Hangzhou Hikvision Digital Technology Co., Ltd.
2018 Annual Report
April 20th 2019
Hikvision 2018 Annual Report
To shareholders
Dear Shareholders,
In 2018, Hikvision realized total revenue of RMB 49.84 billion, with a year-over-year growth
rate of 18.93 percent; and net profit attributable to the parent company of RMB 11.35 billion, an
increase 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 was
more cautious and conservative on sales strategy than any previous year and put more emphasis on
short-term risk management. However, the Company remains upbeat about growth in the domestic
and overseas markets in the years ahead. We actively explored business development opportunities
in both domestic and foreign markets, and continued to increase investment in product research and
development (R&D) and marketing.
In 2018, the Company stepped up the development of its AI Cloud software platform and
facilitated the adoption of AI Cloud. In the era of AI, artificial intelligence is everywhere. We see
opportunities arising from demand for perceptual AI, and recognize the difficulties in meeting the
fragmented demand for perceptual AI applications. The Company offers an AI open development
platform 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 Company
promote the development of intelligent Internet of Things (IoT), as well as help it advance the
integration 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 restructured
its traditional security segments into public business group (PBG), enterprise business group (EBG),
and small and medium enterprise business group (SMBG). The Company will adopt different
business strategies for its various business groups and offer a variety of products and system
solutions. Meanwhile, the development of our innovative businesses is in line with our
expectations.
The external environment remains uncertain to some extent in 2019. However, regardless of
how the external environment evolves, the Company will continue to make R&D investments to
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Hikvision 2018 Annual Report
ensure the competence of its products and system solutions, ramp up investments in customer
services to enhance customer satisfaction, optimize internal operations management to improve
operating efficiency, push forward with its globalization strategy, and step up investments in the
international markets. We remain confident about our future.
The Company will address unconventional business challenges thoughtfully, while continually
improving and growing. With an open, transparent and sincere attitude, we are ready to respond to
uncertainties stemming from various challenges. We firmly believe that we can go further only by
constantly 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
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Hikvision 2018 Annual Report
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior management
of Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as the “Company”)
hereby guarantee that the information presented in this report shall be together be wholly liable for
the truthfulness, accuracy and completeness of its contents and free of any false records, misleading
statements or material omissions, and will undertake individual and joint legal liabilities.
Chen Zongnian, the Company's legal representative, Jin Yan, the person in charge of the
accounting work, and Zhan Junhua, the person in charge of accounting department (accounting
supervisor) 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, Hu
Yangzhong, Wu Weiqi, independent director Lu Jianzhong, Wang Zhidong attended the board
meeting to review this report in person. Independent director Cheng Tianzong and Hong Tianfeng
were unable to attend the board meeting in person due to personal reasons, and authorized
independent director Wang Zhidong and Lu Jianzhong to attend and exercise the voting right on
their behalf respectively.
The profit distribution proposal passed upon deliberation at the meeting of the Board of
Directors is set out as follows: 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.
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 complete
published Chinese 2018 Annual Report may be obtained at www.cninfo.com.cn.
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Hikvision 2018 Annual Report
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 the
changes in the cutting-edge technologies, or fail to realize the business innovation rapidly, the risks of future
development 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 strategy
in response to the changing domestic demands. If the domestic macro-economy continues to decline, the
industry demand will shrink. The Company's development will face great pressure; and difficulties and risks
in 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 the
Company'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 purchasing
power, or political conflict occur in the country where our business is carried out, there might be adverse
impact 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 of
internal management complexity have posed challenges to the Company’s management work and raised
higher requirements on the Company's management team. The Company’s sustainable development will face
certain 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 data
worldwide is becoming stricter, and the compliance review of business is becoming more important. If the
Company's legal compliance ability cannot keep up with the situation, it will bring risks to the Company's
operations.
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, there
is still a possibility of deliberate attempts，including computer viruses, malicious software, hacker and similar
disruptions 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 arising
out of sales, purchase and financing that not settled in RMB (mainly in USD) as well as the exchange rate
fluctuations, 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
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Hikvision 2018 Annual Report
R&D investment, and produces considerable technical achievements, and at the same time, implements
well-organized intellectual property right (IPR) protection measures. However, the risk of intellectual
property disputes and the risk of intellectual property rights violations still exist.
The above notices might not be all-inclusive of all other potential risks, please pay attention to the potential
investment risks
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Hikvision 2018 Annual Report
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
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Hikvision 2018 Annual Report
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
Hangzhou Hikvision Digital Technology Co., Ltd
Company
CETHIK CETHIK Group Co., Ltd. Controlling Shareholder of the Company
Innovative Co-investment Partnership Hangzhou Hikvision Equity Investment Partnership (Limited Partnership)
Hangzhou EZVIZ Network Ltd. (According to the context, also refers to the corresponding
EZVIZ, EZVIZ Network Inc.
business)
Hangzhou Hikvision Robtics Technology Ltd. (According to the context, also refers to the
Hikvision Robotics
corresponding business)
Hikvision Automotive Technology, Hangzhou Hikvision Automotive Electronics Ltd. (According to the context, also refers to
Hikvision Automotive Electronics the corresponding business)
Hangzhou Hikvision Weiying Sensor Technology Ltd. (According to the context, also refers
Hikvision Weiying
to the corresponding business)
Hikvision Storage; Hikvision Smart Wuhan HIK Storage Technology Ltd. (According to the context, also refers to the
Storage corresponding business)
Hangzhou HIK Huiying Technology Ltd. (According to the context, also refers to the
Hikvision Huiying
corresponding business)
Located in Tonglu economic development area, Hangzhou, Zhejiang province, purposes for
production factories, warehousing logistics center. Initially disclosed in Announcement about
Security Industrial Base (Tonglu) 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).
Located in Binjiang district, Hangzhou, Zhejiang province, purposes for the office building.
Initially disclosed in Announcement about the Company’s New Construction of Internet
Internet Security Industry Base
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).
Located in Chongqing, purposes for manufacturing facility, initially disclosed in
Chongqing Manufacture Base
Announcement about Resolution of the 20th Meeting of the 3rd Session Board（No：2016-068）
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
Innovative Business
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
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Hikvision 2018 Annual Report
Automotive Electronics, Hikvision Weiying, Hikvision Storage, Hikvision Huiying and their
related business or products.
The Company publicly issued the bond with nominal value amounting to Euro 400 million;
and the bond was settled, listed and traded on the Irish Stock Exchange on February 18th
Euro Bond
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)
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Hikvision 2018 Annual Report
Section II Corporate Profile & Key Financial Data
I. Corporate Information
Stock abbreviation HIKVISION Stock code 002415
Stock exchange where the shares of the Company
Shenzhen Stock Exchange
are listed
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
E-mail market@hikvision.com; ir@hikvision.com
II. Contacts and contact information
Board Secretary Securities Affairs Representative
Name Huang Fanghong
No. 518 WuLianWang Street, Binjiang
Address
District, Hangzhou
Tel. 0571-88075998; 0571-89710492
Fax 0571-89986895
E-mail 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
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Hikvision 2018 Annual Report
IV. Company Registration and Alteration
Organization code 91330000733796106P
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
Changes in principle business activities since the
signal equipment; Sales of self-produced products; provide technical services,
Company was listed (if any)
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
No change during the reporting period
Company (if any)
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 the
Reporting Period
□ Applicable √ Inapplicable
Financial advisor engaged by the Company to perform the duties of continuous supervision during the reporting
period
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
VI. Key accounting data and Financial Indicators
Whether 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 11,352,869,241.32 9,410,855,084.82 20.64% 7,423,683,960.91
(RMB)
Net profits attributable to
shareholders of the Company
10,983,228,170.60 9,177,116,964.06 19.68% 7,270,742,762.47
excluding non-recurring gains
and losses (RMB)
Net cash flows from operating
9,114,013,286.06 7,373,160,250.68 23.61% 6,216,364,642.05
activities (RMB)
Basic earnings per share
1.240 1.030 20.39% 0.818
(RMB/share)
Diluted earnings per share
1.234 1.024 20.51% 0.817
(RMB/share)
Weighted average ROE 33.99% 34.96% -0.97% 34.58%
At December 31st
st st
At December 31 2018 At December 31 2017 YoY Change (%)
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 37,590,154,638.46 30,358,072,874.22 23.82% 24,285,707,211.82
(RMB)
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 √ No
Whether the Company has continuous losses in the last two years
□ Yes √ No □ Not applicable
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Hikvision 2018 Annual Report
VII. Differences in Accounting Data between Domestic and Overseas Accounting Standards
1. Difference in the financial report of net profits and net assets according to the disclosure of International
Financial 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 International
Financial Reporting Standards (IFRS) and China Accounting Standards in the reporting period.
2. Difference in the financial report of net profits and net assets according to the disclosure of Overseas
Accounting Standards and China Accounting Standards
□ Applicable √ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of Overseas
Accounting Standards and China Accounting Standards in the reporting period.
3. Explanation of the differences in accounting data under domestic and overseas accounting standards
□ Applicable √ Inapplicable
VIII. Key Quarterly Financial Indicators
Unit：RMB
st nd rd th
1 Quarter 2 Quarter 3 Quarter 4 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
1,815,964,569.77 2,331,430,966.09 3,248,407,615.14 3,957,066,090.32
Company
Net profit attributable to shareholders of the
Company excluding non-recurring gains 1,808,323,790.71 2,200,947,170.54 3,142,725,705.56 3,831,231,503.79
and losses
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
Whether there is significant difference between the above individual or aggregate financial indicators and that of
what disclosed in the quarterly report, half-year report
□ Yes √ No
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Hikvision 2018 Annual Report
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
4,975,825.83 1,585,222.50 -736,149.02
the write-off for the impairment provision of assets)
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 319,304,315.50 184,557,043.27 171,321,088.31
subsidy based on standard quota or quantitative continuous
application according to the state industrial policy.)
Net gains and losses from beginning of the reporting period to
the merge date for the subsidiary merged involving enterprises - -42,070.90 3,949,938.20
under common control
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 62,153,461.82 86,740,196.23 321,708.86
liabilities and available-for-sale financial assets, excluding the
effective hedging business related to the regular business
operation of the Company.
Other non-operating income and expenditures except the items
94,651,413.78 30,044,820.52 18,276,871.37
mentioned above
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
, or classifies any non-recurring gain/loss item mentioned in the
aforementioned note as a recurrent gain/loss item
□ Applicable √ Inapplicable
In the reporting period, the Company did not classify an item as a non-recurring gain/loss according to the definition in
the into a recurrent gain/loss item
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Hikvision 2018 Annual Report
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 seven
consecutive years, with 22.6 percent1 of the global video surveillance market share. In the "A&S Security 50" list
published 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 deep
learning and intelligent product families that integrate intelligent analysis capabilities throughout the entire
process from information gathering to storage application. In 2017, Hikvision led the intelligent application trend
based on the fusion of cloud and edge computing architectures, innovatively launching the three-tier AI Cloud
architecture of edge node, edge domain and cloud center, and vigorously promoting the development and
application of AI (artificial intelligence) in the IoT field. In 2018, based on the fusion of cloud and edge
computing architectures, Hikvision deepened and integrated the AI Cloud product line with "Two Pools, One
Library and Four Platforms"2 and proposed the AI Cloud data architecture with the fusion of IoT and Information
Networks. During the implementation of the business, the Company focused on solving the scenario-based and
fragmented AI application and the difficulties in the implementation of user needs, unified the software
architecture internally and promoted the open integration strategy externally, and changed and restructured the
internal organizational structure to match the business changes. Hikvision has laid a solid foundation for the
arrival 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
1
Based on the global video surveillance market report published by IHS Markit in June 2018, with the 2017 data as the statistical basis.
2
Refers to “Computing Resource Pool, Data Resource Pool, Algorithm Warehouse, Data Resource Platform, Intelligent Application
Platform, Resource Scheduling Platform, Operation and Service Platform.
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Hikvision 2018 Annual Report
broader scene for human beings after the Internet era. However, how to make objects see, listen, read and write
like humans? How to make objects respond intellectually? And how to make the interconnection between things
integrate into human beings’ production and living environment to truly form a meridian system? The application
of deep learning drives the combination of artificial intelligence and the perceptual information of objects such as
video, 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 in
the intelligent era. The fusion of cloud and edge computing is a computing architecture that conforms to
intelligent IoT applications and is the allocation method of computing resources that Hikvision adopts and
advocates. On one hand, even if cloud computing power is strong enough, some data only needs to be locally
processed and applied, and does not need to be transmitted to the cloud for processing. On the other hand, the
scale 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 data3, small
videos and images that are processed by edge computing.
Hikvision's AI Cloud computing architecture can be summarized as "the fusion of cloud and edge
computing" and consists of edge nodes, edge domains and cloud centers. Edge nodes and edge domains are
located in the intelligent IoT and make full use of edge computing capabilities; and cloud centers are located in
the intelligent IoT or information networks to form cross-network cloud computing capabilities. Edge nodes focus
on collection of multi-dimensional perception data and front-end intelligent applications; edge domains focus on
aggregation of perception data and intelligent applications; and cloud centers focus on cross-network data fusion
and macro comprehensive applications.
3
Structured data: Data that is logically expressed and implemented by a two-dimensional table structure, strictly following the data
format and length specifications, and is mainly stored and managed through a database.
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Hikvision 2018 Annual Report
From the perspective of data, the data in the intelligent IoT cannot be well used by the information system
and by users until it is organized according to the models required by the information network and fused in the
information network. The intelligent IoT is closely fused with various information networks such as the Internet
and industry information networks to truly realize a full interaction with humans. The connection between
intelligent objects and information systems is the fusion of IoT and information Networks, which will open the
data channel between the intelligent IoT and information networks; it is also the meridian system of data in the
intelligent era. The fusion of IoT and information networks is the data architecture suitable for applications under
intelligent IoT and information network and the data organization form that Hikvision AI Cloud complies with
and advocates.
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Hikvision 2018 Annual Report
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 the
intelligent IoT and information networks. The main capabilities of AI Cloud Data Fusion Platform can be
summarized as horizontal cross-network fusion, vertical cross-layer convergence, dual-network three-type
applications, and data security protection.
Horizontal cross-network fusion: First, regarding data source governance, it is necessary to solve the
quality problem of intelligent IoT data source. Second, for intelligent analysis, it is necessary to use artificial
intelligence to transform IoT data into easy-to-understand data such as people, places, things and objects in the
information network. Third, on IoT data services, it is necessary to send the data to information networks for
fusion with other data while supporting intelligent applications of IoT. Finally, in respect to converged data
governance, it is necessary to organize the data according to the theme library4, topic library5, tag library or
relationship library, and then provides converged data services to support the development of information network
data applications.
Vertical cross-layer convergence: Hikvision provides data platform cascading function to support the
upward 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 of
applications may be developed based on the intelligent application platform: single-scene applications,
cross-scene applications, and comprehensive applications.
4
Theme Library: a business subject - oriented database.
5
Topic Library: a database addressing a certain professional application.
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Hikvision 2018 Annual Report
Data security protection: In the AI Cloud Data Fusion Platform, Hikvision focuses on data protection from
four angles: data collection, transmission and storage, data services, and data applications. Data security is
protected at four levels: development and testing, delivery and implementation, data governance, and operation
and maintenance.
The number of IoT devices worldwide will exceed 20 billion by the year 20206. The intelligent IoT will be
characterized 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 as
terminal, 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 application
of intelligent IoT and information network. In 2018, Hikvision fully released software products of "two pools, one
library 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 “AI
Cloud Data Fusion Platform", continuously consolidating the layout in AI, big data and application areas and
leading the market through technological innovation and product innovation.
6
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
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Hikvision 2018 Annual Report
Through the resource management and scheduling platform, Hikvision realized the unified management of
various resources such as IoT perception, computing storage, intelligent algorithm and software service. In
addition, by introducing the standardization of algorithm library, the pooling of computing storage resources and
other management tools, Hikvision provides unified access, centralized management, flexible scheduling, and
other functions for heterogeneous computing storage resources and algorithm resources, providing more flexible
choices for users and intensifying users’ investments. The software in the algorithm library supports unified
management scheduling of different types of intelligent algorithms from different vendors. It not only realizes the
unified management scheduling of Hikvision's own algorithms for human face, human body and vehicle, etc., but
also completes the algorithm docking with the ecological partners, which have been implemented in a number of
projects.
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 between
business data in the information system and IoT perception data. By providing rich toolkits such as data
aggregation, data governance, multi-dimensional data modeling, data sharing and opening, and universal fusion
applications, the data resource platform provides users with a one-stop solution to various problems such as the
lack 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
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Hikvision 2018 Annual Report
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 and
rapidly deploy applications that fulfill specific business demands by following a unified integration specification
for 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 including
rapid fault identification, response tracking, service evaluation, and statistical assessment of IoT resources and IT
resources, and solved the problem of unified operation and maintenance management of equipment with multiple
types, large quantity and scattered distribution, which effectively improves the efficiency of fault handling and
ensures 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 the
layout of hardware products in respects of edge nodes, edge domains and cloud centers.
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Hikvision continued to break through in imaging, fill-in light, video-structuring and intelligence technologies
in front-end products, from Darkfighter to DarkfighterX, from white fill-in light to hybrid fill-in light, from
monocular 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 fully
upgrade our products through deeply understanding users’ needs. A rich family of future-oriented AI products was
gradually formed, including light intelligence, ubiquitous intelligence, full structuring, intelligent DarkfighterX7,
and hybrid intelligence8 series of products.
7
Intelligent DarkfighterX series cameras adopt dual light fusion + hybrid fill-in light technology, and enable capturing
high-definition color feature images at night without light pollution, and are able to capture features in more distant and complex
scenes through the adaptive image algorithm for feature capture.
8
Hybrid intelligence series cameras adopt advanced structural design, hardware architecture and high-performance intelligent chip
and can perform target detection, active sensing and feature capture of people, vehicles and events in the monitoring scene; realized
scene integration, device integration, installation integration and business integration, and enabled efficient capture of more
dimensional and more efficient data while fulfilling the coverage of the monitoring scene.
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In 2018, Hikvision's back-end products continued to develop in the areas of AI intelligence, big data and
fused storage. Focusing on customer demands, Hikvision greatly improved the accuracy, performance and fused
application level of AI for the back-end intelligent products, and continued to lead the intelligent video
surveillance market.
The central intelligent analysis products are oriented to industry markets such as safe city and smart
transportation. Hikvision put forward the concept of full analysis of video intelligence, full compatibility of
computing resources, and full openness of engines and data in order to form an abundant and open series of
central intelligent products and ecosystem, and has achieved good market performance. In terms of big data,
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Hikvision implemented fused storage and associated applications of multi-dimensional data, and fused security
data with business data, laying a foundation for data governance business. The Company innovatively introduced
a server for data model comparison to convert module data into fully structured information data, enabling unified
management of data in a true sense.
In 2018, Hikvision continued to expand the central display business field, and achieved interactive access to
information, intelligent display of information, and comprehensive presentation of big data through diversified
display 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 places
such as monitoring centers and command centers. In terms of display control products, Hikvision enabled the
classic products such as decoders, splicing controllers and video comprehensive platforms based on the
technologies of video and audio processing, multimedia data integration, ultra-high definition, AI, and clustering
and scattering control, diversifying the applications of monitoring centers and command centers, and maintained
the leading position in the industry.
In 2018, based on solid technology accumulation in the fields of image capture and AI algorithm, Hikvision
improved the "DeepinGo" (明眸) series of close-range facial recognition products. In numerous edge-node
applications 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 recognition
technology with rapid response speed, a more friendly human-equipment interaction, and support for larger
volume face comparison and live detection. The “DeepinGo” series products not only upgrade the traditional "one
card" access control system to the "one face" system, but also effectively improve the security, convenience and
accuracy of the system.
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In 2018, Hikvision continued to promote the implementation of its AI Cloud products and solutions for
intelligent transportation. Based on customer demand, Hikvision integrated videos with multi-dimensional
perception technologies, and created a fused domain product package which consists of intelligent traffic cameras
and intelligent road terminals. To practice the core value of “improve traffic order, alleviate traffic jams, prevent
traffic accidents, enhance traffic safety, and facilitate transportation”, Hikvision innovated its traffic applications
to help further develop the market. The “Environment-Friendly Access Control System”, equipped with snap
cameras, made a technological breakthrough and solved the problem of white-light sharp flash, a light pollution
problem troubling the industry for more than ten years, and was recognized with many awards. In respect to the
comprehensive governance of road traffic, Hikvision’s innovative applications, including “high beam inspection
for vehicles”, “jaywalker”, “pedestrians first”, “snap camera system for horning”, and “inspection of vehicles
emitting black smoke”, played a role in building safe cities. As for static traffic, Hikvision launched cutting-edge
radar products utilizing the technology of multi-dimensional perception: trigger-based radar and smash-proof
radar, which simplifies the construction and maintenance by discarding induction coils and solves parking
problems for users, thus facilitating traffic.
In 2018, Hikvision launched the development of smart fire control products. Relying on the Company's
video and AI technology, combined with multi-dimensional perception, narrow-band transmission and other IoT
technologies, the front-end sensors are able to collect key fire control data and upload it to the platform in real
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Hikvision 2018 Annual Report
time for data analysis and remote monitoring. Through the integration of security and fire control businesses, we
launched an integrated solution for security and fire control, which is widely applicable to urban key units, nine
small places9, schools, hospitals, banks, enterprise campuses and government buildings to enhance the level of fire
control 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 open
integration is the development trend of the video industry and will become a new business format in the era of
intelligence. 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 large
numbers 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 the
applications in the real economy. In order to build an open and shared AI industry ecological environment and
help the implementation of AI, Hikvision launched the AI open platform to provide complete services from
demand 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 to
develop their industry's intelligent algorithms; the open platform incorporates a number of cutting-edge
technologies and has three major characteristics:
1) It utilizes virtual data engine10, transfer learning11, incremental learning12, and other technologies, and can
9
Nine small places refer to small schools or kindergartens, small hospitals, small stores, small restaurants, small hotels, small
recreational bars and clubs, small Internet bars, small beauty salons or bathhouses, and small production and processing enterprises.
10
Virtual data engine: generates image data through 3D modeling, ray tracing, adversarial learning and other approaches; its visual
effects are close to those of on-site collection.
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Hikvision 2018 Annual Report
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; and
3) 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 AI
practitioners to carry out continuous mass innovation with mass wisdom. However, AI practitioners often lack the
suitable products to carry their algorithms in the current time. For this reason, Hikvision has opened a full range of
front-end and back- end AI hardware products to help AI practitioners realize their AI functions and solutions.
Our open systems for equipment include:
11
Transfer learning is a learning method for robots, enabling a robot to apply the knowledge and techniques learned from former
tasks to new tasks.
12
Incremental learning refers to learning new knowledge by a learning system from new samples, storing most of the knowledge it
has learned and overcoming catastrophic losses of memory. The system does not have to visit original data, and is able to enhance its
performance on an overall data set merely by learning new data.
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1) Hikvision equipment operating system, which provides various basic capabilities of the equipment
including image processing, coding and decoding, storage and transmission;
2) Integrated development kit, which opens the equipment's AI computing resources based on the container
technology, 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, testing
environment, app stores, and authorization tools.
In 2018, Hikvision successfully applied the AI open platform to intelligence upgrade in multiple areas. In
pharmaceutical enterprises, the platform helped the standardized review of production behavior of employees and
reduced safety hazards in production. In food production enterprises, it enabled “Transparent Kitchen” and
guaranteed 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 and
R&D have emerged during the process of software development, delivery and maintenance, including product
integration and unification, version upgrade, and repetitive development. Hikvision has comprehensively
upgraded its software engineering capabilities and practices and reconstructed the original software R&D model
by establishing a Unified Software Technology Architecture. The software R&D has changed the development
model from "driven by market demand" to "driven by both market demand and technology planning", in order to
finally realize the sustainable and rapid introduction of high-quality software products to meet the rapidly growing
demand of the software market, providing support for the Company's strategic planning.
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Hikvision 2018 Annual Report
Based on years of accumulation in the front-end field, Hikvision also introduced an evaluation system of
scientific deployment of front-end video surveillance products, which links business applications with front-end
constructions, defines a variety of equipment capability models and scenario evaluation models, enables the
evaluation of the reasonableness of the front-end construction plans and the actual construction results of
front-end products, and outputs evaluation reports and optimization suggestions to guide the scientific deployment
of 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 seven
industries, 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 industry
into 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. Through
reorganizing and integrating the resources, the Company divided its domestic business into three business groups
of PBG (Public Business Group), EBG (Enterprise Business Group) and SMBG (Small and Medium Enterprise
Business Group) to more specifically target different types of markets and customers and more effectively
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Hikvision 2018 Annual Report
coordinate internal resources.
The PBG (Public Business Group) business team, which was established based on the traditional three
business departments of public security, transportation and law enforcement, primarily specializes in urban
governance and urban services, adapts to the block module of the administrative regions, and conforms to the
overall operational needs of urban governance and urban services; the EBG (Enterprise Business Group) business
team, 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 the
strip model of the group enterprises and meets the vertical operation management needs of group enterprises; the
SMBG (Small and Medium Enterprise Business Group) business team, which was established based on the
traditional channel distribution management team, mainly focuses on the small and medium-sized enterprise
market 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 governance
3.1.1 Principal business
Digital government construction is a vital move to implement the Internet power strategy, the digital China
strategy and the smart society strategy. Hikvision PBG relies on the urban big data platform to promote urban
digitalization and intelligent transformation, and facilitate sustainable urban development. Centering on digital
government, 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. Taking
urban 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 states
and public opinions, could all be analyzed and summarized through informational means such as IoT perception
technology 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 of
hidden problems and events, provide timely warning and reminder, carry out linked handling of events, promote
coordinated 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 perception
network for cities to achieve the complete perception collection of city states, features and events, builds twin
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Hikvision 2018 Annual Report
digital cities coexisting with physical cities, establishes a unified urban big data platform, and takes advantage of
this platform to carry out the sharing, development and governance of urban data, empowering the intelligent
applications of various industries and fields of the cities, upgrading the integrated government service system, and
enhancing 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 AI
Cloud architecture, is the brain center for implementing AI Cloud. Compared with the previous video networking
sharing platforms, the “Hikvision Red Digital Forest” platform not only has a stronger access capabilities for
video and IoT resources, but also has the capability for fusion, correlation and deep mining of IoT data and
business 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 it
to carry IoT basic application, smart applications and big data applications across multiple industries and provide
strong support for the implementation of industry solutions such as smart policing, smart transportation, smart
security supervision, smart city management, and smart government.
Cloud-edge fusion, intelligent “perception”: The “perception” capability refers to the capability to extract
targets such as people, cars and objects, and their attributes such as the license plates, vehicle models and colors of
cars from the video images. The efficient collaboration between cloud computing and edge computing greatly
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Hikvision 2018 Annual Report
enhances the system’s intelligent “perception” capabilities. Based on the demands from intelligent application
scenarios, 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 two
sides cooperatively work together to achieve optimal system performance. At the same time, the platform, with AI
algorithm training capability, can train a new AI algorithm based upon the data accumulated on it; and the new AI
algorithm 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 data
based 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 on
application demands, data could be converged on demand, various basic libraries, theme libraries, and topic
libraries can be constructed, and algorithm models such as regional collision, regularity analysis, frequency
analysis, integral warning, and relational graphs can be extracted and summarized. In this way, lager amount and
better 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 of
basic libraries, theme libraries and topic libraries, and the interfaces such as IoT basic services, intelligent analysis
services, big data fused analysis services, algorithm library services, AI training services, and intelligent
application services. We also supported integration with third-party platforms to achieve the complementarity of
capabilities 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 public
security, traffic and travel, ecological protection, and people’s livelihood services, are taken as examples to
represent 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 social
security 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 social
governance model based on collaboration, co-construction, and sharing.
Following the core design concept of “multi-dimensional perception, sharing and co-construction,
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Hikvision 2018 Annual Report
network-wide intelligence, and smart governance”, the Company deployed a multi-dimensional perception system
in different regions and scenarios, and constructed an organically integrated comprehensive three-dimensional
front-end perception system, in order to achieve all-round, all-weather multi-dimensional information perception
and collection. The video information data is deeply integrated with technologies such as artificial intelligence and
big 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, precise
risk prevention and control, and innovative social governance. Through constructing a public security video image
information exchange resource pool with consistent technical standards and uniform requirements, implementing
effective hierarchical integration of various video image resources, and facilitating point location
complementation, network interconnection and platform interoperability, the networking integration of video
image resources in public areas is maximized. The Company established cross-regional, cross-departmental and
cross-level video image information exchange, integrated the sharing and scheduling mechanisms, and provided
visualized government management supporting services for public security, transportation, railway, urban
management, fire control, environment protection, forestry, safety supervision, finance, food and medicine, and
other 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 intelligence
and 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 signal
system of urban roads and alleviate urban traffic congestion; in the field of public transportation, intelligent
identification 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. The
big 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 companies
optimize bus routes and optimize taxi distribution, so that the traffic and travel become more efficient and
convenient.
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
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Hikvision 2018 Annual Report
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 excessive
emission of industrial waste gas, open-air straw burning, smoky vehicles on the road, as well as dust on
construction sites and roads in a timely manner, reducing air pollution and protecting the natural outdoor
environment for the public to enjoy. The implementation of pollution source monitoring and Chief Mechanism for
Rivers13 ensures that unlawful emission and emission leakage from enterprises, abnormal sewage discharge into
the 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 means
could help find out ecological destruction behaviors in time within the red-line area of ecological protection
including overgrazing, dam building, road repairing, mining, and soil breaking. Besides, the application of
ecological environment big data exerts a positive role in pushing forward the overall protection and system
restoration of mountains, rivers, forests, farmlands, lakes, and grasslands, and safeguarding “Clear Water, Blue
Sky and Green Mountains.”
Industry solutions for improving people’s livelihood services
Hikvision PBG launches livelihood service solutions that enhance the convenience and precision service
capabilities 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 order
for them, the handling process can be shortened; by equipping face authentication devices in the number-taking
and handling process, business handling will become more efficient and convenient; by monitoring the condition
of 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 management
level of government centers is enhanced. For instance, the behavior of window service personnel can be
intelligently analyzed in order to improve window service quality; the above technology can also conduct
non-inductive attendance for internal staff, and carry out intelligent reporting of unusual events such as fights and
quarrels in public areas. Based on big data analysis, face and business big data, targeted return visits could be
achieved, which could help find problems easily and avoid repeated visits.
13
Chief Mechanism for Rivers: Principals of party and government departments at all levels act as “river chiefs” to be responsible
for organizing and leading the management and protection of the corresponding rivers and lakes.
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3.2 Enterprise Business Group (EGB): Visual perception assists enterprises in reducing costs and
improving efficiency
3.2.1 Principal business
Digitalization has exerted a great impact on all walks of life and has become a key factor in the
transformation of enterprises. Based on its understanding and insight into the business, Hikvision’s EBG launches
products and solutions centered on video networking and AI visual perception technology for enterprise users. In
process 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 upgrades
with 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 security
business focuses on the infrastructure of enterprises. In 2018, Hikvision EBG continued to enhance its insight and
understanding of industry business, extended its business around the business applications and the management
tools of enterprises, and helped enterprise users achieve business means innovation and improve management
efficiency, which significantly improved the business value recognition by users. Using visual perception as the
most effective digital means, Hikvision EBG plays an important role in the digital transformation of all walks of
life.
3.2.2 Core technology: The AI Open Platform acts as the engine. The Integrated Application Platform and
the Cloud Visualized Management Platform act as two driving wheels
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Hikvision 2018 Annual Report
In the business scenarios for various sub-industries, Hikvision’s EBG takes the AI Open Platform as the
innovation engine and the Integrated Application Platform and the Cloud Visualized Management Platform as two
driving wheels, to provide users with solutions and products based on visual perception capabilities. It takes
advantage of the AI Open Platform to explore and fulfill the visual perception demands based on personalized
scenarios, utilizes the Integrated Application Platform and the Cloud Visualized Management Platform to build a
video grid system and satisfy video networking demands based on privatized deployments and Internet application
scenarios, jointly builds an industrial ecosystem with industry users and partners, and serves digital
transformation.
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 and
ecological 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 AI
application 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 is
continuously iterated. Hikvision EBG relies on the AI Open Platform to enable industry users to rapidly
implement applications based on AI visual perception, providing impetus for intelligent upgrade of the industries.
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Hikvision 2018 Annual Report
A privatized management platform: Integrated Application Platform
As a privatized management platform of Hikvision EBG for enterprise video networking applications, the
Integrated Application Platform relies on Hikvision’s unified software technology architecture and provides video
networking business software management tools (such as smart scenic area management platform, pharmaceutical
enterprise behavior supervision platform, and smart construction site management platform etc.) for different
industry application scenarios, based on its core capabilities such as IoT device access and video networking
services. By applying componentized development technology, the Integrated Application Platform builds
industry 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 the
innovation of business methods, achieves cost reduction and efficiency enhancement, and improves customer
satisfaction.
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-sized
enterprises. 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 efficiency
and deliver better services.
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Hikvision 2018 Annual Report
An enterprise-level public cloud platform: Cloud Visualized Management Platform
The Cloud Visualized Management Platform, relying on equipment access of EZVIZ Cloud, equipment
management, stream media, AI model management and other IoT PaaS services, is a public cloud application
service 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 operation
to partially intelligent operation, and then to fully intelligent operation. Meanwhile, by continuously strengthening
its basic capabilities and leveraging API openness, the Cloud Visualized Management Platform builds an
ecosystem and forms ecosystem cloud service capabilities.
The Cloud Visualized Management Platform offers enterprise-level SaaS services to sub-industries and
dedicates 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 site
management more efficiently through remote video inspection, and enables operators to make better marketing
decisions 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 property
management 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,
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Hikvision 2018 Annual Report
the Cloud Visualized Management Platform delivers a whole set of campus security solutions to middle and
primary schools as well as kindergartens, establishes intelligent campuses with the help of facial attendance and
electronic class board, and provides networking supervision system for education management departments at all
levels so as to realize the networking of multi-dimensional data including video, alarm and students' attendance. In
the logistics industry, the Cloud Visualized Management Platform supplies video networking, vehicle networking
and security check networking services for scenarios such as logistics parks and delivery lockers, and keeps
upgrading centered on people, vehicle, goods, warehouse and safety to facilitate the refined operations of logistics
enterprises. And in the field of alarm operation, the Cloud Visualized Management Platform supports the
acquisition and processing as well as storage and analysis of mass data such as alarm signals, real-time
information and video streaming media, and assists alarm operators in rapidly possessing large cross-regional
alarm operational coordination capability, command and dispatch capability as well as emergency disposal service
capability.
In addition, the Cloud Visualized Management Platform, as a public cloud application service portal on the
basis of sub-scenario-based fragmentized intelligence, relies on the AI Open Platform of the Company to carry out
and implement the corporate strategy of “video + AI”. With public cloud structure, the Cloud Visualized
Management Platform furnishes users with business application value as well as outstanding value in lightweight
deployment, 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, the
business can be summarized into four main lines: business world, social energy, better lives and wealth growth.
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Hikvision 2018 Annual Report
Industry solutions serving the “business world”
Hikvision EBG offers business area solutions for manufacturing, logistics and retail, with an aim of helping
business operators achieve cost reduction and efficiency enhancement and lightening management anxiety.
Large video networking makes employees’ work centralized and intensive, while AI visual perception
technology allows machine-replacing-people and results in a reduction in the number of indirect staff and a
compression in the working hours of direct staff, which improves efficiency. For instance, remote video store
inspection can replace the traditional offline store inspection of retail enterprises; the AI visual perception
technology can be applied to analyze the waiting time of workers in the production process, optimize the time
distribution of workers in different types of production teams, and reduce the indirect waiting time of direct
personnel.
The digitalization of behavioral standards and management practices can improve staff efficiency, and the
digitization of business processes, business scenarios and production facilities can bring about process
optimization and intelligent improvement of asset application efficiency. For instance, precise insight about
consumers can be realized through an analysis of distribution of passenger flow and customer group of retail
stores; the “two-ticket and three-system mechanism”14 of the electric power industry can be implemented,
accident prevention capability of electric power enterprises can be enhanced, and human-factor accident and
serious misoperation accident can be prevented with the help of techniques like face recognition; the digitization
of electric power production facilities can be realized through intelligent reading technology for meters and the
inspection 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 protection
solutions help reduce safety concerns. In the field of manufacturing, these solutions cover the factory area and the
workshop. For instance, best practices for production line workers at pharmaceutical enterprises can be
14
Two tickets: work ticket and operation ticket; three systems: shift system, tour inspection system, and equipment periodic testing
and rotation system.
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Hikvision 2018 Annual Report
standardized by intelligent behavioral analysis to ensure the safety of pharmaceutical production; in the field of
logistics and transportation, these solutions cover the whole logistic park area to realized visualized tracking of the
whole 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 energy
acquisition such as grain growing, oil extraction and coal mining, secondary energy processing such as oil refining
and 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 of
personnel 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 to
reduce personnel costs and help build ubiquitous IoT through video visualized inspection. Intelligent analysis and
alarm can be used to minimize dangerous behaviors such as people intruding into dangerous zones and irregular
operation, by means of AI visual perception technology; and technical support can be provided for the fusion of
IoT and information networks through linkage with an enterprise information system.
The traceability supervision solutions ensure grain production and food production, realize visualization of
traceability, and assist process supervision and automatic identification. For instance, real-time detection can be
carried out for various indicators of the grain planting environment via dynamic environment detection, to realize
real-time supervision of food production environment; all-time intelligent detection can be conducted for ensuring
that staffs wearing the uniforms, and supervising the kitchen environment of various catering units in the
application zones by AI visual perception technology, and problems like multiple supervision departments and
wide scope of supervision could be solved though linkage with regulatory information platform, to build
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Hikvision 2018 Annual Report
transparent kitchens.
Industrial IoT solutions based on visual perception are helpful for energy enterprises to cut cost, improve
quality, speed up processes and improve capital investment. For example, in the metallurgical industry, intelligent
observation and analysis of short-circuit heating of cathode plate in copper electrolytic cell by thermal imaging
camera effectively settles the problems of time-consuming, labor-intensive and inefficiency of traditional manual
meter reading, water sprinkling and manual detection method, whereby manual inspection cost of each workshop
can 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 for
teaching resources and online classroom solutions to achieve quality education resource sharing, and promote fair
education. 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 technology
could 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 and
academic 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 application
in campus.
In the field of intelligent tourism, the AI visual perception technology can comprehensively perceive the
scenic 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
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video cloud technology, live broadcasting scenic spots becomes possible and allows tourists to enjoy and share
scenic spots.
In the field of intelligent healthcare, the video AI recognition technology realizes the identification of
reference personnel, while video networking and AI visual perception technology makes the remote supervision
of medical insurance consumption possible, which facilitates medical digitalization and ensures the fairness of
medical resources.
Industry solutions contributing to “wealth growth”
Hikvision EBG carries out a series of industry solutions dedicated to achieving “wealth growth” for various
industries covering real estate asset construction, property management services and financial institution wealth
management, helping industry users achieve wealth growth.
The large video networking and AI visual perception technology is applied for personnel management and
safety control on construction sites during the construction process. To solve the chaos of construction site staff
management, a real-name attendance management scheme for workers is used with functions such as attendance
statistics and job category statistics, combining with real-name attendance system and real-name enterprise
management system to supervise wage payments of rural migrant workers and prevent the labor force from
defaulting on wages for migrant workers. To settle the matter of difficulties in management of site accidents, a
visualization solution for site safety production is used: by taking advantage of high-altitude panoramic video
monitoring system and intelligent safety helmet equipment, the details of site operation and the situation of safety
helmet wearing of personnel are clear at a glance.
Hikvision EBG empowers leading real estate developers and property management companies through the
application of technological means, so as to enhance brand effect and property management capabilities and
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improve owner’s experience. For instance, by means of consumption structure analysis and dynamic passenger
flow analysis, business planning and precise marketing of commercial properties can be strengthened; by applying
parking robots, a new model of human-free parking lots can be created.
Based on standardized service requirements of financial institutions, combined with application scenarios
such as counter, e-banking, and self-service devices, Hikvision EBG provides various face recognition-based
identity verification methods to realize effective control of operational risks. The AI visual perception technology
is applied for customer classification and behavioral information analysis so as to provide differentiated marketing
services and enhance customer experience.
3.3 Small & Medium Business Group (SMBG): adapting to the transformation trend, contributing to
channel upgrade, and creating a service ecosystem
As the most active business group, small and medium businesses represent strong developmental vitality and
growth potential. The SMB market is a promising market, and the business is driven by real demands from small
businesses and small units, which are less affected by changes in macroeconomic policies. At present, such
demands 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 distribution
management team, aiming to serve small and medium-sized enterprises. The Company sets up SMBG business
team to closely follow the demands of SMB users and distribution customers, efficiently and flexibly provide
products and services based on market insights, and strive to establish an eco-industrial platform for product
distribution, service crowdsourcing, and SaaS sharing.
China’s SMB security market is massive, being not only a device product market, but also an engineering
market, where product price premium brought by the service is an important “moat” of this market. In the
meantime, 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 enormous
overall quantity and the extremely wide range. In this market, the information cannot be easily delivered, the cost
of brand replacement is low, and there are a large number of simple service demands without unified industry
standard. Hikvision SMBG strives to achieve diversified and differentiated business development by changing
marketing methods, broadening product types, deepening scenario-based demands, and innovating channel model.
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Based on AI intelligence and big data, Hikvision SMBG established a comprehensive service platform
integrating cloud business transactions, security services and SaaS applications, and created a new ecosystem of
security Internet; with the help of e-commerce, 400 hotline, official website and other sources of traffic, Hikvision
SMBG deepens access to multiple channels including security, IT and industrial equipment, and obtains
information about both online and offline traffic; Hikvision SMBG builds nationwide logistics and warehousing to
improve logistics turnover efficiency; it optimizes the means of controlling capital stocks, refines channel
customer management, and strengthens systematic risk management; it creates a group of efficient, fast, integrated
service 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 Hikvision
SMBG, and continues to realize the value and create value centered on customers.
Taking advantage of its accumulation of products, channels and services, Hikvision SMBG has
comprehensively 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 new
distribution management system and model, and creates a good user ecology to consolidate the foundation for the
long-term development of the Company’s SMBG business.
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4. Innovative Businesses
During the reporting period, the video technology-based new businesses such as EZVIZ Network, Hikvision
Robotics, Hikvision Automotive Electronics, Hikvision Smart Storage, Hikvision Weiying, and Hikvision
Huiying 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", "garden
light camera LC1", all wireless video intercom "battery doorbell camera DB2", "Internet fingerprint password
lock LT21S", "smart wall switch P1" for intelligent control of the whole house, "smart curtain MC1", and "child
accompanying 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 video
technology as the core.
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EZVIZ improved the intelligence of home-like scenes (business scenes, etc.) and continued to launch new
products 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 allows
users to record different voices such as welcome, reminders and alarms through EZVIZ APP, enriched business
scenario applications. In addition, EZVIZ cloud storage service is growing rapidly, and EZVIZ also explored
AI-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 improve
security compliance through professional qualification certification. In 2018, EZVIZ Cloud obtained the
international certification of cloud security (CSA-STAR15), once again recognized by the international cloud
computing service market, which marked that EZVIZ Cloud is in line with international standards and will
15
CSA-STAR: Security Trust Assurance and Risk certification organized by Cloud Security Alliance (CSA), is an enhanced version
of information safety management system ISO/IEC27001, and provides a comprehensive safety evaluation for cloud computing
services combing Cloud Control Matrix and maturity evaluation module as well as complying with relevant requirements of laws,
regulations and standards.
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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 basic
video 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 150
countries.
It links and aggregates a large number of intelligent terminals and serves customers and end consumers in a
variety of industries worldwide by providing acquisition, transmission, storage and deep analysis capabilities for
video and audio-based IoT data. To date, the EZVIZ Cloud platform has a magnitude of 40 million device
accesses and 30 million users, providing stable and continuous video-based comprehensive services for users
across the world.
Based on the basic capabilities of EZVIZ's hardware + cloud, AI + open interface, EZVIZ Cloud Platform
provides open device access, open basic services, open value-added services, and packages a number of SaaS
common components around application scenarios (for example, identification components, headcount change
detection components, frequency detection components, dynamic face retrieval components which can be used for
applications such as VIP management, off-the-post detection, repeating customer analysis, personnel trajectory
analysis, as well as cloud live broadcasting components of industrial live broadcasting such as scenic and road
condition live, preschool parents live, and Clean and Healthy Kitchen live through applying surveillance); it
allows developers to quickly and easily develop their own business SaaS based on the basic capabilities of EZVIZ
SaaS 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 and
shared video cloud ecosystem has been initially established.
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4.2 Innovative Business -- Hikvision Robotics
Hikvision Robotics focuses on the field of automation and specializes in intelligent manufacturing, and
continues 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 of
robots, provides customers with reliable AGV16 products and solutions, and continuously builds intelligent
internal logistics solutions for factories, which have been widely used in 3C, automotive manufacturing, new
energy, medical, tobacco and other industries. Hikvision Robotics’ main product, Qianmo Robot, released its third
generation in 2018, which supports a variety of vision and laser positioning and navigation methods. The
performance and quality of the third generation has been greatly improved to meet the application requirements in
a variety of complex scenarios. Hikvision Robotics also launched new products such as automatic forklifts and
hybrid robots17, continuously enriching the product series of mobile robots to provide industry customers with a
wider range of product selection.
In the area of machine vision, Hikvision Robotics focuses on industrial visual sensing applications and
specializes in the underlying algorithm software and hardware technology, to provide customers with excellent
machine vision products and algorithm platforms, which have been widely used in various fields of industrial
automation 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
16
AGV：Automated Guided Vehicle
17
Hybrid robot: robot integrated functions of both mobile robot and general industrial robot (such as mechanical arm).
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megapixels, 43 megapixels and 50 megapixels ultra-high resolution industrial cameras to actively deploy and
preempt the high-end industrial camera market. At the same time, it released 8.9 megapixels, 12 megapixels, 20
megapixels, etc. intelligent code reading camera products to help the rapid upgrade of logistics automation. In
addition, Hikvision Robotics also released series products such as smart sensors, high-precision 3D profilers, and
lenses, which could meet the demands of most vision applications, to provide industry customers with one-stop
visual 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 and
focused on the industries, are widely used in various scenarios such as fire rescue, emergency command, traffic
management, facility inspection, and event support and protection. In 2018, Hikvision Robotics successively
released Falcon IV series UAVs, UAV monitoring and management platforms, automatic tracking antennas, fixed
and handheld defense systems, and other new products, providing industry users with complete solutions from
product to system.
4.3 Innovative Business--Hikvision Automotive Electronics
Hikvision Automotive Electronics business is committed to the R&D, manufacturing, sales and services of
Advanced Driving Assistant System (ADAS) and the related sensors, applying Hikvision’s technical reserves in
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image processing, video analysis, AI intelligence, video storage and other fields to the automobile industry. Since
its establishment, Hikvision Automotive Electronics has completed the upgrading of its quality system and the
construction of a new automated production line in accordance with the IATF16949 Standard18.
Self-developed Fully Automated Production Lines and Core Equipment
Hikvision Automotive Electronics business covers OEMs and related operators of passenger cars and
commercial vehicles, and the company has production lines for vehicle mounted cameras, driving recorders, 360°
panoramic viewing systems, streaming rearview mirrors, multimedia intelligent rearview mirrors, ADAS19, radars,
and etc. As of 2018, Hikvision Automotive Electronics has passed the audit and the verification of 20 OEMs and
become their qualified supplier, basically covering domestic mainstream independent brands and some of the joint
venture brands; the company has also implemented more than 200 fixed-point projects, of which more than 100
have been put into mass production. At the same time, relying on Hikvision's branches in more than 200 cities
across China, Hikvision Automotive Electronics has realized transaction coverage of more than 500 channel
partners.
18
IATF16949 Standard: a system standard developed by International Automotive Task Force (IATF) in relation to the R&D,
manufacturing, quality control of automobiles.
19
ADAS：the abbreviation of Advanced Driving Assistant System, an active safety technology, by taking advantage of various
sensors installed in a vehicle, is able to collect environmental data inside and outside of the vehicle immediately to recognize, detect
and trace the static and dynamic objects, so as to alert the driver of potential dangers as soon as possible, draw the driver's attention
and improve safety.
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Product Family of Hikvision Automotive Electronics
Hikvision Automotive Electronics unveiled the first-generation ADAS in 2017. The system, with the
functions of front vehicle collision warning, lane departure warning and driving behavior analysis based on video
analysis, has been widely used in domestic passenger vehicles and dangerous goods transportation vehicles. In
provinces that have introduced the local technical standards such as Jiangsu, Shanxi and Zhejiang, Hikvision
Automotive Electronics is among the first batch of enterprises that passed the testing and certification. While
introducing 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 video
surveillance, which supports the latest 64-layer 3D TLC NAND Flash20, and supports up to 4TB of maximum
capacity. All capacities are equipped with power-down protection21 to meet the cost-effective, high-capacity and
power-down protection demands in automotive and rail industries. The 4TB mass production complements the
20
NAND Flash: Nand-flash memory is a type of flash memory, which has a non-linear internal macro-cell mode, providing cheap
and effective solution for large-capacity solid state memory implementations. TLC: Triple-Level Cell, which is 3 bit per cell, 1
memory storage unit can store 3 bit data.
21
Power-down protection: abnormal power-off will increase the chance of a SSD failure. By providing a power-down protection
mechanism, the SSDs can be ensured of data integrity in the event of abnormal power failure.
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gap in the domestic large-capacity SSD mass production products, which has driven the expansion of external
industrial 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 Surveillance
Hard 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 series
enterprise-class SSD, which is the first mass-produced domestically-controlled enterprise-class SATA SSD
solution. Its performance and performance stability exceed the common read-intensive enterprise-class SSDs. In
the area of industrial-grade SSDs, Hikvision Smart Storage released the S210M and S210N, small-sized and
ultra-small-sized SSDs, with full capacity support from 64GB to 2TB, meeting the needs of miniaturization and
large-capacity development of SSDs, and providing stable performance and system support for the systems.
Product Family of Hikvision Smart Storage
Hikvision Smart Storage provides H1, L1, H10 series video surveillance memory cards, and constantly
introduces new products. Based on the industry application characteristics of video surveillance, Hikvision Smart
Storage launched P1, L2, P10 series video surveillance memory card products, covering various industries such as
public security, transportation, finance and education, applicable to various application environments; at the same
time, these new products have passed the relevant certification of the Ministry of Public Security, protecting
customers’ data security.
For the personal family scenes, Hikvision Smart Storage launched the “Personal Private Cloud” H100 in
2017, which solved the problem of security and sharing convenience of personal data and at the same time
enabled intelligent management of photos and videos through AI technology. For office scenes in small and micro
corporates, Hikvision Smart Storage launched the "Hikvision Enterprise Private Network Disk" H304 in 2018,
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Hikvision 2018 Annual Report
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 to
upgrading under personal scenes, Hikvision Smart Storage released the "single-disk" H90, allowing the idle hard
drive 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
Increased by 8.69%，mainly due to investments on Zhiguang Hailian Big Data Technology Ltd. and
Equity Assets SanMenXiaYun Vision Technology Ltd., and additional investments on Maxio Technology
(Hangzhou) Ltd.
Increased by 68.07%, mainly due to transfer of the completed Internet Video Industry Base, Security
Fixed Assets Industry Base (Tonglu) project-phase 2, and Chongqing Manufacturing Base from construction in
process to fixed assets during the current reporting period.
Increased by 102.70%, mainly due to newly added land use rights of Chengdu Science and
Intangible Assets
Technology Base, Wuhan Science and Technology Base, and Hangzhou Innovation Industry Base.
Decreased by 71.03%, mainly due to transfer of the completed Internet Video Industry Base, Security
Construction in Progress 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 its
goal of better meeting the needs of a fragmented market, Hikvision has been concentrated on technology
accumulation, product development, program design, marketing and service system construction, as well as
supply chain delivery capabilities since its inception. The Company focuses on hiring the right people and builds
its global comprehensive competitive advantages through continuous accumulation.
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1. Focusing on video technology and satisfying users’ fragmented demands with scenario-based products
and solutions
Video technology is a very comprehensive technology, which involves optics, sensors, microelectronic
technology, imaging technology, video compression technology, video storage technology, video transmission
technology, low illumination and wide dynamic technology, video display technology, as well as traditional
pattern recognition technology, deep learning technology that is extremely popular at present, and many other
related technologies. These technologies are rapidly developing and deepening. Regardless of how the market
changes, the Company will continue to invest in video technology and other related technologies, endlessly
develop 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. Given
scenario-based video applications and the fragmented users’ demands, the Company needs to provide the
appropriate products or solutions for different scenarios and often needs to customize them accordingly. In order
to 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 its
competitiveness. For example, the accumulation of big data technology and the construction of big data platform
in 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 only
engaged in one area of the industrial chain, Hikvision provides not only algorithms and products, including
hardware 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 Company
has a three-in-one hierarchical R&D system consisting of the technology platform, the product platform and the
solution platform. The three platforms are different in functions yet cooperate with each other. The continuous
development of technologies, products and solutions enables the Company to respond to and fulfill ongoing
customers’ demands. The Company anticipated the significance of artificial intelligence and has deployed its
business in advance in terms of algorithms, software and hardware. As a result, Hikvision already possesses
relatively complete and mature artificial intelligence technologies, products and systems at present. The Company
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Hikvision 2018 Annual Report
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 locations
including Beijing, Shanghai, Wuhan, Montreal in Canada, and London in Britain. In addition, it is planning to
make R&D investments in various regions including Xi’an, Chengdu, Chongqing and Shijiazhuang, hiring local
professionals 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, and
orders are characterized by small sizes and multiple batches, which poses a challenge to the delivery of the supply
chain and necessitated the development of a flexible production capacity. The Company’s efforts to develop a
flexible production capacity can be summarized in three aspects: first, combining independent production with
outsourced production to balance delivery capacity and production efficiency; second, strengthening the
construction of the internal operation coordination mechanism and the IT system, with production plans leading
marketing, product development and production, maintaining collaboration with suppliers, ensuring efficient and
accurate material demand forecasting and management, and implementing flexible and effective program
coordination and production scheduling, which is crucial for the Company’s supply chain to respond to the
changing demands, optimize costs, and increase efficiency; third, promoting the construction of intelligent
factories and improving the level of manufacturing equipment, which on the one hand enhances the production
efficiency of the factory, and on the other hand improves the technological level and ensures the consistency of
product quality.
Currently, Hikvision has three main manufacturing bases in Hangzhou, Tonglu and Chongqing, and it has
also launched production expansion plans for Tonglu, Wuhan and Chongqing to ensure steady and healthy
business growth. At present, the Company applies the intelligent Qianmo AGV and machine vision cameras at the
Tonglu production base to fully implement the automation of warehousing and in-plant logistics. We will continue
implementing the intelligent factory construction to strengthen the intelligence level of the supply chain system
with the support of a comprehensive information system, IoT technology and automation technology. Based on
the 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
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Hikvision 2018 Annual Report
To better fulfill the fragmented demands of users and reduce the intermediate links of information
transmission, the Company reinforces the construction of its marketing and service networks. Hikvision’s
marketing service network continues to expand to allocate resources globally. The Company has 32
provincial-level business centers/primary branches, and has established 44 overseas sales branches, forming a
marketing network covering more than 100 countries and regions around the world, with the self-owned brand
products being sold to more than 150 countries and regions.
In the domestic market, to better serve customers, Hikvision promotes the transformation of local branches to
provincial business centers, allocates more resources to business centers to better cater to customer needs; and the
provincial business centers act as the front desk for the Company to get closer to users and the market and to
respond to customer needs. For the purpose of better adapting to the demands of customers, Hikvision
revolutionized 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), adopting
different business strategies and offering different products and solutions.
In the meantime, Hikvision continues to establish distribution channels in major countries and regions around
the world. By optimizing the distributor team, it continuously consolidates and expands the outreach of its
business, providing product delivery and after-sales support for various users in various industries of various
countries and regions. Through continuous improvement of products and technical service standards, the
Company provides a comprehensive certification training system for its partners to continuously enhance the
professional capabilities of its partners so as to serve customers together.
Through continuous adjustment of the business structure, Hikvision will continue to build an optimized
organizational 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 of
competitiveness in enterprises. The Company adheres to the “talent-focused, growing together” employment
concept, and has set up a dual career development path consisting of management sequence and professional
sequence, established a professional qualification evaluation system and a talent assessment system, and
implemented a multi-level training mechanism, to continuously invest resources for the cultivation of core talents
and back-up talents for the Company. Through a variety of activities such as “Face-to-Face with Executives”,
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Hikvision 2018 Annual Report
“Dialogue with Managers”, “Humanities Lecture Hall”, and “Reading Club”, the Company creates a fair, open
and 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 has
implemented 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 the
stability and motivation of the Company’s core talents.
6. Continuing to build the quality system, safety system and compliance system to escort the Company’s
development
Hikvision continues to invest resources to strengthen and optimize the quality management system, R&D
management system for product safety, and compliance system to empower its business development. The
Company strictly complies with the applicable laws, regulations and relevant provisions of different countries and
regions where the operation is conducted, fosters an open and transparent atmosphere, welcomes the supervision
of all parties, and constantly optimizes itself.
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Section IV Operation Discussion and Analysis
I. Overview
In 2018, the domestic economy underwent a rapid decline and the impact of overseas non-market factors
soared, 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 perception
technology brought opportunities for the digital transformation of traditional industries, and the fusion of
intelligent IoT and information network generated tremendous space for data governance, data fusion, data
services and data applications, which has once again lifted the bottleneck of the industry development. Hikvision
continued 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 is
oriented by customer demands, driven by technological innovations, and laid equal emphasis on both efficiency
and risk management. During the reporting period, the Company achieved total operating income of RMB 49.84
billion, an increase of 18.93% on a year-over-year basis; and net profit attributable to shareholders of the listed
company of RMB 11.35 billion, an increase of 20.64% on a year-over-year basis. The Company’s overall gross
profit 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 intelligent
applications 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 sales
volume. The Company maintained a relatively large scale R&D investment, with the number of R&D and
technical service personnel in excess of 16,000.
While continuing to invest in the technology and products related to the traditional security business, the
Company accelerated a series of R&D investment in AI Cloud. Following the AI Cloud computing architecture of
cloud-edge fusion, the Company proposed a data architecture of IoT-Information network fusion and
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Hikvision 2018 Annual Report
comprehensively released a series of platforms, such as “two pools, one library and four platforms”, AI open
platform, and video surveillance construction evaluation system, constantly consolidating the business layout in
AI intelligence, big data, and application and building the business architecture system through technological
innovation.
In 2018, Hikvision’s products and solutions were widely applied in the public service market, the enterprise
market, and the consumer market, including intelligent products represented by “Full Structuring”, “Hybrid
Intelligence”, 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 the
public 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’s
livelihood 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 center
forward to stay closer to and better serve customers. The Company re-planned its business groups to PBG, EBG
and SMBG according to the different characteristics of the three types of markets, effectively coordinating
internal 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 and
Israel, one new branch in the Philippines, one new office in Ho Chi Minh City, summed up to 44 overseas
branches and more than 100 authorized repair centers in total in 2018, further improved its overseas sales and
service network. The Company continued to consolidate its overseas channels, focused on breaking through the
project market, maintained investment inputs for the overseas market, enhanced brand influence of the Company
to better serve local customers. In 2018, the Company achieved major project breakthroughs in India and other
countries, 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
fluctuations
In response to the pressure of industry-wide capital contraction brought about by deleveraging campaign in
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Hikvision 2018 Annual Report
domestic China, the Company adopted a destocking strategy in the domestic channel market since the second
quarter of 2018 to help distributors reduce inventory, optimize asset structure and improve the ability to address
capital risks. Meanwhile, it cooperated with the Company’s warehouse management (HiveBox Project22) in major
cities 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 generate
profits as well. Hikvision Automotive Electronics, Hikvision Storage and other innovative businesses have all
invested heavily to propel the target market. Employees were committed to the business development with the
spirit of hard work and entrepreneurship. The Company's employee team and the innovative business team have a
positive and productive working relationship; likewise the Company's business and the innovative businesses
complement 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 manufacturing
flexibility and production efficiency. It also impelled the construction of the supply chain IT system, enhanced the
level 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 were
completed 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 in
the overseas market.
(6) Furthering management change and improving management capabilities
In 2018, the Company continued to promote various management change projects and upgraded capabilities
in all aspects. From focusing on scale growth, we are laying emphasis on both scale growth and efficiency
improvement now. At the same time, we continue to develop and cultivate promising employees to activate
organizational vitality.
22
Hive Box Plan: establish warehouses in major cities across the country, centralize warehouse management, and respond quickly to
distributors’ orders to improve overall delivery efficiency.
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Hikvision 2018 Annual Report
2. Operating incomes and operating costs
1) Operating income structure
Unit：RMB
2018 2017
YoY Change
Proportion to Proportion to (%)
Amount Amount
operating income 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
49,837,132,481.61 100.00% 41,905,476,572.07 100.00% 18.93%
services
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; “Other
innovative businesses” includes corresponding business products of innovative business subsidiaries - Hikvision
Robotics, and Hikvision Automotive Electronics, Hikvision Weiying, Hikvision Storage, Hikvision Huiying, and
Similar 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 1,815,964,569.77 2,331,430,966.09 3,248,407,615.14 3,957,066,090.32
company
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Hikvision 2018 Annual Report
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 1,480,780,632.01 1,810,765,424.69 2,861,268,129.82 3,258,040,898.30
company
2) Industries, products or regions accounting for more than 10% of the Company’s operating income or
operating profit
√ Applicable □ Inapplicable
Unit: RMB
YoY Change (%)
Gross YoY Change (%) YoY Change (%)
Operating income Operating cost of operating
margin of operating cost of gross margin
income
Classified by industry
Video products and
49,837,132,481.61 27,483,469,555.24 44.85% 18.93% 17.11% 0.85%
video services
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
7,323,448,788.51 3,380,634,705.16 53.84% 44.34% 45.68% -0.42%
equipment
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
1,060,561,642.36 588,994,979.45 44.46% 87.85% 70.50% 5.65%
businesses
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 the
statistics caliber of principal business has been changed during the reporting period
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
3) If revenue from physical products sales greater than revenue from providing services
√ Yes □ No
Industry Item Unit 2018 2017 YoY Change (%)
Sales volume Per unit 126,356,788 98,345,860 28.48%
Video products and
video services
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
2018 2017 Increase/
Industry Item Proportion to Proportion to decrease over
Amount Amount
operating cost operating cost previous year
Video products
and video Operating cost 27,483,469,555.24 100.00% 23,467,310,590.76 100.00% 17.11%
services
Classified by products
Unit: RMB
2018 2017 Increase/
Product Item Proportion to Proportion to decrease over
Amount Amount
operating cost operating cost previous year
Front-end
Operating cost 12,054,070,919.03 43.86% 10,354,906,543.30 44.12% 16.41%
equipment
Back-end
Operating cost 3,603,440,284.98 13.11% 3,164,186,804.35 13.48% 13.88%
equipment
Central control
Operating cost 3,380,634,705.16 12.30% 2,320,570,446.43 9.89% 45.68%
equipment
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
Operating cost 997,681,210.62 3.63% 708,022,298.25 3.02% 40.91%
business
Other innovative
Operating cost 588,994,979.45 2.14% 345,446,563.98 1.47% 70.50%
businesses
Subtotal Operating cost 1,586,676,190.07 5.77% 1,053,468,862.23 4.49% 50.61%
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Hikvision 2018 Annual Report
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 holding
subsidiaries, 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 reporting
period:
□ 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
0.47%
sales of the year (%)
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 subsidiary
of 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
0.00%
purchases for the year
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Hikvision 2018 Annual Report
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
Increase/decrease
2018 2017 over previous Note of significant change
year
Improve sales network, increase
Sales expenses 5,892,500,406.52 4,430,220,065.13 33.01%
personnel contribution
Increase in personnel and low-value
Administrative expenses 1,376,013,682.79 1,011,214,457.29 36.08% consumables used in new office
buildings
Increase in foreign exchange gains
Financial expenses -424,257,896.76 265,411,287.66 -259.85%
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 newly
added 850 patents (including 116 patents for invention, 270 utility models and 464 product design patents), and
newly added 112 software copyrights. As of the end of 2018, the Company had accumulatively owned 2809
patents (including 513 invention patents, 741 utility models and 1555 product design patents), and owned 881
software copyrights.
During the reporting period, the Company invested RMB 4.48 billion in R&D, which accounted for 8.99% of
the 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 technical
advantage to product superiority, so as to continually promote the growth of the Company’s performance.
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Hikvision 2018 Annual Report
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
46.55% 49.70% -3.15%
headcount
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
8.99% 7.62% 1.37%
operating income
Capitalized R&D expenses (RMB) 0.00 0.00 0.00
Capitalized R&D expenses as a
0.00% 0.00% 0.00%
percentage of R&D expenses
Reason of significant change of total R&D expenses as a percentage of operating income as compared to last year
□ Applicable √ Inapplicable
Reason and explanation of its reasonableness of significant change of the capitalized R&D expenses
□ Applicable √ Inapplicable
5. Cash flow
Unit: RMB
Increase/decrease over
Item 2018 2017
previous year
Subtotal of cash inflows from
57,331,971,581.36 45,403,833,925.46 26.27%
operating activities
Subtotal of cash outflows from
48,217,958,295.30 38,030,673,674.78 26.79%
operating activities
Net cash flows from operating
9,114,013,286.06 7,373,160,250.68 23.61%
activities
Subtotal of cash inflows from
10,894,117,243.97 10,418,044,681.02 4.57%
investing activities
Subtotal of cash outflows from
9,443,396,961.92 11,626,742,349.71 -18.78%
investing activities
Net cash flows from investing
1,450,720,282.05 -1,208,697,668.69 -220.02%
activities
Subtotal of cash inflows from
12,493,552,609.39 3,642,688,936.06 242.98%
financing activities
Subtotal of cash outflows from
13,298,915,018.82 7,044,435,588.93 88.79%
financing activities
Net cash flows from financing
-805,362,409.43 -3,401,746,652.87 76.33%
activities
Net increase in cash and cash
9,994,553,723.02 2,506,847,571.89 298.69%
equivalents
Explanation of why the related data varied significantly on a YoY basis
√ Applicable □ Inapplicable
The fluctuation of net cash flows from operating activities is mainly due to the increase in sales collection;
the fluctuation of net cash flows from investing activities is mainly due to the increase in the net recovery amount
of principal-guaranteed financial products; the fluctuation of net cash flows from financing activities is mainly
due to equity incentive subscription funds received in the current period.
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Hikvision 2018 Annual Report
Explanation of reasons leading to the material difference between cash flow from operating activities during the
reporting period and net profit for the year
□ Applicable √ Inapplicable
III. Non-Core Business Analysis
□Applicable √Inapplicable
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Hikvision 2018 Annual Report
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
Percentage of Percentage of (%)
Amount Amount
total assets 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
The transfer of Internet Security Vedio Industry
Fixed assets 5,082,415,160.10 8.01% 3,024,025,496.31 5.86% 2.15%
Base, Security Industry Base (Tonglu)
Project-phase 2, and Chongqing Manufacturing
Construction in process 416,092,413.42 0.66% 1,436,319,118.30 2.79% -2.13% Base into fixed assets after completion during the
current reporting period.
Increased Short-term borrowing used for
Short-term loans 3,465,655,688.29 5.46% 97,114,655.91 0.19% 5.27%
temporary capital turnover
Long-term loans 440,000,000.00 0.69% 490,000,000.00 0.95% -0.26% No significant change
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Hikvision 2018 Annual Report
2. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
Unit: RMB
Difference on
translation of Provision for
Profit or loss
financial decline in Purchase Sales
Opening from change in Closing
Item statements value during during the during the
balance fair value during balance
dominated in the current period period
the period
foreign period
currency
Financial assets
Derivative financial
4,100,657.54 -2,249,271.02 8,664.07
assets 1,860,050.59
Subtotal of financial
4,100,657.54 -2,249,271.02 8,664.07 1,860,050.59
assets
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 during
the 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%
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Hikvision 2018 Annual Report
2. Significant equity investment during the reporting period
□Applicable √Inapplicable
3. Significant non-equity investment during the reporting period
√ Applicable □ Inapplicable
Unit: RMB
Fixed assets Cumulative amount of
Invest Project Investment during the Source of Project
Project name investment investment by the end of
method industry current reporting period funds schedule
or not reporting period
Video 171,166,453.22 1,085,180,718.30
Internet Security
Self-built YES product and Bond 100%
Industry Base
video service
Security Video 341,337,980.27 642,026,894.23
Industrial Base product and
Self-built YES Self-fund 100%
(Tonglu)-phase video service
2
Chongqing Video 187,895,561.81 277,289,173.62
Manufacture Self-built YES product and Self-fund 100%
Base video service
Hangzhou Video 50,840,516.83 50,840,516.83
Innovation Self-built YES product and Self-fund 4.96%
Industry Base video service
Chengdu Science Video
and Technology Self-built YES product and 6,577,446.74 6,577,446.74 Self-fund 0.49%
Base Project video service
Chongqing Video
Science and YES product and
Self-built 2,257,412.05 2,257,412.05 Self-fund 0.30%
Technology Base video service
Project-phase 2
Xi’an Science Video
and Technology Self-built YES product and 1,664,067.68 1,664,067.68 Self-fund 0.15%
Base Project video service
Wuhan Science Video
and Technology Self-built YES product and 1,641,509.43 1,641,509.43 Self-fund 0.06%
Base Project video service
Wuhan Video
Intelligence YES product and
Self-built 934,836.51 934,836.51 Self-fund 0.04%
Industry Base video service
Project
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Hikvision 2018 Annual Report
Fixed assets Cumulative amount of
Invest Project Investment during the Source of Project
Project name investment investment by the end of
method industry current reporting period funds schedule
or not reporting period
Total -- -- -- 764,315,784.54 2,068,412,575.39 -- --
4. Financial assets measured at fair values
√ Applicable □ Inapplicable
Unit: RMB
Amount
Current profits Accumulated
Purchase sold
or losses on fair value Cumulative
Initial investment during the during Source of
Category the changes investment Closing balance
cost reporting the funds
changes in fair included in income
period reportin
value equity
g period
Derivative Company's
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
instruments 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 √ Inapplicable
During the reporting period, there was no use of raised fund
VI. Disposal of significant assets and equity
1. Disposal of significant assets:
□ Applicable √ Inapplicable
During the reporting period, there was no disposal of significant assets
2. Sale of significant equity:
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
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 Registered
Company name Principal business Total assets Net assets Operating revenue Operating profit Net profit
type capital
Manufacturing: video surveillance system;
Technology development and service: computer
Hangzhou
system integration, electronic product,
Hikvision
communication product; service: the installation of
System Subsidiary 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
electric security engineering, the design,
Technology.
construction and maintenance of intelligent
Co., Ltd.
system; selling its self-produced products, import
and export its own products and technology.
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:
Hangzhou computer software, electronic product,
Hikvision communication product, digital security product;
Science and Subsidiary wholesale: security electronic product and its 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
Technology auxiliary equipment, intelligent hardware
Co. Ltd. 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
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Hikvision 2018 Annual Report
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
Adjustments of organizational
Beijing Hikvision Security and Protection Technology Service Ltd. Liquidation and Cancellation
framework
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Hikvision 2018 Annual Report
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 an
inevitable requirement for development. The security demands of governments, enterprises and families in
various countries will continue to increase; therefore, the demands for traditional comprehensive security
business 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 of
sub-industries will introduce AI, and AI will be everywhere. Ubiquitous intelligence has brought the
Company clear opportunities. However, the fragmented demands of intelligent applications will be the
constraint. If an efficient and low-cost solution could be found to address the intelligent needs of the
sub-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 the
Company’s business environment in the country and region. Along with increased non-market interference
factors 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 core
corporate value of “clients’ success, value-oriented, integrity and down-to-earth, pursuit of excellence”. The
Company provides high-quality products and services for global customers and creates greater values for
customers worldwide through continuous innovation.
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Hikvision 2018 Annual Report
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 advance
sustainable development of the world”, the Company is committed to empower vision for the security and growth
of 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; and
develop 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 fulfill
customers’ demands.
(4) Maintain the driving force of both products and solutions, and focus on improving the marketing capabilities
of solutions.
(5) Continuously pay attention to the development of organizational capabilities and improve per capita
effectiveness.
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Hikvision 2018 Annual Report
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
Site Research and telephone
From January 1st 2018 to February 2nd 2018 Institutional investors CNINFO, Investor Relations Activity Record: From January 1st 2018 to February 2nd 2018
communication
Site Research and telephone
From February 5th 2018 to March 2nd 2018 Institutional investors CNINFO, Investor Relations Activity Record: From February 5th 2018 to March 2nd 2018
communication
Site Research and telephone
From March 5th 2018 to March 16th 2018 Institutional investors CNINFO, Investor Relations Activity Record: From March 5th 2018 to March 16th 2018
communication
Annual performance result Institutional and
April 23rd 2018 CNINFO, Investor Relations Activity Record: April 23rd 2018
Conference Call individual investors
Institutional and
May 11th 2018 Investor Reception Day CNINFO, Investor Relations Activity Record: May 11th 2018
individual investors
Site Research and telephone Institutional investors
From May 14th 2018 to May 25th 2018 CNINFO, Investor Relations Activity Record: From May 14th 2018 to May 25th 2018
communication
Site Research and telephone Institutional investors
From May 28th 2018 to June 8th 2018 CNINFO, Investor Relations Activity Record: From May 28th 2018 to June 8th 2018
communication
Site Research and telephone Institutional investors
From June 11th 2018 to June 22nd 2018 CNINFO, Investor Relations Activity Record: From June 11th 2018 to June 22nd 2018
communication
Performance Institutional and
July 23rd 2018 CNINFO, Investor Relations Activity Record: July 23rd 2018
result-Conference Call individual investors
Site Research and telephone
From July 24th 2018 to August 10th 2018 Institutional investors CNINFO, Investor Relations Activity Record: From July 24th 2018 to August 10th 2018
communication
76
Hikvision 2018 Annual Report
Time of reception Method of reception Type of reception object Basic situation of the research
Site Research and telephone Institutional investors
From August 13th 2018 to August 31st 2018 CNINFO, Investor Relations Activity Record: From August 13th 2018 to August 31st 2018
communication
From September 3rd 2018 to September 14th Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From September 3rd 2018 to September 14th
2018 communication 2018
Performance Institutional and
October 22nd 2018 CNINFO, Investor Relations Activity Record: October 22nd 2018
result-Conference Call individual investors
Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From October23rd 2018 to November 2nd
From October23rd 2018 to November 2nd 2018
communication 2018
From November 5th 2018 to November 16th Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From November 5th 2018 to November 16th
2018 communication 2018
From November 19th 2018 to December 4th Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From November 19th 2018 to December 4th
2018 communication 2018
From December 5th 2018 to December 17th Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From December 5th 2018 to December 17th
2018 communication 2018
From December 18th 2018 to December 29th Site Research and telephone Institutional investors CNINFO, Investor Relations Activity Record: From December 18th 2018 to December 29th
2018 communication 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.
77
Hikvision 2018 Annual Report
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 Bank of America Merrill Lynch 2018 A-share One-on-One, One-on-multi, small group Meetings, and etc.
New York All kinds of investors
Conference
January 2018 New One-on-One, One-on-multi, small group Meetings, and etc.
US NDR- via Bank of America Merrill Lynch All kinds of investors
York-Boston
January 2018 Hong Kong CICC TMT Forum 2018 All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Bank of America Merrill Lynch APAC TMT One-on-One, One-on-multi, small group Meetings, and etc.
March 2018 Taibei All kinds of investors
Conference 2018
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.
Essence Securities 2018 Mid-Year Investment All kinds of investors
May 2018 Chengdu One-on-One, One-on-multi, small group Meetings, and etc.
Conference
June 2018 Beijing Huatai Securities Mid-Year Conference All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
78
Hikvision 2018 Annual Report
Time of conference Location Conference Name Type of reception object Method of reception
London-Paris-
June 2018 Europe NDR-via CLSA All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Geneva-Zurich
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 One-on-One Meetings
Europe NDR-via CICC All kinds of investors
-London
September 2018 Shenzhen UBS China A-Share Conference 2018 All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Credit Suisse 19th Annual Asian Technology
September 2018 Taibei All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Conference
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 ShenWanHongYuan Securities 2019 Capital Market All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Shenzhen
Forum
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 GF Securities 2018 Winter Listed Company All kinds of investors One-on-One, One-on-multi, small group Meetings, and etc.
Chengdu
Non-disclosure Investment Forum
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Hikvision 2018 Annual Report
(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
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Hikvision 2018 Annual Report
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, implementation
and 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 Company
distributed cash dividend of RMB 6 (tax inclusive) and 5 bonus shares (tax inclusive) per each 10
shares 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 10
shares 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
Net profit attributable Ratio of net profit
to shareholders of attributable to shareholder Amount of cash Ratio of cash
Cash dividends
Year listed Company in of Company in dividends in other dividends in
(including tax)
consolidated consolidated financial methods other methods
statements statements (%)
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 of
the parent company was positive, but the Company did not propose a cash dividend distribution plan of ordinary
shares.
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
II. Profit distribution and capitalizing of capital Reserves proposal for the current reporting
period
Bonus issue per 10 shares (share) 0
Cash dividend per 10 shares (RMB) (tax
6.00
inclusive)
Additional shares converted from capital reserves
0
for 10 shares (share)
Total capital shares as the basis for the distribution
9,348,465,931
proposal (share)
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
29.02%
distributed profit (%)
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.
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Hikvision 2018 Annual Report
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
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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
Commitments in Hikvsion:
offering
(1) Haikang Group will not make use of October 29th Strict
documents or CETHIK Group Co., Ltd. Long-term
the controlling power to offer more 2013 performance
shareholding
favorable conditions to Hikvision than
alterations
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
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Hikvision 2018 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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
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Hikvision 2018 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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
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Hikvision 2018 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
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.
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
Hangzhou Weixun
tenure of the Company’s board of
Investment Management
directors, supervisors and senior
Limited Partnership（later May 17th Strict
management personnel, the annual Long term
renamed as Xinjiang Weixun 2010 performance
transfer of Hikvision’s total shares
Investment Management
should not exceed 25% of total number
Limited Partnership）
of shares held under Weixun; within 6
months after abovementioned
personnel’s dimission, should not
transfer Hikvision’s shares held under
Commitments in
Weixun.
Initial Public
Offering or During Hu Yangzhong, Wu Weiqi, Gong
re-financing
Hongjia’s tenure of the Company’s
board of directors, supervisors and
Hangzhou Pukang Investment senior management personne, the
Limited Partnership（later annual transfer of Hikvision’s total
May 17th Strict
renamed as Xinjiang Pukang shares should not exceed 25% of total Long term
2010 performance
Investment Limited number of shares held under Pukang;
Partnership） whithin 6 months after abovementioned
personnel’s dimission, should not
transfer Hikvision’s shares held under
Pukang.
The Company's directors, During their tenure of the Company’s
supervisors and executive: board of directors, supervisors and May 17th Strict
Long term
HuYangzhong,Wu Weiqi, senior management personnel, the 2010 performance
Jiang Haiqing, Zhou annual shares transfer should not exceed
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Hikvision 2018 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
Zhiping，Xu Lirong, Cai 25% of total number of shares held
Dingguo, He Hongli, Zheng under Weixun; whthin 6 months after
Yibo, Hu Dan, Jiang Yufeng, their dimission, they should not transfer
Liu Xiang, Wang Ruihong, their shares held under Weixun.
Chen Junke
During their tenure of the Company’s
board of directors, supervisors and
senior management personnel, the
Directors, executive officers
annual shares transfer should not exceed May 17th Strict
of the Company: Long term
25% of total number of shares held 2010 performance
Hu Yangzhong, Wu Weiqi
under Pukang; whthin 6 months after
their dimission, they should not transfer
their shares held under Pukang.
During Gong Hongjia’s tenure of the
Company’s board of directors,
supervisors and senior management
The Company’s director personnel, Chen’s annual shares transfer
May 17th Strict
Gong Hongjia’s spouse, Chen should not exceed 25% of total number Long-term
2010 performance
Chunmei of shares held under Pukang; whthin 6
months after the dimission of Gong
Hongjia,Chen should not transfer her
shares held under Pukang.
To avoid any loss of the Company and
other shareholders arising from any
China Electronics Technology
competing business, China Electronics
Group Corporation（later September Strict
Technology Group Corporation, the th
Long term
renamed as China Electronics 18 2008 performance
actual controller of the Company, issued
Technology Group Co., Ltd.）
Letters of non-competition on 18
September, 2008.
Gong Hongjia；
Hangzhou Weixun To avoid any loss of the Company and
Investment Management other shareholders arising from any
Limited Partnership（later competing business, Gong Hongjia,
renamed as Xinjiang Weixun Hangzhou WeiXun Investment
Investment Management Management Limited Partnership,
Limited Partnership）； ZheJiang Orient Holdings Co., Ltd and Strict
Long term
Hangzhou Pukang Investment Hangzhou KangPu Investment July 10th 2008 performance
Management Limited Partnership, the
Limited Partnership（later
promoters of the Company, issued
renamed as Xinjiang Pukang Commitment Letters of non-competition
Investment Limited in the same industry on 10 July, 2008.
Partnership）；ZheJiang Orient
Holdings Co., Ltd.
87
Hikvision 2018 Annual Report
Date of Term of
Commitments Giver of commitments Details of commitments Performance
commitments commitments
CETC Investment Holdin During the effective period of the
Other Co.,Ltd (CETCIH).; The implementation of CETCIH’s plan to
Within 6
commitments to 52nd Research Institute at increase the holding of Hikvision rd
October 23 months from Strict
the company's China Electronics Technology (within 6 months from October 23rd
2018 October 23rd performance
minority Group Corporation; China 2018) and the statutory period, CETCIH
2018
shareholders Electronics Technology will not reduce its shareholdings of
Group Co., Ltd. Hikvision
Whether the
commitments is Yes
fulfilled in time
2. Where any profit forecast was made for any of the Company’s assets or projects and the current
reporting period is still within the forecast period, the Company shall explain whether the performance of
the asset or project reaches the profit forecast and why:
□ Applicable √ Inapplicable
IV. The Company’s funds used by the controlling shareholder or its related parties for
non-operating purposes.
□ Applicable √ Inapplicable
No such case in the reporting period.
V. Explanation given by the board of directors, supervisory committee and independent directors
(if applicable) regarding the “non-standard auditor’s report” issued by the CPA firm for the
current reporting period
□ Applicable √ Inapplicable
VI. For changes in accounting policies, accounting estimates and accounting methods as compared
to the financial report for the prior year
√ Applicable □Inapplicable
1. Changes in accounting policies
The Notice on Amending the 2018 Annual Financial Statements of General Enterprises was issued by the
Ministry of Finance on June 15th 2018 (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
88
Hikvision 2018 Annual Report
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.
The Company started to execute the foregoing accounting standards and policies according to the time
required 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 the
requirements of relevant documents issued by the Ministry of Finance, and were in compliance with the
Accounting Standards for Business Enterprises and related provisions. Such changes only involved the
presentation 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 reporting
period
□ Applicable √ Inapplicable
No such case in the reporting period.
VIII. Explanation for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable □ Inapplicable
During the reporting period, the Company has newly set up eleven wholly-owned subsidiaries and six
holding subsidiaries, and cancelled one company, which have caused the change in consolidation scope. For more
details, please refer to note (VI) “Changes in consolidation scope” of the financial statement.
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Hikvision 2018 Annual Report
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
3
domestic CPA firm
Name of the certified public accountants from the Mou Zhengfei has provided audit service for 3 consecutive years;
domestic CPA firm Zhang Shushu has provided audit service for 2 consecutive year.
Whether the CPA firm was changed in the current period
□ Yes √ No
Engagement 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 √ Inapplicable
No 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 √ Inapplicable
No such case during the reporting period.
XIV. Integrity of the Company and its controlling shareholders and actual controllers
□ Applicable √ Inapplicable
90
Hikvision 2018 Annual Report
XV. The implementation of an Equity Incentive Plan, Employee Stock Incentive Plan, or other
incentive 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 15th 2017, Resolution for the fulfillment of the unlocking conditions of the Second unlock period
for the 2014 Restricted Share Incentive Schemes and the Resolution for the Second repurchase and cancelation of
the locked shares that already granted for 2014 Restricted Share Incentive Schemes were approved by the 26th
meeting of the third Board. Authorized by the first extraordinary general meeting for 2014，a total of 33,803,907
restricted shares of 1068 grantees were vested and circulated on January 8th 2018. Meanwhile, 1,594,641 restricted
shares held by a portion of grantees not fulfilling the incentive conditions were repurchased and cancelled. On
March 27th 2018, repurchase and cancelation process of the restricted shares was complete. Thereafter, there are
1072 grantees left for 2014 Restricted Share Incentive Schemes, granted and locked shares leftover are 33,932,161
shares.
For details, please refer to in the Indicative Notice of Listing the Unlocked Shares during the Second
Unlocking Period of 2014 Restricted Share Incentive Schemes (No. 2018-002) and the Notice of the Completion of
Second Repurchase and Cancelation of Locked Shares that Already Granted for 2014 Restricted Share Incentive
Scheme (No. 2018-017) issued on January 5th 2018 and March 29th 2018 respectively.
By the end of the reporting period, 33,932,161 awarded shares remains un-locked for 2014 Restricted Share
Incentive 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 the
Company's total share capital at the end of the reporting period.
The Company followed the Accounting Standard for Business Enterprises No. 11 – Share-based Payment
and other accounting standards in relation to accounting treatment for Restricted Share Incentive Schemes. Costs
in relation to the shares granted under 2014 and 2016 Restricted Share Incentive Schemes are amortized over the
waiting period for vesting.
During the reporting period, costs amortized in relation to the 2014 and 2016 Restricted Share Incentive
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Hikvision 2018 Annual Report
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.
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Hikvision 2018 Annual Report
XVI. Significant related-party transaction
1. Related-party transactions arising from routine operation
√ Applicable □ Inapplicable
Proportion
Trading to the Whether
Type of Approved
Content of related Amount amount of above Settlement Disclosure
Related party Relationship related Valuation trading quota Disclosure date
transaction （0’000 similar approve method reference
transaction (0’000 RMB）
RMB） transaction d quota
s.
Reference
Subsidiaries or Under the common
Purchase market
research control of the Payment on
Procurement materials, price; 30,054 1.00% 50,000 No
institutes of Company’s actual delivery
receiving services Agreed on
CETC controller.
price
The Company’s Reference
Announcement
director, Gong Purchase market
Shanghai Payment on on projections
Hongjia is the Procurement materials, price; 26,800 0.89% 40,000 No
Fullhan Micro delivery st
April 21 2018 on 2018 related
director of the receiving services Agreed on
transactions
related party price
(No：2018-024）
Reference
A joint venture
Purchase market
Wuhu Sensor affiliated business Payment on
Procurement materials, price; 4,561 0.15% 4,000 No
Technology held by the delivery
receiving services Agreed on
Company
price
Maxio A joint venture Procurement Purchase Reference 5,213 0.17% 8,000 No Payment on
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Hikvision 2018 Annual Report
Proportion
Trading to the Whether
Type of Approved
Content of related Amount amount of above Settlement Disclosure
Related party Relationship related Valuation trading quota Disclosure date
transaction （0’000 similar approve method reference
transaction (0’000 RMB）
RMB） transaction d quota
s.
Technology and affiliated business materials, market delivery
its subsidiaries held by the receiving services price;
Company Agreed on
price
Reference
Subsidiaries or Under the common Providing
market
research control of the services, selling Payment on
Sales price; 50,121 1.01% 120,000 No
institutes of Company’s actual products, delivery
Agreed on
CETC controller. commercial goods
price
Zheng Yibo, the
Company's senior
executive, served as
a director in
Zhejiang Tuxun.
Reference
Zheng Yibo left his Providing
market
post from the services, selling Payment on
Zhejiang Tuxun Sales price; 137 0.00% 500 No
Company in March products, delivery
Agreed on
2018; since it is less commercial goods
price
than 12 months after
Zheng’s departure,
Zhejiang Tuxun
remained a related
party of the
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Hikvision 2018 Annual Report
Proportion
Trading to the Whether
Type of Approved
Content of related Amount amount of above Settlement Disclosure
Related party Relationship related Valuation trading quota Disclosure date
transaction （0’000 similar approve method reference
transaction (0’000 RMB）
RMB） transaction d quota
s.
Company.
Reference
A joint venture Providing
market
Wuhu Sensor affiliated business services, selling Payment on
Sales price; 293 0.01% 500 No
Technology held by the products, delivery
Agreed on
Company commercial goods
price
The Company’s Reference
Providing
senior executive, Jia market
Hangzhou services, selling Payment on
Yonghua, is the Sales price; 78 0.00% 100 No
Comfirmware products, delivery
director of the Agreed on
commercial goods
related party price
Reference
A joint venture Providing
Maxio market
affiliated business services, selling Payment on
Technology and Sales price; 4 0.00% 100 No
held by the products, delivery
its subsidiaries Agreed on
Company commercial goods
price
Reference
A joint venture Providing
Zhiguang market
affiliated business services, selling Payment on
Hailian Big Data Sales price; 126 0.00% 0 -- --
held by the products, delivery
Technology Ltd. Agreed on
Company commercial goods
price
Total -- 117,387 -- 223,200 -- -- -- --
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Hikvision 2018 Annual Report
Details on significant sales return None
1) The part of the actual related party transaction amount with Wuhu Sensor Tech that exceeds the projected amount
Total amount of related transactions projected based on different has been approved by the chairman of the board according to the Company's Related Transaction Management
categories, actual performance during the current reporting period (if System.
any) 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
Not applicable
referencing price (if applicable)
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Hikvision 2018 Annual Report
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 Automotive
Technology Ltd. and Hangzhou HIK Robotics Technology Ltd. approved by the 5th meeting of the 4th session of the
Board of Directors held on August 27th 2018, the Company and Hangzhou Hikvision Equity Investment
Partnership (hereinafter refers to Innovative Co-investment Partnership) jointly increased the capital of
Hikvision’s innovative business subsidiaries: 1) Hikvision and the Innovative Co-investment Partnership jointly
increased the capital of Hikvision Automotive Electronics with a cash payment of RMB 48 million and a cash
payment of RMB 32 million, respectively, with a total capital increase of RMB 80 million. 2) Hikvision and the
Innovative Co-investment Partnership jointly increased the capital of Hikvision Robotics with a cash payment of
RMB 30 million and cash of RMB 20 million respectively, with a total capital increase of RMB 50 million. The
amount of this related transaction totaled RMB 78 million. In addition, reviewed and proved by the second
meeting of Strategy Committee of the 3rd Board of Directors in 2018 (March 9th 2018), Hikvision and the
Innovative Co-investment Partnership jointly established Hangzhou HIK Huiying Technology Ltd. (Hikvision's
invested RMB 48 million), for 12 consecutive months, the cumulative amount of related transactions between
Hikvision and the Innovative Co-investment Partnership was RMB 126 million, accounting for 0.42% of the latest
audited net assets of the Company. As of the end of the reporting period, the Company and the Innovative
Co-investment Partnership have completed the establishment and registration of changes related to the
subsidiaries of the innovative businesses.
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Hikvision 2018 Annual Report
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
August 28th 2018 www.cninfo.com.cn
Automotive Technology Ltd. and Hangzhou HIK Robotics Technology Ltd.
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
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Hikvision 2018 Annual Report
(1) Details of guarantees
Unit: RMB’0000
Guarantees provided by the Company for subsidiaries
Disclosure date of Actual Guarantee
Guarantee Actual occurrence Type of Due
Guaranteed party announcement of guaranteed Term of guarantee for a related
Cap date guarantee or not
the guarantee cap amount 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
May 12th 2018 10,000 July 30th 2018 1,200 Joint guarantee 2018.07.30-2019.07.19 No Yes
Development Ltd.
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 May 12th 2018 Not happened during the reporting period
30,000
Technology Ltd.
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
May 12th 2018 60,000 Not happened during the reporting period
Management Ltd.
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Hikvision 2018 Annual Report
Guarantees provided by the Company for subsidiaries
Disclosure date of Actual Guarantee
Guarantee Actual occurrence Type of Due
Guaranteed party announcement of guaranteed Term of guarantee for a related
Cap date guarantee or not
the guarantee cap amount 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 Total actual guarantee balance for subsidiaries at the end of the reporting
2,245,000.00 406,112.62
period(B3) period(B4)
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 Total actual guarantee amount during the
2,245,000.00 533,369.81
reporting period (A1+B1+C1) reporting period (A2+B2+C2)
Total approved guarantee cap at the end of Total actual guarantee balance at the end
2,245,000.00 406,112.62
reporting period (A3+B3+C3) of the reporting period (A4+B4+C4)
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 of
projects of “Safe Chongqing, Emergency Control System Digital Construction Project”, including 41 districts/counties construction projects, signed by
Chongqing Hikvision System Technology Co., Ltd. Meanwhile, the Company provides a counter guarantee to CETC’s joint responsibilities above.
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Hikvision 2018 Annual Report
(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 risk
without principal guaranteed.
□ Applicable √ Inapplicable
Entrusted finances that projected to be impossible to recover principal, or involving in situations that could possibly
lead 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 responsibilities
While seeking for economic benefits and protecting shareholders’ interests, Hikvision proactively fulfilled
corporate social responsibilities by treating suppliers, customers and consumers in good faith, caring employees’
remuneration benefits, professional development and other legal rights, and actively engaging in environment
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Hikvision 2018 Annual Report
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 future
arrangement for targeted poverty alleviation.
3. Environmental protection
The Company is not a critical pollutant enterprises published by national environmental protection
department
XIX. Other significant events
□ Applicable √ Inapplicable
XX. Significant events of the Company’s subsidiaries
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
Section VI Changes in Shares and Information about Shareholders
I. Changes in Share Capital
1. Table of changes in share capital
Unit: Share
Before the change Changes in the period (+, -) After the change
Share
New Shares Bonus transferred
Shares Ratio Issued Others Sub-total Shares Ratio
share from capital
reserve
1. Shares subject to conditional
1,971,217,850 21.36% -658,144,845 -658,144,845 1,313,073,005 14.23%
restriction(s)
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
582,492,655 6.32% -582,492,655 -582,492,655
corporates
held by domestic natural
269,844,895 2.92% 4,367,785 4,367,785 274,212,680 2.97%
person
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
0 0
corporates
held by overseas natural
1,118,880,300 12.12% -80,019,975 -80,019,975 1,038,860,325 11.26%
person
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
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Hikvision 2018 Annual Report
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 15th 2017, Resolution for the Second repurchase and cancelation of the locked shares that already
granted for 2014 Restricted Share Incentive Schemes were approved by the 26th meeting of the third Board.
Authorized by the first extraordinary general meeting for 2014, a total of 1,594,641 restricted shares held by a
portion of grantees not fulfilling the incentive conditions were repurchased and cancelled. On March 27th 2018,
repurchase and cancelation process of the restricted shares was complete. The Company’s total share capital
decreased 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 15th 2017, Resolution for the Second repurchase and cancelation of the locked shares that already
granted for 2014 Restricted Share Incentive Schemes were approved by the 26th meeting of the third Board.
Authorized by the first extraordinary general meeting for 2014, the board of directors agreed to repurchase and
cancel 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 27th 2018, the process of the second time repurchasing and cancelling shares for 2014 Restricted Share
Incentive Scheme was complete. The Company’s total share capital decreased from 9,228,865,114 shares to
9,227,270,473 shares by 1,594,641 shares.
Other contents that the Company considers necessary or required by the securities regulatory authorities to
disclose
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
2. Changes in restricted shares
√ Applicable □ Inapplicable
Unit: Share
Opening Vested in Increased in Closing
Name of shareholder Note for restricted shares Date of unlocking
restricted shares current period current period restricted shares
According to the relevant
Gong Hongjia 1,118,812,500 80,019,975 0 1,038,792,525 Executives locked shares provisions of executives
shares management
Xinjiang Weixun
Institution restricted share before
Investment Management 438,232,500 438,232,500 0 0 March 19th 2018
IPO
Limited Partnership
Xinjiang Pukang
Institution restricted share before
Investment Limited 144,260,155 144,260,155 0 0 March 19th 2018
IPO
Partnership
Grantees of restricted
share incentive plan 147,820,996 33,803,907 0 112,422,448 Restricted incentive equity shares January 8th 2018
(consolidated)
Executives locked shares+ partial of
the unlocked restricted shares
Hu Yangzhong 91,793,982 0 44,597,626 136,391,608
turning into executives locked
shares
Executives locked shares+ partial of
Wu Weiqi 8,260,566 0 41,176 8,301,742 the unlocked restricted shares
turning into executives locked shares
Executives locked shares+ partial of
Jiang Haiqing 8,255,911 0 96,750 8,352,661 the unlocked restricted shares
turning into executives locked shares
According to the relevant
Jia Yonghua 4,118,807 0 47,626 4,166,433 Executives locked shares
provisions of executives
Li Pan 4,042,926 0 122,625 4,165,551 Executives locked shares
shares management
Executives locked shares+ partial of
Huang Fanghong 70,875 0 74,250 145,125 the unlocked restricted shares
turning into executives locked shares
Executives locked shares+ partial of
the unlocked restricted shares
Jiang Yufeng 30,375 0 30,000 60,375
turning into executives locked
shares
Executives locked shares+ partial of
the unlocked restricted shares
He Hongli 29,025 0 23,550 52,575
turning into executives locked
shares
105
Hikvision 2018 Annual Report
Opening Vested in Increased in Closing
Name of shareholder Note for restricted shares Date of unlocking
restricted shares current period current period restricted shares
Executives locked shares+ partial of
the unlocked restricted shares
Fu Baijun 29,025 0 106,425 135,450
turning into executives locked
shares
Executives locked shares+ partial of
the unlocked restricted shares
Xu Lirong 29,025 0 30,675 59,700
turning into executives locked
shares
Wang Qiuchao 15,000 0 0 15,000 Executives locked shares
As taking the Company’s Director
position, partial of the shares held
Qu Liyang 0 0 11,812 11,812
were turning into executives locked
shares.
Shares locked up within six months
Zhou Zhiping 5,355,432 5,355,432 0 0 September 20th 2018
after leaving his post
Shares locked up within six months
Zheng Yibo 30,375 30,375 0 0 September 20th 2018
after leaving his post
Shares locked up within six months
Cai Dingguo 30,375 30,375 September 20th 2018
after leaving his post
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 counted
within 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 (consolidated
statistics) for grantees and the calculated balance (opening balance - unlocked shares + increased restricted shares) was due to
repurchasing and cancelling of 1,594,641 shares on March 27th 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 and
liabilities
√ Applicable □ Inapplicable
During the reporting period, the Company completed the second repurchasing and cancelling shares for 2014
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Hikvision 2018 Annual Report
Restricted Share Incentive Scheme, the total capital shares were decreased by 1,594,641 shares from
9,228,865,114 shares to 9,227,270,473 shares; the structure of shareholder structure, assets and liabilities of the
Company did not change significantly after the above mentioned items.
3. Existent shares held by internal staff of the Company
□ Applicable √ Inapplicable
107
Hikvision 2018 Annual Report
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholdings
Unit: Share
The total number of common shareholders at the end of the previous month
Total number of common shareholders at the end of the reporting period 194,110 186,407
before the disclosure of the annual report
Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them
The number of Pledged or frozen
Share- Total shares held at the Increase/ The number of
Nature of common shares
Name of shareholder holding percentage end of the reporting decrease during the shares held without
shareholder held with trading Status Amount
(%) period reporting period trading restrictions
restrictions
China Electronics Technology State-owned
39.60% 3,653,674,956 - - 3,653,674,956 Pledged 50,000,000
HIK Group Co., Ltd. corporation
Overseas
Gong Hongjia 13.60% 1,255,056,700 -130,000,000 1,038,792,525 216,264,175 Pledged 367,488,300
individual
Hong Kong Securities Clearing Overseas
8.81% 812,892,497 -88,317,950 - 812,892,497 - -
Company Ltd.(HKSCC) corporation
Domestic
Xinjiang Weixun Investment
non-state-
Management Limited 4.89% 450,795,176 -78,925,700 - 450,795,176 Pledged 237,869,999
owned
Partnership
corporation
Domestic
Xinjiang Pukang Investment non-state-
1.98% 182,510,174 -9,836,700 - 182,510,174 Pledged 72,570,000
Limited Partnership owned
corporation
Domestic
Hu Yangzhong 1.97% 182,186,477 59,400,000 136,639,858 45,546,619 Pledged 90,979,999
Individual
The 52nd Research Institute at State-owned 1.96% 180,775,044 - - 180,775,044 - -
108
Hikvision 2018 Annual Report
China Electronics Technology corporation
Group Corporation
Domestic
CITIC Securities Company non-state-
0.88% 81,513,660 -74,468,969 - 81,513,660 - -
Limited owned
corporation
Overseas
UBS AG 0.72% 66,858,188 -42,065,262 - 66,858,188 - -
corporation
State-owned
Central Huijin Investment Ltd. 0.71% 65,818,800 - - 65,818,800 - --
corporation
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
Explanation on associated relationship or concerted individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment
actions among the above-mentioned shareholders: 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)
Type of shares
Name of shareholder Number of common shares without trading restrictions held at the period-end
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
812,892,497 RMB ordinary shares 812,892,497
Ltd.(HKSCC)
Xinjiang Weixun Investment Management Limited
450,795,176 450,795,176
Partnership
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Hikvision 2018 Annual Report
Particulars about shares held by the Top 10 common shareholders holding shares that are not subject to trading restriction(s)
Type of shares
Name of shareholder Number of common shares without trading restrictions held at the period-end
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
180,775,044 RMB ordinary shares 180,775,044
Technology Group Co. Ltd.
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
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
Explanation on associated relationship and
Limited Partnership, is the spouse of Mr. Gong Hongjia, foreign individual shareholder of the Company. Hu Yangzhong, domestic
concerted actions among top ten common
individual, is holding shares in both Xinjiang Weixun Investment Management Limited Partnership and Xinjiang Pukang Investment
shareholders without trading restrictions, and
Limited Partnership.
among top ten common shareholders and top ten
Except for these, the Company does not know whether the other shareholders are related parties or whether they are acting-in-concert
common shareholders without trading restrictions
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
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Hikvision 2018 Annual Report
2. Particulars about controlling shareholder of the Company
Nature of the controlling shareholder: Central State-owned
Type of the actual controller: Corporation
Legal
Name of controlling Date of
Representative Organization code Business scope
shareholder establishment
Industrial investment; R&D of environmental
protection products, network products, intelligent
China Electronics
Chen November products and electronic products; technology
Technology HIK 9133000014306073XD
Zongnian 29th, 2002 transfer, technical services, manufacturing and sales;
Group Co., Ltd.
business consulting services, rental services of
self-owned real estate; import and export businesses.
Shares held by the controlling shareholder
Indirect control of domestic listed company Phoenix
in other listed companies
Optical Co. Ltd.,
through controlling or holding during the reporting period
Change of the controlling shareholder during the reporting period
□ Applicable √ Inapplicable
The Company's controlling shareholder has not changed during the reporting period.
3. Particulars about the Company’s actual controller & concerted parties
Nature of the actual controller: Central state-owned assets management agency
Type of the actual controller: Corporation
Name of the Legal
Date of Organization
actual Representative Business scope
establishment code
controller
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
China conditions; construction of national major electronic
Electronics February 25th
Xiong Qunli 91110000710929498G information system; the research, development,
Technology 2002
Group Ltd. 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
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Name of the Legal
Date of Organization
actual Representative Business scope
establishment code
controller
"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.
China Electronics Technology Group Ltd is the actual controller of eight domestic listed
Shares held by the actual
controlling shareholder in companies including An’hui Sun Create Electronic Co., Ltd, Shanghai East China Computer Co.,
other listed companies through Ltd, Chengdu Westone Information Industry Co., Ltd., GCI Science & Technology Co., Ltd., Tai’ji
controlling or holding during Computer Corporation Limited, GLARUN Technology Co., Ltd. , Phoenix Optics Co., Ltd., and
the reporting period 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 is
detailed 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
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Hikvision 2018 Annual Report
5. Particulars on shareholding decrease restrictions for the controlling shareholders, actual controller,
restructurer or other committing parties
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
Section VII Information of Preferred Shares
□ Applicable √ Inapplicable
No existed preferred shares for the Company during the reporting period.
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Hikvision 2018 Annual Report
Section VIII Information about Directors, Supervisors, Senior Management
I. Shareholding changes of directors, supervisors, senior management personnel
√Applicable □ Inapplicable
Shares
Shares increased decreased
Shares held at the Shares held at the end of
Tenure Commencement of term of
Name Title Gender Age Termination of term of office beginning of the during the Period during the
status office the Period (Shares)
Period (Shares) (shares) Period
(Shares)
Chen Zongnian Chairman Incumbent Male 54 June 19th 2008 0 0 0 0
Male
Gong Hongjia Vice Chairman Incumbent 54 June 19th 2008 1,385,056,700 0 130,000,000 1,255,056,700
Male
Qu Liyang Director Incumbent 55 March 7th 2018 15,750 0 0 15,750
Director, Male
Hu Yangzhong General Manager Incumbent 54 December 28th 2001 122,786,477 59,400,000 0 182,186,477
(CEO)
Director, Male
Wu Weiqi Standing Deputy Incumbent 55 March 1st 2003 11,371,389 0 0 11,371,389
General Manager
Independent Male
Cheng Tianzong Incumbent 67 March 6th 2015 0 0 0 0
Director
Independent Male
Lu Jianzhong Incumbent 65 March 6th 2015 0 0 0 0
Director
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Hikvision 2018 Annual Report
Shares
Shares increased decreased
Shares held at the Shares held at the end of
Tenure Commencement of term of
Name Title Gender Age Termination of term of office beginning of the during the Period during the
status office the Period (Shares)
Period (Shares) (shares) Period
(Shares)
Independent Male
Wang Zhidong Incumbent 52 March 6th 2015 0 0 0 0
Director
Independent Male
Hong Tianfeng Incumbent 53 December 22nd 2016 0 0 0 0
Director
Cheng Huifang Supervisor Chairman Incumbent Female 66 March 6th 2015 0 0 0 0
Male
Wang Qiuchao Supervisor Incumbent 68 March 6th 2015 20,000 0 0 20,000
Supervisor; person in Male
Xu Lirong Incumbent 56 March 21st 2018 303,000 0 0 303,000
charge of internal audit
Senior Deputy General Male
Jiang Haiqing Incumbent 50 March 1st 2003 11,310,882 80,000 0 11,390,882
Manager
Senior Deputy General Male
Jia Yonghua Incumbent 42 July 22nd 2015 5,601,244 100,000 0 5,701,244
Manager
Senior Deputy General Male
Li Pan Incumbent 41 July 22nd 2015 5,500,068 200,000 0 5,700,068
Manager
Senior Deputy General
He Hongli Incumbent Female 46 December 18th 2005 331,500 0 0 331,500
Manager
Senior Deputy General
Fu Baijun Incumbent Male 47 January 20th 2009 390,000 0 0 390,000
Manager
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Hikvision 2018 Annual Report
Shares
Shares increased decreased
Shares held at the Shares held at the end of
Tenure Commencement of term of
Name Title Gender Age Termination of term of office beginning of the during the Period during the
status office the Period (Shares)
Period (Shares) (shares) Period
(Shares)
Senior Deputy General Male
Cai Changyang Incumbent 48 April 8th 2016 109,500 0 0 109,500
Manager
Senior Deputy General Male
Xu Ximing Incumbent 46 October 11th 2016 0 0 0 0
Manager
Senior Deputy General
Bi Huijuan Incumbent Female 48 October 11th 2016 150,000 0 0 150,000
Manager
Senior Deputy General Male
Jiang Yufeng Incumbent 48 December 18th 2005 325,500 0 0 325,500
Manager
Senior Deputy General Male
Pu Shiliang Incumbent 42 March 21st 2018 293,900 0 0 293,900
Manager
Senior Deputy General Male
Jin Duo Incumbent 54 March 10th 2015 109,500 0 0 109,500
Manager
Senior Deputy General
Manager,
Jin Yan Incumbent Female 40 July 22nd 2015 174,000 0 0 174,000
Person in charge of
finance
Senior Deputy General
Huang Fanghong Manager, Incumbent Female 37 April 8th 2016 292,500 0 0 292,500
Board Secretary
Senior Deputy General
Chen Junke Incumbent Male 48 March 21st 2018 0 0 0 0
Manager
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Hikvision 2018 Annual Report
Shares
Shares increased decreased
Shares held at the Shares held at the end of
Tenure Commencement of term of
Name Title Gender Age Termination of term of office beginning of the during the Period during the
status office the Period (Shares)
Period (Shares) (shares) Period
(Shares)
Male
Liu Xiang Director Left the post 47 May 24th 2014 March 7th 2018 0 0 0 0
Male
Chen Junke Supervisor Left the post 48 June 19th 2008 March 21st 2018 0 0 0 0
Deputy General Male March 21st 2018
Zheng Yibo Left the post 57 June 30th 2004 168,900 0 60,750 108,150
Manager
Deputy General Male March 21st 2018
Cai Dingguo Left the post 52 December 18th 2005 312,000 0 0 312,000
Manager
Deputy General Male March 21st 2018
Zhou Zhiping Left the post 54 December 18th 2005 7,404,876 99,100 0 7,503,976
Manager
Deputy General Male
Xu Lirong Left the post 56 March 1st 2007 March 21st 2018 303,000 0 0 303,000
Manager
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 above
are 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 the
total number of shares held at the beginning and the end of the reporting period.
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Hikvision 2018 Annual Report
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
The general election of the workers and staff
Xu Lirong Employee Supervisor Appointment and dismissal March 21st 2018
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
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Hikvision 2018 Annual Report
1. Directors
Mr Chen Zongnian (陈宗年): Born in 1965, Chen holds a PhD of business administration and has served as
deputy general manager Shenzhen Gao Ke Run Electronics, director and general manager of Zhejiang Haikang
Information Technology Co., Ltd. and Zhejiang Haikang Group Co., Ltd. He also served as an assistant of the
head, deputy head, and the head of 52nd Research Institute at China Electronics Technology Group Corporation
(52nd 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 of
engineering, technology entrepreneur, and angel investor. He has established and invested over 10 enterprises
including TECSUN Co. Ltd., AsiaInfo Dekang, Funian Technology, and Woqi Data, and etc. He took part in the
establishment 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. He
served as the director, deputy director, party secretary and deputy director of the 52nd Research Institute, and
chairman of the board of supervisors of CETHIK. He is currently the deputy director of the Reform and
Development Committee of CETC’s Strategy Committee, and serves as a director of the Company.
Mr. Hu Yangzhong (胡扬忠): Born in 1965, master degree of engineering, senior research engineer. He served
as an engineer of the 52nd Research Institute from June 1989 to December 2001. He has been appointed as a
director of the Company and general manager of the company since December 2001. Hu currently serves as a
director and the general manager of the Company.
Mr. Wu Weiqi (邬伟琪): Born in 1964, bachelor degree of engineering, senior engineer. Wu held various
positions at the 52nd 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, a
standing deputy general manager, and a director of Hikvision. Wu currently serves as a director and standing
deputy general manager of the Company.
Mr. Cheng Tianzong (程天纵): Born in 1952, Taiwanese, master degree in business administration. Cheng
served as president and a director of Hewlett-Packard Development Company, L.P. (China) from 1992 to 1997;
served as the president of the Asia Pacific of Texas Instruments Incorporated (德州仪器) from 1997 to 2007;
served as a vice-president of Hon Hai Corporation (鸿海集团) from July 2007 to 2012, and the chief executive
officer of FIH Mobile Limited, a subsidiary of Hon Hai Corporation (鸿海集团), a company listed on the Hong
Kong Stock Exchange in 2011. He retired in June 2012 and devoted himself to China Maker Campaign (中国创
客运动) to help and guide those start-up companies in September 2013. Cheng currently serves as an independent
director of the Company.
Mr. Lu Jianzhong (陆建忠): Born in 1954, holds bachelor degree in economics and CPA certificate. Lu served
as a lecturer and an associate professor of finance and accounting department at Shanghai Maritime University (上
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Hikvision 2018 Annual Report
海海事大学) from September 1986 to September 1997; he was a CPA and a partner of the auditing department of
PricewaterhouseCoopers, from October 1997 to June 2012; he was a chartered accountant of Shanghai De’an
Certified Public Accountants LLP (上海德安会计师事务所) from July 2012 to July 2013; he was a chartered
accountant of the Shanghai branch of PKF Daxin Certified Public Accountants LLP (大信会计师事务所上海分
所), from August 2013 to July 2014；He was a partner and a chartered accountant and a partner of Zhongxinghua
Certificated Public Accountants LLP (中兴华会计师事务所) from August 2014 to January 2016. Lu currently
serves as a chartered accountant of Dahua Certificated Public Accountants LLP ( 大 华 会 计 师 事 务 所 ),
MPAcc/Maud Enterprise Mentor of Antai College of Economics & Management,Shanghai Jiao Tong University
(上海交通大学安泰管理学院), and an independent director of Hikvision.
Mr. Wang Zhidong (王志东): Born in 1967, Hong Kong permanent resident, bachelor degree of science. He
served as a deputy general manager and chief engineer of Beijing Suntendy Electronic Technology Research
Institute (北京新天地电子信息技术研究所) from April 1992 to August 1993; He served as a general manager of
Richwin Information Technology Co., Ltd. (四通利方信息技术有限公司), and served as chief executive officer
and a director of SINA Corporation (新浪网) from December 1993 to June 2001; He served as chairman and chief
executive officer of Beijing Dianji Technology, Ltd. (北京点击科技有限公司) from December 2001 to July 2013.
Mr. Wang currently serves as 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 Nanjing
University of Posts and Telecommunication (南京邮电大学) from July 1990 to June 1993; He served as an
executive deputy general manager, chief executive of Operation and Delivery, chairman of investment decision
committee, and vice chairman of Huawei Technologies Co., Ltd. (华为技术有限公司) from July 1993 to
September 2011；Hong currently serves as a managing partner of Suzhou Fangguang Venture Investment
Management (Limited Partnership)(苏州方广创业投资管理合伙企业（有限合伙）), an executive director of
Shanghai Fangguang Venture Investment Management Co., Ltd. (上海方广创业投资管理有限公司), and an
independent director of the Company.
2. Supervisors
Ms. Cheng Huifang (程惠芳): Born in 1953, PhD in international finance. She was a member of the 8th and 9th
Zhejiang CPPCC (浙江省政协). Cheng currenly serve as dean of the Global Development Research Institute of
Zhejiang Businesses under Zhejiang University of Technology (浙江工业大学全球浙商发展研究院), president
of Zhejiang Yangtze River Delta of the Institute of Innovation Management (浙江长三角创新管理研究院),
president of the Zhejiang Financial Engineering Society (浙江省金融工程学会), and a supervisor of the
Company.
Mr. Wang Qiuchao (王秋潮): Born in 1951, a professional lawyer with bachelor degree in history and master
degree in law. Wang served as chairman of the Zhejiang Lawyers Association ( 浙江省律师协会) and
vice-president of the Zhejiang Law Society (浙江省法学会). Wang currently serves as arbitrator of the China
International Economic and Trade Arbitration Commission (中国国际经济贸易仲裁委员会, “CIETAC”) , an
arbitrator of Shanghai International Arbitration Center (上海国际仲裁中心) and South China International
Economic and Trade Arbitration Commission (华南国际仲裁中心), and a supervisor of the Company.
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Hikvision 2018 Annual Report
Mr. Xu Lirong (徐礼荣): Born in 1963, master degree of engineering, senior engineer. In January 2002, he
joined Hikvision and served as manager of development division under the R&D center, secretary of the board of
directors and deputy general manager of the Company. He is currently the employee representative supervisor and
the 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 the
Company in November 2001 and served as an assistant of the general manager and a deputy general manager. Mr.
Jiang currently serves as a 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 Hikvision
in January 2002 and held various positions at the Company, including director of Image Process and Analysis
Division under the R&D Center, director of Strategy and Marketing Division, a deputy general manager of the
Supply Chain Management Center, and a deputy general manager of the Company. Mr. Jia currently serves as a
senior 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 engineer
of the 52nd Research Institute from August 2000 to December 2001. He joined Hikvision in December 2001 and
held various positions at the Company, including engineer, product manager, R&D manager, the general manager
of the Transportation Division, the general manager of Hangzhou Branch, a deputy general manager of the
Company. 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 in
December 2001 and served as an assistant to the general manager and a deputy general manager. Ms. He currently
serves 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 52nd Research
Institute 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 general
manager and the person in charge of finance and accounting department, and a deputy general maanger. Mr. Fu
currently serves as a senior deputy general manager of the Company.
Mr. Cai Changyang (蔡昶阳): born in 1971, bachelor degree in engineering. He joined Hikvision in 2004, and
held various positions of the Company, including general manager of Beijing branch, director for government and
enterprise corporation department, director of investment department, director of strategy and marketing
department, and a deputy general manager of the Company. Mr. Cai currently serves as senior deputy general
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Hikvision 2018 Annual Report
manager of the Company.
Mr. Xu Ximing (徐习明): born in 1973, bachelor degree in engineering. From July 1996 to September 2016, he
held 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 a
deputy general manager of the Company. Mr. Xu currently serves as a senior deputy general manager of the
Company.
Ms. Bi Huijuan (毕会娟): born in 1971, PhD in engineering, senior research engineer. From April 1999 to
August 2016, she held various positions in the 15th Research Institute at China Electronics Technology Group
Corporation (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 general
manager 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 in
January 2005 and held various positions in the Company, including general manager of Beijing branch, marketing
director, assistant to general manager, deputy general manager and marketing director, and deputy general
manager. Mr Jiang currently serves as a senior deputy general manager of the Company.
Mr. Pu Shiliang (浦世亮): born in 1977, doctor of engineering, a senior engineer. He joined Hikvision in April
2006 and held various positions in the Company, including R&D engineer, R&D manager, R&D director, dean of
the 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 52nd Research Institute from July 1986 to June
2004. He joined Hikvision in July 2004 and served as general manager of Hangzhou Branch, and a deputy general
manager 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 2004
and held various positions at the Company, including financial manager, the general manager of the Financial
Management Center, and a deputy general manager and the person in charge of finance and accounting. Ms. Jin
currently serves as a senior deputy general manager and the person in charge of finance and accounting of the
Company.
Ms. Huang Fanghong (黄方红): born in 1982, master degree in law. She joined Hikvision in June 2009 and held
various positions at the Company including legal department manager, internal audit manager, internal control
director, and a deputy general manager and the board secretary. Ms. Huang currently serves as a senior deputy
general manager, and board secretary of the Company.
Mr. Chen Junke (陈军科): Born in 1971, bachelor degree in engineering, senior engineer. Chen held various
positions in the 52nd Research Institute from 1994 to 2001, including assistant engineer, engineer and senior
engineer. He joined the Company in 2001 and served as the technology director of the Digital Video Recorder
(DVR) Division of the Technology Management Center, general manager of supply chain management center,
employee representative supervisor. Chen currently serves as senior deputy general manager of the Company.
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Hikvision 2018 Annual Report
Position held in shareholders’ entities
√Applicable □ Inapplicable
Compensation and
Commencement of
Name Shareholder's entity Position in shareholders’ entities allowance from the
the term
shareholders' entity
Chen China Electronics Technology Chairman, Secretary of party
November 2013 Y
Zongnian HIK Group Ltd. committee
China Electronics Technology
Hu Yangzhong Director December 2013 N
HIK Group Ltd.
Supervisor, Member of
China Electronics Technology
Xu Lirong Commission for Discipline December 2013 N
HIK Group Ltd.
Inspection
China Electronics Technology
Liu Xiang Deputy General Manager December 2013 Y
HIK Group Ltd.
China Electronics Technology
Zheng Yibo Member of party committee December 2015 N
HIK Group Ltd.
Positions held in other entities
√Applicable □ Inapplicable
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
Cheng Zhejiang Intelligent IoT Legal
February 2004 N
Zongnian Technology Magazine Representative
Cheng
CETC Finance Ltd. Director December 2012 N
Zongnian
Cheng Zhejiang Wuzhen Street February N
Chairman May 2016
Zongnian Technology Ltd. 2019
Gong Hongjia Furong Technology Ltd. Director October 1999 N
Gong Hongjia Hangzhou FunVio Ltd. Chairman February 2004 N
Chairman of the
Gong Hongjia Funian Technology Ltd. October 2007 N
Board
Beijing Funian Technology N
Gong Hongjia Chairman November 2011
Ltd.
Shanghai Fullhan N
Gong Hongjia Director April 2013
Microelectronics Co., Ltd.
Gong Hongjia Shenzhen Innovation Valley
Investment Management Director July 2014 N
Ltd.
Gong Hongjia Shanghai Pukun
Director September 2014 N
Information Technology
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Hikvision 2018 Annual Report
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
Ltd.
Gong Hongjia FuCe Holdings Ltd. Director October 2014 N
Chuangjia Venture Capital N
Gong Hongjia Director October 2014
Investment Ltd
Shenzhen Jiadao Valley
Y
Gong Hongjia Investment Management General Manager October 2014
Ltd.
Shenzhen Jiadao N
Gongcheng Equity Executive Partner
Gong Hongjia November 2014
Investment Fund (Limited & delegate
Partnership)
Gong Hongjia JiuBaYi Health Technology Director N
November 2014
Ltd.
Gong Hongjia Beijing JiaBoWen
Director March 2015 N
Biotechnology Ltd.
Gong Hongjia Wuhan YouXin Technology Director N
January 2016
Co., Ltd.
Gong Hongjia QingKe Management Director N
February 2017
Consulting Group Ltd.
Gong Hongjia Shenzhen JiadaoFangzhi Executive Partner N
Education Industry & delegate
June 2017
Investment Enterprise
(Limited Partnership)
Gong Hongjia Shenzhen Jiadao Successful Executive Partner N
Investment Enterprise & delegate August 2017
(Limited Partnership)
Gong Hongjia Shanghai AoYuan Medical N
Chairman September 2017
Supplies Ltd.
Gong Hongjia Sichuan JiaDao BoWen N
Chairman December 2017
Ecological Technology Ltd.
Gong Hongjia Beijing JiaDaoGu N
Management Consulting Supervisor April 2018
Ltd.
Gong Hongjia Core Microelectronics N
Director October 2018
(Shanghai) Ltd.
Gong Hongjia Sichuan Five-Plus-One N
Chairman November 2018
Ecological Agriculture
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Hikvision 2018 Annual Report
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
Technology Service Ltd.
Gong Hongjia Sichuan JiaBoWen N
Chairman November 2018
Biological Technology Ltd.
Gong Hongjia Shenzhen Zhongke Science N
and Technology
Achievements
Chairman December 2018
Transformation Equity
Investment Fund
Management Ltd.
Gong Hongjia ZhongYuan Concord Cell Legal N
Genetic Engineering Co., Representative December 2018
Ltd. Chairman
Zhejiang Haikang N
Qu Liyang Director April 2009
Technology Ltd.
Zhejiang YiBo High N
Qu Liyang Director August 2009
Technology Ltd.
Xinjiang Pukang Investment N
Wu Weiqi Management Limited Executive Partner May 2011
Partnership
Wu Weiqi Wuhu Sensor Tech Director N
January 2017
Intelligent Technology Ltd.
Wu Weiqi Maxio Technology Director N
May 2017
(Hangzhou) Ltd.
Cheng Hechun Technology Co., Y
Director June 2014
Tianzong Ltd.
Cheng Y
Zuozhen Co., Ltd. Director January 2015
Tianzong
Cheng Wenhui Technology Co., Independent Y
June 2016
Tianzong Ltd. Director
Lu Jianzhong Shanghai Jiao Tong N
Mentor for
University- Antai College of December 2013
enterprises
Management,
Lu Jianzhong Dahua Certificated Public Chartered N
January 2016
Accountants LLP Accountant
Lu Jianzhong ChangShu FengFan Electric Independent Y
September 2015
Power Equipment Co., Ltd. Director
Lu Jianzhong Ningbo Lehui International Independent March 2016 Y
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Hikvision 2018 Annual Report
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
Construction Equipment Director
Co., Ltd.
Lu Jianzhong COSCO Maritime Transport Independent Y
January 2018
Development Co., Ltd. Director
Lu Jianzhong Shanghai Xinnanyang Angli Independent January 2019 Y
Education Technology Co., Director
Ltd.
Lu Jianzhong Shanghai Mingzhi Electric Independent Y
October 2017 March 2018
Co., Ltd. Director
Beijing Yilian Yisheng
Wang Zhidong Science and Technology Chairman, CEO October 2013 Y
Ltd.
Shanghai Fangguang Y
Executive
Hong Tianfeng Investment Management February 2012
Director
Ltd.
Hong Tianfeng Shanghai Fangguang N
Venture Investment
Management Partnership Managing Partner February 2012
Enterprise (Limited
Partnership)
Hong Tianfeng Shanghai Fangguang
N
Venture Investment
Managing Partner August 2012
Partnership Enterprise
(Limited Partnership)
Hong Tianfeng Shanghai Fangguang Erqi
N
Venture Investment
Managing Partner September 2016
Partnership Enterprise
(Limited Partnership)
Hong Tianfeng Suzhou Fangguang Venture
N
Investment Management
Managing Partner September 2012
Partnership Enterprise
(Limited Partnership)
Hong Tianfeng Suzhou Fangguang Venture
N
Investment Partnership
Managing Partner September 2012
Enterprise (Limited
Partnership)
Hong Tianfeng Suzhou Fangguang Venture
N
Investment Phase 2 Managing Partner July 2016
Partnership Enterprise
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Hikvision 2018 Annual Report
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
(Limited Partnership)
Hong Tianfeng Executive
Shenzhen Pengfenghui N
Director & June 2014
Venture Investment Ltd.
General Manager
Hong Tianfeng Shenzhen Fangguang Executive
N
Enterprise Management Director & May 2016
Consulting Ltd. General Manager
Hong Tianfeng Sannuo Biology Sensor Co., Director Y
September 2013
Ltd.
Hong Tianfeng Shenzhen YunZhiXun Director N
May 2014
Network Technology Ltd.
Hong Tianfeng Jiangsu JiTaiKe Electrics Director N
July 2015
Co., Ltd.
Hong Tianfeng Zhongwei Dahe Cloud
Director N
Connection Network November 2016
Technology Ltd.
Hong Tianfeng Shenzhen N
DongFengMingTu Supervisor August 2016
Enterprise Management Ltd.
Hong Tianfeng CETC Huayun Information
Director March 2017 N
Technology Ltd.
Hong Tianfeng Shanghai Chuangyuan Director N
December
Equipment Technology Co., August 2014
2018
Ltd.
Hong Tianfeng Shanghai Baishitong Director N
Information Technology September 2016 August 2018
Co., Ltd.
Cheng Huifang Independent
Zhejiang FuRun Co., Ltd April 2014 Y
Director
Cheng Huifang Hangzhou HangYang Co., Independent Y
January 2016
Ltd. Director
Cheng Huifang Zhejiang HuaCe Media Co., Independent Y
February 2016
Ltd. Director
Zhejiang Commercial Bank External Y
Cheng Huifang June 2016
Co., Ltd. Supervisor
Cheng Huifang Quzhou NanGaoFeng Independent Y
March 2017
Chemical Co., Ltd. Director
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Hikvision 2018 Annual Report
Position in other Commencement Termination Compensation and allowance
Name Name of other Entity
entity of the term of the term from the other entities
Cheng Huifang Kings Resources Group Co., Independent December Y
Director March 2014
Ltd 2018
Wang Qiuchao Zhejiang T&C Law Firm Partner August 1993 Y
Wang Qiuchao Zhejiang JingSheng Independent Y
Mechanical & Electrical Director April 2015
Co.,ltd
Wang Qiuchao Zhejiang KaiShan Independent Y
May 2015
Compressor Co., Ltd. Director
Wang Qiuchao Hanjia Design Group Co., Independent Y
July 2015
Ltd. Director
Wang Qiuchao External Y
SanBian Sci-Tech Co., Ltd. August 2014 August 2018
Supervisor
Jia Yonghua Hangzhou Confirmwaref Director N
November 2016
Technology Co., Ltd.
Zheng Yibo Zhejiang TuXun Technology Director N
December 2016
Co., Ltd.
Xinjiang Weixun Investment N
Liu Xiang Management Limited Executive partner May 2011
Partnership
Liu Xiang Phoenix Optical Co. LTD Chairman July 2015 N
Phoenix Optical Holding N
Liu Xiang Chairman July 2015
Co. LTD
Beijing LeiShengQiangShi N
Liu Xiang Director January 2017
Technology Ltd.
CETHIK Wuxi Technology N
Liu Xiang Chairman January 2018
Ltd.
Description of
the status of
Liu Xiang and Zheng Yibo have left their posts on March 7th 2018 and March 21st 2018 respectively when terms up.
employment in
other units
Incumbent and off-office directors, supervisors and senior management personnel during the reporting period that
have been imposed administrative penalties by the CSRC during the last three years.
□ Applicable √ Inapplicable
IV. Remuneration of directors, supervisors and senior management personnel
The decision-making program, determination basis and actual remuneration payment of directors, supervisors and
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senior management personnel:
The remuneration of directors, supervisors and senior management personnel will be received preliminarily by
the Remuneration and Appraisal Committee of the Board, among them, remuneration of independent directors
and external supervisors would be further reviewed and approved by general meeting of shareholders. As for
those directors (exclude independent directors), supervisors (exclude external supervisors) and senior
management personnel who receive remuneration from the Company directly, they will receive remuneration
according to the Company’s current Salary System and Performance Appraisal Schemes.
Remuneration of directors, supervisors and senior management personnel
Unit: RMB 0,000
Total remuneration Remuneration
Name Title Gender Age Tenure status from the Company from related
(RMB'0,000) 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
Director, Standing Deputy M Incumbent
Wu Weiqi 55 293.64 N
General Manager
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
Employee Supervisor, Person Incumbent
Xu Lirong M 56 118.78 N
in charge of internal audit
Senior Deputy General Incumbent
Jiang Haiqing M 50 248.62 N
Manager
Senior Deputy General M Incumbent
Jia Yonghua 42 238.20 N
Manager
Senior Deputy General M Incumbent
Li Pan 41 238.17 N
Manager
Senior Deputy General Incumbent
He Hongli F 46 278.43 N
Manager
Senior Deputy General Incumbent
Fu Baijun F 47 248.32 N
Manager
Cai Changyang Senior Deputy General M 48 Incumbent 242.94 N
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Hikvision 2018 Annual Report
Total remuneration Remuneration
Name Title Gender Age Tenure status from the Company from related
(RMB'0,000) parties (Y/N)
Manager
Senior Deputy General Incumbent N
Xu Ximing M 46 418.20
Manager
Senior Deputy General N
Bi Huijuan F 48 Incumbent 362.94
Manager
Senior Deputy General Incumbent N
Jiang Yufeng M 48 248.43
Manager
Senior Deputy General N
Pu Shiliang M 42 Incumbent 208.66
Manager
Senior Deputy General Incumbent N
Jin Duo M 54 238.32
Manager
Senior Deputy General Incumbent N
Jin Yan Manager, person in charge of F 40 238.21
finance and accounting
Senior Deputy General N
Manager Incumbent
Huang Fanghong F 37 238.21
Board Secretary
Internal audit director
Senior Deputy General Incumbent N
Chen Junke M 48 178.69
Manager
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 the
salary 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
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Hikvision 2018 Annual Report
Price for
Restricted
Shares vested in Shares newly restricted Restricted
Shares held at
Name Title the current granted in the shares granted Shares held at
the beginning
period current period (RMB per period-end
of the period
share)
Director, General
Hu Yangzhong 336,000 87,750 - - 248,250
Manager
Director, Standing Deputy
Wu Weiqi 305,100 78,300 - - 226,800
General Manager
Senior Deputy General
Jiang Haiqing 258,000 67,500 - - 190,500
Manager
Senior Deputy General
Zheng Yibo 121,500 60,750 - - 60,750
Manager
Senior Deputy General
Cai Dingguo 231,000 60,750 - - 170,250
Manager
Senior Deputy General
He Hongli 254,100 58,050 - - 196,050
Manager
Senior Deputy General
Fu Baijun 312,600 58,050 - - 254,550
Manager
Supervisor, person in
Xu Lirong 225,600 58,050 - - 167,550
charge of internal audit
Senior Deputy General
Zhou Zhiping 225,600 58,050 - - 167,550
Manager
Senior Deputy General
Jiang Yufen 244,500 60,750 - - 183,750
Manager
Senior Deputy General
Jin Duo 109,500 - - - 109,500
Manager
Senior Deputy General
Jin Yan Manager, person in charge 174,000 - - - 174,000
of finance
Senior Deputy General
Jia Yonghua 109,500 - - - 109,500
Manager
Senior Deputy General
Li Pan 109,500 - - - 109,500
Manager
Senior Deputy General
Cai Changyang 109,500 - - - 109,500
Manager
Senior Deputy General
Bi Huijuan 150,000 - - - 150,000
Manager
Senior Deputy General
Pu Shiliang 293,900 50,000 243,900
Manager
Senior Deputy General
Huang Fanghong 148,500 74,250 74,250
Manager, Secretary of the
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Hikvision 2018 Annual Report
Price for
Restricted
Shares vested in Shares newly restricted Restricted
Shares held at
Name Title the current granted in the shares granted Shares held at
the beginning
period current period (RMB per period-end
of the period
share)
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 20th 2018, and the listing date is January 18th
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
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Hikvision 2018 Annual Report
2. Staff remuneration policy
Hikvision applies scientific talent cultivation methods, effective talent incentive mechanisms and fair
competition platforms to recruit talents, and continuously optimizes the talent structure. The Company provides
employees with remuneration packages which are competitive in the industry. In addition to endowment insurance,
medical insurance, unemployment insurance, employment injury insurance, maternity insurance and housing
provident funds, the Company provides employees with the supplementary commercial insurance, medical
subsidies, travel and communication allowances and other special allowances, in order to create a fairer and more
humanized 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 planning
based on corporate strategy, and implementing it into a training program to help achieve business strategy through
the development of the Company's talent.
In 2018, on the basis of the steady operation of key training systems such as new employees and
management cadres, the Company made key construction and investment in the professional talent development
system and cultural training system. The Company closely follows the strategic transformation of business and
changes in the external environment, and cooperates with business experts and training experts to build a
professional talent development system in six key business area; the cultural training system has clarified the
methodology of the cultural work system through co-creation with senior executives, seminars with middle-level
managers, and research and interviews with front-line employees. In addition, the new employee training, as an
important input port of the cultural training system, has made a deeper link in the understanding, identification
and integration of culture; and the coverage rate of new employee training has reached 99%. The tiered
management training system was implemented across the Company, the implementation of the grassroots
management cadre training program, the middle-level management cadre training project and the middle-to-high
level 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.
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4. Labor outsourcing
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
Section IX Corporate Governance
I. Basic situation of corporate governance
During the reporting period, in accordance relevant laws and regulations, and regulatory and regulatory
documents from supervision department, i.e. Company Law（公司法）, Securities Law（证券法）, Code of
Corporate Governance for Listed Companies in China（上市公司治理规则）, Listing Rules of Shenzhen Stock
Exchange Stock（深圳证券交易所股票上市规则）, Guidelines of the Shenzhen Stock Exchange for the Standard
Operation of Listed Companies 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 the
internal management system based on the actual situation; improved the standardized operation level; performed
information 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 following
aspects:
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 control
and improve the standardized operation level. The Company revised the Regulations on the Management of Fixed
Assets and Low-Value Consumables 《 固 定 资 产 和 低 值 易 耗 品 管 理 规 范 》 to further strengthen assets
management 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 to
improve the post system, promote the construction of talent team, and support the sustainable development of the
Company'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 of
compliance system and ensure the Company's standardized operation.
2. Continuously strengthen internal control and process management. During the reporting period, the
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Hikvision 2018 Annual Report
Company focused on supervising high-risk business processes, finding loopholes, and building a defense line for
the Company’s risk control. The Company conducted investigations related to reported complaints, convened
anti-corruption conferences, and invited family members of key positions to participate in probity education. The
Company's Change Management Steering Committee continued to build a flat organization by promoting
decentralization, de-intermediation, and shifting decision-making downwards, and improved and optimized the
Company'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 good
interactions between the Company and investors, forming a positive interaction and communication. After the
above events, the Company also timely released Investor Relations Activity Record Form to ensure that all
investors have fair access to the Company’s information. In routine duties, the company also communicates with
investors through various channels such as telephone, email and interactive platform in order to maintain
long-term trust relationship between investors and Company.
The Company's information disclosure was approved by the regulatory authorities: the Company has been
awarded the A-level evaluation of the information disclosure of small-and-medium sized listed companies by the
Shenzhen 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 Listed
Companies of China's Small-and-Medium Sized Boards" and "Top Ten Management Teams of China's
Small-and-Medium sized Listed Companies" selected by Securities Times and New Fortune Magazine's 12th
China Listed Company Value Selection; and "Top 10 of the Top 50 China's Board of Directors" selected by
Fortune (Chinese version) and Aon Hewitt Management Consulting.
Any significant incompliance for the relevant regulatory documents issued by China Securities Regulatory
Commission in respect of corporate governance:
□ Yes √ No
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Hikvision 2018 Annual Report
II. Company’s Independence in Businesses, Management, Assets, Institutions and Finance from
Controlling Shareholders
The Company is completely independent in business, management, assets, organization, and finance from its
shareholders. The Company has established a sound internal control system, being capable of operating
independently with its complete and independent business.
(1) Business independence: The Company has its own production, purchases and sales systems, which
are completely independent from controlling shareholders. Therefore, there is no competition among
the Company, controlling shareholders, and related parties.
(2) Personnel independence: The Company has independent personnel. The management has set up
various independent departments, including R&D, production, administration, finance and operation
management divisions, etc., and established complete management methods for labor, personnel,
and salary management. Personnel of the Company are independent from controlling shareholders,
e.g. the Chairman is elected through the general meetings of the Board. In addition, the General
Manager, Senior Deputy General Managers, the Secretary of the Board, CFO, and other senior
management personnel of the Company are only employed and remunerated by the Company, and
do not hold any position in controlling shareholders and is not remunerated by controlling
shareholders. Directors, Supervisors and Senior Management Personnel are appointed through legal
procedures strictly in accordance with relevant regulations stipulated in Company Law and Articles
of Association. There is no controlling shareholder intervention in the Company’s personnel
decisions in general meetings of the Board or shareholders.
(3) Asset Completeness: The property rights of assets are explicitly between the Company and the
controlling shareholders, and no assets, funds, or other resources owned by the Company are
illegally and irregularly occupied or controlled by the controlling shareholders. Assets of the
Company are integrated, including complete property rights of fixed assets for production,
supporting assets for production, and intangible assets of patents, etc. The Company has the full
control and ownership of all assets.
(4) Independence in organizations: The Company’s Board, Supervisor Committee, Management and
other internal organizations operates independently, and each functional department is independent
from controlling shareholders in duty and personnel. There is no superior-subordinate relation
between functional departments of controlling shareholders and those of the Company, which would
have an impact on the Company’s independent operations.
(5) Financial Independence: The Company has established an independent financial department, as
well as a sound and independent financial and accounting system. The Company makes financial
decisions independently. There is no controlling shareholder intervention in the Company’s financial
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and accounting activities. The Company has maintained accounts with banks independently of and
do not share any bank account with our Controlling Shareholders. The Company has undertaken
independent tax registration in accordance with applicable laws, and paid tax independently.
III. Horizontal competition
□ Applicable √ Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings convened during the
Reporting Period
1. Annual General Meeting convened during the reporting period
Proportion
of
Meeting Nature Convened Date Disclosure Date Disclosure Index
participating
investors
Extraordinary
2018 First Extraordinary Public Announcement:
General 70.80% March 7th 2018 March 8th 2018
General Meeting No. 2018-011
Meetings
Annual General Public Announcement:
2017 Annual General Meeting 73.66% May 11th 2018 May 12th 2018
Meeting No. 2018-032
Extraordinary
2018 Second Extraordinary Public Announcement:
General 73.11% December 19th 2018 December 20th 2018
General Meeting No. 2018-065
Meetings
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
rights:
□ Applicable √ Inapplicable
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Hikvision 2018 Annual Report
V. Performance of duties by independent directors during the reporting period
1. Attendance of independent directors in board meetings and general meetings
Attendance of independent directors in board meetings and general meetings
Presence of
Board meeting Board Board meeting Board meeting
independent
Name of presence meeting presence by Board meeting Board meeting not attend in
directors in
Independent required in the presence telecom- presence through absence person for two
general
Director reporting on site communication a proxy (times) (times) consecutive
meetings
period (times) (times) (times) times
(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 Company
Were there any objections on related issues of the Company from independent directors?
□ Yes √ No
3. Other details about the performance of duties by independent directors
Were there any suggestions from independent directors accepted by the Company?
√ Yes □ No
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 on
Small-and-Medium Size Listed companies 《深圳证券交易所中小企业板上市公司规范运作指引》), the Articles
Association (《公司章程》), and Regulations on Independent Directors (《独立董事工作条例》). They focused
on the Company operation, carried out their duties independently and imparted considerable professional advice
on improving the Company’s systems, daily operations and decision making. They provided fair advice during the
Reporting Period and played an effective role in improving the Company supervisory systems and protecting the
legal rights of the Company and the shareholders as a whole. For details, please refer to Independent Directors’
2018 Debriefings disclosed on www.cninfo.com.cn.
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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 proposals
regarding significant investment decisions, considering the domestic and international situation and the
characteristics of the Industry in which the Company operated, and carried out inspection and evaluation on the
implementation situation of the above matters. Meanwhile, the Strategy Committee listened carefully to the senior
management’s report on the operation and development of each business module, actively discussed long-term
future strategic development plans of the Company considering the industrial characteristics and developmental
stage of the Company, and provided valuable suggestions for sustainable, steady and healthy development of the
Company.
2. Audit Committee
The Audit Committee is primarily responsible for the communication, supervision and inspection of internal
and external audits. During the reporting period, the Audit Committee carefully reviewed the Company's financial
information 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 selection
and appointment of the external audit institution. At the same time, the Audit Committee also organized a special
work 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 and
procedures of the Company's directors and senior management personnel, conducted a review of the resume and
qualifications of the new directors and senior executives through communication with relevant departments of the
Company, 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
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Hikvision 2018 Annual Report
remuneration policies and plans for senior management personnel and for the company overall, and made
professional recommendations on the assessment criteria of the above-mentioned personnel, and tracked and
supervised the implementation of the previous year's programs; reviewed and provided guidance for the granting
of 2018 restricted shares, the 3rd unlocking of 2014 restricted stocks and the 1st unlocking of 2016 restricted
stocks.
VII. Performance of duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties during the
Reporting Period?
□ Yes √ No
The Supervisory Committee of the Company will strictly abide by provisions of the Company Law, Standard
Operation Guidelines on Enterprises Listed on SMEs Board at Shenzhen Stock Exchange, Articles of Association,
Rules of Procedures of Supervisory Committee, and relevant laws, regulations and rules, diligently perform its
duties, supervise the legalization and standardization of the corporate finance and directors and senior
management personnel when executing their positions, and practically safeguard the legitimate rights and interests
of the Company, staff and shareholders.
In 2018, the Company's Board of Supervisors convoked a total of 9 meetings, and reviewed a total of 29
proposals which mainly involved in aspects of the Company’s daily operation, financial information and its
disclosure, and vesting of restricted incentive share plan, and etc., for details or Supervisory Committee
resolutions, please refer to www.cninfo.com.cn. Meanwhile, the Company’s Supervisory Committee also
organized on-site special working meetings, listened to the senior management’s report on the operation and
development of each module of the Company, deeply understood the measures of Company's operational and
financial 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 daily
operation situation by means of attending the board meeting and the shareholders' meeting, listening to and review
special report, interview and other forms. The Board of Supervisors believes that the Company has established a
fairly sophisticated internal control system, all significant decisions are scientific and reasonable, and
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Hikvision 2018 Annual Report
decision-making processes are legal. Directors and senior management personnel of the Company are diligent and
responsible when executing duties; and behaviors of violating laws and regulations, damaging interests of the
Company and legitimate rights and interests of shareholders were not found.
2. Checking the financial situation of the Company
During the reporting period, the Supervisory Committee carefully listened to reports of annual financial
works by person in charge of finance and accounting, understood audit work arrangement of external auditors, and
the Supervisory Committee believes that preparation and deliberation procedure of the Company's periodic report
conforms 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 is
free of any false record, misleading statement or significant omission. There is no behavior violating
confidentiality provisions founded for personnel who participated in preparation and deliberation procedure of
periodic reports.
3. Self-evaluation report about internal control of year 2018
During the reporting period, the Supervisory Committee has listened to reports regarding construction and
implementation situations for the internal control system of the Company and its branches and subsidiaries by
Internal Audit Department, Process Management Department and other relevant departments. After a careful
study and discussion, the Supervisory Committee believes that the Company has established a fairly sophisticated
internal control system which conforms to relevant national laws and regulations and fulfills the actual demand of
the Company's production and operation management, obtained effective implementation, and has played a role in
risk prevention and control effect on each section of the Company's production and operation management. The
Board of Directors’ 2018 self-evaluation report about internal control can truthfully and objectively reflect the
internal control system construction and operation conditions of the Company.
4. External Guarantee Situation of the Company
During the reporting period, the Supervisory Committee has carefully listened to the reports by the person in
charge of finance and accounting, understood about demand of guarantees items and relevant implementation
situations of the Company and its subsidiaries, and researched and reviewed relevant proposals regarding
guarantees provided for subsidiaries by the Company. The Supervisory Committee believes that: The Company
provides guarantees for subsidiaries, which fully meets fund demand for its production and management, and is
beneficial to further improve its production and operation abilities. The financial risk of the guarantee provided by
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Hikvision 2018 Annual Report
the Company is in the controllable scope of the Company, and has no significant impact on normal operation of
the Company. For guarantees provided to subsidiaries not wholly-owned by the Company, the minority
shareholders will not provide proportional guarantees, however, those subsidiaries all have good business
prospects and the Company has control power on the subsidiaries’ operation and finance, So there's basically no
risk in providing a guarantee. There is no contravention between relevant provisions of CSRC and Articles of
Association. The guarantee conforms to interests of the Company and general shareholders, and won't have any
adverse effect on the Company.
5. Related-party transactions of the Company
During the reporting period, the Supervisory Committee has supervised decision-making process and
follow-up performance of daily related-party transactions of the Company by means of attending board meetings
and interviewing the senior management personnel. The Supervisory Committee believes that related-party
transactions 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 Articles
of Association. The Board of Directors reviewed related-party transactions according to legal procedures, related
directors 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' meeting
During the reporting period, the Supervisory Committee has carefully reviewed each proposal of the
shareholders' meeting submitted by the Board of Directors, and further inspected practical implementation of each
proposal. The Supervisory Committee believes that the Company's Board of Directors can diligently perform
relevant resolutions of the Shareholders' Meeting.
7. Restricted share plan of the Company
During the reporting period, the Supervisory Committee has researched and reviewed relevant proposals of
unlocking 2014 & 2016 restricted incentive shares plan, and the implementation of 2018 Restricted Incentive
Shares Plan. The Supervisory Committee considered that the company's restricted stock plan implementation
procedures are legal and effective; the introduction of restrictive stock plans is conducive to further improve the
corporate governance structure, and to form a sound and balanced value distribution system; fully motivate the
enthusiasm 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
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Hikvision 2018 Annual Report
the same time, the Board of Supervisors conducted a special review of the "List of Incentives for the 2018
Restricted Share Plan", and considered that the incentive targets included in the company's 2018 Restricted Share
Plan 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 and
valid as the subject of the 2018 Restricted Share Plan.
During the Reporting Period, the Company strictly followed relevant rules and regulations, strengthened
registration management of information insiders and inside information confidentiality management in
preparation of periodic reports, resolution and disclosure, and planning, implementation and announcement of
significant affairs, and other matters related to the Company’s inside information. The Company truthfully filled
in and submitted the Registration Form for Information Insiders, and reported to Shenzhen Stock Exchange Place
in a timely manner.
VIII. Assessment and incentive mechanism for the senior management
The Company has established a fairly sophisticated mechanism on employees’ evaluation and incentive
restraint, and has established a fair and transparent appraisal and incentive mechanism on senior management
personnel and other various level management personnel and employees. The Company’s board of directors has
carried 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 and
performance of operation; and the general manager carried out appraisals of other senior management members
on their operational management and implementation of relevant assignments. In the year 2018, senior
management personnel carried out their duties diligently with good performance, and fairly completed their
objectives and missions set out at the beginning of the year.
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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
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; Internal control deficiencies at
B. Fraud of directors, supervisors and senior management non-financial report level are mainly
personnel on the financial report ; identified by the likelihood of occurrence
C. Significant errors identified by external auditors but not and the extent of impacts on operating
identified during the Company is operating; effective in business.
D. Invalid supervision of audit committee and internal audit
Significant deficiency: the high likelihood
system;
leading to significant reduction of working
E. Other deficiencies that may lead to the wrong judgement of
efficiency, or significant increase of
financial statement reporter.
uncertainty, or significant deviation from
Important deficiency: the expected target;
Qualitative criteria A deficiency or a combination of deficiencies in internal control Important deficiency: a higher likelihood
may prevent errors in financial report from being identified or leading to remarkable reduction of
prevented, although such deficiency is not significant, but working efficiency, or remarkable increase
require attention of the Board and Management, e.g.: of uncertainty, or remarkable deviation
A. Application of accounting policies does not follow the from the expected target;
enterprise accounting standard; Normal deficiency: a low likelihood
B. No internal control systems for fraud; leading to reduction of working efficiency,
C. No control systems or system not effective for unusual or or increase of uncertainty, or deviation
special transactions or no compensatory relevant control; from the expected target;
D. One or more deficiencies which prevent the preparation of
true and fair financial statements.
Normal deficiency: Not significant and not important
deficiency.
potential errors 5% or more of total direct losses of assets is 5% or more of
Significant deficiency
profits total profits
Quantitative criteria
potential errors 2% or more but below direct losses of assets is over 2% but below
Important deficiency:
5% of total profits 5% of total profits
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Hikvision 2018 Annual Report
potential errors is 2% or less of total direct losses of assets is below 2% of total
Normal deficiency:
profits 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
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Section X Corporate Bonds
The Company does not have publicly issued corporate bonds on stock exchange place, which has not terminated
or terminated but fail to collect the full payment before the annual report authorized disclosure date.
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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 Technology
Co., Ltd. (hereinafter referred to as “Hikvision"), including consolidated and parent company's balance
sheet as of December 31st 2018, consolidated and parent company's income statement, cash flow
statement and statement of changes in owners’ equity of 2018 as well as relevant financial notes to
financial statements.
In our opinion, the financial statements annexed have been prepared in accordance with Accounting
Standards for Business Enterprises in all material respects and they present fairly the consolidated and
parent company’s financial position of Hikvision as of December 31st 2018 and consolidated and
parent 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 Public
Accountants. “Responsibilities of Certified Public Accountants for Financial Statements Audit” in the
Audit Report further states our responsibilities under the standards. As per the code of ethics of
Chinese certified public accountants, we are independent from Hikvision and have implemented other
responsibilities as required by the code of ethics. We believe that the audit evidence we have acquired
is 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 current
period based on our professional judgment. These matters are handled based on the financial
statements audit as a whole and the audit opinion formed accordingly. We don’t present opinions
separately on these matters. We confirm that the following matters are key matters to be communicated
through in the audit report.
(I) Recognition of Sales Revenues
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Description:
As shown in Note (V) (37) and Note (XIV) (1), the operating revenue in 2018 in the consolidated
financial statements of the Group for the year ended December 31st 2018 is RMB 49,837.13 million.
The product sales revenue, a key performance indicator, reaches RMB 47,552.07 million, accounting
for 95.41% of the operating revenue, which is a significant amount and has a significant influence on
results 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 rewards
are transferred is different under different revenue models. Therefore, we treat sales revenue
occurrence 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 of
accounting policies of the Group and the Accounting Standards for Business Enterprises;
conducting a background investigation of important customers to check whether there is any
indication 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 details
for identified specific transactions, through systematic analysis of revenue data, and reviewing
relevant 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 supporting
documents; carrying out an additional check of sample(s) under the selected external sales model
for customs declaration records; critically focusing on occurrence of sales revenue recognition and
whether 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 correct
accounting period.
(II) Provision for Decline in Value of Inventories
Description:
As shown in Note (V) (6), as of December 31st 2018, the carrying amount of inventories in the
consolidated financial statements of the Group was RMB 5,842.85 million (excluding completed but
unsettled assets formed by construction contracts), and the provision for diminution in value of
inventories 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 the
financial statements. As shown in Note (III) 11.3 and Note (III) 26 to the financial statements,
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inventories are measured at the lower of cost and net realizable value, on the balance sheet date. The
provision 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 to
be incurred, estimated costs to make the sale and relevant taxes. As the management needs to use
critical accounting estimates in determining the net realizable value of inventories and the amount is
significant, 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 the
effectiveness 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 the
provision for diminution in value of inventories should be made is appropriate, and evaluating the
reasonableness 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 management
estimates the provision for diminution in value of inventories, and recalculating the provision for
diminution 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 selling
price; for raw materials and unfinished products selected as samples, comparing costs of completion
for 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 the
sale 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 are
inventories with an indication of impairment which are not recorded.
IV. Other Information
Management of Hikvision shall be responsible for other information. Other information includes the
information covered in the annual report, excluding the financial statements and our audit report.
Our audit opinion on the financial statements does not cover other information and we do not express
any form of authentication conclusion on other information.
In connection with our audit of the financial statements, our responsibility is to read other information
and to consider whether other information is significantly misstated or materially inconsistent with the
financial 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 other
information, we should report the fact. In this respect, we have nothing to report.
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V. Responsibility of the Management and Governance for the Financial Statements
The management of Hikvision is responsible for the preparation of financial statements in accordance
with Accounting Standards for Business Enterprises to achieve fair presentation, and design,
implementation and maintenance of necessary internal control to enable the financial statements are
free from material misstatement, whether due to fraud or error.
When preparing the financial statements, the management is responsible for assessing the
going-concern ability of Hikvision, disclosing issues related to going-concern as applicable, and
applying going-concern assumptions, unless the management plans to liquidate Hikvision, terminate
operation 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 free
from material misstatement, whether due to fraud or error, and to issue audit report that contain audit
opinions. Reasonable assurance is a high level of assurance, but could not guarantee that an audit
performed in accordance with the Auditing Standards can always figure out any existing material
misstatements. Misstatements may be caused by fraud or error. Misstatement is generally considered to
be material if it 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 judgment
and 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 adequate
and appropriate audit evidence as the basis for expressing audit opinions. As fraud may
involve 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 not
discovering 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 whether
there are material uncertainties in the events or conditions that may cast significant doubts on
Hikvision's ability to continue as a going concern. If we reach a conclusion that there is a
material uncertainty, the Auditing Standards require us to call the attention of the users of the
report to the relevant disclosures in the financial statements in the audit report. If the disclosure
is insufficient, we should issue modified audit opinions. Our conclusion is based on the
information available up to the date of the audit report. However, future events or conditions
may result in the failure of Hikvision to continue as a going concern.
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(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 transactions
and 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 are
responsible for directing, supervising and executing the audit on the Group, and assume full
responsibility for the audit opinions.
We communicated with the governance about the scope of the audit, the schedule and major audit
findings, including the notable shortcomings of internal control identified during the auditing.
We also provide statement to the governance on the independence-related work ethics we follow, and
communicate with the governance on all relations and other matters that might be reasonably deemed
to 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 greatest
importance 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 audit
report unless the laws and regulations forbid the public disclosure of such matters, or, in rare
circumstances, if the negative consequence of communication of matters in the audit report is
reasonably expected to exceed the benefit of the public interest.
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At December 31st 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
(V)2 1,860,050.59 4,100,657.54
profit or loss
Notes receivable & Accounts
(V)3 19,188,886,471.10 18,342,171,688.84
receivable
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
(V)7 380,795,020.47 66,566,230.12
year
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
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At December 31st 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
(V)19 290,998.43 15,946,836.46
through profit or loss
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
(V)25 3,178,171,147.16 1,546,407,270.89
one year
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
37,590,154,638.46 30,358,072,874.22
owner of the Company
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
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At December 31st 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
(XV)1 15,556,312,793.95 12,851,334,929.89
receivable
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
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Hikvision 2018 Annual Report
At December 31st 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
3,172,727,888.37 33,614,018.51
one year
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
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Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Consolidated Income Statement
Unit: RMB
Amount for the current Amount for the prior
Item Notes
period 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
(9,072,889.02) (2,525,266.42)
enterprise and joint-venture enterprise
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
28,823,623.34 (33,353,445.00)
shareholders
(b) Net profit attributable to owners of parent
11,352,869,241.32 9,410,855,084.82
company
V. Other comprehensive income, net of income tax (24,062,992.06) 13,852,652.33
Other comprehensive income attributable to owners of
(21,898,411.75) 13,552,837.86
the Company, net of tax
(I) Items that will not be reclassified subsequently
- -
to profit or loss
(II) Other comprehensive income to be
(21,898,411.75) 13,552,837.86
reclassified to profit or loss in subsequent periods
1. Exchange differences arising on conversion of
financial statements denominated in foreign (21,898,411.75) 13,552,837.86
currencies
Other comprehensive income attributable to minority
(2,164,580.31) 299,814.47
interests, net of tax
VI. Total comprehensive income 11,357,629,872.60 9,391,354,292.15
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Hikvision 2018 Annual Report
Amount for the current Amount for the prior
Item Notes
period period
Total comprehensive income attributable to owners of
11,330,970,829.57 9,424,407,922.68
the parent company
Total comprehensive income attributable to minority
26,659,043.03 (33,053,630.53)
shareholders
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
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For the reporting period from January 1st 2018 to December 31st 2018
Income statement of the parent company
Unit: RMB
Amount for the Amount for the prior
Item Notes
current period 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
(4,200,612.39) (2,525,266.42)
enterprise and joint-venture enterprise
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
160
Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Consolidated Cash Flow Statement
Unit: RMB
Amount for the Amount for the
Item Notes
current period 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
17,971,830.99 23,086,294.46
other long-term assets
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
2,055,859,307.21 1,692,193,203.99
other long-term assets
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
97,509,000.00 92,089,826.67
owners of subsidiaries
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
4,701,738,534.32 3,800,451,724.80
interest expenses
Including : Dividends and profits paid by subsidiaries to minority
- 3,062,500.00
shareholders
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
161
Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Cash Flow Statements of the parent company
Unit: RMB
Amount for the Amount for the
Item Notes
current period 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
13,852,133.88 18,569,173.19
long-term assets
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
604,984,875.82 612,742,341.37
other long-term assets
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
4,640,094,529.94 3,734,122,697.15
interest expenses
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
162
Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
Amount for the 2018
Owner’s Equity Attributable to owners of the Company
Item Other Minority Total owners'
Capital Less: Treasury Retained
Share capital comprehensive Surplus reserve interests equity
reserves share profits
income
I. Opening balance of the
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
current period
II. Increase or decrease in the
(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
current period
(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
(1,594,641.00) 136,741,944.89 (323,387,643.28) - - - 101,274,131.06 559,809,078.23
reduction in capital
1. Capital contribution from
- - - - - - 97,509,000.00 97,509,000.00
shareholders
2. Share-based payment
- 141,703,050.22 - - - - 3,765,131.06 145,468,181.28
recognized in owners’ equity
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
- - (56,211,224.00) - - (4,613,635,236.50) - (4,557,424,012.50)
shareholders
3. Others - - - - - - - -
III. Closing balance of the
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
current period
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Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Consolidated Statement of Changes in Owners' Equity-continued
Unit: RMB
Amount for 2017
Owner’s Equity Attributable to owners of the Company
Item Other Minority Total owners'
Capital Less: Treasury Retained interests equity
Share capital comprehensive Surplus reserve
reserves share profits
income
I. Closing balance of the
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
preceding period
Add: Business merger under
- 2,880,000.00 - - - (5,807,678.26) (5,204,761.36) (8,132,439.62)
common control
II. Opening balance of the
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
current period (restated)
III. Increase or decrease in the
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
current period
(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
49,869,858.00 771,076,861.97 536,813,016.21 - - - 91,780,420.69 375,914,124.45
reduction in capital
1. Capital contribution from
52,326,858.00 608,561,358.54 660,888,216.54 - - - 92,089,826.67 92,089,826.67
shareholders
2. Share-based payment
- 186,951,885.95 - - - - 4,248,711.50 191,200,597.45
recognized in owners’ equity
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
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
current period (restated)
164
Hikvision 2018 Annual Report
For the reporting period from January 1st 2018 to December 31st 2018
Statement of Changes in Owners' Equity of the parent company
Unit: RMB
Amount for 2018
Item
Share capital Capital Less: Treasury share Surplus reserve Retained profits Total owners'
reserves 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
Amount for 2017
Item
Share capital Capital Less: Treasury share Surplus reserve Retained profits Total owners'
reserves 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
165
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
I. Basic Information about the Company
Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as "Company" or "the
Company" or “Hikvision”), is a Sino-foreign equity joint venture company, formerly known as
"Hangzhou Hikvision Digital Technology Ltd", established on November 30th 2001 in Hangzhou upon
the approval letter of Hangzhou High-tech No. 604 [2001] issued by Hangzhou High-tech Industrial
Development Zone Management Committee. On June 25th 2008, with approval of document No. 598
[2008] issued by the MOFCOM (The Ministry of Commerce of the People's Republic of China), the
company was renamed as “Hangzhou Hikvision Digital Technology Co., Ltd.”, headquartered in
Hangzhou, and obtained the business license of enterprise No.91330000733796106P. On May 28 th 2010,
the Company was listed on the Shenzhen Stock Exchange.
On December 23rd 2016, pursuant to the Articles of Association of the Company revised by the
resolution of 20th Meeting of the 3rd session Board of Directors authorized by the 2nd extraordinary
general meeting in 2016, the Company granted 52,326,858 restricted incentive shares to the incentive
grantees, 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 27th 2017, authorized by the Company’s first Extraordinary General Meeting in 2014, the
Company completed procedures of repurchase and cancellation of some of the 2,457,000.00 restricted
stocks that did not meet the incentive conditions, and the total share capital of the Company was adjusted
to 6,152,576,743 shares.
On May 4th 2017, 2016 Profit Distribution Scheme was approved on 2016 Annual General Meeting.
On May 16th 2017, based on total capital shares of 6,152,576,743 shares on the date of interest
distribution, the company issued bonus shares for 3,076,288,371 shares, which adjusted the Company’s
total capital share to 9,228,865,114 shares.
On March 27th 2018, according to the authorization of the Company's first extraordinary
shareholders meeting in 2014, the Company completed the procedures of repurchase and cancellation of
some of the 1,594,641 restricted stocks that did not meet the incentive conditions, and the share capital of
the Company was changed to 9,227,270,473 shares. For details of the share capital, please refer to Notes
(V) 31.
As of December 31st 2018, the Company’s total registered capital is RMB 9,227,270,473, with total
166
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
capital shares of 9,227,270,473 shares (face value RMB 1per share), of which restricted A-shares were
1,313,073,005 shares, A-shares without restriction are 7,914,197,468 shares.
The Company is engaged in other electronic equipment manufacturing business under electronics
industry. Business scope of the Company includes development and production of electronic products
(including explosion-proof electrical products, tele-communication equipment and its ancillary
equipment, multimedia equipment), fire control products, aircraft, robot, intelligent equipment, auto parts
and 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 of
intelligent systems. For details about business scope of the Company and its subsidiaries, please refer to
Note (VII) 1.
The Company’s and consolidated financial reports were approved for issuance by the 10th meeting
of the fourth session Board of Directors of the Company on April 18th 2019.
For consolidation scope of the financial statements, please refer to Note (VII) “Interest in other
entities”. For changes in consolidation scope of the financial statements, please refer to “changes in the
consolidation scope” in Note (VI).
II. Basis of preparation of financial statements
Basis of preparation of financial statements
The Company and its subsidiaries (hereinafter referred to as "the Group") have adopted the Accounting
Standards 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 with
Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15－
General Provisions on Financial Reporting (revised in 2014).
Going concern
The 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 going
concern. 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. Except
certain financial instruments are measured by fair value, these financial statements are prepared in
167
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
accordance with the measurements basis of historical costs. If the asset decreases in value, the provision
for impairment of assets should be made according to relevant regulations.
According to the historical cost measurement, the assets shall be measured as per the amount of cash or
cash equivalent paid at the time of purchase, or the fair value of consideration paid for the purchase of
such assets. The liabilities shall be measured in accordance with the amount of funds or assets actually
received when undertaking current obligations, or the contract amount when undertaking the current
obligations, or the amount of cash or cash equivalents required for paying back the debts in daily
activities.
The fair value is a price received by the market participants from selling asset or transferring liability
during orderly transaction at the measurement date. No matter the fair value is observable or estimated by
using valuation technique, the measured and disclosed fair value in the financial statement shall be
determined on this basis.
When measuring non-financial assets at fair value, the assets shall be measured considering the ability of
market participants to use the assets for optimal use to generate economic benefits, or to sell the assets to
other 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 valuation
techniques involving unobservable inputs in the subsequent fair value measurement, the valuation
technique is corrected in the valuation process in order to make the initial recognition results confirmed
by 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 value
to 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 market
acquired on measurement date;
Level 2: The input value is the input value of relevant assets or liabilities observable directly or
indirectly in addition to level 1 input value;
Level 3: The input value is the non-observable input value of relevant assets or liabilities.
III. Significant accounting policies and accounting estimates
1. Statement for Compliance with Accounting Standards for Business Enterprises (ASBE)
The financial statements of the Company have been prepared in accordance with ASBE, and present truly
and completely, the Company's and consolidated financial position as of December 31st 2018; and the
Company's and consolidated results of operations, the Company’s and consolidated changes in
shareholders' equity, and the Company’s and consolidated cash flows for the year of 2018.
2. Accounting Period
The Group has adopted the calendar year as its accounting year from January 1st to December 31st each
year.
168
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
3. Business Cycle
The business cycle refers to the period from purchase of assets used for processing to realization of cash
or cash equivalents. The Group business cycle is usually 12 months.
4. Functional currency
Renminbi (“RMB”) is the currency in the primary economic environments in which the Company and its
domestic subsidiaries are operated. The Company and its domestic subsidiaries take RMB as their
functional currency. Overseas subsidiaries of the Company determine their functional currency on the
basis of the primary economic environment in which it operates. For functional currency of overseas
subsidiaries 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 control
and business combinations not involving enterprises under common control
Business combinations are classified into business combinations involving enterprises under common
control 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 which
all of the combining enterprises are ultimately controlled by the same party or parties both before and
after the combination, and that control is not transitory.
Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the
combining entities at the date of the combination. The difference between the carrying amount of the net
assets obtained and the carrying amount of the consideration paid for the combination (the aggregate face
value of shares issued as consideration) is adjusted to the share premium in capital reserve. If the share
premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Costs that are directly attributable to the combination are charged to profit or loss in the period in which
they are incurred.
5.2 Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination in
which all of the combining enterprises are not ultimately controlled by the same party or parties before
and after the combination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given,
liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the
acquiree. The intermediary expenses incurred by the acquirer in respect of auditing, legal services,
169
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
valuation and consultancy services, etc. and other associated administrative expenses attributable to the
business 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 a
business combination, that meet the recognition criteria shall be measured at fair value at the acquisition
date.
Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s
identifiable net assets, the difference is treated as an asset and recognized as goodwill, which is measured
at cost on initial recognition. Where the cost of combination is less than the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the acquirer firstly reassesses the measurement of the fair
values of the acquiree’s identifiable assets, liabilities and contingent liabilities and measurement of the
cost of combination. If after that reassessment, the cost of combination is still less than the acquirer’s
interest in the fair value of the acquiree’s identifiable net assets, the acquirer recognizes the remaining
difference immediately into profit or loss for the current period.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and
is 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 right
means that an investor may control an investee; the investor may participate in relevant activities of the
investee to obtain variable rewards and also be able to use the control rights for the investee to influence
its amount of returns. The Group will re-evaluate, if the change of the relevant facts and circumstances
leading to the change of the relevant elements involved in the above definition of control.
The merger of subsidiary starts from the Group obtaining the control power of the subsidiary, and
terminates when the Group loses the control power of the subsidiary.
As for subsidiaries disposed by the Group, operating results and cash flow prior to the disposal date (the
date of losing control right) have been properly included in the consolidated profit statement and
consolidated cash flow statement.
For a subsidiary acquired through a business combination not involving enterprises under common
control, the 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 a
business combination involving enterprises under common control are included in the Group's scope of
consolidation as if they had been included in the scope of consolidation from the date when they first
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came under the common control of the ultimate controlling party. Their operating results and cash flows
from the beginning of the earliest reporting period are included in the consolidated income statement and
consolidated statement of cash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determined
based on 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 interests
and presented as "minority equity" in the consolidated balance sheet. The portion of net profits or losses
of subsidiaries for the period attributable to minority interests is presented as "minority interests" in the
consolidated income statement below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds
the minority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess
amount are still allocated against minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of
control over the subsidiary is accounted for as equity transactions. The carrying amounts of the total
owners' equity attributable to owner of the Company and minority equity are adjusted to reflect the
changes in their relative interests in the subsidiary. The difference between the amount by which the
minority interests are adjusted and the fair value of the consideration paid or received is adjusted to
capital reserve under owners' equity. If the capital reserve is not sufficient to absorb the difference, the
excess 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 equivalents
are the Group's short-term, highly liquid investments that are readily convertible to known amounts of
cash 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 that
approximates the actual spot exchange rate on the date of transaction; The exchange rate that
approximates the actual spot exchange rate on the date of transaction is calculated according to the
middle price of market exchange rate at the beginning of the month in which the transaction happened.
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At the balance sheet date, foreign currency monetary items are translated into [RMB] using the spot
exchange rates at the balance sheet date. Exchange differences arising from the differences between the
spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous
balance sheet date are recognized in profit or loss for the period, except for exchange differences related
to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are
capitalized 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 currency
monetary item constituting a net investment in a foreign operation, exchange difference arising from
changes in exchange rates are recognized as "exchange differences arising on conversion of financial
statements denominated in foreign currencies " in other comprehensive income, and in profit and loss for
the period upon disposal of the foreign operation.
Foreign currency non-monetary items measured at historical cost are converted to the amounts in
functional currency at the spot exchange rates on the dates of the transactions. Foreign currency
non-monetary items measured at fair value are re-converted at the spot exchange rate on the date the fair
value is determined. Difference between the re-converted functional currency amount and the original
functional currency amount is treated as changes in fair value (including changes of exchange rate) and is
recognized 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 foreign
operation are converted from the foreign currency into RMB using the following method: assets and
liabilities 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 at
exchange rates that approximate the actual spot exchange rates on the dates of the transactions; The
difference between the converted assets and the aggregate of liabilities and shareholders' equity items is
recognized into other comprehensive income and shareholders’ equity.
The foreign currency cash flow and cash flow of overseas subsidiaries adopt the exchange rate similar to
the spot rate at the date of cash flow for conversion. The affected amount of cash and cash equivalents
due to the change of exchange rate, as an adjustment item, shall be separately listed as "the impact of cash
and cash equivalents due to the change of exchange rate" in the cash flow statement.
The opening balances and the comparative figures of previous year are presented at the converted
amounts 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 foreign
operation due to disposal of certain interest in it or other reasons, the Group transfers the accumulated
exchange differences arising on conversion of financial statements of this foreign operation attributable to
the owners' equity of the Company and presented under shareholders' equity, to profit or loss in the period
in which the disposal occurs.
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In case of a disposal or other reason that does not result in the Group losing control over a foreign
operation, but only a decrease in proportion of overseas business interests, the proportionate share of
accumulated exchange differences arising on conversion of financial statements are re-attributed to
minority interests and are not recognized in profit and loss under current period. For partial disposals of
equity interests in foreign operations which are associates or joint ventures, the proportionate shares of
the accumulated exchange differences arising on conversion of financial statements of foreign operations
is 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 the
contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at
fair value. For financial assets and financial liabilities at fair value through profit or loss, transaction costs
are immediately recognized in profit or loss. For other financial assets and financial liabilities, transaction
costs are included in their initial recognized amounts.
For the purchase or sale of financial assets in the regular method, the assets and the corresponding
undertaken liabilities are recognized when the assets are received on the trading day, or the assets sold are
derecognized 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 a
financial liability (or a group of financial assets or financial liabilities) and of allocating the interest
income or interest expense over the relevant period, using the effective interest rate. The effective interest
rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial
asset or financial liability, or a shorter period if appropriate, to the current net carrying amount of the
financial asset or financial liability.
When calculating the effective interest rate, the Group estimates future cash flows considering all
contractual terms of the financial asset or financial liability (without considering future credit losses), and
also considers all fees paid or received between the parties to the contract giving rise to the financial asset
and financial liability that are an integral part of the effective interest rate, transaction costs, and
premiums 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, including
financial 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 methods
are recognized and derecognized on a trade date basis.
9.2.1 Financial Assets at Fair Value through Profit or Loss ("FVTPL")
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Financial assets at FVTPL include financial assets held for trading and those designated as financial
assets 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 has
been acquired principally for the purpose of selling in the near term; or (2) On initial recognition it is part
of a portfolio of identified financial instruments that the Group manages together and there is objective
evidence that the Group has a recent actual pattern of short-term profit-taking; or (3) It is a derivative that
is not designated and effective as a hedging instrument, or a financial guarantee contract, or a derivative
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.
Financial assets that meet one of the following conditions can be initially designated as financial assets at
fair value through profit or loss: (1) The designation may eliminate or significantly reduce the
inconsistency in the recognition or measurement of the relevant gains or losses resulting from the
different measurement basis of the financial asset; (2) The formal written documents of the Group's risk
management or investment strategy have stated that the financial asset portfolio or financial assets and
financial liabilities in which the financial assets are located are managed, evaluated and reported to key
management 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 from
changes in the fair value and any dividend or interest income earned on the financial assets are
recognized 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 and
fixed maturity dates that the Group's management has the positive intention and ability to hold to
maturity.
Held-to-maturity investments 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.
9.2.3 Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. Financial assets classified as loans and receivables by the Group include
notes 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.
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9.2.4 Available-for-sale Financial Assets
Available-for-sale financial assets include non-derivative financial assets that are designated on initial
recognition as available for sale, and financial assets that are not classified as financial assets at fair value
through 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 arising
from changes in the fair value are recognized as other comprehensive income, except that impairment
losses and exchange differences related to amortized cost of monetary financial assets denominated in
foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which
time 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 the
available-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 and
whose fair value cannot be reliably measured, and derivative financial assets that are linked to and must
be 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 at
fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Group
determines the amount of any impairment loss. Objective evidence that a financial asset is impaired is
evidence that, arising from one or more events that occurred after the initial recognition of the asset, the
estimated 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 principal
payments;
(3) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting a
concession 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 the
issuer;
(6) Upon an overall assessment of a group of financial assets, observable data indicates that there is a
measurable decrease in the estimated future cash flows from the group of financial assets since the initial
recognition of those assets, although the decrease cannot yet be identified with the individual financial
assets 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 the
group of assets;
(7) Significant adverse changes in the technological, market, economic or legal environment in which the
issuer operates, indicating that the cost of the investment in the equity instrument may not be recovered
by the investor;
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(8) A significant or prolonged decline in the fair value of an investment in an equity instrument below its
cost;
(9) Other objective evidence indicating there is an impairment of a financial asset.
- Impairment of financial assets measured at amortized cost
If financial assets carried at amortized cost are impaired, the carrying amounts of the financial assets are
reduced to the present value of estimated future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset's original effective interest rate. The amount of reduction
is recognized as an impairment loss in profit or loss. If, subsequent to the recognition of an impairment
loss on financial assets carried at amortized cost, there is objective evidence of a recovery in value of the
financial 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 that
the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the
amortized cost would have been had the impairment not been recognized.
For a financial asset that is individually significant, the Group assesses the asset individually for
impairment. For a financial asset that is not individually significant, the Group assesses the asset
individually for impairment or includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment. If the Group determines that no objective
evidence of impairment exists for an individually assessed financial asset (whether significant or not), it
includes the asset in a group of financial assets with similar credit risk characteristics and collectively
reassesses them for impairment. Assets for which an impairment loss is individually recognized are not
included 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 fair
value previously recognized directly in other comprehensive income is reclassified from other
comprehensive income to profit or loss. The amount of the cumulative loss that is reclassified from other
comprehensive income to profit or loss is the difference between the acquisition cost (net of any principal
repayment and amortization) and the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss.
If, subsequent to the recognition of an impairment loss on available-for-sale financial assets, there is
objective evidence of a recovery in value of the financial assets which can be related objectively to an
event 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 other
comprehensive income, while the amount of reversal of impairment loss on available-for-sale debt
instruments is recognized in profit or loss.
- Impairment of financial assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without a
quoted price in an active market) whose fair value cannot be reliably measured, or on a derivative
financial asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the
carrying amount of the financial asset is reduced to the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset. The amount of reduction is
recognized as an impairment loss in profit or loss. The impairment loss on such financial asset is not
reversed once it is recognized.
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9.4 Transfer of Financial Assets
The Group derecognizes a financial asset if one of the following conditions is satisfied: (1) the
contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has been
transferred and substantially all the risks and rewards of ownership of the financial asset is transferred to
the transferee; or (3) although the financial asset has been transferred, the Group neither transfers nor
retains substantially all the risks and rewards of ownership of the financial asset but has not retained
control of the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a
financial asset, and it retains control of the financial asset, it recognizes the financial asset to the extent of
its continuing involvement in the transferred financial asset and recognizes an associated liability. The
extent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposed
to changes in the value of the transferred asset.
For a transfer of a financial asset in its entirety that satisfies the recognition criteria, the difference
between (1) the carrying amount of the financial asset transferred; and (2) the sum of the consideration
received from the transfer and any cumulative gain or loss that has been recognized in other
comprehensive income, is recognized in profit or loss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the
transferred financial asset is allocated between the part that continues to be recognized and the part that is
derecognized, based on the respective fair values of those parts. The difference between (1) the carrying
amount allocated to the part derecognized; and (2) the sum of the consideration received for the part
derecognized and any cumulative gain or loss allocated to the part derecognized which has been
previously 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 the
basis of the substance of the contractual arrangements with the relevant reflected economic essence (not
only 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 through
profit 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 at
FVTPL.
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 of
repurchasing in the near term; or (2) On initial recognition it is part of a portfolio of identified financial
instruments that the Group manages together and there is objective evidence that the Group has a recent
actual pattern of short-term profit-taking; or (3) It is a derivative, except for a derivative that is a
designated and effective hedging instrument, or a financial guarantee contract, or a derivative 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.
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A financial liability may be designated as at FVTPL upon initial recognition only when one of the
following conditions is satisfied: (1) Such designation eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise result from measuring liabilities or recognizing the
gains or losses on them on different bases; or (2) The financial liability forms part of a group of financial
liabilities or a group of financial assets and financial liabilities, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group's documented risk management or
investment strategy, and information about the grouping is reported to key management personnel on that
basis.; 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 from
changes in the fair value or any dividend or interest expenses related to the financial liabilities are
recognized 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 is
subsequently measured at cost. Other financial liabilities, except for financial guarantee contracts, are
subsequently measured at amortized cost using the effective interest method, with gain or loss arising
from 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 guarantor
would settle the debts or bear obligations in accordance with terms of the contract in case the borrower
fails to settle the debts. Financial guarantee contracts that are not designated as financial liabilities at fair
value through profit or loss, are initially measured at their fair values less the directly attributable
transaction costs. Subsequent to initial recognition, they are measured at the higher of: (i) the amount
determined in accordance with Accounting Standard for Business Enterprises No. 13 – Contingencies;
and (ii) the amount initially recognized less cumulative amortization recognized in accordance with the
principles 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 part
of it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to
replace the original financial liability with a new financial liability with substantially different terms is
accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability.
When the Group derecognizes a financial liability or a part of it, it recognizes the difference between the
carrying amount of the financial liability (or part of the financial liability) derecognized and the
consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in
profit or loss.
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9.7 Derivative Instruments and Embedded Derivative Instruments
Derivative financial instruments include forward exchange contracts, interest rate swaps and foreign
exchange options, etc. Derivatives are initially measured at fair value at the date when the derivative
contracts are entered into and are subsequently re-measured at fair value. The resulting gain or loss is
recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not
designated as a financial asset or financial liability at fair value through profit or loss, and treated as a
standalone derivative if 1) the economic characteristics and risks of the embedded derivative are not
closely related to the economic characteristics and risks of the host contract; and 2) a separate instrument
with the same terms as the embedded derivative would meet the definition of a derivative. If the Group is
unable to measure the embedded derivative separately either at acquisition or at a subsequent balance
sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value
through 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 assets
and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and
settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the
net amount is presented in the balance sheet. Except for the above circumstances, financial assets and
financial 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 after
deducting all of its liabilities. That the group issues (including refinancing), repurchases, sells or cancels
equity instruments is taken as the treatment of changes in equities. The group does not confirm the
changes of fair value of equity instruments. Transaction fees relevant to the equity transaction shall be
deducted from the equity.
The Group considers the allocation of the equity holder as the allocation of profits; issued share dividends
do not influence the total equity of the shareholders.
10. Receivables
10.1 Receivables that are individually significant and for which bad debt provision is individually
assessed
A receivable that exceeds RMB 4 million (inclusive) and accounting
Basis or monetary criteria for determining an
for more than 10% of the receivables book balance is deemed as an
individually significant receivable
individually significant receivable by the Group.
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For account receivables that are individually significant, the Group
assesses the receivables individually for impairment. For account
Method of determining provision for
receivables that are not impaired individually, the Group includes the
receivables that are individually significant and
account receivables in a group of financial assets with similar credit
for which bad debt provision is individually
risk characteristics and collectively assesses them for impairment.
assessed
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 Aging analysis
single test impairment
Portfolios that aging analysis is used for bad debt provision:
Provision as a proportion of Provision as a proportion of other
Aging
accounts receivable (%) 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 is
individually assessed:
There are significant differences between the present value of
Reasons for making individual bad debt future cash flow of the receivables and the present value of
provision future cash flow of the receivables portfolio based on aging
analysis as credit risk feature.
Through individual impairment test, determine the bad debts
Bad debt provision methods provisions according to the difference of the amount that the
present value of future cash flows lower than carrying value.
11. Inventories
11.1 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,
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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 of
conversion and other expenditures incurred in bringing the inventories to their present location and
condition.
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 inventories
The inventory is according to cost and net realizable value low metering on the date of balance sheet.
When the net realizable value is lower than cost, withdraw inventory falling price reserves. The net
realizable value refers to the amount derived by deducting the potential cost, estimated selling expense
and relative taxes to the completion date from the estimated sales price of inventory in daily activities.
When determining net realizable value of inventories, take the obtained conclusive evidence as basis and
consider the purposes of holding inventories and influence of events after the balance sheet date.
Provision for decline in value of inventories is made based on the excess of cost of inventory over its net
realizable value on an item-by-item basis.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down of
inventory impairment have disappeared and causing the net realizable value higher than its book value,
such inventory impairment provision are recovered and reversed, and the reversed amount recorded in
profits and losses of the current period.
11.4 Inventory 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 immediate
write-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; the
investor is able to obtain variable benefits from its activities, and at same time, to use the control rights on
the investee to influence the amount of returns. Joint control means that joint control for certain
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arrangement in accordance with relevant agreements; activities relevant to the arrangement cannot be
decided until obtaining the unanimous consent of parties sharing control right. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control or
joint control over those policies. When determining whether an investing enterprise is able to exercise
control or significant influence over an investee, the effect of potential voting rights of the investee, such
as current convertible debts, current executable warrants, etc., held by the investing enterprises or other
parties shall be considered.
12.2 Determination of initial investment cost
For a long-term equity investment acquired through a business combination involving enterprises under
common control, the shares of merged party's book value of owners' equity in the final controlling party
consolidated financial statements obtained on the merger date shall be considered as the initial investment
cost of long-term equity investment. The differences between the initial investment cost of long-term
equity investment and the paid cash, the transferred non-cash assets and the book value of the assumed
debts are adjusted against the capital surplus; if the capital surplus is not sufficient to be offset, the
remaining balance is adjusted against retained earnings. In the case of issued equity securities treated as
consolidation consideration, share of book value of owner's equity of merged party in the final controlling
party consolidated financial statements is regarded as initial investment cost of long-term equity
investments on the date of consolidation; capital reserve shall be adjusted in accordance with taking total
nominal value of issued share as capital share, the difference between the initial investment cost of
long-term equity investments and total book value of issued shares; In case the capital reserve is not
enough for writing down, the retained earnings shall be adjusted.
For a long-term equity investment acquired through business combination not involving enterprises under
common control, and the merging cost confirmed on the purchased date are regarded as the initial
investment cost.
The intermediate expenses made by the combining party or purchaser for audit, legal service, assessment
and other management related expenses during the business merger should be included into the current
profit and loss as it happens.
Conduct initial measurement according the cost for other equity investment other than the long-term
equity investment formed in business merger. In case that the investor may post a significant impact on
the investee or execute joint control but not constitute the control right, long-term equity investment cost
is the sum of fair value of original-held equity investment plus newly-added investment cost in
accordance with No. 22 Accounting Standards for Business Enterprises----Recognition and Measure of
the Financial Instruments.
12.3 Subsequent measurement and recognition of profit or loss
12.3.1 Long-term equity investment accounted for using the cost method
Long-term equity investments in subsidiaries are accounted for using the cost method in the Company's
financial 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
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cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be
adjusted. Income from the investment in the current period shall be recognized in accordance with the
cash dividends or profits declared and issued by the investee.
12.3.2 Long-term equity investment accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An associate
is an entity over which the Group has significant influence and a joint venture is an entity over which the
Group 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 the
Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no
adjustment is made to the initial investment cost. Where the initial investment cost is less than the
Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the
difference is recognized in profit or loss for the period, and the cost of the long-term equity investment is
adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive
income of the investee for the period as investment income or loss and comprehensive income for the
period, meanwhile, the book value of the long-term equity investment shall be adjusted; The Company
shall accordingly reduce the book value of the long-term equity investment in terms of the part that shall
be enjoyed according to the profit or cash dividends declared by the invested unit to be distributed; For
other changes in the owners' equity of the invested unit other than net profits and losses, other
comprehensive incomes and the profit distribution, the book value of long-term equity investment shall
be adjusted and be included into the capital reserves. The Company shall, on the ground of the fair value
of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable
share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity.
If the accounting policies and accounting periods adopted by the invested unit are different from those
adopted by the Company, the adjustment shall be made for the financial statements of the invested unit in
accordance with the accounting policies and accounting periods of the Company to recognize the
investment income and other comprehensive incomes. For the transaction incurred between the group and
associated enterprises and joint ventures, invested or sold assets don't constitute a business, the part that
doesn't achieve internal transaction profit or loss or belongs to the group calculated according to the
enjoyed ratio will be offset, and the profit or loss on investment will be confirmed on this basis. But for
the unrealized loss arising from the internal transaction between the group and the invested unit, if such
transaction loss is defined as the impairment loss of the transferred asset, they cannot be offset.
When the Company determines the net loss of the invested unit which shall be shared, it is necessary to
write-down the book value of the long-term equity investment and other long-term equities substantially
constituting the net investment of the invested unit to zero as a limit. Besides, if the group is obliged to
bear extra loss for the invested unit, it shall be necessary to determine provisions and record them to
current investment loss in compliance with obligations expected to be assumed. If the invested unit
realizes any net profits later, the group shall, after the amount of its attributable share of profits offsets its
attributable share of the un-confirmed losses, resume recognizing its attributable share of profits.
12.4 Disposal of long-term equity investments
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On disposal of a long term equity investment, the difference between the proceeds actually received and
the 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, for
rental to others, or for administrative purposes, and have useful lives of more than one accounting year. A
fixed asset is recognized only when it is probable that economic benefits associated with the asset will
flow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at
cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is
probable that economic benefits associated with the asset will flow to the Group and the subsequent
expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is
derecognized. Other subsequent expenditures are recognized in profit or loss in the period in which they
are 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 subsequent
to the one in which it is ready for intended use. The useful life, estimated net residual value rate and
annual 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 currently
obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already
of 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 the
present value of the minimum lease payments on the lease commencement date as the entry book value of
the leased asset, and book the amount of the minimum lease payments as the entry book value of
long-term account payable, and recognize the difference between the entry value of the leased asset and
that of the long-term account payables as unrecognized financing expenses. In addition, the initial direct
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costs directly attributable to the leased item incurred during the process of negotiating the lease and
signing the leasing agreement shall be included into the value of the leased assets.
The Group adopts a depreciation policy for a fixed asset held under a finance lease which is consistent
with that for its owned fixed asset. If there is reasonable certainty that the Group will obtain ownership of
the leased asset at the end of the lease term, the leased asset is depreciated over its useful life. If there is
no reasonable certainty that the Group will obtain ownership of the leased asset at the end of the lease
term, 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 use
or 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 is
recognized in profit or loss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation
method applied at least once at each financial year-end, and account for any change as a change in an
accounting estimate.
14. Construction in Process
Construction in progress is measured at its actual costs. The actual costs include various construction
expenditures during the construction period, borrowing costs capitalized before it is ready for intended
use and other relevant costs. Construction in progress is not depreciated. Construction in progress is
transferred to a fixed asset when it is ready for intended use.
15. Borrowing Costs
Borrowing costs directly attributable to the acquisition & construction or production of assets eligible for
capitalization shall be capitalized when assets expenditure, borrowing costs and necessary construction or
production for bringing assets to expected conditions for use or marketing have taken place; when
construction or production of assets ready for capitalization reach to expected conditions for use or
marketing, capitalization shall be ceased. Other borrowing expenses are recognized as expenses in the
current period.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is
the actual interest expense incurred on that borrowing for the period less any bank interest earned from
depositing the borrowed funds before being used on the asset or any investment income on the temporary
investment of those funds. Where funds are borrowed under general-purpose borrowings, the Group
determines the amount of interest to be capitalized on such borrowings by applying a capitalization rate
to the weighted average of the excess of cumulative expenditures on the asset over the amounts of
specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates
applicable to the general-purpose borrowings. During the capitalization period, exchange differences
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related to a specific-purpose borrowing denominated in foreign currency are all capitalized. Exchange
differences in connection with general-purpose borrowings are recognized in profit or loss in the period
in 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 is
available 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 method
at 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 is
recognized as intangible asset. Expenditure during development phase that does not meet the following
conditions 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 intangible
asset 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 and
the ability to use or sell the intangible asset; and
(5) The expenditure attributable to the intangible asset during its development phase can be reliably
measured.
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If the expenditures cannot be distinguished between the research phase and development phase, the
Group 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 equity
investment, fixed assets, construction in process and intangible assets with a finite useful life may be
impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated
for such assets. Intangible assets with indefinite useful life and intangible assets not yet available for use
are tested for impairment annually, irrespective of whether there is any indication that the assets may be
impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable
amount of an individual asset, the recoverable amount of the asset group to which the asset belongs will
be estimated. The recoverable amount is determined by the higher of 1) net amount of fair value of the
asset or asset group deducted by the disposal expenses; or 2) the present value of the expected future cash
flow of the asset or asset group.
If the recoverable amount of an asset or an asset group is less than its carrying amount, the deficit is
accounted 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 test
shall be conducted in accordance with the concerned asset group or asset portfolio. That is to allocate the
book value of goodwill to the asset group or asset portfolio that is expected to benefit from the synergies
of the combination in a reasonable way from the date of purchasing. When recoverable amount of
apportion-included asset group or asset portfolio of goodwill is less than book value of goodwill,
impairment loss shall be recognized. Firstly, amount of impairment loss shall be apportioned to the book
value of goodwill of the said asset group or asset portfolio, and then book value of other assets, except for
goodwill, in asset group or asset portfolio shall be abated in proportion.
Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.
18. Employee compensation
18.1 Accountant Arrangement Method of Short-term Remuneration
During accounting period when the Group's employees provide services, actual short-term remuneration
shall be recognized as the liabilities and current profit and loss or relevant asset cost. The Group’s
employee benefits and welfare are included into current profit and loss or relevant asset cost according to
actual amount occurred during the period. If the employee benefits and welfare is non-monetary, it shall
be measured according to its fair value.
During the accounting period that the employees service the Group, the Group pays social insurance
premiums such as medical insurance premium, industrial injury insurance premium, maternity insurance
premium and housing accumulation fund for its employees, as well as labor union expenditure and
employee education expenses calculated and withdrawn according to the regulations, corresponding
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employee remuneration amount shall be calculated and determined in accordance with specified
calculation and withdrawal basis and proportion to recognize corresponding liabilities and included into
the current profit and loss or relevant asset cost.
18.2 Accountant Arrangement Method of Post-employment Benefits
All post-employment benefits shall be considered as the defined contribution plan.
In the accounting period when the employee serves for the Group, the deposited amount calculated based
on defined contribution plan shall be recognized as liabilities and included in the current profit and loss or
relevant asset cost.
18.3 Accountant Arrangement Method of the Termination Benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by such
termination benefits will be determined as the following date, whichever is earlier, and will be included in
the current profit and loss: 1) When the Group cannot unilaterally withdraw the termination benefits
provided due to labor relation cancellation plan or employee lay-off suggestion; or 2）when the Group
determines 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 as
products quality assurance, etc. And it is probable that an outflow of economic benefits will be required
to 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 the
present obligation at the balance sheet date, taking into account factors pertaining to a contingency such
as the risks, uncertainties and time value of money. Where the effect of the time value of money is
material, 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 or
undertakes the equity-instrument-based liabilities in return for services from employees. The Group's
share-based payment is an equity-settled share-based payment.
A share-based payment is a transaction which the Group grants equity instruments, or incurs liabilities for
amounts that are determined based on the price of equity instruments, in return for services rendered by
employees. The Group's share-based payments are equity-settled share-based payments.
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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 the
fair value of the equity instruments granted to employees at the grant date. Such amount is recognized as
related costs or expenses on a straight-line basis over the vesting period, with a corresponding increase in
capital reserve.
At each balance sheet date during the vesting period, the Group makes the best estimate according to the
subsequent latest information of change in the number of employees who are granted with options that
may vest, etc. and revises the number of equity instruments expected to vest. The effect of the above
estimate 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-based
payment arrangement
In case the Group modifies a share-based payment arrangement, if the modification increases the fair
value of the equity instruments granted, the Group will include the incremental fair value of the equity
instruments granted in the measurement of the amount recognized for services received. If the
modification increases the number of the equity instruments granted, the Group will include the fair value
of additional equity instruments granted in the measurement of the amount recognized for services
received. The increase in the fair value of the equity instruments granted is the difference between fair
value of the equity instruments before and after the modification on the date of the modification. If the
Group modifies the terms or conditions of the share-based payment arrangement in a manner that reduces
the total fair value of the share-based payment arrangement, or is not otherwise beneficial to the
employee, the Group will continue to account for the services received as if that modification had not
occurred, other than a cancellation of some or all the equity instruments granted.
If cancellation of the equity instruments granted occurs during the vesting period, the Group will account
for the cancellation of the equity instruments granted as an acceleration of vesting, and recognize
immediately the amount that otherwise would have been recognized over the remainder of the vesting
period in profit or loss for the period, with a corresponding recognition in capital reserve. When the
employee or counterparty can choose whether to meet the non-vesting condition but the condition is not
met during the vesting period, the Group treats it as a cancellation of the 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 significant
risks and rewards of ownership of the goods; (2) the Group retains neither continuing managerial
involvement 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 benefits
will flow to the Group; and (5) the associated costs incurred or to be incurred can be measured reliably.
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21.2 Revenue from rendering of services
Revenue from rendering of services is recognized when (1) the amount of revenue can be measured
reliably; (2) it is probable that the associated economic benefits will flow to the enterprise; (3) the stage
of completion of the transaction can be determined reliably; and (4) the associated costs incurred or to be
incurred can be measured reliably. Revenue from rendering of services is recognized using the percentage
of completion method at the balance sheet date. The stage of completion of a transaction for rendering for
services is determined based on the proportion that costs incurred to date bear to the estimated total costs
of 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 costs
incurred are recognized as expenses for the period. When it is not probable that the costs incurred will be
recovered, revenue is not recognized.
21.3 Construction Contract
Where the outcome of a construction contract can be estimated reliably, contract revenue and costs are
recognized 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 work
bears to the estimated total contract work.
Where the outcome of a construction contract cannot be estimated reliably, (1) if contract costs are
expected to be recoverable, contract revenue is recognized to the extent of contract costs that are expected
to 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 immediately
when incurred and contract revenue is not recognized. When the uncertainties that prevented the outcome
of the construction contract from being estimated reliably no longer exist, revenue and expenses
associated with the construction contract are recognized using the percentage of completion method.
If the estimated total contract costs exceed total contract revenue, the expected loss is recognized
immediately as an expense for the period.
The cumulative costs incurred and cumulative gross profits (or losses) recognized for contracts in
progress and the progress billings are offset and the net amount is presented in the balance sheet. Where
the aggregate of cumulative costs incurred and cumulative gross profits (or losses) recognized exceed the
progress billings for contracts in progress, the surplus is shown as inventory. Where the progress billings
for 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, the
Group recognizes revenue and expenses associated with the construction services rendered during the
construction period in accordance with Accounting Standard for Business Enterprises No.15 –
Construction Contracts. When the construction of the public infrastructure is completed, the Group
recognizes revenue and expenses associated with subsequent operations and services in accordance with
Accounting Standard for Business Enterprises No. 14 – Revenue.
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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 for
constructions and forms long-term assets in other ways, and therefore are categorized as government
subsidy related to assets.
A government grant related to an asset is recognized as deferred income or writing down book value of
related assets. For government grants recognized as deferred income, it should be evenly amortized to
profit or loss over the useful life of the related asset.
22.2 Judgment basis and accountant treatment of government subsidy related to income
The Group receives government subsidies including subsidies for Core Electronic Devices, High-end
Universal Chip and Basic Software Product Projects, Value-Added-Tax rebate (VAT rebate), subsidies
for special projects, and tax refunds, etc., which are not used for constructions and forms long-term assets
in 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 to
be incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or
loss over the periods in which the related costs or losses are recognized. If the grant is a compensation for
related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the
period.
For government subsidies related to the Group’s daily operations shall be booked into other income or
offsetting related expenses; for those not related to the Group’s daily operations, shall be booked into
non-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 are
measured 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
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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 their
tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized
through the balance sheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible
temporary differences are recognized to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be utilized. However, for temporary differences
associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising
from a transaction (not a business combination) that affects neither the accounting profit nor taxable
profits (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 the
extent that it is probable that future taxable profits will be available against which the deductible losses
and tax credits can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries, except where the Group is able to control the timing of the reversal of the temporary
difference 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 are
only recognized to the extent that it is probable that there will be taxable profits against which to utilize
the 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 measured
at the applicable tax rates in the period in which the related assets are recovered or the related liabilities
are recovered in accordance with the tax laws.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when
they arise from transactions or events that are directly recognized in other comprehensive income or in
shareholders' equity, in which case they are recognized in other comprehensive income or in
shareholders' equity; and when they arise from business combinations, in which case they adjust the
carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no
longer probable that sufficient taxable profits will be available in the future to allow the benefit of
deferred tax assets to be utilized. Such reduction in amount is reversed when it becomes probable that
sufficient taxable profits will be available.
23.3 Offset of Income Tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to
realize the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are
offset and presented on a net basis.
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When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax
assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities which intend either to settle current tax assets and
liabilities on a net basis or to realize the assets and liabilities simultaneously, in each future period in
which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax
assets 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 risks
and 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, and
are either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs
incurred are charged to profit or loss for the period. Contingent rents are charged to profit or loss in the
period 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 term
of the relevant lease. Initial direct costs with more than an insignificant amount are capitalized when
incurred, 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 which
they 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 depreciation
method of finance lease of fixed assets.
Unrecognized finance charges are recognized as finance charge for the period using the effective interest
method over the lease term. Contingent rents are credited to profit or loss in the period in which they are
actually incurred. The net amount of minimum lease payments less unrecognized finance charges is
separated into long-term liabilities and the portion of long-term liabilities due within one year for
presentation.
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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 inception
of the lease and the initial direct costs is recognized as a finance lease receivable, and the unguaranteed
residual value is recorded at the same time. The difference between the aggregate of the minimum lease
receivable, the initial direct costs and the unguaranteed residual value, and the aggregate of their present
values is recognized as unearned finance income.
Unearned finance income is recognized as finance income for the period using the effective interest
method over the lease term. Contingent rents are credited to profit or loss in the period in which they are
actually incurred.
The net amount of financial lease receivables less unearned finance income is separated into long-term
debts 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 from
shareholders' 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 uncertainty
factors applied for accounting estimate
During the process of using accounting policy described in note (III), due to the uncertainty in operation
activities, the group should judge, estimate and assume the book value of the report items which may not
be metered reliably. These judgments, estimates and assumptions are based on the historical experience of
the Group's management and other related factors. Differences may exist between the actual results and
the Group’s estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis of
continuous operation. If the changes of accounting estimate only influence current period, the influence
amount will be affirmed during the changing period; if it influences the current period and subsequent
periods, 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 book
value 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 likely
to occur. When the signs indicate that the carrying amount cannot be repurchased, then the impairment
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test shall be implemented. The impairment occurred when the book value of asset or asset group is higher
than the recoverable amount, which is the net amount of fair value minus the disposal expenses or the
present value of expected future cash flow (whichever is higher). The net amount of fair value minus
disposal expenses is determined by deducting the incremental cost which directly belongs to the assets
disposal referring to the price of sales agreement of similar assets in fair transaction or the observable
market price. When predicting present value of future cash flows, management team must estimate the
predicted future cash flows of the said asset or asset portfolio, and shall select proper discount rate to
confirm the present value of future cash flows. Based on the above procedure, the Group's management
team 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 usable
term of fixed assets with similar properties and functions, the estimation of predicted net residual value is
the amount obtained currently by the Group from the assets after deducting the anticipated disposal
expense based on the anticipated status assuming the conditions that fixed assets' predicted useful life
expires and fixed assets are at the end of useful life. The Group shall conduct the review on the predicted
service life and predicted net residual value of fixed assets at least annually. For the current reporting
period, the Group's management did not see signs either indicating a shortened or extended useful life of
the 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 will
calculate and withdraw the impairment provision to the accounts receivables. Because the Group's
management needs to judge the historic conditions of receivable collection, aging, debtor's financial
condition and overall economic environment when considering the impairment provision, there are
uncertainties related to the calculation of impairment provision. Although there is no reason to believe
that the estimation applied when calculating the impairment provision of accounts receivables will have
significant changes in the future, the book value and impairment loss of accounts receivables will change
when 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 the
predicted repair and replacement cost of relevant products. The estimation considers the product claim
rate trend, historic defect rate, industry practice and other major estimations. The management deems that
the current estimation on accrued liabilities of product quality warranty is reasonable, however, the Group
will continue to review the conditions of product repairs, and will conduct adjustment if any sign
indicating 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 a
comprehensive stocktaking to review the impairment circumstances on outmoded and dull inventory if
195
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
any; in addition, the Group's management will regularly review the impairment circumstance of inventory
with long storage time according to the inventory aging list. The review procedure includes the
comparison between carrying value of outmoded, dull inventory and inventory with long storage time and
its corresponding net realizable value in order to determine whether to withdraw provisions on the
outmoded, dull inventory and inventory with long storage time. Based on the above procedure, the
Group's management deems that the full provision amounts have been withdrawn for the outmoded, dull
inventory and inventory with long storage time
Assets from deferred income tax
The realization of deferred income tax assets mainly depends on the actual future profits and the effective
tax rate of temporary difference in the future applicable years. If the actual profit in the future is less than
the estimation, or actual tax rate is lower than the estimation, then the confirmed deferred income tax
assets will be reversed and confirmed in the income statement during the corresponding period. If the
actual profit in the future is more than the estimation, or actual tax rate is higher than the estimation, then
the corresponding deferred income tax assets will be adjusted and confirmed in the income statement
during the corresponding period.
Long-term equity investment impairment
The Group judges whether there is any possibility of impairment of long-term equity investments on the
balance sheet date. When there is an indication that the carrying amount is not recoverable, the
impairment test is carried out, and the impairment provision is measured at the lower of the carrying
amount and the recoverable amount. The recoverable amount of an asset or asset group is determined by
the higher of the fair value of the asset or asset group less the disposal expense and the present value of
the estimated future cash flows of the asset or asset group. When estimating the present value of future
cash flows, management needs to estimate the future cash flows of the asset or asset group and select an
appropriate discount rate to determine the present value of future cash flows. When calculating the net
amount for the fair value less disposal costs to sell, the fair value is the price that the market participant
can receive when selling an asset in an orderly transaction that occurs on the measurement date. If the
reassessed recoverable amount is lower than the current estimate, the difference will affect the book value
of the asset during the change.
Goodwill impairment
When performing impairment test on goodwill, the predicted present value of future cash flow of relevant
asset group or asset group portfolio included the goodwill need to be calculated, the future cash flow of
relevant asset group or asset group portfolio need to be estimated, and the proper pretax rate that fairly
reflects the current market time value of money and specific asset risk need to be determined. When the
future actual result is different from the original estimation, the goodwill impairment loss will alter.
196
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 Such alternations in accounting
"other receivables", "fixed assets", "construction in progress", "other payables" and policy were approved by the
None
"long-term payables" and "management expenses"; reduced line items such as Group at board of director
"receivable notes", “accounts receivable”, “dividends receivable”, “interests general meeting.
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.
IV. Taxes
1. Major categories of taxes and tax rates
Category of tax Basis of tax computation Tax rate
Enterprise income tax Taxable income 25% (Note 1)
For the taxable product sales revenue or taxable labor revenue, the 6%, 10%, 11%, 16%,
Company and its domestic subsidiaries are ordinary Value-added Tax 17% and simple
VAT
payers; the VAT payable is the balance of input tax after deducting collection rate of 3%
the deductible output tax. (Note 2)
City maintenance and
Actual payable turnover tax 7%
construction tax
Education surcharges Actual payable turnover tax 3%
Local education
Actual payable turnover tax 2%
surcharges
Note 1: Except that this Company and subsidiaries in China are applicable to the following tax preference,
this Company's other subsidiaries in China are applicable to 25% of enterprise income tax rate, the
overseas subsidiaries are applicable to 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 group
office of Zhejiang high-tech enterprise identification management work on December 15th 2017, the
Company 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 IC
Design Enterprises in the National Planning Layout for 2013-2014 (Development and Reform High
Technology [2013] No. 2458), in 2013, the Company was recognized as a national key software
197
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
company. According to the Notice on Issues Related to Enterprise Income Tax Preferential Policies
for Software and Integrated Circuit Industry (Finance and Tax [2016] No. 49), the Company was
approved by the tax authorities in August 2018 to pay the 2017 annual corporate income tax at the
rate of 10%. As of the approval date of this report, the Company's 2018 income tax concessions have
not 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 group
office of Zhejiang high-tech enterprise identification management work on December 9th 2016, the
wholly-owned subsidiary, Hangzhou Hikvision System Technology Co., Ltd. (Hangzhou System
Technology) 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 tax
rate 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, the
Company’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 2017
to 2019, the enterprise income tax in the current reporting period shall be calculated and paid
according 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 group
office of Zhejiang high-tech enterprise identification management work on December 15th 2017, the
Company’s joint-venture subsidiary, Hangzhou HIK Robotic Technology Co., Ltd. (Hangzhou
Robotic Technology) were identified as the high-tech enterprises with a valid term of 3 years, from
2017 to 2019. Therefore, the enterprise income tax in the current reporting period shall be calculated
and 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 group
office of Zhejiang high-tech enterprise identification management work on December 15th 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 the
high-tech enterprise certification. Therefore, the corporate income tax is paid at the rate of 25% this
year.
(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-owned
subsidiaries, Chongqing Hikvision Science and Technology Co., Ltd. and Chongqing Hikvision
System Technology Co., Ltd., are qualified to enjoy the west development preferential tax policy
from 2011 to 2020, therefore, the enterprise income rate shall be calculated and paid on the basis of
15% 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
198
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
office of Zhejiang high-tech enterprise identification management work on February 20th 2019, the
Company’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 to
2020. 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 and
Taxation [2011] No. 100) of Ministry of Finance and State Administration of Taxation (SAT), as for the
self-developed software product sales of the Company and the Company’s wholly-owned subsidiaries
such as Shanghai Goldway, Hangzhou System, Beijing Brainaire Storage Technology Ltd., as well as the
Company’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 Robotic
Technology, and Hangzhou HIK Automotive Technology Ltd. (Hangzhou Auto Technology), the VAT
shall 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 1st 2018, taxpayers are subject to VAT
taxable sales or imported goods, and the VAT rate is adjusted from 17%, 11% and 6% to 16%, 10% and 6%
respectively.
199
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
Closing Balance Opening Balance
Foreign currency Exchange rate for Foreign currency Exchange rate for
Item RMB amount RMB amount
amount conversion amount conversion
Cash：
RMB - - 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 - - -
200
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Closing Balance Opening Balance
Foreign currency Exchange rate for Foreign currency Exchange rate for
Item RMB amount RMB amount
amount conversion amount conversion
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
1,071,979,704.80 788,391,050.26
in overseas banks
Details of other currency funds:
Closing Balance Opening Balance
Exchange Exchange
Foreign currency Foreign currency
Item rate for RMB amount rate for RMB amount
amount amount
conversion conversion
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
- - - - - 35,000,000.00
borrowing
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
201
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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, not
designated as a hedging instrument, gains or losses due to changes in fair value is directly included in the current period
profits and losses.
3. Notes receivable & 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
st
Category Pledged amount by December 31 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
Derecognized amount by December 31st 2018 Not Derecognized amount by December 31st
Category
(Note) 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 bank
or others, therefore, those discounted and endorsed bank acceptance bills have been derecognized by the Group.
202
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(4) As of December 31st 2018, the Group transferred the defaulted notes receivable into accounts receivable.
Unit：RMB
Category Amounts transferred into accounts receivable by December 31 st 2018
Bank acceptance bill 207,600,000.00
Commercial acceptance bill -
Total 207,600,000.00
203
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
3.3 Accounts Receivable
(1) Disclosure of accounts receivable by categories
Unit: RMB
Closing Balance Beginning Balance
Carrying amount Bad debt provision Carrying Value Carrying amount Bad debt provision Carrying Value
Category
Proportion Proportion Proportion Proportion(
Amount Amount Amount Amount Amount 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 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
for credit risk
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 as
accounts receivable that is individually significant.
In the portfolio, bad debt provision of accounts receivable by aging analysis:
Unit: RMB
Closing Balance
Aging
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
204
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 debt
allowance 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 31st 2018, there is no termination of accounts receivable booking due to transfer of a financial asset.
(6) As of December 31st 2018, the Group has no assets/liabilities booked due to transferred accounts receivable that the
Group still keep recourse or retain part of the corresponding rights or interests.
4. Prepayments
(1) Prepayments by aging analysis
Unit: RMB
Closing Balance Opening Balance
Aging
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 parties
As of December 31st 2018, the Group’s top five balances of prepayments amounted to RMB 160,994,485.73, accounting
for 34.98% of total closing balance of prepayments.
205
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
5. Other receivables
(1) Disclosure of other receivables by categories
Unit: RMB
Closing Balance Opening Balance
Carrying amount Bad debt provision Carrying Value Carrying amount Bad debt provision Carrying Value
Category
Proportion Proportion Proportion Proportion
Amount Amount Amount Amount Amount 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
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
for credit risk
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 is
individually significant.
In the portfolio, bad debt provision of other receivables by aging analysis
Unit: RMB
Closing Balance
Aging
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
206
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(2) Provision, re-collection, or reverse of the bad debt allowance in the current reporting period
During 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 conversion
of 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 period
In 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
Intentional payments for 3.05
The company E 20,000,000.00 Within 1 year 1,000,000.00
investment
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
Temporary payments for 1.23
The company G 8,096,878.80 Within 1 year 404,843.94
receivables
Total 76,605,913.80 11.67 4,012,384.69
(6) As of December 31st 2018, the Group does not have other receivables related to government subsidies.
(7) As of December 31st 2018, there is no termination of other receivables booking due to transfer of a financial asset.
207
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(8) As of December 31st 2018, the Group has no assets/liabilities booked due to any transferred other receivable that the Group still keep recourse or retain part of the
corresponding rights or interests.
6. Inventories
(1) Categories of inventories
Unit: RMB
Closing Balance Opening Balance
Category Provision for decline in Provision for decline in
Carrying amount Carrying value Carrying amount Carrying value
value of inventories value of inventories
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
203,862,518.60 - 203,862,518.60 60,604,549.68 - 60,604,549.68
by construction contracts
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
Decrease in the current period Effect of foreign currency
Category Opening balance Increase in the current period Closing Balance
Reversals write-offs exchange difference
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 of
provision for inventories in the current reporting period are due to use or sale of inventories.
208
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(3) Completed but unsettled assets formed by construction contracts at the end of December 31st 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
209
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
9. Available-for-sale financial assets
(1) Available-for-sale financial assets
Unit: RMB
Closing Balance Opening Balance
Item
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
Carrying Balance Provision for decline in value Proportion of Cash dividend in the
The invested entity (Note 1) Opening shareholding in the current reporting
Opening balance Increase Decrease Closing balance Increase Decrease Closing balance invested entity (%) period
balance
Zhejiang Tuxun Technology Co., Ltd. 32,430,800.00 - - 32,430,800.00 - - - - 8.1318 -
Hangzhou Confirmware Technology Co.,
26,629,200.00 - - 26,629,200.00 - - - - 9.5238 -
Ltd.
Nanwang Information Industry Group Ltd. 604,313.00 - - 604,313.00 - - - - 0.2518 -
Hangzhou Hikvision Equity Investment
10,000.00 - - 10,000.00 - - - - 0.0017 -
Partnership (Limited Partnership)
CETC Finance Ltd. (Note 2) 227,792,500.00 - - 227,792,500.00 - - - - 3.8300 12,256,000.00
Zhengzhou Guokong Smart City
- 3,500,000.00 - 3,500,000.00 - - - - 7.0000 -
Technology Ltd.
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.
210
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
10. Long-term receivables
(1) Details of long-term receivables
Unit: RMB
Closing balance Opening balance
Item Provision for decline Provision for decline Range of discount rate
Carrying amount Carrying value Carrying amount Carrying value
in value in 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 4,218,121.83 - 4,218,121.83 2,516,655.49 - 2,516,655.49 -
financing
Installments for selling goods 985,732,967.99 - 985,732,967.99 - - - 4.24% ~ 6.45%
Including: Unrealized income from 167,871,990.88 167,871,990.88 -
financing
Less: Non-current assets due within one year 380,795,020.47 - 380,795,020.47 66,566,230.12 - 66,566,230.12 -
(Note (V) 7)
Total 705,512,368.17 - 705,512,368.17 23,375,680.61 - 23,375,680.61 -
(2) As of December 31st 2018,there is no termination of long-term receivables booking due to transfer of a financial asset.
(3) As of December 31st 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 the
corresponding rights or interests.
211
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
11. Long-term equity investment
Unit: RMB
Decrease/Increase in the current reporting period
Closing
Opening Adjustment: Declaration of Closing balance
The invested entity Investment Profit (Loss) Other
Balance Additional Investment Other cash dividends Impairment Balance for impairment
recognized under the equity Changes others provision
Investments reduction comprehensive or profit provision
Method in equity
income distribution
Associated Companies
- 3,563,480.71 - - - - -
Wuhu Sensor Technology
38,207,959.74 - 41,771,440.45 -
Ltd.
27,000,000.00 - (12,615,600.21) - - - - -
Maxio Technology
92,266,773.84 106,651,173.63 -
(Hangzhou) Ltd. (Note 1)
10,000,000.00 - - - - - - -
Zhiguang Hailian Big Data
- 10,000,000.00 -
Technology Ltd. (Note 2)
- (20,769.52) - - - - - 4,879,230.48 -
Sanmenxia Xiaoyun Vision
- 4,900,000.00
Technology Ltd. (Note 3)
130,474,733.58 (9,072,889.02) - - - - - 163,301,844.56 -
Subtotal 41,900,000.00
- (9,072,889.02) - - - - - -
Total 130,474,733.58 41,900,000.00 163,301,844.56
Note 1: According to the Equity Capital Increase Agreements signed between the Group and Maxio Technology (Hangzhou) Ltd. (hereinafter referred to Maxio Technology) and its
shareholders, 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 capital
increment, 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 to
exert 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 20
million 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 consists
of five directors, of which one director is appointed by the Company, who exerts a significant influence on Zhiguan Hailian.
212
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 Xiaoyun
Vision 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 of
directors of Vision Technology consists of three directors, of which one director is appointed by Hangzhou System, who exerts a significant influence on Vision Technology.
213
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
12. Fixed Assets
(1) Details of fixed assets
Unit: RMB
Building and General-purpose Special-purpose Transportation
Items Total
construction equipment equipment vehicles
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 2,034,093,829.56 258,239,589.14 169,061,686.04 23,736,103.76 2,485,131,208.50
reporting period
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 2,032,210,258.03 2,675,897.83 10,424,838.20 - 2,045,310,994.06
construction in progress
3.Decrease in the current 14,085,354.76 9,617,141.57 3,323,406.36 7,323,639.79 34,349,542.48
reporting period
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 2,290,994.48 (238,678.93) (400,631.58) (65,436.92) 1,586,247.05
exchange difference
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 164,921,860.14 56,852,833.36 187,839,213.02 7,904,995.06 417,518,901.58
reporting period
(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 3,629,580.00 10,257,335.50 2,821,773.06 6,599,778.84 23,308,467.40
reporting period
(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 76,627.53 (226,067.98) (51,700.61) (31,043.84) (232,184.90)
exchange difference
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 31st 2018, the Group did not have any significant idle fixed assets.
(3) As of December 31st 2018, the Group had not leased any fixed asset through financial leasing.
(4) As of December 31st 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 31st 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
277,289,173.62 In the process of obtaining the real estate certificates after transferred
Phase I Plant of Chongqing Production Base
from construction in process to fixed assets
Total 315,909,284.84
214
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
13. Construction in progress
(1) Details of construction in progress
Unit: RMB
Closing balance Opening balance
Item
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
Including:
Effect of Accumulated capitalized Capitalization
Transferred to Amount
foreign Other capitalized interest and rate for
Budget Increase in the fixed assets invested as a Construction
Opening currency Reductions interest and profit/loss on interest in the Source of
Item (RMB current during the Closing balance proportion of in Progress
balance exchange ( Note 1) profit/loss on exchange for current funds
0,000) reporting period current budget amount (%)
difference exchange the current reporting
reporting period (%)
(Note 2) reporting period (%)
period
Internet Video
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
Industry Base
Security
industrial base
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
(Tonglu)
project-Phase 2
Chongqing
Self-
Manufacture 27,700.00 89,393,611.81 187,895,561.81 277,289,173.62 - - - 100% 100% - - -
financing
Base
Hangzhou
Self-
Innovation 102,600.00 - 50,840,516.83 - - - 50,840,516.83 4.96% 4.96% - - -
financing
Industry Base
Chengdu
Science and Self-
135,100.00 - 6,577,446.74 - - - 6,577,446.74 0.49% 0.49% - - -
Technology financing
Base Project
Chongqing
Self-
Science and 76,200.00 - 2,257,412.05 - - - 2,257,412.05 0.30% 0.30% - - -
financing
Technology
215
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Including:
Effect of Accumulated capitalized Capitalization
Transferred to Amount
foreign Other capitalized interest and rate for
Budget Increase in the fixed assets invested as a Construction
Opening currency Reductions interest and profit/loss on interest in the Source of
Item (RMB current during the Closing balance proportion of in Progress
balance exchange ( Note 1) profit/loss on exchange for current funds
0,000) reporting period current budget amount (%)
difference exchange the current reporting
reporting period (%)
(Note 2) reporting period (%)
period
Base project-
phase 2
Xi’an Science
and Self-
113,400.00 - 1,664,067.68 - - - 1,664,067.68 0.15% 0.15% - - -
Technology financing
Base project
Wuhan Science
and Self-
254,200.00 - 1,641,509.43 - - - 1,641,509.43 0.06% 0.06% - - -
Technology financing
Base project
Wuhan
Intelligent Self-
238,700.00 - 934,836.51 - - - 934,836.51 0.04% 0.04% - - -
Industry Base financing
project
Self-
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 - - - - -
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 rate
difference.
As of December 31st 2018, the Group did not have any sign of impairment of projects under construction; therefore, no provision for impairment loss was booked.
216
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
14. Intangible assets
(1) Details of Intangible assets
Unit: RMB
Intellectual property
Item Land use right Application Software Total
right
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
- 1,755.77 409,263.61 411,019.38
difference
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
- 1,112.73 154,365.11 155,477.84
difference
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
Increased Decreased
Effect of foreign
The invested entity Opening balance Business combination not currency exchange Closing balance
involving enterprises under Disposal difference
common control
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 61,322,871.63 - - - 61,322,871.63
Ltd. and its subsidiaries
Hundure Technology (Shanghai) Ltd. 13,774,405.88 - - - 13,774,405.88
Hangzhou Haikang Zhicheng Investment 12,573.42 - - - 12,573.42
and Development Ltd.
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
217
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(2) Provision of impairment in goodwill
Unit: RMB
Increased Decrease Effect of foreign
Invested Company Opening balance currency exchange Closing Balance
Provision Disposal difference
Beijing Bangnuo Storage Technology
- 42,695,573.44 - - 42,695,573.44
Ltd.
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 the
reporting period:
The recoverable amounts of the relevant assets have been determined on the discounted present value of the
future cash flow projections. The cash flow projections are based on 2019-2023 Financial Budgets approved by
management covering a 5-year period, with discount rates of 18% to 20%. The sets of cash flows beyond the
5-year period are projected without growth. This growth rates are based on the relevant industry growth
forecasts and do not exceed the average long-term growth rate for the relevant industry. Expected cash
inflows/outflows, considering budgeted net sales, cost of revenue and operating expenses, have been determined
by 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 that
the goodwill related to Beijing Bangnuo Storage Technology Ltd. was impaired. Therefore, goodwill in the
relevant asset group was fully provided with impairment provision amounting to RMB 42,695,573.44. As of the
year 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
Closing balance Opening balance
Item Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
differences differences
Provision for impairment losses
1,364,242,526.16 322,143,179.09 1,162,036,595.26 252,830,021.37
of assets
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
892,163,728.04 133,824,559.21 978,313,377.64 146,747,006.65
inter-group transactions
Changes in the fair value of
275,080.00 68,770.00 15,946,836.46 3,986,709.12
derivative financial instruments
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
Closing balance Opening balance
Item Taxable temporary Taxable temporary
Deferred tax liabilities Deferred tax liabilities
differences differences
Changes in the fair value of
derivative financial 1,482,366.03 370,591.51 4,100,657.54 1,025,164.39
instruments
Difference in fixed asset
170,081,176.39 25,512,176.46 - -
depreciation
Difference in amortization of
695,043.70 104,256.55 - -
intangible assets
Total 172,258,586.12 25,987,024.52 4,100,657.54 1,025,164.39
218
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(3) Deferred tax assets or deferred tax liabilities that are presented at the net amount after offset
Unit: RMB
Closing balance Opening balance
Deferred tax assets or Offset amount at the Deferred tax assets or
Item Offset amount at the end of
liabilities at the net amount beginning of the reporting liabilities at the net amount
the reporting period
after offset period 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 1,253,407,742.28
488,178,801.99
contracts (Note (V) 6)
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 31st 2018, the Group did not have any overdue short-term loans that were failed to repay.
219
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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, not
designated as a hedging instrument, gains or losses due to changes in fair value is directly included in the current
period profits and losses.
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 31st 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 31st 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 192,280,230.62 153,364,544.04
contracts
Total 641,430,490.22 570,573,208.60
(2) As of December 31st 2018, the Group did not have any significant receipts in advance with aging above one year
220
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
22. Payroll payable
(1) Details of payroll payable
Unit: RMB
Increase in the current Decrease in the current
Item Opening balance Closing balance
reporting period reporting period
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
3,749,094.71 458,228,615.92 455,623,850.72 6,353,859.91
scheme
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
Increase in the current Decrease in the current
Item Opening balance Closing balance
reporting period reporting period
1.Wages or salaries, bonuses, allowances and
1,317,396,875.01 6,240,288,518.67 5,763,694,461.00 1,793,990,932.68
subsidies
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
Increase in the current Decrease in the current
Item Opening balance Closing balance
period period
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 retirement
benefit 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 schemes
and unemployment insurance schemes to fund the benefits. The Group has no other material obligation for the
payment of pension benefits beyond the contributions described above, and corresponding expenses are booked
into 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 and
RMB 13,341,057.64) to the pension insurance and unemployment insurance schemes respectively. On
December 31st 2018, the Group still had RMB 6,270,825.40 and RMB 83,034.51 (December 31st 2017: RMB
3,530,623.96 and RMB 218,470.75) payable expenses for pension insurance and unemployment insurance plans
that were due during the reporting period but were not paid. The relevant dues have been paid off after the
reporting period.
221
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 31st 2018, the restricted stock funds received by the Group for 2018 share incentive
scheme amounted to RMB 2,057,898,876.84 (see Note XI for details), and the stock registration was not
completed. This part of the stock has completed the equity registration work on January 18th 2019.
(2) As of December 31st 2018, the Group does not have any significant other payables aging over one year.
222
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 31st 2018, the GBP loans with carrying value of RMB 857,412.45, carry annual interest rate of
2.40% to 2.50% (December 31st 2017: 2.40% to 2.50%); the RMB loan, with carrying value RMB
442,127,162.80, carry annual interest rate ranging from 4.445% to 4.900% (December 31st 2017: 2.65% to
5.00%).
Note 1: As of December 31st 2018, the pledged loan was obtained by the Group with all the rights and benefits
pledged under the Public Security Video Surveillance Network Application Construction-Public-Private
Partnership (PPP) Project Agreement; the maturity date is November 5th 2031. Among them, the annual interest
rate 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 31st 2017, the Group’s RMB 300,000,000.00 pledged loan was pledged by VAT Rebate
Account under the Company’s wholly-owned subsidiary, Hangzhou HIK Science and Technology Ltd., the
balance of VAT Rebate Account is not less than RMB 5,000,000.00 according to the contract, maturity date is
February 16th 2019, annual interest rate is 2.65%; this loan was returned in advance in 2018. Besides, the
Company bear joint liability guarantee for the loan. As of December 31st 2017, The RMB borrowings with a
carrying amount of RMB 10,473,667.00 under the pledged loan were obtained by the Group with a pledge of
accounts receivable with a book value of RMB 60,646,697.33; the maturity date is September 21st 2018, and the
annual 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 subsidiary
of the Group. Pursuant to the capital injection agreement, CDBDF would not participate in senior management
personnel such as directors, and it would either take part in decision-making or make significant influence on
Hangzhou Electronics. The Group shall pay a 1.2% annualized return to CDBDF through dividends or interest
payments, and the Group is required to redeem the CDBDF's equity investment in the current reporting period
by installments each year from 2021 to 2024. Therefore, the capital injection by CDBDF is treated as a
223
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
long-term loan. As of December 31st 2018, CDBDF has aggregately invested RMB 190 million (December 31st
2017: RMB 190 million).
224
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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
Effects of changes Interests expenses Less: Amount due
Issued in the current Repayments in the current
Item Face value Issue Date Maturity Issuance Opening balance in Foreign accrued based on the within one year (Note Closing balance
reporting period reporting period
exchange principal amount (V) 25)
Irish
Euro February 18t
Euro 400,000,000.00 h 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 -
Bond 2016
(Note)
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 3rd, 2016, the Company publically issued the bond with nominal value amounting to Euro 400 million ("Euro Bond"); and the bond was settled, listed and traded
on the Irish Stock Exchange on February 18th, 2016. The Euro Bond has a maturity term for 3 years, maturity date is February 18th, 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 18th per annum, and one-time principal repayment on maturity date. The Euro Bond is
mainly used for constructions of the Company's Security Industry Base (Tonglu), the Internet Security Industry Base. On February 18th 2019, the Company had fully repaid the
principal and interest of the bonds.
225
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
29. Provisions
Unit: RMB
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
Increase in current Decrease in current
Item Opening balance Closing balance Details
reporting period reporting period
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 31st 2018, the deferred income related to government subsidies:
Unit: RMB
Amounts booked into
Related to
Increase in current other income during Other
Liability Items Opening Balance Closing Balance assets/related to
reporting period the current reporting changes
incomes
period
Projects of core electronic
devices, high-end universal
38,714,300.00 136,074,800.00 43,222,036.99 - 131,567,063.01 Related to incomes
chips and basic software
products
Chongqing Manufacture
24,189,300.00 24,189,300.00 403,155.00 - 47,975,445.00 Related to assets
Base construction
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 to
its 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-end
Universal Chip and Basic Software Products, Chongqing Manufacture Base construction, and other projects; Actual
expenses occurred in the current year for projects of core electronic devices, high-end universal chips and basic software
products and other special subsidies related to incomes were recognized in other income; and relevant assets for
Chongqing Manufacture Base construction and other special subsidies related to assets were amortized averagely in
other income within the assets’ useful lives.
31. Share capital
Unit: RMB
Changes for the period
Opening balance Transfer from Closing balance
New issue of Others (Note
Bonus issue (Note 2) Capital Reserve Subtotal
shares (Note 1) 3)
(Note 2)
2018
Total
9,228,865,114.00 - - - (1,594,641.00) (1,594,641.00) 9,227,270,473.00
shares
2017
Total
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
shares
226
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Note 1: On December 23rd 2016, pursuant to the Articles of Association of the Company revised by the resolution of
20th Meeting of the 3rd session Board of Directors authorized by the 2nd extraordinary general meeting in 2016, the
company was approved to grant 52,326,858 shares RMB common shares to 2,936 grantees, with face value of RMB
1.00 per share and issuing price of RMB 12.63 per share. Equity registration for those granted shares were completed
on January 20th 2017, which increased the paid-in capital of RMB 52,326,858.00 in the current year and resulted in
capital reserve of RMB 608,561,358.54.
Note 2：Pursuant to shareholder's resolution of 2016 annual General Meeting dated on May 4th 2017, based upon the
total capital share of 6,152,576,743.00 shares on equity distribution date, the company distributed 5 bonus shares for
each 10 common shares (tax inclusive), resulted in 3,076,288,371 shares increase in total shares, with face value of
RMB 1.00 per share, and a total increase in capital share of RMB 3,076,288,371.00.
Note 3：On December 15th 2017, pursuant to the Articles of Association of the Company revised by the resolution of
26th General Meeting of 3rd 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 total
share capital of the Company decreased by RMB 1,594,641.00, capital reserve decreased by RMB 4,961,105.33 The
registration procedures were completed on March 27th 2018.
On December 6th 2016, pursuant to the Articles of Association of the Company revised by the resolution of 19th
General Meeting of 3rd session Board of Directors authorized by the first Extraordinary General Meeting in 2014, the
Company repurchased and cancelled 2,457,000 granted but restricted treasury shares by cash, and the total share
capital of the Company decreased by RMB 2,457,000.00, capital reserve decreased by RMB 12,694,500.00. The
registration procedures were completed on April 27th 2017.
32. Capital reserves
Unit: RMB
Increase in the current Decrease in the current
Item Opening balance reporting period reporting period Closing balance
(Note 1) (note 2)
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 equity
settlements 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 recognition
of 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 the
Company’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 share
distributions by equity settlements to minority shareholders.
227
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
33. Treasury shares
Unit: RMB
Increase in the current Decrease in the current
Item Opening Balance Closing balance
reporting period (Note 1) reporting period (Note 2)
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 23rd 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 due
to the repurchase and cancellation of 1,594,641 restricted RMB ordinary shares of 2014 Restricted Share Incentive
Scheme; a decrease of RMB 56,211,224.00 due to provision of cash dividend allocated to restricted shareholders; a
decrease of RMB 91,280,659.43 due to the vesting and exercising of 33,422,536 shares for the maturity of 3rd vesting
period of 2014 Restricted Share Incentive Scheme; and a decrease of RMB 226,654,040.80 due to the vesting and
exercising of 30,140,165 shares for the maturity of 1st 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 the
repurchase and cancellation of 2,457,000 restricted ordinary shares of 2014 Restricted Share Incentive Scheme; a
decrease of RMB 92,407,139.16 due to provision of cash dividend allocated to restricted shareholders; and a decrease of
RMB 108,923,700.33 due to the vesting and exercising of 33,803,907 shares for the maturity of 2 nd vesting period of
2014 Restricted Share Incentive Scheme.
34. Other comprehensive income
Unit: RMB
Change for the current reporting period
Less: transfer
to current
Less: Attributable to Attributable
Opening period P/L
Item Before tax income the owner of the to minority Closing balance
balance from previous
balance tax Company (after interest (after
other expense tax)
tax)
comprehensive
income
2018
Other incomes that may be
reclassified subsequently to profit or (27,677,939.35) (24,062,992.06) - - (21,898,411.75) (2,164,580.31) (49,576,351.10)
loss
Included: Effect on conversion of
financial statements denominated in (27,677,939.35) (24,062,992.06) - - (21,898,411.75) (2,164,580.31) (49,576,351.10)
foreign currencies
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 (41,230,777.21) 13,852,652.33 - - 13,552,837.86 299,814.47 (27,677,939.35)
loss
Included: Effect on conversion of
financial statements denominated in (41,230,777.21) 13,852,652.33 - - 13,552,837.86 299,814.47 (27,677,939.35)
foreign currencies
Other comprehensive income (41,230,777.21) 13,852,652.33 - - 13,552,837.86 299,814.47 (27,677,939.35)
228
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
35. Surplus reserves
Unit: RMB
Increase in the current Decrease in the current
Item Surplus reserve Closing balance
reporting period reporting period
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 statutory
surplus 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 11th 2018, based upon the total capital
share of the Company on the equity distribution date, for each 10 ordinary shares, the Company proposed distributing
cash 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
2018 2017
Item
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
229
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
39. Selling expenses
Unit：RMB
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
(63,082,765.25) 311,771,511.91
capitalized specific loan interests
Others 21,409,193.83 17,358,738.67
Total (424,257,896.76) 265,411,287.66
230
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
43. Impairment losses of assets
Unit: RMB
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
Amounts booked into current year
Item 2018 2017
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
(40,669,470.74) 15,885,274.53
value through profits and losses
Investment incomes for available-for-sale financial assets during
12,256,000.00 8,505,842.42
the holding period
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
(2,249,271.02) (11,752,575.40)
derivative financial instruments
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
15,656,203.19 53,842,666.51
derivative financial instruments
Total 13,406,932.17 42,090,091.11
47. Non-operating income
Unit: RMB
Item The amount booked into current period
2018 2017
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
231
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Government subsidies included in current profit and loss:
Unit: RMB
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
Amount recorded into the current period
Item 2018 2017
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
(421,475,254.71) (351,737,760.08)
payment difference
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
113,046,478.04 101,441,652.47
no deferred income tax assets is recognized for the current period
Impact of deductible temporary differences or deductible losses for which
(21,330,045.22) (4,975,770.84)
no deferred income tax assets is recognized for the prior periods
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 Enterprises
under the National Planning Layout between 2013 and 2014 (Fa Gai Gao Ji [2013] No. 2458) , the Company was
identified as a national key software enterprise in December 2013. Pursuant to the Notice on Relevant Issues Concerning
the 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.
232
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
50. Notes to consolidated cash flow statement
(1) Other cash receipts relating to operating activities
Unit: RMB
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
421,095,361.96 218,848,220.03
etc.
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 -
233
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(6) Other cash payments relating to financing activities
Unit: RMB
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
- 9,780,000.00
control in cash consideration
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
(4,975,825.83) (1,585,222.50)
assets
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
234
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(2) Constituents of cash and cash equivalents
Unit: RMB
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 31st 2017: RMB 460,121,972.02), RMB 528, 663,719.04 are various guarantee deposits and other
restricted funds, etc. (December 31st 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
Balance in foreign currency at the Exchange rate for Balance of RMB converted at the
Item
end of the reporting period conversion 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
235
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(2) Details of Overseas Operational Entities
Main overseas
Recording
Name of overseas subsidiaries operational Basis of selection
Currency
office
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
Brazil BRL Selection based on local economic environment
Ltda.
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
Turkey TRY Selection based on local economic environment
Corporation
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
236
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
54. Government Subsidies
(1) Categories
Unit: RMB
Amount booked in current
Category Amount Financial Report Items
profit and loss
VAT Rebate 1,772,810,771.85 Other Income 1,772,810,771.85
Special subsidies
Deferred income / Other income/
Including: other special subsidies 314,594,148.96 259,648,194.21
Non-operating income
Subsidies for core electronic
devices, high-end universal chip
136,074,800.00 Deferred income / Other income 43,222,036.99
and basic software product
projects
Chongqing Manufacture Base
24,189,300.00 Deferred income / Other income 403,155.00
construction subsidies
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.
237
Hikvision 2017 Annual Report
Notes to Financial Statements
For the reporting period ended on December 31st 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 21st meeting of the 3rd session of the Board of Directors held on January 18th 2017, the Company’s subsidiary Hangzhou
Automotive Technology, CETHIK and 7 individual shareholders including Yang Feng signed the agreement to acquire CETHIK’s subsidiary Hangzhou Haikang Ximu Intelligent
Technology 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 of
Haikang Ximu held by 7 individual shareholders including Yang Feng. The aforementioned acquisition was completed on April 30th 2017 and May 24th 2017 respectively. CETHIK
is the controlling shareholder of Haikang Ximu, therefore, this acquisition of 60% shares of Haikang Ximu is categorized as business merger involving enterprises under common
control
Unit：RMB
Income of acquiree from Net profit of acquiree from
Equity Income of acquiree from Net profit of acquiree from
Name of the Basis for Business merger Date of acquisition Basis for determining date beginning of the prior year beginning of the prior year
acquisition ratio beginning of the year to the beginning of the year to the
acquiree under common control of acquisition to the date of acquisition in to the date of acquisition in
(%) date of acquisition date of acquisition
prior comparative period prior comparative period
Both parties are under the
common control of CETHIK Equity transfer date of
HIK Ximu 60% before and after the business April 30th 2017 acquiring the control of - (42,070.90) 10,523,216.38 3,949,939.20
combination, which is not acquiree
temporary
(2) Cost of business merger
Unit：RMB
Cost of business merger HIK Ximu
- Cash 9,780,000.00
238
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(3) Acquiree’s carrying value of assets and liabilities at the date of acquisition
Unit: RMB
HIK Ximu
Ending balance at the end of prior year of the
On the date of acquisition
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:
Time of Amount of contribution Ratio of
Company Name Registered capital
establishment of the Company contribution (%)
Hikvision Xi’an Xueliang Construction Project Management
Ltd. February 2018 RMB 216.16 million RMB 213.99 million 99
(Hikvision Xi’an Xueliang Construction)
Luo Pu District Hai Shi Ding Xin Electronic Technology Ltd.
April 2018 RMB 71.33 million RMB 64.20 million 90
(Luopu Haishi) (Note 1)
Yu Tian Hai Shi Mei Tian Electronic Technology Ltd.
March 2018 RMB 73.65 million RMB 72.18 million 98
(Yutian Haishi) (Note 2)
Xi’An Hikvision Digital Technology Ltd. (Xi’An Hikvision)
January 2018 RMB 200 million RMB 200 million 100
(Note 3)
Wuhan Hikvision Technology Ltd. (Wuhan Hikvision) (Note 4) January 2018 RMB 200 million RMB 200 million 100
Wuhan Hikvision Science and Technology Ltd. (Wuhan
January 2018 RMB 200 million RMB 200 million 100
Science and Technology) (Note 5)
Wuhan Hikvision Fire Control Technology Ltd. (Wuhan Fire
July 2018 RMB 50 million RMB 50 million 100
Control) (Note 6)
Hainan Hikvision System Technology Ltd. (Hainan System)
July 2018 RMB 10 million RMB 10 million 100
(Note 6)
Hangzhou HIK Huiying Science and Technology Ltd.
March 2018 RMB 80 million RMB 48 million 60
(Hangzhou Huiying Science and Technology)
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
August 2018 RMB 80.00 million RMB 44.00 million 55
Data)
Xinjiang CET Yihai Information Technology Ltd. (Xinjiang
August 2018 RMB 200.00 million RMB 120.00 million 60
CET Yihai) (Note 7)
Hikvision Panama Commercial S.A. (Panama Subsidiary)
August 2018 USD 300,000 USD 300,000 100
(Note 6)
239
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Time of Amount of contribution Ratio of
Company Name Registered capital
establishment of the Company contribution (%)
Hikvision Pakistan (SMC-Private) Limited (Pakistan
August 2018 PKR 11.00 million PKR 11.00 million 100
Subsidiary) (Note 6)
Hikvision Peru Closed Stock Company (Peru Subsidiary) (Note
October 2018 PEN 800,000 PEN 800,000 100
6)
Hikvision Technology Israel Ltd. (Israel Subsidiary) (Note 6) December 2018 ILS 550,000 ILS 550,000 100
Nanjing Hikvision Digital Technology Ltd. (Nanjing
December 2018 RMB 80 million RMB 80 million 100
Hikvision) (Note 6)
Note 1: At the end of the reporting period, the actual paid-up capital of Luo Pu District Hai Shi Ding Xin Electronic
Technology 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 Technology
Ltd. 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 RMB
65,250,000.00, 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 contribution
yet; 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
Shareholding ratio
Location of Place of Acquisition
Name Nature of business (%)
operation registration Method
Direct Indirect
System integration,
Hangzhou, -
Hangzhou Hikvision System Technology Ltd. Hangzhou Technology 100.00 Establishment
Zhejiang
development
Hangzhou Hikvision Science and Technology Hangzhou, -
Hangzhou manufacture 100.00 Establishment
Ltd. Zhejiang
Hangzhou Hikvision Security Equipment Leasing Hangzhou, 100.00 -
Hangzhou Finance lease Establishment
Services Ltd. Zhejiang
Chongqing Hikvision System Technology Ltd. Chongqing Chongqing System integration 100.00 - Establishment
Hikvision USA, Inc. USA Los Angeles Sales 100.00 - Establishment
240
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Shareholding ratio
Location of Place of Acquisition
Name Nature of business (%)
operation registration Method
Direct Indirect
HDT International Ltd. Hong Kong Hong Kong Sales 95.00 5.00 Establishment
Business
combination not
Prama Hikvision Indian Private Limited India Mumbai Sales 58.00 - 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
Chongqing Chongqing Manufacture 100.00 - Establishment
Ltd.
Hangzhou Fuyang Hik Baotai Security Hangzhou, 51.00
Hangzhou Construction - Establishment
Technology Services Ltd. (Note 1) Zhejiang
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
Brazil Brazil Sales 95.00 5.00 Establishment
de Seguran Ltda.
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
Business
combination not
Shanghai Goldway Intelligent Traffic System Ltd. Shanghai Shanghai Manufacture 100.00 - involving
enterprises under
common control
Business
combination not
ZAO Hikvision Russia St. Peterburg Sales - 100.00 involving
enterprises under
common control
Business
combination not
Beijing Brainaire Storage Technology Ltd. Beijing Beijing Manufacture 100.00 - involving
enterprises under
common control
Business
combination not
Henan Hua’an Intelligence
Zhengzhou Zhengzhou Construction 51.00 - involving
Development Ltd.
enterprises under
common control
Business
combination not
Henan Hua’an Security Services Ltd. (Note 2) Zhengzhou Zhengzhou Services - 45.90 involving
enterprises under
common control
Business
combination not
Hundure Technology (Shanghai) Ltd. Shanghai Shanghai Manufacture 100.00 - involving
enterprises under
common control
Hikvision Uk Limited UK UK Sales - 100.00 Establishment
Hikvision Poland Spolka Z Ograniczona
Poland Poland Sales - 100.00 Establishment
Odpowiedzialnoscia
Hangzhou Hikvision Electronics Ltd.（Note 3） Hangzhou Hangzhou Manufacture 71.30 - Establishment
Beijing Hikvision Security and Protection
Beijing Beijing Services 100.00 - Establishment
Technology Service Ltd. (Note 4)
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
Technology
Hangzhou EZVIZ Network Ltd. Hangzhou Hangzhou 60.00 - Establishment
development
EZVIZ Inc. USA Los Angeles Sales - 60.00 Establishment
Hangzhou Haikang Zhicheng Investment Hangzhou Hangzhou System integration 80.00 - Business
241
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Shareholding ratio
Location of Place of Acquisition
Name Nature of business (%)
operation registration Method
Direct Indirect
Development Ltd combination not
involving
enterprises under
common control
Technology
Hangzhou Hikvision Robtics Technology Ltd. Hangzhou Hangzhou 60.00 - Establishment
development
Hangzhou Hikvision Investment Management Investment 100.00
Hangzhou Hangzhou - Establishment
Ltd. Management
Technology
Hangzhou Hik Automotive Technology Ltd. Hangzhou Hangzhou 60.00 - Establishment
development
Hangzhou Hikvision Communication Technology Technology
Hangzhou Hangzhou 70.00 - Establishment
Ltd. development
Hangzhou Hikvision Weiying Sensory Technology 60.00
Hangzhou Hangzhou - Establishment
Technology Ltd. development
Hikvision Turkey Technology And Security
Turkey Istanbul Sales 100.00 - Establishment
Systems Commerce Corporation
Hikvision Colombia SAS Columbia Santa Fe Bogota Sales 100.00 - Establishment
Hikvision Kazakhstan limited liability partnership Kazakhstan Astana Sales 100.00 - Establishment
Business
combination not
Secure Holding Limited British Sheffield Manufacture - 100.00 involving
enterprises under
common control
Business
combination not
Pyronix Limited British Sheffield Manufacture - 100.00 involving
enterprises under
common control
Business
combination not
Microwave Solutions Limited British Sheffield Manufacture - 100.00 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
Technology
Wuhan HIK Storage Technology Ltd. Wuhan Wuhan,Hubei 60.00 - Establishment
Development
Urumqi Hai Shi Xin An Electronic Technology Urumqi,
Urumqi Construction - 90.00 Establishment
Ltd. Xinjiang
Business combination
Hangzhou,
Hangzhou Ximu Intelligent Technology Ltd. Hangzhou Manufacture - 60.00 involving enterprises
Zhejiang
under common control
LLC Hikvision Tashkent Uzbekistan Tashkent Sales 100.00 - Establishment
Hikvision Kenya (Pty) Ltd Kenya Kenya Sales - 100.00 Establishment
Hangzhou, Technology
Hangzhou HIK Automotive Software Ltd. Hangzhou - 60.00 Establishment
Zhejiang Development
Hangzhou, Technology
Hangzhou Intelligent Technology Ltd. Hangzhou - 60.00 Establishment
Zhejiang Development
Technology 60.00
Wuhan HIK Storage Software Ltd. Wuhan Wuhan, Hubei - Establishment
development
Technology -
Chengdu Hikvision Digital Technology Ltd. Chengdu Chengdu 100.00 Establishment
development
MoYuHaiShi Electronic Technology Ltd. Hetian Moyu Construction - 85.00 Establishment
Technology 60.00
Hangzhou EZVIZ Software Ltd. Hangzhou Hangzhou - Establishment
development
PiShanHaiShi YongAn Electronic Technology 90.00
Hetian Pishan System integration - Establishment
Ltd.
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
242
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Shareholding ratio
Location of Place of Acquisition
Name Nature of business (%)
operation registration Method
Direct Indirect
Hikvision Deutschland GmbH Germany Germany Sales - 100.00 Establishment
Hikvision Xi’an Xueliang Construction Project Xi’an Xi’an, Shanxi Construction 99.00 Establishment
Management Ltd.
Luo Pu District Hai Shi Ding Xin Electronic
Hetian Xinjiang Hetian System integration - 90 Establishment
Technology Ltd.
Yu Tian Hai Shi Mei Tian Electronic Technology
Hetian Xinjiang Hetian System integration 98 Establishment
Ltd.
Technology
Xi’An Hikvision Digital Technology Ltd. Xi’An Xi’An 100.00 - Establishment
development
Technology
Wuhan Hikvision Technology Ltd. Wuhan Wuhan, Hubei 100.00 - Establishment
development
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, Technology
Hangzhou HIK Huiying Technology Ltd. Hangzhou 60.00 - Establishment
Zhejiang development
Hikvision Mexico S.A.de C.V. Mexico Mexico Sales 100.00 Establishment
Guiyang, Technology
Guizhou Hikvision Transportation Big Data Ltd. Guiyang 55.00 Establishment
Guizhou development
Urumqi,
Xinjiang CET Yihai Information Technology Ltd. Urumqi System integration 60.00 Establishment
Xinjiang
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, Establishment
Nanjing Hikvision Digital Technology Ltd. Nanjing Sales 100.00
Jiangsu
Note 1: Hangzhou Fuyang HIK Baotai Security Technology Services Ltd. is a subsidiary controlled by Hangzhou
System, who holds 51% equity interests. According to the Articles of Association of the Company, Hangzhou System
has 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 Intelligence
Development Ltd.
Note 3: The remaining 28.70% equity interests of Hangzhou Hikvision Electronics Ltd.is held by China Development
Bank Fund. Please refer to Note (V) 27 for details.
Note 4: Beijing Hikvision Security and Protection Technology Service Ltd. has completed Industrial and Commercial
cancellation 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)
243
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
VIII. Risks associated with financial instrument
The Group's principal financial instruments include cash and bank balances, long-term equity investments, notes
receivable & accounts receivable, other receivables, long-term receivables, borrowings, notes payable & accounts
payable, 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 financial
instruments and the risk management policies adopted by the Group to mitigate such risks. The management of the
Group 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 changes
in risk variables to profit or loss for the period or to the interests of shareholders. Since risk variables seldom change on
a stand-alone basis, while the correlation between variables may have significant influence to the ultimate amount of
change effected by the change in a single risk variable, the analysis below is based on the assumption that the changes in
each 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 benefits
of shareholders and other stakeholders. Based on such objective in risk management, the underlying strategy of the
Group’s risk management is to ascertain and analyze all types of risks exposures of the Group, establish appropriate risk
tolerance thresholds, carry out risk management procedures and perform risk monitoring on all kinds of risks in a timely
and 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. The
Company is primarily exposed to risks relating to the currencies such as USD and EUR. The Group’s subsidiaries in the
mainland of China whose procurement, sales and financing are denominated in RMB, USD and EUR, other principal
activities are settled in RMB. The Group’s subsidiaries in Hong Kong and outside China are principally engaged in
procurement, sales, financing and other major business activities in local currencies such as USD, EUR, GBP, RUB, and
etc.
As of December 31st 2018, except for monetary items of foreign currencies set out in Note (V) 53, the Group
mainly adopted the functional currency of each of its subsidiary to present the balance of its assets and liabilities. The
foreign exchange risks arising from assets and liabilities denominated in USD and EUR (which has been converted into
RMB) as follows may generate significant impact on the operating results of the Group.
244
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Unit: RMB
Assets Liabilities
Currencies
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 of
the 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 following
before-tax effect on profit or loss and shareholders’ equity for the current period:
Unit: RMB
2018 2017
Change in foreign exchange rates Effect on shareholders’ Effect on shareholders’
Effect on profit Effect on profit
equity 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 mainly
related to floating interest rate bank borrowings. The Group's policy is to maintain the floating rate of these borrowings
to 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 of
changes in cash flows of financial instruments due to changes in interest rates was relatively low. Therefore, Interest rate
risk sensitivity analysis was not conducted.
1.2 Credit risk
As of December 31st 2018, the biggest credit risk exposure that may cause financial loss suffered by the Group was
mainly 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 that
are measured by fair value, the book value reflects its risk exposure rather than its biggest risk exposure, the biggest
risk 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, credit
approval and implementing other monitoring procedures to ensure necessary follow-up measures are carried out to
recover the overdue debts. In addition, the Group reviews the recovery of each individual receivable at each balance
sheet date to ensure that sufficient provision for bad debts is made for uncollectible funds. As such, the
management of the Group believes that the Group’s exposure to credit risk has been significantly lowered.
245
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
The Group only deposits cash and cash equivalents into banks with relatively high level of credit rating; as such the
risk 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 the
Group’s risk exposure exists in several parties to the contract and certain customers, the Group has no other
significant concentration of credit risk.
246
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
1.3. Liquidity risk
The Group maintains and monitors a level of cash and cash equivalents deemed adequate by the management
to meet the operation needs of the Group and to reduce the effect of cash flow movements when managing liquidity
risk. The management of the Company monitors the usage of bank borrowings, and ensures compliance with
borrowing agreements.
According to the term to maturity of non-discounted and remaining contract obligations, the financial liabilities
held by the Group are analyzed as below:
Unit：RMB
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
Closing fair value
Items
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
247
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Unit: RMB
Fair value at December 31st
Estimation technique Inputs
2018
Forward exchange rate
Forward Foreign Exchange Discounted cash flow
1,860,050.59 Discounted rate that reflects the credit risk of
Contracts (Assets) approach
counterparties
Forward exchange rate
Forward Foreign Exchange Discounted cash flow
(187,498.43) Discounted rate that reflects the credit risk of
Contracts (Liabilities) approach
counterparties
Forward exchange rate
Foreign Exchange Structured Discounted cash flow
(103,500.00) Discounted rate that reflects the credit risk of
Options (Liabilities) approach
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 in
current 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-term
borrowings, bonds payable and long-term payables, and the differences between their carrying amounts and their
respective fair values are insignificant.
X. Related parties and related-party transactions
1. Information on parent company of the Company
Shareholding ratio of Percentage of voting
Place of Nature of
Name Registered capital parent company in the rights of parent company
registration business
Company (%) to the Company (%)
China Electronics Technology HIK Hangzhou, Industrial
RMB 660 million 39.60 39.60
Group Co., Ltd. (CETHIK) Zhejiang investment
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
Associated company of the Group
and its subsidiaries)
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
248
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 one
year after Gong left his post; therefore, Beijing Woqi was still regarded as the Group's related party in 2017. It was no
longer 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 Transaction type Amount for 2018 Amount for 2017
Purchase of materials and
Subsidiaries of CETE 300,540,055.04 215,050,909.52
receiving of services
Purchase of materials and
Shanghai Fullhan Micro 268,000,337.28 219,306,864.78
receiving of services
Purchase of materials and
Maxio Technology and its subsidiaries 52,129,576.75 23,702,468.99
receiving of services
Purchase of materials and
Wuhu SensorTech 45,607,202.32 31,125,042.77
receiving of services
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
Sales of products and rendering
Subsidiaries of CETE 501,207,585.45 796,423,974.48
of services
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
Balance at the end
Content of related party Amount occurred in
Related Party Amount occurred in 2018 of the current Opening Balance
transaction 2017
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 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
249
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
As required by the project owner, China Electronics Technology Group Co., Ltd. has provided a joint guarantee to
responsibility and duties of construction projects of “Safe Chongqing, Emergency Control System Digital Construction
Project”, including 41 districts and counties, signed by Chongqing Hikvision System Technology Co., Ltd. (Chongqing
System) Meanwhile, the Company provides a counter guarantee to China Electronics Technology Group Co., Ltd.
(3) Remuneration of key management personnel
Unit: RMB
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 21st meeting of the 3rd session of the Board on January 18th 2017, the
Company’s subsidiary Hangzhou Hikvision Automotive Electronics acquired the parent company CETHIK’s asset
group with RMB 79.41 million in cash, including RMB 32,700,579.89 in inventories, net of RMB 37,747,049.94 in
credit 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
Closing balance Opening balance
Item Related Party
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 - - -
Maxio Technology and its
Other receivables - - 13,500,000.00 675,000.00
subsidiaries
Total - - 13,500,000.00 675,000.00
Prepayments Subsidiaries of CETE 13,328,415.31 - - -
Maxio Technology and its
Prepayments - - 5,201,444.41 -
subsidiaries
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 of
the 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
250
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
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 Hangzhou
Hikvision 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 Administration
Commission of the State Council and the “Opinion the Restrictive Share Incentive Scheme of Hangzhou
Hikvision 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 Company
convened the ninth meeting of the second session of the Board of Directors on July 25th 2012 and the first
extraordinary general meeting for 2012 on August 13th 2012, whereat the Proposal Relating to the Restrictive
Share Scheme (Amendments to the Draft) of the Company and Highlights was reviewed and passed. The
purpose of the Share Incentive Scheme is to: further improve the Company’s governance structure to establish a
good and balanced value allocation system; establish a profit-sharing and restriction mechanism among
shareholders, the Company and its employees, so as to provide shareholders with sustainable return; fully
mobilize the positivity of core employees to support the Company in realizing its strategies and long-term
sustainable 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 meeting
of the Company, during which the Company may grant restricted shares to grantees under the Scheme. In
principle, each grant should be at an interval of two years. After the expiry of the Scheme, no restricted shares
could be granted to grantees under the Scheme. However, all the provisions of the Scheme remain valid to the
restricted shares granted under the Scheme.
The total number of subject Shares related to the Restricted Shares granted under the Scheme (excluding lapsed
restricted shares) and the total number of subject Shares related to other effective share incentive schemes of the
Company (if any) in aggregate shall not exceed 10% of the total issued share capital of the Company. Unless
approval is obtained at the general meeting by way of special resolution, the total number of Restricted Shares
granted or to be granted to any Participant under this Scheme or other effective share incentive schemes of the
Company (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 of
Directors. 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 the
summary Share Incentive Scheme draft;
(II) The average closing price of the subject shares of the Company for 30 trading days prior to publication of
the summary Share Incentive Scheme draft;
(III) The average price of the subject shares of the Company for 20 trading days prior to publication of the
summary Share Incentive Scheme draft; or
(IV) The unit nominal value of the subject shares of the Company.
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Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Each batch of restricted shares shall not be unlocked unless fulfilling, each time, by the Company its unlock
performance criteria (including net asset yield and operating income growth rate), and by grantees’ individual
performance criteria simultaneously. Where, during any year of the unlocking period, any one or more unlock
criteria 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 future
years. The cancelled restricted shares will be repurchased by the Company based on the grant price.
On August 23rd 2012, after consideration and approval by the general meeting, the Company granted 8,611,611
restricted shares to grantees at a grant price of RMB 10.65 per share (“2012 Share Incentive Scheme”). The
Lock-up Period of the Subject Shares shall last for a period of 24 months commencing on the grant date, during
which the Subject Shares granted to grantees under the scheme shall be subject to lock-up and shall not be
transferable. 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 the
scheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months
following the grant date and the number of shares to be unlocked shall be 1/3 of the aggregate number of the
Subject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date and
the number of shares to be unlocked shall be 1/3 of the aggregate number of the Subject Shares granted; the
third unlocking period shall be the 48 to 60 months following the grant date and the number of shares to be
unlocked shall be 1/3 of the aggregate number of the Subject Shares granted. As of December 31st 2016, the
2012 restricted incentive shares scheme had been completed.
On October 24th 2014, after consideration and approval by the general meeting, the Company granted
52,910,082 restricted shares to grantees at a grant price of RMB 9.25 per share (“2014 Share Incentive
Scheme”). The Lock-up Period of the Subject Shares shall last for a period of 24 months commencing on the
grant date, during which the Subject Shares granted to grantees under the scheme shall be subject to lock-up and
shall not be transferable. 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 the
scheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months
following the grant date and the number of shares to be unlocked shall be 40% of the aggregate number of the
Subject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date and
the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted; the
third unlocking period shall be the 48 to 60 months following the grant date and the number of shares to be
unlocked shall be 30% of the aggregate number of the Subject Shares granted. As of December 31st 2018, the
restricted stock granted in 2014 has all vested.
On December 23rd 2016, after consideration and approval by the general meeting, the Company granted
52,326,858 restricted shares to grantees at a grant price of RMB 12.63 per share (“2016 Share Incentive
Scheme”). The Lock-up Period of the Subject Shares shall last for a period of 24 months commencing on the
grant date, during which the Subject Shares granted to grantees under the scheme shall be subject to lock-up and
shall not be transferable. 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 the
scheme being satisfied, apply for unlocking in 3 tranches: the first unlocking period shall be the 24 to 36 months
following the grant date and the number of shares to be unlocked shall be 40% of the aggregate number of the
Subject Shares granted; the second unlocking period shall be the 36 to 48 months following the grant date and
the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares granted; the
third unlocking period shall be the 48 to 60 months following the grant date and the number of shares to be
unlocked shall be 30% of the aggregate number of the Subject Shares granted.
On December 20th 2018, authorized by the 2nd extraordinary general meeting of 2018 and reviewed by the board
of directors, the Company granted 121,195,458 restricted shares to grantees at a grant price of RMB 16.98 per
share (“2018 Share Incentive Scheme”). The Lock-up Period of the Subject Shares shall last for a period of 24
months commencing on the grant date, during which the Subject Shares granted to grantees under the scheme
shall be subject to lock-up and are not transferable. 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 the scheme being satisfied, apply for unlocking in 3 tranches: the first
unlocking period shall be the 24 to 36 months following the grant date and the number of shares to be unlocked
shall be 40% of the aggregate number of the Subject Shares granted; the second unlocking period shall be the 36
to 48 months following the grant date and the number of shares to be unlocked shall be 30% of the aggregate
number of the Subject Shares granted; the third unlocking period shall be the 48 to 60 months following the
252
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
grant date and the number of shares to be unlocked shall be 30% of the aggregate number of the Subject Shares
granted. The restricted shares of 2018 equity incentives have completed the share registration work in January
2019.
Unit: share
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 RMB 4.11 per share
Company at the end of the reporting period and the remaining period of the -
contract and 22 months
Note: on December 26th 2018, pursuant to the revised Articles of Association and resolutions of the 26th general meeting
of 3rd session board, and approved by the 2nd extraordinary general meeting of 2016, the Company repurchased and
cancelled 509,625 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.
On December 15th 2017, pursuant to the revised articles of association and resolutions of the 26th general meeting of 3rd
session board, and approved by the 2nd extraordinary general meeting of 2016, the Company repurchased and cancelled
1,594,641 granted and unvested restricted RMB treasury shares in cash settlement. The company completed the business
change registration procedure on March 27th 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
26,163,429
period
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 RMB 8.42 per share
RMB 8.42 per share
Company at the end of the reporting period and the remaining period of the and 48 months
and 36 months
contract
Note: on December 26th 2018, pursuant to the revised Articles of Association and resolutions of the 26th general meeting
of 3rd session board, and approved by the 2nd extraordinary general meeting of 2016, the Company repurchased and
cancelled 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.
253
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Unit: share
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
121,195,458 -
period
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
RMB 16.98 per share
Company at the end of the reporting period and the remaining period of the Not applicable
and 60 months
contract
2. Information of the share-based payment through equity settlements
Unit: RMB
2014 Share Incentive Scheme 2016 Share Incentive Scheme 2018 Share Incentive Scheme
Determined based on stock price at Determined based on stock price at Determined based on stock price at
Method of determine the fair value of equity the grant date and the costs of the grant date and the costs of the grant date and the costs of
instruments at the grant date restricted shares during Lock-up restricted shares during Lock-up restricted shares during Lock-up
Period Period Period
Recognition basis of the number of the equity Determined based on the results Determined based on the results Determined based on the results
estimation of each vesting period estimation of each release period estimation of each release period
instruments qualified for vesting
Reasons of the significant difference between
the estimates of the current reporting period None None None
with that of the prior year
Accumulative amount of share-based payment
through equity settlement and further included 363,191,911.52 263,798,391.62 -
in the capital reserve
Total amount of the expenses recognized
according to share-based payment through
20,516,570.66 124,951,610.62 -
equity settlement in the current reporting
period
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-cancellable
operating 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
254
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(3) As of December 31st 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 Distribution
Pursuant to the proposal of the 10th meeting of the 4th session Board of Directors on April 18th 2019, the
Company 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 report
principles, the Group has only one operating segment, which is the research and development, production and
sales of video products and video services.
1.2 Segment financial reporting
External revenue by product or business segments
Unit: RMB
Item Amount for 2018
Operating income Operating cost
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
Video Surveillance Products
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
1,060,561,642.36 588,994,979.45
products
Total 49,295,187,751.22 27,196,229,537.02
Unit: RMB
Item Amount for 2017
Operating income Operating cost
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
Video Surveillance Products
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
564,580,293.97 345,446,563.98
products
Total 41,433,492,971.64 23,281,637,281.80
255
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
External revenue by geographical area & non-current assets by geographical location
Unit: RMB
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.
256
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
XV. Notes to major items of financial statements of the parent company
1. Notes receivable & Accounts receivable
1.1 Categories
Unit: RMB
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 31st 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
st st
Category Derecognized amount by December 31 2018 Not Derecognized amount by December 31 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 31st 2018, the Company has no such case as transferring the defaulted notes receivable into accounts receivable.
257
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
1.3 Accounts receivable
(1) Accounts receivable disclosed by categories:
Unit: RMB
Closing balance Opening balance
Carrying balance Bad debt provision Carrying value Carrying balance Bad debt provision Carrying value
Category
Percentage Percentage Percentage Percentage
Amount Amount Amount Amount Amount 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 16,178,600,865.87 100.00 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
974,081,704.16
basis for credit risk.
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 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
974,081,704.16
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 receivable
that is individually significant.
258
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
In the portfolio, bad debt provision of accounts receivable by aging analysis:
Unit: RMB
Closing balance
Aging
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 reversed
bad 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
Relationship with the Closing balance of bad debt Proportion of closing balance of
Company name Carrying balance
Company provision 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).
259
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
2.3 Other receivables
(1) Other receivables disclosed by categories
Unit：RMB
Closing balance Opening balance
Category Carrying amount Bad debt provision Carrying value Carrying amount Bad debt provision Carrying value
Percentage Percentage Percentage Percentage
Amount Amount Amount Amount Amount 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 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
basis for credit risk
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 is
individually significant.
260
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
In the portfolio, bad debt provision of other receivables by aging analysis:
Unit：RMB
Closing balance
Aging
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 debt
provision 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
Percentage to total other
The name of entity Nature Closing balance Aging Bad debt provision
receivables (%)
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
261
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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
262
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
3. Long-term equity investment
单位：人民币元
Closing Balance Opening Balance
Item
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
117,408,339.90 - 117,408,339.90 84,608,952.29 - 84,608,952.29
ventures
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
Blance of impairment
Provision for impairment
Increase during the Decrease during the loss provision at the end
Name of investee Opening balance Closing balance losses for the current
current reporting period current reporting period of the current reporting
reporting period
period
Hangzhou Hikvision System Technology
719,263,965.23 25,955,856.57 - 745,219,821.80 - -
Ltd.
Hangzhou Hikvision Security Equipment
200,000,000.00 - - 200,000,000.00 - -
Leasing Services Ltd.
Shanghai Goldway Intelligent Traffic
23,000,000.00 - - 23,000,000.00 - -
System Ltd.
Chongqing Hikvision System Technology
200,000,000.00 500,000,000.00 - 700,000,000.00 - -
Ltd.
Hundure Technology (Shanghai) Ltd. 37,247,790.28 - - 37,247,790.28 - -
263
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Hangzhou EZVIZ Network Ltd. 6,040,138.16 601,537.44 - 6,641,675.60 - -
Hangzhou Haikang Zhicheng Investment
24,000,000.00 - - 24,000,000.00 - -
and Development Ltd.
Hangzhou Hik Robotic Technology Ltd. 54,825,970.00 32,576,855.23 - 87,402,825.23 - -
Hangzhou Hikvision Investment
100,000.00 - - 100,000.00 - -
Management Ltd.
Hangzhou Hik Automotive Technology Ltd. 92,346,510.60 48,467,007.52 - 140,813,518.12 - -
Hangzhou Hikvision Communication
7,000,000.00 - - 7,000,000.00 - -
Technology Ltd.
Hangzhou Hik Weiying Sensory Technology
60,000,000.00 - - 60,000,000.00 - -
Ltd.
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 - -
Coperatief Hikvision Europe U.A. 65,485.53 - - 65,485.53 - -
Hikvision Korea Limited 1,535,850.00 - - 1,535,850.00 - -
264
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Hikvision Colombia SAS 1,337,440.00 - - 1,337,440.00 - -
Hikvision Kazakhstan limited liability
4,758.69 - - 4,758.69 - -
partnership
Hikvision Turkey Technology And Security
1,148,115.83 - - 1,148,115.83 -
Systems Commerce Corporation
Chongqing Hikvision Science and
100,000,000.00 - - 100,000,000.00 - -
Technology Ltd.
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
67,475,000.00 - - 67,475,000.00 - -
Development Ltd.
Beijing Hikvision Security and Protection
10,000,000.00 - 10,000,000.00 - - -
Technology Service Ltd.
Henan Hik Hua’An Bao Quan Electronics
510,000.00 - - 510,000.00 - -
Ltd.
Hangzhou Hikvision Science and Technology
1,015,206,036.40 5,535,926.89 - 1,020,741,963.29 - -
Ltd.
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 - -
265
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Hangzhou Haikang Intelligent Technology
- 438,438.67 - 438,438.67 - -
Ltd.
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
- 65,250,000.00 - 65,250,000.00 - -
Ltd.
Hangzhou Huiying Technology Ltd. - 48,000,000.00 - 48,000,000.00 - -
Guizhou Haikang Transportation Big Data
- 5,500,000.00 - 5,500,000.00 - -
Ltd.
Xinjiang CET Yihai Information Technology
- 24,000,000.00 - 24,000,000.00 - -
Ltd.
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
266
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
(2) Inestments in associated enterprises and joint ventures
Unit：RMB
Increase/Decrease during the current reporting period Blance of
impairment
Other loss provision
Investment income Other Declared cash Provision Closing
Name of investee Opening balance Additional Reduce comprehensive at the end of
recognized under changes in dividends or for Others Balance
Investments Investments income the current
the equity method equity profits impairment
adjustment reporting
period
1.Joint Ventures
2.Associated Enterprises
Wuhu Sensor Tech
Intelligent Technology 38,207,959.74 - - 3,563,480.71 - - - - - 41,771,440.45 -
Ltd.
Maxio Technology
46,400,992.55 27,000,000.00 - (7,764,093.10) - - - - - 65,636,899.45 -
(Hangzhou) Ltd.
Zhiguang Hailian Big
- 10,000,000.00 - - - - - - - 10,000,000.00 -
Data Technology Ltd.
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 equity
investment.
267
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
4. Operating income and operating cost
Unit：RMB
2018 2017
Item
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
12,256,000.00 8,505,842.42
period
Gain on disposal of financial assets at fair value through current profit and
- 5,798,781.41
loss
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
Purchase of materials and
Subsidiaries of Hikvision (Note) 7,361,353,668.93 6,627,993,954.60
receiving of services
Purchase of materials and
Maxio Technology and its subsidiaries 51,914,266.05 -
receiving of services
Purchase of materials and
Subsidiaries of CETE 261,945.55 638,139.08
receiving of services
Purchase of materials and
Wuhu Sensor Tech - 158,974.36
receiving of services
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.
268
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
Sales of goods/rendering of services:
Unit：RMB
Related party Transaction type Amount for 2018 Amount for 2017
Sales of products and rendering of
Subsidiaries of Hikvision 15,251,464,800.88 12,713,526,574.11
services
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
Opening Balance at
Amount occurred Closing balance at the Amount occurred
Content of related the beginning of the
Related Party during the current end of the current during the prior
party transaction current reporting
reporting period reporting period reporting period
period
Subsidiaries of CETE Deposit into fixed
3,000,000,000.00 4,000,000,000.00 1,000,000,000.00 1,000,000,000.00
(Note) deposits
Subsidiaries of CETE Deposit into call
(500,000,000.00) - 500,000,000.00 500,000,000.00
(Note) deposits
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 Technology
Finance 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 an
amount not exceeding an equivalent of RMB 22.45 billion (2017：RMB 14.05 billion, USD 250 million), including the
joint liability guarantee for the payment obligations on purchase from suppliers in an amount not exceeding an
equivalent of RMB 2.5 billion (2017: RMB 1.2 billion, USD 40 million), and the joint liability guarantee for the general
credit limit applied from commercial banks and other financial institutions or other financing methods through agreed
methods 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).
269
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
7. Receivables from related parties and payables to related parties
(1) Receivables from related parties
Unit：RMB
Closing balance Opening balance
Item Related party
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
Maxio Technology and
Other receivables 13,500,000.00 675,000.00
its subsidiaries
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
270
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
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
(4,138,938.48) (2,755,085.52)
long-term assets
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
271
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 2018
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 31st 2018, the Company’s closing balance of other monetary funds was RMB 194,556,706.78 (December
31st 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
Description
Item Amount
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 319,304,315.50 /
subsidy based on standard quota or quantitative continuous
enjoyment according to the state industrial policy)
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
62,153,461.82 /
assets and liabilities and available-for-sale financial assets
excluding the effective hedging business related to the regular
business operation of the Company
Other non-operating income and expense except the items
94,651,413.78 /
mentioned above
Impact of income tax (84,510,487.85) /
The impact of minority equity (26,933,458.36) /
Total 369,641,070.72 /
272
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 of
Securities No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (Revised in 2010) issued
by China Securities Regulatory Commission.
Unit：RMB
Weighted average Earnings per share
Profit for the reporting period return on net assets
(%) 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
32.88% 1.199 1.194
attributable to ordinary shareholders of the Company
273
Hikvision 2018 Annual Report
Notes to Financial Statements
For the reporting period from January 1st 2018 to December 31st 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 in
charge of accounting work and person in charge of accounting organization.
3. Original copy of all the Company's documents and announcements were published on the
newspapers 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 20th 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 complete
published Chinese 2018 Annual Report may be obtained at www.cninfo.com.cn.
274
