and general manager of
the company since December 2001. Hu currently serves as a director and the general manager of the Company.
Mr. Wu Weiqi (邬伟琪), Chinese nationality with no overseas residence permission, bachelor’s degree,
senior engineer, held various positions at the 52nd Institute, including technician, assistant manager, engineer and
senior engineer, from July 1986 to December 2001 He joined the Company since December 2001, and has been
appointed as a deputy general manager, a standing deputy general manager, and a director of Hikvision. Wu
currently serves as a director and standing deputy general manager of the Company.
Mr. Cheng Tianzhong ( 程 天 纵 ), with nationality of Taiwan, China, master’s degree in business
administration, served as president and a director of Hewlett-Packard Development Company, L.P.(China) from
1992 to 1997; served as the 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 Mobile Limited, a subsidiary of Hon Hai Corporation (鸿海集团), a company listed
on the Hong Kong Stock Exchange in 2011. He retired in June 2012 and devoted himself to China Maker
Campaign (中国创客运动) to help and guide those start-up companies. Cheng currently served as an independent
director of the Company.
Mr. Wang Zhidong (王志东), permanent resident of HKSAR of People’s Republic of China, graduated with
bachelor’s degree in engineering. He served as a deputy general manager and chief engineer of Suntendy
Electronic Technology and Research Institute (新天地电子信息技术研究所) from April 1992 to August 1993;
He served as a general manager of Richwin Information Technology Co., Ltd. (四通利方信息技术有限公司),
and served as chief executive officer and a director of SINA Corporation (新浪网) from December 1993 to June
2001; He served as chairman and chief executive officer of Beijing Dianji Technology, Ltd. (北京点击科技有限
公司) from December 2001 to July 2013. Mr. Wang currently serves as a founding director or Peking University
Entrepreneurs Club and an independent director of the Company.
Hikvision 2016 Annual Report
Mr. Lu Jianzhong (陆建忠), Chinese nationality, obtained a bachelor’s degree in economics and CPA
certificate. Lu served as a lecturer and an associate professor of finance and accounting at the Shanghai Maritime
University (上海海事大学) from September 1986 to September 1997; he was a partner and a chartered
accountant of the auditing department of PricewaterhouseCoopers, from October 1997 to June 2012; he was a
director of marketing development and a chartered accountant of Shanghai De’an Certified Public Accountants
LLP (上海德安会计师事务所) from July 2012 to July 2013; he was a chartered accountant 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 of Zhongxinghua Certificated Public Accountants LLP
(中兴华会计师事务所) from August 2014 5o January 2016. Lu currently serves 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 the Company.
Mr. Hong Tianfeng （洪天峰）, Chinese nationality, obtained a master degree in engineering. Hong was an
engineer in Nanjing University of Posts and Telecommunication (南京邮电大学) from July 1990 to June 1993;
He served as an executive deputy general manager, chief executive of Operation and Delivery, chairman of
investment decision committee, vice chairman of Huawei technologies co., LTD (华为技术有限公司) from July
1993 to September 2011；Hong currently serve 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）), a executive director of
Shanghai Fangguang Venture Investment Management Co., Ltd. (上海方广创业投资管理有限公司), and an
independent director of the Comypany.
2. Supervisors
Ms. Cheng Huifang (程惠芳), Chinese nationality, obtained PhD in international finance. She was a member
of the 8th and 9th Zhejiang CPPCC (浙江省政协). Cheng currenly serve as principal of the Zhejiang Institute of
Innovation Management of Zhejiang University of Technology (浙江工业大学浙商创新管理研究院), vice
president of the Zhejiang Institute of Science and Technology Development Strategy (浙江省科技发展战略研究
院), 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 supervisor of the
Company.
Mr. Wang Qiuchao (王秋潮), Chinese nationality, a lawyer with master degree in law, served as 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 arbitrator of the China International Economic and Trade Arbitration
Commission (中国国际经济贸易仲裁委员会, “CIETAC”), a member of the Stratgy Committee of the China
Lawyers Association (全国律协战略委员会), a committee member of the Hangzhou People’s Congress
Legislative Advisory Committee (杭州市人大常委会立法咨询委员会), an arbitrator of Shanghai International
Arbitration Center ( 上 海 国 际 仲 裁 中 心 ) , South China International Economic and Trade Arbitration
Commission (华南国际仲裁中心), and a supervisor of the Company.
Mr. Chen Junke (陈军科), Chinese nationality with no overseas residence permission, a bachelor degree in
engineering, senior engineer, began to work since 1994 and held various positions in the 52nd Institute, including
assistant engineer, engineer and senior engineer. He joined the Company in 2001 and has been appointed as the
Hikvision 2016 Annual Report
technical director of the Digital Video Recorder (DVR) Division of the Technology Management Center. Chen
currently serves as a supervisor of the Company and the general manager of the supply chain management center.
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), Chinese nationality with no overseas residence permission, a bachelor’s
graduate in engineering, senior engineer, joined the Company in November 2001 and served as an assistant of the
general manager and a deputy general manager. Mr. Jiang currently serves as a deputy general manager of the
Company.
Mr. Zheng Yibo (郑一波), Chinese nationality with no overseas residence permission, a bachelor’s graduate
in engineering, senior engineer, joined Hikvision in June 2004 and served as a deputy general manager and board
secretary of the Company. Mr. Zheng currently serves as a deputy general manager of the Company.
Mr. Cai Dingguo (蔡定国), Chinese nationality with no overseas residence permission, master degree in
business administration, joined Hikvision in May 2002 and served as a manager of the Marketing Division, an
assistant to the general manager and a deputy general manager. Mr. Cai currently serves as a deputy general
manager of the Company.
Ms. He Hongli (何虹丽), Chinese nationality with no overseas residence permission, master’s degree in
business administration, joined Hikvision in December 2001 and served as a manager of the Human Resource
Division, an assistant to the general manager and a deputy general manager. Ms. He currently serves as a deputy
general manager of the Company.
Mr. Fu Baijun (傅柏军), Chinese nationality with no overseas residence permission, obtained bachelor
degree in economics, Chinese Certificated Public Accountant, and is a senior accountant. He served as an
accountant of the Financial Division of the 52nd Institute, from July 1996 to January 2009, and a deputy general
manager of Zhejiang Haikang Information (浙江海康信息技术股份有限公司). He joined Hikvision in January
2009, and served as financial manager, deputy general manager and chief financial officer. Mr. Fu currently
serves as a deputy general manager of the Company.
Mr. Xu Lirong (徐礼荣), Chinese nationality with no overseas residence permission, obtained master degree
in engineering, and is a senior engineer. He joined Hikvision in January 2002 and served as a manager of the
R&D Center, a board secretary and a deputy general manager. Mr. Xu currently serves as a deputy general
manager of the Company and the secretary of Commuist Party of the Company Division.
Hikvision 2016 Annual Report
Mr. Zhou Zhiping (周治平), Chinese nationality with no overseas residence permission, obtained master
degree in engineering, and is a senior engineer. He joined Hikvision in January 2002 and served as the chief
technical officer and a deputy general manager. Mr. Zhou currently serves as a deputy general manager of the
Company.
Mr. Jiang Yufeng (蒋玉峰), Chinese nationality with no overseas residence permission, obtained bachelor
degree in engineering, and is an engineer. He joined Hikvision in January 2005 and held various positions in our
Beijing branch, including general manager, director of marketing, assistant to the general manager, deputy general
manager and marketing director. Mr. Jiang currently serves as a deputy general manager of the Company.
Mr. Jin Duo (金铎), Chinese nationality with no overseas residence permission, obtained bachelor degree in
engineering, is a senior engineer. He served as a technical officer, assistant to engineers, an engineer and a senior
engineer of the 52nd Institute, from July 1986 to June 2004. He joined Hikvision in July 2004 and served as a
general manager of our Hangzhou Branch. Mr. Jin currently serves as a deputy general manager of the Company.
Ms. Jin Yan (金艳), Chinese nationality with no overseas residence permission, obtained master degree in
management, and is an accountant. She joined Hikvision in 2004 and held various positions at the Company,
including financial manager and the general manager of the Financial Management Center. Ms. Jin currently
serves as a deputy general manager and chief financial officer of the Company.
Mr. Jia Yonghua (贾永华), Chinese nationality with no overseas residence permission, obtained bachelor
degree in engineering, and is a senior engineer. He joined Hikvision in January 2002 and held various positions at
the Company, including the president to the Image Process and Analysis Division of the R&D Center, the
president to the Strategy and Marketing Division, a deputy general manager of the Supply Chain Management
Center. Mr. Jia currently serves as a deputy general manager of the Company.
Mr. Li Pan (礼攀), Chinese nationality with no overseas residence permission, obtained master degree in
engineering, and is a senior engineer. He served as an engineer of the 52nd Institute, from August 2000 to
December 2001. He joined Hikvision in December 2001 and held various positions at the Company, including
engineer, product manager, R&D manager, the general manager of the Transportation Division, the general
manager of our Hangzhou Branch. Mr. Li currently serves as a deputy general manager of the Company.
Ms. Huang Fanghong （黄方红）, Chinese nationality with no overseas residence permission, master degree
in law, served in Hangzhou Silan Microelectronics Co.,Ltd. legal team from 2004 to 2008. She joined Hikvision
in June 2009 and held various positions at the Company including legal department director, internal audit
director, and internal control director. Ms. Huang currently serves as deputy general manager, board secretary, and
internal audit director of the Company.
Mr. Cai Changyang（蔡昶阳） Chinese nationality with no overseas residence permission, obtained 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 and enterprise corporation department, director for
investment department, director for strategy and marketing department, and deputy general manager of the
Company, Mr. Cai currently serves as deputy general manager of the Company.
Hikvision 2016 Annual Report
Mr. Xu Ximing (徐习明), Chinese nationality with no overseas residence permission, obtained bachelor
degree in engineering. From July 1996 to September 2016, he was held various postions in IBM, including
engineer, department manager, director，cusulting service partner, consulting service senior partner, and deputy
general manager. He joined Hikvision in September 2016. Mr. Xu currently serves as deputy general manager of
the Company.
Ms. Bi Huijuan (毕会娟), Chinese nationality with no overseas residence permission, obtained doctor in
engineering. From April 1999 to August 2016, she held various positions in the 15th Research Institute at China
Electronics Technology Group Corporation, including engineer, senior engineer, senior research engineer, head of
R&D department, vice chief engineer, and deputy director. She joined Hikvision in August 2016. Ms. Bi currently
serves as deputy general manager of the Company.
Position held in shareholders entities
Commencement Remuneration from the
Name Shareholder's entity Position
of term of office shareholders' entity
China Electronics
Chen Zongnian Technology HIK Group Co., Chairman, Party Secretary November 2013 Y
Ltd.
China Electronics
Liu Xiang Technology HIK Group Co., Deputy General Manager December 2013 Y
Ltd.
China Electronics
Hu Yangzhong Technology HIK Group Co., Director December 2013 N
Ltd.
China Electronics Supervisor, Member of
Xu Lirong Technology HIK Group Co., Commission for Discipline December 2013 N
Ltd. Inspection
China Electronics
Zheng Yibo Technology HIK Group Co., Party member December 2015 N
Ltd.
Post held in other entities（Exluede subsidiaries included in the consolidated reports）
Commencement of Termination of Remuneration from
Name Shareholder's entity Position
term of office term of office the other entities
Cheng
The 52nd Institutes Head May 2009 N
Zongnian
Cheng Legal N
Zhejiang Periodical Office Feburary 2004
Zongnian Representative
Cheng Director of CETC Finance Co., Ltd. Director December 2012 N
Hikvision 2016 Annual Report
Commencement of Termination of Remuneration from
Name Shareholder's entity Position
term of office term of office the other entities
Zongnian
Cheng Shanghai Fuel Cell Vehicle Powertrain N
Director November 2013
Zongnian Co., Ltd.
Gong Guangzhou Funian Electronic
Chairman November 2011 Y
Hongjia Technology Co., Ltd.
Gong N
FunVio Co., Ltd. Chairman Feburary 2004
Hongjia
Gong Shanghai Fullhan Microelectronics Co., N
Director April 2013
Hongjia Ltd.
Gong N
Fuce Holdings Co., Ltd. Director October 2014
Hongjia
Gong N
Chuangjia Chuangtou Co., Ltd Director October 2014
Hongjia
Gong Shenzhen Jiadao Gongcheng Equity Executive N
November 2014
Hongjia Investment Fund (Limited Partnership) Partner
Gong Shenzhen Jiadao Valley Investment General N
October 2014
Hongjia Management Co., Ltd. Manager
Gong Shenzhen Innovative Valley Investment N
Director July 2014
Hongjia Management Co., Ltd
Gong Director N
JiuBaYao Health Technology Co., Ltd. November 2014
Hongjia
Gong Shanghai Pukun Information Director N
September 2014
Hongjia Technology Co., Ltd
Gong Director N
Beijing Woqi Co., Ltd. July 2011 November 2016
Hongjia
Gong Wuhan YouXinGuang communication Director N
January 2016
Hongjia equipment co., LTD
Xinjiang Weixun Investment Executive N
Liu Xiang May 2011
Management Limited Partnership Partner
Liu Xiang Phoenix Optical Co. LTD Chairman Jualy 2015 N
Liu Xiang Phoenix Optical Holding Co. LTD Chairman July 2015 N
Hu N
Zhejiang Tuxun Technology Co.,Ltd. Director January 2016
Yangzhong
Xinjiang Pukang Investment Executive N
Wu Weiqi May 2011
Management Limited Partnership Partner
Wang Beijing Yilian Yisheng Technology Co.,
Chairman, CEO July 2013 Y
Zhidong Ltd.
Cheng Wenhui Technology Co., Ltd. Independent June 2016 Y
Hikvision 2016 Annual Report
Commencement of Termination of Remuneration from
Name Shareholder's entity Position
term of office term of office the other entities
Tianzhong Director
Cheng Y
Hechun Technology Co., Ltd. Director June 2014
Tianzhong
Cheng Y
Zuozhen Co., Ltd. Director January 2015
Tianzhong
Lu Dahua Certificated Public Accountants Chartered Y
January 2016
Jianzhong LLP Accountant
Lu Antai College of Economics & Y
Jianzhong Management,Shanghai Jiao Tong Mentor December 2013
University
Hong Shanghai Fangguang Venture Executive Y
Feburary 2012
Tianfeng Investment Management Co., Ltd. Director
Hong Suzhou Fangguang Venture Investment Managing N
September 2012
Tianfeng Management (Limited Partnership) Partner
Hong Suzhou Fangguang Venture Investment N
Managing
Tianfeng Management-Phase 2 (Limited Jualy 2016
Partner
Partnership)
Hong Shenzhen Fangguang Enterprise General N
May 2016
Tianfeng Mangement Consulting Co.,Ltd. Manager
Hong Shenzhen Pengfenghui Venture General N
Juen 2014
Tianfeng Investment Co., Ltd. Manager
Hong Shanghai Guangfang Venture Capital N
Managing
Tianfeng Investment Partnership (Limited August 2012
Partner
Partnership)
Hong Shanghai Guangerqi Venture Capital N
Managing
Tianfeng Investment Partnership (Limited September 2016
Partner
Partnership)
Hong Shanghai Huace Navigation Technology N
Director Feburary 2015
Tianfeng Co., Ltd.
Hong Director N
Sannuo Biology Sensor Co., Ltd. September 2013
Tianfeng
Hong Shanghai Chuangyuan Equipment Director N
August 2014
Tianfeng Technology Co., Ltd.
Hong Shenzhen ShiYunZhiXun Network Director N
May 2014
Tianfeng Technology Co., Ltd.
Hong Director N
Jiangsu JiTaiKe Electronics Co., Ltd. July 2015
Tianfeng
Hikvision 2016 Annual Report
Commencement of Termination of Remuneration from
Name Shareholder's entity Position
term of office term of office the other entities
Hong Shanghai Baishitong Information Director N
September 2016
Tianfeng Technology Co., Ltd.
Hong Changjiang Shidai YidongZhuanshou Director N
June 2014
Tianfeng Communication Co., Ltd.
Hong Zhongwei DaheYun Network Director N
November 2016
Tianfeng Connection Technology Co., Ltd.
Hong Shenzhen Fuzhi Software Technology Director N
November 2016
Tianfeng Co., Ltd.
Hong Shenzhen DongfengMingTu N
Supervisor August 2016
Tianfeng Corporation Management Co., Ltd.
Cheng Independent
Zhejiang Furun Company Limited April 2014 Y
Huifang Director
Cheng Independent Y
China Kings Resources Group Co., Ltd March 2014
Huifang Director
Cheng Independent Y
Hangzhou HangYang Co., Ltd. January 2015
Huifang Director
Cheng Independent Y
Zhejiang Huace Media Co., Ltd. Feburary 2016
Huifang Director
Cheng External Y
Zhejiang Commercial Bank Co., Ltd. June 2016
Huifang Supervisor
Wang Y
ZhejiangT&C Law Firm Partner -
Qiuchao
Wang External Y
Sanbian Sci-Tech Co., Ltd. August 2014
Qiuchao Supervisor
Wang Independent Y
Zhejiang Kaishan Compressor Co., Ltd. May 2015
Qiuchao Director
Wang Zhejiang Jingsheng Mechanical & Independent Y
April 2015
Qiuchao Electrical Co.,ltd Director
Wang Zhejiang Hanjia Design Co., Ltd. Independent Y
Jualy 2015
Qiuchao Independent Director Director
Incumbent or Outgoing Directors, Supervisors and Senior management personnel in the reporting period that have
been imposed administrative penalties by the CSRC during the last three years
□ Applicable √ Inapplicable
IV. Remuneration of directors, supervisors and senior management personnel
The following describes the decision-making program, determination basis and actual remuneration payment of
Hikvision 2016 Annual Report
directors, supervisors and senior management personnel.
The remuneration of directors, supervisors and senior management personnel will be received preliminarily by
the Remuneration and Appraisal Committee of the Board, then submitted to the Board for further review and
finally approved by the shareholders at a general meeting. As for those directors (exclude independent directors),
supervisors (exclude external supervisors) and senior management personnel who receive remuneration from the
Company directly, they will receive according to the existing Salary Management System and Performance
Appraisal Policies.
Remuneration of directors, supervisors and senior management personnel Unit: RMB 0,000
Total remuneration
Remuneration from
Name Title Gender Age Tenure status from the Company
related parties (Y/N)
(RMB'0,000)
Chen Zongnian Chairman M 52 Incumbent 0 Y
Gong Hongjia Vice Chairman M 52 Incumbent 0 Y
Liu Xiang Director M 45 Incumbent 0 Y
Hu Yangzhong Director, General Manager M 52 Incumbent 308 N
Director, Standing Deputy General M Incumbent N
Wu Weiqi 53
Manager
Cheng Taizong Independent Director M 65 Incumbent 15 N
Lu Jianzhong Independent Director M 63 Incumbent 15 N
Wang Zhidong Independent Director M 50 Incumbent 15 N
Hong Tianfeng Independent Director M 51 Incumbent 1.25 N
Cheng Huifang Supervisor Chairman F 64 Incumbent 10 N
Wang Qiuchao External Supervisor M 66 Incumbent 10 N
Chen Junke Employeed Supervisor M 46 Incumbent 172 N
Jiang Haiqing Deputy General Manager M 48 Incumbent 244.5 N
Zheng Yibo Deputy General Manager M 55 Incumbent 213 N
Cai Dingguo Deputy General Manager M 50 Incumbent 217 N
He Hongli Deputy General Manager F 44 Incumbent 273 N
Fu Baijun Deputy General Manager M 45 Incumbent 263 N
Xu Lirong Deputy General Manager M 54 Incumbent 215 N
Zhou Zhiping Deputy General Manager M 52 Incumbent 210 N
Jiang Yufeng Deputy General Manager M 46 Incumbent 240 N
Hikvision 2016 Annual Report
Total remuneration
Remuneration from
Name Title Gender Age Tenure status from the Company
related parties (Y/N)
(RMB'0,000)
Jin Duo Deputy General Manager M 52 Incumbent 260 N
Jin Yan Deputy General Manager, CFO 女 38 Incumbent 170.97 N
Jia Yonghua Deputy General Manager M 40 Incumbent 202.73 N
Li Pan Deputy General Manager M 39 Incumbent 202.12 N
Cai Changyang Deputy General Manager M 46 Incumbent 141.79 N
Deputy General Manager N
Huang Fanghong Board Secretary F 35 Incumbent 119.95
Internal audit directo
Xu Ximing Deputy General Manager M 44 Incumbent 90.22 N
Bi Huijuan Deputy General Manager F 46 Incumbent 41.75 N
Total -- -- -- -- 3,941.28 --
Share incentives for directors, supervisors and senior executives in the Reporting Period
√ Applicable □ Inapplicable
Unit: share
Shares
Price for restricted
Restricted Shares unlocked in Shares granted in Restricted Shares
Name Title shares granted
held at year-begin the current the current period held at year-end
(RMB per share)
period
Director, General
Hu Yangzhong 195,000 0 0 195,000
Manager
Director, Standing
Wu Weiqi Deputy General 174,000 0 0 174,000
Manager
Deputy General
Jiang Haiqing 150,000 0 0 150,000
Manager
Deputy General
Zheng Yibo 135,000 0 0 135,000
Manager
Deputy General
Cai Dingguo 135,000 0 0 135,000
Manager
Deputy General
He Hongli 129,000 0 0 129,000
Manager
Deputy General
Fu Baijun 129,000 0 0 129,000
Manager
Deputy General
Fu Baijun 129,000 0 0 129,000
Manager
Deputy General
Zhou Zhiping 129,000 0 0 129,000
Manager
Jiang Yufen Deputy General 135,000 0 0 135,000
Hikvision 2016 Annual Report
Manager
Total -- 1,440,000 0 0 -- 1,440,000
注：(1) This personnels listed above are executives who were included in 2014 restricted shares incentive plan, and shares held
represented above are all 2014 granted restricted shares.
(2) The granted date of 2016 restricted incentive shares scheme was December 23rd, 2016; however the listing date of the
restricted shares was January 20th 2017, therefore, was not covered in the above chart.
(3) During the reporting period, in respect of changes in the number of shares due to the implementation of equity distribution
for 2015, the number of shares at the beginning has been adjusted accordingly.
V. Staff in the Company
1. Statistics of employees, professional structure of the staff, and educational background structure
Number of incumbent employees in the Company 10,192
Number of incumbent employees in major subsidiaries 9,821
Number of incumbent employees 20,013
Number of employees with salaries in current period 20,013
Number of retired employees requiring the Company and its
subsidiaries to bear costs
Professional structure
Tier Number of employees
Administrative staff
R&D staff 9,366
Sales staff 4,061
Functional staff
Production staff 5,704
Total 20,013
Educational background structure
Education background Number of employees
Master and/or doctor/or above 2,535
Bachelor 10,315
College, technical secondary school 1,890
Other 5,273
Total 20,013
Hikvision 2016 Annual Report
2. Staff remuneration policy
Hikvision has always adhered to the core value of \"employee-focused, growing together\", emphasizing the
corporate culture of \"respecting and caring for the individual\". While strengthening and optimizing organization
management as well as enhancing the professional work of human resources, the Company provides employees
with competitive compensation and benefits, incentives and supporting work, living facilities and environment in
industry. It is also concerned about the growth and development of employees, and provides them with good career
development paths and platforms.
3. Staff training plans
The Company is committed to creating a viable training system, focusing on key staff training and cultural
transmission, in order to create a learning organization. In 2016, the Company continued to focus on construction
and investment in key projects such as cadre training and reserve, new staff systemic training, etc. The Company is
also fully focused on internal learning resources development and other aspects, closely aligning with
organizational business development and organization’s requirements for employees’ capabilities and promoting
the continuous development of business. In 2016, the Company trained 3406 employees internally, including 2574
new employees, 832 management staff, with the total training hours exceeding 180,000 hours and the investment of
more than RMB 9 million in training costs. Through continuous investment and team focus, the Company's training
and development efforts align with long-term strategic objectives, annual development plans, job responsibilities
and performance improvement, as well as the employees’ own ability gap and career development, helping to
achieve the overall goal of Hikvision from multiple dimensions, while meeting the needs of employees for personal
capabilities and career development, leading to a win-win result.
In the future, the Company will stick to the goal of constructing a viable training system, build a capacity
training channel system from new employees, junior management staff to middle and senior management staff, and
support more employees in growth and learning with professionalism as the team's primary requirement.
4. Labor outsourcing
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
Section IX Corporate Governance
I. Basic situation of corporate governance
During the reporting period, in accordance with the Company Law（公司法）, Securities Law（证券法）, Code
of Corporate Governance for Listed Companies in China（上市公司治理规则）, Listing Rules of Shenzhen Stock
Exchange Stock（深圳证券交易所股票上市规则）, Guidelines of the Shenzhen Stock Exchange for the Standard
Operation of Listed Companies （深圳证券交易所中小板上市公司规范运作指引 ） on the Small and
Medium-sized Enterprise Board and related regulation, the Company is constantly improving its corporate
governance, optimizing the internal control systems, in order to standardize the management and operation. The
actual situation of corporate governance is in line with laws, regulations and normative documents regarding
corporate governance of listed companies issued by China Securities Regulatory Commission and Shenzhen Stock
Exchange.
During the reporting period, the improvement of corporate governance is mainly reflected in the following
aspects:
1. Improvement in internal management. On the basis of the governance structure where the shareholders'
general meeting, the board of directors and its subordinate committees and the board of supervisors as the highest
power, the decision-making, the supervisory organs respectively, have a clear division of responsibilities and
coordinated operation with the management, the Company has established professional committees internally for
professional division of labor and business decision. The newly established investment committee is responsible for
reviewing investment decisions, and further regulating investment matters and strictly controlling risk. The newly
established human resources management committee is responsible for reviewing decisions on human resources
matters audit to meet the development and management needs of human resources. The newly established change
management and steering committee is responsible for the management and guidance of various projects promotion.
It aims to achieve a transformation from a function-oriented organization to a process-oriented organization through
a series of management changes, comprehensively enhancing the internal management efficiency and support the
Company's strategic objectives.
2. Implementation of long-term incentives. According to the Management Measures for Core Staff’s
Investment in Innovative Business, the Company has set up an investment partnership as the innovative business
Hikvision 2016 Annual Report
investment platform for the core staff. The investment partnership and Hikvision have established joint ventures
including Hik Automobile Technology and Hik Weiying, and made capital increase to EZVIZ Network Inc. and Hik
Robot. The Company has implemented the innovative business investment mechanism for core staff, and built
business partners mechanism while cultivating and developing innovative business, so as to align the interests of
employees and the Company, and form a risk-sharing and benefit-sharing structure to establish long-term protection
mechanism for the Company’s sustained and healthy development.
3. Continuous improvement in investor relations management. After the annual report, semi-annual report,
three quarterly reports and other disclosures, the Company took the initiative to hold a public performance briefing
(including conference call), to make necessary explanation on contents of the regular reports and the development of
the Company within the scope of the rules, and to maintain effective communication with all investors. The
Company also timely released Investor Relations Activity Record Form, and did a good job in appropriate
information disclosure, to increase the transparency of information and protect the interests of small and medium
investors. Meanwhile, general meetings of shareholders held by the Company all provided all shareholders with
online voting platform to ensure that the interests of investors could be reasonably and effectively achieved.
During the reporting period, the Company's information disclosure was approved by the regulatory authorities:
In June 2016: Shenzhen Stock Exchange issued the evaluation results of the information disclosure of small and
medium enterprise board listed companies in 2015, and Hikvision ranked in the A-level (for the sixth consecutive
year). The company has also received some honors in the capital market: “Chinese Listed Companies Investor
Relations Tianma Award - Best Board of Directors in China Small and Medium Board Listed Companies Investor
Relations” by Securities Times and China Fund, \"China’s Top 50 Listed Companies in Outstanding Value Creation
in 2016\" by Economic Observer, Shanghai Advanced Institute of Finance of Shanghai Jiaotong University and
China Scope, \"Golden Bull Top 100 Listed Companies\", \"Golden Bull Most Efficient Company\", \"Golden Bull
Best Small and Medium-Sized Growth Company\" in the 18th Golden Bull Award for listed companies by China
Securities News, \"Top 10 of the Top 50 Chinese Small and Medium Board Listed Companies in Value\", \"Top 10
Management Team of Chinese Small and Medium Board Listed Companies\" in the 10th Chinese Listed Companies
Value Award by Securities Times and New Fortune Magazine, NO.1 in “Future Value Ranking of A-share Listed
Companies in 2016”and“Best A-share Listed Companies” of the 3rd future growth value ranking list of A-share
listed companies in 2016 sponsored by Value Line Magazine, Sina.com, China Economic Net and China Reform
Daily, \"Best Corporate Governance Practice Award\" in the 6th reputation ranking of Chinese listed companies by
Hikvision 2016 Annual Report
National Business Daily, and \"CCTV China’s Top Ten Listed Companies in 2016\" by China Central Television.
Any incompliance of relevant requirements of China Securities Regulatory Commission in respect of corporate
governance:
□ Yes √ No
II. Company’s Independence in Businesses, Management, Assets, Institutions and Finance from
Controlling Shareholders
The Company is completely independent in business, management, assets, organization, and finance from its
shareholders. The Company has established a sound internal control system, being capable of operating
independently 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 among
the 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 operation
management divisions, etc., and established complete management methods for labor, personnel,
and salary 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, Deputy General Managers, the Secretary of the Board, CFO, and other senior management
personnel of the Company are only employed and remunerated by the Company, and do not hold
any position in controlling shareholders and is not remunerated by controlling shareholders.
Directors, Supervisors and Senior Management Personnel are appointed through legal procedures
strictly in accordance with relevant regulations stipulated in Company Law and Articles of
Association. There is no controlling shareholder intervention in the Company’s personnel decisions
in general meetings of the Board or shareholders.
(3) Asset independence & 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 illegally and irregularly occupied or controlled by the controlling shareholders. Assets
of the Company are integrated, including complete property rights of fixed assets for production,
supporting assets for production, and intangible assets of patents, etc. The Company has the full
control and ownership of all assets.
(4) Independence in organizations: The Company’s Board, Supervisor Committee, Management and
other internal organizations operates independently, and each functional department is independent
from controlling shareholders in duty and personnel. There is no superior-subordinate relation
Hikvision 2016 Annual Report
between functional departments of controlling shareholders and those of the Company, which would
have an impact on the Company’s independent operations.
(5) Financial Independence: The Company have established an independent financial department, as
well as a sound and independent financial and accounting system. The Company makes financial
decisions independently. There is no controlling shareholder intervention in the Company’s financial
and accounting activities. The Company has maintained accounts with banks independently of and
do not share any bank account with our Controlling Shareholders. The Company has undertaken
independent tax registration in accordance with applicable laws, and paid tax independently.
III. Competing Business
□ Applicable √ Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings convened during the
Reporting Period
1. Annual General Meeting convened during the Reporting Period
Proportion
of
Meeting Nature Convened Date Disclosure Date Disclosure Index
participating
investors
2016 First Extraordinary Extraordinary No. 2016-001 号；
70.63% January 8th 2016 January 9th 2016
General Meeting 2016 General Meeting www.cninfo.com.cn
Annual General No. 2016-025 号；
2015 Annual General Meeting 71.29% May 5th 2016 May 6th 2016
Meeting www.cninfo.com.cn
2016 Second Extraordinary Extraordinary No. 2016-066 号；
69.25% December 22nd 2016 December 23rd 2016
General Meeting General Meeting www.cninfo.com.cn
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
rights:
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
V. Performance of duties by independent directors during the Reporting Period
1. Attendance of independent directors in board meetings and general meetings
Attendance of independent directors in Board meetings
Presence by
Presence due in Absence for two
Name of Independent Presence on site telecom- Presence through
the Reporting Absence (times) consecutive
Director (times) munication a proxy (times)
Period (times) times
(times)
Cheng Tianzong 12 1 11 0 0 N
Wang Zhidong 12 1 11 0 0 N
Lu Jianzhong 12 1 11 0 0 N
Hong Tianfeng 1 0 1 0 0 N
Presence of independent directors in
general meetings (times)
Note: Mr Hong Tianfeng was elected as the Company’s independent director on December 22 nd 2016 during 2016 Second
Extraordinary General Meeting. After he took office, the Company held total one time of general board meeting of directors during
the reporting period.
2. Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors?
□ Yes √ No
3. Other details about the performance of duties by independent directors
Were there any suggestions from independent directors accepted by the Company?
√ Yes □ No
During the Reporting Period, independent directors strictly followed related rules, regulations, including Company
Act(《公司法》), Guidance of Board of Directors for Listed Compaies (《关于在上市公司建立独立董事的指导
意见》), Shenzhen Stock Exchange Place Standardized Operational Guidance on Small-and-Medium Size Listed
companies (《深圳证券交易所中小企业板上市公司规范运作指引》), the Articles Association (《公司章程》),
and Regulations on Independent Directors (《独立董事工作条例》). They focused on the Company operation,
carried out their duties independently and imparted considerable professional advice on improving the Company’s
systems, daily operations and decision making. They provided fair advice during the Reporting Period and played
an effective role in improving the Company supervisory systems and protecting the legal rights of the Company and
the shareholders as a whole.
Hikvision 2016 Annual Report
VI．Performance of duties by special committees under the Board during the Reporting Period
1. Strategy Committee
During the reporting period, the Strategy Committee has studied and put forward a proposal with regard to
operating items of the Company assets and significant investment decisions, and carried out inspection and
evaluation on the implementation situation of the above matters. Meanwhile, the Strategy Committee has actively
discussed long-term strategic development plans of the Company in the future in accordance with industrial
characteristics and developmental stage combing with production and operation situation of the Company, and
provided valuable and constructive suggestions for steady development of the Company.
2. Audit Committee
During the reporting period, the Audit Committee has carefully audited the Company's financial information
and its disclosure, proposed to replace, select and employ external audit institutions. This committee has been
responsible for communication between internal audit and external audit, and supervising internal audit system of
the Company and its implementation. During the reporting period, the Audit Committee has convoked special
meetings to carefully listen to reports of the internal audit of the Company and the external audit institution which
was newly employed, audited scientificity, rationality, effectiveness and implementation situation of internal
control system of the Company, all subsidiaries and branches, and given guiding opinions on conscientiousness
and job examination of internal audit personnel.
3. Nomination Committee
During the reporting period, the Nomination Committee has strictly audited qualifications of independent
directors and senior managers to be elected and employed, and nominated one independent director and four
senior managers and submitted to the Board Directors for review. This Nomination Committee has perfected
management structure of the Company, continuously improved the Company's management level, and carried out
earnestly its responsibilities.
4. Remuneration and Assessment Committee
During the reporting period, in strict accordance with provisions of Articles of Association, the
Remuneration and Assessment Committee has carefully researched and reviewed remuneration policies and plans
of directors, senior managers and other staff, and proposed profession assessment and suggestion on assessment
criterion of the above personnel. During the reporting period, the Remuneration and Assessment Committee has
researched and reviewed the implementation situations of incentive plans for two main kinds of long-term
employees who involved in core employees investing innovation business and restricted share plan, and given
important guiding opinions and suggestions.
Hikvision 2016 Annual Report
VII. Performance of duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties during the
Reporting Period?
□ Yes √ No
The Supervisory Board of the Company had no objection to the matters of supervision during the Reporting
Period.
The Board of Supervisors of the Company will strictly abide by provisions of the Company Law, Standard
Operation Guidelines on Enterprises Listed on SMEs Board at Shenzhen Stock Exchange, Articles of Association,
Rules of Procedures for Board of Supervisors, and relevant laws, regulations and rules, diligently perform its
duties, supervise behaviors of senior managers conforming to relevant laws, regulations relevant provisions and
implementing the Company position, and practically safeguard the legitimate rights and interests of the Company,
staff and shareholders.
In 2016, the Company's Board of Supervisors convoked a total of 7 meetings, and reviewed a total of 27
proposals which mainly involved in aspects of the Company daily operation, financial information and its
disclosure, and implementation of restricted share plan. In 2016, the Company's Board of Supervisors organized
one special meeting, and deeply understood measures in the aspects of the Company's financial situation,
employee rights protection and process construction via communication with the management level and other
relevant personnel; The Company's Board of Supervisors has attended the special meeting of the Audit Committee,
carefully listened to reports of the internal audit of the Company and the external audit institution which was
newly employed, and understood scientificity, rationality, effectiveness and implementation situation of internal
control system of the Company, all subsidiaries and branches. Supervision situation of relevant issues of the
Company's Board of Supervisors in 2016:
1. Normative Operation Conditions of the Company
During the reporting period, the Board of Supervisors members have supervised the Company's daily
operation situation by means of attending the board meeting and the shareholders' meeting, listening to special
report about review, interview and other forms. The Board of Supervisors thinks that the Company has established
a comparatively perfect internal control system, all significant decisions are scientific and reasonable, and
decision-making processes are legal. Directors and senior management personnel of the Company are diligent and
responsible when executing duties, and behaviors of violating laws and regulations, damaging interests of the
Company and legitimate rights and interests of shareholders.
Hikvision 2016 Annual Report
2. Situation about Checking the Company Finance
During the reporting period, the Board of Supervisors has convoked special meetings to carefully listen to
reports of annual financial works by financial headers, understood audit work arrangement of external auditors,
and carried out meticulous inspection regarding financial systems and financial conditions of the Company, and it
thinks that preparation and deliberation procedure of the Company's periodic report conforms to provisions of
laws, administrative regulations and CSRC (China Securities Regulatory Commission), the report contents truly,
correctly and completely reflects actual conditions of the Company, and any false record, misleading statement or
important omission doesn't exist. There is no behavior violating confidentiality provisions of personnel who
participated in preparation and deliberation procedure of periodic report
3. Self-evaluation report about internal control of year 2016
During the reporting period, the Board of Supervisors has convoked special meetings to listen to reports
regarding construction and implementation situations for the internal control system of the Company, all branches
and subsidiaries by directors of Internal Audit Department, Process Management Department After a careful study
and discussion, the Board of Supervisors thinks that the Company has established a comparatively perfect internal
control system which conforms to relevant national laws and regulations requirements, and actual demand of the
Company's production and operation management, and is obtained effective implementation, and has a better risk
prevention and control effect on each section of the Company's production and operation management. The
self-evaluation report about internal control of the Board of Directors can truthfully and objectively reflect the
internal control system construction and operation conditions of the Company.
4. External Guarantee Situation of the Company
During the reporting period, the Board of Supervisors has known about demand of guarantees items and
relevant implementation situations of the Company and subsidiaries by means of interviewing financial headers,
and researched and reviewed relevant proposals regarding additional guarantees for wholly-owned subsidiaries by
the Company. Board of Supervisors thinks that: The Company provides guarantees for wholly-owned subsidiaries,
which is beneficial to further improve its production and operation abilities, fully meets fund demand required by
its production and management, and effectively improves management benefit. The financial risk of the guarantee
provided by the Company is in the controllable scope of the Company, and has no significant impact on normal
operation of the Company. 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
Hikvision 2016 Annual Report
adverse effect on the Company.
5. Related-party transaction Conditions of the Company
During the reporting period, the Board of Supervisors has supervised decision-making process of transactions,
including daily related-party transaction of the Company and related-party transaction with investment and
partnership enterprise, and the follow-up implementation situations by means of attending the Board of Directors
and interviewing the management level. The Board of Supervisors thinks that related-party transactions happened
to the Company are subject to the principles of voluntariness, equity, reasonableness, and consensus of 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, affiliated directors avoid
votes. Decision-making processes of related-party transactions are legal and compliant. There is no situation
damaging interests of the Company and medium and small shareholders.
6. Implementation of resolutions of shareholders' meeting
During the reporting period, the Board of Supervisors has carefully reviewed each proposal of the
shareholders' meeting submitted by the Board of Directors, and further inspected practical implementation of each
proposal. The Board of Supervisors thinks that the Company's Board of Directors can carefully perform relevant
resolutions of the Shareholders' Meeting.
7. Situations about restricted share plan of the Company
During the reporting period, the Board of Supervisors has researched and reviewed relevant proposals
unlocking of 2012 and 2014 restricted share plans, and relevant proposals of implementation of 2016 restricted
share plan. The Board of Supervisors thinks that: The implementation process of the Company's restricted share
plan is legal and valid, and the launch of the restricted share plan is beneficial to further perfect the Company's
governance structure, and form a favorable and balanced value distribution system; Fully arouse positivity of core
employees, and support realization of the Company strategy and long-term sustainable development; Attract and
retain core employees, and ensure long-term development and competitive advantage of the Company. At the
same time, the Board of Supervisors has carried out special audit regarding Incentive Object List of 2016
Restricted Share Plan, it thinks that: The incentive objects listed in the 2016 restricted share plan of the Company
conform to incentive object conditions stipulated by laws, regulations and normative documents, and incentive
object scope and condition stipulated by 2016 restricted share plan of the Company, which acting as subject
qualification of incentive object of 2016 restricted share plan is legal and valid.
Hikvision 2016 Annual Report
During the Reporting Period, the Company strictly followed relevant rules and regulations, strengthened
management of information insiders in preparation of the report, resolution and disclosure, and announcement of
significant affairs, and other matters related to inside information. The Company respectfully submitted the
registration form for information insiders, and reported to Shenzhen Stock Exchange Place in time.
VIII. Assessment and incentive mechanism for the senior management
The Company established a complete appraisal system on the basis of its target-oriented responsibility system
and adopted a fair and transparent appraisal mechanism for senior management members and other employees. The
Company’s board of dirctors has carried out appraisals of senior management members on the basis of its annual
target-oriented responsibility system and the appraisal result was reflected in the annual performance-based
incentive rewards. The Board carried out appraisals of the general manager and the general manager carried out
appraisals of other senior management members with the duty, capacity and performance of operation and
management objectives.
In the year 2016, senior management personnel carried out their duties with good performance, and completed
their objectives and missions set at 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 4th 2017
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
100.00%
statement
Recognition standard of deficiencies
Nature Financial report level Non-financial report level
Significant deficiency: Internal control deficiencies at non-financial
Qualitative
A deficiency or a combination of deficiencies in internal control report level are mainly identified by the
Hikvision 2016 Annual Report
criteria may prevent significant errors in financial reports from being likelihood of occurrence and the extent of
identified or prevented, e.g.: impacts on operating effective in business.
A. Invalid internal control environment; Significant deficiency: the high likelihood
B. Fraud of directors, supervisors and senior management leading to significant reduction of working
personnel on the financial report ; efficiency, or significant increase of
C. Significant errors identified by external auditors but not uncertainty, or significant deviation from the
identified during the Company is operating; expected target;
D. Invalid supervision of audit committee and internal audit Important deficiency: a higher likelihood
system; leading to remarkable reduction of working
E. Other deficiencies that may lead to the wrong judgement of efficiency, or remarkable increase of
financial statement reporter. uncertainty, or remarkable deviation from the
Important deficiency: expected target;
A deficiency or a combination of deficiencies in internal control Normal deficiency: a low likelihood leading to
may prevent errors in financial report from being identified or reduction of working efficiency, or increase of
prevented, although such deficiency is not significant, but require uncertainty, or deviation from the expected
attention of the Board and Management, e.g.: target;
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.
potential errors
direct losses of assets is 5% or more of total
Significant deficiency 5% or more of
profits
total profits
potential errors
Quantitative 2% or more but direct losses of assets is over 2% but below
Important deficiency
below 5% of 5% of total profits
criteria
total profits
potential errors
direct losses of assets is below 2% of total
Normal deficiency is 2% or less of
profits
total profits
Number of significant deficiencies in financial report level
Number of significant deficiencies in non-financial report level
Number of important deficiencies in financial report level
Number of important deficiencies in non-financial report level
X．Auditor’s report on internal control
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
Section X Coporate Bonds
Whether the Company has publicly issued corporate bonds on stock exchange place, which has not terminated or terminated but fail
to collect the full payment before the annual report authorized disclosure date.
□ Applicable √ Inapplicable
Hikvision 2016 Annual Report
Section XI Financial Report
I. Audit report
Audit Opinion Unmodified unqualified audit opinion
Audit Report sign-off Date April 12th 2017
Audit Institution Name Deloitte Touche Tohmatsu CPA LLP
Audit Report Number Deloitte Auditors’ Report (Audit) No. 17-P01795
Certified Public Accounts Name Mou Zhengfei, Huang Yan
To the shareholders of Hangzhou Hikvision Digital Technology Co., Ltd.
We have audited the accompanying financial statements of Hangzhou Hikvision Digital Technology Co., Ltd. (the
\"Company\"), which comprise the Company's and consolidated balance sheets as of 31 December 2016, and the
Company's and consolidated income statements, the Company's and consolidated statements of changes in
shareholders' equity, and the Company's and consolidated cash flow statements for the year then ended, and the
notes to the financial statements.
1. Management's responsibility for the financial statements
Management of the Company is responsible for the preparation and fair presentation of these financial statements.
This responsibility includes: (1) preparing the financial statements in accordance with Accounting Standards for
Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and
maintaining internal control which is necessary to enable that the financial statements are free from material
misstatement, whether due to fraud or error.
2. Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with China Standards on Auditing. China Standards on Auditing require that we comply with
the Code of Ethics for Chinese Certified Public Accountants, and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, Certified Public Accountants consider the internal control relevant to the preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the
Hikvision 2016 Annual Report
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
3. Opinion
In our opinion, the financial statements of the Company present fairly, in all material respects, the company's and
consolidated financial position as of 31 December 2016, and the company's and consolidated results of operations
and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.
Hikvision 2016 Annual Report
December 31st 2016
Consolidated Balance Sheet
Unit: RMB
Item Notes Closing balance Opening balance
Current Assets:
Cash and bank balances (V)1 13,634,993,154.18 10,106,500,588.53
Financial assets at fair value through
(V)2 15,547,537.34 6,160,279.18
profit or loss
Notes receivable (V)3 2,843,404,415.52 3,044,148,064.81
Accounts receivable (V)4 11,242,812,902.86 8,125,932,742.98
Prepayments (V)5 278,971,025.67 132,662,264.81
Other receivables (V)6 528,600,591.43 335,274,098.54
Inventories (V)7 3,825,159,212.28 2,818,665,737.11
Other current assets (V)8 4,153,992,276.78 2,113,013,249.46
Total Current Assets 36,523,481,116.06 26,682,357,025.42
Non-current Assets:
Available-for-sale financial assets (V)9 283,836,013.00 56,033,513.00
Long-term receivables (V)10 251,588,919.15 105,903,265.79
Long-term equity investment (V)11 35,000,000.00 -
Fixed assets (V)12 2,853,743,612.67 1,887,240,766.08
Construction in progress (V)13 316,482,522.36 844,631,051.21
Intangible assets (V)14 410,256,469.09 343,200,704.36
Goodwill (V)15 248,364,401.47 117,860,200.59
Deferred tax assets (V)16 375,255,076.61 261,215,909.72
Other non-current assets (V)17 40,999,684.42 18,000,000.00
Total Non-current Assets 4,815,526,698.77 3,634,085,410.75
Total Assets 41,339,007,814.83 30,316,442,436.17
Hikvision 2016 Annual Report
December 31st 2016
Consolidated Balance Sheet - continued
Unit: RMB
Item Notes Closing balance Opening balance
Current Liabilities:
Short-term borrowings (V)18 32,291,324.85 876,600,473.94
Financial liabilities at fair value
(V)19 69,789,502.97 19,281,989.69
through profit or loss
Notes payable (V)20 876,804,536.72 209,741,787.71
Accounts payable (V)21 7,008,335,023.47 5,869,739,370.78
Receipts in advance (V)22 469,691,437.39 395,510,795.73
Payroll payable (V)23 1,084,529,374.71 788,069,735.32
Taxes payable (V)24 1,205,675,099.74 822,299,350.08
Interests payable - 4,668,652.09
Dividends payable (V)25 20,105,831.16 24,128,481.48
Other payables (V)26 1,033,169,123.84 159,857,666.08
Non-current liabilities due within
(V)27 15,340,813.03 586,430,847.08
one year
Other current liabilities (V)28 300,177,750.17 518,074,596.90
Total Current Liabilities 12,115,909,818.05 10,274,403,746.88
Non-current Liabilities:
Long-term borrowings (V)29 1,722,207,584.33 675,753,935.00
Bonds payable (V)30 2,954,449,528.77 -
Long-term payables 7,000,000.00 7,000,000.00
Provisions (V)31 41,933,212.54 61,833,874.59
Deferred income (V)32 10,833,745.99 -
Total non-current liabilities 4,736,424,071.63 744,587,809.59
Total liabilities 16,852,333,889.68 11,018,991,556.47
Owner’s Equity
Share capital (V)33 6,102,706,885.00 4,068,772,253.00
Capital reserves (V)34 1,045,440,853.66 1,639,607,652.22
Less: Treasury stock (V)35 300,177,750.17 518,074,596.90
Other comprehensive income (V)36 (41,230,777.21) (27,660,017.70)
Surplus reserve (V)37 2,615,437,822.15 1,895,061,004.09
Retained profits (V)38 14,866,457,856.65 12,196,097,444.07
Total owners' equity attributable to owner
24,288,634,890.08 19,253,803,738.78
of the Company
Minority interests 198,039,035.07 43,647,140.92
Total owners' equity 24,486,673,925.15 19,297,450,879.70
Total liabilities and owners' equity 41,339,007,814.83 30,316,442,436.17
Notes are parts of the financial statements.
Financial statements signed by the following responsible officer:
Legal Representative: Chen Zongnian；Person in Charge of the Accounting Organization: Jin Yan； Chief Accountant: Jin Yan
Hikvision 2016 Annual Report
December 31st 2016
Balance sheet of the Company
Unit: RMB
Item Notes Closing balance Opening balance
Current Assets:
Cash and bank balances 10,249,118,159.19 6,554,624,806.82
Financial assets at fair value through
5,284,890.86 -
profit or loss
Notes receivable 221,542,747.41 285,916,430.68
Accounts receivable (XV)1 10,128,753,520.42 9,120,541,604.04
Prepayments 8,256,040.04 3,975,968.87
Other receivables (XV)2 417,963,245.46 344,944,956.54
Inventories 566,168,466.17 354,607,355.65
Other current assets 3,889,519,711.57 1,475,771,382.66
Total Current Assets 25,486,606,781.12 18,140,382,505.26
Non-current Assets:
Available-for-sale financial assets 283,221,700.00 55,429,200.00
Long-term receivables 72,153,363.60 27,000,000.00
Long-term equity investment (XV)3 1,714,688,703.42 1,175,799,927.25
Fixed assets 1,720,579,461.05 1,759,900,661.47
Construction in progress 248,447,641.34 179,392,535.51
Intangible assets 131,566,733.76 137,328,714.00
Deferred tax assets 177,568,964.27 153,437,862.78
Other non-current assets 10,782,858.00 -
Total Non-current Assets 4,359,009,425.44 3,488,288,901.01
Total Assets 29,845,616,206.56 21,628,671,406.27
Hikvision 2016 Annual Report
December 31st 2016
Balance sheet of the Company - continued
Unit: RMB
Item Notes Closing balance Opening balance
Current Liabilities:
Short-term borrowings - 432,500,194.74
Financial liabilities at fair value
58,858,697.43 -
through profit or loss
Accounts payable 138,851,152.86 116,211,859.13
Receipts in advance 233,831,105.17 171,072,708.07
Payroll payable 811,701,475.85 633,419,309.99
Taxes payable 998,754,860.91 642,749,926.57
Dividends payable 20,105,831.16 24,128,481.48
Other payables 787,861,780.95 91,301,389.43
Non-current liabilities due within
- 162,340,000.00
one year
Other current liabilities 300,177,750.17 518,074,596.90
Total Current Liabilities 3,350,142,654.50 2,791,798,466.31
Non-current Liabilities:
Bonds payable 2,954,449,528.77 -
Provisions 28,799,848.84 56,788,335.77
Total non-current liabilities 2,983,249,377.61 56,788,335.77
Total liabilities 6,333,392,032.11 2,848,586,802.08
Owners’ Equity
Share capital 6,102,706,885.00 4,068,772,253.00
Capital reserves 955,687,875.52 1,647,623,212.04
Less: Treasury stock 300,177,750.17 518,074,596.90
Surplus reserve 2,615,437,822.15 1,895,061,004.09
Retained profits 14,138,569,341.95 11,686,702,731.96
Total owners' equity 23,512,224,174.45 18,780,084,604.19
Total liabilities and owners' equity 29,845,616,206.56 21,628,671,406.27
Hikvision 2016 Annual Report
For fiscal year period from January 1st 2016 to December 31st 2016
Consolidated Income Statement
Unit: RMB
Amount for the current Amount for the prior
Item Notes
period period
I. Total operating income (V)39 31,924,020,872.44 25,271,390,273.42
Less：Total operating costs (V)39 18,649,694,075.44 15,136,793,517.44
Business taxes and surcharges (V)40 255,078,931.50 196,876,622.43
Selling expenses (V)41 2,991,273,819.81 2,179,045,314.71
Administrative expenses (V)42 3,106,761,432.94 2,211,221,871.15
Financial expense (V)43 (226,063,754.62) (152,896,391.70)
Impairment losses of assets (V)44 317,497,358.88 338,874,649.43
Add: Gains from changes in fair values (Losses are indicated
(V)45 (40,171,578.80) (16,154,643.25)
by \"－\")
Investment income (Loss is indicated by \"－\") (V)46 40,493,287.66 148,673,437.25
II. Operating profit (Loss is indicated by \"－\") 6,830,100,717.35 5,493,993,483.96
Add: Non-operating income (V)47 1,510,919,327.24 1,293,978,970.29
Including: Gains from disposal of non-current assets 203,854.22 2,829,117.71
Less: Non-operating expenses (V)48 30,841,696.08 37,930,721.86
Including: Losses from disposal of non-current assets 940,003.24 1,113,694.67
III. Total profit (total losses expressed with \"-\") 8,310,178,348.51 6,750,041,732.39
Less: Income tax expenses (V)49 889,905,208.07 867,643,887.69
IV. Net profit (net loss expressed with \"-\") 7,420,273,140.44 5,882,397,844.70
Net profit attributable to owners of parent company 7,422,261,983.16 5,869,049,646.23
Profit or loss attributable to minority shareholders (1,988,842.72) 13,348,198.47
V. Other comprehensive income, net of income tax (12,687,807.98) (17,989,248.27)
Other comprehensive income attributable to owners of
(13,570,759.51) (18,822,600.24)
the Company, net of tax
(I) Items that will not be reclassified subsequently
- -
to profit or loss
(II) Other comprehensive income to be
(13,570,759.51) (18,822,600.24)
reclassified to profit or loss in subsequent periods
1. Exchange differences arising on conversion of
financial statements denominated in foreign (13,570,759.51) (18,822,600.24)
currencies
Other comprehensive income attributable to minority
882,951.53 833,351.97
interests, net of tax
VI. Total comprehensive income 7,407,585,332.46 5,864,408,596.43
Total comprehensive income attributable to owners of
7,408,691,223.65 5,850,227,045.99
the parent company
Total comprehensive income attributable to minority
(1,105,891.19) 14,181,550.44
shareholders
VII. Earnings per share
(I) Basic earnings per share (XVI)2 1.227 0.977
(II) Diluted earnings per share (XVI)2 1.221 0.971
Hikvision 2016 Annual Report
For fiscal year period from January 1st 2016 to December 31st 2016
Income statement of the Company
Unit: RMB
Amount for the Amount for the prior
Item Notes
current period period
I. Total operating income (XV)4 17,165,449,311.27 14,247,382,172.06
Less: Operating Cost (XV)4 5,967,138,876.83 5,635,878,721.53
Business taxes and surcharges 222,640,567.03 163,525,293.31
Selling expenses 1,923,037,271.14 1,560,498,015.69
Administrative expenses 2,331,920,426.33 1,824,491,151.65
Financial expense (67,337,491.29) (66,657,382.50)
Impairment losses of assets 151,838,196.39 310,847,916.44
Add: Gains from changes in fair values (Losses are indicated by
(53,573,806.57) -
\"－\")
Investment income (Loss is indicated by \"－\") (XV)5 57,191,401.59 346,511,489.93
II. Operating profit (Loss is indicated by \"－\") 6,639,829,059.86 5,165,309,945.87
Add: Non-operating income 1,372,223,454.12 1,201,709,022.19
Including: Gains from disposal of non-current assets 154,566.50 2,710,672.80
Less: Non-operating expenses 7,973,687.35 11,191,064.63
Including: Losses from disposal of non-current assets 370,396.59 976,769.69
III. Total profit (Total loss is indicated by \"－\") 8,004,078,826.63 6,355,827,903.43
Less: Income tax expenses 800,310,646.06 801,193,702.77
IV. Net profit (Net loss is indicated by \"－\") 7,203,768,180.57 5,554,634,200.66
V. Other comprehensive income, net of income tax - -
VI. Total comprehensive income 7,203,768,180.57 5,554,634,200.66
Hikvision 2016 Annual Report
For fiscal year period from January 1st 2016 to December 31st 2016
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 32,660,216,112.46 22,777,510,666.14
Refund of tax and levies 2,592,008,277.39 2,001,179,512.70
Other cash received relating to operating activities (V)50(1) 488,882,790.83 525,913,263.75
Sub-total of cash inflows from operating activities 35,741,107,180.68 25,304,603,442.59
Cash payments for goods purchased and services received 20,889,389,503.82 15,694,627,971.95
Cash paid to and on behalf of employees 3,404,886,547.11 2,501,048,931.40
Payments of various types of taxes 2,913,713,175.75 2,455,175,034.68
Other cash paid relating to operating activities (V)50(2) 2,319,425,793.44 1,437,029,335.39
Sub-total of cash outflows from operating activities 29,527,415,020.12 22,087,881,273.42
Net Cash Flow from Operating Activities (V)51(1) 6,213,692,160.56 3,216,722,169.17
II. Cash Flows from Investing Activities:
Cash receipts from disposals and recovery of investments 4,989,550,266.43 2,928,000,000.00
Cash receipts from investment income 48,773,447.48 148,673,437.25
Net cash receipts from disposals of fixed assets, intangible
19,404,765.15 13,030,975.34
assets and other long-term assets
Other cash received relating to investing activities (V)50(3) 13,398,940.46 35,996,686.98
Sub-total of cash inflows from investing activities 5,071,127,419.52 3,125,701,099.57
Cash payments to acquire or construct fixed assets,
911,376,475.87 1,330,084,112.50
intangible assets and other long-term assets
Cash paid to acquire investments 7,335,420,926.25 1,870,817,394.24
Net cash payments for acquisitions of subsidiaries and other
(V)51(2) 172,473,788.49 -
business units
Other cash paid relating to investing activities 35,000,000.00 -
Sub-total of cash outflows from investing activities 8,454,271,190.61 3,200,901,506.74
Net Cash Flow from Investment Activities (3,383,143,771.09) (75,200,407.17)
III. Cash flows from financing activities:
Cash receipts from capital contributions 247,269,466.66 -
Including: cash receipts from capital contributions from
247,269,466.66 -
minority owners of subsidiaries
Cash receipts from borrowings 4,668,904,940.17 2,790,211,998.69
Cash receipts from bond issue 2,903,120,000.00 -
Other cash receiptsd relating to financing activities (V)50(4) 660,888,216.54 4,000,000.00
Sub-total of cash inflows from financing activities 8,480,182,623.37 2,794,211,998.69
Cash repayments of amounts borrowed 5,104,870,545.06 1,258,504,731.78
Cash payments for distribution of dividends or profits or
2,930,913,722.75 1,652,404,056.80
settlement of interest expenses
Including: payments for distribution of dividends or profits
- 5,121,125.61
to minority owners of subsidiaries
Other cash payments relating to financing activities (V)50(5) 1,602,804.35 2,093,991.15
Sub-total of cash outflows from financing activities 8,037,387,072.16 2,913,002,779.73
Net Cash Flow from Financing Activities 442,795,551.21 (118,790,781.04)
IV. Net foreign exchange differences 212,875,294.92 (100,952,230.26)
V. Net Increase (Decrease) in Cash and Cash Equivalents (V)51(1) 3,486,219,235.60 2,921,778,750.70
Add: Opening balance of Cash and Cash Equivalents (V)51(1) 10,033,033,476.30 7,111,254,725.60
VI. Closing Balance of Cash and Cash Equivalents (V)51(3) 13,519,252,711.90 10,033,033,476.30
Hikvision 2016 Annual Report
For fiscal year period from January 1st 2016 to December 31st 2016
Cash Flow Statements of the Company
Unit: RMB
Amount for the Amount for the prior
Item Notes
current period period
I. Cash Flows from Operating Activities::
Cash receipts from the sale of goods and the rendering of services 18,882,254,702.72 10,803,039,228.70
Refund of tax and levies 1,284,036,478.69 1,074,852,534.11
Other cash receipts relating to operating activities 322,630,474.75 324,140,950.48
Sub-total of cash inflows from operating activities 20,488,921,656.16 12,202,032,713.29
Cash payments for goods acquired and services received 7,375,020,750.77 6,903,906,913.83
Cash payments to and on behalf of employees 1,998,015,491.73 1,584,444,500.81
Payments of all types of taxes 2,349,110,778.76 2,032,510,607.05
Other cash payments relating to operating activities 2,003,975,502.85 1,239,471,585.53
Sub-total of cash outflows from operating activities 13,726,122,524.11 11,760,333,607.22
Net Cash Flow from Operating Activities (XV)8(1) 6,762,799,132.05 441,699,106.07
II. Cash Flows from Investing Activities:
Cash receipts from disposals and recovery of investments 3,871,026,616.63 2,858,000,000.00
Cash receipts from investment income 49,164,784.96 347,490,333.16
Net cash receipts from disposals of fixed assets, intangible assets
3,129,852.68 9,847,896.80
and other long-term assets
Net cash receipts from disposals of subsidiaries and other business
- 6.77
units
Other cash receipts relating to investing activities 3,389,327,585.78 2,344,996,750.40
Sub-total of cash inflows from investing activities 7,312,648,840.05 5,560,334,987.13
Cash payments to acquire or construct fixed assets, intangible assets
255,328,076.51 502,365,875.50
and other long-term assets
Cash payments to acquire investments 6,996,128,459.52 1,482,672,227.26
Other cash payments relating to investing activities 3,403,968,158.86 1,366,590,091.86
Sub-total of cash outflows from investing activities 10,655,424,694.89 3,351,628,194.62
Net Cash Flow from Investment Activities (3,342,775,854.84) 2,208,706,792.51
III. Cash Flows from Financing Activities
Cash receipts from borrowings - 600,084,089.00
Cash receipts from issue of bonds 2,903,120,000.00 -
Other cash receipts relating to financing activities 1,334,260,247.19 518,560,000.00
Sub-total of cash inflows from financing activities 4,237,380,247.19 1,118,644,089.00
Cash repayments of amounts borrowed 597,065,694.74 159,210,925.14
Cash payments for distribution of dividends or profits or settlement 2,898,933,448.56 1,616,845,537.75
of interest expenses
Other cash payments relating to financing activities 654,145,840.87 531,454,491.15
Sub-total of cash outflows from financing activities 4,150,144,984.17 2,307,510,954.04
Net Cash Flow from Financing Activities 87,235,263.02 (1,188,866,865.04)
IV. Net foreign exchange differences 190,636,781.99 (28,926,650.38)
V. Net increase in cash and cash equivalents (XV)8(1) 3,697,895,322.22 1,432,612,383.16
Add: Beginning balance of cash and cash equivalents (XV)8(1) 6,548,073,680.91 5,115,461,297.75
VI. Closing Balance of Cash and Cash Equivalents (XV)8(2) 10,245,969,003.13 6,548,073,680.91
Hikvision 2016 Annual Reports
For fiscal year period from January 1st 2016 to December 31st 2016
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
Amount for the current period
Owner’s Equity Attributable to owners of the Company
Item
Less:Treasury Other comprehensive Minority interests Total owners' equity
Share capital Capital reserves Surplus reserve Retained profits
share income
I. Closing balance of the preceding year 4,068,772,253.00 1,639,607,652.22 518,074,596.90 (27,660,017.70) 1,895,061,004.09 12,196,097,444.07 43,647,140.92 19,297,450,879.70
II. Increase or decrease in the current year
(decrease indicated with “-”)
2,033,934,632.00 (594,166,798.56) (217,896,846.73) (13,570,759.51) 720,376,818.06 2,670,360,412.58 154,391,894.15 5,189,223,045.45
(I) Total comprehensive income (13,570,759.51) 7,422,261,983.16 (1,105,891.19) 7,407,585,332.46
(II) Owners’ contributions and reduction in
capital
(451,494.00) 219,587,651.44 (217,896,846.73) 155,497,785.34 592,530,789.51
1. Capital contribution from owners 97,768,537.96 155,497,785.34 253,266,323.30
2. Share-based payment recognised in
owners’ equity
122,970,423.83 122,970,423.83
3. Others (Note(V)33) (451,494.00) (1,151,310.35) (217,896,846.73) 216,294,042.38
(III) Profit distribution 1,220,631,676.00 720,376,818.06 (4,751,901,570.58) (2,810,893,076.52)
1. Transfer to surplus reserve 720,376,818.06 (720,376,818.06)
2. Distributions to owners (or shareholders) (2,810,893,076.52) (2,810,893,076.52)
3. Others 1,220,631,676.00 (1,220,631,676.00)
(IV) Transfers within owners’ equity 813,754,450.00 (813,754,450.00)
1. Capitalisation of capital reserve 813,754,450.00 (813,754,450.00)
(V) Others
III. Closing balance of the current year 6,102,706,885.00 1,045,440,853.66 300,177,750.17 (41,230,777.21) 2,615,437,822.15 14,866,457,856.65 198,039,035.07 24,486,673,925.15
Amount for the same period of last year
Owner’s Equity Attributable to owners of the Company
Item
Less: Treasury Other comprehensive Minority interests Total owners' equity
Share capital Capital reserves Surplus reserve Retained profits
share income
I. Closing balance of the preceding year 4,069,128,026.00 1,480,046,325.41 547,853,280.23 (8,837,417.46) 1,339,597,584.02 8,510,162,428.31 36,912,881.21 14,879,156,547.26
II. Increase or decrease in the current year
(decrease indicated with “-”)
(355,773.00) 159,561,326.81 (29,778,683.33) (18,822,600.24) 555,463,420.07 3,685,935,015.76 6,734,259.71 4,418,294,332.44
(I) Total comprehensive income (18,822,600.24) 5,869,049,646.23 14,181,550.44 5,864,408,596.43
(II) Owners’ contributions and reduction in
capital
(355,773.00) 157,235,161.69 (29,778,683.33) 186,658,072.02
1. Capital contribution from owners
2. Share-based payment recognised in
owners’ equity
158,773,879.84 158,773,879.84
3. Others (355,773.00) (1,538,718.15) (29,778,683.33) 27,884,192.18
(III) Profit distribution 555,463,420.07 (2,183,114,630.47) (5,121,125.61) (1,632,772,336.01)
1. Transfer to surplus reserve 555,463,420.07 (555,463,420.07)
2. Distributions to owners (or shareholders) (1,627,651,210.40) (5,121,125.61) (1,632,772,336.01)
3. Others
(IV) Transfers within owners’ equity
1. Capitalisation of capital reserve
(V) Others 2,326,165.12 (2,326,165.12)
III. Closing balance of the current year 4,068,772,253.00 1,639,607,652.22 518,074,596.90 (27,660,017.70) 1,895,061,004.09 12,196,097,444.07 43,647,140.92 19,297,450,879.70
Hikvision 2016 Annual Reports
For fiscal year period from January 1st 2016 to December 31st 2016
Statement of Changes in Owners' Equity of the Company
Unit: RMB
Amount for the current period
Item
Share capital Capital reserves Less: Treasury share Surplus reserve Retained profits Total owners' equity
I. Closing balance of the preceding year 4,068,772,253.00 1,647,623,212.04 518,074,596.90 1,895,061,004.09 11,686,702,731.96 18,780,084,604.19
II. Increase or decrease in the current year
(decrease indicated with “-”)
2,033,934,632.00 (691,935,336.52) (217,896,846.73) 720,376,818.06 2,451,866,609.99 4,732,139,570.26
(I) Total comprehensive income 7,203,768,180.57 7,203,768,180.57
(II) Owners’ contributions and reduction in
capital (451,494.00) 121,819,113.48 (217,896,846.73) 339,264,466.21
1.share-based payment recognised in owners’
122,970,423.83 122,970,423.83
equity
2. Others (451,494.00) (1,151,310.35) (217,896,846.73) 216,294,042.38
(III) Profit distribution 1,220,631,676.00 720,376,818.06 (4,751,901,570.58) (2,810,893,076.52)
1.Transfer to surplus reserve 720,376,818.06 (720,376,818.06)
2. Distributions to owners (or shareholders) (2,810,893,076.52) (2,810,893,076.52)
3. Others 1,220,631,676.00 (1,220,631,676.00)
(IV) Transfers within owners’ equity 813,754,450.00 (813,754,450.00)
1. Capitalisation of capital reserve 813,754,450.00 (813,754,450.00)
III. Closing balance of the current year 6,102,706,885.00 955,687,875.52 300,177,750.17 2,615,437,822.15 14,138,569,341.95 23,512,224,174.45
Amount for the same period of last year
Item
Share capital Capital reserves Less: Treasury share Surplus reserve Retained profits Total owners' equity
I. Closing balance of the preceding year 4,069,128,026.00 1,490,388,050.35 547,853,280.23 1,339,597,584.02 8,315,183,161.77 14,666,443,541.91
II. Increase or decrease in the current year
(decrease indicated with “-”)
(355,773.00) 157,235,161.69 (29,778,683.33) 555,463,420.07 3,371,519,570.19 4,113,641,062.28
(I) Total comprehensive income 5,554,634,200.66 5,554,634,200.66
(II) Owners’ contributions and reduction in
capital (355,773.00) 157,235,161.69 (29,778,683.33) 186,658,072.02
1.share-based payment recognised in
158,773,879.84 158,773,879.84
owners’ equity
2. Others (355,773.00) (1,538,718.15) (29,778,683.33) 27,884,192.18
(III) Profit distribution 555,463,420.07 (2,183,114,630.47) (1,627,651,210.40)
1.Transfer to surplus reserve 555,463,420.07 (555,463,420.07)
2. Distributions to owners (or shareholders) (1,627,651,210.40) (1,627,651,210.40)
3. Others
(IV) Transfers within owners’ equity
1. Capitalisation of capital reserve
III. Closing balance of the current year 4,068,772,253.00 1,647,623,212.04 518,074,596.90 1,895,061,004.09 11,686,702,731.96 18,780,084,604.19
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31s t 2016
I. Basic Information About the Company
Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as \"the Company\" or \"Company\"), is a
Sino-foreign Equity Joint Venture Company, formerly known as \"Hangzhou Hikvision Digital Technology Ltd\",
established on December 30th 2001 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 25th 2008, with approval of
Shang Zi No. 598[2008] issued by the MOFCOM, the company was renamed as “Hangzhou Hikvision Digital
Technology Co., Ltd.”, headquartered in Hangzhou, and obtained the business license of enterprise
No.91330000733796106P. On May 28th 2010, the Company was listed on the Shenzhen Stock Exchange.
On May 5th 2016, the Company’s 2015 Annual General Meeting approved 2015 Annual Profit Distribution
Proposal （2015 年年度利润分配预案）. On May 18th 2016, based upon the total capital shares of 4,068,772,253
shares on December 31st 2015, the Company issued bonus shares of 1,220,631,676 shares, and distributed 813,754,450
shares through capitalization of capital reserve, as result, resulted in total capital share of 6,103,158,379 shares.
By the end of November 16th, 2016, the Company completed cancelation procedures for 451,494 shares that
already granted to the participant who was no longer eligible to be a participant, authorized by the 1st Extraordinary
General Meeting of 2012. After the completion of cancelation procedures for 451,494 shares, the total share capital of
the Company decreased to 6,102,706,885 shares. For detail of capital share, please refer to Note (V) 33.
By the end of December 31st, 2016, the Company’s registered capital is RMB 6,102,706,885, with total capital
share of 6,102,706,885 shares (RMB 1 per share), including 1,417,926,033 restricted A-shares, and 4,684,780,852
tradable A-shares.
The Company is engaged in electronic equipment manufacturing business mainly including development,
production and sales of electronic products (including explosion-proof electrical products, communications equipment
and its ancillary equipment, multimedia equipment). Business scope of the Company includes distribution of
self-manufactured products, technical service, electronic equipment installation, electronic engineering and design of
intelligent systems, construction, and maintenance. For details about business scope of the Company and its
subsidiaries, please refer to Note (VII) 1.
This financial report was approved for issue by the 22nd meeting of the third session Board of Directors of the
Company as of April 12th, 2017.
For consolidation scopt of the financial statements, please refer to Note (VII) “Interest in other entities”. For
changes in consolidation scope of the financial statements, please refer to “changes in the consolidation scope” in Note
(VI).
II. Basis for preparation of financial statements
Basis of preparation
The Company and its subsidiaries (hereinafter referred to as \"the Group\") implement Accounting
Standards for Business Enterprises issued by Ministry of Finance and relevant provisions. In addition,
the Group also discloses relevant financial information in accordance with No. 15 Preparation
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Regulations regarding Information Disclosure of Company Public Issuing Securities - General
Provisions of Financial Statement (revised in 2014).
Bookkeeping base and valuation principles
The Group measures the accounting elements in accordance with the accrual accounting basis. Except
certain financial instruments are measured by fair value, these financial statements are prepared in
accordance with the measurements basis of historical costs. If the asset decreases in value, the provision
for impairment of assets should be made according to relevant regulations.
According to the historical cost measurement, the assets shall be measured as per the amount of cash or
cash equivalent paid at the time of purchase, or the fair value of consideration paid for the purchase of
such assets. The liabilities shall be measured in accordance with the amount of funds or assets actually
received when undertaking current obligations, or the contract amount when undertaking the current
obligations, or the amount of cash or cash equivalents required for paying back the debts in daily
activities.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(II) Basis for Preparation of Financial Statements - continued
Bookkeeping base and valuation principles - continued
The fair value is a price received by the market participants from selling asset or transferring liability
during orderly transaction at the measurement date. No matter the fair value is observable or estimated
by using valuation technique, the measured and disclosed fair value in the financial statement shall be
determined on this basis.
Based on the observable extent of the input value of the fair value, and the importance of such input
value to the fair value measurement, the fair value measurement is divided into three levels:
Level 1: The input value is the offer of the same assets or liabilities on active market acquired on
measurement date;
Level 2: The input value is the input value of relevant assets or liabilities observable directly or
indirectly in addition to level 1 input value;
Level 3: The input value is the non-observable input value of assets or liabilities.
Sustainability concern
The Group has evaluated the sustainable operation ability within 12 months from December 31, 2016,
and there is no matter or condition that has significant doubt on the sustainable operation ability.
Therefore, the financial statements are prepared on the basis of going-concern assumption.
III. Important accounting policies and accounting estimates
1. Statement for Compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company comply with requirements of the Accounting
Standards for Business Enterprises, truly and completely reflect situations of the Company and
consolidated financial on December 31, 2016, the Company and consolidated operating results as well
as the Company and consolidated cash flow in year 2016.
2. Accounting Period
The fiscal year of the Group is January 1 to December 31 each year.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
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. Recording Currency
RMB is the currency in the primary economic environments in which the Company and its domestic
subsidiaries are operated. The Company and its domestic subsidiaries take RMB as the recording
currency. Overseas subsidiaries of the Company determine their recording currency based on the main
economic environment in the place of operation. For recording currency of overseas subsidiaries of the
Company, see Note (V) 53. The currency adopted by the Company for preparing the financial
statements is RMB.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
5. Accountant arrangement method for business merger under the common control and under the
different control
Business merges are classified into the business merger under the common control and the business
merger under the different control.
5.1 Business Merger under the Common Control
Business merger under the common control refers to the enterprise participating in the merger, which is
subject to the final control of the same party or the same parties before and after the merger, and such
control is not temporary.
The assets and liabilities obtained during business merger shall be measured on the basis of their
carrying amount of the combined party on the merger date. Adjust capital share premium of the capital
reserve based on the differences between book value of net assets and that of the paid combination
consideration (or total face value of issued shares); if the capital share premium is insufficient to be
written down, the retained earnings shall be adjusted.
Costs incurred directly attributable to the business combination are recorded in the profits and losses of
the current period.
5.2 Business Merger and Goodwill under the Different Control
It suggests that business involved in the combination is free from the final control of one and the same
party or more than one same parties before and after the combination.
Combination cost refers to asset paid by the purchaser to buy the control power from the purchased
party, liabilities incurred or assumed and fair value of equity instrument issued. The expenses made by
the purchaser for audit, legal service, assessment and other management related expenses during the
business merger should be included into the current profit and loss as it happens.
The identifiable assets, liabilities and contingent liabilities that are achieved by the purchaser in merger
and confirmed by the purchased party shall be measured with the fair value on the purchase day.
When combination cost is higher than fair value of the identifiable net assets acquired from the
purchased party due to combination, the difference will be confirmed as goodwill and measured initially
at cost. When combination cost is lower than air value of the identifiable net assets acquired from the
purchased party due to combination, reexamination shall be made to the measurement of fair value of all
identifiable net assets acquired from the purchased party and combination cost. If combination cost is
still lower than the said air value, the difference shall be included into current profit or loss.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Goodwill arising on a business combination is stated separately in the consolidated financial statement,
and the measurement is made its costs minus the accumulative impairment provisions.
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 an investor may control an investee; the investor may participate in relevant activities of the
investee to obtain variable rewards 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 in the above definition of control.
The merger of subsidiary starts from the Group obtaining the control power of the subsidiary, and
terminates when the Group loses the control power of the subsidiary.
As for subsidiaries disposed by the Group, operating results and cash flow prior to the disposal date
(date of losing control right) have been properly included in the consolidated profit statement and
consolidated cash flow statement.
For the subsidiary achieved through business merger under different control, the business performance
and cash flow since the purchase day (date from obtaining the control power) have been properly
included in the consolidated profit statement and consolidated cash flow statement.
For a subsidiary acquired through business combination under the same control, regardless of the time
of business combination in the reporting period, which is regarded to which included in the Group since
the date of finally controlled by the controller, its operating results and cash flows since the beginning of
the reporting period have been included in the Consolidated Income Statement and the Consolidated
Cash Flow Statement.
The principal accounting policies adopted by the subsidiary and the accounting policies will be
specified by the Company, and determination of the accounting period.
The impact of internal transaction of the Company and subsidiary, and between the subsidiaries on the
consolidated financial statement shall be offset during mergers.
Share in owner’s equity of subsidiaries that is not accounted for as equity of parent Company shall be
recorded as the minority shareholder's interest and shall be stated as \"Minority Shareholder's Interest\"
under shareholder's equity in the consolidated Liability Statement. Amount in subsidiaries' current profit
and loss accounted for as equity of minority shareholder shall be stated as “Minority Shareholder
Interest” under the net profits in the consolidated Liability Statement.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Where subsidiaries' loss shared by minority shareholders exceeds the amount of owner’s interests shared
by minority shareholders at the beginning of a year, the balance shall be written down to minority
shareholder's equity.
For the transaction of the control power of the subsidiary not lost due to purchase of minority equity of
the subsidiary or disposal of partial equity investment in the subsidiary, it shall be accounted as equity
transaction, and the book value attributable to the parent Company's owners' equity and minority
shareholders' equity shall be adjusted to reflect the changes of related equity in the subsidiary. The
capital reserve shall be adjusted by difference between the adjustment amount of the minority
shareholders' equity and the fair value of payment /receipt of consideration. Retained earnings can be
adjusted for the enough offset of the capital reserve.
7. Determination Standards of Cash and Cash Equivalents
The term “cash” refers to cash on hand and deposits that are available for payment at any time. The term
“cash equivalents” refers to short-term and highly liquid investments that could be readily convertible to
known amounts of cash and which are subject to an in significant risk of change in value.
8. Foreign Currency Transaction and Conversion of Foreign Currency Statements
8.1 Foreign Currency Transaction
Foreign currency transaction adopts the exchange rate conversion similar to the spot rate of transaction
date during the initial recognition; the exchange rate similar to the spot rate of transaction date is
calculated according to the market rate middle price of the transaction at the beginning of the month.
On the balance sheet date, foreign currency monetary items are converted to recording currency by spot
rate. The exchange balance between the spot rate on that day and initial spot rate or spot rate on former
balance sheet date is included into current profits and losses besides the exchange balance of foreign
currency borrowings meeting capitalization conditions is included into the capital cost upon
capitalization during capitalization period.
Where the preparation of consolidated financial statements is involved in overseas operation, in case of
any foreign currency monetary items of net investment in an overseas operation substantially, then the
exchange balance occurred due to exchange rate movement shall be listed in \"Foreign Currency
Statement Conversion Balance\" of shareholders' equity. When disposing overseas operation, it is
included into the profits and losses of the current period.
For foreign currency non-monetary items measured by historic cost, spot rate on date of transaction
occurrence shall be used for conversion and its recording currency amount. For foreign currency
non-monetary items measured by fair value, spot rate on the fair value determination day will be used
for conversion. The difference between the converted recording currency amount and original recording
currency amount shall be taken as the fair value fluctuation (including exchange rate fluctuation) and
included into current profits and losses or other comprehensive income.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
8.2 Conversion of Foreign Currency Financial Statement
In order to prepare the consolidated financial statements, the foreign currency financial statement of
overseas operation shall be converted as RMB statement according to the following methods: All assets
and liabilities items in the balance sheet shall be converted according to the spot rate of the balance
sheet date; The shareholders' equity item shall be converted according to spot rate at the time of
occurrence; All items in profit statement and all items of reflecting the income distribution amount shall
be converted according to the exchange rate similar to spot rate of transaction date; The difference
between the converted assets items and total number of liabilities items and shareholders' equity items is
determined as other comprehensive incomes and is included in the shareholder's equity.
The foreign currency cash flow and cash flow of overseas subsidiaries adopt the exchange rate similar
to the spot rate at the date of cash flow for conversion. The affected amount of cash and cash
equivalents due to the change of exchange rate, as an adjustment item, shall be separately listed as \"the
impact of cash and cash equivalents due to the change of exchange rate\" in the cash flow statement.
Opening amount of the year and actual amount last year are presented according to the amount after
conversion of financial statement last year.
In case of loss of control power of foreign operation due to disposal of the Group's entire owners' equity
in foreign operation, or the disposal of part of the equity investment or other reasons, the translation
reserve listed in the shareholders' equities items in the balance sheet, related to the foreign operation and
attributable to foreign currency conversion balance of the owners' equity of the parent company shall be
totally converted into the current disposal profit and loss.
In case of the decrease of the ratio of overseas business, but no loss of control power due to disposal of
part of the equity investment or other reasons, the conversion balance related to the disposal of part of
related currency in the overseas business shall be attributable to the minority shareholders' equities, and
not converted into the current profit and loss. In case of disposal of part of equity of the associated
enterprises or joint enterprise in the overseas business, the conversion balance related to the overseas
business shall be converted into the current profit and loss based on the ratio to dispose overseas
business.
9. Financial Instruments
A financial asset or financial liability shall be recognized when the Group becomes a party of financial
instrument contract. Financial asset or financial liability shall be measured at the fair value when
initially recognized. For financial assets and financial liabilities measured at fair value, the change of
which is included into current profits and losses, relevant transaction expenses shall be directly included
into the profits and losses; for other categories of financial assets and liabilities, the relevant transaction
expenses shall be included into the initial recognition amount.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.1 Effective Interest Method
The actual interest rate method refers to the method by which the post-amortization costs and the
interest incomes of different installments or interest expenses are calculated in light of the actual interest
rates of the financial assets or financial liabilities (including a set of financial assets or financial
liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a
financial asset or financial liability within the predicted term of existence or within a shorter applicable
term into the current carrying amount of the financial asset or financial liability.
For calculation of actual interest, the Group shall predict the future cash flow on the basis of taking into
account all the contractual provisions concerning the financial asset or financial liability (the future
credit losses shall not be taken into account), and take into account various fee charges, trading expenses,
premiums or reduced values, etc., which are paid or collected by the parties to a financial asset or
financial liability contract and which form a part of the actual interest rate.
9.2 Classification, Confirmation and Measurement of the Financial Assets
Financial asset shall be classified into the following four categories when they are initially recognized:
the financial assets which are measured at their fair values and the variation of which is recorded into
the profits and losses of the current period, the investments which will be held to their maturity, loans
and the account receivables and financial assets available for sale. Financial asset bought and sold by
regular means shall be recognized and derecognized in accordance with accounting at the transaction
date.
9.2.1 Financial Assets Measured at the Fair Value with Their Changes Included into Current Profit and
Loss
The financial liabilities which are measured at their fair values and of which the variation is included in
the current profits and losses, include transactional financial liabilities and the designated financial
liabilities which are measured at their fair values and of which the variation is included in the current
profits and losses.
The financial assets or liabilities meeting any of the following requirements shall be classified as
transactional financial assets or financial liabilities: (1) The purpose to acquire the said financial assets
or undertake the financial liabilities is mainly for selling or repurchase of them in the near future; (2)
Forming a part of the identifiable combination of financial instruments which are managed in a
centralized way and for which there are objective evidences proving that the enterprise may manage the
combination by way of short-term profit making in the near future; (3) Being a derivative instrument,
excluding the designated derivative instruments which are effective hedging instruments, or derivative
instruments to financial guarantee contracts, and the derivative instruments which are connected with
the equity instrument investments for which there is no quoted price in the active market, whose fair
value cannot be reliably measured, and which shall be settled by delivering the said equity instruments.
Financial assets which are measured at fair value and of which the variation is included in the current
profits and losses shall be measured at the fair value subsequently. Profits and losses generated from
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
variation of fair value and earnings from dividend and interest related to the financial assets shall be
included into profits and losses of the current period.
9.2.2 Investments Held To Maturity
The term \"held-to-maturity investment\" refers to a non-derivative financial asset with a fixed date of
maturity, a fixed or determinable amount of repo price and which the Group holds for a definite purpose
or the enterprise is able to hold until its maturity.
For held-to-maturity investments measured at the post-amortization costs by using actual interest
method, the profits and losses that arise when such financial assets are terminated from recognition, or
are impaired or amortized, shall be recorded into the profits and losses of the current period.
9.2.3 Loans and Receivables
\"Loans and accounts receivables\" refers to the non-derivative financial assets for which there is no
quoted price in the active market and of which the repo amount is fixed or determinable. The Group's
financial assets that are divided into the loan and receivables include notes receivables, accounts
receivables, other receivables, other current assets and long-term receivables, etc.
The loan and receivables adopt the effective interest method, and shall conduct subsequent measurement
according to amortized costs. The gains or losses arising from derecognition, impairment or
amortization should all be included into the current profits and losses.
9.2.4 Available-for-sale Financial Assets
The \"sellable financial assets\" include the non-derivative financial assets which are designated as
sellable when they are initially recognized as well as the financial assets other than financial assets
measured at their fair values and of which the variation is recorded into the profits and losses of the
current period, loans and accounts receivables and investments held until their maturity.
The subsequent measurement may be conducted for the available-for-sale financial assets by the fair
value; the gains or losses formed from the changes of fair value, except that the impairment losses as
well as the relevant exchange balance between foreign currency monetary financial assets and amortized
cost are included into current profits and losses, are determined as other comprehensive incomes which
shall be transferred out during the derecognition of such financial assets and included into current
profits and losses.
Interest acquired from salable financial asset during the holding time and cash dividend that has been
the investee announces to distribute shall be recorded into investment income.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The equity instrument investments for which there is no quotation in the active market and whose fair
value cannot be measured reliably, and the derivative financial assets which are connected with the said
equity instrument and must be settled by delivering the said equity instrument shall be measured on the
basis of their costs.
9.3 Financial Asset Impairment
On the balance sheet date, the Group will inspect the book value of all financial assets except the
financial assets which are measured at their fair values and the variation of which is recorded into the
profits and losses of the current period. Where there is any objective evidence proving that such
financial asset has been impaired, an impairment provision shall be made. The objective evidences
showing the impairment of financial assets refer to the matters that happen after the initial recognition
of financial assets and influence the expected future cash flows of financial assets, and the influence can
be reliably measured by the Company.
The objective evidences that can prove the impairment of financial asset shall include
(1) A serious financial difficulty occurs to the Issuer or debtor;
(2) The debtor breaches any of the contractual stipulations, for example, failing to pay the interests or
the principal or delay, etc.;
(3) The Group makes a concession to the debtor considering the economic or legal factors;
(4) The debtor will probably become bankrupt or carry out other financial restructuring;
(5) The financial asset can no longer continue to be traded in the active market due to serious financial
difficulties of the issuer;
(6) The cash flow decrease of some property in a group of financial assets is indefinable, but after the
general assessment with the public data, the predicted future cash flow of this group of financial assets
has definitely decreased from the initial recognition, and the decreased amount is calculable, including:
-The payment capacity of Debtor in this group of financial assets gets worse gradually;
- The country or region's economy of the Debtor may lead to the financial assets unable to pay;
(7) Any seriously disadvantageous change has occurred to technical, market, economic or legal
environment, etc. operated by the issuers of the equity instruments, which makes the investor of an
equity instrument unable to take back its cost of investment;
(8) The fair value of the equity instrument investments drops significantly or non-contemporarily;
(9) Other objective evidences showing the impairment of the financial asset.
- The financial assets impairment measured by the amortized costs
When impairment occurs, the financial assets counted as amortized cost will write-down its book value
to predict present value of future cash flow confirmed as the primary actual rate of this financial assets
(except for the future credit losses that not happened yet), the write-down cash will be confirmed as the
impairment loss, and will be counted into the current gains and loss. Where any financial asset is
recognized as having suffered from any impairment loss, if there is any objective evidence proving that
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.3 Impairment of Financial Asset -continued
the value of the said financial asset has been restored, and it is objectively related to the events that
occur after such loss is recognized, the impairment-related loss as originally recognized shall be
reversed and be recorded into the profiles and losses of the current period. However, the reversed
carrying amounts shall not be paid more than the post-amortization costs of the said financial asset on
the day of reverse under the assumption that no provision is made for the impairment.
An independent impairment test shall be made by the Group on the financial assets with significant
single amounts. Regarding the financial assets with insignificant single amounts, an independent
impairment test shall be carried out, or they shall be included in a combination of financial assets with
similar credit risk features so as to carry out an impairment-related test. Where, upon independent test,
the financial asset (including those financial assets with significant amounts and those with insignificant
amounts) has not been impaired, it shall be included in a combination of financial assets with similar
risk features so as to conduct another impairment test. The financial assets which have suffered from an
impairment loss in any single amount shall not be included in any combination of financial assets with
similar risk features for any impairment test.
- Available-for-sale financial assets impairment
In case of impairment in available-for-sale financial assets, transfer out the accumulated losses
originally included into other comprehensive incomes and formed due to fair value depreciation and
include into current profits and losses. The transferred-out accumulated losses are the balance of initial
asset acquisition cost, deducting recovered principal, amortized amount, current fair value and
impairment loss originally included into profits and losses.
After the confirmation of impairment loss, if the objective evidence shows that the value of the financial
assets is recovered after the period and it is objectively related with events happening after the
confirmation of the loss, the originally confirmed impairment loss will be switched back; the
impairment loss for the available-for-sale equity instrument investment is switched back and confirmed
as other comprehensive incomes and the impairment loss for available-for-sale debt instrument is
switched back and included into current profits and losses.
- The financial assets impairment measured by the costs
When equity instrument investment which is not quoted in an active market and whose fair value cannot
be measured reliably, or derivative financial assets which is linked with the equity instrument and has to
make settlement by delivering the equity instrument has asset depreciation, the book value shall be
reduced to the present value determined by discounted cash flow based on market return of similar
financial asset at that time which is recognized as impairment loss and shall be included into the current
profits and losses. The impairment loss of such financial asset shall not be reversed once confirmed.
9.4 Transfer of Financial Assets
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Where a financial asset satisfies any of the following requirements, the recognition of is shall be
terminated: (1) where the contractual rights for collecting the cash flow of the said financial asset are
terminated; (2) where the said financial asset has been transferred and all of the risks and rewards
related to the ownership of the said asset has been transferred to the transferee; or (3) where the
financial asset has been transferred and the Group has waives its control over the financial asset though
it retained nearly all of the risks and rewards related to the ownership of the said asset.
If the Group does not transfer or retain nearly all of the risks and rewards related to the ownership of the
financial asset, and does not waive its control over the financial asset, it shall, according to the extent of
its continuous involvement in the transferred financial asset, recognize the related financial asset and
recognize the relevant liability accordingly. The term \"continuous involvement in the transferred
financial asset\" shall refer to the risk level that the enterprise faces resulting from the change of the
value of the financial assets.
If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference
between the amounts of the following 2 items shall be recorded in the profits and losses of the current
period: (1) the book value of the transferred financial asset, and (2) The sum of consideration received
from the transfer, and the accumulative amount of the changes of the fair value originally recorded in
the owner's equities.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book
value of the transferred financial asset shall, between the portion whose recognition has been stopped
and the portion whose recognition has not been stopped, be apportioned according to their respective
relative fair value, and the difference between the amounts of the following 2 items shall be included
into the profits and losses of the current period: (1) the sum of consideration received from the transfer,
and the accumulative amount of the changes of the fair value originally recorded in the owner's equities,
and (2) the said apportioned book value.
9.5 Classification, Confirmation and Measurement of the Financial Liabilities
The group shall classify financial instruments or its components into financial liabilities or equity
instruments during the initial recognition in accordance with contract terms of the issued financial
instruments and reflected economic essence in legal forms and others, in combination with definitions
of financial liabilities and equity instruments.
Financial liability is classified into the financial liability measured at their fair values and of which the
variation is included in the current profits and losses and other financial liabilities.
9.5.1 Financial Liabilities Measured at the Fair Value with Their Changes Included into Current Profit
and Loss
The financial liabilities which are measured at their fair values and of which the change is included in
the current profit and loss, including transactional financial liabilities and the designated financial
liabilities which are measured at their fair values and of which the change is included in the current
profit and loss.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.5 Classification, Recognition and Measurement of Financial Liability- continued
9.5.1 Financial Debts Which Are Measured on the Fair Value and Whose Variations Are Recorded in the
Current Profit and Loss - continued
The financial liability meeting one of the following conditions will be classified as trading financial
liabilities: (1) The purpose for bearing the financial liability is mainly to buy back in the near future; (2)
Forming a part of the identifiable combination of financial instruments, initial recognition is managed in
a centralized way and has objective evidences proving that the Group may manage the combination by
way of short-term profit making in the near future; (3) Belong to derivative instruments excluding
derivative instruments that are designated as the effective hedging instruments, derivative instruments
belonging to financial guarantee contracts, and derivative instruments which are connected with the
equity instrument investment, for which there is no quotation in the active market, whose the fair value
cannot be measured reliably, and which shall be settled by delivering the said equity instruments.
In case of meeting one of the following conditions, the financial liabilities can be measured by fair value
during initial recognition and the changes can be included in the financial liabilities of current profits
and losses: (1) The appointment can eliminate or obviously decrease the inconformity of gains or losses
in confirmation or measurement caused by inconformity in the measurement basis of financial liabilities;
(2) The official written documents on risk management or investment strategies of the Group concerned
have recorded that the portfolio of said financial liabilities, or the portfolio of said financial assets and
liabilities will be managed and evaluated on the basis of their fair values and be reported to the key
management personnel; (3) Eligible mixed instruments, including embedded derivatives;
The current profits and losses and expenses of dividends and interests, arising from the change in the
fair value of the financial liabilities which is follow-up measured at its fair value and of which the
change is included in the current profit and loss, shall be included in the current profit and loss.
9.5.2 Other Financial Liability
The derivative financial liabilities which are connected to the equity instrument for which there is no
quotation in the active market and whose fair value cannot be reliably measured, and which must be
settled by delivering the equity instrument, shall be measured subsequently on the basis of the cost.
These kinds of financial liabilities should be calculated subsequently with the effective rate method and
in accordance with the amortized cost. The profits and losses result from the derecognition or
amortization should be put in the current profit and loss.
9.5.3. Financial Guarantee Contracts
The financial guarantee contract means an agreement pursuant to which a surety and a creditor agree
that the surety shall perform the obligation or bear the liability according to the agreement, when the
debtor fails to perform his obligation. Financial guarantee contract that doesn’t belong to financial
liabilities that are specified to be measured according to fair value and the changes of which are
included in the current profit and loss is initially confirmed according to fair value; after the initial
confirmation, conduct subsequent measurement with the higher remaining balance after deducting the
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
accumulated amortization amount in accordance with principles provided in Accounting Standards for
Business Enterprises No. 14 - Income by the amount confirmed according to Accounting Standards for
Business Enterprises No. 13 - Contingency and the initial confirmation amount.
9.6 Derecognition of Financial Liabilities
For financial asset whose present obligation has been fully or partially relieved, all or part of the
financial asset is derecognized. The Group (the Obligor) and the Obligee sign the agreement to
substitute the new financial liability mode for the existing financial liability. The essences of the
contract provisions for the new financial liability and existing financial liability are different, so the
recognition of existing financial liability can be terminated and the new financial recognition be
recognized at the same time.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned
shall include into the profits and losses of the current period the gap between the carrying amount which
has been terminated from recognition and the considerations it has paid (including the non-cash assets it
has transferred out and the new financial liabilities it has assumed.
9.7 Derivative Instruments and Embedded Derivative Instruments
Derivative financial instruments include forward foreign exchange contract, monetary exchange rate
swap contract, interest rate swap contract and foreign exchange option contract. Conduct initial
measurement and subsequent measurement for the derivative instruments on the related contract signing
date based on fair value. The changes in the fair value of derivatives shall be included into the current
profits and losses.
If mixed instruments that include embedded derivative instruments are not designated as financial assets
or liabilities measured based on fair value with the changes being included into the current profits and
losses, the embedded derivative instruments are not closely related to the main contract concerning
economic characters and risks and the independent instruments conforming to the definition of
derivative instruments that have the same conditions with the embedded derivative instruments are
broken out from the embedded derivative instruments to be disposed as independent derivative financial
instruments. Where it is unable to separately measure the embedded derivative instrument at acquisition
or subsequent balance sheet date, the hybrid instruments shall be designated in whole as the financial
assets or liabilities measured at fair value with changes included in current profits and losses.
9.8 Offset of Financial Assets and Financial Liabilities
When the group has the legal right to offset the confirmed financial assets and financial liabilities and is
entitled to perform the aforesaid legal right at the present, and meanwhile when the group intends to
settle or sell off the financial assets and pay off the financial liabilities by the net amount, the financial
assets and financial liabilities shall be presented in the balance sheet with the amount after the mutual
offset. In all other situations, they are presented separately in the balance sheet and are not offset.
9.9 Equity instrument
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Equity instrument refers to a contract specifying the instrument holder’s share in the remaining equity of
the Group’s asset less all its liabilities. Consideration received from issuing equity instrument less
transaction cost is recorded in owners’ equity. That the group issues (including refinancing), repurchases,
sells or cancels equity instruments is taken as the change treatment of rights and interests. The group
does not confirm the changes of fair value of equity instruments. Transaction fees relevant to the equity
transaction shall be deducted from the equity.
The Group considers the allocation of the equity holder as the allocation of profits; issued share
dividends do not influence the total equity of the shareholders.
10. Receivables
10.1 Receivables accounts of single significant amount and individual provision for bad debts:
The Group deems that the fund with amount of more
Judgment basis or amount standard
than RMB 4 million (inclusive) and accounting for
for financial assets with single
more than 10% of the receivables book balance is the
significant amount
receivables with single significant amount.
The Group separately conducts the impairment test on
the accounts receivables with single significant amount
and other receivables, the accounts receivables and
other receivables without impairment after the separate
Withdrawing method of single
test include the impairment test in the financial asset
withdrawing of bad-debt provision
portfolio with similar credit risk characteristics. The
with significant amount
accounts receivables and other receivables with the
confirmed impairment loss after the separate test on
longer include the impairment test in the financial asset
portfolio with similar credit risk characteristics.
10.2 Accounts receivables of withdrawing bad-debt provision as per credit risks feature combination:
Method of combined bed-debt provision based on credit exposure characteristics
Accounts receivables with
insignificant single amount and
The method of aging accounting receivables
significant single amount but no
single test impairment
Withdrawing bad-debt provision by aging analysis method in combination
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Calculation and
Withdrawing percentage
Aging (more than credit period) withdrawal proportion of
of other receivables (%)
receivables (%)
Within 1 year (inclusive, the same
5
below)
1-2 years 10
2-3 years 30
3-4 years 50
4-5 years 80
More than 5 years 100
10.3 Receivables accounts of single non-significant amount except individual provision for bad debts:
Reasons for single withdrawing of There are significant differences between the present
bad-debt provision value of future cash flow of the receivables and the
present value of future cash flow of the receivables as
credit risk feature by ageing.
Withdrawing method for bad-debt By respective impairment test, it carries out the bad
provision debts preparation according to the difference of the
present value of future cash flows lower than book
value
11. Inventories
11.1 Classification of Inventories
The Group's inventory mainly includes finished goods or commodities held for sale in the daily
activities, completed outstanding assets formed in the construction contract, products in the production
process, materials and supplies used in the production process or in the process of proving labor service.
Initial measurement is conducted for inventory according to cost. The inventory costs include
procurement cost, processing cost and other expenditures for inventory to be in current place and state.
11.2 Valuation Methods of the Inventory Issuing
When the shares are issued, the actual costs of the issued shares are determined using the moving
weighted average method.
11.3 Determination basis of the net realizable value of inventory:
The inventory is according to cost and net realizable value low metering on the date of balance sheet.
When the net realizable value is lower than cost, withdraw inventory falling price reserves. The net
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
realizable value refers to the amount derived by deducting the potential cost, estimated selling expense
and relative taxes to the completion date from the estimated sales price of inventory in daily activities.
When determining net realizable value of inventories, take the obtained conclusive evidence as basis
and consider the purposes of holding inventories and influence of events after the balance sheet date.
Provision for inventories is generally made as the excess of the cost of single inventory item over its net
realizable value.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down of
inventory impairment have disappeared and causing the net realizable value higher than its book value,
such inventory impairment provision are recovered and reversed, and the reversed amount recorded in
profits and losses of the current period.
11.4 Inventory System for Inventory
The inventory system is a perpetual inventory system.
11.5 Amortization Method for Low-value Consumables and Packaging
Packing materials and low-price easily-worn materials are amortized by the one-time writing-off
process.
12. Long-term Equity Investment
12.1 Judgment Standard of Joint Control and Significant Impact
Control right means that an investor may control an investee; the investor may participate in relevant
activities of the investee to obtain variable rewards and also be able to use the control rights for the
investee to influence its amount 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 approval of participants sharing the control right. The significant influence
refers to having the power to participate in the formulation of financial and operating policies of the
invested entity, but no power to control or jointly control the formulation of these policies together with
other parties. When it is confirmed whether or not the invested unit can be controlled or significantly
influenced, the following potential vote power factors have been considered: transferable bond and
warrants executable in the current period by the investing enterprise and other invested units held by it,
etc.
12.2 Confirmation of Initial Investment Costs
For the long-term equity investment acquired through the enterprise merger under the common control,
the shares of merged party's book value of owners' equity in the final controlling party consolidated
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
financial statements obtained on the merger date shall act as the initial investment cost of long-term
equity investment. The differences between the initial investment cost of long-term equity investment
and the paid cash, the transferred non-cash assets and the book value of the assumed debts are adjusted
against the capital surplus; if the capital surplus is not sufficient to be offset, the remaining balance is
adjusted against retained earnings. In the case of issued equity securities treated as consolidation
consideration, share of book value of owner's equity of merged party in a combined financial statement
of the final controlling party is regarded as initial investment cost of long-term equity investments on
the date of consolidation; capital reserve shall be adjusted in accordance with taking total nominal value
of issued share as capital share, the difference between the initial investment cost of long-term equity
investments and total book value of issued shares; In case the capital reserve is not enough for writing
down, the retained earnings shall be adjusted.
The long-term equity investments obtained by the combination of controlling interests under different
control and the merger cost confirmed on the purchased date are regarded as the initial investment cost.
The expenses made by the combining party or purchaser for audit, legal service, assessment and other
management 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 investment formed in business merger. In case that the investor may post a significant impact on
the investee or execute joint control but not constitute the control right, long-term equity investment
cost is the sum of fair value of original and determined held equity investment and newly-increased
investment cost in accordance with No. 22 Accounting Standards for Business
Enterprises----Recognition and Measure of the Financial Instruments.
12.3 Subsequent Measurement and Profit and Loss Confirmation Method
12.3.1 Long-term Equity Investments of Cost Method Accounting
Financial statement shall be calculated through the cost method, in relation to the long-term equity
investments of subsidiaries. Subsidiary corporation means the investee body which can be controlled by
the Group.
The long-term equity investment accounted by the cost method shall be measured at its initial
investment cost. If there are additional investments or disinvestments, the long-term equity investment
cost shall be adjusted. Income from the investment in the current period shall be recognized in
accordance with the cash dividends or profits declared and issued by the investee.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
12.3 Subsequent Measurement and Profit and Loss Confirmation Method - Continued
12.3.2 Long-term Equity Investments of Equity Method Accounting
Investment in consortium and joint venture is accounted for using the equity method. Consortium refers
to investee on which the Group has significant influence; joint venture refers to investee over which the
Group is able to jointly exercise control together with other investors. Associated enterprise means that
the investee which can be greatly influenced by the group; joint enterprise means a kind of joint
arrangement and the group only has control rights of such net assets.
When the equity method is adopted, where exceeding the Company’s share of the fair value of the
invested party’s identifiable net assets at investment date, the initial investment cost of the long-term
equity investment is kept unadjusted; where the initial investment cost of the long-term equity
investment is less than the Company’s share of the fair value of the invested party’s identifiable net
assets at the investment date, the differences are recorded as profit & loss for the current period and the
costs of long-term equity investment are adjusted simultaneously.
When the equity method is used for the accounting, in accordance with the shares in the net profits and
losses, and other comprehensive incomes of the invested unit which the Company is entitled to share or
bear, the investment income and other comprehensive incomes are determined separately, and
meanwhile the book value of the long-term equity investment shall be adjusted; The Company shall
accordingly reduce the book value of the long-term equity investment in terms of the part that shall be
enjoyed according to the profit or cash dividends declared by the invested 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 adjusted and be included into the capital reserves. The Company shall, on the ground of the fair value
of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable
share of the net profits and losses of the invested entity after it adjusts the net profits of the invested
entity. If the accounting policies and accounting periods adopted by the invested unit are different from
those adopted by the Company, the adjustment shall be made for the financial statements of the invested
unit in accordance with the accounting policies and accounting periods of the Company to recognize the
investment income and other comprehensive incomes. For the transaction incurred between the group
and associated enterprises and joint ventures, invested or sold assets don't constitute a business, the part
that doesn't achieve internal transaction profit or loss or belongs to the group calculated according to the
enjoyed ratio will be offset, and the profit or loss on investment will be confirmed on this basis. But for
the unrealized loss arising from the internal transaction between the group and the invested unit, if such
transaction loss is defined as the impairment loss of the transferred asset, they cannot be offset.
When the Company determines the net loss of the invested unit which shall be shared, it is necessary to
write-down the book value of the long-term equity investment and other long-term equities substantially
constituting the net investment of the invested unit to zero as a limit. Besides, if the group is obliged to
bear extra loss for the investment unit, it shall be necessary to determine provisionsf 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 offsets
its attributable share of the un-confirmed losses, resume to recognize its attributable share of profits.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
12.4 Disposing of Long-term Equity Investment
When disposing of a long-term equity investment, the difference between its book value and the actual
purchase price shall be recorded into the current profits and losses.
13. Fixed Assets
13.1 The Conditions of Recognition
The fixed assets refer to tangible assets held for commodity production, rendering of labor service,
renting or operation management, having a service life of more than one accounting year. The fixed
asset can be confirmed only when the economic interest related to a fixed asset is likely to flow into the
group, and the cost of such fixed asset can be reliably measured. Fixed assets are measured initially in
accordance with costs.
Subsequent expenditures related to fixed assets are included in costs of fixed assets when the associated
economic benefits are likely to flow to the Group and the costs can be measured reliably, and the book
value of the replaced part is derecognized; all other subsequent expenditures are included in profits and
losses in the current period when incurred. Other subsequent expenditures except for the above said
subsequent expenditure shall be included into the current profit and loss once occurred.
13.2 Depreciation Method
From the following month when fixed assets reach the estimated applicable status on, the counting and
withdrawing depreciation shall be conducted in its service life using age limit average method. The
service lives, expected rates of net residual value and annual depreciation rates of the fixed assets are as
follows:
Annual
Depreciation Salvage value
Class depreciation
life (year) rate (%)
rate (%)
Houses and buildings 20 years 10 4.5
Common facilities 3-5 years 10 18.0-30.0
Special-purpose
3-5 years 10 18.0-30.0
equipment
Transport equipment 5 years 10 18.0
The predicted net residual value refers to the expected amount that the group may obtain from the
current disposal of a fixed asset after deducting the expected disposal expenses at the expiration of its
predicted service life.
13.3 Identification Basis, Valuation and Depreciation Method of Fixed Assets of Financial Lease
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
On the commencement date of the lease term, record the fair value of the leasing asset or the present
value of the minimum lease payments on the lease commencement date, whichever is lower, as the entry
value of the leased asset, make the amount of the minimum lease payments as the entry value of
long-term account payable, and recognize the balance between the entry value of the leased asset and
that of the long-term account payables as unrecognized financing charges. In addition, the initial direct
costs directly attributable to the leased item incurred during the process of lease negotiating and signing
the leasing agreement shall be included into the asset value of the rent.
The Group applies depreciation policy consistent with its own fixed assets to depreciate the rented fixed
assets under financing lease. If it is reasonable to be certain that the Company will obtain the ownership
of the leased asset when the lease term expires, the leased asset may be fully depreciated over its useful
life. If it is not reasonable to be certain that the Company will obtain the ownership of the leased asset at
the expiry of the lease term, the leased asset may be fully depreciated over the shorter one of the lease
term or its useful life. If the ownership of the leased asset can be reasonably confirmed on the lease term
expiry, the accrual depreciation shall be conducted within the service life of the lease asset; if not, the
accrual depreciation shall be conducted within the shorter of two periods, namely the lease term and the
service life of lease asset.
13.4 Other Instructions
The fixed assets are derecognized when the fixed assets are in disposed state or no future economic
benefits are expected from their use or disposal. The amount of proceeds on sale and transfer of a fixed
asset as well as disposal of a scrapped or damaged fixed asset less its book value and related taxes, are
recognized in profits and losses of the current period.
The Group performs review on service life, predicted net residual value and depreciation method of
fixed assets at the end of the year, any changes will be treated as changes in accounting estimates.
14. Construction in Process
The cost of construction in process shall be measured as per actual costs, including various engineering
expenditures in the construction process, capitalized borrowing expenses for making the engineering
reach the expected serviceable condition, other relevant costs, etc. No depreciation calculated and
withdrawn arises from construction in process. The construction in process shall be transferred to the
fixed assets when it reaches the expected serviceable condition. For those that could reach to the
expected serviceable condition, but haven't gone through the procedures for the final accounts of the
completed projects, they will be converted to fixed assets according to the estimated value. When they
have gone through the final accounts of the completed projects, the provisional estimate value of the
original fixed assets will be adjusted according to the actual costs.
15. Borrowing Expenses
Borrowing costs directly attributable to the acquisition & construction or production of assets eligible
for capitalization shall be capitalized when assets expenditure, borrowing costs and necessary
construction or production for bringing assets to expected conditions for use or marketing have taken
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
place; when construction or production of assets ready for capitalization reach to expected conditions
for use or marketing, capitalization shall be ceased. Other borrowing expenses are recognized as
expenses in the current period.
After actual interest expense generated from the specific loan for current period, minus interest income
from the yet unused borrowed money kept in the bank or investment income made from temporary
investment, these amounts are capitalized; The capitalizing amount is determined after the weighted
average of excess part of accumulative asset expenditures compared to the asset expenditure of special
borrowing multiplied by the capitalization rate of the general borrowing. The capitalization rate shall be
calculated and determined in light of the weighted average interest rate of the general borrowing. In the
capitalization period, all exchange balance of special foreign currency borrowing shall be capitalized;
Exchange balance of general foreign currency borrowing shall be included in the current profit and loss.
16. Intangible Assets
16.1 Intangible Assets
Intangible assets include land use right, intellectual property and application software, etc.
The initial measurement of intangible assets shall be made at its cost. The intangible assets with the
limited service life can be amortized evenly for the original value by installment through the
straight-line method within its predicted service life since the time available for using. The service life
and predicted net residual value of various intangible assets are shown as follows:
Class Service life (year) Salvage value rate (%)
Land utilization right 50 years -
IP Rights 10 Years -
Application Software 5-10 years -
At the end of the period, the service life and amortization method of intangible assets whose service life
is limited shall be reviewed and adjusted when necessary.
16.2 Internal Research and Development Expenditure
Expenditures at research stage are included in current profit and loss when incurred.
Expenditures at development stage that meet all the following conditions are recognized as intangible
assets, otherwise included in current profit and loss:
(1) Complete the intangible asset so that it can be used or sold and has feasibility in technology;
(2) Have the intents to complete, use or sell the intangible assets;
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(3) The usefulness of methods for intangible assets to generate economic benefits can be proved,
including being able to prove that there is a potential market for the products manufactured by applying
the intangible assets or there is a potential market for the intangible assets itself or the intangible assets
will be used internally;
(4) There are sufficient technical, financial and other resources to complete the development of the
intangible assets, and there is ability to use or sell the intangible assets;
(5) The expenditures of the intangible assets in the development stage can be reliably measured.
The expenditures in the research stage and development stage, if failing to be classified, shall be totally
included into the current profit and loss.
17. Long-term Assets Impairment
The Group checks whether the intangible assets determined by a long-term equity investment, fixed
assets, construction in process and service life have any signs of possible impairment at each balance
sheet date. For the assets with signs of impairment, their recoverable amount will be estimated. The
intangible assets with uncertain service life and the intangible assets which have not yet reached
serviceable condition shall be give impairment test every year no matter whether there are signs of
impairment.
The recoverable amount of estimated assets shall be based on single assets; if it is difficult to estimate
the recoverable amount of single assets, the recoverable amount of the asset group shall be determined
based on its belonging asset group. The recoverable amount shall be determined in light of the higher
one between the net amount of the fair value of the assets or asset group deducted by the disposal
expenses and the present value of the expected future cash flow.
If the recoverable amount of assets is lower than its book value, assets impairment preparation shall be
counted and drawn based on its balance and be included in the current profits and losses.
Goodwill impairment test shall be conducted at the end of each year at least. Goodwill impairment test
shall be conducted in accordance with the concerned asset group or asset portfolio. That is to allocate
the book value of goodwill to the asset group or asset portfolio that is expected to benefit from the
synergies of the combination in a reasonable way from the date of purchasing. When recoverable
amount of apportion-included asset group or asset portfolio of goodwill is less than book value of
goodwill, impairment loss shall be confirmed. Firstly, amount of impairment loss shall be apportioned to
the book 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 above asset impairment losses are confirmed, they are not reversed in subsequent accounting
periods.
18. Employee compensation
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
18.1 Accountant Arrangement Method of Short-term Remuneration
During accounting period when the Group's employees provide services, actual short-term remuneration
shall be recognized as the liabilities which are included in current profit and loss or relevant asset cost.
For the employee services and benefits of the Group, they are included into current profit and loss or
relevant asset cost according to actual amount during the actual period. If the staff welfare is
non-monetary welfare, it shall be measured according to its fair value.
During the period when the employees service the Group, the Group pays social insurance premiums
such as medical insurance premium, industrial injury insurance premium, birth insurance premium and
housing accumulation fund for its employees, as well as labor union expenditure and employee
education expenses calculated and withdrawn according the regulations, corresponding employee
remuneration amount shall be calculated and determined in accordance with specified calculation and
withdrawal basis and proportion to recognize corresponding liabilities which are included into the
current profit and loss or relevant asset cost.
18.2 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 defined contribution plan shall be recognized as liabilities and included in the current profit
and loss or relevant asset cost.
18.3 Accountant Arrangement Method of the Termination Benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by such
termination benefits will be determined as the following date, whichever is earlier, and will be included
in the current profit and loss: When the Group cannot unilaterally withdraw the termination benefits
provided due to labor relation cancellation plan or employee lay-off suggestion; When the Group
determines costs or expenses in relation with the restructuring of the paid termination benefits. 19
19. Provisions
When the contingency obligation related to product quality guarantee and others is the present
obligation of the Group, and the obligation performance may cause the outflow of economic profits, of
which the amount can be measured reliably, the amount shall be confirmed as provisions.
The estimated liabilities are measured at balance sheet date in accordance with the best estimate of the
necessary expenses for the performance of the current obligation and factors pertinent to contingencies
such as the risks, uncertainties and the time value of money are taken into account as a whole. If the
time value of money generates a great influence, the best estimate shall be determined in accordance
with discounted amount of the expected future cash outflow.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
20. 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-settled share-based payment.
20.1 Equity-settled Share-based Payment
Equity-settled share-based payment granted to employees
For the equity-settled share-based payment in exchange of services provided by employees, the fair
value shall be measured with the equity instrument granted to the employees on the grant date. The fair
value's amount is based on the optimal estimation of the number of vesting equity instruments within
the waiting period, and shall be included in relevant cost or expense at the time of the granted
immediate vesting according to the straight-line method, the fair value's amount is included in relevant
cost or expense with a corresponding increase of capital reserve at the grant date.
As for each balance sheet date in the waiting period, the Group can make best estimate according to the
variations in the number of vesting staff and other subsequent information, in order to amend the
amount of equity instrument of the predicated vesting right. The stated effects of evaluation shall be
included into the current relevant cost or fees, and the capital reserves shall be adjusted correspondingly.
When receiving the restricted share subscription fund paid the incentive object that the equity incentive
plan granted, then the Group shall confirm the equity and capital reserve (capital share premium)
according to the obtained subscription fund, meanwhile, fully confirm a liability and confirm treasury
stock in terms of repurchase obligations incurred because the Company's incentive object fails to meet
unlocking condition specified in relevant equity incentive plan.
20.2. Related Accounting Treatment of Implementation, Modification and Termination of The
Share-Based Payment Plan
When the Group modifies the share-based payment plan, if the modification increases the fair value of
equity instrument granted, the increase of service shall be recognized according to the increase of fair
value of equity instrument accordingly; If the number of equity instrument granted is modified to
increase, the Group shall confirm the fair value of equity instrument increased as the increase of service
obtained. The increment of fair value for equity instrument refers to the difference in fair value of the
equity instrument before and after the modification on the modification date. If the modification
decreases the total amount of share-based payment fair value or adopts other ways which are adverse to
the employees to modify terms and conditions of share-based payment plan, unless the Group cancels
the part or all of the granted equity instruments, it shall conduct the further accounting treatment of the
services acquired, and it shall be deemed that such change never happens.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
If the conferred equity instruments are cancelled during the waiting period, the Group shall accelerate
exercising the rights of the equity instruments. The amount recognized during the remaining waiting
period shall be included into current profit and loss immediately and the capital reserve shall be
determined simultaneously. If the employees may meet non-exercisable conditions, but fail to not meet
within the waiting period, the Group may cancel them as conferred equity instruments.
21. Income
21.1 Income From Commodity Sales
The Group has transferred the main risk and remuneration from the commodity ownership to the buyer;
the Group retains neither the management rights usually associated with ownership, nor the effective
control of the sale of goods; the amount of incomes can be measured reliably; the related economic
benefits may flow to the enterprise; when the related cost has occurred or will be occur can be measured
reliably, the realization on income from commodity sales shall be confirmed.
21.2 Income From Provision of Labor Service
The realization of incomes for providing labor service shall be confirmed when the amount of incomes
for providing labor service can be reliably measured, relevant economic interests can probably flow into
the enterprise, completion degree of transaction can be reliably determined, costs that have occurred and
will occur in the transaction can be reliably measured. The Group shall confirm the labor service income
provided at the balance sheet date according to the completion percentage method. The completion
process of labor service transaction is determined by the ratio of the already accrued labor service cost
to the total costs.
In the event that result of labor service cannot be estimated reliably, revenue from such labor service is
recognized in accordance with the incurred labor cost which is estimated to be compensated, and such
labor cost is recognized as expenses for current period; where the incurred labor cost is estimated not to
be compensated, revenue from such labor service shall not be recognized. If the labor service cost
already accrued is estimated not to be compensated as predicted, its income shall not be confirmed.
21.3 Construction Contract
If the results of the construction contracts can be reliably estimated, the enterprise can confirm the
contract income and expenses as achieved by the completion percentage method on the balance sheet
date.
Progress of contract completion will be determined based on the proportion of finished contractual
amount of work covering estimated total amount of work.
If the results of the construction contract cannot be estimated reliably: where the contract costs can be
recovered, the contract revenue shall be recognized according to the actual contract costs that can be
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
recovered and the contract costs shall be recognized as the expenses incurred in the current period;
when the contract costs cannot be recovered, the contract costs shall be recognized as the expenses once
they are incurred and the revenue shall not be recognized. Where the uncertain factors affecting the
reliable estimation of the results of the construction contract have no longer been in existence, contract
revenue and expenses shall be recognized based on the percentage-of-completion method. If the
uncertain factors in that results of construction contracts cannot be reliably estimated disappear, the
relevant incomes and expenses to construction contract shall be confirmed according to the completion
percentage method.
If the expected total contract costs exceed the total contract revenue, the expected loss is recognized as
current expenses.
The accumulative cost accrued and accumulative gross profits (losses) confirmed and already settled
payments in the construction contract shall be presented as net amount after offsetting in the balance
sheet. If the sum of accumulative cost accrued and accumulative gross profits (losses) confirmed is
surplus settled part of payments in the construction contract, this part is listed as inventory; If the settled
part of payment is surplus the sum of accumulative cost accrued and accumulative gross profits (losses)
confirmed in the construction contract, this part is listed as prepayment.
As for the construction business of public infrastructures in BOT, the Group will recognize the relevant
income and expenses of the construction services according to Accounting Standards for Business
Enterprises No. 15- Construction Contract in the project construction period; After the completion of
infrastructure, the income and expenses related to the follow-up operation services will be recognized
according to Accounting Standards for Business Enterprises No. 14 - Income.
22. Governmental Subsidy
Governmental subsidies are the monetary and non-monetary assets obtained by the Group from the
government for free. According to the subsidy object regulated in government documents, the
government subsidy will be divided into government subsidy related to assets and income.
The government subsidy shall be recognized when the attached conditions of government subsidies can
be met and obtained. The government subsidy which is monetary assets shall be calculated by the
actually received amount.
22.1 Judgment Basis and Accountant Arrangement Method of Government Subsidy Related to the
Assets
Asset-related government subsidy, shall be recognized as deferred income, evenly spread to the service
life of corresponding assets, and included as profit or loss of the current period.
22.2 Judgment Basis and Accountant Arrangement Method of Government Subsidy Related to the
Income
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The income-related government subsidies shall be recognized as the deferred incomes if it is used to
compensate the relevant expenses and losses in the later period and included into the current profit
and loss in the period of confirming the related expenses; Those used for compensating the related
expenses and losses incurred shall be included into the current profit and loss directly.
23. Deferred Income Tax Assets / Deferred Income Tax Liabilities
The current income tax expenses include income tax and deferred income tax.
23.1. Current Income Tax
On the balance sheet date, the current income tax liabilities (or assets) incurred in the current period or
prior periods shall be measured on the basis of the expected payable (or refundable) amount of income
tax, which is calculated according to the tax law.
23.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities
In case of temporary differences including the difference between the book value of assets and liabilities
and the tax base and difference between the book value and the tax base of the items which are not
recognized as assets and liabilities, however, the tax base of which can be determined in accordance
with tax law, the deferred income tax assets and liabilities shall be recognized by adopting the balance
sheet liability method.
In general, all temporary differences shall be recognized as relevant deferred income taxes. For
deductible temporary differences, the Group shall confirm the related deferred income tax assets when
the taxable income amount of deductible temporary differences that is likely to be deducted in future is
regarded as the limit. In addition, related to the initial recognition of goodwill, and the taxable
temporary differences related to the initial recognition of assets or liabilities occurred in the transaction
which will not influence the accounting profit and taxable income (or deduction loss), and not the
business merger, shall not confirm the deferred income tax assets or liabilities.
As for any deductible loss or tax deduction that can be carried forward to the subsequent years, the
corresponding deferred income tax assets shall be determined to the extent that the amount of future
taxable income to be offset by the deductible loss and tax deduction to be likely obtained.
The Group can confirm deferred income tax liabilities arisen by the taxable temporary differences
related to investment invested with its subsidiary, except that it can control the timing of reversal of
temporary differences, and the temporary differences in the foreseeable future is unlikely to be reversed.
For deductible temporary differences related to the investment of the subsidiary, if it's possible that the
temporary difference shall be switched back in the foreseeable future and obtain sufficient taxable
income for deducting the deductible temporary difference in the future, the Group will confirm it as the
deferred income tax assets.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
23.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities - continued
On the balance sheet date, the deferred income tax assets and deferred income tax liabilities shall, under
the tax law, be measured at the tax rate applicable to the period during which the assets are expected to
be recovered or the liabilities are expected to be settled.
Except that the current income tax and deferred income tax which are confirmed as other
comprehensive incomes or those related to transactions and events directly included into the
shareholders' equities shall be included into other comprehensive incomes or shareholders' equities, as
well as the book value of deferred income tax for goodwill adjustment arising from business merger, the
remaining current income tax and deferred income tax expenses or revenues shall be included into
current profit and loss.
At balance sheet date, it shall recheck the book value of deferred income tax assets. If taxable income is
likely to fail to cover the profits generated from the deferred income tax assets, then it is necessary to
write down the book value of deferred income tax assets. When adequate taxable income is likely to
obtain, recover the deducted amount. When adequate taxable income is likely to obtain, the deducted
amount shall be recovered.
23.3 Offset of Income Tax
When having the legal rights settled at a net amount are owned and it is intended to make settlement at a
net amount, obtain assets or repay liabilities simultaneously, the Group's current income tax assets and
current income tax liabilities shall be presented at a net amount after offsetting.
The deferred income tax assets and liabilities of the Group shall be presented at the net amount after
deducting when having the legal right of settling income tax assets and liabilities in current period at net
amount and the deferred income tax assets and liabilities are pertinent to income tax of the same
taxation subject or different subjects collected by the same tax collection and administration department,
however during each period of significance when the deferred income tax assets and liabilities are
reversed, the taxation subjects involved intend to settle the income tax assets and liabilities in current
period at net amount or obtain assets and settle liabilities simultaneously.
24. Lease
Transfer the financing lease of all risks and remunerations related to the ownership of assets in essence.
Operating leases refer to the leases other than finance leases.
24.1 Accountant Arrangement Method of The Operating Lease
24.1.1 The Group will record operating leasing business as the lessee.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Any rental payment from operating leases shall be recognized in relevant asset costs or current profit
and loss in accordance with the straight-line method in each period within the lease term. Initial direct
expenses shall be included in current profit and loss while the contingent rents shall be included in
current profit and loss when they actually occur. The initial direct costs shall be included into the current
profit and loss. The contingent rental shall be included into the current profit and loss when it is actually
incurred.
24.1.2 The Group will record operating leasing business as the lesser.
The rental income of operating lease during each period within the lease term will be recognized as the
current profit and loss according to the straight-line method. A large amount of initial direct costs shall
be capitalized when occurring and be included into current profit and loss according to the same
installment of rental income in the entire lease term; the other initial direct costs of smaller amount will
be included into the current profit and loss when it occurs. The contingent rental shall be included into
the current profit and loss when it is actually incurred.
24.2. Accountant Arrangement Method of the Financing Lease
24.2.1 The Group will record operating leasing business as the lessee.
For relevant accountant arrangement method, see Note (III) \"15.3 Identification basis, valuation and
depreciation method of fixed assets of financing lease\".
Where the unrecognized financing costs are within the lease term, the current financing costs shall be
recognized in accordance with the effective interest method. Contingent rents shall be included in
current profit and loss when they actually occur. The minimum rental payment shall be presently
respectively as long-term liabilities and long-term liabilities due within one year after deducting the
unrecognized financing costs. The contingent rental shall be included into the current profit and loss
when it is actually incurred. The remaining balance of the minimum leasing payment deducting
unrecognized financing charges is respectively presented as long-term liability and long-term liability
due in one year.
24.2. Accountant Arrangement Method of The Financing Lease
24.2.2 The Group will record operating leasing business as the lesser.
At the beginning date of the lease term, a lessor shall recognize the sum of the minimum lease receipts
on the lease beginning date and the initial direct costs as the entry value in an account of the financing
lease values receivables, and record the un-guaranteed residual value at the same time; The balance
between the sums of the minimum lease receipts, the initial direct costs and the unguaranteed residual
value, and the sum of their present values shall be recognized as unrealized financing income.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The unrealized financing incomes adopt the effective interest method during each lease term to calculate
and recognize the current financing incomes. The contingent rental shall be included into the current
profit and loss when it is actually incurred.
The balance of the receivables financing lease amount deducting unrealized financing revenue is
respectively presented as long-term creditor's rights and long-term creditor's rights due in one year.
25. Buy-back Its Own Shares
When repurchasing this Company shares, the treatment of treasury stock shall be implemented
according to actually-paid amount and the future reference shall be registered at the same time. If the
repurchased shares are cancelled, then the difference between the total amount of cancelled share face
value and share face value of cancelled number of shares and the consideration amount paid by the
actual repurchase shall offset the capital reserve, if the capital reserve is insufficient, then the retained
earnings shall be offset.
If the transaction expense paid in the process of repurchasing this Company shares reduces the
shareholders' equity, then gains or losses shall not be determined.
26. Important judgments used during accounting policy process and key assumptions and
uncertainty factors used in accounting estimate
During the process of using accounting policy described in note (III), due to the uncertainty in operation
activities, the group should judge, estimate and assume the book value which may not be metered
accurately. These judgments, estimates and assumptions are based on the historical experience of the
Group's management level and other key factors. Differences may exist in the actual results and the
group estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis of
continuous operation. If the changes of accounting estimate only influence current period, the influence
number will be affirmed during the changing period; if it influences the current period and future period,
the influence number will be recognized in the current period and future period.
- Key assumptions and uncertainties used in accounting estimate
On balance sheet date, key assumptions and uncertainties in book value of assets and liabilities in future
period caused by the accounting estimate mainly are
Impairment of the fixed assets
At the balance sheet date, the Group will check whether fixed assets have signs that depreciation is
likely to occur. When the signs indicate that the carrying amount cannot be repurchased, then the
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
impairment test shall be implemented. The impairment occurred when the book value of assets or asset
group is higher than the recoverable amount, namely the net amount of fair value minus the disposal
expenses or the present value of expected future cash flow (which is higher). The net amount of fair
value minimum disposal expenses is determined by deducting the incremental cost which directly
belongs to the assets disposal referring to the price of sales agreement of similar assets in fair
transaction or the observable market price. When predicting present value of future cash flows,
management level must estimate the predicted future cash flows of the said asset or asset portfolio, and
shall select proper discount rate to confirm the present value of future cash flows. Based on the above
procedure, the Group's management level deems that fixed assets shall not need to calculate and
withdraw the impairment reserve.
Service life and predicted net residual value of fixed asset
The Group's estimation of fixed assets serviceable life is based on the historical experience of actual
usable term of fixed assets with similar properties and functions, the estimation of predicted net residual
value is the amount obtained currently by the Group from the assets after deducting the anticipated
disposal expense based on the anticipated status assuming that fixed assets' predicted service life expires
and fixed assets are at the end of service life. The Group shall conduct the review on the predicted
service life and predicted net residual value of fixed assets at least at the end of each year, this year the
Group's management level fails to find the conditions to make the Group's fixed asset service life
shortened or extended and need to change predicted net residual value.
Impairment of accounts receivables
When there is a clear evidence to make the accounts receivables recovery in doubt, then the Group will
calculate and withdraw the impairment preparation to the accounts receivables. Because the Group's
management level needs to decide the historic payment collection, aging, debtor's financial condition
and overall economic environment when considering the impairment reserve, so the calculation of
impairment reserve has the uncertainty. Although there is no reason to believe that the based estimation
will have a major change in the future when calculating the impairment of accounts receivables, the
book value and impairment loss of accounts receivables will change when the future actual result is
different from the anticipated and original estimation.
Accrued liabilities of product quality assurance
Accrued liabilities of product quality assurance are an estimation made by the Group according to the
repair and replacement cost of predicted relevant products. The estimation is involved in the product
claim rate trend, history defect rate, industry practice and other major estimations. The management
level deems that the current estimation on accrued liabilities of product quality assurance is reasonable,
but the Group will continue to review the product after-sales service, the Group will conduct adjustment
during the period of sign occurrence once there are indications that the accounting assumptions need to
be adjusted
Provision for impairment of inventories
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Inventories are stated at the lower of cost and net realizable value. The Group will regularly conduct a
comprehensive inventory to determine whether there are outmoded and dull inventory and to review the
impairment circumstances, in addition, the Group's management level will regularly review the
impairment circumstance of inventory with long storage time according to the inventory storage time
list. The review procedure includes the comparison between book value of outmoded, dull inventory and
inventory with long storage time and its corresponding net realizable value in order to determine
whether the outmoded, dull inventory and inventory with long storage time need to calculate and
withdraw reserve in the financial statements. Based on the above procedure, the Group's management
level deems that the full falling price reserves have been calculated and withdrawn for the outmoded,
dull inventory and inventory with long storage time
Assets from deferred income tax
The realization of deferred income tax assets mainly depends on the future actual profit and the effective
tax rate of temporary difference in the future use year. If the actual profit in the future is less than the
estimation, or actual tax rate is lower than the estimation, then the confirmed deferred income tax assets
will be turned back and be confirmed in the income statement during the period of return-back. If the
actual profit in the future is more than the estimation, or actual tax rate is higher than the estimation,
then the corresponding deferred income tax assets will be adjusted and be confirmed in the income
statement during the condition occurrence.
Goodwill impairment
When the goodwill conducts the impairment test, this needs to calculate the predicted present value of
future cash flow of relevant asset group or asset group combination included in the goodwill, and needs
to predict the future cash flow of relevant asset group or asset group combination, and needs to
determine a proper pretax rate that reflects the current market time value of money and specific asset
risk. When the future actual result is different from the original estimation, then the goodwill
impairment loss will change.
IV. Taxes
Major tax categories and rates
Tax category Taxation basis Tax rate
Enterprise income tax Taxable income 25% (Note 1)
For the taxable product sales
revenue or taxable labor
revenue, the Company and
6%, 11%, 17% and simple
its domestic subsidiaries are
VAT collection rate of 3% (Note
an ordinary VAT payer; the
2)
VAT payable is the balance
after the substituted money
on VAT minus deductible
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
input tax.
Business tax Assessable Income 5%, 3% (Note 3)
Urban maintenance and
Actual payable turnover tax 7%
construction tax
Education surcharges Actual payable turnover tax 3%
Local education surcharges Actual payable turnover tax 2%
Note 1: Except that this Company and subsidiaries in China are applicable to the following tax
preference, this Company's other subsidiaries in China are applicable to 25% of enterprise income tax
rate, the overseas subsidiaries are applicable to local tax rate.
(1) In accordance with the Notice on Publishing the List of First Batch of 722 identified High-tech
Enterprises of Zhejiang Province in 2014 (ZGQR [2014] No. 03) issued by Zhejiang high-tech
enterprise identification management work leading group on September 19, 2014, this Company was
identified as the high-tech enterprise with a valid term of 3 years from 2014 to 2016. This year the
enterprise income tax shall be calculated and paid according to tax rate of 15%.
In accordance with the Notice on Printing and Distributing the List of Key Software Enterprise and
Integrated Circuit Design Enterprise within 2013- 2014 Annual National Planning Layout (FGGJ [2013]
No. 2458), in 2013 this Company was identified as the national key software enterprise. In accordance
with the Notice on Relevant Problems of Income Tax Preferential Policy of Software and Integrated
Circuit Industry Enterprise (CS [2016] No. 49), the 2015 annual enterprise income tax shall be
calculated and paid according to tax rate of 10% after this Company was approved by the tax authority
in May 2016. As at approval date of this report, the income tax preferential policy has not been
approved in 2016, so this year the enterprise income tax shall still be calculated and withdrawn
according to tax rate of 15%.
(2) Zhejiang Province Economic and Information Management Committee identified that the
wholly-owned subsidiary - Hangzhou Hikvision System Technology Co., Ltd. (\"Hangzhou System\") is a
software enterprise. In accordance with the tax law, the software enterprise shall enjoy the preferential
policy of exemption for the next first two years and half rate reduction for the next subsequent three
years, the 2016 is the fifth year of profit-making year. Hangzhou System's income tax rate shall be
calculated and paid according to 12.5% after the review for the record in 2015, but this year Hangzhou
System fails to pass the software enterprise review, so this year this Company cannot enjoy the tax
preferential policy of half rate reduction of software enterprise income tax.
In accordance with the Letter of Reply on Publishing the Registration of First Batch of High-tech
Enterprises of Zhejiang Province in 2016 (GKH ZI [2016] No. 149) issued by Zhejiang high-tech
enterprise identification management work leading group on December 9, 2016, this Company was
identified as the high-tech enterprise with a valid term of 3 years from 2016 to 2018. Therefore, the
enterprise income tax this year shall be calculated and paid according to tax rate of 15%.
(3) In accordance with the Notice on Publishing the List of First Batch of Reviewed High-tech
Enterprises of Shanghai in 2014 issued by Shanghai high-tech enterprise identification office, the
wholly-owned subsidiary - Shanghai Gaodewei Intelligent Transportation Systems Co., Ltd. (\"Shanghai
Gaodewei\") passed the review of the high-tech enterprise with a valid term of 3 years from 2014 to
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
2016. Therefore, this year the enterprise income tax shall be calculated and paid according to tax rate of
15%.
(4) In accordance with the Notice on Publishing the List of Second Batch of Reviewed High-tech
Enterprises of Shanghai in 2013 issued by Shanghai high-tech enterprise identification office, the
wholly-owned subsidiary - Hundure Intelligent Systems (Shanghai) Co., Ltd. (\"Shanghai Hundure\")
passed the review of the high-tech enterprise with a valid term of 3 years from 2013 to 2015. But this
year Shanghai Hundure fails to pass the review of the high-tech enterprise, so this year the enterprise
income tax shall be calculated and paid according to tax rate of 25%.
(5) In accordance with CS [2011] No. 58 Document of Ministry of Finance, SAT and General
Administration of Customs, the wholly-owned subsidiaries - Chongqing Hikvision Science and
Technology Co., Ltd. and Chongqing Hikvision System Technology Co., Ltd. Can enjoy the west
development preferential tax policy from 2011 to 2020, this year the enterprise income rate shall be
calculated and paid on the basis of 15%.
Note 2: In accordance with the Notice on Software Product Value-added Tax Policy (CS [2011] No. 100)
of Ministry of Finance and SAT, as for the sales of software products developed by this Company and
its all wholly-owned subsidiaries, such as Shanghai Gaodewei, Hangzhou System, Shanghai Hundure,
Beijing Brainaire Storage Technology Co., Ltd., Hangzhou EZVIZ Network Co., Ltd. and Hangzhou
HIK Robot Technology Co., Ltd., The VAT shall be calculated and paid by tax rate of 17%, the part with
actual tax bearing more than 3% shall be refunded after the approval of the SAT.
Note 3: In accordance with the Notice on Fully Implementing the Change from Business Tax to
Value-Added Tax (CS [2016] No. 36) the Group's business tax has been changed as VAT since May 1,
2016, of which the engineering integration income is applicable to the 11% of VAT rate, engineering
project management income is applicable to the VAT rate with a simple collection rate of 3%.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
Unit: RMB
Closing Balance Opening Balance
Foreign currency Exchange rate for Foreign currency Exchange rate for
Item RMB amount RMB amount
amount conversion amount conversion
Cash：
RMB - - 71,546.66 - - 535,951.44
USD 54,518.00 6.9370 378,191.37 6,298.00 6.4936 40,896.69
EUR 9,914.76 7.3665 73,036.78 12,310.84 7.0952 87,347.87
GBP 3,194.57 8.5094 27,183.87 499.57 9.6159 4,803.82
ZAR 20,000.00 0.5083 10,165.18 20,000.00 0.4177 8,354.00
INR 648,250.61 0.1023 66,308.91 1,838,768.00 0.0977 179,666.02
RUB 700,327.10 0.1151 80,584.44 300,216.10 0.0884 26,539.10
AED 22,038.00 1.8876 41,599.39 - - -
Bank balance：
RMB - - 9,008,949,518.02 - - 8,366,477,608.69
USD 557,895,047.74 6.9370 3,870,112,669.33 233,090,986.16 6.4936 1,513,599,627.73
EUR 63,105,958.57 7.3086 461,213,364.03 10,995,696.90 7.0952 78,016,668.65
GBP 1,162,906.87 8.5162 9,903,554.55 940,967.10 9.6159 9,048,245.53
JPY 408.00 0.0596 24.31 - - -
CHF 4,350.83 6.7989 29,580.86 - - -
ZAR 479,939.35 0.5083 243,938.69 1,426,641.29 0.4177 595,908.07
INR 741,278,806.84 0.1023 75,824,667.94 202,153,791.00 0.0977 19,752,446.92
RUB 376,048,117.90 0.1149 43,219,734.70 410,300,913.83 0.0884 36,270,600.79
HKD 113,182.52 0.8945 101,242.90 247,198.58 0.8378 207,098.03
AUD 358,996.02 5.0157 1,800,616.34 91,861.63 4.7276 434,285.04
AED 8,811,007.21 1.8876 16,631,825.02 1,837.50 1.7684 3,249.44
BRL 8,453,226.09 2.1336 18,035,803.19 178,201.98 1.6445 293,060.28
SGD 34,035.93 4.7995 163,355.45 1,655.21 4.4426 7,353.44
PLN 1,403,342.82 1.6569 2,325,147.58 1,047,350.78 1.5841 1,659,108.37
KRW 120,990,676.00 0.0058 696,509.57 359,794,675.00 0.0055 1,978,870.71
CAD 42,307.32 5.1406 217,485.01 - - -
KZT 27,890,915.57 0.0207 577,341.95 - - -
COP 261,841,960.55 0.0023 604,226.04 - - -
TRY 21,242.60 1.9702 41,851.47 - - -
Other currency
funds:
RMB - - 102,586,217.99 - - 77,272,897.90
USD 3,019,477.89 6.6811 20,173,564.54 - - -
EUR 108,432.98 7.3068 792,298.10 - - -
Total 13,634,993,154.18 10,106,500,588.53
including: deposited
565,682,133.09 331,732,952.04
in overseas banks
As of 31 December 2016, other currency funds book value of the Group in RMB totalled RMB 123,552,080.63,
including a RMB closing balance of RMB 102,586,217.99 (opening balance: RMB 77,272,897.90). The balance of
other currency funds mainly includes cash deposit guaranteed for letter of guarantee of RMB 4,659,173.02 (opening
blance: RMB 13,638,274.27), cash deposit guaranteed for forward foreign exchange transaction of RMB
3,100,000.00 (opening balance RMB 19,643,521.37), cash deposit guaranteed for bank acceptance bill of RMB
57,015,406.62 (opening balance RMB 39,665,967.24), bank deposit of RMB 30,000,000.00 (opening blance: nil)
pledged for long-term borrowing. Other currency funds book value in US Dollar totaled USD 3,019,477.89
(equivalent to RMB 20,173,564.54), cash deposit guaranteed for letter of credit.
Hikvision 2016 Annual Report
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
2. Financial assets as fair value through profit and loss
Unit: RMB
Item Closing Balance Opening Balance
Held-for-trading financial assets 15,547,537.34 6,160,279.18
including: derivative financial assets 15,547,537.34 6,160,279.18
Total 15,547,537.34 6,160,279.18
Derivative financial assets includes forwards and interest rate swap contracts, not designated as a hedging
instrument, gains or losses due to changes in fair value is directly included in the current period profits and
losses.
3. Notes receivable
3.1 Categories of notes receivable
Unit：RMB
Category Closing Balance Opening Balance
Bank acceptance bill 2,762,741,337.04 2,962,863,236.66
Commercial acceptance bill 80,663,078.48 81,284,828.15
Total 2,843,404,415.52 3,044,148,064.81
3.2 Notes receivable pledged at the closing of the year
Unit：RMB
Category Pledged amount by December 31st, 2016
Bank acceptance bill 421,356,552.77
Commercial acceptance bill -
Total 421,356,552.77
3.3 Notes receivable discounted or endorsed at the closing of the year
Unit：RMB
Category Derecognised amount (Note) Not Derecognised amount
Bank acceptance bill 2,941,986,624.94 -
Commercial acceptance bill - -
Total 2,941,986,624.94 -
Note：After the notes receivable discounted was discounted or endorsed, the main risk such as interest rate has
been transferred to bank or others, therefore, all discounted and endorsed bank acceptance bills have
been derecognised by the Group.
3.4 As of December 31st, 2016, there is no such case the Group has to transfer the defaulted note receivable into
account receivable.
Hikvision 2016 Annual Reports
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
4. Account Receivable
4.1 Disclosure of accounts receivable by categories
Unit: RMB
Closing Balance Beginning Balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
Category
Carrying Value Proportion Carrying Value
Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Amount
(%)
Accounts receivable that are
individually significant and for
- - - - - - - - - -
which bad debt provision has been
assessed individually
Accounts receivable with provision
accrued collectively on a portfolio 12,103,912,990.83 100 861,100,087.97 7.11 11,242,812,902.86 8,742,595,008.97 100.00 616,662,265.99 7.05 8,125,932,742.98
basis
Accounts receivable that are not
individually significant but for which
- - - - - - - - - -
bad debt provision has been assessed
individually
Total 12,103,912,990.83 100 861,100,087.97 7.11 11,242,812,902.86 8,742,595,008.97 100.00 616,662,265.99 7.05 8,125,932,742.98
Note: The group categorizes account receivable above RMB 4 million or account for more than 10% of the total account receivable closing balance as accounts receivable that
are individually significant.
The aging analysis of bad debt provision of account receivable in portfolio basis
Unit: RMB
Closing Balance
Aging
Carrying amount Bad debt provision Proportion (%)
Within 1 year 10,523,500,387.08 526,175,019.34 5.00
More than 1 year but not exceeding 2 years 1,079,076,499.37 107,907,649.94 10.00
More than 2 year but not exceeding 3 years 248,963,670.23 74,689,101.07 30.00
More than 3 year but not exceeding 4 years 173,515,249.59 86,757,624.79 50.00
More than 4 year but not exceeding 5 years 66,432,458.64 53,145,966.91 80.00
More than 5 years 12,424,725.92 12,424,725.92 100.00
Subtotal 12,103,912,990.83 861,100,087.97 7.11
Hikvision 2016 Annual Reports
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
4.2 Provision, re-collection, or reverse of the bad debt allowance in current fiscal year
In current fiscal year, the Company recorded a bad debt allowance of RMB 263,333,762.07, an increase of
RMB 20,723.58 bed debt allowance due to coversion from statements in foreign currency. There is no such
case as reversed bad debt allowance or recovered bad debts.
4.3 Actual write-off of accunt receivable during current fiscal year
In current fiscal year, the amount of accounts receivable write-off is RMB 18,916,663.67.
4.4 Top five debtors based on corresponding closing balance of account recievable
Unit: RMB
Relationship with the Book balance of account Closing balance for bed debt
Name of the Party Proportion (%)
Company receivable provision
Related party A Related Party 271,544,092.90 13,577,204.64 2.24
Company A 3rd party 95,128,752.51 10,365,230.34 0.79
rd
Company B 3 party 75,975,206.52 3,798,760.33 0.63
rd
Company C 3 party 68,562,052.33 3,428,102.62 0.57
rd
Company D 3 party 68,263,870.00 9,010,073.50 0.56
Total 579,473,974.26 40,179,371.43 4.79
4.5 As of December 31, 2016, there is no termination of account receivable booking due to transfer of a financial
asset.
4.6 As of December 31, 2016, the Group has no assets/liabilities booked due to transferred account receivable that the
Group still keep recourse or retain part of the corresponding rights or interests.
5. Prepayments
5.1 Aging analysis of prepayments is as follows
Unit: RMB
Closing Balance Opening Balance
Aging
Carrying amount Proportion (%) Carrying amount Proportion (%)
Within 1 year 259,834,265.50 93.14 120,408,286.44 90.76
More than 1 year
but not exceeding 2 16,963,135.17 6.08 5,340,047.37 4.03
years
More than 2 year
but not exceeding 3 122,880.00 0.04 452,917.80 0.34
years
More than 3 years 2,050,745.00 0.74 6,461,013.20 4.87
Total 278,971,025.67 100.00 132,662,264.81 100.00
5.2 Closing balances of top five prepayments parties
As of December 31, 2016, the Group’s top five balances of prepayments amounted to RMB 96,905,107.31,
accounting for 35% of total closing balance of prepayments.
Hikvision 2016 Annual Reports
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
6. Other receivables
6.1 Disclosure of other receivables by categories
Unit: RMB
Closing Balance Opening Balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
Category
Proportion Proportion Carrying Value Carrying Value
Amount Amount Amount Proportion (%) Amount Proportion (%)
(%) (%)
Other receivables that are
individually significant and for
- - - - - - - - - -
which bad debt provision has been
assessed individually
Other receivables with provision
accrued collectively on a portfolio 572,194,253.84 100.00 43,593,662.41 7.62 528,600,591.43 374,811,641.46 100.00 39,537,542.92 10.55 335,274,098.54
basis
Other receivables that are not
individually significant but for
- - - - - - - - -
