Hangzhou Hikvision Digital Technology Co., Ltd.
2018 Annual Report
April 20
th
2019
To shareholders
Dear Shareholders,
In 2018, Hikvision realized total revenue of RMB 49.84 billion, with a year-over-year growthrate of 18.93 percent; and net profit attributable to the parent company of RMB 11.35 billion, anincrease of 20.64 percent year-over-year. The Company maintained solid growth.
Our business faced more challenges in 2018 than in any previous years. The Company wasmore cautious and conservative on sales strategy than any previous year and put more emphasis onshort-term risk management. However, the Company remains upbeat about growth in the domesticand overseas markets in the years ahead. We actively explored business development opportunitiesin both domestic and foreign markets, and continued to increase investment in product research anddevelopment (R&D) and marketing.
In 2018, the Company stepped up the development of its AI Cloud software platform andfacilitated the adoption of AI Cloud. In the era of AI, artificial intelligence is everywhere. We seeopportunities arising from demand for perceptual AI, and recognize the difficulties in meeting thefragmented demand for perceptual AI applications. The Company offers an AI open developmentplatform to its clients, allowing them to participate in AI applications with fragmented demands,and protecting their data at the same time. The gradual adoption of AI Cloud will help the Companypromote the development of intelligent Internet of Things (IoT), as well as help it advance theintegration of IoT with information networks and development of the Company’s big data business.
To better meet clients’ needs and enhance operating efficiency, the Company has restructuredits traditional security segments into public business group (PBG), enterprise business group (EBG),and small and medium enterprise business group (SMBG). The Company will adopt differentbusiness strategies for its various business groups and offer a variety of products and systemsolutions. Meanwhile, the development of our innovative businesses is in line with ourexpectations.
The external environment remains uncertain to some extent in 2019. However, regardless ofhow the external environment evolves, the Company will continue to make R&D investments to
ensure the competence of its products and system solutions, ramp up investments in customerservices to enhance customer satisfaction, optimize internal operations management to improveoperating efficiency, push forward with its globalization strategy, and step up investments in theinternational markets. We remain confident about our future.
The Company will address unconventional business challenges thoughtfully, while continuallyimproving and growing. With an open, transparent and sincere attitude, we are ready to respond touncertainties stemming from various challenges. We firmly believe that we can go further only byconstantly improving ourselves.
In closing, we would like to express our heartfelt gratitude to all shareholders for trusting,understanding and supporting the Company’s operation and management team.
See far, go further!
Board of Hangzhou Hikvision Digital Technology Co., Ltd.
April 2019
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior managementof 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 forthe truthfulness, accuracy and completeness of its contents and free of any false records, misleadingstatements or material omissions, and will undertake individual and joint legal liabilities.
Chen Zongnian, the Company's legal representative, Jin Yan, the person in charge of theaccounting work, and Zhan Junhua, the person in charge of accounting department (accountingsupervisor) hereby declare and warrant that the financial statements in this report are authentic,accurate and complete.
The Company’s chairman Chen Zongnian, and director Gong Hongjia, Qu Liyang, HuYangzhong, Wu Weiqi, independent director Lu Jianzhong, Wang Zhidong attended the boardmeeting to review this report in person. Independent director Cheng Tianzong and Hong Tianfengwere unable to attend the board meeting in person due to personal reasons, and authorizedindependent director Wang Zhidong and Lu Jianzhong to attend and exercise the voting right ontheir behalf respectively.
The profit distribution proposal passed upon deliberation at the meeting of the Board ofDirectors is set out as follows: Based on the Company’s current total share capital of 9,348,465,931shares, the Company proposed to distribute cash dividend of RMB 6 (tax inclusive) per each 10shares to all shareholders, bonus share and share distribution from capital reserve is nil.
Note:
This document is a translated version of the Chinese version 2018 Annual Report (“2018年年度报告”), and the published announcements in the Chinese version shall prevail. The completepublished Chinese 2018 Annual Report may be obtained at www.cninfo.com.cn.
Please read the annual report and pay particular attention to the following risk factors:
1) Risk of technology upgrade: Technologies such as artificial intelligence, big data, cloud computing, and
edge computing are developing rapidly, and technology diffusion is faster. If the Company cannot follow thechanges in the cutting-edge technologies, or fail to realize the business innovation rapidly, the risks of futuredevelopment uncertainties will increase.
2) Domestic macro-economy fluctuation risk: The Company's domestic business is closely related to the
investment needs of the government, enterprises and institutions. The Company adjusts its business strategyin response to the changing domestic demands. If the domestic macro-economy continues to decline, theindustry demand will shrink. The Company's development will face great pressure; and difficulties and risksin business operation will increase.
3) Trade protectionism risks in developed countries: The trend of unilateralism and trade protection in some
of the countries is obviously rising. If the trend of reverse globalization is aggravated, it will affect theCompany's business expansion and brand upgrading in overseas developed markets.4) Risk of global market expansion: The Company’s business covers more than 150 countries and regions
worldwide. If various situations such as foreign exchange rate fluctuation, debt problem, declining purchasingpower, or political conflict occur in the country where our business is carried out, there might be adverseimpact on the Company’s business development.5) Risk of internal management: The continual expansion of business scale, the continuous increase of new
products and new businesses, the sustained growth in total number of employees and the significant rise ofinternal management complexity have posed challenges to the Company’s management work and raisedhigher requirements on the Company's management team. The Company’s sustainable development will facecertain risks if the management level fails to match up with the Company’s business expansion.
6) Legal compliance risk: The world's multilateral trading system is facing an impact. The local laws and
regulations that business activities need to comply with are more complicated. The regulation of dataworldwide is becoming stricter, and the compliance review of business is becoming more important. If theCompany's legal compliance ability cannot keep up with the situation, it will bring risks to the Company'soperations.
7) Risk of cybersecurity: The Company has always attached importance and taken active measures to enhance
cybersecurity performance of our products and systems, However, with any Internet-connected device, thereis still a possibility of deliberate attempts，including computer viruses, malicious software, hacker and similardisruptions to damage our systems or products, causing the cybersecurity issues.
8) Risk of exchange rate fluctuation: The Company carries out operations in various countries and regions
with different currencies. The risk of exchange rate mainly comes from foreign exchange exposures arisingout of sales, purchase and financing that not settled in RMB (mainly in USD) as well as the exchange ratefluctuations, which may probably affect the profitability level of the Company.9) Risk of intellectual property (IP) rights: The Company continues to maintain the relative large scale of
R&D investment, and produces considerable technical achievements, and at the same time, implementswell-organized intellectual property right (IPR) protection measures. However, the risk of intellectualproperty disputes and the risk of intellectual property rights violations still exist.
The above notices might not be all-inclusive of all other potential risks, please pay attention to the potentialinvestment risks
CONTENTS
To shareholders ...... 1
Section I Important Notes, Contents and Definitions ...... 3
Section II Corporate Profile & Key Financial Data ...... 9
Section III Corporate Business Summary ...... 14
Section IV Operation Discussion and Analysis ...... 58
Section V Significant Events ...... 81
Section VI Changes in Shares and Information about Shareholders ...... 103
Section VII Information of Preferred Shares ...... 114
Section VIII Information about Directors, Supervisors, Senior Management ...... 115
Section IX Corporate Governance ...... 136
Section X Corporate Bonds ...... 148
Section XI Financial Report ...... 149
Section XII Documents Available for Reference ...... 274
Definitions
| Term | Definition |
| Reporting Period | From January 1st 2018 to December 31st 2018 |
| Articles of Associations | Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd |
| Hikvision, our Company, the Company | Hangzhou Hikvision Digital Technology Co., Ltd |
| CETHIK | CETHIK Group Co., Ltd. Controlling Shareholder of the Company |
| Innovative Co-investment Partnership | Hangzhou Hikvision Equity Investment Partnership (Limited Partnership) |
| EZVIZ, EZVIZ Network Inc. | Hangzhou EZVIZ Network Ltd. (According to the context, also refers to the corresponding business) |
| Hikvision Robotics | Hangzhou Hikvision Robtics Technology Ltd. (According to the context, also refers to the corresponding business) |
| Hikvision Automotive Technology, Hikvision Automotive Electronics | Hangzhou Hikvision Automotive Electronics Ltd. (According to the context, also refers to the corresponding business) |
| Hikvision Weiying | Hangzhou Hikvision Weiying Sensor Technology Ltd. (According to the context, also refers to the corresponding business) |
| Hikvision Storage; Hikvision Smart Storage | Wuhan HIK Storage Technology Ltd. (According to the context, also refers to the corresponding business) |
| Hikvision Huiying | Hangzhou HIK Huiying Technology Ltd. (According to the context, also refers to the corresponding business) |
| Security Industrial Base (Tonglu) | 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 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). |
| Internet Security Industry Base | Located in Binjiang district, Hangzhou, Zhejiang province, purposes for the office building. Initially disclosed in Announcement about the Company’s New 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). |
| Chongqing Manufacture Base | Located in Chongqing, purposes for manufacturing facility, initially disclosed in Announcement about Resolution of the 20th Meeting of the 3rd Session Board（No：2016-068） |
| Innovative Business | A long investment cycle, business prospects uncertain, has the high risk and uncertainty, in need for direct or indirect investment in exploration, in order for the Company to timely enter into new areas of business. Initially disclosed in Announcement about Management Measures for Core Staff Investment in Innovative Business (《核心员工跟投创新业务管理办法》) (www.cninfo.com.cn). In this report, innovative business also refers to EZVIZ, Hikvision Robtics, Hikvision |
| Automotive Electronics, Hikvision Weiying, Hikvision Storage, Hikvision Huiying and their related business or products. | |
| Euro Bond | 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 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) |
Section II Corporate Profile & Key Financial Data
I. Corporate Information
| Stock abbreviation | HIKVISION | Stock code | 002415 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese (if any) | 杭州海康威视数字技术股份有限公司 | ||
| Abbr. of the Company name in Chinese | 海康威视 | ||
| Name of the Company in English (if any) | HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD | ||
| Abbr. of the Company name in English (if any) | HIKVISION | ||
| Legal representative | Chen Zongnian | ||
| Registered address | No. 555 Qianmo Road, Binjiang District, Hangzhou | ||
| Postal code of Registered address | 310051 | ||
| Business address | No. 518 WuLianWang Street, Binjiang District, Hangzhou | ||
| Postal code of Business address | 310051 | ||
| Company website | www.hikvision.com | ||
| market@hikvision.com; ir@hikvision.com | |||
II. Contacts and contact information
| Board Secretary | Securities Affairs Representative | |
| Name | Huang Fanghong | |
| Address | No. 518 WuLianWang Street, Binjiang District, Hangzhou | |
| Tel. | 0571-88075998; 0571-89710492 | |
| Fax | 0571-89986895 | |
| hikvision@hikvision.com |
III. Information disclosure and place of the report
| Newspaper designated by the Company for information disclosure | Securities Times, Shanghai Securities Journal |
| Website specified by CSRC for release of the Annual Report | www.cninfo.com.cn |
| Place where the Annual Report is available for inspection | Office of the Board of Directors of the Company |
IV. Company Registration and Alteration
| Organization code | 91330000733796106P |
| Changes in principle business activities since the Company was listed (if any) | During the reporting period, the Company operating range newly added fire control products. After the change, the Company's business scope is: research and development (R&D) and production of electronic products (including explosion-proof electrical products, communication equipment and related ancillary equipment, multimedia equipment), fire control products, aircrafts, robots, intelligent equipment, auto parts and accessories, automotive electrical signal equipment; Sales of self-produced products; provide technical services, electronic technology consulting service, training service (excluding the organizational training), electronic equipment installation; electrical engineering, design, construction and maintenance of intelligent system projects. (except country prohibited and restricted items, relating to the specific mandatory license certificate) (subject to ratification in accordance with the project, approved by the relevant departments to operate) |
| Changes of controlling shareholders of the Company (if any) | No change during the reporting period |
V. Other Relevant Information
Accounting firm engaged by the Company
| Name of the accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Business address of the accounting firm | 30F Bund Center 222 Yan An Road East Shanghai |
| Name of accountants for writing signature | Mou Zhenfei, Zhang Shushu |
Sponsor institution engaged by the Company to continuously perform its supervisory function during theReporting Period□ Applicable √ InapplicableFinancial advisor engaged by the Company to perform the duties of continuous supervision during the reportingperiod□ Applicable √ Inapplicable
VI. Key accounting data and Financial IndicatorsWhether the Company performed a retroactive adjustment or restatement of previous accounting data□Yes √No
Unit: RMB
| 2018 | 2017 | YoY Change (%) | 2016 | |
| Operating income (RMB) | 49,837,132,481.61 | 41,905,476,572.07 | 18.93% | 31,934,544,088.82 |
| Net profits attributable to shareholders of the Company (RMB) | 11,352,869,241.32 | 9,410,855,084.82 | 20.64% | 7,423,683,960.91 |
| Net profits attributable to shareholders of the Company excluding non-recurring gains and losses (RMB) | 10,983,228,170.60 | 9,177,116,964.06 | 19.68% | 7,270,742,762.47 |
| Net cash flows from operating activities (RMB) | 9,114,013,286.06 | 7,373,160,250.68 | 23.61% | 6,216,364,642.05 |
| Basic earnings per share (RMB/share) | 1.240 | 1.030 | 20.39% | 0.818 |
| Diluted earnings per share (RMB/share) | 1.234 | 1.024 | 20.51% | 0.817 |
| Weighted average ROE | 33.99% | 34.96% | -0.97% | 34.58% |
| At December 31st 2018 | At December 31st 2017 | YoY Change (%) | At December 31st 2016 | |
| Total assets (RMB) | 63,484,352,233.42 | 51,570,963,466.61 | 23.10% | 41,348,428,750.40 |
| Net assets attributable to shareholders of the Company (RMB) | 37,590,154,638.46 | 30,358,072,874.22 | 23.82% | 24,285,707,211.82 |
The total share capital of the Company as of the previous trading day of the annual report disclosure:
| The total share capital of the Company as of the previous trading day of the annual report disclosure (share) | 9,348,465,931 |
| Fully diluted earnings per share (RMB/share) calculated with the latest share capital | 1.214 |
Whether there is a corporate bond:
□ Yes √ NoWhether the Company has continuous losses in the last two years□ Yes √ No □ Not applicable
VII. Differences in Accounting Data between Domestic and Overseas Accounting Standards
1. Difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards and China Accounting Standards□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of InternationalFinancial Reporting Standards (IFRS) and China Accounting Standards in the reporting period.
2. Difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of OverseasAccounting Standards and China Accounting Standards in the reporting period.
3. Explanation of the differences in accounting data under domestic and overseas accounting standards□ Applicable √ Inapplicable
VIII. Key Quarterly Financial Indicators
Unit：RMB
Whether there is significant difference between the above individual or aggregate financial indicators and that ofwhat disclosed in the quarterly report, half-year report□ Yes √ No
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Operating income | 9,364,828,201.00 | 11,510,930,023.63 | 12,926,932,976.48 | 16,034,441,280.50 |
| Net profit attributable to shareholders of the Company | 1,815,964,569.77 | 2,331,430,966.09 | 3,248,407,615.14 | 3,957,066,090.32 |
| Net profit attributable to shareholders of the Company excluding non-recurring gains and losses | 1,808,323,790.71 | 2,200,947,170.54 | 3,142,725,705.56 | 3,831,231,503.79 |
| Net cash flows from operating activities | -3,856,064,680.53 | 2,234,871,322.53 | 4,267,464,655.50 | 6,467,741,988.56 |
IX. Items and Amounts of Non-recurring Gains and Losses
√ Applicable □ Inapplicable
Unit：RMB
| Item | 2018 | 2017 | 2016 |
| Profit or loss from disposal of non-current assets (including the write-off for the impairment provision of assets) | 4,975,825.83 | 1,585,222.50 | -736,149.02 |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based on standard quota or quantitative continuous application according to the state industrial policy.) | 319,304,315.50 | 184,557,043.27 | 171,321,088.31 |
| Net gains and losses from beginning of the reporting period to the merge date for the subsidiary merged involving enterprises under common control | - | -42,070.90 | 3,949,938.20 |
| Profits and losses attributed to change in fair value for held-for-trading financial assets and held-for-trading financial liabilities, and investment income from disposal of held-for-trading financial assets, held-for-trading financial liabilities and available-for-sale financial assets, excluding the effective hedging business related to the regular business operation of the Company. | 62,153,461.82 | 86,740,196.23 | 321,708.86 |
| Other non-operating income and expenditures except the items mentioned above | 94,651,413.78 | 30,044,820.52 | 18,276,871.37 |
| Less: Impact of income tax | 84,510,487.85 | 50,405,620.44 | 36,000,258.26 |
| The impact of the minority interests (after tax) | 26,933,458.36 | 18,741,470.42 | 4,192,001.02 |
| Total | 369,641,070.72 | 233,738,120.76 | 152,941,198.44 |
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in the<Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-recurring Gains and Losses>, or classifies any non-recurring gain/loss item mentioned in theaforementioned note as a recurrent gain/loss item□ Applicable √ InapplicableIn the reporting period, the Company did not classify an item as a non-recurring gain/loss according to the definition inthe <Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-recurring Gains and Losses> into a recurrent gain/loss item
Section III Corporate Business Summary
I. The principal business of the Company during the reporting period
1. Main Business and industry position
Hikvision is a provider of video-centered intelligent IoT (Internet of Things) solution and big data services.Global research firm IHS Markit has ranked Hikvision as global No. 1 in the video surveillance industry for sevenconsecutive years, with 22.6 percent
of the global video surveillance market share. In the "A&S Security 50" listpublished by A&S Security Automation, Hikvision has been ranked No.1 in the world for three consecutive years.
In 2016, Hikvision integrated deep learning algorithm into products, and launched a full range of deeplearning and intelligent product families that integrate intelligent analysis capabilities throughout the entireprocess from information gathering to storage application. In 2017, Hikvision led the intelligent application trendbased on the fusion of cloud and edge computing architectures, innovatively launching the three-tier AI Cloudarchitecture of edge node, edge domain and cloud center, and vigorously promoting the development andapplication of AI (artificial intelligence) in the IoT field. In 2018, based on the fusion of cloud and edgecomputing architectures, Hikvision deepened and integrated the AI Cloud product line with "Two Pools, OneLibrary and Four Platforms"
and proposed the AI Cloud data architecture with the fusion of IoT and InformationNetworks. During the implementation of the business, the Company focused on solving the scenario-based andfragmented AI application and the difficulties in the implementation of user needs, unified the softwarearchitecture internally and promoted the open integration strategy externally, and changed and restructured theinternal organizational structure to match the business changes. Hikvision has laid a solid foundation for thearrival of the intelligent era.2. Technology Accumulation and Innovation
2.1 Technical Architecture Overview
The interconnection of all things is the cradle of the concept of the Internet of Things, which depicts a
Based on the global video surveillance market report published by IHS Markit in June 2018, with the 2017 data as the statistical basis.
Refers to “Computing Resource Pool, Data Resource Pool, Algorithm Warehouse, Data Resource Platform, Intelligent ApplicationPlatform, Resource Scheduling Platform, Operation and Service Platform.
broader scene for human beings after the Internet era. However, how to make objects see, listen, read and writelike humans? How to make objects respond intellectually? And how to make the interconnection between thingsintegrate into human beings’ production and living environment to truly form a meridian system? The applicationof deep learning drives the combination of artificial intelligence and the perceptual information of objects such asvideo, audio and text, and gives objects intelligence, making it possible for the objects to respond intellectually.When intelligent objects are interconnected into a network, the intelligent Internet of Things is created. At present,the scale and scope of intelligent IoT is expanding, no longer limited to homes, production lines, buildings, etc.The intelligent IoT is a new infrastructure of the intelligence era.
From the perspective of computing, computing architecture with the fusion of cloud and edge is required inthe intelligent era. The fusion of cloud and edge computing is a computing architecture that conforms tointelligent IoT applications and is the allocation method of computing resources that Hikvision adopts andadvocates. On one hand, even if cloud computing power is strong enough, some data only needs to be locallyprocessed and applied, and does not need to be transmitted to the cloud for processing. On the other hand, thescale of the intelligent IoT is so large that it is unrealistic for all data to be transmitted to the cloud for processing,and the growth of bandwidth will not be able to keep up with the growth of IoT data. For example, for video cloud,a current topic in the industry, there is basically no video processed in the cloud, but mainly structured data
, smallvideos and images that are processed by edge computing.
Hikvision's AI Cloud computing architecture can be summarized as "the fusion of cloud and edgecomputing" and consists of edge nodes, edge domains and cloud centers. Edge nodes and edge domains arelocated in the intelligent IoT and make full use of edge computing capabilities; and cloud centers are located inthe intelligent IoT or information networks to form cross-network cloud computing capabilities. Edge nodes focuson collection of multi-dimensional perception data and front-end intelligent applications; edge domains focus onaggregation of perception data and intelligent applications; and cloud centers focus on cross-network data fusionand macro comprehensive applications.
Structured data: Data that is logically expressed and implemented by a two-dimensional table structure, strictly following the dataformat and length specifications, and is mainly stored and managed through a database.
From the perspective of data, the data in the intelligent IoT cannot be well used by the information systemand by users until it is organized according to the models required by the information network and fused in theinformation network. The intelligent IoT is closely fused with various information networks such as the Internetand industry information networks to truly realize a full interaction with humans. The connection betweenintelligent objects and information systems is the fusion of IoT and information Networks, which will open thedata channel between the intelligent IoT and information networks; it is also the meridian system of data in theintelligent era. The fusion of IoT and information networks is the data architecture suitable for applications underintelligent IoT and information network and the data organization form that Hikvision AI Cloud complies withand advocates.
Hikvision AI Cloud's data architecture can be summarized as “the fusion of IoT and information networks",which supports resource governance, data governance, data fusion, data services, and data applications across theintelligent IoT and information networks. The main capabilities of AI Cloud Data Fusion Platform can besummarized as horizontal cross-network fusion, vertical cross-layer convergence, dual-network three-typeapplications, and data security protection.
Horizontal cross-network fusion: First, regarding data source governance, it is necessary to solve thequality problem of intelligent IoT data source. Second, for intelligent analysis, it is necessary to use artificialintelligence to transform IoT data into easy-to-understand data such as people, places, things and objects in theinformation network. Third, on IoT data services, it is necessary to send the data to information networks forfusion with other data while supporting intelligent applications of IoT. Finally, in respect to converged datagovernance, it is necessary to organize the data according to the theme library
, topic library
, tag library orrelationship library, and then provides converged data services to support the development of information networkdata applications.
Vertical cross-layer convergence: Hikvision provides data platform cascading function to support theupward on-demand data convergence in both the intelligent IoT and information networks.
Dual-network three-type applications: In the intelligent IoT and information networks, three types ofapplications may be developed based on the intelligent application platform: single-scene applications,cross-scene applications, and comprehensive applications.
Theme Library: a business subject - oriented database.
Topic Library: a database addressing a certain professional application.
Data security protection: In the AI Cloud Data Fusion Platform, Hikvision focuses on data protection fromfour angles: data collection, transmission and storage, data services, and data applications. Data security isprotected at four levels: development and testing, delivery and implementation, data governance, and operationand maintenance.
The number of IoT devices worldwide will exceed 20 billion by the year 2020
. The intelligent IoT will becharacterized by larger number of terminals, more diverse terminal types, more powerful terminal performance,more complex network architecture, more extensive data content, and more diverse business applications.Therefore, it is necessary to strengthen data security protection and privacy protection at multiple levels such asterminal, network, data, platform services, and applications.2.2 AI Cloud Software and Hardware Platforms
2.2.1 AI Cloud Software Products
Hikvision firmly believes that the AI Cloud architecture is a reasonable solution to the fusion and applicationof intelligent IoT and information network. In 2018, Hikvision fully released software products of "two pools, onelibrary and four platforms" based on the AI Cloud architecture by implementing the "cloud-edge fusion"computing architecture, and continuously deepened the implementation of the "IoT-information network fusion"data architecture in practice, and further integrated the "two pools, one library and four platforms" into an “AICloud Data Fusion Platform", continuously consolidating the layout in AI, big data and application areas andleading the market through technological innovation and product innovation.
https://www.gartner.com/en/newsroom/press-releases/2017-02-07-gartner-says-8-billion-connected-things-will-be-in-use-in-2017-
up-31-percent-from-2016
Through the resource management and scheduling platform, Hikvision realized the unified management ofvarious resources such as IoT perception, computing storage, intelligent algorithm and software service. Inaddition, by introducing the standardization of algorithm library, the pooling of computing storage resources andother management tools, Hikvision provides unified access, centralized management, flexible scheduling, andother functions for heterogeneous computing storage resources and algorithm resources, providing more flexiblechoices for users and intensifying users’ investments. The software in the algorithm library supports unifiedmanagement scheduling of different types of intelligent algorithms from different vendors. It not only realizes theunified management scheduling of Hikvision's own algorithms for human face, human body and vehicle, etc., butalso completes the algorithm docking with the ecological partners, which have been implemented in a number ofprojects.
Through the data resource platform, Hikvision provides the capabilities of data convergence, data storage,data fusion, data computation, data sharing and data universal applications, supporting the fusion betweenbusiness data in the information system and IoT perception data. By providing rich toolkits such as dataaggregation, data governance, multi-dimensional data modeling, data sharing and opening, and universal fusionapplications, the data resource platform provides users with a one-stop solution to various problems such as thelack of data specifications, low data quality, difficult data convergence and management, insufficient data mining,and high data management costs, helping users to quickly realize the delivery of data platforms and supporting
data fusion and application.
Hikvision takes advantage of the intelligent application platform to provide agile development, integration,and operational support for applications. The application developers can quickly develop, seamlessly integrate andrapidly deploy applications that fulfill specific business demands by following a unified integration specificationfor technical architecture, and leveraging the development interfaces such as device access, intelligent resolution,platform services, and universal applications provided by the intelligent application platform.
Through the operation and maintenance service platform, Hikvision realized various functions includingrapid fault identification, response tracking, service evaluation, and statistical assessment of IoT resources and ITresources, and solved the problem of unified operation and maintenance management of equipment with multipletypes, large quantity and scattered distribution, which effectively improves the efficiency of fault handling andensures the operational stability of the video surveillance system.
2.2.2 AI Cloud Hardware Products
In 2018, centering around the AI Cloud architecture, the Company continued to deepen and improve thelayout of hardware products in respects of edge nodes, edge domains and cloud centers.
Hikvision continued to break through in imaging, fill-in light, video-structuring and intelligence technologiesin front-end products, from Darkfighter to DarkfighterX, from white fill-in light to hybrid fill-in light, frommonocular structure to multi-cular structure, and from single intelligence to fully structured hybrid intelligence.Driven by the business demand, we layered products and intelligence; based on application scenarios, we fullyupgrade our products through deeply understanding users’ needs. A rich family of future-oriented AI products wasgradually formed, including light intelligence, ubiquitous intelligence, full structuring, intelligent DarkfighterX
,and hybrid intelligence
series of products.
Intelligent DarkfighterX series cameras adopt dual light fusion + hybrid fill-in light technology, and enable capturinghigh-definition color feature images at night without light pollution, and are able to capture features in more distant and complexscenes through the adaptive image algorithm for feature capture.
Hybrid intelligence series cameras adopt advanced structural design, hardware architecture and high-performance intelligent chipand can perform target detection, active sensing and feature capture of people, vehicles and events in the monitoring scene; realizedscene integration, device integration, installation integration and business integration, and enabled efficient capture of moredimensional and more efficient data while fulfilling the coverage of the monitoring scene.
In 2018, Hikvision's back-end products continued to develop in the areas of AI intelligence, big data andfused storage. Focusing on customer demands, Hikvision greatly improved the accuracy, performance and fusedapplication level of AI for the back-end intelligent products, and continued to lead the intelligent videosurveillance market.
The central intelligent analysis products are oriented to industry markets such as safe city and smarttransportation. Hikvision put forward the concept of full analysis of video intelligence, full compatibility ofcomputing resources, and full openness of engines and data in order to form an abundant and open series ofcentral intelligent products and ecosystem, and has achieved good market performance. In terms of big data,
Hikvision implemented fused storage and associated applications of multi-dimensional data, and fused securitydata with business data, laying a foundation for data governance business. The Company innovatively introduceda server for data model comparison to convert module data into fully structured information data, enabling unifiedmanagement of data in a true sense.
In 2018, Hikvision continued to expand the central display business field, and achieved interactive access toinformation, intelligent display of information, and comprehensive presentation of big data through diversifieddisplay approaches such as seamless splicing, transparency, curved surface, touch control, holographic display.For example, Hikvision's small-pitch LED products, which are based on "Zhenshi" image processing technology,realized ultra-high contrast and ultra-high-definition seamless splicing display and were widely used in placessuch as monitoring centers and command centers. In terms of display control products, Hikvision enabled theclassic products such as decoders, splicing controllers and video comprehensive platforms based on thetechnologies of video and audio processing, multimedia data integration, ultra-high definition, AI, and clusteringand scattering control, diversifying the applications of monitoring centers and command centers, and maintainedthe leading position in the industry.
In 2018, based on solid technology accumulation in the fields of image capture and AI algorithm, Hikvisionimproved the "DeepinGo" (明眸) series of close-range facial recognition products. In numerous edge-nodeapplications such as access control, attendance checking, consumption, visitors management, elevator control,personnel access, etc., the new products have greatly expand the application scenarios of facial recognitiontechnology with rapid response speed, a more friendly human-equipment interaction, and support for largervolume face comparison and live detection. The “DeepinGo” series products not only upgrade the traditional "onecard" access control system to the "one face" system, but also effectively improve the security, convenience andaccuracy of the system.
In 2018, Hikvision continued to promote the implementation of its AI Cloud products and solutions forintelligent transportation. Based on customer demand, Hikvision integrated videos with multi-dimensionalperception technologies, and created a fused domain product package which consists of intelligent traffic camerasand intelligent road terminals. To practice the core value of “improve traffic order, alleviate traffic jams, preventtraffic accidents, enhance traffic safety, and facilitate transportation”, Hikvision innovated its traffic applicationsto help further develop the market. The “Environment-Friendly Access Control System”, equipped with snapcameras, made a technological breakthrough and solved the problem of white-light sharp flash, a light pollutionproblem troubling the industry for more than ten years, and was recognized with many awards. In respect to thecomprehensive governance of road traffic, Hikvision’s innovative applications, including “high beam inspectionfor vehicles”, “jaywalker”, “pedestrians first”, “snap camera system for horning”, and “inspection of vehiclesemitting black smoke”, played a role in building safe cities. As for static traffic, Hikvision launched cutting-edgeradar products utilizing the technology of multi-dimensional perception: trigger-based radar and smash-proofradar, which simplifies the construction and maintenance by discarding induction coils and solves parkingproblems for users, thus facilitating traffic.
In 2018, Hikvision launched the development of smart fire control products. Relying on the Company'svideo and AI technology, combined with multi-dimensional perception, narrow-band transmission and other IoTtechnologies, the front-end sensors are able to collect key fire control data and upload it to the platform in real
time for data analysis and remote monitoring. Through the integration of security and fire control businesses, welaunched an integrated solution for security and fire control, which is widely applicable to urban key units, ninesmall places
, schools, hospitals, banks, enterprise campuses and government buildings to enhance the level of firecontrol information construction in various industries and promote smart fire control constructions.2.3 AI Open Platform
Based on the scenario-based and fragmented characteristics of intelligent application, we believe that openintegration is the development trend of the video industry and will become a new business format in the era ofintelligence. In order to achieve open integration, Hikvision established a complete open system.
The demand for AI in the real economy is very strong and the application of AI has emerged in largenumbers in a scenario-based and fragmented manner. AI applications require many conditions such as data,algorithm, computing power, products and application systems; therefore, it is difficult to implement theapplications in the real economy. In order to build an open and shared AI industry ecological environment andhelp the implementation of AI, Hikvision launched the AI open platform to provide complete services fromdemand mining to application release and to help industries to upgrade.
The AI open platform has two purposes. The first purpose is to help customers with zero algorithm basis todevelop their industry's intelligent algorithms; the open platform incorporates a number of cutting-edgetechnologies and has three major characteristics:
1) It utilizes virtual data engine
, transfer learning
, incremental learning
, and other technologies, and can
Nine small places refer to small schools or kindergartens, small hospitals, small stores, small restaurants, small hotels, smallrecreational bars and clubs, small Internet bars, small beauty salons or bathhouses, and small production and processing enterprises.
Virtual data engine: generates image data through 3D modeling, ray tracing, adversarial learning and other approaches; its visualeffects are close to those of on-site collection.
quickly generate AI algorithms that meet scenario-based demands, based on a small amount of data;2) Algorithm training, compilation, optimization and deployment are all automatically implemented, and the
platform provides one-stop services to customers with zero algorithm basis. The platform can be combined
with Hikvision's application systems to solve the "last mile" problem of AI visual perception applications,
and implement continued collection of data and loop iterative optimization of algorithm model under
production environment; and3) Based on Hikvision's hardware foundation, the platform can easily build intelligent products with powerful
sensing capabilities.
The second purpose is to help AI practitioners to have their own intelligent hardware products and solutions.The large-scale implementation of AI technology in China's real economy requires a large number of AIpractitioners to carry out continuous mass innovation with mass wisdom. However, AI practitioners often lack thesuitable products to carry their algorithms in the current time. For this reason, Hikvision has opened a full range offront-end and back- end AI hardware products to help AI practitioners realize their AI functions and solutions.
Our open systems for equipment include:
Transfer learning is a learning method for robots, enabling a robot to apply the knowledge and techniques learned from formertasks to new tasks.
Incremental learning refers to learning new knowledge by a learning system from new samples, storing most of the knowledge ithas learned and overcoming catastrophic losses of memory. The system does not have to visit original data, and is able to enhance itsperformance on an overall data set merely by learning new data.
1) Hikvision equipment operating system, which provides various basic capabilities of the equipmentincluding image processing, coding and decoding, storage and transmission;
2) Integrated development kit, which opens the equipment's AI computing resources based on the containertechnology, enabling users to integrate their own algorithms on the product; and
3) A variety of supporting services provided in the cloud, including the compiling environment, testingenvironment, app stores, and authorization tools.
In 2018, Hikvision successfully applied the AI open platform to intelligence upgrade in multiple areas. Inpharmaceutical enterprises, the platform helped the standardized review of production behavior of employees andreduced safety hazards in production. In food production enterprises, it enabled “Transparent Kitchen” andguaranteed safe production and standardized storage of food. In the field of natural resources, it empowers“weather identification” and promotes intelligent meteorological observation.
In addition, due to the very fragmented business scenario, a series of problems from customers, delivery andR&D have emerged during the process of software development, delivery and maintenance, including productintegration and unification, version upgrade, and repetitive development. Hikvision has comprehensivelyupgraded its software engineering capabilities and practices and reconstructed the original software R&D modelby establishing a Unified Software Technology Architecture. The software R&D has changed the developmentmodel from "driven by market demand" to "driven by both market demand and technology planning", in order tofinally realize the sustainable and rapid introduction of high-quality software products to meet the rapidly growingdemand of the software market, providing support for the Company's strategic planning.
Based on years of accumulation in the front-end field, Hikvision also introduced an evaluation system ofscientific deployment of front-end video surveillance products, which links business applications with front-endconstructions, defines a variety of equipment capability models and scenario evaluation models, enables theevaluation of the reasonableness of the front-end construction plans and the actual construction results offront-end products, and outputs evaluation reports and optimization suggestions to guide the scientific deploymentof the front-end points.3. Transformation and restructuring of business architecture
Since 2009, the Company has launched solutions that carry a vertical industrial layout covering sevenindustries, including public security, transportation, law enforcement, finance, education and healthcare, energy,and building, and 40 sub-industries to drive the rapid development of its business and lead the security industryinto a solution-oriented era. To better adapt to customers’ demands and improve internal operational efficiency,the Company initiated the transformation and restructuring of its business architecture in 2018. Throughreorganizing and integrating the resources, the Company divided its domestic business into three business groupsof PBG (Public Business Group), EBG (Enterprise Business Group) and SMBG (Small and Medium EnterpriseBusiness Group) to more specifically target different types of markets and customers and more effectively
coordinate internal resources.
The PBG (Public Business Group) business team, which was established based on the traditional threebusiness departments of public security, transportation and law enforcement, primarily specializes in urbangovernance and urban services, adapts to the block module of the administrative regions, and conforms to theoverall operational needs of urban governance and urban services; the EBG (Enterprise Business Group) businessteam, which was established based on the traditional four business departments of traditional finance, energy,building, and education and healthcare, mainly serves the traditional large-scale enterprise market, adapts to thestrip model of the group enterprises and meets the vertical operation management needs of group enterprises; theSMBG (Small and Medium Enterprise Business Group) business team, which was established based on thetraditional channel distribution management team, mainly focuses on the small and medium-sized enterprisemarket services, striving to create an industry ecosystem and platform that integrates product distribution,installation and operation and maintenance services, as well as SaaS sharing.
3.1 Public Business Group (PGB): Data-driven urban governance3.1.1 Principal business
Digital government construction is a vital move to implement the Internet power strategy, the digital Chinastrategy and the smart society strategy. Hikvision PBG relies on the urban big data platform to promote urbandigitalization and intelligent transformation, and facilitate sustainable urban development. Centering on digitalgovernment, digital economy and digital society, Hikvision PBG establishes data sharing, exploits data value,focuses on urban governance, and creates a new era of AI Cloud Internet of Things (IoT).
Data-driven urban governance uses data for analysis, decision-making, management and innovation. Takingurban governance as an example, things as small as well covers and street lamps and as big as bridges and tunnels,and other matters ranging from the flow and stop of vehicles, gathering and dispersal of people to market statesand public opinions, could all be analyzed and summarized through informational means such as IoT perceptiontechnology and big data analysis. Through the search and analysis of various types of data such as traffic data,tourism data, daily life consumption data, government data, medical data and leisure data, we can find all kinds ofhidden problems and events, provide timely warning and reminder, carry out linked handling of events, promotecoordinated management of multiple governance entities, and improve the level of refined urban governance.
With AI Cloud as the core technology framework, Hikvision PBG sets up a unified intelligent perceptionnetwork for cities to achieve the complete perception collection of city states, features and events, builds twin
digital cities coexisting with physical cities, establishes a unified urban big data platform, and takes advantage ofthis platform to carry out the sharing, development and governance of urban data, empowering the intelligentapplications of various industries and fields of the cities, upgrading the integrated government service system, andenhancing the sense of well-being and security of the masses.
3.1.2 Core technology: AI Cloud “Hikvision Red Digital Forest” platform
“Hikvision Red Digital Forest”, the urban IoT intelligent cloud platform of Hikvision PBG under the AICloud architecture, is the brain center for implementing AI Cloud. Compared with the previous video networkingsharing platforms, the “Hikvision Red Digital Forest” platform not only has a stronger access capabilities forvideo and IoT resources, but also has the capability for fusion, correlation and deep mining of IoT data andbusiness data, the capabilities for unified management and scheduling and self-training of multiple AI algorithms,as well as the capabilities for the pooling of computing storage resource and flexible computing, which enables itto carry IoT basic application, smart applications and big data applications across multiple industries and providestrong support for the implementation of industry solutions such as smart policing, smart transportation, smartsecurity supervision, smart city management, and smart government.
Cloud-edge fusion, intelligent “perception”: The “perception” capability refers to the capability to extracttargets such as people, cars and objects, and their attributes such as the license plates, vehicle models and colors ofcars from the video images. The efficient collaboration between cloud computing and edge computing greatly
enhances the system’s intelligent “perception” capabilities. Based on the demands from intelligent applicationscenarios, the corresponding AI algorithms, computing power, data and services can be scheduled on demand;with part of the data processed on the edge node side and part of the data processed on the platform side, the twosides cooperatively work together to achieve optimal system performance. At the same time, the platform, with AIalgorithm training capability, can train a new AI algorithm based upon the data accumulated on it; and the new AIalgorithm can be loaded into edge devices to meet the new intelligent application demands.
Data fusion, deep “cognition”: The “cognition” capability means to discover the essence behind the databased on multidimensional big data mining analysis. From the perspective of application demands, the big data“cognition” capability of a system can be built by integrating IoT data, business data and Internet data. Based onapplication demands, data could be converged on demand, various basic libraries, theme libraries, and topiclibraries can be constructed, and algorithm models such as regional collision, regularity analysis, frequencyanalysis, integral warning, and relational graphs can be extracted and summarized. In this way, lager amount andbetter quality data will be gradually accumulated, the data will support more and more in-depth applications.
Comprehensive opening, empowering various industries: we have fully opened the data from all kinds ofbasic libraries, theme libraries and topic libraries, and the interfaces such as IoT basic services, intelligent analysisservices, big data fused analysis services, algorithm library services, AI training services, and intelligentapplication services. We also supported integration with third-party platforms to achieve the complementarity ofcapabilities and to support industry ecosystems.
3.1.3 Industry application scenarios
Hikvision PBG’s solutions cover all aspects of public services. The solutions in four aspects, namely publicsecurity, traffic and travel, ecological protection, and people’s livelihood services, are taken as examples torepresent how intelligence and data can drive intelligent urban governance.
Solutions for public security
Hikvision PBG provides solutions for public security, aiming to further improve the three-dimensional socialsecurity prevention and control system, strengthen the technological prevention capabilities of public security,enhance the level of grassroots services, advance the construction of a safer China, and establish a socialgovernance model based on collaboration, co-construction, and sharing.
Following the core design concept of “multi-dimensional perception, sharing and co-construction,
network-wide intelligence, and smart governance”, the Company deployed a multi-dimensional perception systemin different regions and scenarios, and constructed an organically integrated comprehensive three-dimensionalfront-end perception system, in order to achieve all-round, all-weather multi-dimensional information perceptionand collection. The video information data is deeply integrated with technologies such as artificial intelligence andbig data to realize dynamic information perception, accurate data analysis and business intelligent assistance,which lays a solid foundation for scientific decision-making and command, efficiently combating crimes, preciserisk prevention and control, and innovative social governance. Through constructing a public security video imageinformation exchange resource pool with consistent technical standards and uniform requirements, implementingeffective hierarchical integration of various video image resources, and facilitating point locationcomplementation, network interconnection and platform interoperability, the networking integration of videoimage resources in public areas is maximized. The Company established cross-regional, cross-departmental andcross-level video image information exchange, integrated the sharing and scheduling mechanisms, and providedvisualized government management supporting services for public security, transportation, railway, urbanmanagement, fire control, environment protection, forestry, safety supervision, finance, food and medicine, andother departments under the premise of ensured safety and controllability.Solutions guaranteeing “traffic and travel”
Hikvision PBG furnishes “traffic and travel” solutions for scenarios such as urban traffic management,transportation hubs, public transportation, traffic network, and cargo transportation, utilizing artificial intelligenceand big data technology to make “traffic and travel” safer, more convenient and more efficient.
In the field of urban traffic management, AI + IoT perception technology could help optimize the signalsystem of urban roads and alleviate urban traffic congestion; in the field of public transportation, intelligentidentification technology could actively detect the abnormal behaviors of drivers and passengers of buses, taxis,freight vehicles, and dangerous goods vehicles, and issue timely warning to ensure the safety of public travel. Thebig data + Internet technology could be utilized to optimize the connection and scheduling of various traffic tools,optimize traffic network, and enhance traffic efficiency; for example, big data analysis could help bus companiesoptimize bus routes and optimize taxi distribution, so that the traffic and travel become more efficient andconvenient.Industry solutions for safeguarding “Clear Water, Blue Sky and Green Mountains”
Hikvision PBG offers a series of industry solutions for safeguarding “Clear Water, Blue Sky and Green
Mountains” to achieve the comprehensive protection of air, water and ecology.
Through AI visual perception technology, together with IoT technology, it is possible to detect excessiveemission of industrial waste gas, open-air straw burning, smoky vehicles on the road, as well as dust onconstruction sites and roads in a timely manner, reducing air pollution and protecting the natural outdoorenvironment for the public to enjoy. The implementation of pollution source monitoring and Chief Mechanism forRivers
ensures that unlawful emission and emission leakage from enterprises, abnormal sewage discharge intothe rivers and lakes, floating garbage on the river, and pollution risk in water sources can be discovered quickly,reducing industrial and domestic sewage pollution and guaranteeing the safety of drinking water.
The application of high-altitude observation, unmanned aerial vehicles (UAV) and other technical meanscould help find out ecological destruction behaviors in time within the red-line area of ecological protectionincluding overgrazing, dam building, road repairing, mining, and soil breaking. Besides, the application ofecological environment big data exerts a positive role in pushing forward the overall protection and systemrestoration of mountains, rivers, forests, farmlands, lakes, and grasslands, and safeguarding “Clear Water, BlueSky and Green Mountains.”Industry solutions for improving people’s livelihood services
Hikvision PBG launches livelihood service solutions that enhance the convenience and precision servicecapabilities of government centers through the application of face recognition and IoT technology. For instance,by performing video identification of people who have made a reservation and automatically arranging the orderfor them, the handling process can be shortened; by equipping face authentication devices in the number-takingand handling process, business handling will become more efficient and convenient; by monitoring the conditionof common facilities that serve the masses and delivering the information in time, the public can be better served.
Through the application of video networking and AI visual perception technology, the internal managementlevel of government centers is enhanced. For instance, the behavior of window service personnel can beintelligently analyzed in order to improve window service quality; the above technology can also conductnon-inductive attendance for internal staff, and carry out intelligent reporting of unusual events such as fights andquarrels in public areas. Based on big data analysis, face and business big data, targeted return visits could beachieved, which could help find problems easily and avoid repeated visits.
Chief Mechanism for Rivers: Principals of party and government departments at all levels act as “river chiefs” to be responsiblefor organizing and leading the management and protection of the corresponding rivers and lakes.
3.2 Enterprise Business Group (EGB): Visual perception assists enterprises in reducing costs andimproving efficiency
3.2.1 Principal business
Digitalization has exerted a great impact on all walks of life and has become a key factor in thetransformation of enterprises. Based on its understanding and insight into the business, Hikvision’s EBG launchesproducts and solutions centered on video networking and AI visual perception technology for enterprise users. Inprocess of digital transformation, we are building a bridge between the physical world and the digital world,propelling the Internet of Everything, and empowering industry users to realize intelligent industrial upgradeswith AIOT as the core.
The digital architecture of an enterprise can be divided into four layers: infrastructure, business applications,management tools, and decision-making support. As the traditional principal business of EBG, the securitybusiness focuses on the infrastructure of enterprises. In 2018, Hikvision EBG continued to enhance its insight andunderstanding of industry business, extended its business around the business applications and the managementtools of enterprises, and helped enterprise users achieve business means innovation and improve managementefficiency, which significantly improved the business value recognition by users. Using visual perception as themost effective digital means, Hikvision EBG plays an important role in the digital transformation of all walks oflife.3.2.2 Core technology: The AI Open Platform acts as the engine. The Integrated Application Platform andthe Cloud Visualized Management Platform act as two driving wheels
In the business scenarios for various sub-industries, Hikvision’s EBG takes the AI Open Platform as theinnovation engine and the Integrated Application Platform and the Cloud Visualized Management Platform as twodriving wheels, to provide users with solutions and products based on visual perception capabilities. It takesadvantage of the AI Open Platform to explore and fulfill the visual perception demands based on personalizedscenarios, utilizes the Integrated Application Platform and the Cloud Visualized Management Platform to build avideo grid system and satisfy video networking demands based on privatized deployments and Internet applicationscenarios, jointly builds an industrial ecosystem with industry users and partners, and serves digitaltransformation.
A one-stop algorithm customized service platform: AI Open Platform
The AI Open Platform is Hikvision’s one-stop algorithm customized service platform for industry users andecological partners to meet the demands of scenario-based visual perception applications in various industries.The AI Open Platform, which has a scenario-based AI development capability, can quickly generate an AIapplication that meets the users’ demands based on a small amount of data. After the application is online for use,the new data is superimposed and accumulated for incremental training, and the optimization algorithm iscontinuously iterated. Hikvision EBG relies on the AI Open Platform to enable industry users to rapidlyimplement applications based on AI visual perception, providing impetus for intelligent upgrade of the industries.
A privatized management platform: Integrated Application Platform
As a privatized management platform of Hikvision EBG for enterprise video networking applications, theIntegrated Application Platform relies on Hikvision’s unified software technology architecture and provides videonetworking business software management tools (such as smart scenic area management platform, pharmaceuticalenterprise behavior supervision platform, and smart construction site management platform etc.) for differentindustry application scenarios, based on its core capabilities such as IoT device access and video networkingservices. By applying componentized development technology, the Integrated Application Platform buildsindustry application architecture based on business understanding, accumulates businesses with common value,responds quickly to users’ demands, practically pushes forward the optimization of business processes and theinnovation of business methods, achieves cost reduction and efficiency enhancement, and improves customersatisfaction.
The Integrated Application Platform of Hikvision EBG, which is based on visual perception AI capability,runs in a localized deployment mode and can adapt to application scenarios of large, medium and small-sizedenterprises. It offers professional enterprise applications, rich application interfaces and high quality services,working together with partners to empower corporate customers and help them reduce costs, enhance efficiencyand deliver better services.
An enterprise-level public cloud platform: Cloud Visualized Management Platform
The Cloud Visualized Management Platform, relying on equipment access of EZVIZ Cloud, equipmentmanagement, stream media, AI model management and other IoT PaaS services, is a public cloud applicationservice portal based on the industrial scenario intelligence that provides SaaS cloud services to chain business,community, general education and other sub-industries, and propels enterprises to evolve from manual operationto partially intelligent operation, and then to fully intelligent operation. Meanwhile, by continuously strengtheningits basic capabilities and leveraging API openness, the Cloud Visualized Management Platform builds anecosystem and forms ecosystem cloud service capabilities.
The Cloud Visualized Management Platform offers enterprise-level SaaS services to sub-industries anddedicates to help enterprises enhance the visualization, standardization and intelligent management capabilities.Currently, it has covered the typical industry scenarios including chain retail, community, general education,logistics, etc.
In the chain retail industry, the Cloud Visualized Management Platform enables managers to complete sitemanagement more efficiently through remote video inspection, and enables operators to make better marketingdecisions by collecting and analyzing the structured data in multiple aspects such as customer flow, human face,human body, etc. In the community scenario, the Cloud Visualized Management Platform helps propertymanagement companies achieve efficient and unified management of residents, visitors, employees and vehicles,and provides residents with safe, convenient and high quality life service experience. In general-education schools,
the Cloud Visualized Management Platform delivers a whole set of campus security solutions to middle andprimary schools as well as kindergartens, establishes intelligent campuses with the help of facial attendance andelectronic class board, and provides networking supervision system for education management departments at alllevels so as to realize the networking of multi-dimensional data including video, alarm and students' attendance. Inthe logistics industry, the Cloud Visualized Management Platform supplies video networking, vehicle networkingand security check networking services for scenarios such as logistics parks and delivery lockers, and keepsupgrading centered on people, vehicle, goods, warehouse and safety to facilitate the refined operations of logisticsenterprises. And in the field of alarm operation, the Cloud Visualized Management Platform supports theacquisition and processing as well as storage and analysis of mass data such as alarm signals, real-timeinformation and video streaming media, and assists alarm operators in rapidly possessing large cross-regionalalarm operational coordination capability, command and dispatch capability as well as emergency disposal servicecapability.
In addition, the Cloud Visualized Management Platform, as a public cloud application service portal on thebasis of sub-scenario-based fragmentized intelligence, relies on the AI Open Platform of the Company to carry outand implement the corporate strategy of “video + AI”. With public cloud structure, the Cloud VisualizedManagement Platform furnishes users with business application value as well as outstanding value in lightweightdeployment, convenient implementation and ongoing optimization and upgrading.
3.2.3 Industry application scenarios
Hikvision EBG’s business covers nearly 20 sub-industries. From the perspective of business integration, thebusiness can be summarized into four main lines: business world, social energy, better lives and wealth growth.
Industry solutions serving the “business world”
Hikvision EBG offers business area solutions for manufacturing, logistics and retail, with an aim of helpingbusiness operators achieve cost reduction and efficiency enhancement and lightening management anxiety.
Large video networking makes employees’ work centralized and intensive, while AI visual perceptiontechnology allows machine-replacing-people and results in a reduction in the number of indirect staff and acompression in the working hours of direct staff, which improves efficiency. For instance, remote video storeinspection can replace the traditional offline store inspection of retail enterprises; the AI visual perceptiontechnology can be applied to analyze the waiting time of workers in the production process, optimize the timedistribution of workers in different types of production teams, and reduce the indirect waiting time of directpersonnel.
The digitalization of behavioral standards and management practices can improve staff efficiency, and thedigitization of business processes, business scenarios and production facilities can bring about processoptimization and intelligent improvement of asset application efficiency. For instance, precise insight aboutconsumers can be realized through an analysis of distribution of passenger flow and customer group of retailstores; the “two-ticket and three-system mechanism”
of the electric power industry can be implemented,accident prevention capability of electric power enterprises can be enhanced, and human-factor accident andserious misoperation accident can be prevented with the help of techniques like face recognition; the digitizationof electric power production facilities can be realized through intelligent reading technology for meters and theinspection efficiency can be improved thanks to the intelligent reading technology for meters.
Safety production assurance solutions, anti-theft solutions, as well as integrated security and fire protectionsolutions help reduce safety concerns. In the field of manufacturing, these solutions cover the factory area and theworkshop. For instance, best practices for production line workers at pharmaceutical enterprises can be
Two tickets: work ticket and operation ticket; three systems: shift system, tour inspection system, and equipment periodic testingand rotation system.
standardized by intelligent behavioral analysis to ensure the safety of pharmaceutical production; in the field oflogistics and transportation, these solutions cover the whole logistic park area to realized visualized tracking of thewhole process of goods movements and visualized dispatch of the platform resources.
Industry solutions serving “social energy”
Hikvision EBG provides a range of industry solutions for “social energy”, covering primary energyacquisition such as grain growing, oil extraction and coal mining, secondary energy processing such as oil refiningand power generation, as well as energy use at gas stations and in the power transmission and distribution.
Safe production solutions are ideal for outdoor areas and harsh environments, and reduce safety risks ofpersonnel operations, environmental changes and equipment production through AI visual perception technology.For example, intelligent, reliable and effective remote control means are available for unattended stations toreduce personnel costs and help build ubiquitous IoT through video visualized inspection. Intelligent analysis andalarm can be used to minimize dangerous behaviors such as people intruding into dangerous zones and irregularoperation, by means of AI visual perception technology; and technical support can be provided for the fusion ofIoT and information networks through linkage with an enterprise information system.
The traceability supervision solutions ensure grain production and food production, realize visualization oftraceability, and assist process supervision and automatic identification. For instance, real-time detection can becarried out for various indicators of the grain planting environment via dynamic environment detection, to realizereal-time supervision of food production environment; all-time intelligent detection can be conducted for ensuringthat staffs wearing the uniforms, and supervising the kitchen environment of various catering units in theapplication zones by AI visual perception technology, and problems like multiple supervision departments andwide scope of supervision could be solved though linkage with regulatory information platform, to build
transparent kitchens.
Industrial IoT solutions based on visual perception are helpful for energy enterprises to cut cost, improvequality, speed up processes and improve capital investment. For example, in the metallurgical industry, intelligentobservation and analysis of short-circuit heating of cathode plate in copper electrolytic cell by thermal imagingcamera effectively settles the problems of time-consuming, labor-intensive and inefficiency of traditional manualmeter reading, water sprinkling and manual detection method, whereby manual inspection cost of each workshopcan be reduced by RMB 400,000 per year.
Industry solutions serving a “better life”
Hikvision EBG provides smart solutions for the healthcare, education and tourism industries.
In the field of higher education, the video cloud technology can be used to provide a cloud platform forteaching resources and online classroom solutions to achieve quality education resource sharing, and promote faireducation. The classroom behavior analysis can enable quantitative evaluation on the classroom teaching effect,providing data support for making major decisions such as students’ learning state, occupational guidance,teachers’ further study directions, improvement of teaching facilities, etc. The AI visual perception technologycould be applied for building a campus identity verification system taking biological characteristics (human face)as the core, which is widely applied in dormitory management, cafeteria consumption, book borrowing andacademic conference, and data association has been established for teaching, educational administration, logistics,safety guard and other information systems, providing a feasible idea for realizing big data intelligent applicationin campus.
In the field of intelligent tourism, the AI visual perception technology can comprehensively perceive thescenic resources, tourists’ behaviors and passenger flow trajectory, and represent group portraits of visitors,whereby reasonably matching resources and enhancing customer service experience; in the meantime, based on
video cloud technology, live broadcasting scenic spots becomes possible and allows tourists to enjoy and sharescenic spots.
In the field of intelligent healthcare, the video AI recognition technology realizes the identification ofreference personnel, while video networking and AI visual perception technology makes the remote supervisionof medical insurance consumption possible, which facilitates medical digitalization and ensures the fairness ofmedical resources.Industry solutions contributing to “wealth growth”
Hikvision EBG carries out a series of industry solutions dedicated to achieving “wealth growth” for variousindustries covering real estate asset construction, property management services and financial institution wealthmanagement, helping industry users achieve wealth growth.
The large video networking and AI visual perception technology is applied for personnel management andsafety control on construction sites during the construction process. To solve the chaos of construction site staffmanagement, a real-name attendance management scheme for workers is used with functions such as attendancestatistics and job category statistics, combining with real-name attendance system and real-name enterprisemanagement system to supervise wage payments of rural migrant workers and prevent the labor force fromdefaulting on wages for migrant workers. To settle the matter of difficulties in management of site accidents, avisualization solution for site safety production is used: by taking advantage of high-altitude panoramic videomonitoring system and intelligent safety helmet equipment, the details of site operation and the situation of safetyhelmet wearing of personnel are clear at a glance.
Hikvision EBG empowers leading real estate developers and property management companies through theapplication of technological means, so as to enhance brand effect and property management capabilities and
improve owner’s experience. For instance, by means of consumption structure analysis and dynamic passengerflow analysis, business planning and precise marketing of commercial properties can be strengthened; by applyingparking robots, a new model of human-free parking lots can be created.
Based on standardized service requirements of financial institutions, combined with application scenariossuch as counter, e-banking, and self-service devices, Hikvision EBG provides various face recognition-basedidentity verification methods to realize effective control of operational risks. The AI visual perception technologyis applied for customer classification and behavioral information analysis so as to provide differentiated marketingservices and enhance customer experience.3.3 Small & Medium Business Group (SMBG): adapting to the transformation trend, contributing tochannel upgrade, and creating a service ecosystem
As the most active business group, small and medium businesses represent strong developmental vitality andgrowth potential. The SMB market is a promising market, and the business is driven by real demands from smallbusinesses and small units, which are less affected by changes in macroeconomic policies. At present, suchdemands have been continuously growing and are gradually upgrading toward visual operation management.
For the SMB market, Hikvision formed the SMBG business team based on the channel distributionmanagement team, aiming to serve small and medium-sized enterprises. The Company sets up SMBG businessteam to closely follow the demands of SMB users and distribution customers, efficiently and flexibly provideproducts and services based on market insights, and strive to establish an eco-industrial platform for productdistribution, service crowdsourcing, and SaaS sharing.
China’s SMB security market is massive, being not only a device product market, but also an engineeringmarket, where product price premium brought by the service is an important “moat” of this market. In themeantime, the SMB market is a very representative long-tail market with personalized and scattered users’demands. Despite of the small individual demand, the cumulative effect of scale is significant given the enormousoverall quantity and the extremely wide range. In this market, the information cannot be easily delivered, the costof brand replacement is low, and there are a large number of simple service demands without unified industrystandard. Hikvision SMBG strives to achieve diversified and differentiated business development by changingmarketing methods, broadening product types, deepening scenario-based demands, and innovating channel model.
Based on AI intelligence and big data, Hikvision SMBG established a comprehensive service platformintegrating cloud business transactions, security services and SaaS applications, and created a new ecosystem ofsecurity Internet; with the help of e-commerce, 400 hotline, official website and other sources of traffic, HikvisionSMBG deepens access to multiple channels including security, IT and industrial equipment, and obtainsinformation about both online and offline traffic; Hikvision SMBG builds nationwide logistics and warehousing toimprove logistics turnover efficiency; it optimizes the means of controlling capital stocks, refines channelcustomer management, and strengthens systematic risk management; it creates a group of efficient, fast, integratedservice providers with standardized delivery capabilities, standardizes the service standards of the industry,expands the scale of services, enhances service revenue, builds the core competitive advantages of HikvisionSMBG, and continues to realize the value and create value centered on customers.
Taking advantage of its accumulation of products, channels and services, Hikvision SMBG hascomprehensively launched five major initiatives: “diversification of products, scale of online business,digitalization of business, standardization of services, and efficiency of operations”, continues to build a newdistribution management system and model, and creates a good user ecology to consolidate the foundation for thelong-term development of the Company’s SMBG business.
4. Innovative Businesses
During the reporting period, the video technology-based new businesses such as EZVIZ Network, HikvisionRobotics, Hikvision Automotive Electronics, Hikvision Smart Storage, Hikvision Weiying, and HikvisionHuiying maintained healthy and steady growth, contributing to the Company's long-term sustainable development.4.1 Innovative Business -- EZVIZ Network
Focusing on smart home business, the EZVIZ Network business continued to grow at a high rate in 2018,with revenues exceeding RMB 1.6 billion for the full year.EZVIZ naturally evolved from intelligent items and kits to a full house intelligent system
In 2018, EZVIZ launched various new products such as "all wireless Internet battery camera C3A", "gardenlight camera LC1", all wireless video intercom "battery doorbell camera DB2", "Internet fingerprint passwordlock LT21S", "smart wall switch P1" for intelligent control of the whole house, "smart curtain MC1", and "childaccompanying robot -- YingBao", and extended the existing IPC product line and smart lock, smart door viewer,smart visual doorbell and other smart home product lines, forming a full house smart home system with videotechnology as the core.
EZVIZ improved the intelligence of home-like scenes (business scenes, etc.) and continued to launch newproducts and optimize services. Under the premise of continuously optimizing the original products and services,EZVIZ launched a new hemispherical product with customizable voices -- "Little Conch" C4W, which allowsusers to record different voices such as welcome, reminders and alarms through EZVIZ APP, enriched businessscenario applications. In addition, EZVIZ cloud storage service is growing rapidly, and EZVIZ also exploredAI-based call reminder and other businesses and received positive response from users.EZVIZ Cloud platform is further opening up, and AI empowers sub-industry applications
EZVIZ Cloud has been striving to build the most comprehensive security protection and actively improvesecurity compliance through professional qualification certification. In 2018, EZVIZ Cloud obtained theinternational certification of cloud security (CSA-STAR
), once again recognized by the international cloudcomputing service market, which marked that EZVIZ Cloud is in line with international standards and will
CSA-STAR: Security Trust Assurance and Risk certification organized by Cloud Security Alliance (CSA), is an enhanced versionof information safety management system ISO/IEC27001, and provides a comprehensive safety evaluation for cloud computingservices combing Cloud Control Matrix and maturity evaluation module as well as complying with relevant requirements of laws,regulations and standards.
provide high-quality, high-level cloud services to overseas customers.
After six years of growth, EZVIZ Cloud has become a global video cloud service platform, providing basicvideo cloud services to global customers and users in North America, South America, Asia Pacific, Europe,Russia, and the United Kingdom. There are currently 27 service areas covering five continents and nearly 150countries.
It links and aggregates a large number of intelligent terminals and serves customers and end consumers in avariety of industries worldwide by providing acquisition, transmission, storage and deep analysis capabilities forvideo and audio-based IoT data. To date, the EZVIZ Cloud platform has a magnitude of 40 million deviceaccesses and 30 million users, providing stable and continuous video-based comprehensive services for usersacross the world.
Based on the basic capabilities of EZVIZ's hardware + cloud, AI + open interface, EZVIZ Cloud Platformprovides open device access, open basic services, open value-added services, and packages a number of SaaScommon components around application scenarios (for example, identification components, headcount changedetection components, frequency detection components, dynamic face retrieval components which can be used forapplications such as VIP management, off-the-post detection, repeating customer analysis, personnel trajectoryanalysis, as well as cloud live broadcasting components of industrial live broadcasting such as scenic and roadcondition live, preschool parents live, and Clean and Healthy Kitchen live through applying surveillance); itallows developers to quickly and easily develop their own business SaaS based on the basic capabilities of EZVIZSaaS components, and to serve their customers by taking advantage of AI capabilities. As of the end of 2018,more than 30,000 partners have joined EZVIZ Cloud, docking more than 5,000 active applications. An open andshared video cloud ecosystem has been initially established.
4.2 Innovative Business -- Hikvision Robotics
Hikvision Robotics focuses on the field of automation and specializes in intelligent manufacturing, andcontinues to explore, invest and rapidly develop in mobile robots, machine vision and industrial-level UAVs(unmanned aerial vehicles), empowering the development of the national manufacturing industry.
In the area of mobile robots, Hikvision Robotics focuses on internal logistics and the core technology ofrobots, provides customers with reliable AGV
products and solutions, and continuously builds intelligentinternal logistics solutions for factories, which have been widely used in 3C, automotive manufacturing, newenergy, medical, tobacco and other industries. Hikvision Robotics’ main product, Qianmo Robot, released its thirdgeneration in 2018, which supports a variety of vision and laser positioning and navigation methods. Theperformance and quality of the third generation has been greatly improved to meet the application requirements ina variety of complex scenarios. Hikvision Robotics also launched new products such as automatic forklifts andhybrid robots
, continuously enriching the product series of mobile robots to provide industry customers with awider range of product selection.
In the area of machine vision, Hikvision Robotics focuses on industrial visual sensing applications andspecializes in the underlying algorithm software and hardware technology, to provide customers with excellentmachine vision products and algorithm platforms, which have been widely used in various fields of industrialautomation such as 3C, electronic semiconductor and logistics, realizing positioning and guidance, measurement,defect detection, code reading, OCR recognition and other applications. In 2018, Hikvision Robotics released 31
AGV：Automated Guided Vehicle
Hybrid robot: robot integrated functions of both mobile robot and general industrial robot (such as mechanical arm).
megapixels, 43 megapixels and 50 megapixels ultra-high resolution industrial cameras to actively deploy andpreempt the high-end industrial camera market. At the same time, it released 8.9 megapixels, 12 megapixels, 20megapixels, etc. intelligent code reading camera products to help the rapid upgrade of logistics automation. Inaddition, Hikvision Robotics also released series products such as smart sensors, high-precision 3D profilers, andlenses, which could meet the demands of most vision applications, to provide industry customers with one-stopvisual product procurement services.
Relying on Hikvision's technology accumulations in the fields of image sensing, AI, big data analysis, etc.,Hikvision Robotics' industrial-level UAVs, with video image processing as the core, based on security andfocused on the industries, are widely used in various scenarios such as fire rescue, emergency command, trafficmanagement, facility inspection, and event support and protection. In 2018, Hikvision Robotics successivelyreleased Falcon IV series UAVs, UAV monitoring and management platforms, automatic tracking antennas, fixedand handheld defense systems, and other new products, providing industry users with complete solutions fromproduct to system.
4.3 Innovative Business--Hikvision Automotive Electronics
Hikvision Automotive Electronics business is committed to the R&D, manufacturing, sales and services ofAdvanced Driving Assistant System (ADAS) and the related sensors, applying Hikvision’s technical reserves in
image processing, video analysis, AI intelligence, video storage and other fields to the automobile industry. Sinceits establishment, Hikvision Automotive Electronics has completed the upgrading of its quality system and theconstruction of a new automated production line in accordance with the IATF16949 Standard
.
Self-developed Fully Automated Production Lines and Core EquipmentHikvision Automotive Electronics business covers OEMs and related operators of passenger cars andcommercial vehicles, and the company has production lines for vehicle mounted cameras, driving recorders, 360°panoramic viewing systems, streaming rearview mirrors, multimedia intelligent rearview mirrors, ADAS
, radars,and etc. As of 2018, Hikvision Automotive Electronics has passed the audit and the verification of 20 OEMs andbecome their qualified supplier, basically covering domestic mainstream independent brands and some of the jointventure brands; the company has also implemented more than 200 fixed-point projects, of which more than 100have been put into mass production. At the same time, relying on Hikvision's branches in more than 200 citiesacross China, Hikvision Automotive Electronics has realized transaction coverage of more than 500 channelpartners.
IATF16949 Standard: a system standard developed by International Automotive Task Force (IATF) in relation to the R&D,manufacturing, quality control of automobiles.
ADAS：the abbreviation of Advanced Driving Assistant System, an active safety technology, by taking advantage of varioussensors installed in a vehicle, is able to collect environmental data inside and outside of the vehicle immediately to recognize, detectand trace the static and dynamic objects, so as to alert the driver of potential dangers as soon as possible, draw the driver's attentionand improve safety.
Product Family of Hikvision Automotive ElectronicsHikvision Automotive Electronics unveiled the first-generation ADAS in 2017. The system, with thefunctions of front vehicle collision warning, lane departure warning and driving behavior analysis based on videoanalysis, has been widely used in domestic passenger vehicles and dangerous goods transportation vehicles. Inprovinces that have introduced the local technical standards such as Jiangsu, Shanxi and Zhejiang, HikvisionAutomotive Electronics is among the first batch of enterprises that passed the testing and certification. Whileintroducing the ADAS, Hikvision Automotive Electronics also provides multi-sensor fusion solutions with video,millimeter wave radar and ultrasonic radar for autonomous driving.
4.4 Innovative Business—Hikvision Smart Storage
In 2018, Hikvision Smart Storage introduced the V210 series dedicated solid state disk (SSD) for videosurveillance, which supports the latest 64-layer 3D TLC NAND Flash
, and supports up to 4TB of maximumcapacity. All capacities are equipped with power-down protection
to meet the cost-effective, high-capacity andpower-down protection demands in automotive and rail industries. The 4TB mass production complements the
NAND Flash: Nand-flash memory is a type of flash memory, which has a non-linear internal macro-cell mode, providing cheapand effective solution for large-capacity solid state memory implementations. TLC: Triple-Level Cell, which is 3 bit per cell, 1memory storage unit can store 3 bit data.
Power-down protection: abnormal power-off will increase the chance of a SSD failure. By providing a power-down protectionmechanism, the SSDs can be ensured of data integrity in the event of abnormal power failure.
gap in the domestic large-capacity SSD mass production products, which has driven the expansion of externalindustrial markets of automotive and railroad and enhanced the brand awareness of the industry. At the same time,Hikvision Smart Storage participated in the formulation of GA/T 1357-2018 Public Safety Video SurveillanceHard Disk Classification and Test Method, which promoted standardized development of video surveillance SSD.Hikvision Smart Storage also made significant breakthroughs in enterprise-class SSD, and released D200 seriesenterprise-class SSD, which is the first mass-produced domestically-controlled enterprise-class SATA SSDsolution. Its performance and performance stability exceed the common read-intensive enterprise-class SSDs. Inthe area of industrial-grade SSDs, Hikvision Smart Storage released the S210M and S210N, small-sized andultra-small-sized SSDs, with full capacity support from 64GB to 2TB, meeting the needs of miniaturization andlarge-capacity development of SSDs, and providing stable performance and system support for the systems.
Product Family of Hikvision Smart StorageHikvision Smart Storage provides H1, L1, H10 series video surveillance memory cards, and constantlyintroduces new products. Based on the industry application characteristics of video surveillance, Hikvision SmartStorage launched P1, L2, P10 series video surveillance memory card products, covering various industries such aspublic security, transportation, finance and education, applicable to various application environments; at the sametime, these new products have passed the relevant certification of the Ministry of Public Security, protectingcustomers’ data security.
For the personal family scenes, Hikvision Smart Storage launched the “Personal Private Cloud” H100 in2017, which solved the problem of security and sharing convenience of personal data and at the same timeenabled intelligent management of photos and videos through AI technology. For office scenes in small and microcorporates, Hikvision Smart Storage launched the "Hikvision Enterprise Private Network Disk" H304 in 2018,
which provided a series of programs that make office work simple and efficient, such as online documents,collaborative sharing, mobile office, organizational structure management, etc. In terms of idle drives due toupgrading under personal scenes, Hikvision Smart Storage released the "single-disk" H90, allowing the idle harddrive to instantly change into network disk.
In 2018, Hikvision Weiying, Hikvision Huiying and other innovative businesses have developed rapidly,opening up new space for the Company's long-term development.
II. Significant changes in main assets
1. Major Changes in Main Assets
| Major assets | Explanation on Major Changes |
| Equity Assets | Increased by 8.69%，mainly due to investments on Zhiguang Hailian Big Data Technology Ltd. and SanMenXiaYun Vision Technology Ltd., and additional investments on Maxio Technology (Hangzhou) Ltd. |
| Fixed Assets | Increased by 68.07%, mainly due to transfer of the completed Internet Video Industry Base, Security Industry Base (Tonglu) project-phase 2, and Chongqing Manufacturing Base from construction in process to fixed assets during the current reporting period. |
| Intangible Assets | Increased by 102.70%, mainly due to newly added land use rights of Chengdu Science and Technology Base, Wuhan Science and Technology Base, and Hangzhou Innovation Industry Base. |
| Construction in Progress | Decreased by 71.03%, mainly due to transfer of the completed Internet Video Industry Base, Security Industry Base (Tonglu) project-phase 2, and Chongqing Manufacturing Base from construction in process to fixed assets during the current reporting period. |
2. Major Overseas Assets
□ Applicable √ Inapplicable
III. Core Competitiveness
Whether it is the video surveillance industry, the security industry, or the intelligent IoT industry, the users’scenario-based demands are very scattered, indicating a market with demand fragmentation. Centering around itsgoal of better meeting the needs of a fragmented market, Hikvision has been concentrated on technologyaccumulation, product development, program design, marketing and service system construction, as well assupply chain delivery capabilities since its inception. The Company focuses on hiring the right people and buildsits global comprehensive competitive advantages through continuous accumulation.
1. Focusing on video technology and satisfying users’ fragmented demands with scenario-based products
and solutionsVideo technology is a very comprehensive technology, which involves optics, sensors, microelectronictechnology, imaging technology, video compression technology, video storage technology, video transmissiontechnology, low illumination and wide dynamic technology, video display technology, as well as traditionalpattern recognition technology, deep learning technology that is extremely popular at present, and many otherrelated technologies. These technologies are rapidly developing and deepening. Regardless of how the marketchanges, the Company will continue to invest in video technology and other related technologies, endlesslydevelop these technologies, and apply these technologies to products or systems to better meet users’ demands.
Based on these video technologies, the Company develops video products and solutions. Givenscenario-based video applications and the fragmented users’ demands, the Company needs to provide theappropriate products or solutions for different scenarios and often needs to customize them accordingly. In orderto meet fragmented demands more efficiently, the Company has been continuously improving its R&D system,optimizing and developing its technology platform, product platform and system platform to maintain itscompetitiveness. For example, the accumulation of big data technology and the construction of big data platformin the past few years have empowered the Company with big data capabilities.
2. Maintaining a high level of R&D investments and proactive planning business development
The continued high level of R&D investment is the core driving force for Hikvision’s competitiveness.During the reporting period, the Company invested RMB 4.48 billion in R&D. Unlike companies that are onlyengaged in one area of the industrial chain, Hikvision provides not only algorithms and products, includinghardware products like cameras, access control for channels, structured servers, etc., but also application systems,being a company that covers the entire industrial chain from technology and products to systems. The Companyhas a three-in-one hierarchical R&D system consisting of the technology platform, the product platform and thesolution platform. The three platforms are different in functions yet cooperate with each other. The continuousdevelopment of technologies, products and solutions enables the Company to respond to and fulfill ongoingcustomers’ demands. The Company anticipated the significance of artificial intelligence and has deployed itsbusiness in advance in terms of algorithms, software and hardware. As a result, Hikvision already possessesrelatively complete and mature artificial intelligence technologies, products and systems at present. The Company
is confidently working to seize the opportunity once again in the current wave of artificial intelligence.
Hikvision has established an R&D system, which is headquartered in Hangzhou and covers various locationsincluding Beijing, Shanghai, Wuhan, Montreal in Canada, and London in Britain. In addition, it is planning tomake R&D investments in various regions including Xi’an, Chengdu, Chongqing and Shijiazhuang, hiring localprofessionals to lay a good foundation for the Company’s sustainable development.
3. Improving manufacturing flexibility and continuously enhancing product delivery capability
Due to the fragmented market demand, there is a wide variety of products and a wide range of models, andorders are characterized by small sizes and multiple batches, which poses a challenge to the delivery of the supplychain and necessitated the development of a flexible production capacity. The Company’s efforts to develop aflexible production capacity can be summarized in three aspects: first, combining independent production withoutsourced production to balance delivery capacity and production efficiency; second, strengthening theconstruction of the internal operation coordination mechanism and the IT system, with production plans leadingmarketing, product development and production, maintaining collaboration with suppliers, ensuring efficient andaccurate material demand forecasting and management, and implementing flexible and effective programcoordination and production scheduling, which is crucial for the Company’s supply chain to respond to thechanging demands, optimize costs, and increase efficiency; third, promoting the construction of intelligentfactories and improving the level of manufacturing equipment, which on the one hand enhances the productionefficiency of the factory, and on the other hand improves the technological level and ensures the consistency ofproduct quality.
Currently, Hikvision has three main manufacturing bases in Hangzhou, Tonglu and Chongqing, and it hasalso launched production expansion plans for Tonglu, Wuhan and Chongqing to ensure steady and healthybusiness growth. At present, the Company applies the intelligent Qianmo AGV and machine vision cameras at theTonglu production base to fully implement the automation of warehousing and in-plant logistics. We will continueimplementing the intelligent factory construction to strengthen the intelligence level of the supply chain systemwith the support of a comprehensive information system, IoT technology and automation technology. Based onthe Tonglu Production Base template, we’ll build more agile, flexible and scaled intelligent factories.4. Continuously optimizing marketing and service networks and building organizational capabilities that match the
Company’s businesses
To better fulfill the fragmented demands of users and reduce the intermediate links of informationtransmission, the Company reinforces the construction of its marketing and service networks. Hikvision’smarketing service network continues to expand to allocate resources globally. The Company has 32provincial-level business centers/primary branches, and has established 44 overseas sales branches, forming amarketing network covering more than 100 countries and regions around the world, with the self-owned brandproducts being sold to more than 150 countries and regions.
In the domestic market, to better serve customers, Hikvision promotes the transformation of local branches toprovincial business centers, allocates more resources to business centers to better cater to customer needs; and theprovincial business centers act as the front desk for the Company to get closer to users and the market and torespond to customer needs. For the purpose of better adapting to the demands of customers, Hikvisionrevolutionized and reorganized the traditional security business in 2018 and established the Public Business Group(PBG), the Enterprise Business Group (EBG) and the Small & Medium Business Group (SMBG), adoptingdifferent business strategies and offering different products and solutions.
In the meantime, Hikvision continues to establish distribution channels in major countries and regions aroundthe world. By optimizing the distributor team, it continuously consolidates and expands the outreach of itsbusiness, providing product delivery and after-sales support for various users in various industries of variouscountries and regions. Through continuous improvement of products and technical service standards, theCompany provides a comprehensive certification training system for its partners to continuously enhance theprofessional capabilities of its partners so as to serve customers together.
Through continuous adjustment of the business structure, Hikvision will continue to build an optimizedorganizational capability that is more compatible with the market.
5. Strengthening human resource construction to support the company’s sustainable development
The competition among enterprises is ultimately the competition for talent, the most important source ofcompetitiveness in enterprises. The Company adheres to the “talent-focused, growing together” employmentconcept, and has set up a dual career development path consisting of management sequence and professionalsequence, established a professional qualification evaluation system and a talent assessment system, andimplemented a multi-level training mechanism, to continuously invest resources for the cultivation of core talentsand back-up talents for the Company. Through a variety of activities such as “Face-to-Face with Executives”,
“Dialogue with Managers”, “Humanities Lecture Hall”, and “Reading Club”, the Company creates a fair, openand positive organizational atmosphere and helps employees gain a sense of accomplishment and belonging.
In addition to providing employees with competitive compensation in the industry, the Company hasimplemented a restricted share incentive scheme for the fourth time in 2018, awarding more than 6,000 employees,covering the core talent team of executives and business backbones from various levels, thereby maintaining thestability and motivation of the Company’s core talents.6. Continuing to build the quality system, safety system and compliance system to escort the Company’sdevelopment
Hikvision continues to invest resources to strengthen and optimize the quality management system, R&Dmanagement system for product safety, and compliance system to empower its business development. TheCompany strictly complies with the applicable laws, regulations and relevant provisions of different countries andregions where the operation is conducted, fosters an open and transparent atmosphere, welcomes the supervisionof all parties, and constantly optimizes itself.
Section IV Operation Discussion and Analysis
I. Overview
In 2018, the domestic economy underwent a rapid decline and the impact of overseas non-market factorssoared, resulting in continuously rising uncertainty risks. Affected by the economic and political environment,with a clear downward trend of market demand, the Company faced greater business challenges than ever before.On the other hand, the application of AI technology accelerated the development of IoT, visual perceptiontechnology brought opportunities for the digital transformation of traditional industries, and the fusion ofintelligent IoT and information network generated tremendous space for data governance, data fusion, dataservices and data applications, which has once again lifted the bottleneck of the industry development. Hikvisioncontinued to maintain a solid growth through its own operations and efforts.
Facing a complicated domestic and overseas environment, the Company adhered to a growth strategy that isoriented by customer demands, driven by technological innovations, and laid equal emphasis on both efficiencyand risk management. During the reporting period, the Company achieved total operating income of RMB 49.84billion, an increase of 18.93% on a year-over-year basis; and net profit attributable to shareholders of the listedcompany of RMB 11.35 billion, an increase of 20.64% on a year-over-year basis. The Company’s overall grossprofit margin was 44.85% in 2018, improving by 0.85% compared to the prior year.
II. Core business analysis
1. Overview(1) Continuing to maintain R&D investment and speeding up the implementation of intelligentapplications of technologies, products and solutions
In 2018, the Company’s R&D investment reached RMB 4.48 billion, accounting for 8.99% of its total salesvolume. The Company maintained a relatively large scale R&D investment, with the number of R&D andtechnical service personnel in excess of 16,000.
While continuing to invest in the technology and products related to the traditional security business, theCompany accelerated a series of R&D investment in AI Cloud. Following the AI Cloud computing architecture ofcloud-edge fusion, the Company proposed a data architecture of IoT-Information network fusion and
comprehensively released a series of platforms, such as “two pools, one library and four platforms”, AI openplatform, and video surveillance construction evaluation system, constantly consolidating the business layout inAI intelligence, big data, and application and building the business architecture system through technologicalinnovation.
In 2018, Hikvision’s products and solutions were widely applied in the public service market, the enterprisemarket, and the consumer market, including intelligent products represented by “Full Structuring”, “HybridIntelligence”, Darkfighter series of intelligent cameras, intelligent traffic products, full-analysis intelligent servers,“DeepinGo” series close-range face recognition intelligent access control products；and its solutions facing thepublic service industry represented by public security projects, solutions guaranteeing “traffic and travel”,solutions for safeguarding “clear water, blue sky and green mountains”; and solutions for improving people’slivelihood services; as well as its solutions facing the enterprise industry represented by solutions serving the“business world”, “social energy”, “better life”, and “wealth growth”.(2) Transforming and reorganizing business organizations to further reach the market and users
For the domestic market, the Company advanced the construction of provincial-level business centers,upgraded provincial-level branches to business centers, and set up secondary branches in key cities, moving sales,R&D and technical support resources forward and relocating market front-line and decision-making centerforward to stay closer to and better serve customers. The Company re-planned its business groups to PBG, EBGand SMBG according to the different characteristics of the three types of markets, effectively coordinatinginternal resources and forming market coverage according to customer differences.
For the overseas markets, the Company set up five new subsidiaries in Mexico, Panama, Pakistan, Peru andIsrael, one new branch in the Philippines, one new office in Ho Chi Minh City, summed up to 44 overseasbranches and more than 100 authorized repair centers in total in 2018, further improved its overseas sales andservice network. The Company continued to consolidate its overseas channels, focused on breaking through theproject market, maintained investment inputs for the overseas market, enhanced brand influence of the Companyto better serve local customers. In 2018, the Company achieved major project breakthroughs in India and othercountries, and made some progress in the project markets of many countries and regions.(3) Making targeted adjustments to business strategy and being cautious in dealing with economic
fluctuationsIn response to the pressure of industry-wide capital contraction brought about by deleveraging campaign in
domestic China, the Company adopted a destocking strategy in the domestic channel market since the secondquarter of 2018 to help distributors reduce inventory, optimize asset structure and improve the ability to addresscapital risks. Meanwhile, it cooperated with the Company’s warehouse management (HiveBox Project
) in majorcities across the country to speed up the operating turnover of our channel partners.
In the second half of 2018, facing the risks brought by the continuous downturn of the domestic economy,the Company paid more attention to the quality of revenue.(4) Continuing to promote the development of innovative business
In 2018, EZVIZ business continued to be profitable, and the Hikvision Robot business started to generateprofits as well. Hikvision Automotive Electronics, Hikvision Storage and other innovative businesses have allinvested heavily to propel the target market. Employees were committed to the business development with thespirit of hard work and entrepreneurship. The Company's employee team and the innovative business team have apositive and productive working relationship; likewise the Company's business and the innovative businessescomplement each other and are synergistic.(5) Improving supply chain management and deploying overseas production bases
In 2018, the Company promoted intelligent manufacturing in its production base, improving manufacturingflexibility and production efficiency. It also impelled the construction of the supply chain IT system, enhanced thelevel of process operation, and reinforced the control and management of the production process.
During the reporting period, the Tonglu Production Base-Phase 2 and the Chongqing Production Base werecompleted and delivered, and the factory in India, the Company’s first production base in the overseas market,was constructed, forming overseas manufacturing capabilities to more effectively ensure the products supply inthe overseas market.(6) Furthering management change and improving management capabilities
In 2018, the Company continued to promote various management change projects and upgraded capabilitiesin all aspects. From focusing on scale growth, we are laying emphasis on both scale growth and efficiencyimprovement now. At the same time, we continue to develop and cultivate promising employees to activateorganizational vitality.
Hive Box Plan: establish warehouses in major cities across the country, centralize warehouse management, and respond quickly todistributors’ orders to improve overall delivery efficiency.
2. Operating incomes and operating costs1) Operating income structure
Unit：RMB
| 2018 | 2017 | YoY Change (%) | |||
| Amount | Proportion to operating income | Amount | Proportion to operating income | ||
| Total operating income | 49,837,132,481.61 | 100.00% | 41,905,476,572.07 | 100.00% | 18.93% |
| Classified by industry | |||||
| Video products and video services | 49,837,132,481.61 | 100.00% | 41,905,476,572.07 | 100.00% | 18.93% |
| Classified by product | |||||
| Front-end equipment | 24,083,382,887.01 | 48.32% | 21,090,230,299.49 | 50.33% | 14.19% |
| Back-end equipment | 6,779,290,973.76 | 13.60% | 6,151,038,063.70 | 14.68% | 10.21% |
| Central control equipment | 7,323,448,788.51 | 14.69% | 5,073,899,931.95 | 12.11% | 44.34% |
| Constructions | 2,285,061,427.63 | 4.59% | 2,540,799,165.58 | 6.06% | -10.07% |
| Others | 6,668,689,372.12 | 13.39% | 5,394,298,987.25 | 12.87% | 23.62% |
| Subtotal | 47,139,873,449.03 | 94.59% | 40,250,266,447.97 | 96.05% | 17.12% |
| Smart home business | 1,636,697,390.22 | 3.28% | 1,090,629,830.13 | 2.60% | 50.07% |
| Other innovative businesses | 1,060,561,642.36 | 2.13% | 564,580,293.97 | 1.35% | 87.85% |
| Subtotal | 2,697,259,032.58 | 5.41% | 1,655,210,124.10 | 3.95% | 62.96% |
| Classified by region | |||||
| Domestic | 35,646,435,049.93 | 71.53% | 29,661,186,316.32 | 70.78% | 20.18% |
| Overseas | 14,190,697,431.68 | 28.47% | 12,244,290,255.75 | 29.22% | 15.90% |
Note: In the category classified by product, “Smart home business” under innovative businesses was listed separately; “Otherinnovative businesses” includes corresponding business products of innovative business subsidiaries - HikvisionRobotics, and Hikvision Automotive Electronics, Hikvision Weiying, Hikvision Storage, Hikvision Huiying, andSimilar hereinafter.
Unit: RMB
| 2018 | ||||
| Q1 | Q2 | Q3 | Q4 | |
| Operating income | 9,364,828,201.00 | 11,510,930,023.63 | 12,926,932,976.48 | 16,034,441,280.50 |
| Net profits attributable to shareholders of the listed company | 1,815,964,569.77 | 2,331,430,966.09 | 3,248,407,615.14 | 3,957,066,090.32 |
| 2017 | ||||
| Q1 | Q2 | Q3 | Q4 | |
| Operating income | 7,043,724,101.73 | 9,403,815,634.79 | 11,282,202,421.66 | 14,175,734,413.89 |
| Net profits attributable to shareholders of the listed company | 1,480,780,632.01 | 1,810,765,424.69 | 2,861,268,129.82 | 3,258,040,898.30 |
2) Industries, products or regions accounting for more than 10% of the Company’s operating income or
operating profit√ Applicable □ Inapplicable
Unit: RMB
| Operating income | Operating cost | Gross margin | YoY Change (%) of operating income | YoY Change (%) of operating cost | YoY Change (%) of gross margin | |
| Classified by industry | ||||||
| Video products and video services | 49,837,132,481.61 | 27,483,469,555.24 | 44.85% | 18.93% | 17.11% | 0.85% |
| Classified by product | ||||||
| Front-end equipment | 24,083,382,887.01 | 12,054,070,919.03 | 49.95% | 14.19% | 16.41% | -0.95% |
| Back-end equipment | 6,779,290,973.76 | 3,603,440,284.98 | 46.85% | 10.21% | 13.88% | -1.71% |
| Central control equipment | 7,323,448,788.51 | 3,380,634,705.16 | 53.84% | 44.34% | 45.68% | -0.42% |
| Constructions | 2,285,061,427.63 | 2,008,019,572.05 | 12.12% | -10.07% | -11.95% | 1.88% |
| Others | 6,668,689,372.12 | 4,850,627,883.95 | 27.26% | 23.62% | 12.97% | 6.85% |
| Subtotal | 47,139,873,449.03 | 25,896,793,365.17 | 45.06% | 17.12% | 15.54% | 0.75% |
| Smart home business | 1,636,697,390.22 | 997,681,210.62 | 39.04% | 50.07% | 40.91% | 3.96% |
| Other innovative businesses | 1,060,561,642.36 | 588,994,979.45 | 44.46% | 87.85% | 70.50% | 5.65% |
| Subtotal | 2,697,259,032.58 | 1,586,676,190.07 | 41.17% | 62.96% | 50.61% | 4.82% |
| Classified by region | ||||||
| Domestic | 35,646,435,049.93 | 19,658,459,789.79 | 44.85% | 20.18% | 14.32% | 2.83% |
| Overseas | 14,190,697,431.68 | 7,825,009,765.45 | 44.86% | 15.90% | 24.79% | -3.93% |
Adjusted statistics of principal business are based on the caliber at the end of the reporting period of last year, if thestatistics 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
| Industry | Item | Unit | 2018 | 2017 | YoY Change (%) |
| Video products and video services | Sales volume | Per unit | 126,356,788 | 98,345,860 | 28.48% |
| Output volume | Per unit | 128,068,306 | 100,205,025 | 27.81% |
Explanation on why the related data varied by more than 30% on a YOY basis□Applicable √Inapplicable
4) Fulfillment of signed significant sales contracts by the reporting period
□ Applicable √ Inapplicable
5) Operating cost structure
Classified by industry
Unit: RMB
| Industry | Item | 2018 | 2017 | Increase/ decrease over previous year | ||
| Amount | Proportion to operating cost | Amount | Proportion to operating cost | |||
| Video products and video services | Operating cost | 27,483,469,555.24 | 100.00% | 23,467,310,590.76 | 100.00% | 17.11% |
Classified by products
Unit: RMB
| Product | Item | 2018 | 2017 | Increase/ decrease over previous year | ||
| Amount | Proportion to operating cost | Amount | Proportion to operating cost | |||
| Front-end equipment | Operating cost | 12,054,070,919.03 | 43.86% | 10,354,906,543.30 | 44.12% | 16.41% |
| Back-end equipment | Operating cost | 3,603,440,284.98 | 13.11% | 3,164,186,804.35 | 13.48% | 13.88% |
| Central control equipment | Operating cost | 3,380,634,705.16 | 12.30% | 2,320,570,446.43 | 9.89% | 45.68% |
| Constructions | Operating cost | 2,008,019,572.05 | 7.31% | 2,280,617,025.82 | 9.72% | -11.95% |
| Others | Operating cost | 4,850,627,883.95 | 17.65% | 4,293,560,908.63 | 18.30% | 12.97% |
| Subtotal | Operating cost | 25,896,793,365.17 | 94.23% | 22,413,841,728.53 | 95.51% | 15.54% |
| Smart home business | Operating cost | 997,681,210.62 | 3.63% | 708,022,298.25 | 3.02% | 40.91% |
| Other innovative businesses | Operating cost | 588,994,979.45 | 2.14% | 345,446,563.98 | 1.47% | 70.50% |
| Subtotal | Operating cost | 1,586,676,190.07 | 5.77% | 1,053,468,862.23 | 4.49% | 50.61% |
6) Any change in consolidation scope during the reporting period
√Yes □ No
During the reporting period, the Company has newly set up eleven wholly-owned subsidiaries and six holdingsubsidiaries, and cancelled one company, which have caused the changes in 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 reportingperiod:
□ Applicable √ Inapplicable
8) Major customers and suppliers:
Sales to major customers of the Company
| Sales to top five customers (RMB) | 1,907,664,504.44 |
| Total sales to top five customers as a percentage of the total sales for the year (%) | 3.83% |
| Total sales to the related parties in top five customers as a percentage of the total sales of the year (%) | 0.47% |
Information on top five customers
| No. | Name of Customer | Sales Amount (RMB) | Percentage of total sales for the year |
| 1 | First | 855,032,885.62 | 1.72% |
| 2 | Second | 328,807,648.02 | 0.66% |
| 3 | Third | 257,177,044.92 | 0.52% |
| 4 | Fourth (related party) | 235,831,258.92 | 0.47% |
| 5 | Fifth | 230,815,666.96 | 0.46% |
| Total | -- | 1,907,664,504.44 | 3.83% |
Other information of major customers
√Applicable □ Inapplicable
The Company’s fourth customer regarding sales amount is a related party: branch research institute and subsidiaryof CETC (under the common control of CETC, consolidated as required)
Major suppliers of the Company
| Total purchases from top five suppliers (RMB) | 6,869,030,217.74 |
| Total purchases from top five suppliers as a percentage of the total purchases for the year | 22.88% |
| Total purchases from the related parties in the top five suppliers as a percentage of the total purchases for the year | 0.00% |
Information on top five suppliers of the Company
| No. | Supplier Name | Purchase Amount (RMB) | Percentage of total purchase for the year |
| 1 | First | 3,415,111,828.07 | 11.38% |
| 2 | Second | 1,237,317,431.12 | 4.12% |
| 3 | Third | 769,661,849.33 | 2.56% |
| 4 | Fourth | 731,451,005.50 | 2.44% |
| 5 | Fifth | 715,488,103.72 | 2.38% |
| Total | -- | 6,869,030,217.74 | 22.88% |
Other information on major suppliers□ Applicable √ Inapplicable
3. Expenses
Unit: RMB
| 2018 | 2017 | Increase/decrease over previous year | Note of significant change | |
| Sales expenses | 5,892,500,406.52 | 4,430,220,065.13 | 33.01% | Improve sales network, increase personnel contribution |
| Administrative expenses | 1,376,013,682.79 | 1,011,214,457.29 | 36.08% | Increase in personnel and low-value consumables used in new office buildings |
| Financial expenses | -424,257,896.76 | 265,411,287.66 | -259.85% | Increase in foreign exchange gains during the reporting period |
| R&D expenses | 4,482,780,693.41 | 3,194,223,108.16 | 40.34% | Continue to increase R&D investments |
4. R&D Investment
√Applicable □Inapplicable
Benefited from the professional intellectual property management system, in 2018, the Company has newlyadded 850 patents (including 116 patents for invention, 270 utility models and 464 product design patents), andnewly added 112 software copyrights. As of the end of 2018, the Company had accumulatively owned 2809patents (including 513 invention patents, 741 utility models and 1555 product design patents), and owned 881software copyrights.
During the reporting period, the Company invested RMB 4.48 billion in R&D, which accounted for 8.99% ofthe operating income. Owing to the continuous relatively high level R&D investment and continuous innovation,the Company is able to keep and enhance its technology leading position and rapidly transform technicaladvantage to product superiority, so as to continually promote the growth of the Company’s performance.
R&D investment of the Company
| 2018 | 2017 | Change Percentage | |
| Number of Engineers (ppl) | 16,010 | 13,085 | 22.35% |
| Engineers as percentage of Total headcount | 46.55% | 49.70% | -3.15% |
| Amount of R&D expenses (RMB) | 4,482,780,693.41 | 3,194,223,108.16 | 40.34% |
| R&D investment as a percentage of operating income | 8.99% | 7.62% | 1.37% |
| Capitalized R&D expenses (RMB) | 0.00 | 0.00 | 0.00 |
| Capitalized R&D expenses as a percentage of R&D expenses | 0.00% | 0.00% | 0.00% |
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
| Item | 2018 | 2017 | Increase/decrease over previous year |
| Subtotal of cash inflows from operating activities | 57,331,971,581.36 | 45,403,833,925.46 | 26.27% |
| Subtotal of cash outflows from operating activities | 48,217,958,295.30 | 38,030,673,674.78 | 26.79% |
| Net cash flows from operating activities | 9,114,013,286.06 | 7,373,160,250.68 | 23.61% |
| Subtotal of cash inflows from investing activities | 10,894,117,243.97 | 10,418,044,681.02 | 4.57% |
| Subtotal of cash outflows from investing activities | 9,443,396,961.92 | 11,626,742,349.71 | -18.78% |
| Net cash flows from investing activities | 1,450,720,282.05 | -1,208,697,668.69 | -220.02% |
| Subtotal of cash inflows from financing activities | 12,493,552,609.39 | 3,642,688,936.06 | 242.98% |
| Subtotal of cash outflows from financing activities | 13,298,915,018.82 | 7,044,435,588.93 | 88.79% |
| Net cash flows from financing activities | -805,362,409.43 | -3,401,746,652.87 | 76.33% |
| Net increase in cash and cash equivalents | 9,994,553,723.02 | 2,506,847,571.89 | 298.69% |
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 sales collection;the fluctuation of net cash flows from investing activities is mainly due to the increase in the net recovery amountof principal-guaranteed financial products; the fluctuation of net cash flows from financing activities is mainlydue to equity incentive subscription funds received in the current period.
Explanation of reasons leading to the material difference between cash flow from operating activities during thereporting 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
| December 31st 2018 | December 31st 2017 | YoY Change (%) | Note of significant change | |||
| Amount | Percentage of total assets | Amount | Percentage of total assets | |||
| Cash and bank balances | 26,552,402,711.23 | 41.83% | 16,468,430,702.64 | 31.93% | 9.90% | Increase in sales collection |
| Accounts receivable and notes receivable | 19,188,886,471.10 | 30.23% | 18,342,171,688.84 | 35.57% | -5.34% | No significant change |
| Inventory | 5,725,104,153.41 | 9.02% | 4,940,332,311.65 | 9.58% | -0.56% | Inventory increases as sales increase |
| Long-term equity investment | 163,301,844.56 | 0.26% | 130,474,733.58 | 0.25% | 0.01% | Mainly due to investments in associates |
| Fixed assets | 5,082,415,160.10 | 8.01% | 3,024,025,496.31 | 5.86% | 2.15% | The transfer of Internet Security Vedio Industry Base, Security Industry Base (Tonglu) Project-phase 2, and Chongqing Manufacturing Base into fixed assets after completion during the current reporting period. |
| Construction in process | 416,092,413.42 | 0.66% | 1,436,319,118.30 | 2.79% | -2.13% | |
| Short-term loans | 3,465,655,688.29 | 5.46% | 97,114,655.91 | 0.19% | 5.27% | Increased Short-term borrowing used for temporary capital turnover |
| Long-term loans | 440,000,000.00 | 0.69% | 490,000,000.00 | 0.95% | -0.26% | No significant change |
2. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
Unit: RMB
| Item | Opening balance | Profit or loss from change in fair value during the period | Difference on translation of financial statements dominated in foreign currency | Provision for decline in value during the current period | Purchase during the period | Sales during the period | Closing balance |
| Financial assets | |||||||
| Derivative financial assets | 4,100,657.54 | -2,249,271.02 | 8,664.07 | 1,860,050.59 | |||
| Subtotal of financial assets | 4,100,657.54 | -2,249,271.02 | 8,664.07 | 1,860,050.59 | |||
| Financial Liabilities | 15,946,836.46 | 15,656,203.19 | -365.16 | 290,998.43 | |||
Whether there were any material changes on the measurement attributes of major assets of the Company duringthe reporting period:
□ Yes √ No
3. Assets right restrictions as of the end of reporting period
Unit: RMB
| Item | Closing Book Value (RMB) | Reasons for being restricted |
| Monetary fund | 528,663,719.04 | Various cash deposits and other restricted funds |
| Notes receivable | 412,061,782.74 | Pledge for issuance of bank acceptance |
| Total | 940,725,501.78 |
V. Analysis of Investments
1. Overview
√Applicable □ Inapplicable
| Investment during 2018 (RMB) | Investment during 2017 (RMB) | Fluctuation (%) |
| 2,070,774,031.12 | 1,804,851,313.86 | 14.73% |
2. Significant equity investment during the reporting period
□Applicable √Inapplicable
3. Significant non-equity investment during the reporting period
√ Applicable □ Inapplicable
Unit: RMB
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of reporting period | Source of funds | Project schedule |
| Internet Security Industry Base | Self-built | YES | Video product and video service | 171,166,453.22 | 1,085,180,718.30 | Bond | 100% |
| Security Industrial Base (Tonglu)-phase 2 | Self-built | YES | Video product and video service | 341,337,980.27 | 642,026,894.23 | Self-fund | 100% |
| Chongqing Manufacture Base | Self-built | YES | Video product and video service | 187,895,561.81 | 277,289,173.62 | Self-fund | 100% |
| Hangzhou Innovation Industry Base | Self-built | YES | Video product and video service | 50,840,516.83 | 50,840,516.83 | Self-fund | 4.96% |
| Chengdu Science and Technology Base Project | Self-built | YES | Video product and video service | 6,577,446.74 | 6,577,446.74 | Self-fund | 0.49% |
| Chongqing Science and Technology Base Project-phase 2 | Self-built | YES | Video product and video service | 2,257,412.05 | 2,257,412.05 | Self-fund | 0.30% |
| Xi’an Science and Technology Base Project | Self-built | YES | Video product and video service | 1,664,067.68 | 1,664,067.68 | Self-fund | 0.15% |
| Wuhan Science and Technology Base Project | Self-built | YES | Video product and video service | 1,641,509.43 | 1,641,509.43 | Self-fund | 0.06% |
| Wuhan Intelligence Industry Base Project | Self-built | YES | Video product and video service | 934,836.51 | 934,836.51 | Self-fund | 0.04% |
| Project name | Invest method | Fixed assets investment or not | Project industry | Investment during the current reporting period | Cumulative amount of investment by the end of reporting period | Source of funds | Project schedule |
| Total | -- | -- | -- | 764,315,784.54 | 2,068,412,575.39 | -- | -- |
4. Financial assets measured at fair values
√ Applicable □ Inapplicable
Unit: RMB
| Category | Initial investment cost | Current profits or losses on the changes in fair value | Accumulated fair value changes included in equity | Purchase during the reporting period | Amount sold during the reporting period | Cumulative investment income | Closing balance | Source of funds |
| Derivative instruments | 1,400,293,692.23 | 13,406,932.17 | 0.00 | 7,860,873,273.42 | -40,669,470.74 | 1,013,306,062.25 | Company's own funds | |
| Total | 1,400,293,692.23 | 13,406,932.17 | 0.00 | 7,860,873,273.42 | -40,669,470.74 | 1,013,306,062.25 | -- |
5. Use of raised funds□ Applicable √ InapplicableDuring the reporting period, there was no use of raised fund
VI. Disposal of significant assets and equity
1. Disposal of significant assets:
□ Applicable √ InapplicableDuring the reporting period, there was no disposal of significant assets2. Sale of significant equity:
□ Applicable √ Inapplicable
VII. Analysis of major subsidiaries and investees
√ Applicable □ Inapplicable
Information about major subsidiaries, and investees that contribute above 10% of the Company’s Net Profit
Unit：RMB
| Company name | Company type | Principal business | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Hangzhou Hikvision System Technology. Co., Ltd. | Subsidiary | Manufacturing: video surveillance system; Technology development and service: computer system integration, electronic product, communication product; service: the installation of electric security engineering, the design, construction and maintenance of intelligent system; selling its self-produced products, import and export its own products and technology. | 600 million | 4,039,319,343.68 | 1,484,001,942.46 | 3,670,112,122.85 | 302,469,418.63 | 316,692,239.46 |
| Hangzhou Hikvision Science and Technology Co. Ltd. | Subsidiary | Manufacturing: security electronic product, intelligent hardware electronic products, explosion-proof electric products., IC card and IC card RW device, mobile phone, cordless phone, handheld wireless police terminal, hand held mobile police terminal; technology development, technology consulting, results transferring: computer software, electronic product, communication product, digital security product; wholesale: security electronic product and its auxiliary equipment, intelligent hardware electronic product, explosion-proof electrics, security electronic product and its auxiliary equipment, intelligent hardware electronic product, explosion-proof electrics, IC card and IC card RW device, mobile phone, cordless phone, handheld wireless police terminal, hand held mobile police terminal;；import and export business | 1000 million | 26,761,014,281.27 | 2,680,178,976.27 | 46,198,675,003.99 | 889,705,199.85 | 683,540,040.65 |
Information about obtaining and disposal of subsidiaries during the reporting period√ Applicable □ Inapplicable
| Company name | Equity acquisition and disposal method during the reporting period | Impact on overall production results |
| Xi’An Hikvision Digital Technology Ltd. | Cash contribution | Business development |
| Hangzhou HIK Huiying Technology Ltd. | Cash contribution | Business development |
| Xinjiang CET Yihai Information Technology Ltd. | Cash contribution | Business development |
| Xinjiang CET Yihai Information Technology Ltd. | Cash contribution | Business development |
| Luo Pu District Hai Shi Ding Xin Electronic Technology Ltd. | Cash contribution | Business development |
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. | Cash contribution | Business development |
| Hikvision Xi’an Xueliang Construction Project Management Ltd. | Cash contribution | Business development |
| Wuhan Hikvision Science and Technology Ltd. | Cash contribution | Business development |
| Wuhan Hikvision Technology Ltd. | Cash contribution | Business development |
| Wuhan Hikvision Fire Control Technology Ltd. | Cash contribution | Business development |
| Hainan Hikvision System Technology Ltd. | Cash contribution | Business development |
| Nanjing Hikvision Digital Technology Ltd. | Cash contribution | Business development |
| Hikvision Panama Commercial S.A. | Cash contribution | Expand overseas sales channels |
| Hikvision Mexico S.A.de C.V. | Cash contribution | Expand overseas sales channels |
| Hikvision Pakistan (SMC-Private) Limited | Cash contribution | Expand overseas sales channels |
| Hikvision Peru Closed Stock Company | Cash contribution | Expand overseas sales channels |
| Hikvision Technology Israel Ltd. | Cash contribution | Expand overseas sales channels |
| Beijing Hikvision Security and Protection Technology Service Ltd. | Liquidation and Cancellation | Adjustments of organizational framework |
VIII. Structural entities controlled by the Company
□ Applicable √ Inapplicable
IX. Outlook for the Future Development of the Company
1. Industry developing trends(1) Continual growth in traditional comprehensive security needs
Security is highly valued, and therefore continuously enhancing the security and protection capability is aninevitable requirement for development. The security demands of governments, enterprises and families invarious countries will continue to increase; therefore, the demands for traditional comprehensive securitybusiness will maintain a solid growth.(2) Rapidly emerging demand for intelligent applications, AI will be ubiquitous
AI empowers objects with intelligence and facilitates the swift development of IoT. A large number ofsub-industries will introduce AI, and AI will be everywhere. Ubiquitous intelligence has brought theCompany clear opportunities. However, the fragmented demands of intelligent applications will be theconstraint. If an efficient and low-cost solution could be found to address the intelligent needs of thesub-industries, the industry will flourish.(3) Greater challenges arising from increased non-market interference factors in overseas markets
The competitive and cooperation relationship between different countries directly or indirectly affects theCompany’s business environment in the country and region. Along with increased non-market interferencefactors in overseas markets, the uncertainty risks will continue to rise.2. Development Strategy of the Company
Hikvision is a provider of Intelligent IoT solutions and big data services with video as its core competence.The Company adheres to the business philosophy of "professionalism, honesty, and integrity”, is dedicated to corecorporate value of “clients’ success, value-oriented, integrity and down-to-earth, pursuit of excellence”. TheCompany provides high-quality products and services for global customers and creates greater values forcustomers worldwide through continuous innovation.
With the corporate mission of “exploring innovative ways to better perceive and understand the world,empowering vision for decision-makers and practitioners and work together to enhance safety and advancesustainable development of the world”, the Company is committed to empower vision for the security and growthof the world.3. Key Operation Priorities in 2019(1) Continue to carry out refined marketing in the existing market to ensure stable and efficient revenue generation;develop the market of AI-perceptual intelligent business to fulfill more fragmented demands for intelligence; anddevelop big data business under the cloud-edge fusion and IoT-information network fusion architectures.(2) Continue to promote innovative businesses and strive to make the innovation businesses bigger and stronger.(3) Continue to enhance the Company’s R&D capabilities in technology, products and systems to better fulfillcustomers’ demands.(4) Maintain the driving force of both products and solutions, and focus on improving the marketing capabilitiesof solutions.(5) Continuously pay attention to the development of organizational capabilities and improve per capitaeffectiveness.
X. Reception of activities including research, communication and interviews during the report period
√ Applicable □ Inapplicable
(1) Reception of research activities during the reporting period.
| Time of reception | Method of reception | Type of reception object | Basic situation of the research |
| From January 1st 2018 to February 2nd 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From January 1st 2018 to February 2nd 2018 |
| From February 5th 2018 to March 2nd 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From February 5th 2018 to March 2nd 2018 |
| From March 5th 2018 to March 16th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From March 5th 2018 to March 16th 2018 |
| April 23rd 2018 | Annual performance result Conference Call | Institutional and individual investors | CNINFO, Investor Relations Activity Record: April 23rd 2018 |
| May 11th 2018 | Investor Reception Day | Institutional and individual investors | CNINFO, Investor Relations Activity Record: May 11th 2018 |
| From May 14th 2018 to May 25th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From May 14th 2018 to May 25th 2018 |
| From May 28th 2018 to June 8th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From May 28th 2018 to June 8th 2018 |
| From June 11th 2018 to June 22nd 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From June 11th 2018 to June 22nd 2018 |
| July 23rd 2018 | Performance result-Conference Call | Institutional and individual investors | CNINFO, Investor Relations Activity Record: July 23rd 2018 |
| From July 24th 2018 to August 10th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From July 24th 2018 to August 10th 2018 |
| Time of reception | Method of reception | Type of reception object | Basic situation of the research |
| From August 13th 2018 to August 31st 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From August 13th 2018 to August 31st 2018 |
| From September 3rd 2018 to September 14th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From September 3rd 2018 to September 14th 2018 |
| October 22nd 2018 | Performance result-Conference Call | Institutional and individual investors | CNINFO, Investor Relations Activity Record: October 22nd 2018 |
| From October23rd 2018 to November 2nd 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From October23rd 2018 to November 2nd 2018 |
| From November 5th 2018 to November 16th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From November 5th 2018 to November 16th 2018 |
| From November 19th 2018 to December 4th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From November 19th 2018 to December 4th 2018 |
| From December 5th 2018 to December 17th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From December 5th 2018 to December 17th 2018 |
| From December 18th 2018 to December 29th 2018 | Site Research and telephone communication | Institutional investors | CNINFO, Investor Relations Activity Record: From December 18th 2018 to December 29th 2018 |
(2) Participation of conferences for investor relationship activities during the reporting period.
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| January 2018 | Shanghai | Ever-Bright Securities 2018 Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2018 | Las Vegas | Nomura@CES 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2018 | Beijing | Morgan Stanley China TMT Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| January 2018 | Beijing | 16th Annual DBAccess China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2018 | New York | Bank of America Merrill Lynch 2018 A-share Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2018 | New York-Boston | US NDR- via Bank of America Merrill Lynch | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| January 2018 | Hong Kong | CICC TMT Forum 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| March 2018 | Taibei | Bank of America Merrill Lynch APAC TMT Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| April 2018 | Hangzhou | Haitong Securities 2018 Spring Corporate Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Los Angeles | Jefferies Technology conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | NYC-SFO | US NDR- via Jefferies | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Beijing | JP Morgan Global China Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Shenzhen | CICC Industrial Internet Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Hong Kong | BNP 2018 TMT Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Hong Kong | Macquarie Greater China Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Shenzhen | HSBC 5th Annual China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Hangzhou | 23rd CLSA China Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Hongkong | Goldman Sachs TechNet Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Beijing | Morgan Stanley 4th Annual China Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| May 2018 | Chengdu | Essence Securities 2018 Mid-Year Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| June 2018 | Beijing | Huatai Securities Mid-Year Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| Time of conference | Location | Conference Name | Type of reception object | Method of reception |
| June 2018 | London-Paris- Geneva-Zurich | Europe NDR-via CLSA | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2018 | London | CICC Forum (UK) 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2018 | Stockholm -London | Europe NDR-via CICC | All kinds of investors | One-on-One Meetings |
| September 2018 | Shenzhen | UBS China A-Share Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2018 | Taibei | Credit Suisse 19th Annual Asian Technology Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| September 2018 | Hongkong | 25th CLSA Investors' Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Shenzhen | 9th Credit Suisse China Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Hong Kong | Jefferies 8th Annual Greater China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Beijing | Bank of America Merrill Lynch China Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Shenzhen | 13th CITI China Investment Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Shenzhen | CITIC Securities 2018 Annual Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Hong Kong | J.P. Morgan Global TMT Conference 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Shenzhen | ShenWanHongYuan Securities 2019 Capital Market Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| November 2018 | Singapore | Morgan Stanley 17th Annual Asia Pacific Summit | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| December 2018 | Shanghai | Merchants Securities 2018 Investment Conference | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| December 2018 | Tokyo | Nomura Investment Forum 2018 | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
| December 2018 | Chengdu | GF Securities 2018 Winter Listed Company Non-disclosure Investment Forum | All kinds of investors | One-on-One, One-on-multi, small group Meetings, and etc. |
(3) Investor relations activity statistics during the current year
| Number of daily research received (Site and telephone conference, times) | 395 |
| Number of institutional investors received (ppl) | 3373 |
| Number of individual investors received (ppl) | 80 |
| Number of investor relations conference participated | 38 |
Section V Significant Events
I. Profit distribution of ordinary shares and capitalization of capital reserves
Profit distribution policy of ordinary shares in the reporting period, especially the formulation, implementationand adjustment of cash dividend policy
□ Applicable √ Inapplicable
Profit distribution policy (proposal) and capitalizing of capital reserves policy (proposal) in last three years(including the current reporting period)
(1) Profit distribution for the year 2016：Based on the total share capital of 6,152,576,743 shares on the
actual date of record when implementing the 2016 profit distribution proposal, the Companydistributed cash dividend of RMB 6 (tax inclusive) and 5 bonus shares (tax inclusive) per each 10shares to all shareholders; share distribution from capital reserve is nil.(2) Profit distribution for the year 2017： Based on the Company’s total share capital of 9,227,270,473
shares, the Company proposed to distribute cash dividend of RMB 5 (tax inclusive) per each 10shares to all shareholders, bonus share and share distribution from capital reserve is nil.(3) Profit distribution proposal for the year 2018：Based on the Company’s current total share capital of
9,348,465,931 shares, the Company proposed to distribute cash dividend of RMB 6 (tax inclusive)per each 10 shares to all shareholders, bonus share and share distribution from capital reserve is nil.Cash dividend of ordinary shares in last 3 years (including the current reporting period)
Unit: RMB
| Year | Cash dividends (including tax) | Net profit attributable to shareholders of listed Company in consolidated statements | Ratio of net profit attributable to shareholder of Company in consolidated financial statements (%) | Amount of cash dividends in other methods | Ratio of cash dividends in other methods |
| 2018 | 5,609,079,558.60 | 11,352,869,241.32 | 49.41% | 0.00 | 0.00% |
| 2017 | 4,613,635,236.50 | 9,410,855,084.82 | 49.02% | 0.00 | 0.00% |
| 2016 | 3,691,546,045.80 | 7,423,683,960.91 | 49.74% | 0.00 | 0.00% |
During the reporting period, the company was profitable and the distributable profits to ordinary shareholders ofthe parent company was positive, but the Company did not propose a cash dividend distribution plan of ordinaryshares.
□ Applicable √ Inapplicable
II. Profit distribution and capitalizing of capital Reserves proposal for the current reportingperiod
| Bonus issue per 10 shares (share) | 0 |
| Cash dividend per 10 shares (RMB) (tax inclusive) | 6.00 |
| Additional shares converted from capital reserves for 10 shares (share) | 0 |
| Total capital shares as the basis for the distribution proposal (share) | 9,348,465,931 |
| Total cash dividend (RMB) (tax inclusive) | 5,609,079,558.60 |
| Distributable profits (RMB) | 19,327,533,457.91 |
| Percentage of cash dividends in the total distributed profit (%) | 29.02% |
| Cash dividend policy: | |
| The Company is in the development stage and has a substantial plan of cash expenditure. In the current profit distribution, cash dividends shall account for at least 20%. | |
| Details about the plan for profit distribution and capitalizing capital reserves into share capital | |
| As audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, in 2018, the parent company of the Company realized net profit of RMB 9,769,694,399.19，after deducting the statutory surplus reserve of RMB 976,969,439.92, which was provided at 10% of the net profits, adding the undistributed profit of the parent company at the beginning of the year of RMB 15,148,443,735.14, deducting the cash dividends of RMB 4,613,635,236.50 in 2017, as of December 31st 2018, the profits attributable to shareholders of the parent company amounted to RMB 19,327,533,457.91. As of December 31st 2018, the profits attributable to shareholders in the consolidated statement were RMB 22,360,593,257.53 (consolidated). To sum up, according to the principle of “whichever is lower”, the profits attributable to shareholders this year was RMB 19,327,533,457.91. Based on the Company’s total share capital of 9,348,465,931 shares, the Company proposed to distribute cash dividend of RMB 6 (tax inclusive) per each 10 shares to all shareholders, bonus share and share distribution from capital reserve is nil. The above scheme will distribute a total cash dividend of RMB 5,609,079,558.60, and the remaining undistributed profits will be transferred to the next year. | |
III. Performance of commitments
1. Complete and incomplete commitments of the Company and its actual controller, shareholders, related
parties, acquirers, and other related parties for the commitments by the end of the reporting period.
√ Applicable □ Inapplicable
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Commitments in offering documents or shareholding alterations | CETHIK Group Co., Ltd. | 1. Commitments in non-competition within the industry: In the period as controlling shareholders of the Hikvision, CETHIK and its controlling subsidiaries (excluding Hikvision and its subsidiaries, the same below) will not be engaged in such business that is competitive to Hikvision and its subsidiaries directly or indirectly. 2. Commitments in decrease and regulation of transactions with related party: Zhejiang Haikang Group Co., Ltd (hereinafter referred to as Haikang Group or actual controller) as the controlling shareholders of Hangzhou Hikvision Digital Technology Co., Ltd (hereinafter referred to as "Hikvision" or "Listed Company") are commited as below for the transactions with Hikvsion: (1) Haikang Group will not make use of the controlling power to offer more favorable conditions to Hikvision than those to any independent third party in any fair market transactions in the cooperation with Hikvision. (2) Haikang Group will not make use of the controlling power to obtain the prior right to complete the transaction with Hikvision. (3) Haikang Group will not deal with Hikvsion in not fair terms comparing to the market prices to prejudice the Company’s interests. For unavoidable related transactions, the Company will observe the principles of justice and fairness to deterimine prices according to the market on the basis of equality, voluntarily. The Company will obey the Articles of Association and other regulatory documents related to the avoiding of | October 29th 2013 | Long-term | Strict performance |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| 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 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 |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| 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 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 |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| 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 Initial Public Offering or re-financing | Hangzhou Weixun Investment Management Limited Partnership（later renamed as Xinjiang Weixun Investment Management Limited Partnership） | During Hu Yangzhong, Wu Weiqi, JiangHaiqing, Zhou Zhiping, Xu Lirong, Cai Dingguo, He Hongli, Zheng Yibo, Hu Dan,、Jiang Yufeng, Liu Xiang, Wang Ruihong, Chen Junke’s tenure of the Company’s board of directors, supervisors and senior management personnel, the annual transfer of Hikvision’s total shares should not exceed 25% of total number of shares held under Weixun; within 6 months after abovementioned personnel’s dimission, should not transfer Hikvision’s shares held under Weixun. | May 17th 2010 | Long term | Strict performance |
| Hangzhou Pukang Investment Limited Partnership（later renamed as Xinjiang Pukang Investment Limited Partnership） | During Hu Yangzhong, Wu Weiqi, Gong Hongjia’s tenure of the Company’s board of directors, supervisors and senior management personne, the annual transfer of Hikvision’s total shares should not exceed 25% of total number of shares held under Pukang; whithin 6 months after abovementioned personnel’s dimission, should not transfer Hikvision’s shares held under Pukang. | May 17th 2010 | Long term | Strict performance | |
| The Company's directors, supervisors and executive: HuYangzhong,Wu Weiqi, Jiang Haiqing, Zhou | During their tenure of the Company’s board of directors, supervisors and senior management personnel, the annual shares transfer should not exceed | May 17th 2010 | Long term | Strict performance |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Zhiping，Xu Lirong, Cai Dingguo, He Hongli, Zheng Yibo, Hu Dan, Jiang Yufeng, Liu Xiang, Wang Ruihong, Chen Junke | 25% of total number of shares held under Weixun; whthin 6 months after their dimission, they should not transfer their shares held under Weixun. | ||||
| Directors, executive officers of the Company: Hu Yangzhong, Wu Weiqi | During their tenure of the Company’s board of directors, supervisors and senior management personnel, the annual shares transfer should not exceed 25% of total number of shares held under Pukang; whthin 6 months after their dimission, they should not transfer their shares held under Pukang. | May 17th 2010 | Long term | Strict performance | |
| The Company’s director Gong Hongjia’s spouse, Chen Chunmei | During Gong Hongjia’s tenure of the Company’s board of directors, supervisors and senior management personnel, Chen’s annual shares transfer should not exceed 25% of total number of shares held under Pukang; whthin 6 months after the dimission of Gong Hongjia,Chen should not transfer her shares held under Pukang. | May 17th 2010 | Long-term | Strict performance | |
| China Electronics Technology Group Corporation（later renamed as China Electronics Technology Group Co., Ltd.） | To avoid any loss of the Company and other shareholders arising from any competing business, China Electronics Technology Group Corporation, the actual controller of the Company, issued Letters of non-competition on 18 September, 2008. | September 18th 2008 | Long term | Strict performance | |
| Gong Hongjia； Hangzhou Weixun Investment Management Limited Partnership（later renamed as Xinjiang Weixun Investment Management Limited Partnership）； Hangzhou Pukang Investment Limited Partnership（later renamed as Xinjiang Pukang Investment Limited Partnership）；ZheJiang Orient Holdings Co., Ltd. | To avoid any loss of the Company and other shareholders arising from any competing business, Gong Hongjia, Hangzhou WeiXun Investment Management Limited Partnership, ZheJiang Orient Holdings Co., Ltd and Hangzhou KangPu Investment Management Limited Partnership, the promoters of the Company, issued Commitment Letters of non-competition in the same industry on 10 July, 2008. | July 10th 2008 | Long term | Strict performance |
| Commitments | Giver of commitments | Details of commitments | Date of commitments | Term of commitments | Performance |
| Other commitments to the company's minority shareholders | CETC Investment Holdin Co.,Ltd (CETCIH).; The 52nd Research Institute at China Electronics Technology Group Corporation; China Electronics Technology Group Co., Ltd. | During the effective period of the implementation of CETCIH’s plan to increase the holding of Hikvision (within 6 months from October 23rd 2018) and the statutory period, CETCIH will not reduce its shareholdings of Hikvision | October 23rd 2018 | Within 6 months from October 23rd 2018 | Strict performance |
| Whether the commitments is fulfilled in time | Yes | ||||
2. Where any profit forecast was made for any of the Company’s assets or projects and the currentreporting period is still within the forecast period, the Company shall explain whether the performance ofthe asset or project reaches the profit forecast and why:
□ Applicable √ Inapplicable
IV. The Company’s funds used by the controlling shareholder or its related parties fornon-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 thecurrent reporting period
□ Applicable √ Inapplicable
VI. For changes in accounting policies, accounting estimates and accounting methods as comparedto the financial report for the prior year
√ Applicable □Inapplicable
1. Changes in accounting policies
The Notice on Amending the 2018 Annual Financial Statements of General Enterprises was issued by theMinistry of Finance on June 15
th
2018 (Accounting Council (2018) No. 15, hereinafter referred to as FinancialAccounting No. 15 Document). The Financial Accounting No. 15 Document revised the presentation items on the
balance sheet and the income statement, and added new items such as “receivable notes and accounts receivable”,“payable notes and accounts payable” and “research and development expenses”; revised contents of line itemssuch as "other receivables", "fixed assets", "construction in progress", "other payables" and "long-term payables"and "management expenses"; reduced line items such as "receivable notes", “accounts receivable”, “dividendsreceivable”, “interests receivable”, “fixed assets clearance”, “engineering materials”, “payable notes”, “accountspayable”, “interest payable”, “dividends payable” and the "special payables"; Under the “Financial Expenses”item, the “Including: Interest Expenses” and “Interest Income” lines were added to report, and the presentationposition of some items in the income statement were adjusted.
The Company started to execute the foregoing accounting standards and policies according to the timerequired by the Ministry of Finance, and changed the relevant accounting policies.
2. Influence of the changes in accounting policies on the Company
Such changes in accounting policies were reasonably conducted by the Company according to therequirements of relevant documents issued by the Ministry of Finance, and were in compliance with theAccounting Standards for Business Enterprises and related provisions. Such changes only involved thepresentation and adjustment of items in the financial statements, had no influence on the Company’s total assets,net assets, operating income or net profit, and caused no damage to interests of the Company and shareholders.
VII. Explanation for retrospective restatement of major accounting errors during the reportingperiod
□ Applicable √ Inapplicable
No such case in the reporting period.
VIII. Explanation for changes in scope of the consolidated financial statements as compared to thefinancial report for the prior year
√ Applicable □ Inapplicable
During the reporting period, the Company has newly set up eleven wholly-owned subsidiaries and sixholding subsidiaries, and cancelled one company, which have caused the change in consolidation scope. For moredetails, 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 Certified Public Accountants LLP |
| Remuneration for the domestic CPA firm (RMB’0000) | 305 |
| Consecutive years of the audit service provided by the domestic CPA firm | 3 |
| Name of the certified public accountants from the domestic CPA firm | Mou Zhengfei has provided audit service for 3 consecutive years; Zhang Shushu has provided audit service for 2 consecutive year. |
Whether the CPA firm was changed in the current period□ Yes √ NoEngagement of internal control audit CPA firm, financial advisor or sponsor□ Applicable √Not applicable
X. Listing suspension and termination after disclosure of this annual report
□ Applicable √ Inapplicable
XI. Bankruptcy and restructuring
□ Applicable √ InapplicableNo such case during the reporting period.
XII. Material litigation and arbitration□ Applicable √ Inapplicable
No such case during the reporting period.
XIII. Punishments and rectifications
□ Applicable √ InapplicableNo such case during 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 Incentive Plan, or otherincentive plans
√Applicable □Inapplicable
1) During the reporting period, the Company completed the second time unlocking, repurchasing and
cancelling shares for 2014 Restricted Share Incentive Scheme.On December 15
th
2017, Resolution for the fulfillment of the unlocking conditions of the Second unlock periodfor the 2014 Restricted Share Incentive Schemes and the Resolution for the Second repurchase and cancelation ofthe locked shares that already granted for 2014 Restricted Share Incentive Schemes were approved by the 26
th
meeting of the third Board. Authorized by the first extraordinary general meeting for 2014，a total of 33,803,907restricted shares of 1068 grantees were vested and circulated on January 8
th
2018. Meanwhile, 1,594,641 restrictedshares held by a portion of grantees not fulfilling the incentive conditions were repurchased and cancelled. OnMarch 27
th
2018, repurchase and cancelation process of the restricted shares was complete. Thereafter, there are1072 grantees left for 2014 Restricted Share Incentive Schemes, granted and locked shares leftover are 33,932,161shares.
For details, please refer to in the Indicative Notice of Listing the Unlocked Shares during the SecondUnlocking Period of 2014 Restricted Share Incentive Schemes (No. 2018-002) and the Notice of the Completion ofSecond Repurchase and Cancelation of Locked Shares that Already Granted for 2014 Restricted Share IncentiveScheme (No. 2018-017) issued on January 5
th
2018 and March 29
th
2018 respectively.
By the end of the reporting period, 33,932,161 awarded shares remains un-locked for 2014 Restricted ShareIncentive Scheme; 78,490,287 awarded shares remains un-locked for 2016 Restricted Share Incentive Scheme;and the total number of unblocked restricted shares are 112,422,448 shares, accounting for 1.22% of theCompany's total share capital at the end of the reporting period.
The Company followed the Accounting Standard for Business Enterprises No. 11 – Share-based Paymentand other accounting standards in relation to accounting treatment for Restricted Share Incentive Schemes. Costsin relation to the shares granted under 2014 and 2016 Restricted Share Incentive Schemes are amortized over thewaiting period for vesting.
During the reporting period, costs amortized in relation to the 2014 and 2016 Restricted Share Incentive
Schemes of the Company have no material impact on the financial position and operating results of the Company.For details, please refer to Note (XI) - Share-based Payments.
XVI. Significant related-party transaction
1. Related-party transactions arising from routine operation
√ Applicable □ Inapplicable
| Related party | Relationship | Type of related transaction | Content of related transaction | Valuation | Trading Amount （0’000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0’000 RMB） | Whether above approved quota | Settlement method | Disclosure date | Disclosure reference |
| Subsidiaries or research institutes of CETC | Under the common control of the Company’s actual controller. | Procurement | Purchase materials, receiving services | Reference market price; Agreed on price | 30,054 | 1.00% | 50,000 | No | Payment on delivery | April 21st 2018 | Announcement on projections on 2018 related transactions (No：2018-024） |
| Shanghai Fullhan Micro | The Company’s director, Gong Hongjia is the director of the related party | Procurement | Purchase materials, receiving services | Reference market price; Agreed on price | 26,800 | 0.89% | 40,000 | No | Payment on delivery | ||
| Wuhu Sensor Technology | A joint venture affiliated business held by the Company | Procurement | Purchase materials, receiving services | Reference market price; Agreed on price | 4,561 | 0.15% | 4,000 | No | Payment on delivery | ||
| Maxio | A joint venture | Procurement | Purchase | Reference | 5,213 | 0.17% | 8,000 | No | Payment on |
| Related party | Relationship | Type of related transaction | Content of related transaction | Valuation | Trading Amount （0’000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0’000 RMB） | Whether above approved quota | Settlement method | Disclosure date | Disclosure reference |
| Technology and its subsidiaries | affiliated business held by the Company | materials, receiving services | market price; Agreed on price | delivery | |||||||
| Subsidiaries or research institutes of CETC | Under the common control of the Company’s actual controller. | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 50,121 | 1.01% | 120,000 | No | Payment on delivery | ||
| Zhejiang Tuxun | Zheng Yibo, the Company's senior executive, served as a director in Zhejiang Tuxun. Zheng Yibo left his post from the Company in March 2018; since it is less than 12 months after Zheng’s departure, Zhejiang Tuxun remained a related party of the | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 137 | 0.00% | 500 | No | Payment on delivery |
| Related party | Relationship | Type of related transaction | Content of related transaction | Valuation | Trading Amount （0’000 RMB） | Proportion to the amount of similar transactions. | Approved trading quota (0’000 RMB） | Whether above approved quota | Settlement method | Disclosure date | Disclosure reference |
| Company. | |||||||||||
| Wuhu Sensor Technology | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 293 | 0.01% | 500 | No | Payment on delivery | ||
| Hangzhou Comfirmware | The Company’s senior executive, Jia Yonghua, is the director of the related party | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 78 | 0.00% | 100 | No | Payment on delivery | ||
| Maxio Technology and its subsidiaries | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 4 | 0.00% | 100 | No | Payment on delivery | ||
| Zhiguang Hailian Big Data Technology Ltd. | A joint venture affiliated business held by the Company | Sales | Providing services, selling products, commercial goods | Reference market price; Agreed on price | 126 | 0.00% | 0 | Payment on delivery | -- | -- | |
| Total | -- | 117,387 | -- | 223,200 | -- | -- | -- | -- | |||
| Details on significant sales return | None |
| Total amount of related transactions projected based on different categories, actual performance during the current reporting period (if any) | 1) The part of the actual related party transaction amount with Wuhu Sensor Tech that exceeds the projected amount has been approved by the chairman of the board according to the Company's Related Transaction Management System. 2) The amount of related party transactions with Zhiguang Hailian has not been reviewed, and has been approved by the chairman of the board according to the Company's Related Transaction Management System. |
| Reasons on significant difference between trading price and market referencing price (if applicable) | Not applicable |
2. Related-party transactions regarding purchase and disposal of assets or equity
□Applicable √Inapplicable
No such case in the reporting period.3. Significant related-party transactions arising from joint investments on external parties
□Applicable √Inapplicable
No such case in the reporting period.4. Related-parties’ creditor's rights and debts
□ Applicable √Inapplicable
No related-parties’ creditor’s rights or debts during the reporting period.5. Other significant related party transactions
√Applicable □Inapplicable
Pursuant to the Proposal on Capital Increase and Related Transactions to Hangzhou HIK AutomotiveTechnology Ltd. and Hangzhou HIK Robotics Technology Ltd. approved by the 5
th
meeting of the 4
th
session of theBoard of Directors held on August 27
th
2018, the Company and Hangzhou Hikvision Equity InvestmentPartnership (hereinafter refers to Innovative Co-investment Partnership) jointly increased the capital ofHikvision’s innovative business subsidiaries: 1) Hikvision and the Innovative Co-investment Partnership jointlyincreased the capital of Hikvision Automotive Electronics with a cash payment of RMB 48 million and a cashpayment of RMB 32 million, respectively, with a total capital increase of RMB 80 million. 2) Hikvision and theInnovative Co-investment Partnership jointly increased the capital of Hikvision Robotics with a cash payment ofRMB 30 million and cash of RMB 20 million respectively, with a total capital increase of RMB 50 million. Theamount of this related transaction totaled RMB 78 million. In addition, reviewed and proved by the secondmeeting of Strategy Committee of the 3
rd
Board of Directors in 2018 (March 9
th
2018), Hikvision and theInnovative Co-investment Partnership jointly established Hangzhou HIK Huiying Technology Ltd. (Hikvision'sinvested RMB 48 million), for 12 consecutive months, the cumulative amount of related transactions betweenHikvision and the Innovative Co-investment Partnership was RMB 126 million, accounting for 0.42% of the latestaudited net assets of the Company. As of the end of the reporting period, the Company and the InnovativeCo-investment Partnership have completed the establishment and registration of changes related to thesubsidiaries of the innovative businesses.
Disclosure website for provisional reports on significant related transactions:
| Title of provisional reports | Disclosure date | Disclosure website |
| Proposal on Capital Increase and Related Transactions to Hangzhou HIK Automotive Technology Ltd. and Hangzhou HIK Robotics Technology Ltd. | August 28th 2018 | www.cninfo.com.cn |
XVII. Significant contracts and their execution
1. Trusteeship, contracting and leasing
(1) Trusteeship
□ Applicable √ Inapplicable
No such case in the reporting period.
(2) Contracting
□ Applicable √ Inapplicable
No such case in the reporting period.
(3) Leasing
□ Applicable √ Inapplicable
No significant leasing during the reporting period.
2. Significant guarantees
√Applicable □ Inapplicable
(1) Details of guarantees
Unit: RMB’0000
| Guarantees provided by the Company for subsidiaries | ||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee Cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Hangzhou Hikvision Science and Technology Ltd. | May 12th 2018 | 670,000 | December 6th 2016 | 358,291.00 | Joint guarantee | 2016.12.06-2020.12.31 | No | Yes |
| Hangzhou Hikvision System Technology Ltd | May 12th 2018 | 80,000 | October 10th 2017 | 6,764.32 | Joint guarantee | 2017.10.10-2020.12.31 | No | Yes |
| HIKVISION INTERNATIONAL CO., LTD. | May 12th 2018 | 350,000 | December 27th 2017 | 34,559.38 | Joint guarantee | 2017.12.27-2019.04.5 | No | Yes |
| Hangzhou Hikvision Electronics Ltd. | May 12th 2018 | 370,000 | October 19th 2018 | 5,297.92 | Joint guarantee | 2018.10.19-2019.10.19 | No | Yes |
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | May 12th 2018 | 10,000 | July 30th 2018 | 1,200 | Joint guarantee | 2018.07.30-2019.07.19 | No | Yes |
| Chongqing Hikvision Science and Technologies Ltd. | May 12th 2018 | 110,000 | Not happened during the reporting period | |||||
| Chongqing Hikvision System Technology Ltd. | May 12th 2018 | 50,000 | Not happened during the reporting period | |||||
| Chengdu Hikvision Digital Technology Ltd. | May 12th 2018 | 80,000 | Not happened during the reporting period | |||||
| Urumchi HaiShi Xin’An Electronic Technology Ltd. | May 12th 2018 | 50,000 | Not happened during the reporting period | |||||
| Mo Yu Hai Shi Electronic Technology Ltd. | May 12th 2018 | 30,000 | Not happened during the reporting period | |||||
| Pi Shan Hai Shi Yong An Electronic Technology Ltd. | May 12th 2018 | 35,000 | Not happened during the reporting period | |||||
| Luo Pu Hai Shi Ding Xin Electronic Science and Technology Ltd. | May 12th 2018 | 30,000 | Not happened during the reporting period | |||||
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. | May 12th 2018 | 30,000 | Not happened during the reporting period | |||||
| Wuhan Hikvision Technology Ltd. | May 12th 2018 | 120,000 | Not happened during the reporting period | |||||
| Wuhan Hikvision Science and Technology Ltd. | May 12th 2018 | 120,000 | Not happened during the reporting period | |||||
| Hikvision Xi’an Xueliang Construction Project Management Ltd. | May 12th 2018 | 60,000 | Not happened during the reporting period | |||||
| Guarantees provided by the Company for subsidiaries | ||||||||||||||
| Guaranteed party | Disclosure date of announcement of the guarantee cap | Guarantee Cap | Actual occurrence date | Actual guaranteed amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not | ||||||
| Xi’An Hikvision Digital Technology Ltd. | May 12th 2018 | 50,000 | Not happened during the reporting period | |||||||||||
| Total guarantee cap for subsidiaries approved during the reporting period(B1) | 2,245,000.00 | Total actual guarantee amount for subsidiaries during the reporting period(B2) | 533,369.81 | |||||||||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period(B3) | 2,245,000.00 | Total actual guarantee balance for subsidiaries at the end of the reporting period(B4) | 406,112.62 | |||||||||||
| Total guarantee amount provided by the Company (total of the above-mentioned kinds of guarantees) (During the reporting period, there was no such case as guarantee provided for external parties, or guarantees between subsidiaries, therefore, there is only item B, item A or C is nil) | ||||||||||||||
| Total guarantee cap approved during the reporting period (A1+B1+C1) | 2,245,000.00 | Total actual guarantee amount during the reporting period (A2+B2+C2) | 533,369.81 | |||||||||||
| Total approved guarantee cap at the end of reporting period (A3+B3+C3) | 2,245,000.00 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 406,112.62 | |||||||||||
| Portion of the total actual guarantee amount (A4+B4+C4) in net assets of the Company | 10.80% | |||||||||||||
| Of which | ||||||||||||||
| The balance of guarantee for shareholders, actual controllers and their affiliates. (D) | 0 | |||||||||||||
| Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset ratio over 70% (E) | 392,850.38 | |||||||||||||
| Total amount of guarantee exceeding 50% of net assets (F) | 0 | |||||||||||||
| Total guarantee amount of the above-mentioned 3 kinds of guarantees (D+E+F) | 392,850.38 | |||||||||||||
Illustration of compound method guarantee
As required by the project owner, China Electronics Technology Group Co., Ltd. (CETC) has provided a joint guarantee to responsibility and duties ofprojects of “Safe Chongqing, Emergency Control System Digital Construction Project”, including 41 districts/counties construction projects, signed byChongqing Hikvision System Technology Co., Ltd. Meanwhile, the Company provides a counter guarantee to CETC’s joint responsibilities above.
(2) Illegal provision of guarantees for external parties
□ Applicable √ Inapplicable
No such case in the reporting period.3. Entrusting others to execute any cash asset management
(1) Entrusted finances
√Applicable □ Inapplicable
Entrusted finance during the reporting period
Unit: 0,000 RMB
| Type | Capital Source | Actual Amount | Undue Balance | Amount overdue |
| Bank Financial Products | Self-fund | 110,000 | 0 | 0 |
| Total | 110,000 | 0 | 0 | |
Details about entrusted finances that are individually significant or low security level, with low liquidity, and high riskwithout principal guaranteed.
□ Applicable √ Inapplicable
Entrusted finances that projected to be impossible to recover principal, or involving in situations that could possiblylead to decline in value
□ Applicable √ Inapplicable
(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 social responsibilitiesWhile seeking for economic benefits and protecting shareholders’ interests, Hikvision proactively fulfilledcorporate 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 the Company’s 2018 Annual Social Responsibility Report disclosed on CNINFO(www.cninfo.com.cn)2. 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 futurearrangement for targeted poverty alleviation.3. Environmental protection
The Company is not a critical pollutant enterprises published by national environmental protectiondepartment
XIX. Other significant events
□ Applicable √ Inapplicable
XX. Significant events of the Company’s subsidiaries
□ Applicable √ Inapplicable
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 | Ratio | New Shares Issued | Bonus share | Share transferred from capital reserve | Others | Sub-total | Shares | Ratio | |
| 1. Shares subject to conditional restriction(s) | 1,971,217,850 | 21.36% | -658,144,845 | -658,144,845 | 1,313,073,005 | 14.23% | |||
| 1)State holdings | 0 | 0 | |||||||
| 2)Shares held by State-owned corporate | 0 | 0 | |||||||
| 3) Other domestic shares | 852,337,550 | 9.24% | -578,124,870 | -578,124,870 | 274,212,680 | 2.97% | |||
| Including: held by domestic corporates | 582,492,655 | 6.32% | -582,492,655 | -582,492,655 | |||||
| held by domestic natural person | 269,844,895 | 2.92% | 4,367,785 | 4,367,785 | 274,212,680 | 2.97% | |||
| 4) Foreign shares | 1,118,880,300 | 12.12% | -80,019,975 | -80,019,975 | 1,038,860,325 | 11.26% | |||
| Including:held by overseas corporates | 0 | 0 | |||||||
| held by overseas natural person | 1,118,880,300 | 12.12% | -80,019,975 | -80,019,975 | 1,038,860,325 | 11.26% | |||
| 2. Shares without restriction | 7,257,647,264 | 78.64% | 656,550,204 | 656,550,204 | 7,914,197,468 | 85.77% | |||
| 1) RMB ordinary shares | 7,257,647,264 | 78.64% | 656,550,204 | 656,550,204 | 7,914,197,468 | 85.77% | |||
| 2) Domestically listed foreign shares | 0 | 0 | |||||||
| 3) Foreign shares listed overseas | 0 | 0 | |||||||
| 4) Others | 0 | 0 | |||||||
| 3. Total | 9,228,865,114 | 100.00% | -1,594,641 | -1,594,641 | 9,227,270,473 | 100.00% |
Reason for the changes in share capital√ Applicable □ Inapplicable(1) The second time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme:
On December 15
th
2017, Resolution for the Second repurchase and cancelation of the locked shares that alreadygranted for 2014 Restricted Share Incentive Schemes were approved by the 26
th
meeting of the third Board.Authorized by the first extraordinary general meeting for 2014, a total of 1,594,641 restricted shares held by aportion of grantees not fulfilling the incentive conditions were repurchased and cancelled. On March 27
th
2018,repurchase and cancelation process of the restricted shares was complete. The Company’s total share capitaldecreased from 9,228,865,114 shares to 9,227,270,473 shares by 1,594,641 shares.
Approval for changes in share capital
√ Applicable □ Inapplicable
(1) The second time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme:
On December 15
th
2017, Resolution for the Second repurchase and cancelation of the locked shares that alreadygranted for 2014 Restricted Share Incentive Schemes were approved by the 26
th
meeting of the third Board.Authorized by the first extraordinary general meeting for 2014, the board of directors agreed to repurchase andcancel 1,594,641 restricted shares held by a portion of grantees not fulfilling the incentive conditions.
Transfer for changes in share capital
√ Applicable □ Inapplicable
(1) The second time repurchasing and cancelling shares for 2014 Restricted Share Incentive Scheme:
On March 27
th
2018, the process of the second time repurchasing and cancelling shares for 2014 Restricted ShareIncentive Scheme was complete. The Company’s total share capital decreased from 9,228,865,114 shares to9,227,270,473 shares by 1,594,641 shares.
Other contents that the Company considers necessary or required by the securities regulatory authorities todisclose
□ Applicable √ Inapplicable
2. Changes in restricted shares√ Applicable □ Inapplicable
Unit: Share
| Name of shareholder | Opening restricted shares | Vested in current period | Increased in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Gong Hongjia | 1,118,812,500 | 80,019,975 | 0 | 1,038,792,525 | Executives locked shares | According to the relevant provisions of executives shares management |
| Xinjiang Weixun Investment Management Limited Partnership | 438,232,500 | 438,232,500 | 0 | 0 | Institution restricted share before IPO | March 19th 2018 |
| Xinjiang Pukang Investment Limited Partnership | 144,260,155 | 144,260,155 | 0 | 0 | Institution restricted share before IPO | March 19th 2018 |
| Grantees of restricted share incentive plan (consolidated) | 147,820,996 | 33,803,907 | 0 | 112,422,448 | Restricted incentive equity shares | January 8th 2018 |
| Hu Yangzhong | 91,793,982 | 0 | 44,597,626 | 136,391,608 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | According to the relevant provisions of executives shares management |
| Wu Weiqi | 8,260,566 | 0 | 41,176 | 8,301,742 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Jiang Haiqing | 8,255,911 | 0 | 96,750 | 8,352,661 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Jia Yonghua | 4,118,807 | 0 | 47,626 | 4,166,433 | Executives locked shares | |
| Li Pan | 4,042,926 | 0 | 122,625 | 4,165,551 | Executives locked shares | |
| Huang Fanghong | 70,875 | 0 | 74,250 | 145,125 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Jiang Yufeng | 30,375 | 0 | 30,000 | 60,375 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| He Hongli | 29,025 | 0 | 23,550 | 52,575 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares |
| Name of shareholder | Opening restricted shares | Vested in current period | Increased in current period | Closing restricted shares | Note for restricted shares | Date of unlocking |
| Fu Baijun | 29,025 | 0 | 106,425 | 135,450 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Xu Lirong | 29,025 | 0 | 30,675 | 59,700 | Executives locked shares+ partial of the unlocked restricted shares turning into executives locked shares | |
| Wang Qiuchao | 15,000 | 0 | 0 | 15,000 | Executives locked shares | |
| Qu Liyang | 0 | 0 | 11,812 | 11,812 | As taking the Company’s Director position, partial of the shares held were turning into executives locked shares. | |
| Zhou Zhiping | 5,355,432 | 5,355,432 | 0 | 0 | Shares locked up within six months after leaving his post | September 20th 2018 |
| Zheng Yibo | 30,375 | 30,375 | 0 | 0 | Shares locked up within six months after leaving his post | September 20th 2018 |
| Cai Dingguo | 30,375 | 30,375 | Shares locked up within six months after leaving his post | September 20th 2018 | ||
| Total | 1,971,217,850 | 701,732,719 | 45,182,515 | 1,313,073,005 | -- | -- |
Note:
1. Executives who are grantees under incentive restricted shares scheme, his/her holding incentive restricted shares are countedwithin the total incentive restricted shares (consolidated statistics) on the fourth row.2. The difference of 1,594,641 shares between ending balance of restricted shares of total incentive restricted shares (consolidatedstatistics) for grantees and the calculated balance (opening balance - unlocked shares + increased restricted shares) was due torepurchasing and cancelling of 1,594,641 shares on March 27
th
2018.
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 andliabilities
√ Applicable □ Inapplicable
During the reporting period, the Company completed the second repurchasing and cancelling shares for 2014
Restricted Share Incentive Scheme, the total capital shares were decreased by 1,594,641 shares from9,228,865,114 shares to 9,227,270,473 shares; the structure of shareholder structure, assets and liabilities of theCompany did not change significantly after the above mentioned items.3. Existent shares held by internal staff of the Company
□ Applicable √ Inapplicable
III. Particulars about the shareholders and actual controller1. Total number of shareholders and their shareholdings
Unit: Share
| Total number of common shareholders at the end of the reporting period | 194,110 | The total number of common shareholders at the end of the previous month before the disclosure of the annual report | 186,407 | ||||||
| Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them | |||||||||
| Name of shareholder | Nature of shareholder | Share- holding percentage (%) | Total shares held at the end of the reporting period | Increase/ decrease during the reporting period | The number of common shares held with trading restrictions | The number of shares held without trading restrictions | Pledged or frozen | ||
| Status | Amount | ||||||||
| China Electronics Technology HIK Group Co., Ltd. | State-owned corporation | 39.60% | 3,653,674,956 | - | - | 3,653,674,956 | Pledged | 50,000,000 | |
| Gong Hongjia | Overseas individual | 13.60% | 1,255,056,700 | -130,000,000 | 1,038,792,525 | 216,264,175 | Pledged | 367,488,300 | |
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | Overseas corporation | 8.81% | 812,892,497 | -88,317,950 | - | 812,892,497 | - | - | |
| Xinjiang Weixun Investment Management Limited Partnership | Domestic non-state- owned corporation | 4.89% | 450,795,176 | -78,925,700 | - | 450,795,176 | Pledged | 237,869,999 | |
| Xinjiang Pukang Investment Limited Partnership | Domestic non-state- owned corporation | 1.98% | 182,510,174 | -9,836,700 | - | 182,510,174 | Pledged | 72,570,000 | |
| Hu Yangzhong | Domestic Individual | 1.97% | 182,186,477 | 59,400,000 | 136,639,858 | 45,546,619 | Pledged | 90,979,999 | |
| The 52nd Research Institute at | State-owned | 1.96% | 180,775,044 | - | - | 180,775,044 | - | - | |
| China Electronics Technology Group Corporation | corporation | |||||||
| CITIC Securities Company Limited | Domestic non-state- owned corporation | 0.88% | 81,513,660 | -74,468,969 | - | 81,513,660 | - | - |
| UBS AG | Overseas corporation | 0.72% | 66,858,188 | -42,065,262 | - | 66,858,188 | - | - |
| Central Huijin Investment Ltd. | State-owned corporation | 0.71% | 65,818,800 | - | - | 65,818,800 | - | -- |
| Explanation on associated relationship or concerted actions among the above-mentioned shareholders: | China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd.. Ms. Chen Chunmei, limited partner of Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment Limited Partnership. Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Measures for Management of the Disclosure of the Shareholding Changes of Shareholders of the Listed Company. | |||||||
| Particulars about shares held by the Top 10 common shareholders holding shares that are not subject to trading restriction(s) | |||
| Name of shareholder | Number of common shares without trading restrictions held at the period-end | Type of shares | |
| Type | Number | ||
| China Electronics Technology HIK Group Co., Ltd. | 3,653,674,956 | RMB ordinary shares | 3,653,674,956 |
| Hong Kong Securities Clearing Company Ltd.(HKSCC) | 812,892,497 | RMB ordinary shares | 812,892,497 |
| Xinjiang Weixun Investment Management Limited Partnership | 450,795,176 | 450,795,176 | |
| Particulars about shares held by the Top 10 common shareholders holding shares that are not subject to trading restriction(s) | |||
| Name of shareholder | Number of common shares without trading restrictions held at the period-end | Type of shares | |
| Type | Number | ||
| Gong Hongjia | 216,264,175 | RMB ordinary shares | 216,264,175 |
| Xinjiang Pukang Investment Limited Partnership | 182,510,174 | RMB ordinary shares | 182,510,174 |
| The 52nd Research Institute at China Electronics Technology Group Co. Ltd. | 180,775,044 | RMB ordinary shares | 180,775,044 |
| CITIC Securities Company Limited | 81,513,660 | RMB ordinary shares | 81,513,660 |
| UBS AG | 66,858,188 | RMB ordinary shares | 66,858,188 |
| Central Huijin Investment Ltd. | 65,818,800 | RMB ordinary shares | 65,818,800 |
| Hu Yangzhong | 45,546,619 | RMB ordinary shares | 45,546,619 |
| Explanation on associated relationship and concerted actions among top ten common shareholders without trading restrictions, and among top ten common shareholders and top ten common shareholders without trading restrictions | China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at China Electronics Technology Group Co., Ltd. are all subject to control of China Electronics Technology Group Co. Ltd. Ms. Chen Chunmei, limited partner of Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment Limited Partnership. Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert parties in accordance with the Measures for Management of the Disclosure of the Shareholding Changes of Shareholders of the Listed Company. | ||
Any of the Company’s top 10 common shareholders or top 10 non-restricted common shareholders conducted any agreed buy-back in the reporting period?
□ Applicable √ Inapplicable
2. Particulars about controlling shareholder of the Company
Nature of the controlling shareholder: Central State-ownedType of the actual controller: Corporation
| Name of controlling shareholder | Legal Representative | Date of establishment | Organization code | Business scope |
| China Electronics Technology HIK Group Co., Ltd. | Chen Zongnian | November 29th, 2002 | 9133000014306073XD | Industrial investment; R&D of environmental protection products, network products, intelligent products and electronic products; technology transfer, technical services, manufacturing and sales; business consulting services, rental services of self-owned real estate; import and export businesses. |
| Shares held by the controlling shareholder in other listed companies through controlling or holding during the reporting period | Indirect control of domestic listed company Phoenix Optical Co. Ltd., | |||
Change of the controlling shareholder during the reporting period
□ Applicable √ InapplicableThe Company's controlling shareholder has not changed during the reporting period.
3. Particulars about the Company’s actual controller & concerted partiesNature of the actual controller: Central state-owned assets management agencyType of the actual controller: Corporation
| Name of the actual controller | Legal Representative | Date of establishment | Organization code | Business scope |
| China Electronics Technology Group Ltd. | Xiong Qunli | February 25th 2002 | 91110000710929498G | The Company is responsible for the development and manufacturing of military electronic equipment and systems integration, electronic equipment for weapon platform, military software and electronic basic products; and the construction of national defense electronic information infrastructure and safeguard conditions; construction of national major electronic information system; the research, development, production and sales of civil electronic information software, materials, components, equipment and system integration and related common technology; self-operated and agent import and export business of various commodities and technologies (except for goods and technologies that are restricted or restricted by the state-limited company); operating feed processing and |
| Name of the actual controller | Legal Representative | Date of establishment | Organization code | Business scope |
| "three comes one supplement" business; operating counter trade and entrepot trade; Industrial investment; asset management; engaged in e-commerce information services; organization of enterprises in the industry to go abroad, participate in exhibitions. | ||||
| Shares held by the actual controlling shareholder in other listed companies through controlling or holding during the reporting period | China Electronics Technology Group Ltd is the actual controller of eight domestic listed companies including An’hui Sun Create Electronic Co., Ltd, Shanghai East China Computer Co., Ltd, Chengdu Westone Information Industry Co., Ltd., GCI Science & Technology Co., Ltd., Tai’ji Computer Corporation Limited, GLARUN Technology Co., Ltd. , Phoenix Optics Co., Ltd., and CETC Microwave Communication (Shanghai) Co., Ltd., and etc. | |||
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 isdetailed as follows:
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 restrictions for the controlling shareholders, actual controller,restructurer or other committing parties
□ Applicable √ Inapplicable
Section VII Information of Preferred Shares
□ Applicable √ InapplicableNo existed preferred shares for the Company during the reporting period.
Section VIII Information about Directors, Supervisors, Senior Management
I. Shareholding changes of directors, supervisors, senior management personnel
√Applicable □ Inapplicable
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Chen Zongnian | Chairman | Incumbent | Male | 54 | June 19th 2008 | 0 | 0 | 0 | 0 | |
| Gong Hongjia | Vice Chairman | Incumbent | Male | 54 | June 19th 2008 | 1,385,056,700 | 0 | 130,000,000 | 1,255,056,700 | |
| Qu Liyang | Director | Incumbent | Male | 55 | March 7th 2018 | 15,750 | 0 | 0 | 15,750 | |
| Hu Yangzhong | Director, General Manager (CEO) | Incumbent | Male | 54 | December 28th 2001 | 122,786,477 | 59,400,000 | 0 | 182,186,477 | |
| Wu Weiqi | Director, Standing Deputy General Manager | Incumbent | Male | 55 | March 1st 2003 | 11,371,389 | 0 | 0 | 11,371,389 | |
| Cheng Tianzong | Independent Director | Incumbent | Male | 67 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Lu Jianzhong | Independent Director | Incumbent | Male | 65 | March 6th 2015 | 0 | 0 | 0 | 0 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Wang Zhidong | Independent Director | Incumbent | Male | 52 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Hong Tianfeng | Independent Director | Incumbent | Male | 53 | December 22nd 2016 | 0 | 0 | 0 | 0 | |
| Cheng Huifang | Supervisor Chairman | Incumbent | Female | 66 | March 6th 2015 | 0 | 0 | 0 | 0 | |
| Wang Qiuchao | Supervisor | Incumbent | Male | 68 | March 6th 2015 | 20,000 | 0 | 0 | 20,000 | |
| Xu Lirong | Supervisor; person in charge of internal audit | Incumbent | Male | 56 | March 21st 2018 | 303,000 | 0 | 0 | 303,000 | |
| Jiang Haiqing | Senior Deputy General Manager | Incumbent | Male | 50 | March 1st 2003 | 11,310,882 | 80,000 | 0 | 11,390,882 | |
| Jia Yonghua | Senior Deputy General Manager | Incumbent | Male | 42 | July 22nd 2015 | 5,601,244 | 100,000 | 0 | 5,701,244 | |
| Li Pan | Senior Deputy General Manager | Incumbent | Male | 41 | July 22nd 2015 | 5,500,068 | 200,000 | 0 | 5,700,068 | |
| He Hongli | Senior Deputy General Manager | Incumbent | Female | 46 | December 18th 2005 | 331,500 | 0 | 0 | 331,500 | |
| Fu Baijun | Senior Deputy General Manager | Incumbent | Male | 47 | January 20th 2009 | 390,000 | 0 | 0 | 390,000 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Cai Changyang | Senior Deputy General Manager | Incumbent | Male | 48 | April 8th 2016 | 109,500 | 0 | 0 | 109,500 | |
| Xu Ximing | Senior Deputy General Manager | Incumbent | Male | 46 | October 11th 2016 | 0 | 0 | 0 | 0 | |
| Bi Huijuan | Senior Deputy General Manager | Incumbent | Female | 48 | October 11th 2016 | 150,000 | 0 | 0 | 150,000 | |
| Jiang Yufeng | Senior Deputy General Manager | Incumbent | Male | 48 | December 18th 2005 | 325,500 | 0 | 0 | 325,500 | |
| Pu Shiliang | Senior Deputy General Manager | Incumbent | Male | 42 | March 21st 2018 | 293,900 | 0 | 0 | 293,900 | |
| Jin Duo | Senior Deputy General Manager | Incumbent | Male | 54 | March 10th 2015 | 109,500 | 0 | 0 | 109,500 | |
| Jin Yan | Senior Deputy General Manager, Person in charge of finance | Incumbent | Female | 40 | July 22nd 2015 | 174,000 | 0 | 0 | 174,000 | |
| Huang Fanghong | Senior Deputy General Manager, Board Secretary | Incumbent | Female | 37 | April 8th 2016 | 292,500 | 0 | 0 | 292,500 | |
| Chen Junke | Senior Deputy General Manager | Incumbent | Male | 48 | March 21st 2018 | 0 | 0 | 0 | 0 |
| Name | Title | Tenure status | Gender | Age | Commencement of term of office | Termination of term of office | Shares held at the beginning of the Period (Shares) | Shares increased during the Period (shares) | Shares decreased during the Period (Shares) | Shares held at the end of the Period (Shares) |
| Liu Xiang | Director | Left the post | Male | 47 | May 24th 2014 | March 7th 2018 | 0 | 0 | 0 | 0 |
| Chen Junke | Supervisor | Left the post | Male | 48 | June 19th 2008 | March 21st 2018 | 0 | 0 | 0 | 0 |
| Zheng Yibo | Deputy General Manager | Left the post | Male | 57 | June 30th 2004 | March 21st 2018 | 168,900 | 0 | 60,750 | 108,150 |
| Cai Dingguo | Deputy General Manager | Left the post | Male | 52 | December 18th 2005 | March 21st 2018 | 312,000 | 0 | 0 | 312,000 |
| Zhou Zhiping | Deputy General Manager | Left the post | Male | 54 | December 18th 2005 | March 21st 2018 | 7,404,876 | 99,100 | 0 | 7,503,976 |
| Xu Lirong | Deputy General Manager | Left the post | Male | 56 | March 1st 2007 | March 21st 2018 | 303,000 | 0 | 0 | 303,000 |
| Total | -- | -- | 1,552,027,686 | 59,879,100 | 130,060,750 | 1,481,846,036 |
Note:
(1) Number shares held at the beginning of the period, shares increased during the period, shares decreased during the period for directors, supervisors, and senior management personnel aboveare all shares directly held by them accordingly, including restricted shares.(2) During the reporting period, the number shares held at the beginning of the period, shares increased during the period, shares decreased during the period for newly appointed directors,supervisors, and senior management personnel is the data after their appointment.(3) Xu Lirong left the Company as a deputy general manager and was appointed as the employee supervisor. The number of the Company’s shares held by him was only counted once in thetotal number of shares held at the beginning and the end of the reporting period.
II. Changes of directors, supervisors and senior management personnel
√Applicable □Inapplicable
| Name | Position | Type | Date | Reasons |
| Qu Liyang | Director | Appointment and dismissal | March 7th 2018 | The general election of the board of directors |
| Liu Xiang | Director | Leave the post when terms were up | March 7th 2018 | Termination on term of office |
| Xu Lirong | Employee Supervisor | Appointment and dismissal | March 21st 2018 | The general election of the workers and staff congress |
| Chen Junke | Employee Supervisor | Leave the post when terms were up | March 21st 2018 | Termination on term of office |
| Pu Shiliang | Senior management personnel | Appointment and dismissal | March 21st 2018 | Appointment |
| Chen Junke | Senior management personnel | Appointment and dismissal | March 21st 2018 | Appointment |
| Zheng Yibo | Senior management personnel | Leave the post when terms were up | March 21st 2018 | Termination on term of office |
| Cai Dingguo | Senior management personnel | Leave the post when terms were up | March 21st 2018 | Termination on term of office |
| Zhou Zhiping | Senior management personnel | Leave the post when terms were up | March 21st 2018 | Termination on term of office |
| Xu Lirong | Senior management personnel | Leave the post when terms were up | March 21st 2018 | Termination on term of office |
III. Positions and Incumbency
1. DirectorsMr Chen Zongnian (陈宗年): Born in 1965, Chen holds a PhD of business administration and has served asdeputy general manager Shenzhen Gao Ke Run Electronics, director and general manager of Zhejiang HaikangInformation Technology Co., Ltd. and Zhejiang Haikang Group Co., Ltd. He also served as an assistant of thehead, deputy head, and the head of 52
nd
Research Institute at China Electronics Technology Group Corporation(52
nd
Research Institute). Chen currently serves as the chairman of China Electronics Technology HIK Group Co.,Ltd. (CETHIK) and chairman of the Company.
Mr. Gong Hongjia (龚虹嘉): Born in 1965, Hong Kong permanent resident. Gong holds a bachelor degree ofengineering, technology entrepreneur, and angel investor. He has established and invested over 10 enterprisesincluding TECSUN Co. Ltd., AsiaInfo Dekang, Funian Technology, and Woqi Data, and etc. He took part in theestablishment of the Company in November 2001 and served as a director and vice chairman of the Company.Gong currently serves as a vice chairman of the Company.
Mr. Qu Liyang (屈力扬): Born in 1964, bachelor degree of engineering, researcher-level senior engineer. Heserved as the director, deputy director, party secretary and deputy director of the 52
nd
Research Institute, andchairman of the board of supervisors of CETHIK. He is currently the deputy director of the Reform andDevelopment Committee of CETC’s Strategy Committee, and serves as a director of the Company.
Mr. Hu Yangzhong (胡扬忠): Born in 1965, master degree of engineering, senior research engineer. He servedas an engineer of the 52
nd
Research Institute from June 1989 to December 2001. He has been appointed as adirector of the Company and general manager of the company since December 2001. Hu currently serves as adirector and the general manager of the Company.
Mr. Wu Weiqi (邬伟琪): Born in 1964, bachelor degree of engineering, senior engineer. Wu held variouspositions at the 52
nd
Research Institute, including technician, engineer associate, engineer and senior engineer,from July 1986 to December 2001. Since November 2001, He has been appointed as a deputy general manager, astanding deputy general manager, and a director of Hikvision. Wu currently serves as a director and standingdeputy general manager of the Company.
Mr. Cheng Tianzong (程天纵): Born in 1952, Taiwanese, master degree in business administration. Chengserved 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 executiveofficer of FIH Mobile Limited, a subsidiary of Hon Hai Corporation (鸿海集团), a company listed on the HongKong 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 in September 2013. Cheng currently serves as an independentdirector of the Company.
Mr. Lu Jianzhong (陆建忠): Born in 1954, holds bachelor degree in economics and CPA certificate. Lu servedas a lecturer and an associate professor of finance and accounting department at Shanghai Maritime University (上
海海事大学) from September 1986 to September 1997; he was a CPA and a partner of the auditing department ofPricewaterhouseCoopers, from October 1997 to June 2012; he was a chartered accountant of Shanghai De’anCertified Public Accountants LLP (上海德安会计师事务所) from July 2012 to July 2013; he was a charteredaccountant of the Shanghai branch of PKF Daxin Certified Public Accountants LLP (大信会计师事务所上海分所), from August 2013 to July 2014；He was a partner and a chartered accountant and a partner of ZhongxinghuaCertificated Public Accountants LLP (中兴华会计师事务所) from August 2014 to January 2016. Lu currentlyserves as a chartered accountant of Dahua Certificated Public Accountants LLP (大华会计师事务所),MPAcc/Maud Enterprise Mentor of Antai College of Economics & Management,Shanghai Jiao Tong University(上海交通大学安泰管理学院), and an independent director of Hikvision.
Mr. Wang Zhidong (王志东): Born in 1967, Hong Kong permanent resident, bachelor degree of science. Heserved as a deputy general manager and chief engineer of Beijing Suntendy Electronic Technology ResearchInstitute (北京新天地电子信息技术研究所) from April 1992 to August 1993; He served as a general manager ofRichwin Information Technology Co., Ltd. (四通利方信息技术有限公司), and served as chief executive officerand a director of SINA Corporation (新浪网) from December 1993 to June 2001; He served as chairman and chiefexecutive 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 chairman and chief executive officer of Beijing Yilianyisheng Techonology Co.Ltd.(北京易连忆生科技有限公司), and an independent director of the Company.
Mr. Hong Tianfeng (洪天峰): Born in 1966, master degree in engineering. Hong was an engineer in NanjingUniversity of Posts and Telecommunication (南京邮电大学) from July 1990 to June 1993; He served as anexecutive deputy general manager, chief executive of Operation and Delivery, chairman of investment decisioncommittee, and vice chairman of Huawei Technologies Co., Ltd. (华为技术有限公司) from July 1993 toSeptember 2011；Hong currently serves as a managing partner of Suzhou Fangguang Venture InvestmentManagement (Limited Partnership)(苏州方广创业投资管理合伙企业（有限合伙）), an executive director ofShanghai Fangguang Venture Investment Management Co., Ltd. (上海方广创业投资管理有限公司), and anindependent director of the Company.
2. Supervisors
Ms. Cheng Huifang (程惠芳): Born in 1953, PhD in international finance. She was a member of the 8
th
and 9
th
Zhejiang CPPCC (浙江省政协). Cheng currenly serve as dean of the Global Development Research Institute ofZhejiang Businesses under Zhejiang University of Technology (浙江工业大学全球浙商发展研究院), presidentof 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 theCompany.
Mr. Wang Qiuchao (王秋潮): Born in 1951, a professional lawyer with bachelor degree in history and masterdegree in law. Wang served as chairman of the Zhejiang Lawyers Association (浙江省律师协会) andvice-president of the Zhejiang Law Society (浙江省法学会). Wang currently serves as arbitrator of the ChinaInternational Economic and Trade Arbitration Commission (中国国际经济贸易仲裁委员会, “CIETAC”) , anarbitrator of Shanghai International Arbitration Center (上海国际仲裁中心) and South China InternationalEconomic and Trade Arbitration Commission (华南国际仲裁中心), and a supervisor of the Company.
Mr. Xu Lirong (徐礼荣): Born in 1963, master degree of engineering, senior engineer. In January 2002, hejoined Hikvision and served as manager of development division under the R&D center, secretary of the board ofdirectors and deputy general manager of the Company. He is currently the employee representative supervisor andthe person in charge of internal audit of the Company.
3. Senior management personnel
Mr. Hu Yangzhong (胡扬忠): Please refer to his profile in preceding part of the report.
Mr Wu Weiqi (邬伟琪): Please refer to his profile in preceding part of the report.
Mr. Jiang Haiqing (蒋海清): Born in 1969, bachelor degree in engineering, a senior engineer. He joined theCompany in November 2001 and served as an assistant of the general manager and a deputy general manager. Mr.Jiang currently serves as a senior deputy general manager of the Company.
Mr. Jia Yonghua (贾永华): born in 1977, bachelor degree in engineering, a senior engineer. He joined Hikvisionin January 2002 and held various positions at the Company, including director of Image Process and AnalysisDivision under the R&D Center, director of Strategy and Marketing Division, a deputy general manager of theSupply Chain Management Center, and a deputy general manager of the Company. Mr. Jia currently serves as asenior deputy general manager of the Company.
Mr. Li Pan (礼攀): born in 1978, master degree in engineering, and is a senior engineer. He served as an engineerof the 52
nd
Research Institute from August 2000 to December 2001. He joined Hikvision in December 2001 andheld various positions at the Company, including engineer, product manager, R&D manager, the general managerof the Transportation Division, the general manager of Hangzhou Branch, a deputy general manager of theCompany. Mr. Li currently serves as a senior deputy general manager of the Company.
Ms. He Hongli (何虹丽): Born in 1973, master degree in business administration. She joined Hikvision inDecember 2001 and served as an assistant to the general manager and a deputy general manager. Ms. He currentlyserves as a senior deputy general manager of the Company.
Mr. Fu Baijun (傅柏军): Born in 1972, bachelor degree in economics, Chinese Certificated Public Accountant,professor-level senior accountant. He served as an accountant of the accounting division of the 52
nd
ResearchInstitute and a deputy general manager of Zhejiang Haikang Information Co. Ltd. (浙江海康信息技术股份有限公司) from July 1996 to December 2008. He joined Hikvision in January 2009, and served as a deputy generalmanager and the person in charge of finance and accounting department, and a deputy general maanger. Mr. Fucurrently serves as a senior deputy general manager of the Company.
Mr. Cai Changyang (蔡昶阳): born in 1971, bachelor degree in engineering. He joined Hikvision in 2004, andheld various positions of the Company, including general manager of Beijing branch, director for government andenterprise corporation department, director of investment department, director of strategy and marketingdepartment, and a deputy general manager of the Company. Mr. Cai currently serves as senior deputy general
manager of the Company.
Mr. Xu Ximing (徐习明): born in 1973, bachelor degree in engineering. From July 1996 to September 2016, heheld various positions in IBM, including engineer, department manager, director，partner of consulting service,senior partner of consulting service, and a vice president. He joined Hikvision in September 2016, and served as adeputy general manager of the Company. Mr. Xu currently serves as a senior deputy general manager of theCompany.
Ms. Bi Huijuan (毕会娟): born in 1971, PhD in engineering, senior research engineer. From April 1999 toAugust 2016, she held various positions in the 15
th
Research Institute at China Electronics Technology GroupCorporation (CETC), including engineer, senior engineer, senior research engineer, head of R&D department,vice chief engineer, and deputy director. She joined Hikvision in August 2016, and served as a deputy generalmanager of the Company. Ms. Bi currently serves as a senior deputy general manager of the Company.
Mr. Jiang Yufeng (蒋玉峰): born in 1971, bachelor degree of engineering, an engineer. He joined Hikvision inJanuary 2005 and held various positions in the Company, including general manager of Beijing branch, marketingdirector, assistant to general manager, deputy general manager and marketing director, and deputy generalmanager. Mr Jiang currently serves as a senior deputy general manager of the Company.
Mr. Pu Shiliang (浦世亮): born in 1977, doctor of engineering, a senior engineer. He joined Hikvision in April2006 and held various positions in the Company, including R&D engineer, R&D manager, R&D director, dean ofthe R&D institute, and chief expert. He currently serves as a senior deputy general manager of the Company.
Mr. Jin Duo (金铎): born in 1965, bachelor degree in engineering, a senior engineer. He served as a technician,assistant to engineers, an engineer and a senior engineer of the 52
nd
Research Institute from July 1986 to June2004. He joined Hikvision in July 2004 and served as general manager of Hangzhou Branch, and a deputy generalmanager of the Company. Mr. Jin currently serves as a senior deputy general manager of the Company.
Ms. Jin Yan (金艳): born in 1979, master degree in management, an accountant. She joined Hikvision in 2004and held various positions at the Company, including financial manager, the general manager of the FinancialManagement Center, and a deputy general manager and the person in charge of finance and accounting. Ms. Jincurrently serves as a senior deputy general manager and the person in charge of finance and accounting of theCompany.
Ms. Huang Fanghong (黄方红): born in 1982, master degree in law. She joined Hikvision in June 2009 and heldvarious positions at the Company including legal department manager, internal audit manager, internal controldirector, and a deputy general manager and the board secretary. Ms. Huang currently serves as a senior deputygeneral manager, and board secretary of the Company.
Mr. Chen Junke (陈军科): Born in 1971, bachelor degree in engineering, senior engineer. Chen held variouspositions in the 52nd Research Institute from 1994 to 2001, including assistant engineer, engineer and seniorengineer. He joined the Company in 2001 and served as the technology director of the Digital Video Recorder(DVR) Division of the Technology Management Center, general manager of supply chain management center,employee representative supervisor. Chen currently serves as senior deputy general manager of the Company.
Position held in shareholders’ entities
√Applicable □ Inapplicable
| Name | Shareholder's entity | Position in shareholders’ entities | Commencement of the term | Compensation and allowance from the shareholders' entity |
| Chen Zongnian | China Electronics Technology HIK Group Ltd. | Chairman, Secretary of party committee | November 2013 | Y |
| Hu Yangzhong | China Electronics Technology HIK Group Ltd. | Director | December 2013 | N |
| Xu Lirong | China Electronics Technology HIK Group Ltd. | Supervisor, Member of Commission for Discipline Inspection | December 2013 | N |
| Liu Xiang | China Electronics Technology HIK Group Ltd. | Deputy General Manager | December 2013 | Y |
| Zheng Yibo | China Electronics Technology HIK Group Ltd. | Member of party committee | December 2015 | N |
Positions held in other entities
√Applicable □ Inapplicable
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Cheng Zongnian | Zhejiang Intelligent IoT Technology Magazine | Legal Representative | February 2004 | N | |
| Cheng Zongnian | CETC Finance Ltd. | Director | December 2012 | N | |
| Cheng Zongnian | Zhejiang Wuzhen Street Technology Ltd. | Chairman | May 2016 | February 2019 | N |
| Gong Hongjia | Furong Technology Ltd. | Director | October 1999 | N | |
| Gong Hongjia | Hangzhou FunVio Ltd. | Chairman | February 2004 | N | |
| Gong Hongjia | Funian Technology Ltd. | Chairman of the Board | October 2007 | N | |
| Gong Hongjia | Beijing Funian Technology Ltd. | Chairman | November 2011 | N | |
| Gong Hongjia | Shanghai Fullhan Microelectronics Co., Ltd. | Director | April 2013 | N | |
| Gong Hongjia | Shenzhen Innovation Valley Investment Management Ltd. | Director | July 2014 | N | |
| Gong Hongjia | Shanghai Pukun Information Technology | Director | September 2014 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Ltd. | |||||
| Gong Hongjia | FuCe Holdings Ltd. | Director | October 2014 | N | |
| Gong Hongjia | Chuangjia Venture Capital Investment Ltd | Director | October 2014 | N | |
| Gong Hongjia | Shenzhen Jiadao Valley Investment Management Ltd. | General Manager | October 2014 | Y | |
| Gong Hongjia | Shenzhen Jiadao Gongcheng Equity Investment Fund (Limited Partnership) | Executive Partner & delegate | November 2014 | N | |
| Gong Hongjia | JiuBaYi Health Technology Ltd. | Director | November 2014 | N | |
| Gong Hongjia | Beijing JiaBoWen Biotechnology Ltd. | Director | March 2015 | N | |
| Gong Hongjia | Wuhan YouXin Technology Co., Ltd. | Director | January 2016 | N | |
| Gong Hongjia | QingKe Management Consulting Group Ltd. | Director | February 2017 | N | |
| Gong Hongjia | Shenzhen JiadaoFangzhi Education Industry Investment Enterprise (Limited Partnership) | Executive Partner & delegate | June 2017 | N | |
| Gong Hongjia | Shenzhen Jiadao Successful Investment Enterprise (Limited Partnership) | Executive Partner & delegate | August 2017 | N | |
| Gong Hongjia | Shanghai AoYuan Medical Supplies Ltd. | Chairman | September 2017 | N | |
| Gong Hongjia | Sichuan JiaDao BoWen Ecological Technology Ltd. | Chairman | December 2017 | N | |
| Gong Hongjia | Beijing JiaDaoGu Management Consulting Ltd. | Supervisor | April 2018 | N | |
| Gong Hongjia | Core Microelectronics (Shanghai) Ltd. | Director | October 2018 | N | |
| Gong Hongjia | Sichuan Five-Plus-One Ecological Agriculture | Chairman | November 2018 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Technology Service Ltd. | |||||
| Gong Hongjia | Sichuan JiaBoWen Biological Technology Ltd. | Chairman | November 2018 | N | |
| Gong Hongjia | Shenzhen Zhongke Science and Technology Achievements Transformation Equity Investment Fund Management Ltd. | Chairman | December 2018 | N | |
| Gong Hongjia | ZhongYuan Concord Cell Genetic Engineering Co., Ltd. | Legal Representative Chairman | December 2018 | N | |
| Qu Liyang | Zhejiang Haikang Technology Ltd. | Director | April 2009 | N | |
| Qu Liyang | Zhejiang YiBo High Technology Ltd. | Director | August 2009 | N | |
| Wu Weiqi | Xinjiang Pukang Investment Management Limited Partnership | Executive Partner | May 2011 | N | |
| Wu Weiqi | Wuhu Sensor Tech Intelligent Technology Ltd. | Director | January 2017 | N | |
| Wu Weiqi | Maxio Technology (Hangzhou) Ltd. | Director | May 2017 | N | |
| Cheng Tianzong | Hechun Technology Co., Ltd. | Director | June 2014 | Y | |
| Cheng Tianzong | Zuozhen Co., Ltd. | Director | January 2015 | Y | |
| Cheng Tianzong | Wenhui Technology Co., Ltd. | Independent Director | June 2016 | Y | |
| Lu Jianzhong | Shanghai Jiao Tong University- Antai College of Management, | Mentor for enterprises | December 2013 | N | |
| Lu Jianzhong | Dahua Certificated Public Accountants LLP | Chartered Accountant | January 2016 | N | |
| Lu Jianzhong | ChangShu FengFan Electric Power Equipment Co., Ltd. | Independent Director | September 2015 | Y | |
| Lu Jianzhong | Ningbo Lehui International | Independent | March 2016 | Y |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Construction Equipment Co., Ltd. | Director | ||||
| Lu Jianzhong | COSCO Maritime Transport Development Co., Ltd. | Independent Director | January 2018 | Y | |
| Lu Jianzhong | Shanghai Xinnanyang Angli Education Technology Co., Ltd. | Independent Director | January 2019 | Y | |
| Lu Jianzhong | Shanghai Mingzhi Electric Co., Ltd. | Independent Director | October 2017 | March 2018 | Y |
| Wang Zhidong | Beijing Yilian Yisheng Science and Technology Ltd. | Chairman, CEO | October 2013 | Y | |
| Hong Tianfeng | Shanghai Fangguang Investment Management Ltd. | Executive Director | February 2012 | Y | |
| Hong Tianfeng | Shanghai Fangguang Venture Investment Management Partnership Enterprise (Limited Partnership) | Managing Partner | February 2012 | N | |
| Hong Tianfeng | Shanghai Fangguang Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | August 2012 | N | |
| Hong Tianfeng | Shanghai Fangguang Erqi Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | September 2016 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Management Partnership Enterprise (Limited Partnership) | Managing Partner | September 2012 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Partnership Enterprise (Limited Partnership) | Managing Partner | September 2012 | N | |
| Hong Tianfeng | Suzhou Fangguang Venture Investment Phase 2 Partnership Enterprise | Managing Partner | July 2016 | N |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| (Limited Partnership) | |||||
| Hong Tianfeng | Shenzhen Pengfenghui Venture Investment Ltd. | Executive Director & General Manager | June 2014 | N | |
| Hong Tianfeng | Shenzhen Fangguang Enterprise Management Consulting Ltd. | Executive Director & General Manager | May 2016 | N | |
| Hong Tianfeng | Sannuo Biology Sensor Co., Ltd. | Director | September 2013 | Y | |
| Hong Tianfeng | Shenzhen YunZhiXun Network Technology Ltd. | Director | May 2014 | N | |
| Hong Tianfeng | Jiangsu JiTaiKe Electrics Co., Ltd. | Director | July 2015 | N | |
| Hong Tianfeng | Zhongwei Dahe Cloud Connection Network Technology Ltd. | Director | November 2016 | N | |
| Hong Tianfeng | Shenzhen DongFengMingTu Enterprise Management Ltd. | Supervisor | August 2016 | N | |
| Hong Tianfeng | CETC Huayun Information Technology Ltd. | Director | March 2017 | N | |
| Hong Tianfeng | Shanghai Chuangyuan Equipment Technology Co., Ltd. | Director | August 2014 | December 2018 | N |
| Hong Tianfeng | Shanghai Baishitong Information Technology Co., Ltd. | Director | September 2016 | August 2018 | N |
| Cheng Huifang | Zhejiang FuRun Co., Ltd | Independent Director | April 2014 | Y | |
| Cheng Huifang | Hangzhou HangYang Co., Ltd. | Independent Director | January 2016 | Y | |
| Cheng Huifang | Zhejiang HuaCe Media Co., Ltd. | Independent Director | February 2016 | Y | |
| Cheng Huifang | Zhejiang Commercial Bank Co., Ltd. | External Supervisor | June 2016 | Y | |
| Cheng Huifang | Quzhou NanGaoFeng Chemical Co., Ltd. | Independent Director | March 2017 | Y |
| Name | Name of other Entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the other entities |
| Cheng Huifang | Kings Resources Group Co., Ltd | Independent Director | March 2014 | December 2018 | Y |
| Wang Qiuchao | Zhejiang T&C Law Firm | Partner | August 1993 | Y | |
| Wang Qiuchao | Zhejiang JingSheng Mechanical & Electrical Co.,ltd | Independent Director | April 2015 | Y | |
| Wang Qiuchao | Zhejiang KaiShan Compressor Co., Ltd. | Independent Director | May 2015 | Y | |
| Wang Qiuchao | Hanjia Design Group Co., Ltd. | Independent Director | July 2015 | Y | |
| Wang Qiuchao | SanBian Sci-Tech Co., Ltd. | External Supervisor | August 2014 | August 2018 | Y |
| Jia Yonghua | Hangzhou Confirmwaref Technology Co., Ltd. | Director | November 2016 | N | |
| Zheng Yibo | Zhejiang TuXun Technology Co., Ltd. | Director | December 2016 | N | |
| Liu Xiang | Xinjiang Weixun Investment Management Limited Partnership | Executive partner | May 2011 | N | |
| Liu Xiang | Phoenix Optical Co. LTD | Chairman | July 2015 | N | |
| Liu Xiang | Phoenix Optical Holding Co. LTD | Chairman | July 2015 | N | |
| Liu Xiang | Beijing LeiShengQiangShi Technology Ltd. | Director | January 2017 | N | |
| Liu Xiang | CETHIK Wuxi Technology Ltd. | Chairman | January 2018 | N | |
| Description of the status of employment in other units | Liu Xiang and Zheng Yibo have left their posts on March 7th 2018 and March 21st 2018 respectively when terms up. | ||||
Incumbent and off-office directors, supervisors and senior management personnel during the reporting period thathave been imposed administrative penalties by the CSRC during the last three years.□ Applicable √ Inapplicable
IV. Remuneration of directors, supervisors and senior management personnel
The decision-making program, determination basis and actual remuneration payment of directors, supervisors and
senior management personnel:
The remuneration of directors, supervisors and senior management personnel will be received preliminarily bythe Remuneration and Appraisal Committee of the Board, among them, remuneration of independent directorsand external supervisors would be further reviewed and approved by general meeting of shareholders. As forthose directors (exclude independent directors), supervisors (exclude external supervisors) and seniormanagement personnel who receive remuneration from the Company directly, they will receive remunerationaccording to the Company’s current Salary System and Performance Appraisal Schemes.
Remuneration of directors, supervisors and senior management personnel
Unit: RMB 0,000
| Name | Title | Gender | Age | Tenure status | Total remuneration from the Company (RMB'0,000) | Remuneration from related parties (Y/N) |
| Chen Zongnian | Chairman | M | 54 | Incumbent | 0 | Y |
| Gong Hongjia | Vice Chairman | M | 54 | Incumbent | 0 | Y |
| Qu Liyang | Director | M | 55 | Incumbent | 0 | Y |
| Hu Yangzhong | Director, General Manager | M | 54 | Incumbent | 308.79 | N |
| Wu Weiqi | Director, Standing Deputy General Manager | M | 55 | Incumbent | 293.64 | N |
| Cheng Tianzong | Independent Director | M | 67 | Incumbent | 27.5 | N |
| Lu Jianzhong | Independent Director | M | 65 | Incumbent | 27.5 | N |
| Wang Zhidong | Independent Director | M | 52 | Incumbent | 27.5 | N |
| Hong Tianfeng | Independent Director | M | 53 | Incumbent | 27.5 | N |
| Cheng Huifang | Supervisor Chairman | F | 66 | Incumbent | 18.33 | N |
| Wang Qiuchao | External Supervisor | M | 68 | Incumbent | 18.33 | N |
| Xu Lirong | Employee Supervisor, Person in charge of internal audit | M | 56 | Incumbent | 118.78 | N |
| Jiang Haiqing | Senior Deputy General Manager | M | 50 | Incumbent | 248.62 | N |
| Jia Yonghua | Senior Deputy General Manager | M | 42 | Incumbent | 238.20 | N |
| Li Pan | Senior Deputy General Manager | M | 41 | Incumbent | 238.17 | N |
| He Hongli | Senior Deputy General Manager | F | 46 | Incumbent | 278.43 | N |
| Fu Baijun | Senior Deputy General Manager | F | 47 | Incumbent | 248.32 | N |
| Cai Changyang | Senior Deputy General | M | 48 | Incumbent | 242.94 | N |
| Name | Title | Gender | Age | Tenure status | Total remuneration from the Company (RMB'0,000) | Remuneration from related parties (Y/N) |
| Manager | ||||||
| Xu Ximing | Senior Deputy General Manager | M | 46 | Incumbent | 418.20 | N |
| Bi Huijuan | Senior Deputy General Manager | F | 48 | Incumbent | 362.94 | N |
| Jiang Yufeng | Senior Deputy General Manager | M | 48 | Incumbent | 248.43 | N |
| Pu Shiliang | Senior Deputy General Manager | M | 42 | Incumbent | 208.66 | N |
| Jin Duo | Senior Deputy General Manager | M | 54 | Incumbent | 238.32 | N |
| Jin Yan | Senior Deputy General Manager, person in charge of finance and accounting | F | 40 | Incumbent | 238.21 | N |
| Huang Fanghong | Senior Deputy General Manager Board Secretary Internal audit director | F | 37 | Incumbent | 238.21 | N |
| Chen Junke | Senior Deputy General Manager | M | 48 | Incumbent | 178.69 | N |
| Liu Xiang | Director | M | 47 | Left the post | 0 | Y |
| Chen Junke | Supervisor | M | 48 | Left the post | 59.52 | N |
| Zheng Yibo | Deputy General Manager | M | 57 | Left the post | 44.66 | N |
| Cai Dingguo | Deputy General Manager | M | 52 | Left the post | 24.66 | N |
| Zhou Zhiping | Deputy General Manager | M | 54 | Left the post | 44.66 | N |
| Xu Lirong | Deputy General Manager | M | 56 | Left the post | 44.61 | N |
| Total | -- | -- | -- | -- | 4712.32 | -- |
Note: The salary of the new appointed and adjusted directors, supervisors and executive management in the reporting period is thesalary during the period in which they held the position.
Share incentives for directors, supervisors and senior executives in the Reporting Period
√ Applicable □ Inapplicable
Unit: share
| Name | Title | Restricted Shares held at the beginning of the period | Shares vested in the current period | Shares newly granted in the current period | Price for restricted shares granted (RMB per share) | Restricted Shares held at period-end |
| Hu Yangzhong | Director, General Manager | 336,000 | 87,750 | - | - | 248,250 |
| Wu Weiqi | Director, Standing Deputy General Manager | 305,100 | 78,300 | - | - | 226,800 |
| Jiang Haiqing | Senior Deputy General Manager | 258,000 | 67,500 | - | - | 190,500 |
| Zheng Yibo | Senior Deputy General Manager | 121,500 | 60,750 | - | - | 60,750 |
| Cai Dingguo | Senior Deputy General Manager | 231,000 | 60,750 | - | - | 170,250 |
| He Hongli | Senior Deputy General Manager | 254,100 | 58,050 | - | - | 196,050 |
| Fu Baijun | Senior Deputy General Manager | 312,600 | 58,050 | - | - | 254,550 |
| Xu Lirong | Supervisor, person in charge of internal audit | 225,600 | 58,050 | - | - | 167,550 |
| Zhou Zhiping | Senior Deputy General Manager | 225,600 | 58,050 | - | - | 167,550 |
| Jiang Yufen | Senior Deputy General Manager | 244,500 | 60,750 | - | - | 183,750 |
| Jin Duo | Senior Deputy General Manager | 109,500 | - | - | - | 109,500 |
| Jin Yan | Senior Deputy General Manager, person in charge of finance | 174,000 | - | - | - | 174,000 |
| Jia Yonghua | Senior Deputy General Manager | 109,500 | - | - | - | 109,500 |
| Li Pan | Senior Deputy General Manager | 109,500 | - | - | - | 109,500 |
| Cai Changyang | Senior Deputy General Manager | 109,500 | - | - | - | 109,500 |
| Bi Huijuan | Senior Deputy General Manager | 150,000 | - | - | - | 150,000 |
| Pu Shiliang | Senior Deputy General Manager | 293,900 | 50,000 | 243,900 | ||
| Huang Fanghong | Senior Deputy General Manager, Secretary of the | 148,500 | 74,250 | 74,250 |
| Name | Title | Restricted Shares held at the beginning of the period | Shares vested in the current period | Shares newly granted in the current period | Price for restricted shares granted (RMB per share) | Restricted Shares held at period-end |
| board | ||||||
| Total | -- | 3,718,400 | 772,250 | - | - | 2,946,150 |
Note：
(1) This personnel listed above are executives who were included in 2014 restricted shares incentive plan and
2016 restricted shares incentive plan, and current executives.(2) The 2018 restricted shares incentive plan is granted on December 20
th
2018, and the listing date is January 18
th
2019, which is not covered in the above form.
V. Staff in the Company
1. Statistics of employees, professional structure of the staff, and educational background
| Number of incumbent employees in the parent Company | 18137 | |
| Number of incumbent employees in major subsidiaries | 16255 | |
| Number of incumbent employees | 34392 | |
| Number of employees receiving salaries in current period | 34392 | |
| Number of retired employees requiring the parent Company and its subsidiaries to bear costs | 0 | |
| Professional structure | ||
| Tier | Number of employees | |
| Administrative staff | 499 | |
| Engineers | 16010 | |
| Sales staff | 7482 | |
| Functional staff | 1312 | |
| Production staff | 9089 | |
| Total | 34392 | |
| Educational background | ||
| Education background | Number of employees | |
| Master and/or doctor/or above | 5570 | |
| Bachelor | 18505 | |
| Junior College (professional training) | 2115 | |
| Other | 8202 | |
| Total | 34392 | |
2. Staff remuneration policy
Hikvision applies scientific talent cultivation methods, effective talent incentive mechanisms and faircompetition platforms to recruit talents, and continuously optimizes the talent structure. The Company providesemployees with remuneration packages which are competitive in the industry. In addition to endowment insurance,medical insurance, unemployment insurance, employment injury insurance, maternity insurance and housingprovident funds, the Company provides employees with the supplementary commercial insurance, medicalsubsidies, travel and communication allowances and other special allowances, in order to create a fairer and morehumanized working environment for each employee; so that each employee is able to demonstrate his/her value,and creates value to satisfy increasing demands for a good life.3. Staff training plans
The Company is committed to building a strategically oriented training model, formulating talent planningbased on corporate strategy, and implementing it into a training program to help achieve business strategy throughthe development of the Company's talent.
In 2018, on the basis of the steady operation of key training systems such as new employees andmanagement cadres, the Company made key construction and investment in the professional talent developmentsystem and cultural training system. The Company closely follows the strategic transformation of business andchanges in the external environment, and cooperates with business experts and training experts to build aprofessional talent development system in six key business area; the cultural training system has clarified themethodology of the cultural work system through co-creation with senior executives, seminars with middle-levelmanagers, and research and interviews with front-line employees. In addition, the new employee training, as animportant input port of the cultural training system, has made a deeper link in the understanding, identificationand integration of culture; and the coverage rate of new employee training has reached 99%. The tieredmanagement training system was implemented across the Company, the implementation of the grassrootsmanagement cadre training program, the middle-level management cadre training project and the middle-to-highlevel leadership projects have fully promoted the capacity improvement of different levels of management cadres;and the cumulative coverage rate of management training projects reached 88% .
In 2019, the Company will continue to be strategically oriented, aim at improving business capabilities,strengthen the system operation of learning and development, and build a professional platform.
4. Labor outsourcing
□ Applicable √ Inapplicable
Section IX Corporate Governance
I. Basic situation of corporate governance
During the reporting period, in accordance relevant laws and regulations, and regulatory and regulatorydocuments from supervision department, i.e. Company Law（公司法）, Securities Law（证券法）, Code ofCorporate Governance for Listed Companies in China（上市公司治理规则）, Listing Rules of Shenzhen StockExchange Stock（深圳证券交易所股票上市规则）, Guidelines of the Shenzhen Stock Exchange for the StandardOperation of Listed Companies on the Small and Medium-sized Enterprise Board（深圳证券交易所中小板上市公司规范运作指引）, the Company further improved its corporate governance structure and optimized theinternal management system based on the actual situation; improved the standardized operation level; performedinformation disclosure obligations, disclose relevant information in a true, accurate, complete and timely manner,and maintained the legitimate rights and interests of investors.
During the reporting period, the improvement of corporate governance is mainly reflected in the followingaspects:
1. The Company continuously optimizes its internal management systems.
In light of the current business development, the Company revised the Authorization Management System《授权管理制度》 and the General Manager's Working Rules 《总经理工作细则》 to strengthen internal controland improve the standardized operation level. The Company revised the Regulations on the Management of FixedAssets and Low-Value Consumables 《固定资产和低值易耗品管理规范》to further strengthen assetsmanagement and improve the efficiency of asset use. The Company formulated the Position Management System《岗位管理制度》 and the Talent Selection and Promotion System 《人才选拔与晋升降级制度》, in order toimprove the post system, promote the construction of talent team, and support the sustainable development of theCompany's business. In order to promote the Company's standardized operation in various countries and regions,the Company established the Compliance Department during the reporting period to strengthen the construction ofcompliance system and ensure the Company's standardized operation.
2. Continuously strengthen internal control and process management. During the reporting period, the
Company focused on supervising high-risk business processes, finding loopholes, and building a defense line forthe Company’s risk control. The Company conducted investigations related to reported complaints, convenedanti-corruption conferences, and invited family members of key positions to participate in probity education. TheCompany's Change Management Steering Committee continued to build a flat organization by promotingdecentralization, de-intermediation, and shifting decision-making downwards, and improved and optimized theCompany's internal management by enhancing system construction.
3. Continuous improvement on investor relations management. After each periodic financial report disclosure,the Company took the initiative to hold a public performance briefing (including conference call, Web-meeting),hosted periodic investor receptions; actively listened to investors' opinions and suggestions to form goodinteractions between the Company and investors, forming a positive interaction and communication. After theabove events, the Company also timely released Investor Relations Activity Record Form to ensure that allinvestors have fair access to the Company’s information. In routine duties, the company also communicates withinvestors through various channels such as telephone, email and interactive platform in order to maintainlong-term trust relationship between investors and Company.
The Company's information disclosure was approved by the regulatory authorities: the Company has beenawarded the A-level evaluation of the information disclosure of small-and-medium sized listed companies by theShenzhen Stock Exchange for 8 consecutive years. The Company has also won some honors in the capital market:
Jin Junma's “Technology Innovation Award for Listed Company” selected by Securities Daily; "The Top 50 ListedCompanies of China's Small-and-Medium Sized Boards" and "Top Ten Management Teams of China'sSmall-and-Medium sized Listed Companies" selected by Securities Times and New Fortune Magazine's 12thChina Listed Company Value Selection; and "Top 10 of the Top 50 China's Board of Directors" selected byFortune (Chinese version) and Aon Hewitt Management Consulting.
Any significant incompliance for the relevant regulatory documents issued by China Securities RegulatoryCommission in respect of corporate governance:
□ Yes √ No
II. Company’s Independence in Businesses, Management, Assets, Institutions and Finance fromControlling Shareholders
The Company is completely independent in business, management, assets, organization, and finance from itsshareholders. The Company has established a sound internal control system, being capable of operatingindependently with its complete and independent business.
(1) Business independence: The Company has its own production, purchases and sales systems, which
are completely independent from controlling shareholders. Therefore, there is no competition amongthe Company, controlling shareholders, and related parties.
(2) Personnel independence: The Company has independent personnel. The management has set up
various independent departments, including R&D, production, administration, finance and operationmanagement divisions, etc., and established complete management methods for labor, personnel,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 GeneralManager, Senior Deputy General Managers, the Secretary of the Board, CFO, and other seniormanagement personnel of the Company are only employed and remunerated by the Company, anddo not hold any position in controlling shareholders and is not remunerated by controllingshareholders. Directors, Supervisors and Senior Management Personnel are appointed through legalprocedures strictly in accordance with relevant regulations stipulated in Company Law and Articlesof Association. There is no controlling shareholder intervention in the Company’s personneldecisions in general meetings of the Board or shareholders.
(3) Asset Completeness: The property rights of assets are explicitly between the Company and the
controlling shareholders, and no assets, funds, or other resources owned by the Company areillegally and irregularly occupied or controlled by the controlling shareholders. Assets of theCompany 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 fullcontrol 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 independentfrom controlling shareholders in duty and personnel. There is no superior-subordinate relationbetween functional departments of controlling shareholders and those of the Company, which wouldhave an impact on the Company’s independent operations.
(5) Financial Independence: The Company has established an independent financial department, as
well as a sound and independent financial and accounting system. The Company makes financialdecisions independently. There is no controlling shareholder intervention in the Company’s financial
and accounting activities. The Company has maintained accounts with banks independently of anddo not share any bank account with our Controlling Shareholders. The Company has undertakenindependent tax registration in accordance with applicable laws, and paid tax independently.
III. Horizontal competition
□ Applicable √ Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings convened during theReporting Period
1. Annual General Meeting convened during the reporting period
| Meeting | Nature | Proportion of participating investors | Convened Date | Disclosure Date | Disclosure Index |
| 2018 First Extraordinary General Meeting | Extraordinary General Meetings | 70.80% | March 7th 2018 | March 8th 2018 | Public Announcement: No. 2018-011 |
| 2017 Annual General Meeting | Annual General Meeting | 73.66% | May 11th 2018 | May 12th 2018 | Public Announcement: No. 2018-032 |
| 2018 Second Extraordinary General Meeting | Extraordinary General Meetings | 73.11% | December 19th 2018 | December 20th 2018 | Public Announcement: No. 2018-065 |
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed votingrights:
□ Applicable √ Inapplicable
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 and general meetings | |||||||
| Name of Independent Director | Board meeting presence required in the reporting period (times) | Board meeting presence on site (times) | Board meeting presence by telecom- communication (times) | Board meeting presence through a proxy (times) | Board meeting absence (times) | Board meeting not attend in person for two consecutive times | Presence of independent directors in general meetings (times) |
| Cheng Tianzong | 10 | 1 | 9 | 0 | 0 | N | 0 |
| Lu Jianzhong | 10 | 1 | 9 | 0 | 0 | N | 1 |
| Wang Zhidong | 10 | 1 | 9 | 0 | 0 | N | 0 |
| Hong Tianfeng | 10 | 0 | 9 | 1 | 0 | N | 1 |
2. Objections from independent directors on related issues of the CompanyWere there any objections on related issues of the Company from independent directors?
□ Yes √ No
3. Other details about the performance of duties by independent directorsWere there any suggestions from independent directors accepted by the Company?
√ Yes □ No
Details: 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 onSmall-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 ArticlesAssociation (《公司章程》), and Regulations on Independent Directors (《独立董事工作条例》). They focusedon the Company operation, carried out their duties independently and imparted considerable professional adviceon improving the Company’s systems, daily operations and decision making. They provided fair advice during theReporting Period and played an effective role in improving the Company supervisory systems and protecting thelegal rights of the Company and the shareholders as a whole. For details, please refer to Independent Directors’2018 Debriefings disclosed on www.cninfo.com.cn.
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 researched, studied and put forward proposalsregarding significant investment decisions, considering the domestic and international situation and thecharacteristics of the Industry in which the Company operated, and carried out inspection and evaluation on theimplementation situation of the above matters. Meanwhile, the Strategy Committee listened carefully to the seniormanagement’s report on the operation and development of each business module, actively discussed long-termfuture strategic development plans of the Company considering the industrial characteristics and developmentalstage of the Company, and provided valuable suggestions for sustainable, steady and healthy development of theCompany.
2. Audit Committee
The Audit Committee is primarily responsible for the communication, supervision and inspection of internaland external audits. During the reporting period, the Audit Committee carefully reviewed the Company's financialinformation and its disclosure, reviewed the annual audit work summary report of the external audit institution,listened to the relevant internal audit department's report, and made comments and suggestions on the selectionand appointment of the external audit institution. At the same time, the Audit Committee also organized a specialwork meeting to track the implementation of major issues in the financial center and internal control department,and put forward relevant requirements for internal control of the Company.
3. Nomination Committee
During the reporting period, the Nomination Committee carefully studied the selection criteria andprocedures of the Company's directors and senior management personnel, conducted a review of the resume andqualifications of the new directors and senior executives through communication with relevant departments of theCompany, and actually fulfilled the duties of the Nominating Committee.
4. Remuneration and Appraisal Committee
During the reporting period, the Remuneration and Appraisal Committee carefully studied and reviewed the
remuneration policies and plans for senior management personnel and for the company overall, and madeprofessional recommendations on the assessment criteria of the above-mentioned personnel, and tracked andsupervised the implementation of the previous year's programs; reviewed and provided guidance for the grantingof 2018 restricted shares, the 3
rd
unlocking of 2014 restricted stocks and the 1
st
unlocking of 2016 restrictedstocks.
VII. Performance of duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties during theReporting Period?
□ Yes √ No
The Supervisory Committee of the Company will strictly abide by provisions of the Company Law, StandardOperation Guidelines on Enterprises Listed on SMEs Board at Shenzhen Stock Exchange, Articles of Association,Rules of Procedures of Supervisory Committee, and relevant laws, regulations and rules, diligently perform itsduties, supervise the legalization and standardization of the corporate finance and directors and seniormanagement personnel when executing their positions, and practically safeguard the legitimate rights and interestsof the Company, staff and shareholders.
In 2018, the Company's Board of Supervisors convoked a total of 9 meetings, and reviewed a total of 29proposals which mainly involved in aspects of the Company’s daily operation, financial information and itsdisclosure, and vesting of restricted incentive share plan, and etc., for details or Supervisory Committeeresolutions, please refer to www.cninfo.com.cn. Meanwhile, the Company’s Supervisory Committee alsoorganized on-site special working meetings, listened to the senior management’s report on the operation anddevelopment of each module of the Company, deeply understood the measures of Company's operational andfinancial situation, the establishment and implementation of internal control system, and protection of employees’rights and interests, etc.Supervisory Committee’s opinions on relevant matters in 2018:
1. Normative Operation Conditions of the Company
During the reporting period, the Supervisory Committee members have supervised the Company's dailyoperation situation by means of attending the board meeting and the shareholders' meeting, listening to and reviewspecial report, interview and other forms. The Board of Supervisors believes that the Company has established afairly sophisticated 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 andresponsible when executing duties; and behaviors of violating laws and regulations, damaging interests of theCompany and legitimate rights and interests of shareholders were not found.
2. Checking the financial situation of the CompanyDuring the reporting period, the Supervisory Committee carefully listened to reports of annual financialworks by person in charge of finance and accounting, understood audit work arrangement of external auditors, andthe Supervisory Committee believes that preparation and deliberation procedure of the Company's periodic reportconforms to provisions of laws, administrative regulations and CSRC (China Securities Regulatory Commission)regulations, the report contents truly, correctly and completely reflects actual conditions of the Company, and isfree of any false record, misleading statement or significant omission. There is no behavior violatingconfidentiality provisions founded for personnel who participated in preparation and deliberation procedure ofperiodic reports.
3. Self-evaluation report about internal control of year 2018
During the reporting period, the Supervisory Committee has listened to reports regarding construction andimplementation situations for the internal control system of the Company and its branches and subsidiaries byInternal Audit Department, Process Management Department and other relevant departments. After a carefulstudy and discussion, the Supervisory Committee believes that the Company has established a fairly sophisticatedinternal control system which conforms to relevant national laws and regulations and fulfills the actual demand ofthe Company's production and operation management, obtained effective implementation, and has played a role inrisk prevention and control effect on each section of the Company's production and operation management. TheBoard of Directors’ 2018 self-evaluation report about internal control can truthfully and objectively reflect theinternal control system construction and operation conditions of the Company.
4. External Guarantee Situation of the Company
During the reporting period, the Supervisory Committee has carefully listened to the reports by the person incharge of finance and accounting, understood about demand of guarantees items and relevant implementationsituations of the Company and its subsidiaries, and researched and reviewed relevant proposals regardingguarantees provided for subsidiaries by the Company. The Supervisory Committee believes that: The Companyprovides guarantees for subsidiaries, which fully meets fund demand for its production and management, and isbeneficial to further improve its production and operation abilities. 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 ofthe Company. For guarantees provided to subsidiaries not wholly-owned by the Company, the minorityshareholders will not provide proportional guarantees, however, those subsidiaries all have good businessprospects and the Company has control power on the subsidiaries’ operation and finance, So there's basically norisk in providing a guarantee. There is no contravention between relevant provisions of CSRC and Articles ofAssociation. The guarantee conforms to interests of the Company and general shareholders, and won't have anyadverse effect on the Company.
5. Related-party transactions of the CompanyDuring the reporting period, the Supervisory Committee has supervised decision-making process andfollow-up performance of daily related-party transactions of the Company by means of attending board meetingsand interviewing the senior management personnel. The Supervisory Committee believes that related-partytransactions happened to the Company are subject to the principles of voluntariness, fairness and reasonableness,and consensus of the transaction parties, and conform to relevant laws and regulations and provisions of Articlesof Association. The Board of Directors reviewed related-party transactions according to legal procedures, relateddirectors avoid votes; and the 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' meetingDuring the reporting period, the Supervisory Committee has carefully reviewed each proposal of theshareholders' meeting submitted by the Board of Directors, and further inspected practical implementation of eachproposal. The Supervisory Committee believes that the Company's Board of Directors can diligently performrelevant resolutions of the Shareholders' Meeting.
7. Restricted share plan of the CompanyDuring the reporting period, the Supervisory Committee has researched and reviewed relevant proposals ofunlocking 2014 & 2016 restricted incentive shares plan, and the implementation of 2018 Restricted IncentiveShares Plan. The Supervisory Committee considered that the company's restricted stock plan implementationprocedures are legal and effective; the introduction of restrictive stock plans is conducive to further improve thecorporate governance structure, and to form a sound and balanced value distribution system; fully motivate theenthusiasm of core employees, support the Company's strategic realization and long-term sustainable development;attract and retain core employees to ensure the Company's long-term development and competitive advantage. At
the same time, the Board of Supervisors conducted a special review of the "List of Incentives for the 2018Restricted Share Plan", and considered that the incentive targets included in the company's 2018 Restricted SharePlan are in compliance with the conditions of incentives specified in laws, regulations and regulatory documents,in line with the scope and conditions of incentives specified in the 2018 Restricted Share Plan, and are legal andvalid as the subject of the 2018 Restricted Share Plan.
During the Reporting Period, the Company strictly followed relevant rules and regulations, strengthenedregistration management of information insiders and inside information confidentiality management inpreparation of periodic reports, resolution and disclosure, and planning, implementation and announcement ofsignificant affairs, and other matters related to the Company’s inside information. The Company truthfully filledin and submitted the Registration Form for Information Insiders, and reported to Shenzhen Stock Exchange Placein a timely manner.
VIII. Assessment and incentive mechanism for the senior management
The Company has established a fairly sophisticated mechanism on employees’ evaluation and incentiverestraint, and has established a fair and transparent appraisal and incentive mechanism on senior managementpersonnel and other various level management personnel and employees. The Company’s board of directors hascarried out annual appraisals of senior management members mainly based on annual target achievement index.The Board is responsible for appraisals of the general manager on the general manager’s duty, capacity andperformance of operation; and the general manager carried out appraisals of other senior management memberson their operational management and implementation of relevant assignments. In the year 2018, seniormanagement personnel carried out their duties diligently with good performance, and fairly completed theirobjectives and missions set out 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 20th 2019 | ||
| Disclosure index of full text of self-evaluation report on internal control | www.cninfo.com.cn | ||
| Proportion of assets evaluated in total assets | 100.00% | ||
| Proportion of revenue evaluated in total revenue per consolidated financial statement | 100.00% | ||
| Recognition standard of deficiencies | |||
| Nature | Financial report level | Non-financial report level | |
| Qualitative criteria | Significant deficiency: A deficiency or a combination of deficiencies in internal control may prevent significant errors in financial reports from being identified or prevented, e.g.: A. Invalid internal control environment; B. Fraud of directors, supervisors and senior management personnel on the financial report ; C. Significant errors identified by external auditors but not identified during the Company is operating; D. Invalid supervision of audit committee and internal audit system; E. Other deficiencies that may lead to the wrong judgement of financial statement reporter. Important deficiency: A deficiency or a combination of deficiencies in internal control may prevent errors in financial report from being identified or prevented, although such deficiency is not significant, but require attention of the Board and Management, e.g.: A. Application of accounting policies does not follow the enterprise accounting standard; B. No internal control systems for fraud; C. No control systems or system not effective for unusual or special transactions or no compensatory relevant control; D. One or more deficiencies which prevent the preparation of true and fair financial statements. Normal deficiency: Not significant and not important deficiency. | Internal control deficiencies at non-financial report level are mainly identified by the likelihood of occurrence and the extent of impacts on operating effective in business. Significant deficiency: the high likelihood leading to significant reduction of working efficiency, or significant increase of uncertainty, or significant deviation from the expected target; Important deficiency: a higher likelihood leading to remarkable reduction of working efficiency, or remarkable increase of uncertainty, or remarkable deviation from the expected target; Normal deficiency: a low likelihood leading to reduction of working efficiency, or increase of uncertainty, or deviation from the expected target; | |
| Quantitative criteria | Significant deficiency | potential errors 5% or more of total profits | direct losses of assets is 5% or more of total profits |
| Important deficiency: | potential errors 2% or more but below 5% of total profits | direct losses of assets is over 2% but below 5% of total profits | |
| Normal deficiency: | potential errors is 2% or less of total profits | direct losses of assets is below 2% of total profits | |
| Number of significant deficiencies in financial report level | 0 | ||
| Number of significant deficiencies in non-financial report level | 0 | ||
| Number of important deficiencies in financial report level | 0 | ||
| Number of important deficiencies in non-financial report level | 0 | ||
X．Audit report or assurance report on internal control
□ Applicable √ Inapplicable
Section X Corporate Bonds
The Company does not have publicly issued corporate bonds on stock exchange place, which has not terminatedor terminated but fail to collect the full payment before the annual report authorized disclosure date.
Section XI Financial Report
I. Audit report
| Audit Opinion | Unmodified unqualified audit opinion |
| Audit Report sign-off Date | April 18th 2019 |
| Audit Institution Name | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Audit Report Number | Deloitte Auditors’ Report (Audit) No. 19-P02882 |
| Certified Public Accounts Name | Mou Zhengfei, Zhang Shushu |
To all shareholders of Hangzhou Hikvision Digital Technology Co., Ltd.:
I. Audit Opinion
We have audited the accompanying financial statements of Hangzhou Hikvision Digital TechnologyCo., Ltd. (hereinafter referred to as “Hikvision"), including consolidated and parent company's balancesheet as of December 31
st
2018, consolidated and parent company's income statement, cash flowstatement and statement of changes in owners’ equity of 2018 as well as relevant financial notes tofinancial statements.
In our opinion, the financial statements annexed have been prepared in accordance with AccountingStandards for Business Enterprises in all material respects and they present fairly the consolidated andparent company’s financial position of Hikvision as of December 31
st
2018 and consolidated andparent company’s financial performance and cash flows of 2018.
II. Basis of Opinion
We have conducted our audit in accordance with the Auditing Standards for Chinese Certified PublicAccountants. “Responsibilities of Certified Public Accountants for Financial Statements Audit” in theAudit Report further states our responsibilities under the standards. As per the code of ethics ofChinese certified public accountants, we are independent from Hikvision and have implemented otherresponsibilities as required by the code of ethics. We believe that the audit evidence we have acquiredis sufficient and appropriate to provide a basis for our audit opinion.
III. Key Matters
Key matters are matters we deem the most significant to the financial statements audit for the currentperiod based on our professional judgment. These matters are handled based on the financialstatements audit as a whole and the audit opinion formed accordingly. We don’t present opinionsseparately on these matters. We confirm that the following matters are key matters to be communicatedthrough in the audit report.
(I) Recognition of Sales Revenues
Description:
As shown in Note (V) (37) and Note (XIV) (1), the operating revenue in 2018 in the consolidatedfinancial statements of the Group for the year ended December 31
st
2018 is RMB 49,837.13 million.The product sales revenue, a key performance indicator, reaches RMB 47,552.07 million, accountingfor 95.41% of the operating revenue, which is a significant amount and has a significant influence onresults of operations. The product sales revenue models include internal and external sales of products,etc. There may be relevant risks of revenue recognition, as the point in time at which risks and rewardsare transferred is different under different revenue models. Therefore, we treat sales revenueoccurrence and cutoff as key audit matters.
Audit Measures:
Main audit procedures that we perform for the aforesaid key audit matters include:
(1) Understanding and evaluating design and implementation of key internal control in relation to
revenue recognition, and testing the effectiveness of its operation;
(2) For revenues under different sales models, selecting a sample to check a sales contract, reviewing
its main transaction terms, evaluating whether revenue recognition complies with requirements ofaccounting policies of the Group and the Accounting Standards for Business Enterprises;conducting a background investigation of important customers to check whether there is anyindication of existence of abnormal customers or transactions;
(3) Analyzing revenues and gross profits, based on product types, to understand whether there are
abnormal fluctuations in the revenues and gross profits for the year, and conducting a test of detailsfor identified specific transactions, through systematic analysis of revenue data, and reviewingrelevant supporting documents;
(4) Selecting sample(s) from product sales revenues recorded for the year, checking invoices, sales
contracts or orders, shipping orders, signature forms or customs declarations and other supportingdocuments; carrying out an additional check of sample(s) under the selected external sales modelfor customs declaration records; critically focusing on occurrence of sales revenue recognition andwhether they are recorded in the correct accounting period.
(5) Sampling review the sales revenue of products for a certain period before the end of the year, check
the relevant supporting documents, and confirm whether the sales revenue is booked in the correctaccounting period.
(II) Provision for Decline in Value of Inventories
Description:
As shown in Note (V) (6), as of December 31
st
2018, the carrying amount of inventories in theconsolidated financial statements of the Group was RMB 5,842.85 million (excluding completed butunsettled assets formed by construction contracts), and the provision for diminution in value ofinventories was RMB 321.61 million. The carrying value of the Group’s inventories is relatively high,so the provision for diminution in value of inventories has a relatively significant influence on thefinancial statements. As shown in Note (III) 11.3 and Note (III) 26 to the financial statements,
inventories are measured at the lower of cost and net realizable value, on the balance sheet date. Theprovision for impairment of inventories is made when the net realizable value is lower than the cost.Net realizable value is the estimated selling price for inventories less estimated costs of completion tobe incurred, estimated costs to make the sale and relevant taxes. As the management needs to usecritical accounting estimates in determining the net realizable value of inventories and the amount issignificant, we treat the provision for diminution in value of inventories as a key audit matter.
Audit Measures
Main audit procedures that we perform for the aforesaid key audit matters include:
(1) Understanding and evaluating design and implementation of key internal control in relation to
provision for diminution in value of inventories by the Company’s management, and testing theeffectiveness of its operation;
(2) Understanding the Group’s accounting policies for the provision for diminution in value of
inventories, evaluating whether identification of inventories by the management for which theprovision for diminution in value of inventories should be made is appropriate, and evaluating thereasonableness of the estimated net realizable value by the management;
(3) Testing the completeness and accuracy of data in the list of inventories for which the provision for
diminution in value of inventories should be made, based on which the Company’s managementestimates the provision for diminution in value of inventories, and recalculating the provision fordiminution in value of inventories;
(4) Selecting sample(s) from inventories to test the net realizable value. For the finished product selected
as a sample, comparing the book cost of the finished product with recent or subsequent actual sellingprice; for raw materials and unfinished products selected as samples, comparing costs of completionfor the same type of raw materials and unfinished products and costs to make the sale for the period,and evaluating the reasonableness of estimated cost of completion to be incurred, costs to make thesale and relevant taxes;
(5) Performing the supervision and selective examination procedure for inventory-taking of the Group,
with focus on defective, obsolete or slow-moving inventories, and checking whether there areinventories with an indication of impairment which are not recorded.
IV. Other Information
Management of Hikvision shall be responsible for other information. Other information includes theinformation covered in the annual report, excluding the financial statements and our audit report.
Our audit opinion on the financial statements does not cover other information and we do not expressany form of authentication conclusion on other information.
In connection with our audit of the financial statements, our responsibility is to read other informationand to consider whether other information is significantly misstated or materially inconsistent with thefinancial statements or the information we learned during the audit.
Based on the works we have performed, if we determine that there is a material misstatement in otherinformation, we should report the fact. In this respect, we have nothing to report.
V. Responsibility of the Management and Governance for the Financial Statements
The management of Hikvision is responsible for the preparation of financial statements in accordancewith Accounting Standards for Business Enterprises to achieve fair presentation, and design,implementation and maintenance of necessary internal control to enable the financial statements arefree from material misstatement, whether due to fraud or error.
When preparing the financial statements, the management is responsible for assessing thegoing-concern ability of Hikvision, disclosing issues related to going-concern as applicable, andapplying going-concern assumptions, unless the management plans to liquidate Hikvision, terminateoperation or has no other realistic choice.
The governance is responsible for supervising financial reporting processes of Hikvision.
VI. Responsibility of Certified Public Accountants on Audit of the Financial Statements
Our objective is to obtain reasonable assurance as to whether the overall financial statements are freefrom material misstatement, whether due to fraud or error, and to issue audit report that contain auditopinions. Reasonable assurance is a high level of assurance, but could not guarantee that an auditperformed in accordance with the Auditing Standards can always figure out any existing materialmisstatements. Misstatements may be caused by fraud or error. Misstatement is generally considered tobe material if it is reasonably expected that the misstatement, alone or aggregated, may affect the users’financial decisions based on the financial statements.
In performing the audit in accordance with the Auditing Standards, we applied professional judgmentand maintained professional skepticism. Meanwhile, we also perform the following duties:
(1) Identify and evaluate the risk of material misstatement of financial statements due to fraud or
error; design and implement audit procedures to cope with these risks, and obtain adequateand appropriate audit evidence as the basis for expressing audit opinions. As fraud mayinvolve collusion, forgery, willful omission, misrepresentation or override of internal control,the risk of not discovering a material misstatement due to fraud is higher than the risk of notdiscovering a material misstatement due to error.
(2) Understand the internal control related to auditing as a way to design appropriate audit
procedures. However, the purpose is not to comment on the effectiveness of internal controls.
(3) Evaluate the properness of accounting policy selected by the management and the rationality of
accounting estimate and related disclosure.
(4) Reach a conclusion on whether the going concern assumption adopted by the management is
appropriate. Meanwhile, based on the audit evidence obtained, reach a conclusion on whetherthere are material uncertainties in the events or conditions that may cast significant doubts onHikvision's ability to continue as a going concern. If we reach a conclusion that there is amaterial uncertainty, the Auditing Standards require us to call the attention of the users of thereport to the relevant disclosures in the financial statements in the audit report. If the disclosureis insufficient, we should issue modified audit opinions. Our conclusion is based on theinformation available up to the date of the audit report. However, future events or conditionsmay result in the failure of Hikvision to continue as a going concern.
(5) Evaluate the overall presentation, structure and content (including the disclosure) of the financial
statements and evaluate whether the financial statements fairly reflect the related transactionsand events.
(6) Obtain adequate and appropriate audit evidence on the financial information of entity or business
activities of Hikvision so as to express audit opinions on the financial statements. We areresponsible for directing, supervising and executing the audit on the Group, and assume fullresponsibility for the audit opinions.
We communicated with the governance about the scope of the audit, the schedule and major auditfindings, including the notable shortcomings of internal control identified during the auditing.
We also provide statement to the governance on the independence-related work ethics we follow, andcommunicate with the governance on all relations and other matters that might be reasonably deemedto influence our independence as well as relevant precautionary measures (as applicable).
We determine which of the matters we communicated with the governance are of the greatestimportance to the audit of financial statements of the current period so as to make them key matters.We describe the matters in the audit report. We decide not to communicate on such matters in the auditreport unless the laws and regulations forbid the public disclosure of such matters, or, in rarecircumstances, if the negative consequence of communication of matters in the audit report isreasonably expected to exceed the benefit of the public interest.
At December 31
st
2018
Consolidated Balance Sheet
Unit: RMB
| Item | Notes | Closing balance | Opening balance |
| Current Assets: | |||
| Cash and bank balances | (V)1 | 26,552,402,711.23 | 16,468,430,702.64 |
| Financial assets at fair value through profit or loss | (V)2 | 1,860,050.59 | 4,100,657.54 |
| Notes receivable & Accounts receivable | (V)3 | 19,188,886,471.10 | 18,342,171,688.84 |
| Including : Notes receivable | (V)3.2 | 2,569,445,189.92 | 3,636,961,616.03 |
| Accounts receivable | (V)3.3 | 16,619,441,281.18 | 14,705,210,072.81 |
| Prepayments | (V)4 | 460,304,219.65 | 527,576,857.11 |
| Other receivables | (V)5 | 586,748,265.21 | 583,681,240.81 |
| Inventories | (V)6 | 5,725,104,153.41 | 4,940,332,311.65 |
| Non-current assets due within one year | (V)7 | 380,795,020.47 | 66,566,230.12 |
| Other current assets | (V)8 | 730,682,813.14 | 3,720,449,532.88 |
| Total Current Assets | 53,626,783,704.80 | 44,653,309,221.59 | |
| Non-current Assets: | |||
| Available-for-sale financial assets | (V)9 | 290,966,813.00 | 287,466,813.00 |
| Long-term receivables | (V)10 | 705,512,368.17 | 23,375,680.61 |
| Long-term equity investment | (V)11 | 163,301,844.56 | 130,474,733.58 |
| Fixed assets | (V)12 | 5,082,415,160.10 | 3,024,025,496.31 |
| Construction in progress | (V)13 | 416,092,413.42 | 1,436,319,118.30 |
| Intangible assets | (V)14 | 869,913,050.09 | 429,160,982.63 |
| Goodwill | (V)15 | 212,269,337.23 | 248,964,102.97 |
| Deferred tax assets | (V)16 | 534,346,941.25 | 479,070,649.49 |
| Other non-current assets | (V)17 | 1,582,750,600.80 | 858,796,668.13 |
| Total Non-current Assets | 9,857,568,528.62 | 6,917,654,245.02 | |
| Total Assets | 63,484,352,233.42 | 51,570,963,466.61 |
At December 31
st
2018
Consolidated Balance Sheet - continued
Unit: RMB
| Item | Notes | Closing balance | Opening balance |
| Current Liabilities: | |||
| Short-term borrowings | (V)18 | 3,465,655,688.29 | 97,114,655.91 |
| Financial liabilities at fair value through profit or loss | (V)19 | 290,998.43 | 15,946,836.46 |
| Notes payable & Accounts payable | (V)20 | 10,765,145,485.74 | 10,885,340,440.18 |
| Receipts in advance | (V)21 | 641,430,490.22 | 570,573,208.60 |
| Payroll payable | (V)22 | 1,921,608,104.04 | 1,391,291,256.90 |
| Taxes payable | (V)23 | 1,418,921,664.57 | 1,453,515,065.77 |
| Other payables | (V)24 | 2,953,203,190.99 | 496,718,217.83 |
| Including : Dividend payable | (V)24.2 | 119,917,640.92 | 94,857,139.16 |
| Non-current liabilities due within one year | (V)25 | 3,178,171,147.16 | 1,546,407,270.89 |
| Other current liabilities | (V)26 | 364,984,759.94 | 744,583,627.22 |
| Total Current Liabilities | 24,709,411,529.38 | 17,201,490,579.76 | |
| Non-current Liabilities: | |||
| Long-term borrowings | (V)27 | 440,000,000.00 | 490,000,000.00 |
| Bonds payable | (V)28 | - | 3,120,920,000.00 |
| Long-term payables | - | 2,437,038.62 | |
| Provisions | (V)29 | 77,625,238.49 | 63,068,638.49 |
| Deferred income | (V)30 | 293,179,089.13 | 88,925,771.65 |
| Total non-current liabilities | 810,804,327.62 | 3,765,351,448.76 | |
| Total liabilities | 25,520,215,857.00 | 20,966,842,028.52 | |
| Owners’ Equity | |||
| Share capital | (V)31 | 9,227,270,473.00 | 9,228,865,114.00 |
| Capital reserves | (V)32 | 1,956,139,660.52 | 1,819,397,715.63 |
| Less: Treasury shares | (V)33 | 364,984,759.94 | 744,583,627.22 |
| Other comprehensive income | (V)34 | (49,576,351.10) | (27,677,939.35) |
| Surplus reserves | (V)35 | 4,460,712,358.45 | 3,483,742,918.53 |
| Retained earnings | (V)36 | 22,360,593,257.53 | 16,598,328,692.63 |
| Total owners' equity attributable to owner of the Company | 37,590,154,638.46 | 30,358,072,874.22 | |
| Minority equity | 373,981,737.96 | 246,048,563.87 | |
| Total owners' equity | 37,964,136,376.42 | 30,604,121,438.09 | |
| Total liabilities and owners' equity | 63,484,352,233.42 | 51,570,963,466.61 |
The accompanying notes form part of the financial statements.The financial statements were signed by the following:
Legal Representative: Chen Zongnian；Person in charge of the accounting work: Jin Yan;Person in Charge of the Accounting Department: Zhan Junhua
At December 31
st
2018
Balance sheet of the parent company
Unit: RMB
| Item | Notes | Closing balance | Opening balance |
| Current Assets: | |||
| Cash and bank balances | 19,192,461,228.22 | 12,304,090,713.99 | |
| Notes receivable & Accounts receivable | (XV)1 | 15,556,312,793.95 | 12,851,334,929.89 |
| Including : Notes receivable | (XV)1.2 | 351,793,632.24 | 345,651,612.11 |
| Accounts receivable | (XV)1.3 | 15,204,519,161.71 | 12,505,683,317.78 |
| Prepayments | 132,344,929.55 | 94,545,948.67 | |
| Other receivables | (XV)2 | 522,987,955.34 | 712,142,493.72 |
| Including : Dividend receivables | (XV)2 | 2,550,000.00 | 2,550,000.00 |
| Inventories | 168,885,723.93 | 376,776,045.69 | |
| Other current assets | 93,661,315.14 | 3,296,055,941.42 | |
| Total Current Assets | 35,666,653,946.13 | 29,634,946,073.38 | |
| Non-current Assets: | |||
| Available-for-sale financial assets | 290,956,813.00 | 287,456,813.00 | |
| Long-term equity investment | (XV)3 | 4,361,147,395.90 | 3,367,076,734.95 |
| Fixed assets | 2,844,176,300.34 | 1,757,777,870.77 | |
| Construction in progress | 65,156,482.70 | 914,859,063.00 | |
| Intangible assets | 197,147,608.73 | 154,604,755.69 | |
| Deferred tax assets | 221,779,547.02 | 200,147,031.89 | |
| Other non-current assets | 14,601,579.55 | 16,925,712.83 | |
| Total Non-current Assets | 7,994,965,727.24 | 6,698,847,982.13 | |
| Total Assets | 43,661,619,673.37 | 36,333,794,055.51 |
At December 31
st
2018
Balance sheet of the company - continued
Unit: RMB
| Item | Notes | Closing balance | Opening balance |
| Current Liabilities: | |||
| Notes payable & Accounts payable | 356,787,605.91 | 286,629,255.35 | |
| Receipts in advance | 204,337,524.21 | 216,747,866.68 | |
| Payroll payable | 1,272,626,004.95 | 946,587,240.01 | |
| Taxes payable | 987,057,652.70 | 1,219,102,007.88 | |
| Other payables | 2,529,600,057.31 | 800,458,183.20 | |
| Including : Dividends payable | 117,467,640.92 | 92,407,139.16 | |
| Non-current liabilities due within one year | 3,172,727,888.37 | 33,614,018.51 | |
| Other current liabilities | 364,984,759.94 | 744,583,627.22 | |
| Total Current Liabilities | 8,888,121,493.39 | 4,247,722,198.85 | |
| Non-current Liabilities: | |||
| Bonds payable | - | 3,120,920,000.00 | |
| Provisions | 52,956,535.09 | 43,024,784.70 | |
| Deferred Income | 186,747,708.01 | 62,903,600.00 | |
| Total non-current liabilities | 239,704,243.10 | 3,226,848,384.70 | |
| Total liabilities | 9,127,825,736.49 | 7,474,570,583.55 | |
| Owners’ Equity | |||
| Share capital | 9,227,270,473.00 | 9,228,865,114.00 | |
| Capital reserves | 1,883,262,407.46 | 1,742,755,331.51 | |
| Less: Treasury shares | 364,984,759.94 | 744,583,627.22 | |
| Surplus reserves | 4,460,712,358.45 | 3,483,742,918.53 | |
| Retained earnings | 19,327,533,457.91 | 15,148,443,735.14 | |
| Total owners' equity | 34,533,793,936.88 | 28,859,223,471.96 | |
| Total liabilities and owners' equity | 43,661,619,673.37 | 36,333,794,055.51 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Consolidated Income Statement
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Total operating income | (V)37 | 49,837,132,481.61 | 41,905,476,572.07 |
| Less：Total operating costs | (V)37 | 27,483,469,555.24 | 23,467,310,590.76 |
| Business taxes and surcharges | (V)38 | 418,323,053.64 | 370,993,824.45 |
| Selling expenses | (V)39 | 5,892,500,406.52 | 4,430,220,065.13 |
| Administrative expenses | (V)40 | 1,376,013,682.79 | 1,011,214,457.29 |
| Research and Development (R&D) expenses | (V)41 | 4,482,780,693.41 | 3,194,223,108.16 |
| Financial expenses | (V)42 | (424,257,896.76) | 265,411,287.66 |
| Including：Interest expenses | 154,599,429.03 | 99,488,392.12 | |
| Interest income | 444,981,799.05 | 216,789,778.20 | |
| Impairment losses of assets | (V)43 | 426,949,023.05 | 484,568,899.16 |
| Add: Other Income | (V)44 | 2,083,997,067.37 | 1,673,251,852.26 |
| Investment income | (V)45 | 51,929,640.63 | 44,650,105.12 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | (9,072,889.02) | (2,525,266.42) | |
| Gains (losses) from changes in fair values | (V)46 | 13,406,932.17 | 42,090,091.11 |
| Asset disposal income (loss) | 4,975,825.83 | 1,585,222.50 | |
| II. Operating profit | 12,335,663,429.72 | 10,443,111,610.45 | |
| Add: Non-operating income | (V)47 | 111,362,918.34 | 46,729,250.63 |
| Less: Non-operating expenses | (V)48 | 8,593,484.58 | 3,020,378.72 |
| III. Total profit | 12,438,432,863.48 | 10,486,820,482.36 | |
| Less: Income tax expenses | (V)49 | 1,056,739,998.82 | 1,109,318,842.54 |
| IV. Net profit | 11,381,692,864.66 | 9,377,501,639.82 | |
| 4.1 Classification by continuous operation | |||
| (a) Net profit on continuous operation | 11,381,692,864.66 | 9,377,501,639.82 | |
| (b) Net loss on terminated operation | - | - | |
| 4.2 Classification by attribution of ownership | |||
| (a) Profit or loss attributable to minority shareholders | 28,823,623.34 | (33,353,445.00) | |
| (b) Net profit attributable to owners of parent company | 11,352,869,241.32 | 9,410,855,084.82 | |
| V. Other comprehensive income, net of income tax | (24,062,992.06) | 13,852,652.33 | |
| Other comprehensive income attributable to owners of the Company, net of tax | (21,898,411.75) | 13,552,837.86 | |
| (I) Items that will not be reclassified subsequently to profit or loss | - | - | |
| (II) Other comprehensive income to be reclassified to profit or loss in subsequent periods | (21,898,411.75) | 13,552,837.86 | |
| 1. Exchange differences arising on conversion of financial statements denominated in foreign currencies | (21,898,411.75) | 13,552,837.86 | |
| Other comprehensive income attributable to minority interests, net of tax | (2,164,580.31) | 299,814.47 | |
| VI. Total comprehensive income | 11,357,629,872.60 | 9,391,354,292.15 |
| Item | Notes | Amount for the current period | Amount for the prior period |
| Total comprehensive income attributable to owners of the parent company | 11,330,970,829.57 | 9,424,407,922.68 | |
| Total comprehensive income attributable to minority shareholders | 26,659,043.03 | (33,053,630.53) | |
| VII. Earnings per share | |||
| (I) Basic earnings per share | (XVI)2 | 1.240 | 1.030 |
| (II) Diluted earnings per share | (XVI)2 | 1.234 | 1.024 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Income statement of the parent company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Total operating income | (XV)4 | 22,288,214,116.66 | 19,167,979,291.38 |
| Less: Operating Cost | (XV)4 | 6,599,669,485.30 | 6,100,951,920.79 |
| Business taxes and surcharges | 284,413,700.01 | 258,550,741.27 | |
| Selling expenses | 2,758,483,789.96 | 1,987,923,082.04 | |
| Administrative expenses | 625,098,237.96 | 375,734,883.68 | |
| Research and Development (R&D) expenses | 3,502,168,162.60 | 2,531,443,228.88 | |
| Financial expenses | (180,009,521.00) | (187,143,169.54) | |
| Including : Interest expenses | 92,955,424.65 | 36,221,864.47 | |
| Interest income | 394,158,854.37 | 193,381,088.48 | |
| Impairment losses of assets | 226,183,330.78 | 107,602,826.75 | |
| Add: Other income | 1,814,462,323.26 | 1,467,905,996.67 | |
| Investment income | (XV)5 | 82,844,595.18 | 34,502,356.33 |
| Including: Investment gain (loss) in associated enterprise and joint-venture enterprise | (4,200,612.39) | (2,525,266.42) | |
| Gains (losses) from changes in fair values | - | 53,573,806.57 | |
| Asset disposal income (loss) | 4,138,938.48 | 2,755,085.52 | |
| II. Operating profit | 10,373,652,787.97 | 9,551,653,022.60 | |
| Add: Non-operating income | 56,661,310.97 | 18,333,263.62 | |
| Less: Non-operating expenses | 1,444,733.80 | 1,489,124.20 | |
| III. Total profit | 10,428,869,365.14 | 9,568,497,162.02 | |
| Less: Income tax expenses | 659,174,965.95 | 885,446,198.25 | |
| IV. Net profit | 9,769,694,399.19 | 8,683,050,963.77 | |
| V. Other comprehensive income, net of income tax | - | - | |
| VI. Total comprehensive income | 9,769,694,399.19 | 8,683,050,963.77 |
For the reporting period from January 1
st
2018 to December 31
st
2018Consolidated 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 | 51,986,564,929.24 | 42,136,145,087.13 | |
| Receipts of tax refunds | 3,721,596,390.15 | 2,733,759,603.00 | |
| Other cash receipts relating to operating activities | (V)50(1) | 1,623,810,261.97 | 533,929,235.33 |
| Sub-total of cash inflows from operating activities | 57,331,971,581.36 | 45,403,833,925.46 | |
| Cash payments for goods purchased and services received | 32,254,846,787.67 | 25,634,553,120.83 | |
| Cash paid to and on behalf of employees | 7,091,219,541.27 | 5,036,917,567.98 | |
| Payments of various types of taxes | 4,362,658,730.44 | 3,557,905,236.73 | |
| Other cash payments relating to operating activities | (V)50(2) | 4,509,233,235.92 | 3,801,297,749.24 |
| Sub-total of cash outflows from operating activities | 48,217,958,295.30 | 38,030,673,674.78 | |
| Net Cash Flow from Operating Activities | (V)51(1) | 9,114,013,286.06 | 7,373,160,250.68 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 10,684,968,183.97 | 10,300,303,620.25 | |
| Cash receipts from investment income | 101,672,000.39 | 31,290,097.01 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 17,971,830.99 | 23,086,294.46 | |
| Other cash receipts relating to investing activities | (V)50(3) | 89,505,228.62 | 63,364,669.30 |
| Sub-total of cash inflows from investing activities | 10,894,117,243.97 | 10,418,044,681.02 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 2,055,859,307.21 | 1,692,193,203.99 | |
| Cash paid to acquire investments | 7,367,537,654.71 | 9,921,049,145.72 | |
| Other cash payments relating to investing activities | (V)50(4) | 20,000,000.00 | 13,500,000.00 |
| Sub-total of cash outflows from investing activities | 9,443,396,961.92 | 11,626,742,349.71 | |
| Net Cash Flow from Investing Activities | 1,450,720,282.05 | (1,208,697,668.69) | |
| III. Cash flows from financing activities: | |||
| Cash receipts from capital contributions | 97,509,000.00 | 92,089,826.67 | |
| Including: cash receipts from capital contributions from minority owners of subsidiaries | 97,509,000.00 | 92,089,826.67 | |
| Cash receipts from borrowings | 10,338,144,732.55 | 3,550,599,109.39 | |
| Other cash receipts relating to financing activities | (V)50(5) | 2,057,898,876.84 | - |
| Sub-total of cash inflows from financing activities | 12,493,552,609.39 | 3,642,688,936.06 | |
| Cash repayments of borrowings | 8,590,620,738.17 | 3,205,532,364.13 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 4,701,738,534.32 | 3,800,451,724.80 | |
| Including : Dividends and profits paid by subsidiaries to minority shareholders | - | 3,062,500.00 | |
| Other cash payments relating to financing activities | (V)50(6) | 6,555,746.33 | 38,451,500.00 |
| Sub-total of cash outflows from financing activities | 13,298,915,018.82 | 7,044,435,588.93 | |
| Net Cash Flow from Financing Activities | (805,362,409.43) | (3,401,746,652.87) | |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 235,182,564.34 | (255,868,357.23) | |
| V. Net Increase in Cash and Cash Equivalents | (V)51(1) | 9,994,553,723.02 | 2,506,847,571.89 |
| Add: Opening balance of Cash and Cash Equivalents | (V)51(1) | 16,029,185,269.17 | 13,522,337,697.28 |
| VI. Closing Balance of Cash and Cash Equivalents | (V)51(2) | 26,023,738,992.19 | 16,029,185,269.17 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Cash Flow Statements of the parent company
Unit: RMB
| Item | Notes | Amount for the current period | Amount for the prior period |
| I. Cash Flows from Operating Activities:: | |||
| Cash receipts from the sale of goods and the rendering of services | 22,847,371,972.05 | 19,722,915,694.68 | |
| Receipts of tax refunds | 1,651,607,032.63 | 1,439,270,404.56 | |
| Other cash receipts relating to operating activities | 796,433,730.94 | 339,663,486.81 | |
| Sub-total of cash inflows from operating activities | 25,295,412,735.62 | 21,501,849,586.05 | |
| Cash payments for goods acquired and services received | 7,541,359,566.51 | 7,025,548,254.61 | |
| Cash payments to and on behalf of employees | 3,610,460,282.38 | 2,598,154,101.03 | |
| Payments of all types of taxes | 3,556,689,194.01 | 2,868,678,724.73 | |
| Other cash payments relating to operating activities | 2,871,618,240.21 | 1,742,871,959.31 | |
| Sub-total of cash outflows from operating activities | 17,580,127,283.11 | 14,235,253,039.68 | |
| Net Cash Flow from Operating Activities | (XV)8(1) | 7,715,285,452.51 | 7,266,596,546.37 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from recovery of investments | 4,350,005,971.53 | 5,279,892,396.70 | |
| Cash receipts from investment income | 97,039,236.04 | 34,474,342.25 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 13,852,133.88 | 18,569,173.19 | |
| Other cash receipts relating to investing activities | 15,536,557,642.39 | 8,014,628,629.24 | |
| Sub-total of cash inflows from investing activities | 19,997,454,983.84 | 13,347,564,541.38 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 604,984,875.82 | 612,742,341.37 | |
| Cash payments to acquire investments | 2,131,183,014.00 | 6,280,754,974.91 | |
| Other cash payments relating to investing activities | 15,385,247,510.53 | 8,280,364,802.77 | |
| Sub-total of cash outflows from investing activities | 18,121,415,400.35 | 15,173,862,119.05 | |
| Net Cash Flow from Investing Activities | 1,876,039,583.49 | (1,826,297,577.67) | |
| III. Cash Flows from Financing Activities | |||
| Cash receipts from borrowings | 700,000,000.00 | 300,000,000.00 | |
| Other cash receipts relating to financing activities | 4,988,766,432.46 | 2,415,734,336.55 | |
| Sub-total of cash inflows from financing activities | 5,688,766,432.46 | 2,715,734,336.55 | |
| Cash repayments of borrowings | 700,000,000.00 | 300,000,000.00 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 4,640,094,529.94 | 3,734,122,697.15 | |
| Other cash payments relating to financing activities | 3,422,541,181.42 | 1,855,669,510.90 | |
| Sub-total of cash outflows from financing activities | 8,762,635,711.36 | 5,889,792,208.05 | |
| Net Cash Flow from Financing Activities | (3,073,869,278.90) | (3,174,057,871.50) | |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 177,395,997.38 | (208,127,567.22) | |
| V. Net increase in cash and cash equivalents | (XV)8(1) | 6,694,851,754.48 | 2,058,113,529.98 |
| Add: Beginning balance of cash and cash equivalents | (XV)8(1) | 12,304,082,533.11 | 10,245,969,003.13 |
| VI. Closing Balance of Cash and Cash Equivalents | (XV)8(2) | 18,998,934,287.59 | 12,304,082,533.11 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
| Item | Amount for the 2018 | |||||||
| Owner’s Equity Attributable to owners of the Company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Opening balance of the current period | 9,228,865,114.00 | 1,819,397,715.63 | 744,583,627.22 | (27,677,939.35) | 3,483,742,918.53 | 16,598,328,692.63 | 246,048,563.87 | 30,604,121,438.09 |
| II. Increase or decrease in the current period | (1,594,641.00) | 136,741,944.89 | (379,598,867.28) | (21,898,411.75) | 976,969,439.92 | 5,762,264,564.90 | 127,933,174.09 | 7,360,014,938.33 |
| (I) Total comprehensive income | - | - | - | (21,898,411.75) | - | 11,352,869,241.32 | 26,659,043.03 | 11,357,629,872.60 |
| (II) Owners’ contributions and reduction in capital | (1,594,641.00) | 136,741,944.89 | (323,387,643.28) | - | - | - | 101,274,131.06 | 559,809,078.23 |
| 1. Capital contribution from shareholders | - | - | - | - | - | - | 97,509,000.00 | 97,509,000.00 |
| 2. Share-based payment recognized in owners’ equity | - | 141,703,050.22 | - | - | - | - | 3,765,131.06 | 145,468,181.28 |
| 3. Others | (1,594,641.00) | (4,961,105.33) | (323,387,643.28) | - | - | - | - | 316,831,896.95 |
| (III) Profit distribution | - | - | (56,211,224.00) | - | 976,969,439.92 | (5,590,604,676.42) | - | (4,557,424,012.50) |
| 1. Transfer to surplus reserve | - | - | - | - | 976,969,439.92 | (976,969,439.92) | - | - |
| 2. Distributions to shareholders | - | - | (56,211,224.00) | - | - | (4,613,635,236.50) | - | (4,557,424,012.50) |
| 3. Others | - | - | - | - | - | - | - | - |
| III. Closing balance of the current period | 9,227,270,473.00 | 1,956,139,660.52 | 364,984,759.94 | (49,576,351.10) | 4,460,712,358.45 | 22,360,593,257.53 | 373,981,737.96 | 37,964,136,376.42 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Consolidated Statement of Changes in Owners' Equity-continued
Unit: RMB
| Item | Amount for 2017 | |||||||
| Owner’s Equity Attributable to owners of the Company | Minority interests | Total owners' equity | ||||||
| Share capital | Capital reserves | Less: Treasury share | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Closing balance of the preceding period | 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 |
| Add: Business merger under common control | - | 2,880,000.00 | - | - | - | (5,807,678.26) | (5,204,761.36) | (8,132,439.62) |
| II. Opening balance of the current period (restated) | 6,102,706,885.00 | 1,048,320,853.66 | 300,177,750.17 | (41,230,777.21) | 2,615,437,822.15 | 14,860,650,178.39 | 192,834,273.71 | 24,478,541,485.53 |
| III. Increase or decrease in the current period | 3,126,158,229.00 | 771,076,861.97 | 444,405,877.05 | 13,552,837.86 | 868,305,096.38 | 1,737,678,514.24 | 53,214,290.16 | 6,125,579,952.56 |
| (I) Total comprehensive income | - | - | - | 13,552,837.86 | - | 9,410,855,084.82 | (33,053,630.53) | 9,391,354,292.15 |
| (II) Owners’ contributions and reduction in capital | 49,869,858.00 | 771,076,861.97 | 536,813,016.21 | - | - | - | 91,780,420.69 | 375,914,124.45 |
| 1. Capital contribution from shareholders | 52,326,858.00 | 608,561,358.54 | 660,888,216.54 | - | - | - | 92,089,826.67 | 92,089,826.67 |
| 2. Share-based payment recognized in owners’ equity | - | 186,951,885.95 | - | - | - | - | 4,248,711.50 | 191,200,597.45 |
| 3. Others | (2,457,000.00) | (24,436,382.52) | (124,075,200.33) | - | - | - | (4,558,117.48) | 92,623,700.33 |
| (III) Profit distribution | 3,076,288,371.00 | - | (92,407,139.16) | - | 868,305,096.38 | (7,673,176,570.58) | (5,512,500.00) | (3,641,688,464.04) |
| 1. Transfer to surplus reserve | - | - | - | - | 868,305,096.38 | (868,305,096.38) | - | - |
| 2. Distributions to shareholders | - | - | (92,407,139.16) | - | - | (3,728,583,103.20) | (5,512,500.00) | (3,641,688,464.04) |
| 3. Others | 3,076,288,371.00 | - | - | - | - | (3,076,288,371.00) | - | - |
| IV. Closing balance of the current period (restated) | 9,228,865,114.00 | 1,819,397,715.63 | 744,583,627.22 | (27,677,939.35) | 3,483,742,918.53 | 16,598,328,692.63 | 246,048,563.87 | 30,604,121,438.09 |
For the reporting period from January 1
st
2018 to December 31
st
2018
Statement of Changes in Owners' Equity of the parent company
Unit: RMB
| Item | Amount for 2018 | |||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained profits | Total owners' equity | |
| I. Opening balance of the current period | 9,228,865,114.00 | 1,742,755,331.51 | 744,583,627.22 | 3,483,742,918.53 | 15,148,443,735.14 | 28,859,223,471.96 |
| II. Increase or decrease in the current period | (1,594,641.00) | 140,507,075.95 | (379,598,867.28) | 976,969,439.92 | 4,179,089,722.77 | 5,674,570,464.92 |
| (I) Total comprehensive income | - | - | - | - | 9,769,694,399.19 | 9,769,694,399.19 |
| (II) Owners’ contributions and reduction in capital | (1,594,641.00) | 140,507,075.95 | (323,387,643.28) | - | - | 462,300,078.23 |
| 1. Capital contribution from shareholders | - | - | - | - | - | - |
| 2. Share-based payment recognized in owners’ equity | - | 145,468,181.28 | - | - | - | 145,468,181.28 |
| 3. Others | (1,594,641.00) | (4,961,105.33) | (323,387,643.28) | - | - | 316,831,896.95 |
| (III) Profit distribution | - | - | (56,211,224.00) | 976,969,439.92 | (5,590,604,676.42) | (4,557,424,012.50) |
| 1.Transfer to surplus reserve | - | - | - | 976,969,439.92 | (976,969,439.92) | - |
| 2. Distributions to shareholders | - | - | (56,211,224.00) | - | (4,613,635,236.50) | (4,557,424,012.50) |
| 3. Others | - | - | - | - | - | - |
| III. Closing balance of the current period | 9,227,270,473.00 | 1,883,262,407.46 | 364,984,759.94 | 4,460,712,358.45 | 19,327,533,457.91 | 34,533,793,936.88 |
| Item | Amount for 2017 | |||||
| Share capital | Capital reserves | Less: Treasury share | Surplus reserve | Retained profits | Total owners' equity | |
| I. Opening balance of the current period | 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 |
| II. Increase or decrease in the current period | 3,126,158,229.00 | 787,067,455.99 | 444,405,877.05 | 868,305,096.38 | 1,009,874,393.19 | 5,346,999,297.51 |
| (I) Total comprehensive income | - | - | - | - | 8,683,050,963.77 | 8,683,050,963.77 |
| (II) Owners’ contributions and reduction in capital | 49,869,858.00 | 787,067,455.99 | 536,813,016.21 | - | - | 300,124,297.78 |
| 1. Capital contribution from shareholders | 52,326,858.00 | 608,561,358.54 | 660,888,216.54 | - | - | - |
| 2. Share-based payment recognized in owners’ equity | - | 191,200,597.45 | - | - | - | 191,200,597.45 |
| 3. Others | (2,457,000.00) | (12,694,500.00) | (124,075,200.33) | - | - | 108,923,700.33 |
| (III) Profit distribution | 3,076,288,371.00 | - | (92,407,139.16) | 868,305,096.38 | (7,673,176,570.58) | (3,636,175,964.04) |
| 1.Transfer to surplus reserve | - | - | - | 868,305,096.38 | (868,305,096.38) | - |
| 2. Distributions to shareholders | - | - | (92,407,139.16) | - | (3,728,583,103.20) | (3,636,175,964.04) |
| 3. Others | 3,076,288,371.00 | - | - | - | (3,076,288,371.00) | - |
| III. Closing balance of the current period | 9,228,865,114.00 | 1,742,755,331.51 | 744,583,627.22 | 3,483,742,918.53 | 15,148,443,735.14 | 28,859,223,471.96 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
I. Basic Information about the Company
Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as "Company" or "theCompany" or “Hikvision”), is a Sino-foreign equity joint venture company, formerly known as"Hangzhou Hikvision Digital Technology Ltd", established on November 30
th
2001 in Hangzhou uponthe approval letter of Hangzhou High-tech No. 604 [2001] issued by Hangzhou High-tech IndustrialDevelopment Zone Management Committee. On June 25
th
2008, with approval of document No. 598[2008] issued by the MOFCOM (The Ministry of Commerce of the People's Republic of China), thecompany was renamed as “Hangzhou Hikvision Digital Technology Co., Ltd.”, headquartered inHangzhou, and obtained the business license of enterprise No.91330000733796106P. On May 28
th
2010,the Company was listed on the Shenzhen Stock Exchange.
On December 23
rd
2016, pursuant to the Articles of Association of the Company revised by theresolution of 20th Meeting of the 3rd session Board of Directors authorized by the 2nd extraordinarygeneral meeting in 2016, the Company granted 52,326,858 restricted incentive shares to the incentivegrantees, The Company completed the registration procedure for business changes on January 20th 2017,adjusted the Company’s total capital share to 6,155,033,743 shares.
On April 27
th
2017, authorized by the Company’s first Extraordinary General Meeting in 2014, theCompany completed procedures of repurchase and cancellation of some of the 2,457,000.00 restrictedstocks that did not meet the incentive conditions, and the total share capital of the Company was adjustedto 6,152,576,743 shares.
On May 4
th
2017, 2016 Profit Distribution Scheme was approved on 2016 Annual General Meeting.On May 16
th
2017, based on total capital shares of 6,152,576,743 shares on the date of interestdistribution, the company issued bonus shares for 3,076,288,371 shares, which adjusted the Company’stotal capital share to 9,228,865,114 shares.
On March 27th 2018, according to the authorization of the Company's first extraordinaryshareholders meeting in 2014, the Company completed the procedures of repurchase and cancellation ofsome of the 1,594,641 restricted stocks that did not meet the incentive conditions, and the share capital ofthe Company was changed to 9,227,270,473 shares. For details of the share capital, please refer to Notes(V) 31.
As of December 31
st
2018, the Company’s total registered capital is RMB 9,227,270,473, with total
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
capital shares of 9,227,270,473 shares (face value RMB 1per share), of which restricted A-shares were1,313,073,005 shares, A-shares without restriction are 7,914,197,468 shares.
The Company is engaged in other electronic equipment manufacturing business under electronicsindustry. Business scope of the Company includes development and production of electronic products(including explosion-proof electrical products, tele-communication equipment and its ancillaryequipment, multimedia equipment), fire control products, aircraft, robot, intelligent equipment, auto partsand accessories, and electrical signal equipment for vehicle; sales of self-manufactured products;technical service, electronic technology consulting service, training service (excluding class training),electronic equipment installation, electronic engineering, and design, construction and maintenance ofintelligent systems. For details about business scope of the Company and its subsidiaries, please refer toNote (VII) 1.
The Company’s and consolidated financial reports were approved for issuance by the 10
th
meetingof the fourth session Board of Directors of the Company on April 18
th
2019.
For consolidation scope of the financial statements, please refer to Note (VII) “Interest in otherentities”. For changes in consolidation scope of the financial statements, please refer to “changes in theconsolidation scope” in Note (VI).
II. Basis of preparation of financial statements
Basis of preparation of financial statementsThe Company and its subsidiaries (hereinafter referred to as "the Group") have adopted the AccountingStandards for Business Enterprises ("ASBE") and relevant provisions issued by the Ministry of Finance("MoF"). In addition, the Group has disclosed relevant financial information in accordance withInformation Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15－
General Provisions on Financial Reporting (revised in 2014).
Going concernThe Group has evaluated its going concern for 12 months going forward starting from December 31
st
2018, and there is no factor that may cast significant doubt on the entity's ability to continue as a goingconcern. Therefore, the financial statements have been prepared on a going concern basis.
Bookkeeping base and valuation principles
The Group measures the accounting elements in accordance with the accrual accounting basis. Exceptcertain financial instruments are measured by fair value, these financial statements are prepared in
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
accordance with the measurements basis of historical costs. If the asset decreases in value, the provisionfor 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 orcash equivalent paid at the time of purchase, or the fair value of consideration paid for the purchase ofsuch assets. The liabilities shall be measured in accordance with the amount of funds or assets actuallyreceived when undertaking current obligations, or the contract amount when undertaking the currentobligations, or the amount of cash or cash equivalents required for paying back the debts in dailyactivities.
The fair value is a price received by the market participants from selling asset or transferring liabilityduring orderly transaction at the measurement date. No matter the fair value is observable or estimated byusing valuation technique, the measured and disclosed fair value in the financial statement shall bedetermined on this basis.
When measuring non-financial assets at fair value, the assets shall be measured considering the ability ofmarket participants to use the assets for optimal use to generate economic benefits, or to sell the assets toother market participants to use the assets for optimal use to generate economic benefits.
For the financial assets measured with transaction price at the initial recognition, and the use of valuationtechniques involving unobservable inputs in the subsequent fair value measurement, the valuationtechnique is corrected in the valuation process in order to make the initial recognition results confirmedby valuation techniques equal to the transaction price.
Based on the observable extent of the input value of the fair value, and the importance of such input valueto the fair value measurement, the fair value measurement is divided into three levels:
? Level 1: The input value is the unadjusted offer of the same assets or liabilities on active marketacquired on measurement date;? Level 2: The input value is the input value of relevant assets or liabilities observable directly orindirectly in addition to level 1 input value;? Level 3: The input value is the non-observable input value of relevant assets or liabilities.
III. Significant accounting policies and accounting estimates
1. Statement for Compliance with Accounting Standards for Business Enterprises (ASBE)The financial statements of the Company have been prepared in accordance with ASBE, and present trulyand completely, the Company's and consolidated financial position as of December 31
st
2018; and theCompany's and consolidated results of operations, the Company’s and consolidated changes inshareholders' equity, and the Company’s and consolidated cash flows for the year of 2018.
2. Accounting PeriodThe Group has adopted the calendar year as its accounting year from January 1
st
to December 31
st
eachyear.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
3. Business CycleThe business cycle refers to the period from purchase of assets used for processing to realization of cashor cash equivalents. The Group business cycle is usually 12 months.
4. Functional currencyRenminbi (“RMB”) is the currency in the primary economic environments in which the Company and itsdomestic subsidiaries are operated. The Company and its domestic subsidiaries take RMB as theirfunctional currency. Overseas subsidiaries of the Company determine their functional currency on thebasis of the primary economic environment in which it operates. For functional currency of overseassubsidiaries of the Company, see Note (V) 53. The Group adopts RMB to prepare its financial statements.
5. The accounting treatment of business combinations involving enterprises under common controland business combinations not involving enterprises under common controlBusiness combinations are classified into business combinations involving enterprises under commoncontrol and business combinations not involving enterprises under common control.
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in whichall of the combining enterprises are ultimately controlled by the same party or parties both before andafter the combination, and that control is not transitory.
Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by thecombining entities at the date of the combination. The difference between the carrying amount of the netassets obtained and the carrying amount of the consideration paid for the combination (the aggregate facevalue of shares issued as consideration) is adjusted to the share premium in capital reserve. If the sharepremium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Costs that are directly attributable to the combination are charged to profit or loss in the period in whichthey are incurred.
5.2 Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination inwhich all of the combining enterprises are not ultimately controlled by the same party or parties beforeand after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given,liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of theacquiree. The intermediary expenses incurred by the acquirer in respect of auditing, legal services,
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
valuation and consultancy services, etc. and other associated administrative expenses attributable to thebusiness combination are recognized in profit or loss when they are incurred.
The acquiree’s identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in abusiness combination, that meet the recognition criteria shall be measured at fair value at the acquisitiondate.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’sidentifiable net assets, the difference is treated as an asset and recognized as goodwill, which is measuredat cost on initial recognition. Where the cost of combination is less than the acquirer’s interest in the fairvalue of the acquiree’s identifiable net assets, the acquirer firstly reassesses the measurement of the fairvalues of the acquiree’s identifiable assets, liabilities and contingent liabilities and measurement of thecost of combination. If after that reassessment, the cost of combination is still less than the acquirer’sinterest in the fair value of the acquiree’s identifiable net assets, the acquirer recognizes the remainingdifference immediately into profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, andis presented separately in the consolidated financial statements.
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 rightmeans that an investor may control an investee; the investor may participate in relevant activities of theinvestee to obtain variable rewards and also be able to use the control rights for the investee to influenceits amount of returns. The Group will re-evaluate, if the change of the relevant facts and circumstancesleading 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, andterminates 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 (thedate of losing control right) have been properly included in the consolidated profit statement andconsolidated cash flow statement.
For a subsidiary acquired through a business combination not involving enterprises under commoncontrol, the operating results and cash flows from the acquisition date (the date when control is obtained)are included in the consolidated income statement and consolidated statement of cash flows.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through abusiness combination involving enterprises under common control are included in the Group's scope ofconsolidation as if they had been included in the scope of consolidation from the date when they first
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
came under the common control of the ultimate controlling party. Their operating results and cash flowsfrom the beginning of the earliest reporting period are included in the consolidated income statement andconsolidated statement of cash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determinedbased on the uniform accounting policies and accounting periods set out by the Company.
All significant intra-group balances and transactions are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interestsand presented as "minority equity" in the consolidated balance sheet. The portion of net profits or lossesof subsidiaries for the period attributable to minority interests is presented as "minority interests" in theconsolidated income statement below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceedsthe minority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excessamount are still allocated against minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss ofcontrol over the subsidiary is accounted for as equity transactions. The carrying amounts of the totalowners' equity attributable to owner of the Company and minority equity are adjusted to reflect thechanges in their relative interests in the subsidiary. The difference between the amount by which theminority interests are adjusted and the fair value of the consideration paid or received is adjusted tocapital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference, theexcess are adjusted against retained earnings.
7. Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalentsare the Group's short-term, highly liquid investments that are readily convertible to known amounts ofcash and which are subject to an insignificant risk of changes in value.
8. Conversion of transactions and financial statements denominated in foreign currencies.
8.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate thatapproximates the actual spot exchange rate on the date of transaction; The exchange rate thatapproximates the actual spot exchange rate on the date of transaction is calculated according to themiddle price of market exchange rate at the beginning of the month in which the transaction happened.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
At the balance sheet date, foreign currency monetary items are translated into [RMB] using the spotexchange rates at the balance sheet date. Exchange differences arising from the differences between thespot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previousbalance sheet date are recognized in profit or loss for the period, except for exchange differences relatedto a specific-purpose borrowing denominated in foreign currency that qualify for capitalization arecapitalized as part of the cost of the qualifying asset during the capitalization period.
When the consolidated financial statements include foreign operation(s), if there is foreign currencymonetary item constituting a net investment in a foreign operation, exchange difference arising fromchanges in exchange rates are recognized as "exchange differences arising on conversion of financialstatements denominated in foreign currencies " in other comprehensive income, and in profit and loss forthe period upon disposal of the foreign operation.Foreign currency non-monetary items measured at historical cost are converted to the amounts infunctional currency at the spot exchange rates on the dates of the transactions. Foreign currencynon-monetary items measured at fair value are re-converted at the spot exchange rate on the date the fairvalue is determined. Difference between the re-converted functional currency amount and the originalfunctional currency amount is treated as changes in fair value (including changes of exchange rate) and isrecognized in profit and loss or as other comprehensive income.
8.2 Conversion of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreignoperation are converted from the foreign currency into RMB using the following method: assets andliabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;shareholders' equity items are converted at the spot exchange rates at the dates on which such items arose;all items in the income statement as well as items reflecting the distribution of profits are translated atexchange rates that approximate the actual spot exchange rates on the dates of the transactions; Thedifference between the converted assets and the aggregate of liabilities and shareholders' equity items isrecognized into other comprehensive income and shareholders’ equity.
The foreign currency cash flow and cash flow of overseas subsidiaries adopt the exchange rate similar tothe spot rate at the date of cash flow for conversion. The affected amount of cash and cash equivalentsdue to the change of exchange rate, as an adjustment item, shall be separately listed as "the impact of cashand cash equivalents due to the change of exchange rate" in the cash flow statement.
The opening balances and the comparative figures of previous year are presented at the convertedamounts in the previous year's financial statements.
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreignoperation due to disposal of certain interest in it or other reasons, the Group transfers the accumulatedexchange differences arising on conversion of financial statements of this foreign operation attributable tothe owners' equity of the Company and presented under shareholders' equity, to profit or loss in the periodin which the disposal occurs.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
In case of a disposal or other reason that does not result in the Group losing control over a foreignoperation, but only a decrease in proportion of overseas business interests, the proportionate share ofaccumulated exchange differences arising on conversion of financial statements are re-attributed tominority interests and are not recognized in profit and loss under current period. For partial disposals ofequity interests in foreign operations which are associates or joint ventures, the proportionate shares ofthe accumulated exchange differences arising on conversion of financial statements of foreign operationsis reclassified to profit or loss under current period.
9. Financial Instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to thecontractual provisions of the instrument. Financial assets and financial liabilities are initially measured atfair value. For financial assets and financial liabilities at fair value through profit or loss, transaction costsare immediately recognized in profit or loss. For other financial assets and financial liabilities, transactioncosts are included in their initial recognized amounts.
For the purchase or sale of financial assets in the regular method, the assets and the correspondingundertaken liabilities are recognized when the assets are received on the trading day, or the assets sold arederecognized on the trading day.
9.1 Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a financial asset or afinancial liability (or a group of financial assets or financial liabilities) and of allocating the interestincome or interest expense over the relevant period, using the effective interest rate. The effective interestrate is the rate that exactly discounts estimated future cash flows through the expected life of the financialasset or financial liability, or a shorter period if appropriate, to the current net carrying amount of thefinancial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering allcontractual terms of the financial asset or financial liability (without considering future credit losses), andalso considers all fees paid or received between the parties to the contract giving rise to the financial assetand financial liability that are an integral part of the effective interest rate, transaction costs, andpremiums or discounts, etc.9.2 Classification, Confirmation and Measurement of the Financial Assets
On initial recognition, the Group’s financial assets are classified into one of the four categories, includingfinancial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables,and available-for-sale financial assets. All purchases or sales of financial assets through regular methodsare recognized and derecognized on a trade date basis.
9.2.1 Financial Assets at Fair Value through Profit or Loss ("FVTPL")
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Financial assets at FVTPL include financial assets held for trading and those designated as financialassets at fair value through profit or loss.
A financial asset is classified as held for trading if one of the following conditions is satisfied: (1) It hasbeen acquired principally for the purpose of selling in the near term; or (2) On initial recognition it is partof a portfolio of identified financial instruments that the Group manages together and there is objectiveevidence that the Group has a recent actual pattern of short-term profit-taking; or (3) It is a derivative thatis not designated and effective as a hedging instrument, or a financial guarantee contract, or a derivativethat is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted pricein an active market) whose fair value cannot be reliably measured.
Financial assets that meet one of the following conditions can be initially designated as financial assets atfair value through profit or loss: (1) The designation may eliminate or significantly reduce theinconsistency in the recognition or measurement of the relevant gains or losses resulting from thedifferent measurement basis of the financial asset; (2) The formal written documents of the Group's riskmanagement or investment strategy have stated that the financial asset portfolio or financial assets andfinancial liabilities in which the financial assets are located are managed, evaluated and reported to keymanagement personnel on the basis of fair value; (3) Eligible hybrid tools with embedded derivatives
Financial assets at FVTPL are subsequently measured at fair value. Any gains or losses arising fromchanges in the fair value and any dividend or interest income earned on the financial assets arerecognized in profit or loss.
9.2.2 Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments andfixed maturity dates that the Group's management has the positive intention and ability to hold tomaturity.
Held-to-maturity investments are subsequently measured at amortized cost using the effective interestmethod. Gain or loss arising from derecognition, impairment or amortization is recognized in profit orloss.
9.2.3 Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. Financial assets classified as loans and receivables by the Group includenotes receivable, accounts receivable, other receivables, long-term receivables, and etc.Loans and receivables are subsequently measured at amortized cost using the effective interest method.Gain or loss arising from derecognition, impairment or amortization is recognized in profit or loss.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
9.2.4 Available-for-sale Financial Assets
Available-for-sale financial assets include non-derivative financial assets that are designated on initialrecognition as available for sale, and financial assets that are not classified as financial assets at fair valuethrough profit or loss, loans and receivables or held-to-maturity investments.Available-for-sale financial assets are subsequently measured at fair value, and gains or losses arisingfrom changes in the fair value are recognized as other comprehensive income, except that impairmentlosses and exchange differences related to amortized cost of monetary financial assets denominated inforeign currencies are recognized in profit or loss, until the financial assets are derecognized, at whichtime the gains or losses are released and recognized in profit or loss.Interests obtained and the dividends declared by the investee during the period in which theavailable-for-sale financial assets are held, are recognized in investment gains.For investments in equity instruments that do not have a quoted market price in an active market andwhose fair value cannot be reliably measured, and derivative financial assets that are linked to and mustbe settled by delivery of such unquoted equity instruments, they are measured at cost.
9.3 Impairment of financial assets
The Group assesses at each balance sheet date the carrying amounts of financial assets other than those atfair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Groupdetermines the amount of any impairment loss. Objective evidence that a financial asset is impaired isevidence that, arising from one or more events that occurred after the initial recognition of the asset, theestimated future cash flows of the financial asset, which can be reliably measured, have been affected.Objective evidence that a financial asset is impaired includes the following observable events:
(1) Significant financial difficulty of the issuer or obligor;(2) A breach of contract by the borrower, such as a default or delinquency in interest or principalpayments;(3) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting aconcession to the borrower;(4) It becoming probable that the borrower will enter bankruptcy or other financial reorganizations;(5) The disappearance of an active market for that financial asset because of financial difficulties of theissuer;(6) Upon an overall assessment of a group of financial assets, observable data indicates that there is ameasurable decrease in the estimated future cash flows from the group of financial assets since the initialrecognition of those assets, although the decrease cannot yet be identified with the individual financialassets in the group. Such observable data includes:
- Adverse changes in the payment status of borrower in the group of assets;- Economic conditions in the country or region of the borrower which may lead to a failure to pay thegroup of assets;(7) Significant adverse changes in the technological, market, economic or legal environment in which theissuer operates, indicating that the cost of the investment in the equity instrument may not be recoveredby the investor;
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(8) A significant or prolonged decline in the fair value of an investment in an equity instrument below itscost;(9) Other objective evidence indicating there is an impairment of a financial asset.- Impairment of financial assets measured at amortized costIf financial assets carried at amortized cost are impaired, the carrying amounts of the financial assets arereduced to the present value of estimated future cash flows (excluding future credit losses that have notbeen incurred) discounted at the financial asset's original effective interest rate. The amount of reductionis recognized as an impairment loss in profit or loss. If, subsequent to the recognition of an impairmentloss on financial assets carried at amortized cost, there is objective evidence of a recovery in value of thefinancial assets which can be related objectively to an event occurring after the impairment is recognized,the previously recognized impairment loss is reversed. However, the reversal is made to the extent thatthe carrying amount of the financial asset at the date the impairment is reversed does not exceed what theamortized cost would have been had the impairment not been recognized.For a financial asset that is individually significant, the Group assesses the asset individually forimpairment. For a financial asset that is not individually significant, the Group assesses the assetindividually for impairment or includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses them for impairment. If the Group determines that no objectiveevidence of impairment exists for an individually assessed financial asset (whether significant or not), itincludes the asset in a group of financial assets with similar credit risk characteristics and collectivelyreassesses them for impairment. Assets for which an impairment loss is individually recognized are notincluded in a collective assessment of impairment.
- Impairment of available-for-sale financial assets
When an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fairvalue previously recognized directly in other comprehensive income is reclassified from othercomprehensive income to profit or loss. The amount of the cumulative loss that is reclassified from othercomprehensive income to profit or loss is the difference between the acquisition cost (net of any principalrepayment and amortization) and the current fair value, less any impairment loss on that financial assetpreviously recognized in profit or loss.If, subsequent to the recognition of an impairment loss on available-for-sale financial assets, there isobjective evidence of a recovery in value of the financial assets which can be related objectively to anevent occurring after the impairment is recognized, the previously recognized impairment loss is reversed.The amount of reversal of impairment loss on available-for-sale equity instruments is recognized as othercomprehensive income, while the amount of reversal of impairment loss on available-for-sale debtinstruments is recognized in profit or loss.
- Impairment of financial assets measured at costIf an impairment loss has been incurred on an investment in unquoted equity instrument (without aquoted price in an active market) whose fair value cannot be reliably measured, or on a derivativefinancial asset that is linked to and must be settled by delivery of such an unquoted equity instrument, thecarrying amount of the financial asset is reduced to the present value of estimated future cash flowsdiscounted at the current market rate of return for a similar financial asset. The amount of reduction isrecognized as an impairment loss in profit or loss. The impairment loss on such financial asset is notreversed once it is recognized.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
9.4 Transfer of Financial Assets
The Group derecognizes a financial asset if one of the following conditions is satisfied: (1) thecontractual rights to the cash flows from the financial asset expire; or (2) the financial asset has beentransferred and substantially all the risks and rewards of ownership of the financial asset is transferred tothe transferee; or (3) although the financial asset has been transferred, the Group neither transfers norretains substantially all the risks and rewards of ownership of the financial asset but has not retainedcontrol of the financial asset.If the Group neither transfers nor retains substantially all the risks and rewards of ownership of afinancial asset, and it retains control of the financial asset, it recognizes the financial asset to the extent ofits continuing involvement in the transferred financial asset and recognizes an associated liability. Theextent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposedto changes in the value of the transferred asset.For a transfer of a financial asset in its entirety that satisfies the recognition criteria, the differencebetween (1) the carrying amount of the financial asset transferred; and (2) the sum of the considerationreceived from the transfer and any cumulative gain or loss that has been recognized in othercomprehensive income, is recognized in profit or loss.If a part of the transferred financial asset qualifies for derecognition, the carrying amount of thetransferred financial asset is allocated between the part that continues to be recognized and the part that isderecognized, based on the respective fair values of those parts. The difference between (1) the carryingamount allocated to the part derecognized; and (2) the sum of the consideration received for the partderecognized and any cumulative gain or loss allocated to the part derecognized which has beenpreviously recognized in other comprehensive income, is recognized in profit or loss.
9.5 Classification, recognition and measurement of financial liabilities
Debt and equity instruments issued by the Group are classified into financial liabilities or equity on thebasis of the substance of the contractual arrangements with the relevant reflected economic essence (notonly in the form of law) and definitions of financial liability and equity instrument.On initial recognition, financial liabilities are classified into financial liabilities at fair value throughprofit or loss and other financial liabilities.
9.5.1 Financial liabilities at fair value through profit or loss (FVTPL)
Financial liabilities at FVTPL consist of financial liabilities held for trading and those designated as atFVTPL.A financial liability is classified as held for trading if one of the following conditions is satisfied: (1)undertake the purpose of financial liability, it has been acquired principally for the purpose ofrepurchasing in the near term; or (2) On initial recognition it is part of a portfolio of identified financialinstruments that the Group manages together and there is objective evidence that the Group has a recentactual pattern of short-term profit-taking; or (3) It is a derivative, except for a derivative that is adesignated and effective hedging instrument, or a financial guarantee contract, or a derivative that islinked to and must be settled by delivery of an unquoted equity instrument (without a quoted price in anactive market) whose fair value cannot be reliably measured.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
A financial liability may be designated as at FVTPL upon initial recognition only when one of thefollowing conditions is satisfied: (1) Such designation eliminates or significantly reduces a measurementor recognition inconsistency that would otherwise result from measuring liabilities or recognizing thegains or losses on them on different bases; or (2) The financial liability forms part of a group of financialliabilities or a group of financial assets and financial liabilities, which is managed and its performance isevaluated on a fair value basis, in accordance with the Group's documented risk management orinvestment strategy, and information about the grouping is reported to key management personnel on thatbasis.; or (3) qualified hybrid tool with inclusion of embedded derivatives.Financial liabilities at FVTPL are subsequently measured at fair value. Any gains or losses arising fromchanges in the fair value or any dividend or interest expenses related to the financial liabilities arerecognized in profit or loss.
9.5.2 Other financial liabilities
For a derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument(without a quoted price in an active market) whose fair value cannot be reliably measured, it issubsequently measured at cost. Other financial liabilities, except for financial guarantee contracts, aresubsequently measured at amortized cost using the effective interest method, with gain or loss arisingfrom derecognition or amortization recognized in profit or loss.
9.5.3. Financial Guarantee Contracts
A financial guarantee contract is a contract by which the guarantor and the lender agree that the guarantorwould settle the debts or bear obligations in accordance with terms of the contract in case the borrowerfails to settle the debts. Financial guarantee contracts that are not designated as financial liabilities at fairvalue through profit or loss, are initially measured at their fair values less the directly attributabletransaction costs. Subsequent to initial recognition, they are measured at the higher of: (i) the amountdetermined in accordance with Accounting Standard for Business Enterprises No. 13 – Contingencies;and (ii) the amount initially recognized less cumulative amortization recognized in accordance with theprinciples set out in Accounting Standard for Business Enterprises No. 14 – Revenue.
9.6 Derecognition of Financial Liabilities
The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or partof it) is discharged. An agreement between the Group (an existing borrower) and an existing lender toreplace the original financial liability with a new financial liability with substantially different terms isaccounted for as an extinguishment of the original financial liability and the recognition of a newfinancial liability.When the Group derecognizes a financial liability or a part of it, it recognizes the difference between thecarrying amount of the financial liability (or part of the financial liability) derecognized and theconsideration paid (including any non-cash assets transferred or new financial liabilities assumed) inprofit or loss.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
9.7 Derivative Instruments and Embedded Derivative Instruments
Derivative financial instruments include forward exchange contracts, interest rate swaps and foreignexchange options, etc. Derivatives are initially measured at fair value at the date when the derivativecontracts are entered into and are subsequently re-measured at fair value. The resulting gain or loss isrecognized in profit or loss.An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is notdesignated as a financial asset or financial liability at fair value through profit or loss, and treated as astandalone derivative if 1) the economic characteristics and risks of the embedded derivative are notclosely related to the economic characteristics and risks of the host contract; and 2) a separate instrumentwith the same terms as the embedded derivative would meet the definition of a derivative. If the Group isunable to measure the embedded derivative separately either at acquisition or at a subsequent balancesheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair valuethrough profit or loss.
9.8 Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognized financial assetsand financial liabilities, and intends either to settle on a net basis, or to realize the financial asset andsettle the financial liability simultaneously, a financial asset and a financial liability shall be offset and thenet amount is presented in the balance sheet. Except for the above circumstances, financial assets andfinancial liabilities shall be presented separately in the balance sheet and shall not be offset.
9.9 Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. That the group issues (including refinancing), repurchases, sells or cancelsequity instruments is taken as the treatment of changes in equities. The group does not confirm thechanges of fair value of equity instruments. Transaction fees relevant to the equity transaction shall bededucted from the equity.The Group considers the allocation of the equity holder as the allocation of profits; issued share dividendsdo not influence the total equity of the shareholders.
10. Receivables
10.1 Receivables that are individually significant and for which bad debt provision is individuallyassessed
| Basis or monetary criteria for determining an individually significant receivable | A receivable that exceeds RMB 4 million (inclusive) and accounting for more than 10% of the receivables book balance is deemed as an individually significant receivable by the Group. |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
| Method of determining provision for receivables that are individually significant and for which bad debt provision is individually assessed | For account receivables that are individually significant, the Group assesses the receivables individually for impairment. For account receivables that are not impaired individually, the Group includes the account receivables in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Account receivables for which an impairment loss is individually recognized are not included in a collective assessment of impairment. |
10.2 Receivables for which bad debt provision is collectively assessed on a portfolio basis
| Method of recognizing bad debt provisions for receivables based upon collective assessment on a portfolio basis. | |
| Accounts receivables with insignificant single amount and significant single amount but no single test impairment | Aging analysis |
Portfolios that aging analysis is used for bad debt provision:
| Aging | Provision as a proportion of accounts receivable (%) | Provision as a proportion of other receivables (%) |
| Within 1 year (inclusive, the same below) | 5 | 5 |
| 1-2 years | 10 | 10 |
| 2-3 years | 30 | 30 |
| 3-4 years | 50 | 50 |
| 4-5 years | 80 | 80 |
| More than 5 years | 100 | 100 |
10.3 Accounts receivable that are not individually significant but for which bad debt provision isindividually assessed:
| Reasons for making individual bad debt provision | There are significant differences between the present value of future cash flow of the receivables and the present value of future cash flow of the receivables portfolio based on aging analysis as credit risk feature. |
| Bad debt provision methods | Through individual impairment test, determine the bad debts provisions according to the difference of the amount that the present value of future cash flows lower than carrying value. |
11. Inventories11.1 Categories of inventories
The Group's inventories mainly include finished goods or commodities held for sale in the daily activities,completed outstanding assets formed in the construction contract, products in the production process,
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
materials and supplies used in the production process or in the process of proving labor service.Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs ofconversion and other expenditures incurred in bringing the inventories to their present location andcondition.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the mobile weighted average method.
11.3 Basis for determining net realizable value of inventoriesThe 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 netrealizable value refers to the amount derived by deducting the potential cost, estimated selling expenseand 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 andconsider the purposes of holding inventories and influence of events after the balance sheet date.
Provision for decline in value of inventories is made based on the excess of cost of inventory over its netrealizable value on an item-by-item basis.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down ofinventory 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 inprofits and losses of the current period.
11.4 Inventory count system
The perpetual inventory system is maintained for stock system.
11.5 Amortization method for low cost and short-lived consumable items and packaging materials
Packaging materials and low cost and short-lived consumable items are amortized using the immediatewrite-off method.
12. Long-term Equity Investment
12.1 Basis for determining joint control and significant influence over investee
Control is the power to govern an entity through participating in relevant activities of the investee; theinvestor is able to obtain variable benefits from its activities, and at same time, to use the control rights onthe investee to influence the amount of returns. Joint control means that joint control for certain
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
arrangement in accordance with relevant agreements; activities relevant to the arrangement cannot bedecided until obtaining the unanimous consent of parties sharing control right. Significant influence is thepower to participate in the financial and operating policy decisions of the investee but is not control orjoint control over those policies. When determining whether an investing enterprise is able to exercisecontrol or significant influence over an investee, the effect of potential voting rights of the investee, suchas current convertible debts, current executable warrants, etc., held by the investing enterprises or otherparties shall be considered.
12.2 Determination of initial investment cost
For a long-term equity investment acquired through a business combination involving enterprises undercommon control, the shares of merged party's book value of owners' equity in the final controlling partyconsolidated financial statements obtained on the merger date shall be considered as the initial investmentcost of long-term equity investment. The differences between the initial investment cost of long-termequity investment and the paid cash, the transferred non-cash assets and the book value of the assumeddebts are adjusted against the capital surplus; if the capital surplus is not sufficient to be offset, theremaining balance is adjusted against retained earnings. In the case of issued equity securities treated asconsolidation consideration, share of book value of owner's equity of merged party in the final controllingparty consolidated financial statements is regarded as initial investment cost of long-term equityinvestments on the date of consolidation; capital reserve shall be adjusted in accordance with taking totalnominal value of issued share as capital share, the difference between the initial investment cost oflong-term equity investments and total book value of issued shares; In case the capital reserve is notenough for writing down, the retained earnings shall be adjusted.
For a long-term equity investment acquired through business combination not involving enterprises undercommon control, and the merging cost confirmed on the purchased date are regarded as the initialinvestment cost.
The intermediate expenses made by the combining party or purchaser for audit, legal service, assessmentand other management related expenses during the business merger should be included into the currentprofit and loss as it happens.
Conduct initial measurement according the cost for other equity investment other than the long-termequity investment formed in business merger. In case that the investor may post a significant impact onthe investee or execute joint control but not constitute the control right, long-term equity investment costis the sum of fair value of original-held equity investment plus newly-added investment cost inaccordance with No. 22 Accounting Standards for Business Enterprises----Recognition and Measure ofthe Financial Instruments.
12.3 Subsequent measurement and recognition of profit or loss
12.3.1 Long-term equity investment accounted for using the cost methodLong-term equity investments in subsidiaries are accounted for using the cost method in the Company'sfinancial statements. A subsidiary is an investee that is controlled by the Group.The long-term equity investment accounted by the cost method shall be measured at its initial investment
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
cost. If there are additional investments or disinvestments, the long-term equity investment cost shall beadjusted. Income from the investment in the current period shall be recognized in accordance with thecash dividends or profits declared and issued by the investee.
12.3.2 Long-term equity investment accounted for using the equity methodThe Group accounts for investment in associates and joint ventures using the equity method. An associateis an entity over which the Group has significant influence and a joint venture is an entity over which theGroup can only exercise joint control along with other investors on the investee’s net assets.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theGroup’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, noadjustment is made to the initial investment cost. Where the initial investment cost is less than theGroup’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, thedifference is recognized in profit or loss for the period, and the cost of the long-term equity investment isadjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensiveincome of the investee for the period as investment income or loss and comprehensive income for theperiod, meanwhile, the book value of the long-term equity investment shall be adjusted; The Companyshall accordingly reduce the book value of the long-term equity investment in terms of the part that shallbe enjoyed according to the profit or cash dividends declared by the invested unit to be distributed; Forother changes in the owners' equity of the invested unit other than net profits and losses, othercomprehensive incomes and the profit distribution, the book value of long-term equity investment shallbe adjusted and be included into the capital reserves. The Company shall, on the ground of the fair valueof all identifiable assets of the invested entity when it obtains the investment, recognize the attributableshare 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 thoseadopted by the Company, the adjustment shall be made for the financial statements of the invested unit inaccordance with the accounting policies and accounting periods of the Company to recognize theinvestment income and other comprehensive incomes. For the transaction incurred between the group andassociated enterprises and joint ventures, invested or sold assets don't constitute a business, the part thatdoesn't achieve internal transaction profit or loss or belongs to the group calculated according to theenjoyed ratio will be offset, and the profit or loss on investment will be confirmed on this basis. But forthe unrealized loss arising from the internal transaction between the group and the invested unit, if suchtransaction 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 towrite-down the book value of the long-term equity investment and other long-term equities substantiallyconstituting the net investment of the invested unit to zero as a limit. Besides, if the group is obliged tobear extra loss for the invested unit, it shall be necessary to determine provisions and record them tocurrent investment loss in compliance with obligations expected to be assumed. If the invested unitrealizes any net profits later, the group shall, after the amount of its attributable share of profits offsets itsattributable share of the un-confirmed losses, resume recognizing its attributable share of profits.
12.4 Disposal of long-term equity investments
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
On disposal of a long term equity investment, the difference between the proceeds actually received andthe carrying amount is recognized in profit or loss for the period.
13. Fixed Assets
13.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, forrental to others, or for administrative purposes, and have useful lives of more than one accounting year. Afixed asset is recognized only when it is probable that economic benefits associated with the asset willflow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured atcost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it isprobable that economic benefits associated with the asset will flow to the Group and the subsequentexpenditures can be measured reliably. Meanwhile the carrying amount of the replaced part isderecognized. Other subsequent expenditures are recognized in profit or loss in the period in which theyare incurred.
13.2 Depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequentto the one in which it is ready for intended use. The useful life, estimated net residual value rate andannual depreciation rate of each category of fixed assets are as follows:
| Class | Depreciation period (years) | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings and Constructions | 20 years | 10 | 4.5 |
| General-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Special-purpose equipment | 3-5 years | 10 | 18.0-30.0 |
| Transportation vehicles | 5 years | 10 | 18.0 |
Estimated net residual value of a fixed asset is the estimated amount that the Group would currentlyobtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were alreadyof the age and in the condition expected at the end of its useful life.
13.3 Identification basis and valuation methods for fixed assets acquired under finance leases
On the commencement date of the lease term, record the lower of the fair value of the leasing asset or thepresent value of the minimum lease payments on the lease commencement date as the entry book value ofthe leased asset, and book the amount of the minimum lease payments as the entry book value oflong-term account payable, and recognize the difference between the entry value of the leased asset andthat of the long-term account payables as unrecognized financing expenses. In addition, the initial direct
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
costs directly attributable to the leased item incurred during the process of negotiating the lease andsigning the leasing agreement shall be included into the value of the leased assets.
The Group adopts a depreciation policy for a fixed asset held under a finance lease which is consistentwith that for its owned fixed asset. If there is reasonable certainty that the Group will obtain ownership ofthe leased asset at the end of the lease term, the leased asset is depreciated over its useful life. If there isno reasonable certainty that the Group will obtain ownership of the leased asset at the end of the leaseterm, the leased asset is depreciated over the shorter of the lease term and its useful life.
13.4 Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its useor disposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged,the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes isrecognized in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciationmethod applied at least once at each financial year-end, and account for any change as a change in anaccounting estimate.
14. Construction in Process
Construction in progress is measured at its actual costs. The actual costs include various constructionexpenditures during the construction period, borrowing costs capitalized before it is ready for intendeduse and other relevant costs. Construction in progress is not depreciated. Construction in progress istransferred to a fixed asset when it is ready for intended use.
15. Borrowing Costs
Borrowing costs directly attributable to the acquisition & construction or production of assets eligible forcapitalization shall be capitalized when assets expenditure, borrowing costs and necessary construction orproduction for bringing assets to expected conditions for use or marketing have taken place; whenconstruction or production of assets ready for capitalization reach to expected conditions for use ormarketing, capitalization shall be ceased. Other borrowing expenses are recognized as expenses in thecurrent period.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized isthe actual interest expense incurred on that borrowing for the period less any bank interest earned fromdepositing the borrowed funds before being used on the asset or any investment income on the temporaryinvestment of those funds. Where funds are borrowed under general-purpose borrowings, the Groupdetermines the amount of interest to be capitalized on such borrowings by applying a capitalization rateto the weighted average of the excess of cumulative expenditures on the asset over the amounts ofspecific-purpose borrowings. The capitalization rate is the weighted average of the interest ratesapplicable to the general-purpose borrowings. During the capitalization period, exchange differences
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
related to a specific-purpose borrowing denominated in foreign currency are all capitalized. Exchangedifferences in connection with general-purpose borrowings are recognized in profit or loss in the periodin which they are incurred.
16. Intangible Assets
16.1 Intangible Assets Valuation Method and Service Life
Intangible assets include land use right, intellectual property (IP) and application software, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life isavailable for use, its original cost is amortized over its estimated useful life using the straight-line method.The useful life and predicted net residual value of various intangible assets are shown as follows:
| Class | Service life (year) | Salvage value rate (%) |
| Land use right | 40 or 50 years | - |
| IP Right | 10 Years | - |
| Application Software | 5-10 years | - |
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization methodat the end of the period, and makes adjustments when necessary.
16.2 Internal Research and Development Expenditure
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.
Expenditure during the development phase that meets all of the following conditions at the same time isrecognized as intangible asset. Expenditure during development phase that does not meet the followingconditions is recognized in profit or loss for the period.
(1) It is technically feasible to complete the intangible asset so that it will be available for use or sale;(2) The Group has the intention to complete the intangible asset and use or sell it;(3) The Group can demonstrate the ways in which the intangible asset will generate economic benefits,including the evidence of the existence of a market for the output of the intangible asset or the intangibleasset itself or, if it is to be used internally, the usefulness of the intangible asset;(4) The availability of adequate technical, financial and other resources to complete the development andthe ability to use or sell the intangible asset; and(5) The expenditure attributable to the intangible asset during its development phase can be reliablymeasured.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
If the expenditures cannot be distinguished between the research phase and development phase, theGroup recognizes all of them in profit or loss for the period.
17. Long-term Assets Impairment
The Group assesses at each balance sheet date whether there is any indication that the long-term equityinvestment, fixed assets, construction in process and intangible assets with a finite useful life may beimpaired. If there is any indication that such assets may be impaired, recoverable amounts are estimatedfor such assets. Intangible assets with indefinite useful life and intangible assets not yet available for useare tested for impairment annually, irrespective of whether there is any indication that the assets may beimpaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverableamount of an individual asset, the recoverable amount of the asset group to which the asset belongs willbe estimated. The recoverable amount is determined by the higher of 1) net amount of fair value of theasset or asset group deducted by the disposal expenses; or 2) the present value of the expected future cashflow of the asset or asset group.
If the recoverable amount of an asset or an asset group is less than its carrying amount, the deficit isaccounted for as an impairment loss and is recognized in profit or loss for the period.
Goodwill impairment test shall be conducted at the end of each year at least. Goodwill impairment testshall be conducted in accordance with the concerned asset group or asset portfolio. That is to allocate thebook value of goodwill to the asset group or asset portfolio that is expected to benefit from the synergiesof the combination in a reasonable way from the date of purchasing. When recoverable amount ofapportion-included asset group or asset portfolio of goodwill is less than book value of goodwill,impairment loss shall be recognized. Firstly, amount of impairment loss shall be apportioned to the bookvalue of goodwill of the said asset group or asset portfolio, and then book value of other assets, except forgoodwill, in asset group or asset portfolio shall be abated in proportion.
Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.
18. Employee compensation18.1 Accountant Arrangement Method of Short-term RemunerationDuring accounting period when the Group's employees provide services, actual short-term remunerationshall be recognized as the liabilities and current profit and loss or relevant asset cost. The Group’semployee benefits and welfare are included into current profit and loss or relevant asset cost according toactual amount occurred during the period. If the employee benefits and welfare is non-monetary, it shallbe measured according to its fair value.
During the accounting period that the employees service the Group, the Group pays social insurancepremiums such as medical insurance premium, industrial injury insurance premium, maternity insurancepremium and housing accumulation fund for its employees, as well as labor union expenditure andemployee education expenses calculated and withdrawn according to the regulations, corresponding
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
employee remuneration amount shall be calculated and determined in accordance with specifiedcalculation and withdrawal basis and proportion to recognize corresponding liabilities and included intothe 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 basedon defined contribution plan shall be recognized as liabilities and included in the current profit and loss orrelevant asset cost.
18.3 Accountant Arrangement Method of the Termination Benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by suchtermination benefits will be determined as the following date, whichever is earlier, and will be included inthe current profit and loss: 1) When the Group cannot unilaterally withdraw the termination benefitsprovided due to labor relation cancellation plan or employee lay-off suggestion; or 2）when the Groupdetermines costs or expenses in relation with the restructuring of the paid termination benefits.
19. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency such asproducts quality assurance, etc. And it is probable that an outflow of economic benefits will be requiredto settle the obligation, and the amount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle thepresent obligation at the balance sheet date, taking into account factors pertaining to a contingency suchas the risks, uncertainties and time value of money. Where the effect of the time value of money ismaterial, the amount of the provision is determined by discounting the related future cash outflows.
20. Share-based Payment
Share-based payment refers to a transaction in which the Group grants the equity instruments orundertakes the equity-instrument-based liabilities in return for services from employees. The Group'sshare-based payment is an equity-settled share-based payment.A share-based payment is a transaction which the Group grants equity instruments, or incurs liabilities foramounts that are determined based on the price of equity instruments, in return for services rendered byemployees. The Group's share-based payments are equity-settled share-based payments.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
20.1 Equity-settled share-based payments
Grants to employees are equity-settled share-based payments.
Equity-settled share-based payments in exchange for services rendered by employees are measured at thefair value of the equity instruments granted to employees at the grant date. Such amount is recognized asrelated costs or expenses on a straight-line basis over the vesting period, with a corresponding increase incapital reserve.
At each balance sheet date during the vesting period, the Group makes the best estimate according to thesubsequent latest information of change in the number of employees who are granted with options thatmay vest, etc. and revises the number of equity instruments expected to vest. The effect of the aboveestimate is recognized as related costs or expenses, with a corresponding adjustment to capital reserve.]
20.2. Accounting treatment related to implementation, modification and termination of share-basedpayment arrangement
In case the Group modifies a share-based payment arrangement, if the modification increases the fairvalue of the equity instruments granted, the Group will include the incremental fair value of the equityinstruments granted in the measurement of the amount recognized for services received. If themodification increases the number of the equity instruments granted, the Group will include the fair valueof additional equity instruments granted in the measurement of the amount recognized for servicesreceived. The increase in the fair value of the equity instruments granted is the difference between fairvalue of the equity instruments before and after the modification on the date of the modification. If theGroup modifies the terms or conditions of the share-based payment arrangement in a manner that reducesthe total fair value of the share-based payment arrangement, or is not otherwise beneficial to theemployee, the Group will continue to account for the services received as if that modification had notoccurred, other than a cancellation of some or all the equity instruments granted.If cancellation of the equity instruments granted occurs during the vesting period, the Group will accountfor the cancellation of the equity instruments granted as an acceleration of vesting, and recognizeimmediately the amount that otherwise would have been recognized over the remainder of the vestingperiod in profit or loss for the period, with a corresponding recognition in capital reserve. When theemployee or counterparty can choose whether to meet the non-vesting condition but the condition is notmet during the vesting period, the Group treats it as a cancellation of the equity instruments granted.
21. Revenue
21.1 Revenue from sale of goods
Revenue from sale of goods is recognized when (1) the Group has transferred to the buyer the significantrisks and rewards of ownership of the goods; (2) the Group retains neither continuing managerialinvolvement to the degree usually associated with ownership nor effective control over the goods sold; (3)the amount of revenue can be measured reliably; (4) it is probable that the associated economic benefitswill flow to the Group; and (5) the associated costs incurred or to be incurred can be measured reliably.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
21.2 Revenue from rendering of servicesRevenue from rendering of services is recognized when (1) the amount of revenue can be measuredreliably; (2) it is probable that the associated economic benefits will flow to the enterprise; (3) the stageof completion of the transaction can be determined reliably; and (4) the associated costs incurred or to beincurred can be measured reliably. Revenue from rendering of services is recognized using the percentageof completion method at the balance sheet date. The stage of completion of a transaction for rendering forservices is determined based on the proportion that costs incurred to date bear to the estimated total costsof the transaction.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably,revenue is recognized only to the extent of the costs incurred that will be recoverable, and the costsincurred are recognized as expenses for the period. When it is not probable that the costs incurred will berecovered, revenue is not recognized.
21.3 Construction ContractWhere the outcome of a construction contract can be estimated reliably, contract revenue and costs arerecognized using the percentage of completion method at the balance sheet date.
The stage of completion of a contract is determined using the proportion that completed contract workbears to the estimated total contract work.
Where the outcome of a construction contract cannot be estimated reliably, (1) if contract costs areexpected to be recoverable, contract revenue is recognized to the extent of contract costs that are expectedto be recoverable; and contract costs are recognized as expenses in the period in which they are incurred;(2) if contract costs are not expected to be recoverable, they are recognized as expenses immediatelywhen incurred and contract revenue is not recognized. When the uncertainties that prevented the outcomeof the construction contract from being estimated reliably no longer exist, revenue and expensesassociated with the construction contract are recognized using the percentage of completion method.
If the estimated total contract costs exceed total contract revenue, the expected loss is recognizedimmediately as an expense for the period.
The cumulative costs incurred and cumulative gross profits (or losses) recognized for contracts inprogress and the progress billings are offset and the net amount is presented in the balance sheet. Wherethe aggregate of cumulative costs incurred and cumulative gross profits (or losses) recognized exceed theprogress billings for contracts in progress, the surplus is shown as inventory. Where the progress billingsfor contracts in progress exceed the aggregate of cumulative costs incurred and cumulative gross profits(or losses) recognized, the surplus is shown as receipts in advance.
For participation in public infrastructure construction using the Build-Operate-Transfer (BOT) model, theGroup recognizes revenue and expenses associated with the construction services rendered during theconstruction period in accordance with Accounting Standard for Business Enterprises No.15 –Construction Contracts. When the construction of the public infrastructure is completed, the Grouprecognizes revenue and expenses associated with subsequent operations and services in accordance withAccounting Standard for Business Enterprises No. 14 – Revenue.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
22. Governmental Subsidy
22.1 Judgment basis and Accountant treatment of government subsidy related to assets
The government subsidies for Chongqing Manufacture Base construction and etc. are used forconstructions and forms long-term assets in other ways, and therefore are categorized as governmentsubsidy related to assets.
A government grant related to an asset is recognized as deferred income or writing down book value ofrelated assets. For government grants recognized as deferred income, it should be evenly amortized toprofit or loss over the useful life of the related asset.
22.2 Judgment basis and accountant treatment of government subsidy related to incomeThe Group receives government subsidies including subsidies for Core Electronic Devices, High-endUniversal Chip and Basic Software Product Projects, Value-Added-Tax rebate (VAT rebate), subsidiesfor special projects, and tax refunds, etc., which are not used for constructions and forms long-term assetsin other ways, and therefore are categorized as government subsidy related to income.
For a government grant related to income, if the grant is a compensation for related expenses or losses tobe incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit orloss over the periods in which the related costs or losses are recognized. If the grant is a compensation forrelated expenses or losses already incurred, the grant is recognized immediately in profit or loss for theperiod.
For government subsidies related to the Group’s daily operations shall be booked into other income oroffsetting related expenses; for those not related to the Group’s daily operations, shall be booked intonon-operating income/expense.
23. Deferred Income Tax Assets / Deferred Income Tax Liabilities
The income tax expenses include current income tax and deferred income tax.
23.1. Current Income Tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods aremeasured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
23.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base,or between the nil carrying amount of those items that are not recognized as assets or liabilities and theirtax base that can be determined according to tax laws, deferred tax assets and liabilities are recognizedthrough the balance sheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductibletemporary differences are recognized to the extent that it is probable that taxable profits will be availableagainst which the deductible temporary differences can be utilized. However, for temporary differencesassociated with the initial recognition of goodwill and the initial recognition of an asset or liability arisingfrom a transaction (not a business combination) that affects neither the accounting profit nor taxableprofits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to theextent that it is probable that future taxable profits will be available against which the deductible lossesand tax credits can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments insubsidiaries, except where the Group is able to control the timing of the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future.Deferred tax assets arising from deductible temporary differences associated with such investments areonly recognized to the extent that it is probable that there will be taxable profits against which to utilizethe benefits of the temporary differences and they are expected to reverse in the foreseeable future.
On the balance sheet date, the deferred income tax assets and deferred income tax liabilities are measuredat the applicable tax rates in the period in which the related assets are recovered or the related liabilitiesare recovered in accordance with the tax laws.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except whenthey arise from transactions or events that are directly recognized in other comprehensive income or inshareholders' equity, in which case they are recognized in other comprehensive income or inshareholders' equity; and when they arise from business combinations, in which case they adjust thecarrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is nolonger probable that sufficient taxable profits will be available in the future to allow the benefit ofdeferred tax assets to be utilized. Such reduction in amount is reversed when it becomes probable thatsufficient taxable profits will be available.
23.3 Offset of Income TaxWhen the Group has a legal right to settle on a net basis and intends either to settle on a net basis or torealize the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities areoffset and presented on a net basis.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred taxassets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either thesame taxable entity or different taxable entities which intend either to settle current tax assets andliabilities on a net basis or to realize the assets and liabilities simultaneously, in each future period inwhich significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred taxassets and deferred tax liabilities are offset and presented on a net basis.
24. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risksand rewards of ownership to the lessee. All other leases are classified as operating leases.
24.1 Accounting treatment of operating Lease
24.1.1 The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, andare either included in the cost of related asset or charged to profit or loss for the period. Initial direct costsincurred are charged to profit or loss for the period. Contingent rents are charged to profit or loss in theperiod in which they are actually incurred.
24.1.2 The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the termof the relevant lease. Initial direct costs with more than an insignificant amount are capitalized whenincurred, and are recognized in profit or loss on the same basis as rental income over the lease term.Other initial direct costs with an insignificant amount are charged to profit or loss in the period in whichthey are incurred. Contingent rents are charged to profit or loss in the period in which they actually arise.
24.2. Accounting treatment of the finance lease
24.2.1 The Group as lessee under finance leases
For relevant accounting treatment, refer to Note (III) 13.3 Identification basis, valuation and depreciationmethod of finance lease of fixed assets.
Unrecognized finance charges are recognized as finance charge for the period using the effective interestmethod over the lease term. Contingent rents are credited to profit or loss in the period in which they areactually incurred. The net amount of minimum lease payments less unrecognized finance charges isseparated into long-term liabilities and the portion of long-term liabilities due within one year forpresentation.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
24.2.2 The Group as lessor under finance leases
At the commencement of the lease term, the aggregate of the minimum lease receivable at the inceptionof the lease and the initial direct costs is recognized as a finance lease receivable, and the unguaranteedresidual value is recorded at the same time. The difference between the aggregate of the minimum leasereceivable, the initial direct costs and the unguaranteed residual value, and the aggregate of their presentvalues is recognized as unearned finance income.
Unearned finance income is recognized as finance income for the period using the effective interestmethod over the lease term. Contingent rents are credited to profit or loss in the period in which they areactually incurred.
The net amount of financial lease receivables less unearned finance income is separated into long-termdebts receivable and the portion of long-term debts receivable due within one year for presentation.
25. Repurchase of the Company’s shares
The consideration and transaction costs paid to repurchase the Company’s shares are deducted fromshareholders' equity. No gain or loss is recognized in profit or loss in such repurchase.
26. Important judgments while applying accounting policy, and key assumptions and uncertaintyfactors applied for accounting estimateDuring the process of using accounting policy described in note (III), due to the uncertainty in operationactivities, the group should judge, estimate and assume the book value of the report items which may notbe metered reliably. These judgments, estimates and assumptions are based on the historical experience ofthe Group's management and other related factors. Differences may exist between the actual results andthe Group’s estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis ofcontinuous operation. If the changes of accounting estimate only influence current period, the influenceamount will be affirmed during the changing period; if it influences the current period and subsequentperiods, the influence amount 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 for performing accounting estimates on bookvalue of assets and liabilities in subsequent future periods are:
Impairment of the fixed assets
At the balance sheet date, the Group will review whether fixed assets have signs that impairment is likelyto occur. When the signs indicate that the carrying amount cannot be repurchased, then the impairment
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
test shall be implemented. The impairment occurred when the book value of asset or asset group is higherthan the recoverable amount, which is the net amount of fair value minus the disposal expenses or thepresent value of expected future cash flow (whichever is higher). The net amount of fair value minusdisposal expenses is determined by deducting the incremental cost which directly belongs to the assetsdisposal referring to the price of sales agreement of similar assets in fair transaction or the observablemarket price. When predicting present value of future cash flows, management team must estimate thepredicted future cash flows of the said asset or asset portfolio, and shall select proper discount rate toconfirm the present value of future cash flows. Based on the above procedure, the Group's managementteam deems that it is not necessary to withdraw provision of fixed assets impairment.
Useful life and predicted net residual value of fixed asset
The Group's estimation of fixed assets useful life is based on the historical experience of actual usableterm of fixed assets with similar properties and functions, the estimation of predicted net residual value isthe amount obtained currently by the Group from the assets after deducting the anticipated disposalexpense based on the anticipated status assuming the conditions that fixed assets' predicted useful lifeexpires and fixed assets are at the end of useful life. The Group shall conduct the review on the predictedservice life and predicted net residual value of fixed assets at least annually. For the current reportingperiod, the Group's management did not see signs either indicating a shortened or extended useful life ofthe Group’s fixed asset or indicating a change in predicted net residual value.
Impairment of accounts receivables
When there is a clear evidence to make the accounts receivables collection in doubt, then the Group willcalculate and withdraw the impairment provision to the accounts receivables. Because the Group'smanagement needs to judge the historic conditions of receivable collection, aging, debtor's financialcondition and overall economic environment when considering the impairment provision, there areuncertainties related to the calculation of impairment provision. Although there is no reason to believethat the estimation applied when calculating the impairment provision of accounts receivables will havesignificant changes in the future, the book value and impairment loss of accounts receivables will changewhen the future actual result is different from the anticipated and original estimations.
Accrued liabilities of product quality warranty
Accrued liabilities of product quality assurance are an estimation made by the Group according to thepredicted repair and replacement cost of relevant products. The estimation considers the product claimrate trend, historic defect rate, industry practice and other major estimations. The management deems thatthe current estimation on accrued liabilities of product quality warranty is reasonable, however, the Groupwill continue to review the conditions of product repairs, and will conduct adjustment if any signindicating the need to make adjustments on accounting estimates.
Impairment provision for inventories
Inventories are measured at the lower of cost and net realizable value. The Group will regularly conduct acomprehensive stocktaking to review the impairment circumstances on outmoded and dull inventory if
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
any; in addition, the Group's management will regularly review the impairment circumstance of inventorywith long storage time according to the inventory aging list. The review procedure includes thecomparison between carrying value of outmoded, dull inventory and inventory with long storage time andits corresponding net realizable value in order to determine whether to withdraw provisions on theoutmoded, dull inventory and inventory with long storage time. Based on the above procedure, theGroup's management deems that the full provision amounts have been withdrawn for the outmoded, dullinventory and inventory with long storage time
Assets from deferred income tax
The realization of deferred income tax assets mainly depends on the actual future profits and the effectivetax rate of temporary difference in the future applicable years. If the actual profit in the future is less thanthe estimation, or actual tax rate is lower than the estimation, then the confirmed deferred income taxassets will be reversed and confirmed in the income statement during the corresponding period. If theactual profit in the future is more than the estimation, or actual tax rate is higher than the estimation, thenthe corresponding deferred income tax assets will be adjusted and confirmed in the income statementduring the corresponding period.
Long-term equity investment impairment
The Group judges whether there is any possibility of impairment of long-term equity investments on thebalance sheet date. When there is an indication that the carrying amount is not recoverable, theimpairment test is carried out, and the impairment provision is measured at the lower of the carryingamount and the recoverable amount. The recoverable amount of an asset or asset group is determined bythe higher of the fair value of the asset or asset group less the disposal expense and the present value ofthe estimated future cash flows of the asset or asset group. When estimating the present value of futurecash flows, management needs to estimate the future cash flows of the asset or asset group and select anappropriate discount rate to determine the present value of future cash flows. When calculating the netamount for the fair value less disposal costs to sell, the fair value is the price that the market participantcan receive when selling an asset in an orderly transaction that occurs on the measurement date. If thereassessed recoverable amount is lower than the current estimate, the difference will affect the book valueof the asset during the change.
Goodwill impairment
When performing impairment test on goodwill, the predicted present value of future cash flow of relevantasset group or asset group portfolio included the goodwill need to be calculated, the future cash flow ofrelevant asset group or asset group portfolio need to be estimated, and the proper pretax rate that fairlyreflects the current market time value of money and specific asset risk need to be determined. When thefuture actual result is different from the original estimation, the goodwill impairment loss will alter.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
27. Significant alternation in accounting policy and accounting estimations
| Changes in accounting policies and reasons | Approval Procedures | Notes |
| The Group has implemented the Notice on Amending the 2018 Annual Financial Statements of General Enterprises issued by the Ministry of Finance on June 15th 2018 starting from the preparation of the 2018 financial statements (Accounting Council (2018) No. 15, hereinafter referred to as Financial Accounting No. 15 Document). The Financial Accounting No. 15 Document revised the presentation items on the balance sheet and the income statement, and added new items such as “receivable notes and accounts receivable”, “payable notes and accounts payable” and “research and development expenses”; revised contents of line items such as "other receivables", "fixed assets", "construction in progress", "other payables" and "long-term payables" and "management expenses"; reduced line items such as "receivable notes", “accounts receivable”, “dividends receivable”, “interests receivable”, “fixed assets clearance”, “engineering materials”, “payable notes”, “accounts payable”, “interest payable”, “dividends payable” and the "special payables"; Under the “Financial Expenses” item, the “Including: Interest Expenses” and “Interest Income” lines were added to report, and the presentation position of some items in the income statement were adjusted. For the above-mentioned changes in the listed items, the company adopted the retrospective adjustment method for accounting treatment, and made retrospective adjustments to the comparative data of the previous year. | Such alternations in accounting policy were approved by the Group at board of director general meeting. | None |
IV. Taxes1. Major categories of taxes and tax rates
| Category of tax | Basis of tax computation | Tax rate |
| Enterprise income tax | Taxable income | 25% (Note 1) |
| VAT | For the taxable product sales revenue or taxable labor revenue, the Company and its domestic subsidiaries are ordinary Value-added Tax payers; the VAT payable is the balance of input tax after deducting the deductible output tax. | 6%, 10%, 11%, 16%, 17% and simple collection rate of 3% (Note 2) |
| City maintenance and construction tax | Actual payable turnover tax | 7% |
| Education surcharges | Actual payable turnover tax | 3% |
| Local education surcharges | Actual payable turnover tax | 2% |
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, theoverseas subsidiaries are applicable to corresponding local tax rate.
(1) In accordance with the Letter of Reply on Publishing the List of First Batch of identified High-tech
Enterprises of Zhejiang Province in 2017 (GuoKeHuoZi [2017] No. 201) issued by the leading groupoffice of Zhejiang high-tech enterprise identification management work on December 15
th
2017, theCompany was identified as the high-tech enterprise with a valid term of 3 years, from 2017 to 2019.Therefore, the Company’s enterprise income tax rate is 15% for the current reporting period.According to the Notice on Printing and Distributing the List of Key Software Enterprises and ICDesign Enterprises in the National Planning Layout for 2013-2014 (Development and Reform HighTechnology [2013] No. 2458), in 2013, the Company was recognized as a national key software
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
company. According to the Notice on Issues Related to Enterprise Income Tax Preferential Policiesfor Software and Integrated Circuit Industry (Finance and Tax [2016] No. 49), the Company wasapproved by the tax authorities in August 2018 to pay the 2017 annual corporate income tax at therate of 10%. As of the approval date of this report, the Company's 2018 income tax concessions havenot been filed; therefore, the Company's 2018 corporate income tax is still paid at the rate of 15%.
(2) In accordance with the Letter of Reply on Publishing the Registration of First Batch of High-Tech
Enterprises of Zhejiang Province in 2016 (GuoKeHuoZi [2016] No. 149) issued by leading groupoffice of Zhejiang high-tech enterprise identification management work on December 9
th
2016, thewholly-owned subsidiary, Hangzhou Hikvision System Technology Co., Ltd. (Hangzhou SystemTechnology) was identified as the high-tech enterprise with a valid term of 3 years, from 2016 to 2018,the enterprise income tax in the current reporting period shall be calculated and paid according to taxrate of 15%.
(3) According to the Notice on Publishing the List of Second Batch of proposed identified High-tech
Enterprises of Shanghai in 2017 issued by Shanghai high-tech enterprise identification office, theCompany’s wholly-owned subsidiary, Shanghai Goldway Intelligent Traffic System Co., Ltd.(Shanghai Goldway) was identified as the high-tech enterprise with a valid term of 3 years, from 2017to 2019, the enterprise income tax in the current reporting period shall be calculated and paidaccording to tax rate of 15%.
(4) In accordance with the Replies on Publishing the List of First Batch of identified High-tech
Enterprises of Zhejiang Province in 2017 (GuoKeHuoZi [2017] No. 201) issued by the leading groupoffice of Zhejiang high-tech enterprise identification management work on December 15
th
2017, theCompany’s joint-venture subsidiary, Hangzhou HIK Robotic Technology Co., Ltd. (HangzhouRobotic Technology) were identified as the high-tech enterprises with a valid term of 3 years, from2017 to 2019. Therefore, the enterprise income tax in the current reporting period shall be calculatedand paid according to tax rate of 15%.
(5) In accordance with the Replies on Publishing the List of First Batch of identified High-tech
Enterprises of Zhejiang Province in 2017 (GuoKeHuoZi [2017] No. 201) issued by the leading groupoffice of Zhejiang high-tech enterprise identification management work on December 15
th
2017,Hangzhou EZVIZ Network Co., Ltd. (Hangzhou EZVIZ), a joint venture subsidiary of the Company,was recognized as a high-tech enterprise and was valid for 3 years from 2017 to 2019. This year,Hangzhou EZVIZ Company has separated the sales and R&D functions and did not meet thehigh-tech enterprise certification. Therefore, the corporate income tax is paid at the rate of 25% thisyear.
(6) In accordance with Finance and Taxation [2011] No. 58 Document of Ministry of Finance, State
Administration of Taxation (SAT) and General Administration of Customs, the wholly-ownedsubsidiaries, Chongqing Hikvision Science and Technology Co., Ltd. and Chongqing HikvisionSystem Technology Co., Ltd., are qualified to enjoy the west development preferential tax policyfrom 2011 to 2020, therefore, the enterprise income rate shall be calculated and paid on the basis of15% in the current reporting period.
(7) In accordance with the Replies on Publishing the List of First Batch of identified High-tech
Enterprises of Zhejiang Province in 2018 (GuoKeHuoZi [2019] No. 70) issued by the leading group
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
office of Zhejiang high-tech enterprise identification management work on February 20
th
2019, theCompany’s joint venture subsidiary, Hangzhou Fuyang Baotai Security Technology Service Co., Ltd.(Fuyang Baotai), was recognized as a high-tech enterprise and was valid for 3 years from 2018 to2020. Therefore, this year's corporate income tax is reduced at a rate of 15%.
Note 2: In accordance with the Notice on Software Product Value-added Tax Policy (Finance andTaxation [2011] No. 100) of Ministry of Finance and State Administration of Taxation (SAT), as for theself-developed software product sales of the Company and the Company’s wholly-owned subsidiariessuch as Shanghai Goldway, Hangzhou System, Beijing Brainaire Storage Technology Ltd., as well as theCompany’s joint-venture subsidiaries such as Wuhan HIK Storage Technology Ltd. (Wuhan Storage),Hangzhou EZVIZ Software Ltd. (EZVIZ Software), Hangzhou HIK Automotive Software Ltd.(Automotive Software), Hangzhou HIK Huiying Technology Ltd. (Huiying), and Hangzhou RoboticTechnology, and Hangzhou HIK Automotive Technology Ltd. (Hangzhou Auto Technology), the VATshall be calculated and paid with tax rate of 17% at first, then the portion with actual tax bearing excess 3%shall be refunded after SAT reviews.
Note 3: According to Finance and Tax [2018] No. 32, since May 1
st
2018, taxpayers are subject to VATtaxable sales or imported goods, and the VAT rate is adjusted from 17%, 11% and 6% to 16%, 10% and 6%respectively.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
| Closing Balance | Opening Balance | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Cash： | ||||||
| RMB | - | - | 79,737.43 | - | - | 130,403.91 |
| USD | 24,087.34 | 6.8632 | 165,316.26 | 35,098.97 | 6.5342 | 229,343.66 |
| EUR | 9,765.86 | 7.8473 | 76,635.60 | 15,918.33 | 7.8023 | 124,199.58 |
| GBP | 8,927.97 | 8.6762 | 77,460.86 | 7,396.17 | 8.7792 | 64,932.46 |
| ZAR | 17,034.95 | 0.4735 | 8,066.05 | 19,530.51 | 0.5277 | 10,306.25 |
| INR | 2,000,830.71 | 0.0980 | 196,081.41 | 1,222,954.96 | 0.1019 | 124,619.11 |
| RUB | 13,899.49 | 0.0986 | 1,370.49 | 22,805.81 | 0.1135 | 2,588.46 |
| AED | 585.76 | 1.8688 | 1,094.68 | 35,070.03 | 1.7790 | 62,389.59 |
| HKD | 697.90 | 0.8762 | 611.50 | 3,072.66 | 0.8359 | 2,568.44 |
| BRL | 8,697.30 | 1.7569 | 15,280.29 | 9,297.27 | 1.9641 | 18,260.77 |
| Bank balance： | ||||||
| RMB | - | - | 20,217,862,141.55 | - | - | 10,082,944,463.42 |
| USD | 707,524,091.98 | 6.8632 | 4,855,879,348.05 | 822,098,082.75 | 6.5342 | 5,371,753,292.29 |
| EUR | 51,833,430.49 | 7.8473 | 406,752,479.11 | 36,681,727.64 | 7.8023 | 286,201,843.60 |
| GBP | 4,918,810.45 | 8.6762 | 42,676,583.25 | 1,171,110.92 | 8.7792 | 10,281,416.98 |
| JPY | 407.98 | 0.0619 | 25.25 | 408.00 | 0.0579 | 23.62 |
| ZAR | 22,340,466.04 | 0.4735 | 10,578,210.66 | 11,105,021.55 | 0.5277 | 5,860,119.88 |
| INR | 3,438,377,221.94 | 0.0980 | 336,960,967.75 | 1,604,304,664.42 | 0.1019 | 163,478,645.31 |
| RUB | 534,613,774.24 | 0.0986 | 52,712,918.14 | 431,796,810.54 | 0.1135 | 49,008,937.99 |
| HKD | 1,837,365.44 | 0.8762 | 1,609,899.60 | 147,865.08 | 0.8359 | 123,600.42 |
| AUD | 1,821,443.30 | 4.8250 | 8,788,463.91 | 1,110,556.92 | 5.0928 | 5,655,844.28 |
| AED | 7,944,928.08 | 1.8688 | 14,847,550.81 | 5,099,038.05 | 1.7790 | 9,071,188.69 |
| BRL | 8,376,095.19 | 1.7569 | 14,715,961.64 | 4,579,468.83 | 1.9641 | 8,994,534.73 |
| SGD | 102,603.21 | 5.0062 | 513,652.19 | 35,788.26 | 4.8831 | 174,757.65 |
| PLN | 489,691.46 | 1.8269 | 894,617.32 | 338,408.19 | 1.8680 | 632,146.48 |
| KRW | 845,397,940.00 | 0.0061 | 5,178,062.38 | 461,310,471.00 | 0.0061 | 2,818,145.67 |
| CAD | 828,274.50 | 5.0381 | 4,172,929.76 | 824,149.98 | 5.2009 | 4,286,321.63 |
| KZT | 25,306,904.92 | 0.0183 | 463,116.36 | 43,256,830.49 | 0.0195 | 843,508.19 |
| COP | 441,460,035.46 | 0.0021 | 921,371.24 | 150,707,765.53 | 0.0022 | 328,799.13 |
| TRY | 371.19 | 1.2962 | 481.14 | 46,834.84 | 1.7291 | 80,982.11 |
| THB | 13,527,107.82 | 0.2110 | 2,854,219.75 | 4,267,411.59 | 0.1998 | 852,750.61 |
| HUF | 2,372,916.62 | 0.0244 | 57,888.25 | 57,206,835.37 | 0.0250 | 1,430,205.20 |
| NZD | 77,267.45 | 4.5954 | 355,074.84 | 106,049.60 | 4.6327 | 491,295.98 |
| CZK | 245,451.93 | 0.3029 | 74,347.39 | 1,701,256.64 | 0.3057 | 520,074.15 |
| KES | 923,936.07 | 0.0671 | 61,996.11 | 23,771,784.15 | 0.0630 | 1,497,622.40 |
| UZS | 330,724,362.57 | 0.0008 | 271,094.76 | 260,975,830.78 | 0.0008 | 208,597.98 |
| IDR | 4,324,868,647.85 | 0.0005 | 2,037,445.62 | - | - | - |
| MYR | 337,537.88 | 1.6479 | 556,228.67 | - | - | - |
| PHP | 7,098,709.59 | 0.1304 | 925,671.73 | - | - | - |
| VND | 2,400,000,000.00 | 0.0003 | 706,800.00 | - | - | - |
| QAR | 92,830.45 | 1.8378 | 170,603.80 | - | - | - |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
| Closing Balance | Opening Balance | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Other currency funds: | ||||||
| RMB | - | - | 530,958,544.17 | - | - | 459,284,934.33 |
| USD | 5,130,938.50 | 6.8632 | 35,214,593.87 | 7,768.39 | 6.5342 | 50,760.21 |
| EUR | 140,937.52 | 7.8473 | 1,105,979.01 | 100,775.09 | 7.8023 | 786,277.48 |
| BRL | 498,949.67 | 1.7569 | 876,604.67 | - | - | - |
| INR | 119,281.00 | 0.0980 | 11,689.54 | - | - | - |
| ZAF | 28,499.20 | 0.4735 | 13,494.37 | - | - | - |
| Total | 26,552,402,711.23 | 16,468,430,702.64 | ||||
| including: deposited in overseas banks | 1,071,979,704.80 | 788,391,050.26 | ||||
Details of other currency funds:
| Closing Balance | Opening Balance | |||||
| Item | Foreign currency amount | Exchange rate for conversion | RMB amount | Foreign currency amount | Exchange rate for conversion | RMB amount |
| Capitals with limitations： | ||||||
| Deposits for letter of Credit in RMB | - | - | 60,199,342.63 | - | - | - |
| Bank acceptance bill | - | - | 52,522,279.43 | - | - | 204,607,890.97 |
| Deposits for letter of guarantee | - | - | 41,428,996.22 | - | - | 20,379,624.20 |
| Deposits for letter of Credit in EUR | 137,209.86 | 7.8473 | 1,076,726.94 | 74,056.26 | 7.8023 | 577,809.16 |
| Deposits for letter of Credit in BRL | 498,949.67 | 1.7569 | 876,604.67 | - | - | - |
| Deposits for letter of Credit in USD | 5,133.88 | 6.8632 | 35,234.78 | 5,133.72 | 6.5342 | 33,544.74 |
| Tax Operation Margin for India | 119,281.00 | 0.0980 | 11,689.54 | - | - | - |
| Other security deposit | - | - | 504,195.08 | - | - | 502,664.40 |
| Deposits pledged for long-term borrowing | - | - | - | - | - | 35,000,000.00 |
| Other capitals with limitations | - | - | 372,008,649.75 | - | - | 178,143,900.00 |
| Subtotal | 528,663,719.04 | 439,245,433.47 | ||||
| Capitals without limitations: | ||||||
| Other currency funds in USD | 5,127,923.38 | 6.8632 | 35,193,900.56 | 2,634.67 | 6.5342 | 17,215.47 |
| Deposit in Alipay, Tenpay, etc. | - | - | 4,280,539.59 | - | - | 20,650,854.76 |
| Other currency funds in EUR | 3,727.66 | 7.8473 | 29,252.07 | 26,718.83 | 7.8023 | 208,468.32 |
| Other currency funds in ZAR | 28,499.20 | 0.4735 | 13,494.37 | - | - | - |
| Subtotal | 39,517,186.59 | 20,876,538.55 | ||||
| Total | 568,180,905.63 | 460,121,972.02 | ||||
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
2. Financial assets valued at fair value through profit and loss
Unit: RMB
| Item | Closing Balance | Opening Balance |
| Held-for-trading financial assets | 1,860,050.59 | 4,100,657.54 |
| including: derivative financial assets | 1,860,050.59 | 4,100,657.54 |
| Total | 1,860,050.59 | 4,100,657.54 |
Derivative financial assets includes forwards, foreign exchange option contract and interest rate swap contracts, notdesignated as a hedging instrument, gains or losses due to changes in fair value is directly included in the current periodprofits and losses.
3. Notes receivable & Accounts receivable
3.1 Categories of notes receivable & accounts receivable
Unit：RMB
| Category | Closing Balance | Opening Balance |
| Notes receivable | 2,569,445,189.92 | 3,636,961,616.03 |
| Accounts receivable | 16,619,441,281.18 | 14,705,210,072.81 |
| Total | 19,188,886,471.10 | 18,342,171,688.84 |
3.2 Notes receivable(1) Categories of notes receivable
Unit：RMB
| Category | Closing Balance | Opening Balance |
| Bank acceptance bill | 2,273,846,399.85 | 3,513,890,558.68 |
| Commercial acceptance bill | 295,598,790.07 | 123,071,057.35 |
| Total | 2,569,445,189.92 | 3,636,961,616.03 |
(2) Notes receivable pledged by the Group at the closing of the reporting period
Unit：RMB
| Category | Pledged amount by December 31st 2018 |
| Bank acceptance bill | 412,061,782.74 |
| Commercial acceptance bill | - |
| Total | 412,061,782.74 |
(3) Notes receivable discounted or endorsed by the Group at the closing of the reporting period
Unit：RMB
| Category | Derecognized amount by December 31st 2018 (Note) | Not Derecognized amount by December 31st 2018 |
| Bank acceptance bill | 2,370,887,528.74 | - |
| Commercial acceptance bill | 32,316,962.85 | 94,097,879.36 |
| Total | 2,403,204,491.59 | 94,097,879.36 |
Note：Because the main risks related to such bank acceptance bill, such as interest rate risk, has been transferred to bankor others, therefore, those discounted and endorsed bank acceptance bills have been derecognized by the Group.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(4) As of December 31
st
2018, the Group transferred the defaulted notes receivable into accounts receivable.
Unit：RMB
| Category | Amounts transferred into accounts receivable by December 31st 2018 |
| Bank acceptance bill | 207,600,000.00 |
| Commercial acceptance bill | - |
| Total | 207,600,000.00 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
3.3 Accounts Receivable
(1) Disclosure of accounts receivable by categories
Unit: RMB
| Category | Closing Balance | Beginning Balance | ||||||||
| Carrying amount | Bad debt provision | Carrying Value | Carrying amount | Bad debt provision | Carrying Value | |||||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | 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 basis for credit risk | 17,878,831,244.30 | 100.00 | 1,259,389,963.12 | 7.04 | 16,619,441,281.18 | 15,839,958,044.79 | 100.00 | 1,134,747,971.98 | 7.16 | 14,705,210,072.81 |
| Accounts receivable that are not individually significant but for which bad debt provision has been assessed individually | - | - | - | - | - | - | - | - | - | - |
| Total | 17,878,831,244.30 | 100.00 | 1,259,389,963.12 | 7.04 | 16,619,441,281.18 | 15,839,958,044.79 | 100.00 | 1,134,747,971.98 | 7.16 | 14,705,210,072.81 |
Note: The Group categorizes a single account receivable in an amount above RMB 4 million and representing more than 10% of the total accounts receivable closing balance asaccounts receivable that is individually significant.
In the portfolio, bad debt provision of accounts receivable by aging analysis:
Unit: RMB
| Aging | Closing Balance | ||
| Carrying amount | Bad debt provision | Proportion (%) | |
| Within 1 year | 15,987,369,870.28 | 799,368,493.51 | 5.00 |
| 1-2 years | 1,146,177,216.01 | 114,617,721.60 | 10.00 |
| 2-3 years | 417,396,769.58 | 125,219,030.87 | 30.00 |
| 3-4 years | 194,009,612.97 | 97,004,806.49 | 50.00 |
| 4-5 years | 53,489,324.04 | 42,791,459.23 | 80.00 |
| Over 5 years | 80,388,451.42 | 80,388,451.42 | 100.00 |
| Subtotal | 17,878,831,244.30 | 1,259,389,963.12 | 7.04 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Provision, re-collection, or reverse of the bad debt allowance in the current reporting period
In the current reporting period, the Company recorded a bad debt allowance of RMB 131,669,945.21, bad debtallowance balance increased for RMB 6,296,818.63 due to conversion of financial reports prepared in foreign currency.No reversal of bad debts during the year.
(3) Actual write-off of account receivable during current reporting period
In the current reporting period, the amount of accounts receivable write-off is RMB 13,324,772.70.
(4) Top five debtors based on corresponding closing balance of account receivables
Unit: RMB
| Name of the Party | Relationship with the Company | Book balance of accounts receivable | Closing balance for bad debt provision | Proportion (%) |
| Related party A | Related Party | 545,951,381.97 | 28,351,499.31 | 3.05 |
| Company A | Third party | 174,862,609.67 | 8,743,130.48 | 0.98 |
| Company B | Third party | 138,877,590.52 | 8,136,252.19 | 0.78 |
| Company C | Third party | 105,757,148.26 | 5,287,857.41 | 0.59 |
| Company D | Third party | 90,662,456.71 | 4,533,122.84 | 0.51 |
| Total | 1,056,111,187.13 | 55,051,862.23 | 5.91 |
(5) As of December 31
st
2018, there is no termination of accounts receivable booking due to transfer of a financial asset.
(6) As of December 31
st
2018, the Group has no assets/liabilities booked due to transferred accounts receivable that theGroup still keep recourse or retain part of the corresponding rights or interests.
4. Prepayments
(1) Prepayments by aging analysis
Unit: RMB
| Aging | Closing Balance | Opening Balance | ||
| Carrying amount | Proportion (%) | Carrying amount | Proportion (%) | |
| Within 1 year | 371,339,135.76 | 80.67 | 481,603,579.15 | 91.29 |
| 1-2 years | 87,446,891.75 | 19.00 | 38,258,814.47 | 7.25 |
| 2-3 years | 1,219,965.56 | 0.27 | 7,480,653.49 | 1.42 |
| Over 3 years | 298,226.58 | 0.06 | 233,810.00 | 0.04 |
| Total | 460,304,219.65 | 100.00 | 527,576,857.11 | 100.00 |
(2) Closing balances of top five prepayments partiesAs of December 31
st
2018, the Group’s top five balances of prepayments amounted to RMB 160,994,485.73, accountingfor 34.98% of total closing balance of prepayments.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
5. Other receivables
(1) Disclosure of other receivables by categories
Unit: RMB
| Category | Closing Balance | Opening Balance | ||||||||
| Carrying amount | Bad debt provision | Carrying Value | Carrying amount | Bad debt provision | Carrying Value | |||||
| Amount | Proportion (%) | Amount | Proportion (%) | Amount | Amount | Proportion (%) | Amount | Proportion (%) | Amount | |
| 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 basis for credit risk | 656,516,001.11 | 100.00 | 69,767,735.90 | 10.63 | 586,748,265.21 | 641,690,488.45 | 100.00 | 58,009,247.64 | 9.04 | 583,681,240.81 |
| Other receivables that are not individually significant but for which bad debt provision has been assessed individually | - | - | - | - | - | - | - | - | - | - |
| Total | 656,516,001.11 | 100.00 | 69,767,735.90 | 10.63 | 586,748,265.21 | 641,690,488.45 | 100.00 | 58,009,247.64 | 9.04 | 583,681,240.81 |
Note: The group categorizes other receivables above RMB 4 million and accounts for more than 10% of the total other receivables closing balance as other receivable that isindividually significant.
In the portfolio, bad debt provision of other receivables by aging analysis
Unit: RMB
| Aging | Closing Balance | ||
| Carrying amount | Bad debt provision | Proportion (%) | |
| Within 1 year | 361,469,319.94 | 18,073,466.44 | 5.00 |
| 1-2 years | 217,350,403.34 | 21,735,040.33 | 10.00 |
| 2-3 years | 51,754,285.72 | 15,526,285.72 | 30.00 |
| 3-4 years | 21,211,001.97 | 10,605,500.99 | 50.00 |
| 4-5 years | 4,517,736.72 | 3,614,189.00 | 80.00 |
| Over 5 years | 213,253.42 | 213,253.42 | 100.00 |
| Total | 656,516,001.11 | 69,767,735.90 | 10.63 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Provision, re-collection, or reverse of the bad debt allowance in the current reporting periodDuring the reporting period, the Company recorded a bad debt allowance of RMB 21,082,073.23; bad debt allowance amount increased by RMB 2,261,415.03 due to conversionof financial statements prepared in foreign currency; there is no such case as recollected or reversed bad debt allowance.(3) Actual write-off of other receivables during current reporting periodIn the current reporting period, the actual write-off of other receivables is RMB 11,585,000.00.(4) Nature of other receivables
Unit: RMB
| Nature of other receivables | Closing balance | Opening balance |
| Other receivables for interim payments | 354,225,077.10 | 365,413,004.37 |
| Guarantee deposits | 185,672,767.89 | 199,237,401.53 |
| Tax rebates for export | 30,189,439.56 | 28,195,951.27 |
| Acquisition of asset group | - | 19,053,271.93 |
| Investment intention fund | 20,000,000.00 | 13,500,000.00 |
| Others | 66,428,716.56 | 16,290,859.35 |
| Total | 656,516,001.11 | 641,690,488.45 |
(5) Top five debtors based on corresponding closing balance of other receivables
Unit: RMB
| Entities | Nature | Carrying amount | Aging | Proportion of total (%) | Bad debt Provision |
| Tax authorities | Tax rebates | 30,000,000.00 | Within 1 year | 4.57 | 1,500,000.00 |
| The company E | Intentional payments for investment | 20,000,000.00 | Within 1 year | 3.05 | 1,000,000.00 |
| Hangzhou customs of the People's Republic of China. | Guarantee deposits | 9,444,600.00 | Within 2 year | 1.44 | 550,635.00 |
| The company F | Guarantee deposits | 9,064,435.00 | Within 2 year | 1.38 | 556,905.75 |
| The company G | Temporary payments for receivables | 8,096,878.80 | Within 1 year | 1.23 | 404,843.94 |
| Total | 76,605,913.80 | 11.67 | 4,012,384.69 |
(6) As of December 31
st
2018, the Group does not have other receivables related to government subsidies.
(7) As of December 31
st
2018, there is no termination of other receivables booking due to transfer of a financial asset.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(8) As of December 31
st
2018, the Group has no assets/liabilities booked due to any transferred other receivable that the Group still keep recourse or retain part of thecorresponding rights or interests.
6. Inventories
(1) Categories of inventories
Unit: RMB
| Category | Closing Balance | Opening Balance | ||||
| Carrying amount | Provision for decline in value of inventories | Carrying value | Carrying amount | Provision for decline in value of inventories | Carrying value | |
| Raw materials | 1,558,519,309.65 | 4,736,249.82 | 1,553,783,059.83 | 1,279,086,935.83 | 4,092,497.08 | 1,274,994,438.75 |
| Work-in-progress | 415,593,344.57 | - | 415,593,344.57 | 196,583,804.97 | - | 196,583,804.97 |
| Finished goods | 3,868,735,444.19 | 316,870,213.78 | 3,551,865,230.41 | 3,598,361,044.81 | 190,211,526.56 | 3,408,149,518.25 |
| Completed but unsettled assets formed by construction contracts | 203,862,518.60 | - | 203,862,518.60 | 60,604,549.68 | - | 60,604,549.68 |
| Total | 6,046,710,617.01 | 321,606,463.60 | 5,725,104,153.41 | 5,134,636,335.29 | 194,304,023.64 | 4,940,332,311.65 |
(2) Provision for decline in value of inventories
Unit: RMB
| Category | Opening balance | Increase in the current period | Decrease in the current period | Effect of foreign currency exchange difference | Closing Balance | |
| Reversals | write-offs | |||||
| Raw materials | 4,092,497.08 | 2,542,286.05 | - | 1,898,533.31 | - | 4,736,249.82 |
| Finished goods | 190,211,526.56 | 228,959,145.12 | - | 107,143,721.89 | 4,843,263.99 | 316,870,213.78 |
| Subtotal | 194,304,023.64 | 231,501,431.17 | - | 109,042,255.20 | 4,843,263.99 | 321,606,463.60 |
Net realizable value of inventory is calculated based on estimated selling price less all estimated cost of completion, estimated sales expenses, and related tax fees. The write-offs ofprovision for inventories in the current reporting period are due to use or sale of inventories.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(3) Completed but unsettled assets formed by construction contracts at the end of December 31
st
2018.
Unit: RMB
| Item | Amount |
| Accumulated occurred costs of construction | 3,951,469,639.19 |
| Accumulated booked gross profit margin | 262,224,571.96 |
| Less: estimated losses | - |
| Settled amounts | 2,756,423,950.27 |
| Completed but unsettled assets formed by construction contracts | 1,457,270,260.88 |
| Including: other non-current assets (Note (V) 17) | 1,253,407,742.28 |
| Inventories | 203,862,518.60 |
7. Non-current assets due within one year
Unit: RMB
| Item | Closing Balance | Opening Balance |
| Long-term receivables due within one year (Note (V) 10) | 380,795,020.47 | 66,566,230.12 |
| Total | 380,795,020.47 | 66,566,230.12 |
8. Other current assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Principal-guaranteed bank finance products | - | 3,390,000,000.00 |
| Deductible VAT input | 608,132,453.24 | 286,332,435.43 |
| Withhold and remit individual income tax | 71,402,966.15 | - |
| Prepaid corporate income tax | 31,542,797.57 | 42,645,678.02 |
| Prepaid tariff | 12,880,594.90 | - |
| Others | 6,724,001.28 | 1,471,419.43 |
| Total | 730,682,813.14 | 3,720,449,532.88 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
9. Available-for-sale financial assets
(1) Available-for-sale financial assets
Unit: RMB
| Item | Closing Balance | Opening Balance | ||||
| Carrying amount | Provision for decline in value | Carrying Value | Carrying amount | Provision for decline in value | Carrying Value | |
| Available-for-sale equity instruments | 290,966,813.00 | - | 290,966,813.00 | 287,466,813.00 | - | 287,466,813.00 |
| Measured by cost method | 290,966,813.00 | - | 290,966,813.00 | 287,466,813.00 | - | 287,466,813.00 |
| Total | 290,966,813.00 | - | 290,966,813.00 | 287,466,813.00 | - | 287,466,813.00 |
(2) Closing balance of available-for-sale financial assets by cost method
Unit: RMB
| The invested entity (Note 1) | Carrying Balance | Provision for decline in value | Proportion of shareholding in the invested entity (%) | Cash dividend in the current reporting period | ||||||
| Opening balance | Increase | Decrease | Closing balance | Opening balance | Increase | Decrease | Closing balance | |||
| Zhejiang Tuxun Technology Co., Ltd. | 32,430,800.00 | - | - | 32,430,800.00 | - | - | - | - | 8.1318 | - |
| Hangzhou Confirmware Technology Co., Ltd. | 26,629,200.00 | - | - | 26,629,200.00 | - | - | - | - | 9.5238 | - |
| Nanwang Information Industry Group Ltd. | 604,313.00 | - | - | 604,313.00 | - | - | - | - | 0.2518 | - |
| Hangzhou Hikvision Equity Investment Partnership (Limited Partnership) | 10,000.00 | - | - | 10,000.00 | - | - | - | - | 0.0017 | - |
| CETC Finance Ltd. (Note 2) | 227,792,500.00 | - | - | 227,792,500.00 | - | - | - | - | 3.8300 | 12,256,000.00 |
| Zhengzhou Guokong Smart City Technology Ltd. | - | 3,500,000.00 | - | 3,500,000.00 | - | - | - | - | 7.0000 | - |
| Total | 287,466,813.00 | 3,500,000.00 | - | 290,966,813.00 | - | - | - | - | - | 12,256,000.00 |
Note1： The Group’s equity investments listed are all non-listed companies; and the Group has no control, joint control or significant influence on the invested entities.Note2： CETC Finance Co., Ltd is one of the companies held under CETC, which is the Company’s ultimate controlling shareholder.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
10. Long-term receivables(1) Details of long-term receivables
Unit: RMB
| Item | Closing balance | Opening balance | Range of discount rate | ||||
| Carrying amount | Provision for decline in value | Carrying value | Carrying amount | Provision for decline in value | Carrying value | ||
| Financial leases receivables | 100,574,420.65 | - | 100,574,420.65 | 89,941,910.73 | - | 89,941,910.73 | 0.54% ~ 6.05% |
| Including: Unrealized income from financing | 4,218,121.83 | - | 4,218,121.83 | 2,516,655.49 | - | 2,516,655.49 | - |
| Installments for selling goods | 985,732,967.99 | - | 985,732,967.99 | - | - | - | 4.24% ~ 6.45% |
| Including: Unrealized income from financing | 167,871,990.88 | 167,871,990.88 | - | ||||
| Less: Non-current assets due within one year (Note (V) 7) | 380,795,020.47 | - | 380,795,020.47 | 66,566,230.12 | - | 66,566,230.12 | - |
| Total | 705,512,368.17 | - | 705,512,368.17 | 23,375,680.61 | - | 23,375,680.61 | - |
(2) As of December 31
st
2018,there is no termination of long-term receivables booking due to transfer of a financial asset.
(3) As of December 31
st
2018, the Group has no assets/liabilities booked due to any transferred long-term receivable that the Group still keep recourse or retain part of thecorresponding rights or interests.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
11. Long-term equity investment
Unit: RMB
| The invested entity | Opening Balance | Decrease/Increase in the current reporting period | Closing Balance | Closing balance for impairment provision | |||||||
| Additional Investments | Investment reduction | Investment Profit (Loss) recognized under the equity Method | Adjustment: Other comprehensive income | Other Changes in equity | Declaration of cash dividends or profit distribution | Impairment provision | others | ||||
| Associated Companies | |||||||||||
| Wuhu Sensor Technology Ltd. | 38,207,959.74 | - | - | 3,563,480.71 | - | - | - | - | - | 41,771,440.45 | - |
| Maxio Technology (Hangzhou) Ltd. (Note 1) | 92,266,773.84 | 27,000,000.00 | - | (12,615,600.21) | - | - | - | - | - | 106,651,173.63 | - |
| Zhiguang Hailian Big Data Technology Ltd. (Note 2) | - | 10,000,000.00 | - | - | - | - | - | - | - | 10,000,000.00 | - |
| Sanmenxia Xiaoyun Vision Technology Ltd. (Note 3) | - | 4,900,000.00 | - | (20,769.52) | - | - | - | - | - | 4,879,230.48 | - |
| Subtotal | 130,474,733.58 | 41,900,000.00 | (9,072,889.02) | - | - | - | - | - | 163,301,844.56 | - | |
| Total | 130,474,733.58 | 41,900,000.00 | - | (9,072,889.02) | - | - | - | - | - | 163,301,844.56 | - |
Note 1: According to the Equity Capital Increase Agreements signed between the Group and Maxio Technology (Hangzhou) Ltd. (hereinafter referred to Maxio Technology) and itsshareholders, the Company increased capital investment of RMB 27 million on Maxio Technology, and increased capital has been paid by the end of the reporting year. After this capitalincrement, the Group together is holding 47.64% equity of Maxio Technology. The board of Maxio Technology consists of three directors, one of whom is appointed by the Group toexert a significant influence on the Maxio Technology.
Note 2: The Group signed an agreement with independent third party Tianjin Xinzhi Video Technology Co., Ltd. and Guizhou Province Radio and Television Information Network Co.,Ltd. on the establishment of Zhiguang Hailian Big Data Technology Ltd. (hereinafter referred to as “Zhiguang Hailian”). According to the agreement, the Company invested RMB 20million and the equity ratio obtained was 20%. As of the reporting year end, the Company has actually paid over RMB 10 million. The board of directors of Zhiguang Hailian consistsof five directors, of which one director is appointed by the Company, who exerts a significant influence on Zhiguan Hailian.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Note 3: This year, the Group signed an agreement with the independent third party Sanmenxia Xiaoyun Information Service Co., Ltd. on the establishment of Sanmenxia XiaoyunVision Technology Ltd. (hereinafter referred to as “Vision Technology”). The Company’s subsidiary, Hangzhou Hikvision System Technology Ltd. (hereinafter referred to as“Hangzhou System”), contributed RMB 4.90 million, which was paid in full by Hangzhou System by the end of the year, and the proportion of equity acquired was 49%. The board ofdirectors of Vision Technology consists of three directors, of which one director is appointed by Hangzhou System, who exerts a significant influence on Vision Technology.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
12. Fixed Assets
(1) Details of fixed assets
Unit: RMB
| Items | Building and construction | General-purpose equipment | Special-purpose equipment | Transportation vehicles | Total |
| Total original carrying amount | |||||
| 1. Opening balance | 2,635,572,180.62 | 232,106,450.97 | 927,755,822.62 | 62,377,196.97 | 3,857,811,651.18 |
| 2. Increase in the current reporting period | 2,034,093,829.56 | 258,239,589.14 | 169,061,686.04 | 23,736,103.76 | 2,485,131,208.50 |
| 1) purchase | 1,883,571.53 | 255,563,691.31 | 158,636,847.84 | 23,736,103.76 | 439,820,214.44 |
| 2) transferred from construction in progress | 2,032,210,258.03 | 2,675,897.83 | 10,424,838.20 | - | 2,045,310,994.06 |
| 3.Decrease in the current reporting period | 14,085,354.76 | 9,617,141.57 | 3,323,406.36 | 7,323,639.79 | 34,349,542.48 |
| 1) disposal or write-off | 14,085,354.76 | 9,617,141.57 | 3,323,406.36 | 7,323,639.79 | 34,349,542.48 |
| 4. Effect of foreign currency exchange difference | 2,290,994.48 | (238,678.93) | (400,631.58) | (65,436.92) | 1,586,247.05 |
| 5.Closing Balance | 4,657,871,649.90 | 480,490,219.61 | 1,093,093,470.72 | 78,724,224.02 | 6,310,179,564.25 |
| Accumulated depreciation | |||||
| 1. Opening balance | 388,100,028.52 | 84,717,617.61 | 320,033,092.54 | 40,935,416.20 | 833,786,154.87 |
| 2. Increase in the current reporting period | 164,921,860.14 | 56,852,833.36 | 187,839,213.02 | 7,904,995.06 | 417,518,901.58 |
| (1) provided | 164,921,860.14 | 56,852,833.36 | 187,839,213.02 | 7,904,995.06 | 417,518,901.58 |
| 3.Decrease in the current reporting period | 3,629,580.00 | 10,257,335.50 | 2,821,773.06 | 6,599,778.84 | 23,308,467.40 |
| (1) disposal or write-off | 3,629,580.00 | 10,257,335.50 | 2,821,773.06 | 6,599,778.84 | 23,308,467.40 |
| 4. Effect of foreign currency exchange difference | 76,627.53 | (226,067.98) | (51,700.61) | (31,043.84) | (232,184.90) |
| 5.Closing balance | 549,468,936.19 | 131,087,047.49 | 504,998,831.89 | 42,209,588.58 | 1,227,764,404.15 |
| Provision for decline in value | |||||
| 1.Opening balance | - | - | - | - | - |
| 2.Increase in the current reporting period | - | - | - | - | - |
| 3. Decrease in the current reporting period | - | - | - | - | - |
| 4.Closing balance | - | - | - | - | - |
| Total carrying value | |||||
| 1. Closing balance | 4,108,402,713.71 | 349,403,172.12 | 588,094,638.83 | 36,514,635.44 | 5,082,415,160.10 |
| 2. Opening balance | 2,247,472,152.10 | 147,388,833.36 | 607,722,730.08 | 21,441,780.77 | 3,024,025,496.31 |
(2) As of December 31
st
2018, the Group did not have any significant idle fixed assets.
(3) As of December 31
st
2018, the Group had not leased any fixed asset through financial leasing.
(4) As of December 31
st
2018, the Group had not rent out any fixed asset through operating leasing(5) Fixed assets of which certificates of title have not been granted as of December 31
st
2018.
Unit: RMB
| Item | Carrying amount | Reason for certificates of title not granted |
| Office building for branches | 38,620,111.22 | In the process of obtaining the real estate certificates |
| Phase I Plant of Chongqing Production Base | 277,289,173.62 | In the process of obtaining the real estate certificates after transferred from construction in process to fixed assets |
| Total | 315,909,284.84 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
13. Construction in progress
(1) Details of construction in progress
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Carrying amount | Provision | Carrying value | Carrying amount | Provision | Carrying value | |
| Security industrial base (Tonglu) -Phase 2 | - | - | - | 300,688,913.96 | - | 300,688,913.96 |
| Internet Video Industry Base | - | - | - | 914,014,265.08 | - | 914,014,265.08 |
| Public Security Monitoring Site Project | 291,404,089.32 | - | 291,404,089.32 | 105,039,082.92 | - | 105,039,082.92 |
| Hangzhou Innovation Industrial Base | 50,840,516.83 | - | 50,840,516.83 | - | - | - |
| Others | 73,847,807.27 | - | 73,847,807.27 | 116,576,856.34 | - | 116,576,856.34 |
| Total | 416,092,413.42 | - | 416,092,413.42 | 1,436,319,118.30 | - | 1,436,319,118.30 |
(2) Changes in significant construction in progress during the current reporting period
Unit: RMB
| Item | Budget (RMB 0,000) | Opening balance | Increase in the current reporting period | Transferred to fixed assets during the current reporting period | Effect of foreign currency exchange difference | Other Reductions ( Note 1) | Closing balance | Amount invested as a proportion of budget amount (%) | Construction in Progress (%) | Accumulated capitalized interest and profit/loss on exchange (Note 2) | Including: capitalized interest and profit/loss on exchange for the current reporting period | Capitalization rate for interest in the current reporting period (%) | Source of funds |
| Internet Video Industry Base | 108,000.00 | 914,014,265.08 | 171,166,453.22 | 1,085,180,718.30 | - | - | - | 100% | 100% | 231,020,655.04 | 24,249,143.13 | 1.25% | Bond |
| Security industrial base (Tonglu) project-Phase 2 | 64,000.00 | 300,688,913.96 | 341,337,980.27 | 642,026,894.23 | - | - | - | 100% | 100% | (87,331,908.38) | (87,331,908.38) | 1.25% | Bond |
| Chongqing Manufacture Base | 27,700.00 | 89,393,611.81 | 187,895,561.81 | 277,289,173.62 | - | - | - | 100% | 100% | - | - | - | Self- financing |
| Hangzhou Innovation Industry Base | 102,600.00 | - | 50,840,516.83 | - | - | - | 50,840,516.83 | 4.96% | 4.96% | - | - | - | Self- financing |
| Chengdu Science and Technology Base Project | 135,100.00 | - | 6,577,446.74 | - | - | - | 6,577,446.74 | 0.49% | 0.49% | - | - | - | Self- financing |
| Chongqing Science and Technology | 76,200.00 | - | 2,257,412.05 | - | - | - | 2,257,412.05 | 0.30% | 0.30% | - | - | - | Self- financing |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
| Item | Budget (RMB 0,000) | Opening balance | Increase in the current reporting period | Transferred to fixed assets during the current reporting period | Effect of foreign currency exchange difference | Other Reductions ( Note 1) | Closing balance | Amount invested as a proportion of budget amount (%) | Construction in Progress (%) | Accumulated capitalized interest and profit/loss on exchange (Note 2) | Including: capitalized interest and profit/loss on exchange for the current reporting period | Capitalization rate for interest in the current reporting period (%) | Source of funds |
| Base project- phase 2 | |||||||||||||
| Xi’an Science and Technology Base project | 113,400.00 | - | 1,664,067.68 | - | - | - | 1,664,067.68 | 0.15% | 0.15% | - | - | - | Self- financing |
| Wuhan Science and Technology Base project | 254,200.00 | - | 1,641,509.43 | - | - | - | 1,641,509.43 | 0.06% | 0.06% | - | - | - | Self- financing |
| Wuhan Intelligent Industry Base project | 238,700.00 | - | 934,836.51 | - | - | - | 934,836.51 | 0.04% | 0.04% | - | - | - | Self- financing |
| Others | - | 132,222,327.45 | 316,625,325.55 | 40,814,207.91 | 1,145,681.50 | 57,002,502.41 | 352,176,624.18 | - | - | - | - | - | Self- financing |
| Total | 1,119,900.00 | 1,436,319,118.30 | 1,080,941,110.09 | 2,045,310,994.06 | 1,145,681.50 | 57,002,502.41 | 416,092,413.42 | - | - | 143,688,746.66 | (63,082,765.25) | - | - |
Note 1：Other reductions during the current reporting period were completed construction of assets under financial leasing project that transferred into long-term receivables.
Note 2: This amount is calculated by interest expense for specific foreign currency borrowings, less interest income for unused borrowing fund and profit/loss on exchange ratedifference.
As of December 31
st
2018, the Group did not have any sign of impairment of projects under construction; therefore, no provision for impairment loss was booked.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
14. Intangible assets
(1) Details of Intangible assets
Unit: RMB
| Item | Land use right | Intellectual property right | Application Software | Total |
| Total original carrying amount | ||||
| 1.Opening balance | 324,362,066.44 | 39,269,042.11 | 182,640,105.31 | 546,271,213.86 |
| 2. Increased | 451,227,259.69 | 106,965.02 | 53,278,481.88 | 504,612,706.59 |
| (1) Purchase | 451,227,259.69 | 106,965.02 | 53,278,481.88 | 504,612,706.59 |
| 3.Decreased | - | 106,965.02 | 3,201,729.94 | 3,308,694.96 |
| (1)Disposal or write-off | - | 106,965.02 | 3,201,729.94 | 3,308,694.96 |
| 4.Effect of foreign currency exchange difference | - | 1,755.77 | 409,263.61 | 411,019.38 |
| 5.Closing balance | 775,589,326.13 | 39,270,797.88 | 233,126,120.86 | 1,047,986,244.87 |
| Total accumulated amortization | ||||
| 1.Opening balance | 18,571,240.39 | 12,058,812.00 | 86,480,178.84 | 117,110,231.23 |
| 2.Increased | 16,295,483.25 | 7,207,993.49 | 38,657,773.85 | 62,161,250.59 |
| (1)Provided | 16,295,483.25 | 7,207,993.49 | 38,657,773.85 | 62,161,250.59 |
| 3.Decreased | - | 66,848.75 | 1,286,916.13 | 1,353,764.88 |
| (2)Disposal or write-off | - | 66,848.75 | 1,286,916.13 | 1,353,764.88 |
| 4.Effect of foreign currency exchange difference | - | 1,112.73 | 154,365.11 | 155,477.84 |
| 5. Closing balance | 34,866,723.64 | 19,201,069.47 | 124,005,401.67 | 178,073,194.78 |
| Provision for decline in value | ||||
| 1.Opening balance | - | - | - | - |
| 2.Increased | - | - | - | - |
| 3. Decreased | - | - | - | - |
| 4.Closing balance | - | - | - | - |
| Total carrying value | ||||
| Closing carrying value | 740,722,602.49 | 20,069,728.41 | 109,120,719.19 | 869,913,050.09 |
| Opening carrying value | 305,790,826.05 | 27,210,230.11 | 96,159,926.47 | 429,160,982.63 |
15. Goodwill
(1) Goodwill book value
Unit: RMB
| The invested entity | Opening balance | Increased | Decreased | Effect of foreign currency exchange difference | Closing balance |
| Business combination not involving enterprises under common control | Disposal | ||||
| ZAO Hikvision | 67,349.64 | - | - | - | 67,349.64 |
| Beijing Brainaire Storage Technology Ltd. | 42,695,573.44 | - | - | - | 42,695,573.44 |
| Henan HuaAn Intelligence Development Ltd. and its subsidiaries | 61,322,871.63 | - | - | - | 61,322,871.63 |
| Hundure Technology (Shanghai) Ltd. | 13,774,405.88 | - | - | - | 13,774,405.88 |
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | 12,573.42 | - | - | - | 12,573.42 |
| Secure Holdings Limited (SHL) | 131,091,328.96 | - | - | 6,000,807.70 | 137,092,136.66 |
| Total | 248,964,102.97 | - | - | 6,000,807.70 | 254,964,910.67 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Provision of impairment in goodwill
Unit: RMB
| Invested Company | Opening balance | Increased | Decrease | Effect of foreign currency exchange difference | Closing Balance |
| Provision | Disposal | ||||
| Beijing Bangnuo Storage Technology Ltd. | - | 42,695,573.44 | - | - | 42,695,573.44 |
| Total | - | 42,695,573.44 | - | - | 42,695,573.44 |
The key assumptions used in the Group’s annual impairment test performed for goodwill at the end of thereporting period:
The recoverable amounts of the relevant assets have been determined on the discounted present value of thefuture cash flow projections. The cash flow projections are based on 2019-2023 Financial Budgets approved bymanagement covering a 5-year period, with discount rates of 18% to 20%. The sets of cash flows beyond the5-year period are projected without growth. This growth rates are based on the relevant industry growthforecasts and do not exceed the average long-term growth rate for the relevant industry. Expected cashinflows/outflows, considering budgeted net sales, cost of revenue and operating expenses, have been determinedby management based on past performance and expectations for the future market development.
During the current reporting year, the Group assessed the recoverable amount of goodwill and determined thatthe goodwill related to Beijing Bangnuo Storage Technology Ltd. was impaired. Therefore, goodwill in therelevant asset group was fully provided with impairment provision amounting to RMB 42,695,573.44. As of theyear end, Beijing Bangnuo Storage Technology Ltd. has entered the cancellation process.
16. Deferred tax assets/deferred tax liabilities
(1) Deferred tax assets that are not presented on net off basis
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Provision for impairment losses of assets | 1,364,242,526.16 | 322,143,179.09 | 1,162,036,595.26 | 252,830,021.37 |
| Payroll payables | 220,173,893.79 | 33,026,084.07 | 253,384,576.51 | 38,007,686.48 |
| Share-based compensation | 115,893,666.94 | 18,240,425.31 | 208,856,209.85 | 32,070,672.55 |
| Provisions | 52,956,535.09 | 7,943,480.27 | 43,024,784.70 | 6,453,717.71 |
| Expenditure without invoice | 113,835,410.80 | 17,075,311.62 | - | - |
| Unrealized profit from inter-group transactions | 892,163,728.04 | 133,824,559.21 | 978,313,377.64 | 146,747,006.65 |
| Changes in the fair value of derivative financial instruments | 275,080.00 | 68,770.00 | 15,946,836.46 | 3,986,709.12 |
| Deferred income | 186,747,708.01 | 28,012,156.20 | - | - |
| Total | 2,946,288,548.83 | 560,333,965.77 | 2,661,562,380.42 | 480,095,813.88 |
(2) Deferred tax liabilities that are not presented on net off basis
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Changes in the fair value of derivative financial instruments | 1,482,366.03 | 370,591.51 | 4,100,657.54 | 1,025,164.39 |
| Difference in fixed asset depreciation | 170,081,176.39 | 25,512,176.46 | - | - |
| Difference in amortization of intangible assets | 695,043.70 | 104,256.55 | - | - |
| Total | 172,258,586.12 | 25,987,024.52 | 4,100,657.54 | 1,025,164.39 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(3) Deferred tax assets or deferred tax liabilities that are presented at the net amount after offset
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Offset amount at the end of the reporting period | Deferred tax assets or liabilities at the net amount after offset | Offset amount at the beginning of the reporting period | Deferred tax assets or liabilities at the net amount after offset | |
| Deferred tax assets | 25,987,024.52 | 534,346,941.25 | 1,025,164.39 | 479,070,649.49 |
| Deferred tax liabilities | 25,987,024.52 | - | 1,025,164.39 | - |
(4) Unrecognized deferred income tax assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Deductible temporary difference | 811,602,394.93 | 628,129,115.31 |
| Deductible losses | 935,162,077.25 | 520,259,773.50 |
| Total | 1,746,764,472.18 | 1,148,388,888.81 |
(5) Deductible losses of unrecognized deferred income tax assets that will expire in the following years
Unit: RMB
| Year | Closing balance | Opening balance |
| 2018 | - | 6,269,195.05 |
| 2019 | 5,645,442.54 | 5,645,442.54 |
| 2020 | 3,636,058.38 | 3,636,058.38 |
| 2021 | 103,268,429.06 | 172,921,472.26 |
| 2022 | 331,787,605.27 | 331,787,605.27 |
| 2023 | 490,824,542.00 | - |
| Total | 935,162,077.25 | 520,259,773.50 |
17. Other non-current assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Completed but unsettled assets formed by construction contracts (Note (V) 6) | 1,253,407,742.28 | 488,178,801.99 |
| Prepayments for equipment | 196,992,554.09 | 52,356,860.27 |
| Prepayments for acquisition of land | 98,000,000.05 | 314,410,044.45 |
| Prepayments for infrastructure | 32,759,311.95 | 3,850,961.42 |
| Prepayments for purchase of property | 1,590,992.43 | - |
| Total | 1,582,750,600.80 | 858,796,668.13 |
18. Short-term borrowings
(1) Categories of short-term loans
Unit: RMB
| Item | Closing balance | Opening balance |
| Guaranteed loans | 3,166,655,588.29 | 74,622,548.39 |
| Fiduciary loan | 247,000,100.00 | 10,492,107.52 |
| Pledged loans | 52,000,000.00 | 12,000,000.00 |
| Total | 3,465,655,688.29 | 97,114,655.91 |
(2) As of December 31
st
2018, the Group did not have any overdue short-term loans that were failed to repay.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
19. Financial liabilities booked at fair value, and differences in fair value booked through profit or loss in the
current reporting period
Unit: RMB
| Item | Closing balance | Opening balance |
| Held-for-trading financial liabilities | 290,998.43 | 15,946,836.46 |
| Including: derivative financial liabilities | 290,998.43 | 15,946,836.46 |
| total | 290,998.43 | 15,946,836.46 |
Derivative financial liabilities include forward foreign exchange contracts and foreign exchange option contracts, notdesignated as a hedging instrument, gains or losses due to changes in fair value is directly included in the currentperiod profits and losses.
20. Notes payable & Accounts payable
20.1 Categories
Unit: RMB
| Item | Closing balance | Opening balance |
| Notes payable | 463,479,760.54 | 845,397,427.92 |
| Accounts payable | 10,301,665,725.20 | 10,039,943,012.26 |
| Total | 10,765,145,485.74 | 10,885,340,440.18 |
20.2 Notes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Bank acceptance Bill | 463,479,760.54 | 845,397,427.92 |
| Total | 463,479,760.54 | 845,397,427.92 |
As of December 31
st
2018, the Group did not have any unpaid matured notes payable.
20.3 Accounts payable
(1) List of accounts payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Payments for goods | 10,208,299,054.08 | 9,948,393,218.09 |
| Payables on equipment | 93,366,671.12 | 91,549,794.17 |
| Total | 10,301,665,725.20 | 10,039,943,012.26 |
As of December 31
st
2018, the Group did not have any significant accounts payable with aging above one year.
21. Receipts in advance
(1) List of receipts in advance
Unit: RMB
| Item | Closing balance | Opening balance |
| Advanced receipts from sales of goods | 449,150,259.60 | 417,208,664.56 |
| Advanced receipts from construction contracts | 192,280,230.62 | 153,364,544.04 |
| Total | 641,430,490.22 | 570,573,208.60 |
(2) As of December 31
st
2018, the Group did not have any significant receipts in advance with aging above one year
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
22. Payroll payable
(1) Details of payroll payable
Unit: RMB
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1.Short-term remuneration | 1,387,542,162.19 | 7,163,307,772.49 | 6,635,595,690.55 | 1,915,254,244.13 |
| 2. Termination benefits – defined contribution scheme | 3,749,094.71 | 458,228,615.92 | 455,623,850.72 | 6,353,859.91 |
| Total | 1,391,291,256.90 | 7,621,536,388.41 | 7,091,219,541.27 | 1,921,608,104.04 |
(2) List of Short-term remuneration
Unit: RMB
| Item | Opening balance | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 1.Wages or salaries, bonuses, allowances and subsidies | 1,317,396,875.01 | 6,240,288,518.67 | 5,763,694,461.00 | 1,793,990,932.68 |
| 2.Staff welfare | 5,090,949.83 | 186,948,698.09 | 191,146,525.46 | 893,122.46 |
| 3.Social insurance contributions | 3,010,470.90 | 326,976,000.47 | 326,752,046.83 | 3,234,424.54 |
| Including: medical insurance | 2,966,831.43 | 285,393,088.52 | 285,372,431.39 | 2,987,488.56 |
| Injury insurance | 9,592.94 | 12,634,957.38 | 12,587,146.82 | 57,403.50 |
| Maternity insurance | 34,046.53 | 28,947,954.57 | 28,792,468.62 | 189,532.48 |
| 4.Housing funds | 109,455.82 | 290,592,426.25 | 290,654,271.67 | 47,610.40 |
| 5.Labor union and education fund | 61,934,410.63 | 118,502,129.01 | 63,348,385.59 | 117,088,154.05 |
| subtotal | 1,387,542,162.19 | 7,163,307,772.49 | 6,635,595,690.55 | 1,915,254,244.13 |
(3) Defined contribution scheme (Note)
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Basic pension insurance | 3,530,623.96 | 442,866,778.48 | 440,126,577.04 | 6,270,825.40 |
| Unemployment insurance | 218,470.75 | 15,361,837.44 | 15,497,273.68 | 83,034.51 |
| Subtotal | 3,749,094.71 | 458,228,615.92 | 455,623,850.72 | 6,353,859.91 |
Note：
During the reporting periods, the employees of the Company are the members of state-managed retirementbenefit plan, and unemployment insurance plan, operated by the respective governments of these jurisdictions.The Group is required to contribute specified percentage out of payroll costs to the retirement benefit schemesand unemployment insurance schemes to fund the benefits. The Group has no other material obligation for thepayment of pension benefits beyond the contributions described above, and corresponding expenses are bookedinto profits and losses of related assets during the current period.
The Group shall pay a total of RMB 442,866,778.48 and RMB 15,361,837.44 (2017: RMB 293,546,430.53 andRMB 13,341,057.64) to the pension insurance and unemployment insurance schemes respectively. OnDecember 31
st
2018, the Group still had RMB 6,270,825.40 and RMB 83,034.51 (December 31
st
2017: RMB3,530,623.96 and RMB 218,470.75) payable expenses for pension insurance and unemployment insurance plansthat were due during the reporting period but were not paid. The relevant dues have been paid off after thereporting period.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
23. Taxes payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Enterprise income tax | 1,085,546,102.66 | 1,099,786,533.85 |
| Value-added tax | 242,237,174.61 | 281,447,062.92 |
| City construction and maintenance tax | 26,667,741.79 | 19,789,046.85 |
| Education surcharges | 11,563,769.42 | 8,501,502.81 |
| Local education surcharges | 7,686,512.17 | 5,666,165.96 |
| Others | 45,220,363.92 | 38,324,753.38 |
| Total | 1,418,921,664.57 | 1,453,515,065.77 |
24. Other payables
24.1 Categories
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividend payable | 119,917,640.92 | 94,857,139.16 |
| Other payables | 2,833,285,550.07 | 401,861,078.67 |
| Total | 2,953,203,190.99 | 496,718,217.83 |
24.2 Dividend payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividends of restricted shares | 117,467,640.92 | 92,407,139.16 |
| Dividends of ordinary shares | 2,450,000.00 | 2,450,000.00 |
| Total | 119,917,640.92 | 94,857,139.16 |
24.3 Other payables
(1) List of other payables according to the nature of the payment
Unit: RMB
| Item | Closing balance | Opening balance |
| Share incentive funds (Note) | 2,057,898,876.84 | - |
| Accrued expenses | 297,778,297.42 | 149,359,652.21 |
| Guarantee and deposit fees | 212,959,951.64 | 145,730,079.74 |
| Collection and payment on behalf | 124,191,240.27 | 87,921,755.93 |
| Unexpired commercial acceptance bills that were endorsed | 94,097,879.36 | - |
| Other expense payable | 46,359,304.54 | 18,849,590.79 |
| Total | 2,833,285,550.07 | 401,861,078.67 |
Note: As of December 31
st
2018, the restricted stock funds received by the Group for 2018 share incentivescheme amounted to RMB 2,057,898,876.84 (see Note XI for details), and the stock registration was notcompleted. This part of the stock has completed the equity registration work on January 18
th
2019.
(2) As of December 31
st
2018, the Group does not have any significant other payables aging over one year.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
25. Non-current liabilities due within one year
Unit：RMB
| Item | Closing balance | Opening balance |
| Bonds Payable due within one year (Note (V) 28) | 3,172,727,888.37 | 33,614,018.51 |
| Long-term borrowings due within one year (Note (V) 27) | 2,984,575.25 | 1,512,793,252.38 |
| Long-term payables due within one year | 2,458,683.54 | - |
| Total | 3,178,171,147.16 | 1,546,407,270.89 |
26. Other current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Subscription payment of restricted shares | 364,984,759.94 | 744,583,627.22 |
| Total | 364,984,759.94 | 744,583,627.22 |
27. Long-term borrowings
Unit: RMB
| Item | Closing balance | Opening balance |
| Pledged loan (Note 1) | 251,000,000.00 | 310,473,667.00 |
| Fiduciary loan | 1,984,575.25 | 2,319,585.38 |
| Guaranteed loans | - | 1,500,000,000.00 |
| Other borrowing (Note 2) | 190,000,000.00 | 190,000,000.00 |
| Less：Long-term loans due within one year (Note (V) 25) | 2,984,575.25 | 1,512,793,252.38 |
| Total | 440,000,000.00 | 490,000,000.00 |
As of December 31
st
2018, the GBP loans with carrying value of RMB 857,412.45, carry annual interest rate of2.40% to 2.50% (December 31
st
2017: 2.40% to 2.50%); the RMB loan, with carrying value RMB442,127,162.80, carry annual interest rate ranging from 4.445% to 4.900% (December 31
st
2017: 2.65% to5.00%).
Note 1: As of December 31
st
2018, the pledged loan was obtained by the Group with all the rights and benefitspledged under the Public Security Video Surveillance Network Application Construction-Public-PrivatePartnership (PPP) Project Agreement; the maturity date is November 5
th
2031. Among them, the annual interestrate of RMB 250,000,000.00 is 4.445%, and the annual interest rate of RMB 1,000,000.00 is 4.900%.
As of December 31
st
2017, the Group’s RMB 300,000,000.00 pledged loan was pledged by VAT RebateAccount under the Company’s wholly-owned subsidiary, Hangzhou HIK Science and Technology Ltd., thebalance of VAT Rebate Account is not less than RMB 5,000,000.00 according to the contract, maturity date isFebruary 16
th
2019, annual interest rate is 2.65%; this loan was returned in advance in 2018. Besides, theCompany bear joint liability guarantee for the loan. As of December 31
st
2017, The RMB borrowings with acarrying amount of RMB 10,473,667.00 under the pledged loan were obtained by the Group with a pledge ofaccounts receivable with a book value of RMB 60,646,697.33; the maturity date is September 21
st
2018, and theannual interest rate is 5.00%.
Note 2: During 2016, the Group entered into an agreement with CDB Development Fund(国开发展基金, as"CDBDF") to jointly inject capital into Hikvision Electronics Co., Ltd. ("Hangzhou Electronics"), a subsidiaryof the Group. Pursuant to the capital injection agreement, CDBDF would not participate in senior managementpersonnel such as directors, and it would either take part in decision-making or make significant influence onHangzhou Electronics. The Group shall pay a 1.2% annualized return to CDBDF through dividends or interestpayments, and the Group is required to redeem the CDBDF's equity investment in the current reporting periodby installments each year from 2021 to 2024. Therefore, the capital injection by CDBDF is treated as a
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
long-term loan. As of December 31
st
2018, CDBDF has aggregately invested RMB 190 million (December 31
st
2017: RMB 190 million).
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
28. Bonds payable
(1) Bonds payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Euro Bond (Note) | - | 3,120,920,000.00 |
| Total | - | 3,120,920,000.00 |
(2) Change in bond payable balance
Unit: RMB
| Item | Face value | Issue Date | Maturity | Issuance | Opening balance | Issued in the current reporting period | Effects of changes in Foreign exchange | Interests expenses accrued based on the principal amount | Repayments in the current reporting period | Less: Amount due within one year (Note (V) 25) | Closing balance |
| Irish Euro Bond (Note) | Euro 400,000,000.00 | February 18th 2016 | 3 years | 2,903,120,000.00 | 3,154,534,018.51 | - | 18,319,994.86 | 38,982,875.00 | 39,109,000.00 | 3,172,727,888.37 | - |
| Total | Euro 400,000,000.00 | 2,903,120,000.00 | 3,154,534,018.51 | - | 18,319,994.86 | 38,982,875.00 | 39,109,000.00 | 3,172,727,888.37 | - |
Note: On February 3
rd
, 2016, the Company publically issued the bond with nominal value amounting to Euro 400 million ("Euro Bond"); and the bond was settled, listed and tradedon the Irish Stock Exchange on February 18
th
, 2016. The Euro Bond has a maturity term for 3 years, maturity date is February 18
th
, 2019, the issuance price of the bond is 99.959%of the principal value, and coupon rate is 1.25%, with interest payment date of February 18
th
per annum, and one-time principal repayment on maturity date. The Euro Bond ismainly used for constructions of the Company's Security Industry Base (Tonglu), the Internet Security Industry Base. On February 18
th
2019, the Company had fully repaid theprincipal and interest of the bonds.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
29. Provisions
Unit: RMB
Item
| Item | Closing balance | Opening balance |
| Product warranty | 77,625,238.49 | 63,068,638.49 |
| Total | 77,625,238.49 | 63,068,638.49 |
30. Deferred income
Unit: RMB
| Item | Opening balance | Increase in current reporting period | Decrease in current reporting period | Closing balance | Details |
| Cloud storage service income | 26,022,171.65 | 127,494,411.81 | 94,825,957.09 | 58,690,626.37 | Note 1 |
| Government Subsidies | 62,903,600.00 | 221,389,300.00 | 49,804,437.24 | 234,488,462.76 | Note 2 |
| Total | 88,925,771.65 | 348,883,711.81 | 144,630,394.33 | 293,179,089.13 |
As of December 31
st
2018, the deferred income related to government subsidies:
Unit: RMB
| Liability Items | Opening Balance | Increase in current reporting period | Amounts booked into other income during the current reporting period | Other changes | Closing Balance | Related to assets/related to incomes |
| Projects of core electronic devices, high-end universal chips and basic software products | 38,714,300.00 | 136,074,800.00 | 43,222,036.99 | - | 131,567,063.01 | Related to incomes |
| Chongqing Manufacture Base construction | 24,189,300.00 | 24,189,300.00 | 403,155.00 | - | 47,975,445.00 | Related to assets |
| Other special subsidies | - | 33,384,445.24 | 1,415,094.30 | - | 31,969,350.94 | Related to incomes |
| Other special subsidies | - | 27,740,754.76 | 4,764,150.95 | - | 22,976,603.81 | Related to assets |
| Subtotal | 62,903,600.00 | 221,389,300.00 | 49,804,437.24 | - | 234,488,462.76 |
Note 1: This is revenue related to cloud storage service, video service, and telephone service that the Group provides toits customers; and the Group recognized the revenue accordingly during the period the service is actually provided.
Note 2: Refer to government subsidies received by the Group for projects of Core Electronic Devices, High-endUniversal Chip and Basic Software Products, Chongqing Manufacture Base construction, and other projects; Actualexpenses occurred in the current year for projects of core electronic devices, high-end universal chips and basic softwareproducts and other special subsidies related to incomes were recognized in other income; and relevant assets forChongqing Manufacture Base construction and other special subsidies related to assets were amortized averagely inother income within the assets’ useful lives.
31. Share capital
Unit: RMB
| Opening balance | Changes for the period | Closing balance | |||||
| New issue of shares (Note 1) | Bonus issue (Note 2) | Transfer from Capital Reserve (Note 2) | Others (Note 3) | Subtotal | |||
| 2018 | |||||||
| Total shares | 9,228,865,114.00 | - | - | - | (1,594,641.00) | (1,594,641.00) | 9,227,270,473.00 |
| 2017 | |||||||
| Total shares | 6,102,706,885.00 | 52,326,858.00 | 3,076,288,371.00 | - | (2,457,000.00) | 3,126,158,229.00 | 9,228,865,114.00 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Note 1: On December 23
rd
2016, pursuant to the Articles of Association of the Company revised by the resolution of
th
Meeting of the 3
rd
session Board of Directors authorized by the 2
nd
extraordinary general meeting in 2016, thecompany was approved to grant 52,326,858 shares RMB common shares to 2,936 grantees, with face value of RMB1.00 per share and issuing price of RMB 12.63 per share. Equity registration for those granted shares were completedon January 20
th
2017, which increased the paid-in capital of RMB 52,326,858.00 in the current year and resulted incapital reserve of RMB 608,561,358.54.
Note 2：Pursuant to shareholder's resolution of 2016 annual General Meeting dated on May 4
th
2017, based upon thetotal capital share of 6,152,576,743.00 shares on equity distribution date, the company distributed 5 bonus shares foreach 10 common shares (tax inclusive), resulted in 3,076,288,371 shares increase in total shares, with face value ofRMB 1.00 per share, and a total increase in capital share of RMB 3,076,288,371.00.
Note 3：On December 15
th
2017, pursuant to the Articles of Association of the Company revised by the resolution of
th
General Meeting of 3
rd
session Board of Directors authorized by the first Extraordinary General Meeting in 2014,the Company repurchased and cancelled 1,594,641 granted but restricted RMB treasury shares by cash, and the totalshare capital of the Company decreased by RMB 1,594,641.00, capital reserve decreased by RMB 4,961,105.33 Theregistration procedures were completed on March 27
th
2018.
On December 6
th
2016, pursuant to the Articles of Association of the Company revised by the resolution of 19
th
General Meeting of 3
rd
session Board of Directors authorized by the first Extraordinary General Meeting in 2014, theCompany repurchased and cancelled 2,457,000 granted but restricted treasury shares by cash, and the total sharecapital of the Company decreased by RMB 2,457,000.00, capital reserve decreased by RMB 12,694,500.00. Theregistration procedures were completed on April 27
th
2017.
32. Capital reserves
Unit: RMB
Item
| Item | Opening balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (note 2) | Closing balance |
| 2018 | ||||
| Share premium | 1,594,317,396.71 | 243,326,385.07 | 8,726,236.39 | 1,828,917,545.39 |
| Other capital reserves | 225,080,318.92 | 145,468,181.28 | 243,326,385.07 | 127,222,115.13 |
| Total | 1,819,397,715.63 | 388,794,566.35 | 252,052,621.46 | 1,956,139,660.52 |
| 2017 | ||||
| Share premium | 906,039,832.49 | 716,962,658.24 | 28,685,094.02 | 1,594,317,396.71 |
| Other capital reserves | 142,281,021.17 | 191,200,597.45 | 108,401,299.70 | 225,080,318.92 |
| Total | 1,048,320,853.66 | 908,163,255.69 | 137,086,393.72 | 1,819,397,715.63 |
Note 1：This increase in share premium during the current reporting period was due to the share distributions by equitysettlements for stock exercise, transferring other capital reserves into share premium of RMB 243,326,385.07.
During the current reporting period, the increase of RMB 145,468,181.28 in other capital reserves is due to recognitionof equity investment payments into capital reserve; please refer to Note (XI).
Note 2：The decrease of RMB 4,961,105.33 in share premium during the current reporting period was due to theCompany’s repurchase of 1,594,641 granted but restricted RMB treasury shares by cash, please refer to Note (V)31-Note 3; The decrease of RMB 3,765,131.06 in share premium during the current reporting period was due to sharedistributions by equity settlements to minority shareholders.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
33. Treasury shares
Unit: RMB
Item
| Item | Opening Balance | Increase in the current reporting period (Note 1) | Decrease in the current reporting period (Note 2) | Closing balance |
| 2018 | ||||
| Restricted shares incentive scheme | 744,583,627.22 | - | 379,598,867.28 | 364,984,759.94 |
| Total | 744,583,627.22 | - | 379,598,867.28 | 364,984,759.94 |
| 2017 | ||||
| Restricted shares incentive scheme | 300,177,750.17 | 660,888,216.54 | 216,482,339.49 | 744,583,627.22 |
| Total | 300,177,750.17 | 660,888,216.54 | 216,482,339.49 | 744,583,627.22 |
Note 1：The increase of treasury shares was due to granting 52,326,858 shares RMB common shares to 2,936 grantees,with issuing price of RMB 12.63 per share on December 23
rd
2016. Please refer to Note (V) 31-Note 1.
Note 2: During the current year, the decreased amounts of treasury shares includes a decrease of RMB 5,452,943.05 dueto the repurchase and cancellation of 1,594,641 restricted RMB ordinary shares of 2014 Restricted Share IncentiveScheme; a decrease of RMB 56,211,224.00 due to provision of cash dividend allocated to restricted shareholders; adecrease of RMB 91,280,659.43 due to the vesting and exercising of 33,422,536 shares for the maturity of 3
rd
vestingperiod of 2014 Restricted Share Incentive Scheme; and a decrease of RMB 226,654,040.80 due to the vesting andexercising of 30,140,165 shares for the maturity of 1
st
vesting period of 2016 Restricted Share Incentive Scheme.
During the prior year, the decreased amounts in treasury shares includes a decrease of RMB 15,151,500.00 due to therepurchase and cancellation of 2,457,000 restricted ordinary shares of 2014 Restricted Share Incentive Scheme; adecrease of RMB 92,407,139.16 due to provision of cash dividend allocated to restricted shareholders; and a decrease ofRMB 108,923,700.33 due to the vesting and exercising of 33,803,907 shares for the maturity of 2
nd
vesting period of2014 Restricted Share Incentive Scheme.
34. Other comprehensive income
Unit: RMB
| Item | Opening balance | Change for the current reporting period | Closing balance | ||||
| Before tax balance | Less: transfer to current period P/L from previous other comprehensive income | Less: income tax expense | Attributable to the owner of the Company (after tax) | Attributable to minority interest (after tax) | |||
| 2018 | |||||||
| Other incomes that may be reclassified subsequently to profit or loss | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| Included: Effect on conversion of financial statements denominated in foreign currencies | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| Other comprehensive income | (27,677,939.35) | (24,062,992.06) | - | - | (21,898,411.75) | (2,164,580.31) | (49,576,351.10) |
| 2017 | |||||||
| Other incomes that may be reclassified subsequently to profit or loss | (41,230,777.21) | 13,852,652.33 | - | - | 13,552,837.86 | 299,814.47 | (27,677,939.35) |
| Included: Effect on conversion of financial statements denominated in foreign currencies | (41,230,777.21) | 13,852,652.33 | - | - | 13,552,837.86 | 299,814.47 | (27,677,939.35) |
| Other comprehensive income | (41,230,777.21) | 13,852,652.33 | - | - | 13,552,837.86 | 299,814.47 | (27,677,939.35) |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
35. Surplus reserves
Unit: RMB
Item
| Item | Surplus reserve | Increase in the current reporting period | Decrease in the current reporting period | Closing balance |
| 2018 | ||||
| Statutory surplus reserves (Note) | 3,483,742,918.53 | 976,969,439.92 | - | 4,460,712,358.45 |
| Total | 3,483,742,918.53 | 976,969,439.92 | - | 4,460,712,358.45 |
| 2017 | ||||
| Statutory surplus reserves (Note) | 2,615,437,822.15 | 868,305,096.38 | - | 3,483,742,918.53 |
| Total | 2,615,437,822.15 | 868,305,096.38 | - | 3,483,742,918.53 |
Note: According to the Company Law and the Articles of Association of the Company, the Group shall make statutorysurplus reserves for 10% of the parent company’s net profit.
36. Retained earnings
Unit: RMB
| Item | 2018 | 2017 |
| Retained Earnings at the close of previous reporting period before adjustment | 16,598,328,692.63 | 14,866,457,856.65 |
| Business merger involving enterprises under common control | - | (5,807,678.26) |
| Adjusted retained earnings at the beginning of the period | 16,598,328,692.63 | 14,860,650,178.39 |
| Add: Net profit attributable to owners of the Company for the current period | 11,352,869,241.32 | 9,410,855,084.82 |
| Less: Appropriation to statutory surplus reserve | 976,969,439.92 | 868,305,096.38 |
| Dividends on ordinary shares payable (Note) | 4,613,635,236.50 | 3,728,583,103.20 |
| Bonus shares (Note) | - | 3,076,288,371.00 |
| Retained earnings at the end of the period | 22,360,593,257.53 | 16,598,328,692.63 |
Note：According to the resolution of 2017 annual General Meeting dated on May 11
th
2018, based upon the total capitalshare of the Company on the equity distribution date, for each 10 ordinary shares, the Company proposed distributingcash dividends of RMB 5 (tax inclusive), the rest of retained earnings were all carried forward for future distributions.
37. Operating income/operating cost
Unit: RMB
| Item | 2018 | 2017 | ||
| Revenue | Cost | Revenue | Cost | |
| Operating income | 49,295,187,751.22 | 27,196,229,537.02 | 41,433,492,971.64 | 23,281,637,281.80 |
| Other operating income | 541,944,730.39 | 287,240,018.22 | 471,983,600.43 | 185,673,308.96 |
| Total | 49,837,132,481.61 | 27,483,469,555.24 | 41,905,476,572.07 | 23,467,310,590.76 |
38. Business Taxes and Surcharges
Unit: RMB
| Items | 2018 | 2017 |
| City construction and maintenance tax | 211,078,359.19 | 184,178,487.72 |
| Education surcharges | 90,741,825.21 | 79,171,750.66 |
| Local education surcharges | 60,416,824.31 | 52,554,052.44 |
| Stamp duty | 23,480,129.33 | 21,204,038.05 |
| Real estate tax | 22,533,688.75 | 27,313,836.21 |
| Tax on use of land | 5,802,424.47 | 3,809,143.26 |
| Vehicle and vessel tax | 230,511.99 | 359,385.12 |
| Others | 4,039,290.39 | 2,403,130.99 |
| Total | 418,323,053.64 | 370,993,824.45 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
39. Selling expenses
Unit：RMB
Items
| Items | 2018 | 2017 |
| Payroll | 3,042,017,625.28 | 2,059,369,959.77 |
| Marketing Expenses | 1,009,897,096.88 | 989,796,431.96 |
| Shipping, transportation, and vehicle expense | 615,804,479.82 | 524,069,679.12 |
| Travelling expenses | 361,180,853.78 | 237,314,257.81 |
| Business entertainment | 160,025,004.46 | 125,379,736.40 |
| Office expenses | 169,194,478.31 | 170,953,756.11 |
| Professional Intermediary expenses | 142,079,756.94 | 61,246,276.11 |
| Rental expenses | 139,899,056.72 | 114,093,486.77 |
| Depreciation and amortization expenses | 79,460,744.36 | 71,891,477.67 |
| Others | 172,941,309.97 | 76,105,003.41 |
| Total | 5,892,500,406.52 | 4,430,220,065.13 |
40. Administrative Expenses
Unit：RMB
| Items | 2018 | 2017 |
| Payroll | 820,726,311.40 | 603,359,766.87 |
| Office expenses | 136,511,246.38 | 94,520,352.22 |
| Depreciation and amortization expenses | 91,425,634.46 | 65,761,526.31 |
| Travelling expenses | 64,067,674.29 | 62,187,444.48 |
| Shipping, transportation, utility expense | 46,011,849.69 | 31,626,528.25 |
| Professional Intermediary expenses | 42,816,965.71 | 27,989,898.95 |
| Rental expenses | 22,313,258.20 | 37,430,367.92 |
| Business entertainment | 5,186,034.09 | 13,092,056.07 |
| Others | 146,954,708.57 | 75,246,516.22 |
| Total | 1,376,013,682.79 | 1,011,214,457.29 |
41. R&D Expenses
Unit：RMB
| Items | 2018 | 2017 |
| Payroll | 3,259,555,224.24 | 2,389,327,036.58 |
| Consumables and service fees | 455,302,393.17 | 271,984,271.83 |
| Office expenses | 155,140,877.67 | 140,334,835.75 |
| Depreciation and amortization expenses | 152,029,898.69 | 115,713,790.11 |
| New product design fees | 132,612,918.48 | 21,670,917.63 |
| Travelling expenses | 124,739,331.81 | 80,919,135.10 |
| Intermediate testing fees | 117,034,981.47 | 86,804,811.03 |
| Rental expenses | 26,312,384.22 | 11,800,310.70 |
| Others | 60,052,683.66 | 75,667,999.43 |
| Total | 4,482,780,693.41 | 3,194,223,108.16 |
42. Financial Expenses
Unit: RMB
| Items | 2018 | 2017 |
| Interest expenses | 176,236,038.18 | 144,540,387.42 |
| Less：Interest income | 476,088,318.21 | 270,155,908.15 |
| Effect on changes in foreign exchange | (208,897,575.81) | 685,439,581.63 |
| Less﹕Foreign exchange differences on specific loan and the capitalized specific loan interests | (63,082,765.25) | 311,771,511.91 |
| Others | 21,409,193.83 | 17,358,738.67 |
| Total | (424,257,896.76) | 265,411,287.66 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
43. Impairment losses of assets
Unit: RMB
Items
| Items | 2018 | 2017 |
| Inventory devaluation | 231,501,431.17 | 160,349,172.37 |
| Bad debt | 152,752,018.44 | 324,219,726.79 |
| Goodwill devaluation | 42,695,573.44 | - |
| Total | 426,949,023.05 | 484,568,899.16 |
44. Other income
Unit: RMB
| Item | 2018 | 2017 | Amounts booked into current year non-recurring gains and losses |
| VAT Rebates | 1,772,810,771.85 | 1,503,184,391.37 | - |
| Special subsidies | 295,650,812.88 | 146,314,453.00 | 295,650,812.88 |
| Tax refunds | 15,535,482.64 | 23,753,007.89 | 15,535,482.64 |
| Total | 2,083,997,067.37 | 1,673,251,852.26 | 311,186,295.52 |
45. Investment income
(1) Details of investment income
Unit: RMB
| Item | 2018 | 2017 |
| Long-term equity investment losses based on equity method | (9,072,889.02) | (2,525,266.42) |
| Investment income (losses) on disposal of financial assets at fair value through profits and losses | (40,669,470.74) | 15,885,274.53 |
| Investment incomes for available-for-sale financial assets during the holding period | 12,256,000.00 | 8,505,842.42 |
| Investment income redeemed on matured financial products | 89,416,000.39 | 22,784,254.59 |
| Total | 51,929,640.63 | 44,650,105.12 |
46. Profits (losses) from changes in fair values
Unit: RMB
| Sources of gains/losses from changes in fair values | 2018 | 2017 |
| Financial assets at fair value through profits and losses | (2,249,271.02) | (11,752,575.40) |
| Including: Profits (losses) on the changes in fair value of derivative financial instruments | (2,249,271.02) | (11,752,575.40) |
| Financial liabilities at fair value through profits and losses | 15,656,203.19 | 53,842,666.51 |
| Including: Profits (losses) on the changes in fair value of derivative financial instruments | 15,656,203.19 | 53,842,666.51 |
| Total | 13,406,932.17 | 42,090,091.11 |
47. Non-operating income
Unit: RMB
| Item | 2018 | 2017 | The amount booked into current period non-recurring profits and looses |
| Fines and confiscations | 88,125,508.92 | 28,955,431.80 | 88,125,508.92 |
| Special subsidies | 7,622,573.32 | 9,456,852.87 | 7,622,573.32 |
| Tax reduction | 495,446.66 | 5,032,729.51 | 495,446.66 |
| Others | 15,119,389.44 | 3,284,236.45 | 15,119,389.44 |
| Total | 111,362,918.34 | 46,729,250.63 | 111,362,918.34 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Government subsidies included in current profit and loss:
Unit: RMB
Item
| Item | 2018 | 2017 | Related to assets/Related to incomes |
| Other special subsidies | 7,622,573.32 | 9,456,852.87 | Related to incomes |
| Tax reduction | 495,446.66 | 5,032,729.51 | Related to incomes |
| Total | 8,118,019.98 | 14,489,582.38 |
48. Non-operating expenses
Unit: RMB
| Item | 2018 | 2017 | Amount recorded into the current period non-recurring profits (losses) |
| Local water conservancy construction fund | 755,016.33 | 825,530.98 | 755,016.33 |
| Others | 7,838,468.25 | 2,194,847.74 | 7,838,468.25 |
| Total | 8,593,484.58 | 3,020,378.72 | 8,593,484.58 |
49. Income tax expenses(1) Details of Income tax expenses
Unit: RMB
| Item | 2018 | 2017 |
| Current income tax | 1,533,491,545.29 | 1,564,816,313.41 |
| Deferred income tax | (55,276,291.76) | (103,759,710.79) |
| Previous year's income tax filing and payment difference | (421,475,254.71) | (351,737,760.08) |
| Total | 1,056,739,998.82 | 1,109,318,842.54 |
(2) Reconciliation of income tax expenses to the accounting profit
Unit: RMB
| 2018 | 2017 | |
| Total profit | 12,438,432,863.48 | 10,486,820,482.36 |
| Income tax expenses calculated at applicable tax rates of 15% | 1,865,764,929.52 | 1,573,023,072.35 |
| Impact of non-deductible costs, expenses and losses | 14,328,775.33 | 9,131,011.50 |
| Tax effect of non-taxable income | (3,329,287.02) | (2,382,834.30) |
| Impact of deductible temporary differences or deductible losses for which no deferred income tax assets is recognized for the current period | 113,046,478.04 | 101,441,652.47 |
| Impact of deductible temporary differences or deductible losses for which no deferred income tax assets is recognized for the prior periods | (21,330,045.22) | (4,975,770.84) |
| Differences of income tax annual filing (Note) | (421,475,254.71) | (351,737,760.08) |
| Impact by different tax rates applicable to different subsidiaries | 129,320,046.84 | 91,779,869.98 |
| Impact of additional deduction of R&D expenses | (474,764,267.90) | (209,272,075.55) |
| Others | (144,821,376.06) | (97,688,322.99) |
| Income tax expenses | 1,056,739,998.82 | 1,109,318,842.54 |
Note: Pursuant to the Notice on Printing the List of Key Software Enterprises and Integrated Circuit Design Enterprisesunder the National Planning Layout between 2013 and 2014 (Fa Gai Gao Ji [2013] No. 2458) , the Company wasidentified as a national key software enterprise in December 2013. Pursuant to the Notice on Relevant Issues Concerningthe Preferential Policies for Enterprise Income Tax on Software and Integrated Circuit Industry (Finance and Taxation[2016] No. 49), the Company was approved by the tax authorities in August 2018 to apply enterprise income tax of 10%for 2017, therefore, the enterprise’s 2018 income tax expenses was reduced by RMB 421,475,254.71.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
50. Notes to consolidated cash flow statement
(1) Other cash receipts relating to operating activities
Unit: RMB
Item
| Item | 2018 | 2017 |
| Interest income | 476,088,318.21 | 270,155,908.15 |
| Government subsidies | 475,057,090.12 | 194,485,605.87 |
| Others | 672,664,853.64 | 69,287,721.31 |
| Total | 1,623,810,261.97 | 533,929,235.33 |
(2) Other cash payments relating to operating activities
Unit: RMB
| Item | 2018 | 2017 |
| Office expenses and business expenses | 982,457,628.37 | 813,083,186.67 |
| Advertising and Selling services | 760,259,932.32 | 762,346,850.11 |
| Shipping and transportation expense | 673,183,441.02 | 566,519,922.42 |
| R&D expense | 641,409,412.08 | 403,860,343.28 |
| Travelling expense | 515,750,188.76 | 380,420,837.39 |
| Outsourced service expenses, professional Intermediary expenses, and etc. | 421,095,361.96 | 218,848,220.03 |
| Deposits to restricted monetary funds | 276,503,897.11 | 348,737,496.48 |
| Rental expense | 188,524,699.14 | 163,324,165.39 |
| Others | 50,048,675.16 | 144,156,727.47 |
| Total | 4,509,233,235.92 | 3,801,297,749.24 |
(3) Other cash receipts relating to investing activities
Unit: RMB
| Item | 2018 | 2017 |
| Receipts of financing leases | 89,505,228.62 | 21,175,369.30 |
| Government subsidies received related to assets | - | 24,189,300.00 |
| Withdrawal of project loans | - | 18,000,000.00 |
| Total | 89,505,228.62 | 63,364,669.30 |
(4) Other cash payments related to investing activities
Unit: RMB
| Item | 2018 | 2017 |
| Cash payments for investment intention funds | 20,000,000.00 | 13,500,000.00 |
| Total | 20,000,000.00 | 13,500,000.00 |
(5) Other cash receipts relating to financing activities
Unit: RMB
| Item | 2018 | 2017 |
| Receipts of subscriptions for share incentives | 2,057,898,876.84 | - |
| Total | 2,057,898,876.84 | - |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(6) Other cash payments relating to financing activities
Unit: RMB
Item
| Item | 2018 | 2017 |
| Repurchase of restricted shares | 6,555,746.33 | 15,151,500.00 |
| Payments for temporary borrowing | - | 7,000,000.00 |
| Payments for acquiring minority shareholders’ equity | - | 6,520,000.00 |
| Payments for business merger involving enterprises under the common control in cash consideration | - | 9,780,000.00 |
| Total | 6,555,746.33 | 38,451,500.00 |
51. Supplementary information about cash flow statement
(1) Supplementary information about cash flow statement
Unit: RMB
| Supplementary information | 2018 | 2017 |
| 1. Reconciliation of net profit to cash flow from operating activities: | ||
| Net profit | 11,381,692,864.66 | 9,377,501,639.82 |
| Add: Impairment of assets | 426,949,023.05 | 484,568,899.16 |
| Fixed assets depreciation | 417,518,901.58 | 301,861,330.86 |
| Amortization of intangible assets | 62,161,250.59 | 39,412,000.70 |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (4,975,825.83) | (1,585,222.50) |
| Gains from changes in fair value | (13,406,932.17) | (42,090,091.11) |
| Financial expenses | 81,142,249.58 | 272,067,756.32 |
| Investment income | (51,929,640.63) | (44,650,105.12) |
| Share-based payment based on equity settlement | 145,468,181.28 | 191,200,597.45 |
| Changes in restricted fund | (89,418,285.57) | (323,504,991.19) |
| Increase in deferred income tax assets | (55,276,291.76) | (103,759,710.79) |
| Increase in inventories | (1,021,116,536.92) | (1,269,276,296.32) |
| Increase in operating other non-current assets | (765,228,940.29) | (488,178,801.99) |
| Increase in operating receivables | (2,355,926,510.27) | (4,734,950,220.76) |
| Increase in operating payables | 752,106,461.28 | 3,660,640,740.49 |
| Increase in deferred income | 204,253,317.48 | 53,902,725.66 |
| Net cash flow from operating activities | 9,114,013,286.06 | 7,373,160,250.68 |
| 2. Significant investing and financing activities not involving cash receipts and payments: | ||
| 3. Net changes in cash and cash equivalents: | ||
| Ending balance of cash | 26,023,738,992.19 | 16,029,185,269.17 |
| Less: Opening balance of cash | 16,029,185,269.17 | 13,522,337,697.28 |
| Add: Ending balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase in cash and cash equivalents | 9,994,553,723.02 | 2,506,847,571.89 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Constituents of cash and cash equivalents
Unit: RMB
Item
| Item | Closing balance | Opening balance |
| Cash | 26,023,738,992.19 | 16,029,185,269.17 |
| Including: Cash on hand | 621,654.57 | 769,612.23 |
| Bank deposit for payment at any time | 25,983,600,151.03 | 16,007,539,118.39 |
| Other monetary capital for payment at any time | 39,517,186.59 | 20,876,538.55 |
| Cash equivalents | - | - |
| Ending balance of cash and cash equivalents | 26,023,738,992.19 | 16,029,185,269.17 |
Among the total balance of RMB 568,180,905.63 of the other monetary fund(s) at the end of the reporting period(December 31
st
2017: RMB 460,121,972.02), RMB 528, 663,719.04 are various guarantee deposits and otherrestricted funds, etc. (December 31
st
2017: RMB 439,245,433.47), not cash and cash equivalents.
52. Assets with restriction in ownership or use rights
Unit: RMB
| Item | Carrying Value at the end of the period | Cause of restriction |
| Monetary fund(s) | 528,663,719.04 | Various guarantee deposits and other restricted funds |
| Notes receivable | 412,061,782.74 | Pledged for issuing bank acceptance bill |
| Total | 940,725,501.78 |
53. Monetary items of foreign currencies
(1) foreign currencies
| Item | Balance in foreign currency at the end of the reporting period | Exchange rate for conversion | Balance of RMB converted at the end of the reporting period |
| Monetary funds | |||
| Including: USD | 700,987,933.45 | 6.8632 | 4,811,020,384.85 |
| EUR | 44,084,093.34 | 7.8473 | 345,941,105.67 |
| GBP | 63,379.22 | 8.6762 | 549,890.79 |
| RUB | 215,795,923.95 | 0.0986 | 21,277,478.10 |
| AED | 7,945,514.19 | 1.8688 | 14,848,646.14 |
| Accounts receivable | |||
| Including: USD | 326,728,855.58 | 6.8632 | 2,242,405,481.62 |
| EUR | 5,745,656.80 | 7.8473 | 45,087,892.61 |
| Short-term borrowing | |||
| Including: GBP | 10,564,000.00 | 8.6762 | 91,655,376.80 |
| Accounts Payable | |||
| Including: USD | 222,426,824.52 | 6.8632 | 1,526,559,782.05 |
| Bonds payable | |||
| Including: EUR | 404,308,219.18 | 7.8473 | 3,172,727,888.37 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Details of Overseas Operational Entities
Name of overseas subsidiaries
| Name of overseas subsidiaries | Main overseas operational office | Recording Currency | Basis of selection |
| HDT International Ltd. | Hongkong | HKD | Selection based on local economic environment |
| Hikvision Europe BV | Netherlands | EUR | Selection based on local economic environment |
| Prama Hikvision Indian Private Limited | India | INR | Selection based on local economic environment |
| Hikvision Uk Limited | UK | GBP | Selection based on local economic environment |
| Hikvision Italy (S.R.L.) | Italy | EUR | Selection based on local economic environment |
| Hikvision International Co., Limited | Hongkong | HKD | Selection based on local economic environment |
| Hikvision Australia PTY Ltd. | Australia | AUD | Selection based on local economic environment |
| Hikvision Spain, S.L. | Spain | EUR | Selection based on local economic environment |
| Hikvision France SAS | France | EUR | Selection based on local economic environment |
| Hikvision Singapore Pte. Ltd | Singapore | SGD | Selection based on local economic environment |
| Hikvision South Africa (Pty) Ltd. | South Africa | ZAR | Selection based on local economic environment |
| Hikvision FZE | Dubai | USD | Selection based on local economic environment |
| Hikvision Poland Spolka Z ograniczona Odpowiedzialnoscia. | Poland | PLN | Selection based on local economic environment |
| Hikivision do Brasil Comercio de Equipamentos de Seguran?a Ltda. | Brazil | BRL | Selection based on local economic environment |
| Hikvision LLC | Russia | RUB | Selection based on local economic environment |
| EZVIZ Inc. | USA | USD | Selection based on local economic environment |
| Cooperative Hikvision Europe U.A. | Netherlands | USD | Selection based on local economic environment |
| Hikvision Korea Limited | Korea | KRW | Selection based on local economic environment |
| Hikvision Colombia SAS | Columbia | COP | Selection based on local economic environment |
| Hikvision Kazakhstan limited liability partnership | Kazakhstan | KZT | Selection based on local economic environment |
| Pyronix Ltd | UK | GBP | Selection based on local economic environment |
| Microwave Solutions Limited | UK | GBP | Selection based on local economic environment |
| Secure Holdings limited | UK | GBP | Selection based on local economic environment |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | Turkey | TRY | Selection based on local economic environment |
| ZAO Hikvision | Russia | RUB | Selection based on local economic environment |
| Hikvision Hungary Limited | Hungary | HUF | Selection based on local economic environment |
| Hikvision New Zealand Limited | New Zealand | NZD | Selection based on local economic environment |
| Hikvision Czech s.r.o. | Czech | CZK | Selection based on local economic environment |
| Hikvision Deutschland GmbH | Germany | EUR | Selection based on local economic environment |
| Hikvision Kenya (Pty) Ltd | Kenya | KES | Selection based on local economic environment |
| LLC Hikvision Tashkent | Uzbekistan | UZS | Selection based on local economic environment |
| Hikvision (Malaysia) SDN. BHD | Malaysia | MYR | Selection based on local economic environment |
| Hikvision USA,Inc. | USA | USD | Selection based on local economic environment |
| Hikvision Canada INC. | Canada | CAD | Selection based on local economic environment |
| Hikvision Mexico S.A.de C.V. | Mexico | MXN | Selection based on local economic environment |
| Hikvision Panama Commercial S.A. | Panama | USD | Selection based on local economic environment |
| Hikvision Pakistan (SMC-Private) Limited | Pakistan | PKR | Selection based on local economic environment |
| Hikvision Peru Closed Stock Company | Peru | PEN | Selection based on local economic environment |
| Hikvision Technology Israel Ltd. | Israel | ILS | Selection based on local economic environment |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
54. Government Subsidies
(1) Categories
Unit: RMB
Category
| Category | Amount | Financial Report Items | Amount booked in current profit and loss |
| VAT Rebate | 1,772,810,771.85 | Other Income | 1,772,810,771.85 |
| Special subsidies | |||
| Including: other special subsidies | 314,594,148.96 | Deferred income / Other income/ Non-operating income | 259,648,194.21 |
| Subsidies for core electronic devices, high-end universal chip and basic software product projects | 136,074,800.00 | Deferred income / Other income | 43,222,036.99 |
| Chongqing Manufacture Base construction subsidies | 24,189,300.00 | Deferred income / Other income | 403,155.00 |
| Tax Reduction | 16,030,929.30 | Other income/ Non-operating income | 16,030,929.30 |
| Total | 2,263,699,950.11 | 2,092,115,087.35 |
(2) There was no refund of government subsidies during the reporting period.
Notes to Financial StatementsFor the reporting period ended on December 31
st
2017
VI. Changes in consolidation scope
1. Business mergers involving enterprises under the common control
(1) Business mergers involving enterprises under common control during last year
Hangzhou Haikang Ximu Intelligent Technology Co., Ltd. (“Haikang Ximu”)
Pursuant to the resolution approved by the Company’s 21
st
meeting of the 3rd session of the Board of Directors held on January 18
th
2017, the Company’s subsidiary HangzhouAutomotive Technology, CETHIK and 7 individual shareholders including Yang Feng signed the agreement to acquire CETHIK’s subsidiary Hangzhou Haikang Ximu IntelligentTechnology Co., Ltd., of which RMB 9.78 million was for acquiring 60% shares of Haikang Ximu held by CETHIK, and RMB 6,520,000.00 was for acquiring 40% shares ofHaikang Ximu held by 7 individual shareholders including Yang Feng. The aforementioned acquisition was completed on April 30
th
2017 and May 24
th
2017 respectively. CETHIKis the controlling shareholder of Haikang Ximu, therefore, this acquisition of 60% shares of Haikang Ximu is categorized as business merger involving enterprises under commoncontrol
Unit：RMB
Name of the
acquiree
| Name of the acquiree | Equity acquisition ratio (%) | Basis for Business merger under common control | Date of acquisition | Basis for determining date of acquisition | Income of acquiree from beginning of the year to the date of acquisition | Net profit of acquiree from beginning of the year to the date of acquisition | Income of acquiree from beginning of the prior year to the date of acquisition in prior comparative period | Net profit of acquiree from beginning of the prior year to the date of acquisition in prior comparative period |
| HIK Ximu | 60% | Both parties are under the common control of CETHIK before and after the business combination, which is not temporary | April 30th 2017 | Equity transfer date of acquiring the control of acquiree | - | (42,070.90) | 10,523,216.38 | 3,949,939.20 |
(2) Cost of business merger
Unit：RMB
| Cost of business merger | HIK Ximu |
| - Cash | 9,780,000.00 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(3) Acquiree’s carrying value of assets and liabilities at the date of acquisition
Unit: RMB
| HIK Ximu | ||
| On the date of acquisition | Ending balance at the end of prior year of the acquistiiton | |
| Assets： | ||
| Cash and bank balances | 2,462,383.90 | 3,084,985.38 |
| Accounts receivable | 919,422.04 | 1,030,422.04 |
| Inventories | 4,788,664.47 | 4,788,664.47 |
| Other assets | 386,806.71 | 516,863.68 |
| Liabilities： | ||
| Other payables | 15,927,658.68 | 15,995,583.60 |
| Other liabilities | 804,128.96 | 1,557,791.59 |
| Net assets (liabilities) | (8,174,510.52) | (8,132,439.62) |
| less：minority interests | (3,269,804.21) | (3,252,975.85) |
| Net assets (liabilities) acquired | (4,904,706.31) | (4,879,463.77) |
2. Changes of consolidation scope due to other causes
(1) The subsidiaries newly established and incorporated in the consolidation scope during the current period as
follows:
| Company Name | Time of establishment | Registered capital | Amount of contribution of the Company | Ratio of contribution (%) |
| Hikvision Xi’an Xueliang Construction Project Management Ltd. (Hikvision Xi’an Xueliang Construction) | February 2018 | RMB 216.16 million | RMB 213.99 million | 99 |
| Luo Pu District Hai Shi Ding Xin Electronic Technology Ltd. (Luopu Haishi) (Note 1) | April 2018 | RMB 71.33 million | RMB 64.20 million | 90 |
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. (Yutian Haishi) (Note 2) | March 2018 | RMB 73.65 million | RMB 72.18 million | 98 |
| Xi’An Hikvision Digital Technology Ltd. (Xi’An Hikvision) (Note 3) | January 2018 | RMB 200 million | RMB 200 million | 100 |
| Wuhan Hikvision Technology Ltd. (Wuhan Hikvision) (Note 4) | January 2018 | RMB 200 million | RMB 200 million | 100 |
| Wuhan Hikvision Science and Technology Ltd. (Wuhan Science and Technology) (Note 5) | January 2018 | RMB 200 million | RMB 200 million | 100 |
| Wuhan Hikvision Fire Control Technology Ltd. (Wuhan Fire Control) (Note 6) | July 2018 | RMB 50 million | RMB 50 million | 100 |
| Hainan Hikvision System Technology Ltd. (Hainan System) (Note 6) | July 2018 | RMB 10 million | RMB 10 million | 100 |
| Hangzhou HIK Huiying Science and Technology Ltd. (Hangzhou Huiying Science and Technology) | March 2018 | RMB 80 million | RMB 48 million | 60 |
| Hikvision Mexico S.A.de C.V. (Mexico Subsidiary) (Note 6) | July 2018 | MXN 6.70 million | MXN 6.70 million | 100 |
| Guizhou Hikvision Transportation Big Data Ltd. (Guizhou Big Data) | August 2018 | RMB 80.00 million | RMB 44.00 million | 55 |
| Xinjiang CET Yihai Information Technology Ltd. (Xinjiang CET Yihai) (Note 7) | August 2018 | RMB 200.00 million | RMB 120.00 million | 60 |
| Hikvision Panama Commercial S.A. (Panama Subsidiary) (Note 6) | August 2018 | USD 300,000 | USD 300,000 | 100 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Company Name
| Company Name | Time of establishment | Registered capital | Amount of contribution of the Company | Ratio of contribution (%) |
| Hikvision Pakistan (SMC-Private) Limited (Pakistan Subsidiary) (Note 6) | August 2018 | PKR 11.00 million | PKR 11.00 million | 100 |
| Hikvision Peru Closed Stock Company (Peru Subsidiary) (Note 6) | October 2018 | PEN 800,000 | PEN 800,000 | 100 |
| Hikvision Technology Israel Ltd. (Israel Subsidiary) (Note 6) | December 2018 | ILS 550,000 | ILS 550,000 | 100 |
| Nanjing Hikvision Digital Technology Ltd. (Nanjing Hikvision) (Note 6) | December 2018 | RMB 80 million | RMB 80 million | 100 |
Note 1: At the end of the reporting period, the actual paid-up capital of Luo Pu District Hai Shi Ding Xin ElectronicTechnology Ltd. was RMB 64,197,000.00, entirely contributed by the Group.
Note 2: At the end of the reporting period, the actual paid-up capital of Yu Tian Hai Shi Mei Tian Electronic TechnologyLtd. was RMB 72,181,700.00, entirely contributed by the Group.
Note 3: At the end of the reporting period, the actual paid-up capital of Xi’an Hikvision was RMB 50,000,000.00,entirely contributed by the Group.
Note 4: At the end of the reporting period, the actual paid-up capital of Wuhan Hikvision was RMB 12,600,000.00,entirely contributed by the Group.
Note 5: At the end of the reporting period, the actual paid-up capital of Wuhan Science and Technology was RMB65,250,000.00, entirely contributed by the Group.
Note 6: At the end of the reporting period, Wuhan Fire Control, Nanjing System, Mexico Subsidiary, Panama Subsidiary,Pakistan Subsidiary, Peru Subsidiary, Israel Subsidiary, and Nanjing Hikvision have not completed capital contributionyet; therefore, its actual paid-up capital was nil.
Note 7: At the end of the reporting period, the actual paid-up capital of Xinjiang CET Yihai was RMB 24,000,000.00,entirely contributed by the Group.
(2) Cancellation of the Company’s Subsidiary during the current period：
| Company Name | Date of equity disposition | Proportion of shareholding (%) |
| Beijing Hikvision Security and Protection Technology Service Ltd. | January 2018 | 100 |
VII. Interest in other entities
1. Equity in subsidiaries
(1) Composition of the corporate group
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Hangzhou Hikvision System Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | System integration, Technology development | 100.00 | - | Establishment |
| Hangzhou Hikvision Science and Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | manufacture | 100.00 | - | Establishment |
| Hangzhou Hikvision Security Equipment Leasing Services Ltd. | Hangzhou | Hangzhou, Zhejiang | Finance lease | 100.00 | - | Establishment |
| Chongqing Hikvision System Technology Ltd. | Chongqing | Chongqing | System integration | 100.00 | - | Establishment |
| Hikvision USA, Inc. | USA | Los Angeles | Sales | 100.00 | - | Establishment |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| HDT International Ltd. | Hong Kong | Hong Kong | Sales | 95.00 | 5.00 | Establishment |
| Prama Hikvision Indian Private Limited | India | Mumbai | Sales | 58.00 | - | Business combination not involving enterprises under common control |
| Hikvision Europe BV | Europe | Amsterdam | Sales | - | 100.00 | Establishment |
| Hikvision FZE | Dubai | Dubai | Sales | 100.00 | - | Establishment |
| Hikvision Singapore Pte. Ltd | Singapore | Singapore | Sales | 100.00 | - | Establishment |
| Chongqing Hikvision Science and Technology Ltd. | Chongqing | Chongqing | Manufacture | 100.00 | - | Establishment |
| Hangzhou Fuyang Hik Baotai Security Technology Services Ltd. (Note 1) | Hangzhou | Hangzhou, Zhejiang | Construction | - | 51.00 | Establishment |
| Hikvision South Africa (Pty) Ltd. | South Africa | South Africa | Sales | 100.00 | - | Establishment |
| Hikvision Italy S.R.L. | Italy | Milan | Sales | - | 100.00 | Establishment |
| Hikvision do Brasil Comercio de Equipamentos de Seguran?a Ltda. | Brazil | Brazil | Sales | 95.00 | 5.00 | Establishment |
| Hikvision Australia PTY Ltd. | Australia | Australia | Sales | 100.00 | - | Establishment |
| Hikvision International Co., Limited | Hong Kong | Hong Kong | Sales | 100.00 | - | Establishment |
| Hikvision France SAS | France | France | Sales | - | 100.00 | Establishment |
| Hikvision Spain,S.L. | Spain | Spain | Sales | - | 100.00 | Establishment |
| Shanghai Goldway Intelligent Traffic System Ltd. | Shanghai | Shanghai | Manufacture | 100.00 | - | Business combination not involving enterprises under common control |
| ZAO Hikvision | Russia | St. Peterburg | Sales | - | 100.00 | Business combination not involving enterprises under common control |
| Beijing Brainaire Storage Technology Ltd. | Beijing | Beijing | Manufacture | 100.00 | - | Business combination not involving enterprises under common control |
| Henan Hua’an Intelligence Development Ltd. | Zhengzhou | Zhengzhou | Construction | 51.00 | - | Business combination not involving enterprises under common control |
| Henan Hua’an Security Services Ltd. (Note 2) | Zhengzhou | Zhengzhou | Services | - | 45.90 | Business combination not involving enterprises under common control |
| Hundure Technology (Shanghai) Ltd. | Shanghai | Shanghai | Manufacture | 100.00 | - | Business combination not involving enterprises under common control |
| Hikvision Uk Limited | UK | UK | Sales | - | 100.00 | Establishment |
| Hikvision Poland Spolka Z Ograniczona Odpowiedzialnoscia | Poland | Poland | Sales | - | 100.00 | Establishment |
| Hangzhou Hikvision Electronics Ltd.（Note 3） | Hangzhou | Hangzhou | Manufacture | 71.30 | - | Establishment |
| Beijing Hikvision Security and Protection Technology Service Ltd. (Note 4) | Beijing | Beijing | Services | 100.00 | - | Establishment |
| Cooperative Hikvision Europe U.A. | Netherlands | Netherlands | Sales | 99.00 | 1.00 | Establishment |
| Hikvision Canada Inc. | Canada | Canada | Sales | 100.00 | - | Establishment |
| Hikvision LLC | Moscow | Moscow | Sales | 100.00 | - | Establishment |
| Hikvision Korea Limited | Korea | Korea | Sales | 100.00 | - | Establishment |
| Hangzhou EZVIZ Network Ltd. | Hangzhou | Hangzhou | Technology development | 60.00 | - | Establishment |
| EZVIZ Inc. | USA | Los Angeles | Sales | - | 60.00 | Establishment |
| Hangzhou Haikang Zhicheng Investment | Hangzhou | Hangzhou | System integration | 80.00 | - | Business |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Development Ltd | combination not involving enterprises under common control | |||||
| Hangzhou Hikvision Robtics Technology Ltd. | Hangzhou | Hangzhou | Technology development | 60.00 | - | Establishment |
| Hangzhou Hikvision Investment Management Ltd. | Hangzhou | Hangzhou | Investment Management | 100.00 | - | Establishment |
| Hangzhou Hik Automotive Technology Ltd. | Hangzhou | Hangzhou | Technology development | 60.00 | - | Establishment |
| Hangzhou Hikvision Communication Technology Ltd. | Hangzhou | Hangzhou | Technology development | 70.00 | - | Establishment |
| Hangzhou Hikvision Weiying Sensory Technology Ltd. | Hangzhou | Hangzhou | Technology development | 60.00 | - | Establishment |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | Turkey | Istanbul | Sales | 100.00 | - | Establishment |
| Hikvision Colombia SAS | Columbia | Santa Fe Bogota | Sales | 100.00 | - | Establishment |
| Hikvision Kazakhstan limited liability partnership | Kazakhstan | Astana | Sales | 100.00 | - | Establishment |
| Secure Holding Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Pyronix Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Microwave Solutions Limited | British | Sheffield | Manufacture | - | 100.00 | Business combination not involving enterprises under common control |
| Tianjin Hikvision System Technology Ltd. | Tianjin | Tianjin | Construction | 100.00 | - | Establishment |
| Hikvision Hungary Limited | Hungary | Hungary | Sales | - | 100.00 | Establishment |
| Hikvision New Zealand Limited | New Zealand | Auckland | Sales | - | 100.00 | Establishment |
| Wuhan HIK Storage Technology Ltd. | Wuhan | Wuhan,Hubei | Technology Development | 60.00 | - | Establishment |
| Urumqi Hai Shi Xin An Electronic Technology Ltd. | Urumqi | Urumqi, Xinjiang | Construction | - | 90.00 | Establishment |
| Hangzhou Ximu Intelligent Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Manufacture | - | 60.00 | Business combination involving enterprises under common control |
| LLC Hikvision Tashkent | Uzbekistan | Tashkent | Sales | 100.00 | - | Establishment |
| Hikvision Kenya (Pty) Ltd | Kenya | Kenya | Sales | - | 100.00 | Establishment |
| Hangzhou HIK Automotive Software Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology Development | - | 60.00 | Establishment |
| Hangzhou Intelligent Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology Development | - | 60.00 | Establishment |
| Wuhan HIK Storage Software Ltd. | Wuhan | Wuhan, Hubei | Technology development | - | 60.00 | Establishment |
| Chengdu Hikvision Digital Technology Ltd. | Chengdu | Chengdu | Technology development | 100.00 | - | Establishment |
| MoYuHaiShi Electronic Technology Ltd. | Hetian | Moyu | Construction | - | 85.00 | Establishment |
| Hangzhou EZVIZ Software Ltd. | Hangzhou | Hangzhou | Technology development | - | 60.00 | Establishment |
| PiShanHaiShi YongAn Electronic Technology Ltd. | Hetian | Pishan | System integration | - | 90.00 | Establishment |
| Henan Haikang Hua’anBaoQuan Electronics Ltd. | Zhengzhou | Zhengzhou | Construction | 51.00 | - | Establishment |
| Hikvision Czech s.r.o. | Czech | Czech | Sales | - | 100.00 | Establishment |
| Hikvision (Malaysia) SDN. BHD | Malaysia | Malaysia | Sales | - | 100.00 | Establishment |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Name
| Name | Location of operation | Place of registration | Nature of business | Shareholding ratio (%) | Acquisition Method | |
| Direct | Indirect | |||||
| Hikvision Deutschland GmbH | Germany | Germany | Sales | - | 100.00 | Establishment |
| Hikvision Xi’an Xueliang Construction Project Management Ltd. | Xi’an | Xi’an, Shanxi | Construction | 99.00 | Establishment | |
| Luo Pu District Hai Shi Ding Xin Electronic Technology Ltd. | Hetian | Xinjiang Hetian | System integration | - | 90 | Establishment |
| Yu Tian Hai Shi Mei Tian Electronic Technology Ltd. | Hetian | Xinjiang Hetian | System integration | 98 | Establishment | |
| Xi’An Hikvision Digital Technology Ltd. | Xi’An | Xi’An | Technology development | 100.00 | - | Establishment |
| Wuhan Hikvision Technology Ltd. | Wuhan | Wuhan, Hubei | Technology development | 100.00 | - | Establishment |
| Wuhan Hikvision Science and Technology Ltd. | Wuhan | Wuhan, Hubei | Sales | 100.00 | - | Establishment |
| Wuhan Hikvision Fire Control Technology Ltd. | Wuhan | Wuhan, Hubei | Sales | 100.00 | - | Establishment |
| Hainan Hikvision System Technology Ltd. | Hainan | Hainan | System integration | 100.00 | - | Establishment |
| Hangzhou HIK Huiying Technology Ltd. | Hangzhou | Hangzhou, Zhejiang | Technology development | 60.00 | - | Establishment |
| Hikvision Mexico S.A.de C.V. | Mexico | Mexico | Sales | 100.00 | Establishment | |
| Guizhou Hikvision Transportation Big Data Ltd. | Guiyang | Guiyang, Guizhou | Technology development | 55.00 | Establishment | |
| Xinjiang CET Yihai Information Technology Ltd. | Urumqi | Urumqi, Xinjiang | System integration | 60.00 | Establishment | |
| Hikvision Panama Commercial S.A | Panama | Panama | Sales | 100.00 | Establishment | |
| Hikvision Pakistan (SMC-Private) Limited | Pakistan | Pakistan | Sales | 100.00 | Establishment | |
| Hikvision Peru Closed Stock Company | Peru | Peru | Sales | 95.00 | 5.00 | Establishment |
| Hikvision Technology Israel Ltd. | Israel | Israel | Sales | 100.00 | Establishment | |
| Nanjing Hikvision Digital Technology Ltd. | Nanjing | Nanjing, Jiangsu | Sales | 100.00 | Establishment | |
Note 1: Hangzhou Fuyang HIK Baotai Security Technology Services Ltd. is a subsidiary controlled by HangzhouSystem, who holds 51% equity interests. According to the Articles of Association of the Company, Hangzhou Systemhas a 50% dividend payout ratio in the said company (Fuyang Baotai).
Note 2: Henan Hua’an Security Services Ltd. is a subsidiary controlled and invested by Henan Hua’an IntelligenceDevelopment Ltd.
Note 3: The remaining 28.70% equity interests of Hangzhou Hikvision Electronics Ltd.is held by China DevelopmentBank Fund. Please refer to Note (V) 27 for details.
Note 4: Beijing Hikvision Security and Protection Technology Service Ltd. has completed Industrial and Commercialcancellation in 2018.
2. Equity in joint ventures or associates
(1) Aggregated financial information of insignificant joint-ventures or associates
Unit：RMB
| Closing balance / Amount for 2018 | Opening balance / Amount for 2017 | |
| Associates： | ||
| The aggregate carrying amount of investments in associates | 174,900,000.00 | 133,000,000.00 |
| The aggregate amount of the following items calculated based on the Company’s equity share percentage of the associates | ||
| --Net loss and total comprehensive loss | (11,598,155.44) | (2,525,266.42) |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
VIII. Risks associated with financial instrument
The Group's principal financial instruments include cash and bank balances, long-term equity investments, notesreceivable & accounts receivable, other receivables, long-term receivables, borrowings, notes payable & accountspayable, other payables, other current liabilities, bonds payable, long-term payables, derivative financial instruments, etc.Details of these financial instruments are set out in Note (V). Below are the risks associated with such financialinstruments and the risk management policies adopted by the Group to mitigate such risks. The management of theGroup manages and monitors such risk exposures to ensure such risks are contained within a prescribed scope.
The Company adopts sensitivity analysis techniques to analyze the possible effects of rational and probable changesin risk variables to profit or loss for the period or to the interests of shareholders. Since risk variables seldom change ona stand-alone basis, while the correlation between variables may have significant influence to the ultimate amount ofchange effected by the change in a single risk variable, the analysis below is based on the assumption that the changes ineach variable occurred separately.
1. Objectives and policies of risk management
The Group engages in risk management with the aim of achieving an appropriate balance between risk and return,where the negative effects of risks against the Group’s operating results are minimized, in order to maximize the benefitsof shareholders and other stakeholders. Based on such objective in risk management, the underlying strategy of theGroup’s risk management is to ascertain and analyze all types of risks exposures of the Group, establish appropriate risktolerance thresholds, carry out risk management procedures and perform risk monitoring on all kinds of risks in a timelyand reliable manner, thus containing risk exposures within a prescribed scope.1.1 Market risks
1.1.1. Foreign exchange risks
Foreign exchange risks refer to the risk that losses will occur because of changes in foreign exchange rates. TheCompany is primarily exposed to risks relating to the currencies such as USD and EUR. The Group’s subsidiaries in themainland of China whose procurement, sales and financing are denominated in RMB, USD and EUR, other principalactivities are settled in RMB. The Group’s subsidiaries in Hong Kong and outside China are principally engaged inprocurement, sales, financing and other major business activities in local currencies such as USD, EUR, GBP, RUB, andetc.
As of December 31
st
2018, except for monetary items of foreign currencies set out in Note (V) 53, the Groupmainly adopted the functional currency of each of its subsidiary to present the balance of its assets and liabilities. Theforeign exchange risks arising from assets and liabilities denominated in USD and EUR (which has been converted intoRMB) as follows may generate significant impact on the operating results of the Group.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Unit: RMB
Currencies
| Currencies | Assets | Liabilities | ||
| Closing balance | Opening balance | Closing balance | Opening balance | |
| USD | 7,053,425,866.47 | 6,919,071,811.35 | 1,526,559,782.05 | 1,336,240,339.97 |
| EUR | 391,028,998.28 | 288,885,022.47 | 3,172,727,888.37 | 3,154,534,018.51 |
The Group has been paying close attention to the effect of fluctuation in exchange rate on the foreign exchange risks ofthe Group, and has purchased forward foreign exchange contracts to mitigate the foreign exchange risk exposure.
Sensitivity analysis on exchange rate risk
With other variables unchanged, the exchange rate might float within a reasonable range, and has the followingbefore-tax effect on profit or loss and shareholders’ equity for the current period:
Unit: RMB
| Change in foreign exchange rates | 2018 | 2017 | ||
| Effect on profit | Effect on shareholders’ equity | Effect on profit | Effect on shareholders’ equity | |
| 5% appreciation of USD against functional currency | 276,343,304.22 | 276,343,304.22 | 279,141,573.57 | 279,141,573.57 |
| 5% depreciation of USD against functional currency | (276,343,304.22) | (276,343,304.22) | (279,141,573.57) | (279,141,573.57) |
| 5% appreciation of EUR against functional currency | (139,084,944.50) | (139,084,944.50) | (143,282,449.80) | (143,282,449.80) |
| 5% depreciation of EUR against functional currency | 139,084,944.50 | 139,084,944.50 | 143,282,449.80 | 143,282,449.80 |
1.1.2. Interest rate risk－risk related to changes in cash flow
.The Group's risk related to changes in the cash flow of financial instruments due to changes in interest rates is mainlyrelated to floating interest rate bank borrowings. The Group's policy is to maintain the floating rate of these borrowingsto eliminate the risk of changes in the fair value of interest rates.
The Group's amount of borrowings with floating interest rate at the end of the year was not significant, and the risk ofchanges in cash flows of financial instruments due to changes in interest rates was relatively low. Therefore, Interest raterisk sensitivity analysis was not conducted.
1.2 Credit risk
As of December 31
st
2018, the biggest credit risk exposure that may cause financial loss suffered by the Group wasmainly due to the other party’s inability to fulfill obligations that caused the loss on the Group’s financial assets,which include:
The book value of a confirmed financial asset in the consolidated balance sheet : for those financial instruments thatare measured by fair value, the book value reflects its risk exposure rather than its biggest risk exposure, the biggestrisk exposure will change as the future fair value changes.
In order to minimize credit risk, the Group has established a team responsible for formulating credit limit, creditapproval and implementing other monitoring procedures to ensure necessary follow-up measures are carried out torecover the overdue debts. In addition, the Group reviews the recovery of each individual receivable at each balancesheet date to ensure that sufficient provision for bad debts is made for uncollectible funds. As such, themanagement of the Group believes that the Group’s exposure to credit risk has been significantly lowered.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
The Group only deposits cash and cash equivalents into banks with relatively high level of credit rating; as such therisk of cash and cash equivalents is low.
The Group has adopted necessary policies to ensure that all the sales customers have good credit records. Since theGroup’s risk exposure exists in several parties to the contract and certain customers, the Group has no othersignificant concentration of credit risk.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
1.3. Liquidity risk
The Group maintains and monitors a level of cash and cash equivalents deemed adequate by the managementto meet the operation needs of the Group and to reduce the effect of cash flow movements when managing liquidityrisk. The management of the Company monitors the usage of bank borrowings, and ensures compliance withborrowing agreements.
According to the term to maturity of non-discounted and remaining contract obligations, the financial liabilitiesheld by the Group are analyzed as below:
Unit：RMB
December 31
st
2018
| December 31st 2018 | ||||
| Within one year | 1-5 years | More than five years | Total | |
| Non-derivative financial liabilities | ||||
| Short-term borrowings | 3,574,343,151.20 | - | - | 3,574,343,151.20 |
| Notes payable & Accounts payable | 10,765,145,485.74 | - | - | 10,765,145,485.74 |
| Other payables | 2,953,203,190.99 | - | - | 2,953,203,190.99 |
| Other current liabilities | 364,984,759.94 | - | - | 364,984,759.94 |
| Bonds payable | 3,178,156,500.00 | - | - | 3,178,156,500.00 |
| Long-term borrowings | 16,269,458.68 | 301,148,355.56 | 192,697,383.33 | 510,115,197.57 |
| Long-term payables | 2,458,683.54 | - | - | 2,458,683.54 |
| Derivative financial liabilities | ||||
| Forward foreign exchange contracts- settled in the gross amount | ||||
| - Cash inflow | 181,663,617.62 | - | - | 181,663,617.62 |
| - Cash outflow | 181,954,616.05 | - | - | 181,954,616.05 |
| - Net cash outflow | 290,998.43 | - | - | 290,998.43 |
IX. Fair value disclosure
1. The financial assets and financial liabilities measured at fair value at the end of the reporting period
Unit：RMB
| Items | Closing fair value | |||
| Level 1 | Level 2 | Level 3 | Total | |
| I. Continuous fair value measurement | - | 1,569,052.16 | - | 1,569,052.16 |
| (I) Financial assets at fair value through profit and loss | ||||
| 1. Tradable Financial Assets | - | 1,860,050.59 | - | 1,860,050.59 |
| -- Derivative financial assets | - | 1,860,050.59 | - | 1,860,050.59 |
| Total assets measured continuously at fair value | - | 1,860,050.59 | - | 1,860,050.59 |
| (II) Tradable Financial Liabilities | ||||
| - Derivative financial liabilities | - | 290,998.43 | - | 290,998.43 |
| Total liabilities measured continuously at fair value | - | 290,998.43 | - | 290,998.43 |
2. Information on the estimation technique and important parameters adopted as for continuous Level 2 fair
value measurement items
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Unit: RMB
| Fair value at December 31st 2018 | Estimation technique | Inputs | |
| Forward Foreign Exchange Contracts (Assets) | 1,860,050.59 | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparties |
| Forward Foreign Exchange Contracts (Liabilities) | (187,498.43) | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparties |
| Foreign Exchange Structured Options (Liabilities) | (103,500.00) | Discounted cash flow approach | Forward exchange rate Discounted rate that reflects the credit risk of counterparties |
3. Items measured at continuous fair value. There were no transfers between levels for the current reporting
period. There was no estimation technique change for the current reporting period
4. Fair values of financial assets and financial liabilities that not measured at fair value
The Group’s management believes that the carrying amounts of financial assets and financial liabilities stated incurrent assets and current liabilities in financial statements approximate to their respective fair values.
The financial liabilities which are not subsequently measured at fair values by the Group include long-termborrowings, bonds payable and long-term payables, and the differences between their carrying amounts and theirrespective fair values are insignificant.
X. Related parties and related-party transactions
1. Information on parent company of the Company
| Name | Place of registration | Nature of business | Registered capital | Shareholding ratio of parent company in the Company (%) | Percentage of voting rights of parent company to the Company (%) |
| China Electronics Technology HIK Group Co., Ltd. (CETHIK) | Hangzhou, Zhejiang | Industrial investment | RMB 660 million | 39.60 | 39.60 |
The ultimate controlling party of the Company is China Electronics Technology Group Co., Ltd. ("CETE").
2. Information on the subsidiaries of the Company
For details of the subsidiaries of the Company, see Note (VII).
3. Information on the joint ventures and associated companies of the Company
For details of the associated companies of the Company, see Note (V) 11.
4. Information on other related parties
| Name | Relationship |
| Gong Hongjia | Director of the company, holds 13.60% of the share of the Company |
| Shanghai Fullhan Microelectronics Co., Ltd. (Shanghai Fullhan Micro) | Gong Hongjia or his relative(s) serve(s) as the director(s) |
| Zhejiang Tuxun Technology Co.,Ltd. (Zhejiang Tuxun) | The Group’s senior management serve(s) as director(s) of this company (Note 1) |
| Confirmware Technology(Hangzhou) Co., Ltd. (Hangzhou Confirmware) | The Group’s senior management serve(s) as director(s) of this company |
| Beijing Woqi Co., Ltd.(Beijing Woqi) | Gong Hongjia or his relative(s) serve(s) as the director(s) (Note 2) |
| Wuhu Sensor Technology Co., Ltd. (Wuhu SensorTech) | Associated company of the Group |
| Maxio Technology (Hangzhou) Ltd. and its subsidiaries (Maxio Technology and its subsidiaries) | Associated company of the Group |
| Zhiguang Hailian Big Data Technology Ltd. (Zhiguang Hailian) | Associated company of the Group |
| Subsidiaries of CETE (Note 3) | Under common control of the ultimate controlling party of the Company |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Note 1: Due to the departure of the senior management of the Group, and this reporting year is the year of departure,Zhejiang Tuxun was still identified as a related party of the Group for the current reporting year.
Note 2: Mr Gong Hongjia left Beijing Woqi as a director in November 2016. The year of 2017 is the subsequent oneyear after Gong left his post; therefore, Beijing Woqi was still regarded as the Group's related party in 2017. It was nolonger regarded as the Group’s related party in the current reporting period.
Note 3: Subsidiaries of CETC, excluding Hikvision and its subsidiaries.
5. Related party transactions
(1) Related party transactions regarding sales and purchases of goods, provision of services and receiving services
Purchase of commodities / receiving of services:
Unit: RMB
Related party
| Related party | Transaction type | Amount for 2018 | Amount for 2017 |
| Subsidiaries of CETE | Purchase of materials and receiving of services | 300,540,055.04 | 215,050,909.52 |
| Shanghai Fullhan Micro | Purchase of materials and receiving of services | 268,000,337.28 | 219,306,864.78 |
| Maxio Technology and its subsidiaries | Purchase of materials and receiving of services | 52,129,576.75 | 23,702,468.99 |
| Wuhu SensorTech | Purchase of materials and receiving of services | 45,607,202.32 | 31,125,042.77 |
| Beijing Woqi | Purchase of materials | Not applicable | 4,441,973.51 |
| Total | 666,277,171.39 | 493,627,259.57 |
Sales of commodities / rendering of services:
Unit: RMB
| Related party | Transaction content | Amount for 2018 | Amount for 2017 |
| Subsidiaries of CETE | Sales of products and rendering of services | 501,207,585.45 | 796,423,974.48 |
| Wuhu Sensor Tech | Sales of products | 2,934,921.28 | 985,868.39 |
| Zhejiang Tuxun | Sales of products | 1,368,910.39 | 1,474,411.13 |
| Zhiguang Hailian | Sales of products | 1,259,520.66 | - |
| Hangzhou Confirmware | Sales of products | 779,678.00 | 370,341.82 |
| Maxio Technology and its subsidiaries | Sales of products | 39,051.29 | 7,068.37 |
| Total | 507,589,667.07 | 799,261,664.19 |
Statement of capital deposits:
Unit: RMB
| Related Party | Content of related party transaction | Amount occurred in 2018 | Balance at the end of the current period | Amount occurred in 2017 | Opening Balance |
| Subsidiaries of CETE (Note) | Deposit into fixed deposits | 3,000,000,000.00 | 4,000,000,000.00 | 1,000,000,000.00 | 1,000,000,000.00 |
| Subsidiaries of CETE (Note) | Deposit into call deposits | (500,000,000.00) | - | 500,000,000.00 | 500,000,000.00 |
| Total | 2,500,000,000.00 | 4,000,000,000.00 | 1,500,000,000.00 | 1,500,000,000.00 |
Note: the fixed deposits and call deposits that the Group deposited into China Electronic Technology Finance Co., Ltd.
The above transactions are executed at market prices.
(2) Guaranteed by the related party
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
As required by the project owner, China Electronics Technology Group Co., Ltd. has provided a joint guarantee toresponsibility and duties of construction projects of “Safe Chongqing, Emergency Control System Digital ConstructionProject”, including 41 districts and counties, signed by Chongqing Hikvision System Technology Co., Ltd. (ChongqingSystem) Meanwhile, the Company provides a counter guarantee to China Electronics Technology Group Co., Ltd.
(3) Remuneration of key management personnel
Unit: RMB
Item
| Item | Amount for the current year | Amount for the prior year |
| Compensation of key management personnel | 45,672,000.00 | 43,518,890.00 |
(4) Other related party transactions
Prior reporting year:
Pursuant to resolution of the Company’s 21
st
meeting of the 3
rd
session of the Board on January 18
th
2017, theCompany’s subsidiary Hangzhou Hikvision Automotive Electronics acquired the parent company CETHIK’s assetgroup with RMB 79.41 million in cash, including RMB 32,700,579.89 in inventories, net of RMB 37,747,049.94 incredit and debt, RMB 3,966,381.68 in fixed assets, and RMB 5,000,000.00 in prepaid expenses
6. Receivables from related parties and payables to related parties
(1) Receivables from related parties
Unit: RMB
| Item | Related Party | Closing balance | Opening balance | ||
| Carrying balance | Bad debt provision | Carrying balance | Bad debt provision | ||
| Accounts receivable | Subsidiaries of CETE | 707,471,470.74 | 38,564,084.85 | 764,292,224.05 | 39,661,148.57 |
| Accounts receivable | Zhejiang Tuxun | 345,738.04 | 17,286.90 | 833,986.98 | 41,699.35 |
| Accounts receivable | Hangzhou Confirmware | 298,619.99 | 15,611.00 | 21,219.99 | 1,197.00 |
| Accounts receivable | Zhiguang Hailian | 986,160.75 | 49,308.04 | - | - |
| Total | 709,101,989.52 | 38,646,290.79 | 765,147,431.02 | 39,704,044.92 | |
| Notes receivable | Subsidiaries of CETE (Note) | 60,983,163.83 | - | - | - |
| Notes receivable | Hangzhou Confirmware | 150,000.00 | - | - | - |
| Total | 61,133,163.83 | - | - | - | |
| Other receivables | Maxio Technology and its subsidiaries | - | - | 13,500,000.00 | 675,000.00 |
| Total | - | - | 13,500,000.00 | 675,000.00 | |
| Prepayments | Subsidiaries of CETE | 13,328,415.31 | - | - | - |
| Prepayments | Maxio Technology and its subsidiaries | - | - | 5,201,444.41 | - |
| Total | 13,328,415.31 | - | 5,201,444.41 | - | |
Note: the RMB 30,440,529.78 portion of the notes receivable is the acceptance note of the related party, who is the issuer ofthe note, and the former endorser is a non-associated third party.
(2) Payables to related parties
Unit: RMB
| Item | Related Party | Closing balance | Opening balance |
| Accounts payable | Subsidiaries of CETE | 166,845,140.44 | 160,186,487.11 |
| Accounts payable | Shanghai Fullhan Micro | 106,744,509.28 | 103,732,194.30 |
| Accounts payable | Wuhu Sensor Tech | 5,944,535.61 | 14,496,160.00 |
| Accounts payable | Beijing Woqi | Not applicable | 1,301,025.64 |
| Accounts payable | Maxio Technology and its subsidiaries | - | 117,563.33 |
| Total | 279,534,185.33 | 279,833,430.38 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Item
| Item | Related Party | Closing balance | Opening balance |
| Notes Payable | Shanghai Fullhan Micro | 13,838,900.00 | - |
| Total | 13,838,900.00 | - | |
| Receipts in advance | Subsidiaries of CETE | 2,306,953.47 | 1,647,988.21 |
| Total | 2,306,953.47 | 1,647,988.21 | |
| Other payables | Subsidiaries of CETE | 63,683,807.94 | 73,881,697.00 |
| Other payables | Shanghai Fullhan Micro | 100,000.00 | 100,000.00 |
| Other payables | Wuhu Sensor Tech | 50,000.00 | - |
| Other payables | Zhejiang Tuxun | 9,290.00 | - |
| Other payables | Beijing Woqi | Not applicable | 150,000.00 |
| Total | 63,843,097.94 | 74,131,697.00 |
XI. Share-based payments
1. Overview of share-based payments
According to the “Approval of the Implementation of the Restrictive Share Incentive Scheme of HangzhouHikvision Digital Technology Co., Ltd. (关于杭州海康威视数字技术股份有限公司实施限制性股票激励计划的批复)” (Guo Zi Fen Pei [2012] No. 426) issued by the State-owned Assets Supervision and AdministrationCommission of the State Council and the “Opinion the Restrictive Share Incentive Scheme of HangzhouHikvision Digital Technology Co., Ltd. (关于杭州海康威视数字技术股份有限公司限制性股票激励计划的意见)” (Shang Shi Bu Han [2012] No. 353) issued by China Securities Regulatory Commission, the Companyconvened the ninth meeting of the second session of the Board of Directors on July 25
th
2012 and the firstextraordinary general meeting for 2012 on August 13
th
2012, whereat the Proposal Relating to the RestrictiveShare Scheme (Amendments to the Draft) of the Company and Highlights was reviewed and passed. Thepurpose of the Share Incentive Scheme is to: further improve the Company’s governance structure to establish agood and balanced value allocation system; establish a profit-sharing and restriction mechanism amongshareholders, the Company and its employees, so as to provide shareholders with sustainable return; fullymobilize the positivity of core employees to support the Company in realizing its strategies and long-termsustainable development; attract and retain core employees to ensure the Company’s long-term development.
The Scheme shall be effective for a term of 10 years commencing from the date of approval by general meetingof the Company, during which the Company may grant restricted shares to grantees under the Scheme. Inprinciple, each grant should be at an interval of two years. After the expiry of the Scheme, no restricted sharescould be granted to grantees under the Scheme. However, all the provisions of the Scheme remain valid to therestricted shares granted under the Scheme.
The total number of subject Shares related to the Restricted Shares granted under the Scheme (excluding lapsedrestricted shares) and the total number of subject Shares related to other effective share incentive schemes of theCompany (if any) in aggregate shall not exceed 10% of the total issued share capital of the Company. Unlessapproval is obtained at the general meeting by way of special resolution, the total number of Restricted Sharesgranted or to be granted to any Participant under this Scheme or other effective share incentive schemes of theCompany (if any) in aggregate shall not exceed 1% of the total issued share capital of the Company.
The grant price for restricted shares, being the purchase price by staff, shall be determined by the Board ofDirectors. The grant price shall not be lower than 50% of the following price, whichever is the highest:
(I) The closing price of the subject shares of the Company for one trading day prior to publication of thesummary Share Incentive Scheme draft;(II) The average closing price of the subject shares of the Company for 30 trading days prior to publication ofthe summary Share Incentive Scheme draft;(III) The average price of the subject shares of the Company for 20 trading days prior to publication of thesummary Share Incentive Scheme draft; or(IV) The unit nominal value of the subject shares of the Company.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Each batch of restricted shares shall not be unlocked unless fulfilling, each time, by the Company its unlockperformance criteria (including net asset yield and operating income growth rate), and by grantees’ individualperformance criteria simultaneously. Where, during any year of the unlocking period, any one or more unlockcriteria for the Company or individuals is or are not fulfilled, such portion of subject shares shall be cancelled,and no grantees shall be entitled to make another application for unlocking those subject shares in the futureyears. The cancelled restricted shares will be repurchased by the Company based on the grant price.
On August 23
rd
2012, after consideration and approval by the general meeting, the Company granted 8,611,611restricted shares to grantees at a grant price of RMB 10.65 per share (“2012 Share Incentive Scheme”). TheLock-up Period of the Subject Shares shall last for a period of 24 months commencing on the grant date, duringwhich the Subject Shares granted to grantees under the scheme shall be subject to lock-up and shall not betransferable. The Unlocking Period shall be the 24 to 60 months following the grant of restricted shares(including Lock-up Period), during which grantees may, subject to unlocking conditions stipulated by thescheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 monthsfollowing the grant date and the number of shares to be unlocked shall be 1/3 of the aggregate number of theSubject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date andthe number of shares to be unlocked shall be 1/3 of the aggregate number of the Subject Shares granted; thethird unlocking period shall be the 48 to 60 months following the grant date and the number of shares to beunlocked shall be 1/3 of the aggregate number of the Subject Shares granted. As of December 31
st
2016, the2012 restricted incentive shares scheme had been completed.
On October 24
th
2014, after consideration and approval by the general meeting, the Company granted52,910,082 restricted shares to grantees at a grant price of RMB 9.25 per share (“2014 Share IncentiveScheme”). The Lock-up Period of the Subject Shares shall last for a period of 24 months commencing on thegrant date, during which the Subject Shares granted to grantees under the scheme shall be subject to lock-up andshall not be transferable. The Unlocking Period shall be the 24 to 60 months following the grant of restrictedshares (including Lock-up Period), during which grantees may, subject to unlocking conditions stipulated by thescheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 monthsfollowing the grant date and the number of shares to be unlocked shall be 40% of the aggregate number of theSubject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date andthe number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted; thethird unlocking period shall be the 48 to 60 months following the grant date and the number of shares to beunlocked shall be 30% of the aggregate number of the Subject Shares granted. As of December 31
st
2018, therestricted stock granted in 2014 has all vested.
On December 23
rd
2016, after consideration and approval by the general meeting, the Company granted52,326,858 restricted shares to grantees at a grant price of RMB 12.63 per share (“2016 Share IncentiveScheme”). The Lock-up Period of the Subject Shares shall last for a period of 24 months commencing on thegrant date, during which the Subject Shares granted to grantees under the scheme shall be subject to lock-up andshall not be transferable. The Unlocking Period shall be the 24 to 60 months following the grant of restrictedshares (including Lock-up Period), during which grantees may, subject to unlocking conditions stipulated by thescheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 monthsfollowing the grant date and the number of shares to be unlocked shall be 40% of the aggregate number of theSubject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date andthe number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted; thethird unlocking period shall be the 48 to 60 months following the grant date and the number of shares to beunlocked shall be 30% of the aggregate number of the Subject Shares granted.
On December 20
th
2018, authorized by the 2
nd
extraordinary general meeting of 2018 and reviewed by the boardof directors, the Company granted 121,195,458 restricted shares to grantees at a grant price of RMB 16.98 pershare (“2018 Share Incentive Scheme”). The Lock-up Period of the Subject Shares shall last for a period of 24months commencing on the grant date, during which the Subject Shares granted to grantees under the schemeshall be subject to lock-up and are not transferable. The Unlocking Period shall be the 24 to 60 monthsfollowing the grant of restricted shares (including Lock-up Period), during which grantees may, subject tounlocking conditions stipulated by the scheme being satisfied, apply for unlocking in 3 tranches: the firstunlocking period shall be the 24 to 36 months following the grant date and the number of shares to be unlockedshall be 40% of the aggregate number of the Subject Shares granted; the second unlocking period shall be the 36to 48 months following the grant date and the number of shares to be unlocked shall be 30% of the aggregatenumber of the Subject Shares granted; the third unlocking period shall be the 48 to 60 months following the
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
grant date and the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Sharesgranted. The restricted shares of 2018 equity incentives have completed the share registration work in January2019.
Unit: share
2014 Share Incentive Scheme
| 2014 Share Incentive Scheme | 2018 | 2017 |
| Total of equity instruments outstanding at the beginning of the reporting period | 33,932,161 | 46,220,473 |
| Total of equity instruments granted during the current reporting period | - | 23,110,236 |
| Total of equity instruments vested during the current reporting period | 33,422,536 | 33,803,907 |
| Total of equity instruments forfeited during the current reporting period (Note) | 509,625 | 1,594,641 |
| Total of equity instruments outstanding at the end of the reporting period | - | 33,932,161 |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | - | RMB 4.11 per share and 22 months |
Note: on December 26
th
2018, pursuant to the revised Articles of Association and resolutions of the 26
th
general meetingof 3
rd
session board, and approved by the 2
nd
extraordinary general meeting of 2016, the Company repurchased andcancelled 509,625 granted and unvested restricted RMB treasury shares in cash settlement. As of the reporting date, theCompany has not completed the registration procedures for industrial and commercial changes.
On December 15
th
2017, pursuant to the revised articles of association and resolutions of the 26
th
general meeting of 3
rd
session board, and approved by the 2
nd
extraordinary general meeting of 2016, the Company repurchased and cancelled1,594,641 granted and unvested restricted RMB treasury shares in cash settlement. The company completed the businesschange registration procedure on March 27
th
2018.
Unit: share
| 2016 Share Incentive Scheme | 2018 | 2017 |
| Total of equity instruments outstanding at the beginning of the reporting period | 78,490,287 | 52,326,858 |
| Total of equity instruments granted (share dividend) during the current reporting period | 26,163,429 | |
| Total of equity instruments vested during the current reporting period | 30,140,165 | - |
| Total of equity instruments forfeited during the current reporting period | 2,945,610 | - |
| Total of equity instruments outstanding at the end of the reporting period | 45,404,512 | 78,490,287 |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | RMB 8.42 per share and 36 months | RMB 8.42 per share and 48 months |
Note: on December 26
th
2018, pursuant to the revised Articles of Association and resolutions of the 26
th
general meetingof 3
rd
session board, and approved by the 2
nd
extraordinary general meeting of 2016, the Company repurchased andcancelled 2,945,610 granted and unvested restricted RMB treasury shares in cash settlement. As of the reporting date,the Company has not completed the registration procedures for industrial and commercial changes.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Unit: share
2018 Share Incentive Scheme
| 2018 Share Incentive Scheme | 2018 | 2017 |
| Total of equity instruments outstanding at the beginning of the reporting period | - | - |
| Total of equity instruments granted (share dividend) during the current reporting period | 121,195,458 | - |
| Total of equity instruments vested during the current reporting period | - | - |
| Total of equity instruments forfeited during the current reporting period | - | - |
| Total of equity instruments outstanding at the end of the reporting period | 121,195,458 | - |
| The exercise price (ex-rights) of the outstanding Share-based payments of the Company at the end of the reporting period and the remaining period of the contract | RMB 16.98 per share and 60 months | Not applicable |
2. Information of the share-based payment through equity settlements
Unit: RMB
| 2014 Share Incentive Scheme | 2016 Share Incentive Scheme | 2018 Share Incentive Scheme | |
| Method of determine the fair value of equity instruments at the grant date | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period | Determined based on stock price at the grant date and the costs of restricted shares during Lock-up Period |
| Recognition basis of the number of the equity instruments qualified for vesting | Determined based on the results estimation of each vesting period | Determined based on the results estimation of each release period | Determined based on the results estimation of each release period |
| Reasons of the significant difference between the estimates of the current reporting period with that of the prior year | None | None | None |
| Accumulative amount of share-based payment through equity settlement and further included in the capital reserve | 363,191,911.52 | 263,798,391.62 | - |
| Total amount of the expenses recognized according to share-based payment through equity settlement in the current reporting period | 20,516,570.66 | 124,951,610.62 | - |
3. There is no share-based payment through cash settlements
XII. Commitments and contingencies
1. Significant commitments
(1) Capital commitments
Unit: RMB’000
| Closing balance | Opening balance | |
| Contracted but not yet recognized in financial statements | ||
| - Commitment on construction of long-term assets | 10,420,984 | 11,641,286 |
| Total | 10,420,984 | 11,641,286 |
(2) Operating lease commitments
As of the balance sheet date, the Group had the following external commitments in respect of non-cancellableoperating leases:
Unit: RMB’000
| Closing balance | Opening balance | |
| Minimum lease payments under non-cancellable operating leases: | ||
| First year subsequent to the balance sheet date | 182,124 | 93,006 |
| Second year subsequent to the balance sheet date | 139,759 | 49,061 |
| Third year subsequent to the balance sheet date | 98,017 | 33,185 |
| Subsequent years | 117,099 | 72,516 |
| Total | 536,999 | 247,768 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(3) As of December 31
st
2018, the Group has no other significant commitments need to be disclosed.
2. Contingencies
The Group has no significant contingencies to be disclosed.
XIII. Events after the balance sheet date
1. Significant unadjusted events
The Group did not have any significant unadjusted events after the balance sheet date.
2. Profit DistributionPursuant to the proposal of the 10
th
meeting of the 4
th
session Board of Directors on April 18
th
2019, theCompany proposed to distribute cash dividend of RMB 6 (tax inclusive) per each 10 shares to all shareholders,the above dividend distribution plan is still subject to the approval of the general meeting of shareholders.
XIV. Other significant events
1. Segment information
1.1 Report segment determining and accounting policy
According to the Group's internal organization structure, management requirements and internal reportprinciples, the Group has only one operating segment, which is the research and development, production andsales of video products and video services.
1.2 Segment financial reporting
External revenue by product or business segmentsUnit: RMB
Item
| Item | Amount for 2018 | ||
| Operating income | Operating cost | ||
| Video Surveillance Products | Front-end equipment | 24,083,382,887.01 | 12,054,070,919.03 |
| Back-end equipment | 6,779,290,973.76 | 3,603,440,284.98 | |
| Central control equipment | 7,323,448,788.51 | 3,380,634,705.16 | |
| Constructions | 2,285,061,427.63 | 2,008,019,572.05 | |
| Other products | 6,126,744,641.73 | 4,563,387,865.73 | |
| Innovative Business Products | Smart home business products | 1,636,697,390.22 | 997,681,210.62 |
| Other innovative business products | 1,060,561,642.36 | 588,994,979.45 | |
| Total | 49,295,187,751.22 | 27,196,229,537.02 | |
Unit: RMB
| Item | Amount for 2017 | ||
| Operating income | Operating cost | ||
| Video Surveillance Products | Front-end equipment | 21,090,230,299.49 | 10,354,906,543.30 |
| Back-end equipment | 6,151,038,063.70 | 3,164,186,804.35 | |
| Central control equipment | 5,073,899,931.95 | 2,320,570,446.43 | |
| Constructions | 2,540,799,165.58 | 2,280,617,025.82 | |
| Other products | 4,922,315,386.82 | 4,107,887,599.67 | |
| Innovative Business Products | Smart home business products | 1,090,629,830.13 | 708,022,298.25 |
| Other innovative business products | 564,580,293.97 | 345,446,563.98 | |
| Total | 41,433,492,971.64 | 23,281,637,281.80 | |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
External revenue by geographical area & non-current assets by geographical locationUnit: RMB
Item
| Item | 2018 | 2017 |
| External revenue generated in domestic area | 35,646,435,049.93 | 29,661,186,316.32 |
| External revenue generated in overseas area | 14,190,697,431.68 | 12,244,290,255.75 |
| Total | 49,837,132,481.61 | 41,905,476,572.07 |
Unit: RMB
| Item (Note) | Closing balance | Opening balance |
| Non-current assets in domestic area | 7,810,496,315.84 | 5,676,079,020.66 |
| Non-current assets in overseas area | 352,944,245.80 | 321,187,347.68 |
| Total | 8,163,440,561.64 | 5,997,266,368.34 |
Note: the non-current assets above did not include available-for-sale financial assets, long-term receivables, long-term
equity investment, and deferred tax assets.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
XV. Notes to major items of financial statements of the parent company
1. Notes receivable & Accounts receivable
1.1 Categories
Unit: RMB
Item
| Item | Closing balance | Opening balance |
| Notes payable | 351,793,632.24 | 345,651,612.11 |
| Accounts payable | 15,204,519,161.71 | 12,505,683,317.78 |
| Total | 15,556,312,793.95 | 12,851,334,929.89 |
1.2 Notes receivable(1) Notes receivable by categories
Unit: RMB
| Item | Closing balance | Opening balance |
| Bank acceptance bill | 230,388,838.47 | 342,025,770.11 |
| Commercial acceptance bill | 121,404,793.77 | 3,625,842.00 |
| Total | 351,793,632.24 | 345,651,612.11 |
(2) As of December 31
st
2018, the Company does not have pledged notes receivable.
(3) Notes receivable endorsed or discounted by the Company at the closing of the reporting period.
Unit: RMB
| Category | Derecognized amount by December 31st 2018 | Not Derecognized amount by December 31st 2018 |
| Bank acceptance bill | 785,251,824.92 | - |
| Commercial acceptance bill | - | 94,097,879.36 |
| Total | 785,251,824.92 | 94,097,879.36 |
(4) As of December 31
st
2018, the Company has no such case as transferring the defaulted notes receivable into accounts receivable.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
1.3 Accounts receivable
(1) Accounts receivable disclosed by categories:
Unit: RMB
Category
| Category | Closing balance | Opening balance | ||||||||
| Carrying balance | Bad debt provision | Carrying value | Carrying balance | Bad debt provision | Carrying value | |||||
| Amount | Percentage (%) | Amount | Percentage (%) | Amount | Amount | Percentage (%) | Amount | Percentage (%) | 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 basis for credit risk. | 16,178,600,865.87 | 100.00 | 974,081,704.16 | 6.02 | 15,204,519,161.71 | 13,338,459,657.76 | 100.00 | 832,776,339.98 | 6.24 | 12,505,683,317.78 |
| Accounts receivable that are not individually significant but for which bad debt provision has been assessed individually | - | - | - | - | - | - | - | - | - | - |
| Total | 16,178,600,865.87 | 100.00 | 974,081,704.16 | 6.02 | 15,204,519,161.71 | 13,338,459,657.76 | 100.00 | 832,776,339.98 | 6.24 | 12,505,683,317.78 |
The Group categorizes accounts receivable in an amount above RMB 4 million and representing more than 10% of the total accounts receivable closing balance as account receivablethat is individually significant.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
In the portfolio, bad debt provision of accounts receivable by aging analysis:
Unit: RMB
Aging
| Aging | Closing balance | ||
| Amount | Bad debt provision | Percentage (%) | |
| Within 1 year | 15,618,344,356.51 | 780,917,217.81 | 5.00 |
| 1–2 years | 282,387,660.08 | 28,238,766.01 | 10.00 |
| 2–3 years | 106,736,251.95 | 32,020,875.59 | 30.00 |
| 3–4 years | 62,667,629.31 | 31,333,814.66 | 50.00 |
| 4–5 years | 34,469,689.66 | 27,575,751.73 | 80.00 |
| Over 5 years | 73,995,278.36 | 73,995,278.36 | 100.00 |
| Total | 16,178,600,865.87 | 974,081,704.16 | 6.02 |
(2) Bad debt provision provided, recovered or reversed during the current reporting period
The amount of bad debt provision in the current reporting period was RMB 147,157,266.25, and the reversedbad debt provision was nil.
(3) Accounts receivable actually written off in the current reporting period.
The accounts receivable actually written off in the current reporting period was RMB 5,851,902.07.
(4) The top five debtors of accounts receivables in terms of closing balance.
Unit: RMB
| Company name | Relationship with the Company | Carrying balance | Closing balance of bad debt provision | Proportion of closing balance of accounts receivables in total (%) |
| Subsidiary A | Subsidiary | 13,264,295,223.05 | 663,214,761.15 | 81.99 |
| Company H | Third party | 54,576,118.62 | 38,356,947.73 | 0.34 |
| Company I | Third party | 52,537,683.78 | 3,792,132.07 | 0.32 |
| Subsidiary J | Third party | 46,042,296.46 | 2,337,255.32 | 0.28 |
| Company K | Third party | 43,853,937.29 | 2,372,390.05 | 0.27 |
| Total | 13,461,305,259.20 | 710,073,486.32 | 83.20 |
(5) At the end of the current reporting period, there is no account receivable derecognized due to the transfer
of financial assets.
(6) At the end of the current reporting period, there is no asset or liability formed by continuing involvement
in derecognized accounts receivables.
2. Other receivables
2.1 By categories
Unit：RMB
| Category | Closing balance | Opening Balance |
| Dividends receivable | 2,550,000.00 | 2,550,000.00 |
| Other receivables | 520,437,955.34 | 709,592,493.72 |
| Total | 522,987,955.34 | 712,142,493.72 |
2.2 Dividends receivable
Unit：RMB
| Invested company | Closing balance | Opening Balance |
| Hikvision’s subsidiaries | 2,550,000.00 | 2,550,000.00 |
| Total | 2,550,000.00 | 2,550,000.00 |
Note: Hikvision's subsidiaries are subsidiaries of the Company, as detailed in Note (VII).
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
2.3 Other receivables
(1) Other receivables disclosed by categories
Unit：RMB
Category
| Category | Closing balance | Opening balance | ||||||||
| Carrying amount | Bad debt provision | Carrying value | Carrying amount | Bad debt provision | Carrying value | |||||
| Amount | Percentage (%) | Amount | Percentage (%) | Amount | Amount | Percentage (%) | Amount | Percentage (%) | Amount | |
| 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 basis for credit risk | 571,652,208.08 | 100.00 | 51,214,252.74 | 8.96 | 520,437,955.34 | 764,252,803.59 | 100.00 | 54,660,309.87 | 7.15 | 709,592,493.72 |
| Other receivables that are not individually significant but for which bad debt provision has been assessed individually | - | - | - | - | - | - | - | - | - | - |
| Total | 571,652,208.08 | 100.00 | 51,214,252.74 | 8.96 | 520,437,955.34 | 764,252,803.59 | 100.00 | 54,660,309.87 | 7.15 | 709,592,493.72 |
The Group categorizes other receivable in an amount above RMB 4 million and representing more than 10% of the total other receivables closing balance as other receivable that isindividually significant.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
In the portfolio, bad debt provision of other receivables by aging analysis:
Unit：RMB
Aging
| Aging | Closing balance | ||
| Carrying amount | Bad debt provision | Percentage of appropriation (%) | |
| Within 1 year | 404,261,570.98 | 20,213,078.55 | 5.00 |
| 1–2 years | 116,909,408.52 | 11,690,940.85 | 10.00 |
| 2–3 years | 34,670,896.40 | 10,401,268.92 | 30.00 |
| 3–4 years | 12,485,671.08 | 6,242,835.54 | 50.00 |
| 4–5 years | 3,292,661.10 | 2,634,128.88 | 80.00 |
| Over 5 years | 32,000.00 | 32,000.00 | 100.00 |
| Total | 571,652,208.08 | 51,214,252.74 | 8.96 |
(2) Bad debt provision provided, recovered or reversed during the reporting period
The amount of bad debt reversed in the current reporting period was RMB 3,446,057.13, and the bad debtprovision was nil in the current reporting period.
(3) The actual write-off of other receivables for the current reporting period.
The write-off of other receivables in the current reporting period was nil.
(4) Other receivables by nature
Unit：RMB
| Nature | Closing balance | Opening balance |
| Temporary borrowing | 254,412,122.73 | 425,722,254.59 |
| Temporary payments for receivables | 235,499,619.96 | 240,668,412.28 |
| Guarantee deposit | 59,549,614.46 | 82,796,114.04 |
| Investment deposit | 20,000,000.00 | 13,500,000.00 |
| Others | 2,190,850.93 | 1,566,022.68 |
| Total | 571,652,208.08 | 764,252,803.59 |
(5) Top 5 debtors of other receivables in terms of closing balance
Unit：RMB
| The name of entity | Nature | Closing balance | Aging | Percentage to total other receivables (%) | Bad debt provision |
| Subsidiary B | Internal Payment | 105,397,167.54 | Within 1 year | 18.44 | 5,269,858.38 |
| Subsidiary C | Internal Payment | 56,603,506.70 | Within 1 year | 9.90 | 2,830,175.34 |
| Subsidiary D | Internal Payment | 27,606,933.41 | Within 1 year | 4.83 | 1,380,346.67 |
| Subsidiary E | Internal Payment | 17,733,732.34 | Within 1 year | 3.10 | 886,686.62 |
| Subsidiary F | Internal Payment | 14,034,552.93 | Within 1 year | 2.46 | 701,727.65 |
| Total | 221,375,892.92 | 38.73 | 11,068,794.66 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(6) At the end of the current reporting period, there were no other receivables derecognized due to the
transfer of financial assets.
(7) At the end of the current reporting period, there were no assets or liabilities formed by continuing
involvement in derecognized other receivables
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
3. Long-term equity investment
单位：人民币元
Item
| Item | Closing Balance | Opening Balance | ||||
| Book Balance | Provisions | Book Value | Book Balance | Provisions | Book Value | |
| Investment in subsidiaries | 4,317,555,407.77 | 73,816,351.77 | 4,243,739,056.00 | 3,282,467,782.66 | - | 3,282,467,782.66 |
| Inestments in associated enterprises and joint ventures | 117,408,339.90 | - | 117,408,339.90 | 84,608,952.29 | - | 84,608,952.29 |
| Total | 4,434,963,747.67 | 73,816,351.77 | 4,361,147,395.90 | 3,367,076,734.95 | - | 3,367,076,734.95 |
(1) Investment in subsidiaries
Unit：RMB
| Name of investee | Opening balance | Increase during the current reporting period | Decrease during the current reporting period | Closing balance | Provision for impairment losses for the current reporting period | Blance of impairment loss provision at the end of the current reporting period |
| Hangzhou Hikvision System Technology Ltd. | 719,263,965.23 | 25,955,856.57 | - | 745,219,821.80 | - | - |
| Hangzhou Hikvision Security Equipment Leasing Services Ltd. | 200,000,000.00 | - | - | 200,000,000.00 | - | - |
| Shanghai Goldway Intelligent Traffic System Ltd. | 23,000,000.00 | - | - | 23,000,000.00 | - | - |
| Chongqing Hikvision System Technology Ltd. | 200,000,000.00 | 500,000,000.00 | - | 700,000,000.00 | - | - |
| Hundure Technology (Shanghai) Ltd. | 37,247,790.28 | - | - | 37,247,790.28 | - | - |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Hangzhou EZVIZ Network Ltd.
| Hangzhou EZVIZ Network Ltd. | 6,040,138.16 | 601,537.44 | - | 6,641,675.60 | - | - |
| Hangzhou Haikang Zhicheng Investment and Development Ltd. | 24,000,000.00 | - | - | 24,000,000.00 | - | - |
| Hangzhou Hik Robotic Technology Ltd. | 54,825,970.00 | 32,576,855.23 | - | 87,402,825.23 | - | - |
| Hangzhou Hikvision Investment Management Ltd. | 100,000.00 | - | - | 100,000.00 | - | - |
| Hangzhou Hik Automotive Technology Ltd. | 92,346,510.60 | 48,467,007.52 | - | 140,813,518.12 | - | - |
| Hangzhou Hikvision Communication Technology Ltd. | 7,000,000.00 | - | - | 7,000,000.00 | - | - |
| Hangzhou Hik Weiying Sensory Technology Ltd. | 60,000,000.00 | - | - | 60,000,000.00 | - | - |
| HDT International Ltd. | 87,786.14 | - | - | 87,786.14 | - | - |
| Prama Hikvision Indian Private Limited | 1,585,696.80 | - | - | 1,585,696.80 | - | - |
| Hikvision International Co., Limited | 79,423.52 | - | - | 79,423.52 | - | - |
| Hikvision Australia Pty Ltd. | 2,866,850.00 | - | - | 2,866,850.00 | - | - |
| Hikvision Singapore Pte. Ltd | 1,900,590.00 | - | - | 1,900,590.00 | - | - |
| Hikvision South Africa (Pty) Ltd. | 1,578,650.00 | - | - | 1,578,650.00 | - | - |
| Hikvision Dubai FZE | 1,870,351.40 | - | - | 1,870,351.40 | - | - |
| Hikvision Brazil Participacoes Ltda. | 4,579,750.50 | - | - | 4,579,750.50 | - | - |
| Hikvision Limited Liability Company | 647,249.19 | - | - | 647,249.19 | - | - |
| Co?peratief Hikvision Europe U.A. | 65,485.53 | - | - | 65,485.53 | - | - |
| Hikvision Korea Limited | 1,535,850.00 | - | - | 1,535,850.00 | - | - |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Hikvision Colombia SAS
| Hikvision Colombia SAS | 1,337,440.00 | - | - | 1,337,440.00 | - | - |
| Hikvision Kazakhstan limited liability partnership | 4,758.69 | - | - | 4,758.69 | - | - |
| Hikvision Turkey Technology And Security Systems Commerce Corporation | 1,148,115.83 | - | - | 1,148,115.83 | - | |
| Chongqing Hikvision Science and Technology Ltd. | 100,000,000.00 | - | - | 100,000,000.00 | - | - |
| Hikvision USA, Inc. | 1,546,160.00 | - | - | 1,546,160.00 | - | - |
| Hikvision Canada, Inc. | 994,442.54 | - | - | 994,442.54 | - | - |
| Henan Hua’An Bao Quan Intelligent Development Ltd. | 67,475,000.00 | - | - | 67,475,000.00 | - | - |
| Beijing Hikvision Security and Protection Technology Service Ltd. | 10,000,000.00 | - | 10,000,000.00 | - | - | - |
| Henan Hik Hua’An Bao Quan Electronics Ltd. | 510,000.00 | - | - | 510,000.00 | - | - |
| Hangzhou Hikvision Science and Technology Ltd. | 1,015,206,036.40 | 5,535,926.89 | - | 1,020,741,963.29 | - | - |
| Hangzhou Hikvision Electronics Ltd. | 397,745,645.00 | - | - | 397,745,645.00 | - | - |
| Beijing Brainaire Storage Technology Ltd. | 95,878,126.85 | - | - | 95,878,126.85 | 73,816,351.77 | 73,816,351.77 |
| Tianjin Hikvision System Technology Ltd. | 10,000,000.00 | - | - | 10,000,000.00 | - | - |
| Wuhan HIK Storage Technology Ltd. | 60,000,000.00 | - | - | 60,000,000.00 | - | - |
| Chengdu Hikvision Digital Technology Ltd. | 80,000,000.00 | 220,000,000.00 | - | 300,000,000.00 | - | - |
| Hangzhou HIK Automotive Software Ltd. | - | 1,589,417.56 | - | 1,589,417.56 | - | - |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Hangzhou Haikang Intelligent TechnologyLtd.
| Hangzhou Haikang Intelligent Technology Ltd. | - | 438,438.67 | - | 438,438.67 | - | - |
| Hangzhou EZVIZ Software Ltd. | - | 3,739,571.23 | - | 3,739,571.23 | - | - |
| LLC Hikvision Tashkent | - | 833,014.00 | - | 833,014.00 | - | - |
| Xi’an Hikvision Digital Technology Ltd. | - | 50,000,000.00 | - | 50,000,000.00 | - | - |
| Wuhan Hikvision Technology Ltd. | - | 12,600,000.00 | - | 12,600,000.00 | - | - |
| Wuhan Hikvision Science and Technology Ltd. | - | 65,250,000.00 | - | 65,250,000.00 | - | - |
| Hangzhou Huiying Technology Ltd. | - | 48,000,000.00 | - | 48,000,000.00 | - | - |
| Guizhou Haikang Transportation Big Data Ltd. | - | 5,500,000.00 | - | 5,500,000.00 | - | - |
| Xinjiang CET Yihai Information Technology Ltd. | - | 24,000,000.00 | - | 24,000,000.00 | - | - |
| Total | 3,282,467,782.66 | 1,045,087,625.11 | 10,000,000.00 | 4,317,555,407.77 | 73,816,351.77 | 73,816,351.77 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
(2) Inestments in associated enterprises and joint ventures
Unit：RMB
Name of investee
| Name of investee | Opening balance | Increase/Decrease during the current reporting period | Closing Balance | Blance of impairment loss provision at the end of the current reporting period | |||||||
| Additional Investments | Reduce Investments | Investment income recognized under the equity method | Other comprehensive income adjustment | Other changes in equity | Declared cash dividends or profits | Provision for impairment | Others | ||||
| 1.Joint Ventures | |||||||||||
| 2.Associated Enterprises | |||||||||||
| Wuhu Sensor Tech Intelligent Technology Ltd. | 38,207,959.74 | - | - | 3,563,480.71 | - | - | - | - | - | 41,771,440.45 | - |
| Maxio Technology (Hangzhou) Ltd. | 46,400,992.55 | 27,000,000.00 | - | (7,764,093.10) | - | - | - | - | - | 65,636,899.45 | - |
| Zhiguang Hailian Big Data Technology Ltd. | - | 10,000,000.00 | - | - | - | - | - | - | - | 10,000,000.00 | - |
| Subtotal | 84,608,952.29 | 37,000,000.00 | - | (4,200,612.39) | - | - | - | - | - | 117,408,339.90 | - |
| Total | 84,608,952.29 | 37,000,000.00 | - | (4,200,612.39) | - | - | - | - | - | 117,408,339.90 | - |
As of December 31st 2018, there were no restrictions on the capability of transferring fund to the Company from investees in which the Company held long-term equityinvestment.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
4. Operating income and operating cost
Unit：RMB
Item
| Item | 2018 | 2017 | ||
| Income | Cost | Income | Cost | |
| Operating income | 19,948,078,284.47 | 6,337,037,884.18 | 17,441,474,419.75 | 5,888,031,274.47 |
| Other operating income | 2,340,135,832.19 | 262,631,601.12 | 1,726,504,871.63 | 212,920,646.32 |
| Total | 22,288,214,116.66 | 6,599,669,485.30 | 19,167,979,291.38 | 6,100,951,920.79 |
5. Investment income
(1) Details of investment income
Unit：RMB
| Item | 2018 | 2017 |
| Long-term equity investment income measured by cost method | - | 5,737,500.00 |
| Long-term equity investment losses (income) measured by equity method | (4,200,612.39) | 1,608,952.29 |
| Investment loss on disposal of long-term equity investment | (9,994,028.47) | (9,929,719.62) |
| Investment gains for available-for-sale financial assets during the holding period | 12,256,000.00 | 8,505,842.42 |
| Gain on disposal of financial assets at fair value through current profit and loss | - | 5,798,781.41 |
| Investment income from redemption of bank finance products upon expiry | 84,783,236.04 | 22,780,999.83 |
| Total | 82,844,595.18 | 34,502,356.33 |
6. Related party transactions
(1) Sales and purchase of goods, provision of services and receiving services
Purchase of goods/receiving of services:
Unit：RMB
| Related party | Transaction type | Amount for 2018 | Amount for 2017 |
| Subsidiaries of Hikvision (Note) | Purchase of materials and receiving of services | 7,361,353,668.93 | 6,627,993,954.60 |
| Maxio Technology and its subsidiaries | Purchase of materials and receiving of services | 51,914,266.05 | - |
| Subsidiaries of CETE | Purchase of materials and receiving of services | 261,945.55 | 638,139.08 |
| Wuhu Sensor Tech | Purchase of materials and receiving of services | - | 158,974.36 |
| Total | 7,413,529,880.53 | 6,628,791,068.04 |
Note: Subsidiaries of Hikvision are subsidiaries of the Company. See Note (VII) for details.
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Sales of goods/rendering of services:
Unit：RMB
Related party
| Related party | Transaction type | Amount for 2018 | Amount for 2017 |
| Subsidiaries of Hikvision | Sales of products and rendering of services | 15,251,464,800.88 | 12,713,526,574.11 |
| Subsidiaries of CETE | Sales of products | 103,277,524.19 | 49,207,183.00 |
| Zhiguang Hailian | Sales of products | 1,259,520.66 | - |
| Wuhu Sensor Tech | Sales of products | - | 38,888.89 |
| Total | 15,356,001,845.73 | 12,762,772,646.00 |
Statement of capital deposits:
Unit: RMB
| Related Party | Content of related party transaction | Amount occurred during the current reporting period | Closing balance at the end of the current reporting period | Amount occurred during the prior reporting period | Opening Balance at the beginning of the current reporting period |
| Subsidiaries of CETE (Note) | Deposit into fixed deposits | 3,000,000,000.00 | 4,000,000,000.00 | 1,000,000,000.00 | 1,000,000,000.00 |
| Subsidiaries of CETE (Note) | Deposit into call deposits | (500,000,000.00) | - | 500,000,000.00 | 500,000,000.00 |
| Total | 2,500,000,000.00 | 4,000,000,000.00 | 1,500,000,000.00 | 1,500,000,000.00 |
Note: The Company had deposited fixed deposits and call deposits into China Electronic Science and TechnologyFinance Ltd.
Those transactions above were executed at market prices or at the prices agreed by both parties.
(2) Guarantees with related parties
During 2018, the Company has provided guarantees for its 17 wholly-owned and majority-owned subsidiaries in anamount not exceeding an equivalent of RMB 22.45 billion (2017：RMB 14.05 billion, USD 250 million), including thejoint liability guarantee for the payment obligations on purchase from suppliers in an amount not exceeding anequivalent of RMB 2.5 billion (2017: RMB 1.2 billion, USD 40 million), and the joint liability guarantee for the generalcredit limit applied from commercial banks and other financial institutions or other financing methods through agreedmethods in an amount not exceeding an equivalent of RMB 19.95 billion (2017: RMB 12.85 billion, USD 210 million).
For details of the Company's guarantees on Safety Chongqing project, please refer to Note X (5).
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
7. Receivables from related parties and payables to related parties
(1) Receivables from related parties
Unit：RMB
Item
| Item | Related party | Closing balance | Opening balance | ||
| Carrying balance | Bad debt provision | Carrying balance | Provision | ||
| Accounts receivable | Subsidiaries of Hikvision | 13,281,977,578.40 | 664,098,878.92 | 10,839,522,465.63 | 542,196,076.58 |
| Accounts receivable | Subsidiaries of CETE | 77,379,251.13 | 4,303,331.24 | 24,170,969.21 | 1,526,150.68 |
| Accounts receivable | Zhiguang Hailian | 986,160.75 | 49,308.04 | - | - |
| Total | 13,360,342,990.28 | 668,451,518.20 | 10,863,693,434.84 | 543,722,227.26 | |
| Notes receivable | Subsidiaries of CETE | 2,168,790.00 | - | - | - |
| Total | 2,168,790.00 | - | - | - | |
| Other receivables | Subsidiaries of Hikvision | 254,412,122.73 | 12,720,606.14 | 425,722,254.59 | 21,286,112.72 |
| Other receivables | Maxio Technology and its subsidiaries | 13,500,000.00 | 675,000.00 | ||
| Total | 254,412,122.73 | 12,720,606.14 | 439,222,254.59 | 21,961,112.72 | |
| Prepayments | Subsidiaries of Hikvision | 11,465,581.45 | - | 3,349,033.66 | - |
| Prepayments | Subsidiaries of CETE | 6,616,973.90 | - | - | - |
| Total | 18,082,555.35 | - | 3,349,033.66 | - | |
| Dividend receivables | Subsidiaries of Hikvision | 2,550,000.00 | - | 2,550,000.00 | - |
| Total | 2,550,000.00 | - | 2,550,000.00 | - | |
(2) payables to related parties
Unit：RMB
| Item | Related party | Closing balance | Opening balance |
| Accounts payable | Subsidiaries of Hikvision | 92,669,607.45 | 54,312,472.11 |
| Accounts payable | Subsidiaries of CETE | 168,726.74 | 1,314.27 |
| Accounts payable | Shanghai Fullhan Micro | - | |
| Total | 92,838,334.19 | 54,313,786.38 | |
| Receipts in advance | Subsidiaries of Hikvision | 8,276,019.65 | 1,228,879.80 |
| Receipts in advance | Subsidiaries of CETE | 555,320.76 | 47,751.41 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Item
| Item | Related party | Closing balance | Opening balance |
| Total | 8,831,340.41 | 1,276,631.21 | |
| Other payables | Subsidiaries of Hikvision | 127,168,684.42 | 610,605,005.68 |
| Other payables | Subsidiaries of CETE | 180,520.00 | 150,000.00 |
| Other payables | Shanghai Fullhan Micro | 100,000.00 | 100,000.00 |
| Other payables | Zhejiang Tuxun | 9,290.00 | |
| Total | 127,458,494.42 | 610,855,005.68 |
8. Supplementary information to the cash flow statement
(1) Supplementary information to the cash flow statement
Unit：RMB
| Supplementary information | 2018 | 2017 |
| 1. Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 9,769,694,399.19 | 8,683,050,963.77 |
| Add: Assets impairment | 226,183,330.78 | 107,602,826.75 |
| Depreciation of fixed assets | 220,185,337.21 | 152,589,101.28 |
| Amortization of intangible assets | 36,076,412.59 | 23,332,836.62 |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (4,138,938.48) | (2,755,085.52) |
| Gains from change in fair value | - | (53,573,806.57) |
| Financial expenses | 32,451,328.20 | 176,050,487.00 |
| Investment income | (82,844,595.18) | (34,502,356.33) |
| Share-based payment through equity settlement | 104,563,570.17 | 137,918,045.21 |
| Change in restricted funds | (193,518,759.75) | 3,140,975.18 |
| Decrease (Increase) in deferred income tax assets | (21,632,515.13) | (22,578,067.62) |
| Decrease of inventories | 199,234,551.87 | 171,317,351.10 |
| Decrease (Increase) in operating receivables | (2,909,749,021.26) | (2,617,942,969.04) |
| Increase (Decrease) in operating payables | 214,936,244.29 | 504,231,944.54 |
| Increase in deferred income | 123,844,108.01 | 38,714,300.00 |
| Net cash flow from operating activities | 7,715,285,452.51 | 7,266,596,546.37 |
| 2. Major investing and financing activities not involving cash receipt and payment: | ||
| 3. Net change in cash and cash equivalents: | ||
| Closing balance of cash | 18,998,934,287.59 | 12,304,082,533.11 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Supplementary information
| Supplementary information | 2018 | 2017 |
| Less: Opening balance of cash | 12,304,082,533.11 | 10,245,969,003.13 |
| Add: Closing balance of cash equivalents | - | |
| Less: Opening balance of cash equivalents | - | |
| Net increase in cash and cash equivalents | 6,694,851,754.48 | 2,058,113,529.98 |
(2) Composition of cash and cash equivalents
Unit：RMB
| Item | Closing balance | Opening balance |
| I. Cash | 18,998,934,287.59 | 12,304,082,533.11 |
| Including: Cash on hand | 284,520.29 | 378,292.56 |
| Bank deposit for payment at any time | 18,997,620,001.15 | 12,303,704,240.55 |
| Other monetary funds for payment at any time | 1,029,766.15 | - |
| II. Cash equivalents | - | |
| III. Closing balance of cash and cash equivalents | 18,998,934,287.59 | 12,304,082,533.11 |
On December 31
st
2018, the Company’s closing balance of other monetary funds was RMB 194,556,706.78 (December
st
2017: RMB 8,180.88), of which RMB 193,526,940.63 were all various guarantee deposits (December 31
st
2017:
RMB 8,180.88), not cash or cash equivalents.
XVI. Supplementary information
1. Details of current non-recurring gains and losses
Unit：RMB
| Item | Amount | Description |
| Profit or loss from disposal of non-current assets | 4,975,825.83 | / |
| The government subsidies included in the current profits and losses (excluding the government subsidy closely related to regular course of business of the Company and government subsidy based on standard quota or quantitative continuous enjoyment according to the state industrial policy) | 319,304,315.50 | / |
| Net profit or loss of the subsidiary from the beginning of the reporting period to the merger date, for business combination involving enterprises under common control | - | / |
| Held- for-trading financial assets, profits and losses from change in fair value of held-for-trading financial liabilities, and investment income from disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets excluding the effective hedging business related to the regular business operation of the Company | 62,153,461.82 | / |
| Other non-operating income and expense except the items mentioned above | 94,651,413.78 | / |
| Impact of income tax | (84,510,487.85) | / |
| The impact of minority equity | (26,933,458.36) | / |
| Total | 369,641,070.72 | / |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
2. Return on net assets and earnings per share
The return on net assets and earnings per share have been prepared by Hangzhou Hikvision Digital Technology Co., Ltd.in accordance with the Information Disclosure and Presentation Rules for Companies Making Public Offering ofSecurities No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (Revised in 2010) issuedby China Securities Regulatory Commission.
Unit：RMB
Profit for the reporting period
| Profit for the reporting period | Weighted average return on net assets (%) | Earnings per share | |
| Basic earnings per share | Diluted earnings per share | ||
| Net profit attributable to ordinary shareholders of the Company | 33.99% | 1.240 | 1.234 |
| Net profit excluding non-recurring items of profit or loss attributable to ordinary shareholders of the Company | 32.88% | 1.199 | 1.194 |
Notes to Financial StatementsFor the reporting period from January 1
st
2018 to December 31
st
2018
Section XII Documents Available for Reference
1. The financial report was signed by the Company's legal representative.
2. The financial report was signed and sealed by the person in charge of the Company, the person incharge of accounting work and person in charge of accounting organization.
3. Original copy of all the Company's documents and announcements were published on thenewspapers designated by CSRC within the reporting period.
The above documents are completely placed at the Company's board of directors’ office.
Hangzhou Hikvision Digital Technology Co., Ltd.
Chairman: Chen Zongnian
April 20
th
2019
Note:
This document is a translated version of the Chinese version 2018 Annual Report (“2018年年度报告”), and the published announcements in the Chinese version shall prevail. The completepublished Chinese 2018 Annual Report may be obtained at www.cninfo.com.cn.