HANGZHOU HIKVISION DIGITAL
TECHNOLOGY CO., LTD.
2016 Annual Report
April 14th 2017
Hikvision 2016 Annual Report To Shareholders
Dear Shareholders,
The security industry in 2016 was characterized by further consolidation and steady growth. Despite continued volatility in the global economy and diverse competitive landscapes around the world, Hangzhou Hikvision Digital Technology Co., Ltd. (the Company) made numerous effective strategic adjustments. TheCompany’s focus on increasing its profitability resulted in a gross profit margin of41.58% in 2016, up from40.10% in 2015. With increased investments, the Company achieved balanced growth of26.32% in operating revenue,24.32% in operating profit, and26.46% in net profit, while continuing to maintain healthy overall development.
Interest in intelligent video surveillance solutions accelerated in 2016, driven by technology innovations. TheCompany’s research and development in intelligent video surveillance based on the modeling analysis technique of video content has been progressing slowly for the past decade, and we have experienced commercial success notably in the car license plate identification market segment. In 2015, based on advancements in GPU and deep learning technologies, the Company launched its Artificial Intelligence (AI)-central product line: “Falcon”(猎鹰), a video structuring server, and “Blade”(刀锋), a vehicle image structuring server, which received favorable market recognition last year. Then, in 2016, based on further developments in GPU/VPU and deep learning technologies, the Company launched“DeepInview”(深眸), a new series of intelligent video cameras;“DeepInmind”(超脑) NVRs; “DivineCaptor”(神捕), intelligent traffic products; and“Hikface”(脸谱), facial analytics products. As a result, the Company now offers AI-edge devices and AI-central products. AI-edge products include front-end and back-end products, along with integrated AI-product applications tailored to vertical markets.
Hikvision 2016 Annual Report As our mission “New Vision, New World” implies, we believe Hikvision is well-positioned to provide compelling, state-of-the-art, and innovative intelligent video surveillance solutions to our markets. As video surveillance digitization and networking did at the beginning of the millennium, the Company believes AI and intelligent video surveillance solutions now present an outstanding opportunity to increase our global market share and expand shareholder value, continue to provide new technology that enables businesses across the globe to be more efficient and profitable, and to make the world safer and more secure.
In 2016 the Company also saw the initial implementation of Management Measures for Core Staff Co-investment in Innovative Business(核心员工跟投创新业务管理办法), along with three new business ventures: 1) EZVIZ Network Company(萤石网络公司), converted to a Smart Home business; 2) Robotics Technology Company launched, focusing on industrial automation; and 3) Automotive Technology Company emerged, focused on intelligent automobile developments. These three entrepreneurial innovative subsidiaries, co-founded by internal staffs, created exciting new opportunities for further growth of the Company. Based on the long-term effective mechanism of “risk-sharing and benefit-sharing” for internally co-founded innovative enterprises, the innovative businesses are expected to drive the Company beyond the industrial life-cycle and maintain a long-term sustainable healthy development of the Company.
As a global company, we are mindful of potential volatility in the market as the result of political and economic pressures in various regions of the world. TheCompany’s executive management team is dedicated to diligently performing its duties while adhering to the highest ethical standards. We strive to improve our growth as a respectable world-class enterprise by continually evaluating our performance and maintaining optimal productivity. To drive the
Hikvision 2016 Annual ReportCompany’s growth, we will continue to enhance and optimize our processes with the goal of providing outstanding value for our customers and generating long-term sustainable returns for our shareholders.
In the year ahead, continuing uncertainty in global political and economic conditions combined with a decline in domestic economic growth rate is expected. The Company will continue to confront this new macro-economic reality with a steadfast focus on its values, and we are confident that 2017 will be a year of solid and sound development for the Company.
We would like to express our sincere gratitude for the trust and support you place in the executive management team of the Company.
Board of Directors
Hangzhou Hikvision Digital Technology Co., Ltd.
April 2017
Hikvision 2016 Annual Report Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior management of Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that the information presented in this report shall be together be wholly liable for the truthfulness, accuracy and completeness of its contents and free of any false records, misleading statements or material omissions.
Chen ZongNian, the Company's Chairman, Jin Yan, the head of accounting (Accounting Officer) hereby declare and warrant that the financial statements in the Report are authentic, accurate and complete.
Chen ZongNian, theCompany’s Chairman, directors of the Company including Hu Yangzhong, Wu weiqi, and independent directors of the Company, including Cheng Tianzong, Lu Jianzhong, Wang Zhidong, and Hong Tianfeng attended the Board Meeting to review this Annual Report. Gong Hongjia, theCompany’s vice chairman did not attend the Board Meeting because of his trip oversea, Director Hu Yangzhong was authorized to attend the board meeting on behalf of Gong Hongjia and exercise MrGong’s voting rights instead.
The profit distribution proposal passed upon deliberation at the meeting of the Board of Directors is set out as follows: Based on the total share capital on the actual date of record when implementing the proposal, all shareholders will receive a cash dividend of RMB 6 (tax inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive) for each 10 ordinary shares; share distribution from capital reserve is nil.
Hikvision 2016 Annual Report Please read the annual report and pay particular attention to the following risk factors: 1) Risk of technology upgrade: With the development of cloud computing, big data, artificial intelligence, and other technologies, the demand and business models of the industry will change accordingly. If the Company cannot follow the changes in the cutting-edge technologies, or fail to realize the business innovation rapidly, the risks of future development uncertainties will increase.
2) Risk of product information security: Although the Company has dedicated resources to prevent the cybersecurity risk for our products, there is still a possibility of deliberate third-party (including viruses, malicious software, hacker and similar disruptions) attempts to damage our systems or products, causing the security issues for cybersecurity.
3) Risk of foreign exchange: The overseas sales ratio has increased continuously, and the
Company has to carry out operations in different countries with various currencies. Exporting transactions are mostly settled in United States Dollars ("USD"), meanwhile, parts of the imported raw materials are also mainly setteled in USD. Therefore, the fluctuation of the foreign exchange rate has a potential to affect the profits of the Company.
4) Risk of management: the Company continues to expand business scale, innovative product and business continues to increase, total number of employees also grows rapidly, which pose challenges and higher requests to the Company's management. The sustainable development of the company might face certain risk, if the management ability could not match up with theCompany’s business expansion.
The above notices might not be all-inclusive of all other potential risks, please pay attention to the potential investment risk.
Hikvision 2016 Annual Report Contents
Section I Important Notes and Definitions ...................................................................................... 4 Section II Corporate Profile and Substantial Financial Indicators .............................................. 8 Section III Corporate Business Summary ..................................................................................... 12 Section IV Management Discussion and Analysis ......................................................................... 27 Section V Significant Events ........................................................................................................... 47 Section VI Changes in Shares and Information about Shareholders .......................................... 63 Section VII Information on Preferred Shares ............................................................................... 72 Section VIII Information on Directors, Supervisors, Senior Management and Employees ..... 73 Section IX Corporate Governance ................................................................................................. 88 Section X Coporate Bonds ............................................................................................................... 99 Section XI Financial Report .......................................................................................................... 100 Section XII Documents Available for Reference ......................................................................... 206
Hikvision 2016 Annual Report Definitions
|||
|-|-|
|Term|Definition|
|Reporting Period|From January 1st 2016 to December 31st,2016|
|Articles of Associations|Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd|
|Hikvision, our Company, Company|Hangzhou Hikvision Digital Technology Co., Ltd|
|Innovative Co-investment Partnership|Hangzhou Hikvision Equity Investment Partnership (Limited Partneership)|
|Ezviz Network Inc.|Hangzhou Ezviz Network Co., Ltd.|
|Hikvision Robotics|Hangzhou Hikvision Robtics Technology Co., Ltd.|
|Hikvision Automotive Technology|Hangzhou Hikvision Automotive Technology Co., Ltd.|
|Hikvision Weiying|Hangzhou Hikvision Weiying Sensor Technology Co., Ltd.|
||Located in Tonglu economic development area, Hangzhou, Zhejiang province,|
||purposes for production factories, warehousing logistics center. Initially disclosed|
||in Announcement about the Company’s Investment in Tonglu to Set up Wholly|
|Hikvision Tonglu Security Industrial Base||
||Owned Subsidiary and New Hikvision Security Industry Base (Tonglu) Project(《关|
||于在桐庐投资设立全资子公司及新建海康威视安防产业基地（桐庐）项目的公|
||告》) (NO. 2014-044).|
||Located in Binjiang district, Hangzhou, Zhejiang province, purposes for the office|
||building. Initially disclosed in Announcement about the Company’s New|
|Internet Security Industry Base||
||Construction of Internet Security Industry Base Project (《关于新建海康威视互联|
||网安防产业基地项目的公告》)(NO. 2014-035).|
||A long investment cycle, business prospects uncertain, has the high risk and|
||uncertainty, in need for direct or indirect investment in exploration, in order for the|
||Company to timely enter into new areas of business. Initially disclosed in|
||Announcement about Management Measures for Core Staff Investment in|
|Innovative Business||
||Innovative Business (《核心员工跟投创新业务管理办法》) (www.cninfo.com)|
||In this report, innovative business also refers to Ezviz, Hikvision Robtics,|
||Hikvision Automotive Technology, Hikvision Weiying, and their related business or|
||products.|
||The Company publicly issued the bond with nominal value amounting to Euro 400|
||million; and the bond was settled, listed and traded on the Irish Stock Exchange on|
|Euro Bond||
||February 18th, 2016. For details, please refer to Announcement about Issuing|
||Foreign Currency Bond (《关于境外发行外币债券的进展公告》) (NO. 2016-004)|

Hikvision 2016 Annual Report Section II Corporate Profile and Substantial Financial Indicators I. Corporate Information
|||||
|-|-|-|-|
|Stock abbreviation|HIKVISION|Stock code|002415|
|Stock exchange where the shares of the Company||||
||Shenzhen Stock Exchange|||
|are listed||||
|Name of the Company in Chinese|杭州海康威视数字技术股份有限公司|||
|Abbr. of the Company name in Chinese|海康威视|||
|Name of the Company in English (if any)|HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD|||
|Abbr. of the Company name in English (if any)|HIKVISION|||
|Legal representative|Chen Zongnian|||
|Registered address|No. 555 Qianmo Road, Binjiang District, Hangzhou|||
|Postal code of Registered address|310051|||
|Business address|No. 555 Qianmo Road, Binjiang District, Hangzhou|||
|Postal code of Business address|310051|||
|Company website|www.hikvision.com|||
|E-mail|market@hikvision.com|||

II. Contacts and contact information
||||
|-|-|-|
||Board Secretary|Securities Affairs Representative|
|Name|Huang Fanghong|Li Yi|
||No. 555 Qianmo Road, Binjiang|No. 555 Qianmo Road, Binjiang|
|Address|||
||District, Hangzhou|District, Hangzhou|
|Tel.|0571-89710492|0571-89710492|
|Fax|0571-89986895|0571-89986895|
|E-mail|hikvision@hikvision.com|hikvision@hikvision.com|

 III. Information disclosure and place of the report
|||
|-|-|
|Newspaper designated by the Company for||
||Securities Times, China Securities News and Securities Daily|
|information disclosure||
|Website specified by CSRC for release of the||
||www.cninfo.com|
|Annual Report||
|Place where the Annual Report is available for||
||Office of the Board of Directors of the Company|
|inspection||

Hikvision 2016 Annual Report IV. Company Registration and Alteration
|||
|-|-|
|Organization code|91330000733796106P|
||During the reporting period, the Company operating range newly added|
||research and development, production and sales of following categories:|
||explosion-proof electrical products, communications equipment and its|
||ancillary equipment, multimedia equipment, aircraft, robot and intelligent|
||equipment, auto parts and accessories, automotive electrical signal equipment.|
||After the change, the Company's business scope is: the electronic products|
||(including explosion-proof electrical products, communications equipment|
|Changes in principle business activities since the||
||and its ancillary equipment, multimedia equipment), aircraft, robot and|
|Company was listed (if any)||
||intelligent equipment, auto parts and accessories, automotive electrical signal|
||equipment research and development, production; Sales of self-produced|
||products; provide technical services, electronic equipment installation;|
||electrical engineering and intelligent systems engineering design, construction|
||and maintenance. (except country prohibited and restricted items, relating to|
||the specific mandatory license certificate) (subject to ratification in accordance|
||with the project, approved by the relevant departments to operate)|
|Changes of controlling shareholders of the||
||None|
|Company (if any)||

V. Other Relevant Information
Accounting firm engaged by the Company
|||
|-|-|
|Name of the accounting firm|Deloitte Touche Tohmatsu CPA LLP|
|Business address of the accounting firm|30F Bund Center 222 Yan An Road East Shanghai 200002,PRC|
|Name of accountants for writing signature|Mou Zhenfei, Huang Yan|

Sponsors/Financial advisors engaged by the Company to continuously perform its supervisory function during the Reporting Period
□ Applicable√ Inapplicable
VI. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data due to changes of accounting policies and correction of accounting errors
□ Yes√ No
||||||
|-|-|-|-|-|
||2016|2015|YoY Change (%)|2014|
||31,924,020,872.44|25,271,390,273.42|||
|Operating income (RMB)|||26.32%|17,233,114,021.70|
|Net profits attributable to shareholders of the Company|7,422,261,983.16|5,869,049,646.23|||
||||26.46%|4,665,368,689.94|
|(RMB)|||||
|Net profits attributable to shareholders of the Company|||||
||7,270,742,762.47|5,604,890,259.09|29.72%|4,474,975,306.54|
|excluding non-recurring gains and losses (RMB)|||||

Hikvision 2016 Annual Report
||||||
|-|-|-|-|-|
||6,213,692,160.56|3,216,722,169.17|||
|Net cash flows from operating activities (RMB)|||93.17%|3,706,420,782.04|
|Basic earnings per share (RMB/share)|1.227|0.977|25.59%|0.777|
|Diluted earnings per share (RMB/share)|1.221|0.971|25.75%|0.776|
|Weighted average ROE|34.56%|35.28%|-0.72%|36.27%|
||At the end of 2016|At the end of 2015|YoY Change (%)|At the end of 2014|
|Total assets (RMB)|41,339,007,814.83|30,316,442,436.17|36.36%|21,290,520,311.29|
|Net assets attributable to shareholders of the Company|24,288,634,890.08|19,253,803,738.78|||
||||26.15%|14,842,243,666.05|
|(RMB)|||||

Total captital shares by one day before thedisclosure：
|||
|-|-|
|Total captital shares by one day before the|6,155,033,743|
|disclosure (share)||
|Diluted earnings per share calculated based on the|1.206|
|most updatedcapital shares（RMB/share）||

Whether any corporate bond existed
□ Yes√ No
VII. Differences in Accounting Data between Domestic and Overseas Accounting Standards 1. Difference in the financial report of net profits and net assets according to the disclosure of International Accounting Standards and China Accounting Standards
□ Applicable√ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of International Financial Reporting Standards (IFRS) and China Accounting Standards in the reporting period. 2. Difference in the financial report of net profits and net assets according to the disclosure of Overseas Accounting Standards and China Accounting Standards
□ Applicable√ Inapplicable
There is no difference in the financial report of net profits and net assets according to the disclosure of Overseas Accounting Standards and China Accounting Standards in the reporting period.
VIII. Key Quarterly Financial Indicators
Hikvision 2016 Annual ReportUnit：RMB
||||||
|-|-|-|-|-|
||1st Quarter|2nd Quarter|3rd Quarter|4th Quarter|
|Operating income|5,199,710,391.90|7,348,488,334.22|8,588,270,242.70|10,787,551,903.62|
|Net profit attributable to shareholders of the|||||
||1,143,615,399.83|1,463,231,055.55|2,243,111,069.90|2,572,304,457.88|
|Company|||||
|Net profit attributable to shareholders of the|||||
||1,133,528,590.60|1,440,674,330.49|2,143,368,877.17|2,553,170,964.21|
|Company excluding non-recurring gains|||||
|and losses|||||
|Net cash flows from operating activities|-1,432,111,768.75|1,829,919,025.23|1,556,206,067.43|4,259,678,836.65|

 Significant difference between the above financial indicators or sum of it with disclosed quarterly report, half-year report
□ Yes√ No
IX. Items and Amounts of Non-recurring Gains and Losse
Unit：RMB
|||||
|-|-|-|-|
|Item|2016|2015|2014|
|Profit or loss from disposal of non-current assets (including the write-off|-736,149.02|||
|||1,715,423.04|-467,280.37|
|for the impairment of assets)||||
|The government subsidies included in the current profits and losses|171,321,088.31|||
|(excluding the government subsidy1closely related to regular course of||||
|||169,279,486.81|48,953,698.71|
|business of the Company and government subsidy based on standard||||
|quota or quantitative continuous application according to the state||||
|industrial policy.)||||
|Held-to-maturity financial assets, profits and losses of fair value|321,708.86|||
|held-for-trading financial liabilities, and investment income in disposal of||||
|||132,518,794.00|154,461,038.78|
|held-for-trading financial assets and liabilities and available-for sale||||
|financial assets excluding the effective hedging business related to the||||
|regular business operation of the Company.||||
|Other non-operating income and expenditures except the items|18,276,871.38|||
|||15,481,300.69|9,898,857.59|
|mentioned above||||
|Less: Impact of income tax|36,000,258.26|54,882,891.58|22,458,098.06|
|The impact of the minority interests (after tax)|1,664,040.58|-47,274.18|-5,166.75|
|Total|151,519,220.69|264,159,387.14|190,393,383.40|

 Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in the<Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-recurring Gains andLosses>, 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<Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-recurring Gains andLosses>, or classifies any non-recurring gain/loss item mentioned in the aforementioned note as a recurrent gain/loss item
1 Please refer to Note (V) 47 for details about government subsidy closely related to regular course of business of the Company and
government subsidy based on standard quota or quantitative continuous application according to the state industrial policy.
Hikvision 2016 Annual Report Section III Corporate Business Summary
I. The principal business of the Company during the reporting period
1. Main business and position in the industry
As a provider of Internet of Things (IoT) solutions and data operation service based on the video, Hikvision provides security, visual management and big data services to customers around the world. Hikvision has the core technologies of audio and video encoding, video image processing, and audio and video data storage, as well as forward-looking technologies such as cloud computing, big data, and deep learning. It provides professional segmentation products, Intelligent Visual Management (IVM) solutions and big data services to industries, including Public Security, Transportation, Judicial System, Education and Healthcare, Financial Institutions, Energy, as well as Intelligent Building. In addition to the video surveillance industry, Hikvision extended its business to smart home, industrial automation and automotive electronics industries based on video technology to explore potential for sustainable development.
As the world's largest security manufacturer, Hikvision is the witness, practitioner and important promoter of videosurveillance’s revolutions of digitalization, networking, and intelligence. In 2016, Hikvision was granted international credit rating of A-, A-, and A3 by Fitch,S&P, andMoody’s respectively and the rating outlooks are stable, representing a leading position among the global enterprises.
2. Main products, services and applications
After engaging in the security industry for many years, the Company has rich experience in technologies, products and solutions and possesses full range of products from the front end (perception), transmission, storage,
Hikvision 2016 Annual Report and display control to the integrated management platform and provides "one-stop" overall solution for multi-level security needs of governments, enterprises, families and individual users.
The multidimensional front-end (perception), all-weather, three-dimensional and intelligent features are important elements of system efficiency. Front-end (perception) products have abundant categories in the Company's product mix, which mainly comprises a full-range and full-format of optical cameras suitable for a variety of scenarios, a full range of access control, all-purpose card, video intercom and burglary alarm products, multi-series thermal imaging camera and sensor products, as well as multi-series industrial camera products. In addition to the realization of video capture for visible light and thermal imaging, the Company currently has the product layout of multi-dimensional capture for non-video information such as audio, switching value, Radio Frequency Identification Devices (RFID), temperature and humidity, PM2.5, geographical coordinates, and camera azimuth.
In 2016, the Company launched the Super-Defog(超级透雾),Darkfighter+2（星光+）
and
DarkfighterX3(黑光) series cameras to meet the need for clear imaging in all-weather scenarios through innovative design of camera image processing technology and image sensor architecture. In view of the three-dimensional perception needs of different industries, the Company launched products including
PanoVu4(鹰眼) camera series, 2Darkfighter+ series camera, using sensors of large surface and leveragingHikvision’s proprietary ISP image processing technology, which enables users to capture clear and bright color image even in low-lighting environment without the help of supplemental lighting. It performs better than traditional Darkfighter camera.
3 DarkfighterX series camera, usingHikvision’s proprietary SpecEX dual lighting fusion technology, which enables users to capture clearer, cleaner and brighter color image than that ofDarkfighter+ series camera in darker environment than Starlight.
4 PanoVu series camera, usingHikvision’s proprietary exposure simultaneous control technology and the technology of characteristic matching, the single product can support 180° and 360° panoramic merging image, of which Dome-shaped PanoVu can be linked to close-up shots to capture details.[as shown in
thepicture]
Hikvision 2016 Annual Report professional Unmanned Aerial Vehicle（UAV） series, vehicle-mounted and handheld camera, vehicle entrances and exits camera system, access portal camera system, electronic police camera system, traffic camera recording system, and parking guidance camera system.
TheCompany’s transmission products mainly include a variety of optical transmission products including video encoders, video decoders, video optical transceivers, network optical transceivers, as well as other network switches.
As more than99.9% of the information transmitted in the video sensor network is video information, to achieve the quality and cost balance under the effective transmission, we must use the least data volume to transmit better quality video images, and the key lies in the video coding and decoding performance. Video coding and decoding technology is one of the core technologies invested by Hikvision for a long term.
In 2003, the Company pioneered the application of H.264 in video surveillance industry and achieved success (after more than a decade of development, H.264 has become the industry standard). With maturing application conditions for the new generation of video coding standard H.265, Hikvision launched the Smart 265 coding technology which is independently researched and developed by the Company and it is fully compatible with H.265. In the same image quality conditions, it reduced at least30% of data volume compared to H.265 and70% compared to H.264. It greatly reduced the transmission and storage costs, making the Company's products and solutions more competitive and laying a solid foundation for wide application of High Definition (HD) and Ultra High Definition (UHD) equipment and preparation for the arrival of video big data era.
Hikvision 2016 Annual Report The Company's storage products mainly include multi-series video storage products such as XVR (Hybrid Video Recorder), NVR (Network Video Recorder), and CVR (Central Storage Video Recorder), cloud storage system products for mass storage requirements, as well as central data storage product series based on NAS and SAN architecture. To meet front-end storage needs, the Company also introduced other storage media products such as SD memory card and Solid State Disk (SSD).
Storage products are mainly used to store video. Due to the particularity of video information, it is priority to achieve the "reliable storage and efficient retrieving"; especially in the context of mass video information, under which video storage products should have higher storage security and reading efficiency. TheR&D team for storage of Hikvision has focused on development of storage technology for years and took the lead in launching a number of advanced technologies in the industry. The "Active object mass storage systems and key technologies"(主动对象海量存储系统及关键技术) was granted the second place of National Technology Invention Award. The cloud storage system of Hikvision applies the design idea for the user-oriented business applications and integrates the technologies of cluster application, load balancing, virtualization, cloud structuring, discrete storage, and disaster recovery backup. The Company provides users with high-performance, highly reliable and uninterrupted video, picture data storage and business access services, which are suitable for mass PB-level video and image data storage. Given that the hardware device scale and storage capacity continued to expand, the performance and storage capacity of video cloud storage system maintained a linear growth, and this attribute laid a foundation for the expansion of cloud services on the basis of video cloud storage.
Control and display products are usually located in the monitoring center and used for presentation of the image and information in the monitoring center, mainly composed of the Multifunction VideoCenter（视频综合平台）, LCD/DLP (splicing) large screen, small pitch LED large screen and large screen controller products, controlling keyboard, and etc. The Multifunction Video Center is originated by Hikvision and integrates HD video coding and decoder, display control, storage control, intelligent analysis, centralized control and other features to greatly simplify the monitoring center deployment architecture. Since its first release in 2010, it has become a classic device in the industry.
Hikvision 2016 Annual Report The Comprehensive Management Platform(综合管理平台) is the platform software for the management of the above-mentioned products/systems and helps users to integrate various resources of the system based on the network, providing abundant security and application functions, so as to maximize the power of technical protection and enhance theusers’ ability to deal with various security incidents and risks.
Security business is the Company's core business and traditional pillar business, which is mainly to satisfy the security protection needs of users. With the accumulation and innovation of techonologies, the Company used a variety of new technical protection measures to help users to constantly enhance the response to a variety of security risks and problems. At the same time, the Company is conducting another major business filed, the management visualization(可视化管理), to meet the need of promoting business management capability, adopting visualization technology to help users to expand their management methods, improve their management capabilities, hereby enhancing business management efficiency. The visualization management solution oriented on industry applications is an important part of Hikvision's business system.
Since Hikvision commenced the solution business in 2008, the Company's solution team has formed a complete solution product system which continues to deepen the development through conducting in-depth research on user business scenarios for customized needs of seven vertical industries including the Public Security, Finance, Transportation, Judicial System, Energy, Intelligent Building, as well as Education and Healthcare and hundreds of sub-sectors. In response to the core needs of industrial users to enhance business management capabilities, the Company helped users build a complete perception network covering information collection,
Hikvision 2016 Annual Report transmission, storage, analysis and application, with application of Intelligent Visual Management Software (iVMS), to achieve the business management innovation model, so as to enhance the business management efficiency.
Take the transportation industry as an example,Hikvision’s intelligent city transportation comprehensive management solution integrates video surveillance system, monitoring point, electronic police, UAV, traffic signals and many other means of perception and provides penalties for traffic violation acts, intersection control, traffic guidance, special rectification, traffic information services and other functions based on intelligent analysis and big data technology. It can meet the needs of various intelligent traffic management applications and transform the video information into front-line productivity, shorten the decision-making time, reduce the labor cost, improve the work efficiency, and promote transition of the urban traffic management to the three-dimensional, visualized, and intelligent development.
Users’ needs to use visual means to enhance the business management ability have already existed in the beginning of the appearance of video surveillance system. Due to the limitation of technology in the past, users could only manually extract the key information in the video, therefore, the practical application is limited. In recent years, with application of the computer vision-based video intelligent analysis technology, computers can make elementary analysis and identification of certain specific objects and scenario characteristics, which solves the problems of only relying on labor to some extent and helps users carry out some simple visual management business applications. However, this application is still limited by insufficient computer analysis accuracy and unsatisfied multi-dimensional information processing capabilities due to constraints such as computing capabilities, data size, and so on.
As the deep learning algorithm gets mature, training data size expands and hardware computing capabilities enhance, machines can do better than people in many aspects. This provides a broader room for the development of visual management business. Compared with the traditional intelligent analysis algorithm, the deep learning algorithm can advance the "intelligence" to higher accuracy, greater environmental adaptability and richer identification of object types to tap the needs for deeper level of data value.
Hikvision paid much attention to the intelligent technology development in the computer vision field since its inception. The Company started the research and development of intelligent analysis technology in 2006 and made the technical layout of deep learning in 2013; it formally established Hikvision Research Institute(海康威视研究院) in 2014, focusing on the research of perception, intelligent analysis, cloud storage, cloud computing
Hikvision 2016 Annual Report and video big data. In 2015, the deep learning technology research team of Hikvision was ranked the world's first in MOT
Challenge5
Multi-Target Tracking Technology,
KITTI6
Vehicle Detection and Vehicle Head Direction Assessment Algorithm Evaluation. It also was ranked theworld’s first in PASCAL
VOC7
Target Detection and ImageNet8
Scenario Classification in 2016. It won the championship in the text recognition tasks of three competitions of
ICDAR9
Robust Reading including “Web and Email Born-Digital Images”, the "Focused Scene Text" and the "Incidental Scene Text" in March 2017, significantly surpassing other domestic and international teams.
With the experience in video technology applications and the capabilities to integrate products and systems, the Company quickly commercialized deep learning and video big data technology advantages into products, forming an advanced intelligent product family from capturing to processing, embedded intelligent analysis technology from the front-end to back-end products, and big data application platform.
5 MOT Challenge: an algorithm evaluation organization jointly founded by Adelaide University, Zurich Federal Institute of Technology and Technical University of Darmstadt to evaluate the performance of multiple pedestrian object tracking technology in video surveillance environment. MOT Challenge is the authority in the multi-target tracking technology evaluation.
6 KITTI: An algorithmic evaluation organization co-founded by the Karlsruhe Institute of Technology and the Toyota Institute of Technology in Chicago to evaluate the object (motor vehicle, non-motor vehicle, pedestrian, etc.) detection, target tracking, etc.. KITTI is the authority in automotive applications evaluation.
7 PASCAL VOC: A visual identification competition, jointly founded by Univerisity of Leeds, Zurich Federal Institute of Technologe, University of Edinburg, Microsoft, Oxford University, contains the tasks such as object classification, target detection, image segmentation, and etc. PASCAL VOC is the originator of visual identification competition, and has profound and great influence on the development of computer vision. 8 ImageNet Large Scale Visual Recognition Challenge is a computer vision competition sponsored by Stanford, Carnegie Mellon, North Carolina and Michigan and other first-class schools. It guides the direction of the development of computer vision, and has attracted a lot of active top research teams, academic schools and industrial giants. The results of each competition have an important and far-reaching impact on the academic and industry.
9 ICDAR is known as the International Conference on Document Analysis and Recognition, hosted by the International Association for Pattern Recognition (IAPR). Its document analysis and recognition competition is the world's most influential game in the current OCR (Optical Character
Recognition, image recognition) technology field. It has attracted 2367 teams from 82 countries to participate.
Hikvision 2016 Annual Report Intelligent camera series such as "DeepInview", "Divine Captor", People and Identification Matching(人证对比)， and "DeepInmind" series intelligent NVR, with embedded deep learning algorithm, have more accurate big data induction capabilities than human brains, and can extract multiple feature information of people, vehicles and objects and detect events in complex environments;
Hikvision 2016 Annual Report “Blade” vehicle feature structured server, "Falcon" video cloud structured server, "Divine Captor" traffic incident detection server, "Hikface" face analysis server and other GPU array video cloud structured server products enable efficient structured processing of massive video and image data;
Hikvision 2016 Annual Report Hikvision big data server applies the high-speed data bus and memory computing framework, which is better than the traditional Hadoop framework, combining with the video cloud structured server. It achieves million-level message sending and receiving, 100 billion-level data searching in seconds, and billion-level image searching by image in seconds, and the massive structured video data can be effectively applied to provide efficient retrieval, and provides efficient retrieval, analysis, in-depth application, statistic and other big data services.
Hikvision 2016 Annual Report Video surveillance system is a natural IoT system, with the perception as the means and the application as the core. The cameras work as the eyes of the machine, whose video capturing function has developed from analog to digital, from standard definition to high-definition, achieving image from "visible" to "clear". If the camera can "understand" and enable the machine to process video image content, it would be an intelligent upgrade in the video technology field, and a leap progress in video applications. Hikvision now stands in the forefront of industry reform and captures opportunities brought by deep learning for the industry, and integrates video perception, deep learning, cloud computing, big data technology withusers’ business needs, to give an new connotation of the four levels of IoT-“pereption, transmission, understand and application”(感、传、知、用), promotes the upgrade of the industry as a whole, and embraces the arrival of video artificial intelligence (AI) era. 3. Main sales model and performance drivers
The Company's marketing organization structure is mainly composed of the sales branches/subsidiaries by regions, together with the matrix model of the vertical industry business divisions to sell products to end users, mainly through integrators, engineering contractors and distributors and other partners.
TheCompany’s performance drivers are mainly derived from industry growth and technical expansion. On the one hand, the increase of various instability factors has led to the increasing attention to security and stability around the world as a comprehensive social problem. Enhancing the ability of security defense, public security, and comprehensive management has become a prerequisite of the social development. The traditional security industry gained constant growth due to increasing demands of governments, enterprises and families for security products, as well as the upgrading demands from the existing market.
On the other hand, video-related technological innovation, cloud computing, big data, artificial intelligence, and biological recognition technologies have been further upgraded, leading to innovative products with fast-changing features, advanced shapes and innovative functions, as well as application demands that are gradually subdivided and deepening. The traditional security industry is still undergoing the transition of network and HD, and revolution of intelligence is on the way. The traditional security industry continues to expand towards security, visualization and big data, and the future industry is not limited by the form of traditional security. Under the progress of video image content recognition technology, video will gradually release the potential power as the natural container of massive data and information and will be applied in many other industries.
Hikvision 2016 Annual Report II. Major Changes in Main Assets
1. Major Changes in Main Assets
√ Applicable□ Inapplicable
|||
|-|-|
|Major assets|Explanation on Major Changes|
||Increased by 469.01%, mainly due to investment to CETC Finance Co., Ltd. and Wuhu Sensor|
|Equity Assets||
||Technology Co, Ltd.|
||Increased by 51.21%, mainly due to the completion of Phase 1 of Tonglu Security Industrial Base|
|Fixed Assets||
||project and its conversion into fixed assets|
|Intangible Assets|No significant changes|
||Decreased by 62.53%, mainly due to the completion of Phase 1 of Tonglu Security Industrial Base|
|Construction in Progress||
||project and its conversion into fixed assets|

2. Major Overseas Assets
□ Applicable√ Inapplicable
III. Core Competitiveness
As an industry leader, Hikvision builds a global comprehensive competitive advantage through continuous improvement of internal management with strongR&D, production, sales, service integration capabilities and software, hardware, system integration capabilities.
1. LayeredR&D to ensure continuous supply and effectiveR&D of new technologies and new products The Company has established a one-stop HierarchicalR&D system from research, design, development, testing, technical support and service, centered in Hangzhou headquarter, coveringR&D centers in Beijing, Shanghai, Chongqing, Wuhan, and Montreal of Canada and Silicon Valley of United States. In the system, the Hikvision Research Institute serves as the technology platform, the productR&D center serves as the product platform, and the system business center serves as the solution platform. Hikvision Research Institute is responsible for fundamental, forward-looking research, with the productR&D center responsible for the development of embedded software and hardware, and the system business center responsible for the development of platform software and system integration software for integrating industry products, enabling the technology,
products, solutions platforms to complement each other. After years of operation, the different sectors ofR&D
systems of the Company independently and cooperatively work with each other to quickly meetusers’ needs.
Hikvision 2016 Annual Report Over the years, the Company's annualR&D investment accounted for about7-8% of sales revenue. A relatively high level ofR&D investment allows the Company to maintain long-term investment of research and development resources, while a good operating system not only allows theR&D team to continuously capture cutting-edge technology and launch innovative products that pioneer the industry, but also adjust product focus and enhance product features and performance based on market feedback and service summary, forming market-oriented effective research and development.
2. Focusing on the industry segment and enhancing ability in understanding and commercializing the business needs
The Company insists on "creating value for users according to their needs", leverages the deep understanding of the needs of users and provides competitive tailored products based on the features of Public Security, Transportation, Judicial System, Education and Healthcare, Finance, Energy, Intelligent Building and major industries and different characteristics of market segments and business segments. The Company also helps users achieve value by integrating systems, products, software and services through solutions.
In the ongoing cooperation in the industry segments, the Company has gained a lot of in-depth involvement "industry/business experience", enabling the Company to deeply understand the needs of users and to improve the synergy between product and software, and enhance the Company's system integration capabilities in the continuous cycle of introducing, implementing and improving solutions. Such move thus enables the Company to quickly meetusers’ core management needs with the rapidly changing applicable solutions. The experience and ability are accumulated over a long term across multiple dimensions, and was digged deeper with the continuous changing ofusers’ needs, which cannot be directly copied and is also difficult to quickly obtained.
3. Global marketing service system contributing to the continued steady growth of the Company's business The Company has established one of the most universal marketing networks in the industry, which comprises 35 branches and more than 200 liaison offices based on the branches throughout China mainland, which ensures quick response to the needs of customers, users and partners. The Company has established 28 overseas sales branches, forming a constantly improving marketing network covering more than 100 countries and regions globally, with products being sold to more than 150 countries and regions carrying our own brand. Facing tens of thousands of partners, such as engineering contractors, distributors and service outsourcing businesses, the Company provides certification and training system for all areas and continuously enhances the professional competence of its partners to better serve our customers.
Hikvision 2016 Annual Report The Company has established a three-tier service system, which comprises Hangzhou Global Customer Service Center, Subsidiary Customer Service Department and Authorized Customer Service Station. Through linking Hangzhou headquarters, which has resources advantage, with more than 50 subsidiaries in major markets and branches and partners around the world, and covering the pre-sales and after-sales including product delivery, project delivery, software deployment, system operation and maintenance and other multi-dimensional services, the Company has achieved localized comprehensive service system worldwide.
4. A good talent training system and a long-term incentive mechanism to ensure the sustainable and healthy development of the Company
In the rapid development of the industry, the Company has always adhered to the concept of "talent-focused, growing together". It has set up a dual career development path of management sequence and professional sequence, created a learning organization, cared about the growth of employees, implemented a targeted multi-level training system, established a professional qualification evaluation system and a talent assessment system, and formed a complete talentreserve’s training mechanism, which continuously meets theCompany’s demand for core talents during the rapid growth stage.
The Company actively promotes the implementation of diversified incentive measures to maintain the stability of core talents. In 2012, 2014 and 2016, the Company implemented three restrictive stock incentive schemes, awarding a total of nearly 5,000 employees, covering the core talents team from the executive, middle, to low-level management staffs and business backbones, focusing on business backbones as the main incentive objects. In 2016, the Company has implemented an innovative business co-investment mechanism for the core staffs to co-invest in the new business with the Company. The Innovative Co-investment Partnership established by employees has become a shareholder of EZVIZ Network Inc., Hikvison Automotive Technology, Hikvision Robotic Technology and other innovative businesses, and the majority of core employees has become business partners sharing risk and benefits with the Company's innovative businesses, which has greatly stimulated the enthusiasm ofemployees’ entrepreneurial spirits. The start of innovation business has brought new momentum for the Company's sustainable development.
5. Sustained significant scale advantages
Over the years, the Company has insisted on maximizing its ability in the professional field. It has built the industry's largest technologyR&D platform and supply chain platform for lean productions, and has reduced costs through scale operation. For internal operation and management, the Company has successively introduced SAP's
Hikvision 2016 Annual Report ERP system R3, Oracle's CRM system Siebel, PTC's PDM/PLM system Windchill and Oracle's HCM system Peoplesoft, and has introduced CMMI and IPD intoR&D management system. The introduction and implementation of these excellent management tools have further enhanced the Company's operational management capabilities.
Hikvision 2016 Annual Report Section IV Operation Discussion and Analysis
I. Overview
In 2016, the growth pattern of global developed economies becomes divided, and the uncertainty and downside risks of emerging market economies increased after adjustment and transformation, and the security industry worldwide was also affected by downside and unstable factors of the macro-economy. Affected by declining growth rate in 2015, the performance growth rate of the Company in 2016 was low in the beginning and high at the end, showing a rebound pattern. Based on different competition patterns in different regions, the Company made many strategic adjustments and started to pay more attention to profitability growth than scale growth.
The Company launched excellent new products through technological innovation, continuously improved product performance through constant improvement, optimized practice through deep understanding ofusers’ demand and brought value to users by meeting continuously increasing demand on product application and service appeal from the users so as to ensure the development and growth of the Company. During the reporting period, the Company achieved total operating income of RMB 31.92 billion, increased by26.32% on a year-over-year basis; and net profit attributed to shareholders of the listed company of RMB 7.42 billion, increased by26.46% on a year-over-year basis. The profitability of the Company improved continuously, resulted in an overall gross profit margin of41.58% in 2016, increased by1.48% on a year-on-year basis. The net operating cash flow of the Company in 2016 was RMB 6.21 billion, increased by93.17% on a year-on-year basis, and the condition of excessive account receivables increase in 2015 was obviously improved during this reporting period.
II. Main business analysis
1. Overview
(1) Continuous improvement of new technologies and products drives the development of the industry In 2016, theR&D input of the Company was RMB 2.43 billion, accounting for7.62% of its total sales volume, remained the largest in the industry withR&D team exceeded 9,000 personnels. The Company kept its leading position in technological innovation and product innovation through continuous inputs in technological innovation, rapidly promoted the technologies and products to the market through the operation system integrating
Hikvision 2016 Annual Report technologies, products and solutions and created benchmarking models in key vertical industry, which continuously promoted the business development and laid the foundation for the steady increase of company performance.
In 2016, the Company continued to promote AI products and launched “DeepInview” camera, “DeepInmind” NVR, “Hikface” face analysis server and other series of products, which has initially formed the market coverage. In aspect of productR&D, the Company constantly made innovations based on its deep understanding and rich accumulated experience in video technology and continuously launchedDarkfighter+, DarkfighterX, PanoVu cameras and other high-end products of the industry. With these advanced products, the Company broke through the homogeneous competition and continuously built new leading competitiveness to reinforce and enhance the competitive advantage of the Company.
(2) Deep cultivation of application market to expand visual management business
In 2016, the Company continued to promote the business development strategy of “maximum extending the industry vertically and expanding the business horizontally”, constantly proposed targeted vertical solutions based on the profound understanding of various business scenarios and business demand, which promoted the system-level competitiveness of the Company in gaining users/clients and achieved better vertical industry growth performance.
With continuously deepened demand on video application of the users, traditional security manufacturers integrated more functions to a single security product to ensure dual demands of security and business management from massive application scenarios, and thus the border for security industry gradually became blurred. Facing expanded scale of industry application system, increased complexity and extension trend of traditional security demand to business management demand, the Company continued to focus on the security industry, and has maintained a solid growth of the security business; meanwhile, it seized the upgrading opportunity ofusers’ demand for video application and explored the visual management of urban fire control, visual traceability for agricultural product process, visual supervision of constructional engineering, visual integrated management of hotels, finance visualization and other business scopes based on the rich product line and profound solution ability of the Company to promote the development of visual business.
(3) Continuous construction of marketing networks to improve marketing efficiency
For the domestic market, in light of the trend that users pay more attention to the application value of products and further demand for enhanced service from manufacturers, the Company continued to promote the
Hikvision 2016 Annual Report strategy of "industry segmentation and regional expansion", strengthened the investment on the user side and implemented solution marketing and consultative marketing; at the same time, the Company focused on the needs of users, improved the service ability, established a marketing network and a service system much closer to users. In the aspect of domestic channel market, the Company absorbed excellent channel partners by continuously promoting the standardization of products and market transparency, and standardized the channel market by strengthening sales supervision, to promote well-organized competition and healthy development of the industry. For overseas markets, the Company acquired British alarm company, SHL and its Pyronix brand, to supplement the alarm business product line and obtained more sales channels. The Company established 3 overseas subsidiaries in Kazakhstan, Columbia and Turkey, and 3 new offices respectively in Thailand, Indonesia and Dubai, totaled in 28 overseas branches, to further improve the overseas sales network. The Company continued to implement the strategy of sales localization and technical support and service localization, and penetrating into project market from the SMB market. In 2016, the Company's overseas sales revenue continued to maintain at a leading position in the global security industry, but particular regions were impacted by the sluggish economy.
In 2016, the Company introduced the profit index into theCompany’s KPI system and considered the improvement of marketing efficiency as an important measure for the improvement of marketing management. The implementation of 2016 had represented a good effect on the stability of the Company's overall gross margin. (4) Rapid takeoff of innovative businesses with promising prospects
For Internet video business, EZVIZ carried out continuous innovations, launched a series of products meeting various needs of medium-to-small and micro enterprises, families and individuals, and actively promoted an open platform based on the EZVIZ cloud business to provide stable and continuous integrated video services for external partners and solve all kinds of integrated video-based application. By the end of 2016, EZVIZ cloud platform had had 10 million-level of users, and a total of more than a thousand of EZVIZ O stores opened in more than 500 cities in China, and has achieved good market results.
For robot business, taking the Automatic Guided Vehicle (AGV) as the carrier and relying on the core technology maturely applied by “QIANMO”, the Company launched Automatic Guided Vehicle, intelligent sorting robots and intelligent parking robots, among which, the intelligent parking robot was unveiled in Wuzhen in November 2016 at the Third Session of the World Internet Conference and became the world's first application case of robotic intelligent parking system. In addition, the professional products and solutions of Hikvision Robots
Hikvision 2016 Annual Report also had a certain market effect in the field of machine vision and industrial UAV.
For automotive electronics business, the Company founded Hikvision Automotive Technology in the middle of 2016 and had initially unveiled the automotive electronics business in October at the Beijing Security Exhibition, new launched products including Dashcam, intelligent rearview mirrors and vehicle-mounted monitoring camera and related accessories.
Based on the strategic deployment of upstream and downstream businesses in the industry and long-term development considerations of the Company, the Company established the uncooled infrared sensor (Hangzhou HIK Weiying Sensor Technology Co., Ltd.) and the solid state disk (SSD) storage technology as new innovative businesses, in order to establish a strategic control point in new fields to form new growth momentum for the Company.
(5) New Security Industry Base was put into production, upgraded manufacturing capacity
In the reporting period, Phase I of Tonglu Security Industry Base was completed and put into production, became the most significant manufacturing base of the Company at present. Relying on the development of the Hikvision robotic business, the Company applied the self-developed warehouse management system and more than 600 "QIANMO" intelligent robots and fully implemented automated warehousing and internal logistics, which had improved the efficiency of warehousing operations by60%. In addition, Tonglu Base has constantly promoted the automated production line project, introduced an automatic production line in every stage of production, from the production of components to the completion of the whole equipment, improved the product quality and production efficiency, established leading manufacturing ability and flexible customization ability in the industry to ensure on-time high-quality product delivery to meet the needs from various business developments.
(6) Promotion of management reform and improvement of internal efficiency
In 2016, the Company continued to promote the management reform, implemented strategic consulting projects, corporate culture consulting projects, sales value chain projects,R&D IPD projects and projects for building long-term mechanism for procedures, and continued to promote the implementation of LTC (from business opportunity to payment) process optimization projects and solutions IPD projects. Through introducing excellent management tools and management methodologies and learning from the best practice in the industry, the Company enhanced the level of internal management and improved its efficiency.
Hikvision 2016 Annual Report 2. Operating incomes and operating costs
(1) Operating income structure
Unit: RMB
|||||||
|-|-|-|-|-|-|
||2016||2015|||
||||||Increase/ decrease|
|||Proportion to||Proportion to|over previous year|
||Amount||Amount|||
|||operating income||operating income||
||31,924,020,872.44|100.00%|25,271,390,273.42|100.00%|26.32%|
|Total operating||||||
|income||||||
|Classified by industry||||||
|Video products and|31,924,020,872.44|100.00%|25,271,390,273.42|100.00%|26.32%|
|video content services||||||
|Classified by product||||||
||15,881,528,158.70|49.75%|13,317,160,183.14|52.70%|19.26%|
|Front-end equipment||||||
||5,197,388,761.80|16.28%|4,355,419,527.94|17.23%|19.33%|
|Back-end equipment||||||
|Central control|3,988,683,952.14|12.49%|2,355,593,484.09|9.32%|69.33%|
|equipment||||||
||1,451,424,275.00|4.55%|1,690,863,504.02|6.69%|-14.16%|
|Construction projects||||||
||647,651,465.10|2.03%|221,928,671.32|0.88%|191.83%|
|Innovative business||||||
||4,757,344,259.70|14.90%|3,330,424,902.91|13.18%|42.84%|
|Others||||||
|Classified by region||||||
||22,563,636,220.37|70.68%|18,614,982,772.42|73.66%|21.21%|
|Domestic||||||
||9,360,384,652.07|29.32%|6,656,407,501.00|26.34%|40.62%|
|Overseas||||||

 Note: in the category classified by product, the "innovative business" will be listed separately from this reporting period, so the category classified by product is adjusted with the same caliber from the same period of last year. The term "innovative business" includes corresponding business products of innovative business subsidiaries - EZVIZ Network, Hikvision Robotics, and Hikvision Automotive Technology. Similar hereinafter.
(2) Industries, products or regions accounting for more than10% of theCompany’s operating income or operating profit
√ Applicable□ Inapplicable
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||||||Increase/|
|||||Increase/ decrease|||
||||||Increase/ decrease|decrease of|
||||Gross|of operating|||
||Operating income|Operating cost|||of operating cost|gross margin|
||||margin|income over|||
||||||over previous year|over previous|
|||||previous year|||
|||||||year|
|Classified by industry|||||||
|Video products|||||||
||31,924,020,872.44|18,649,694,075.44|41.58%|26.32%|23.21%|1.48%|
|and video content|||||||
|services|||||||

Hikvision 2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|||||||Increase/|
|||||Increase/ decrease|||
||||||Increase/ decrease|decrease of|
||||Gross|of operating|||
||Operating income|Operating cost|||of operating cost|gross margin|
||||margin|income over|||
||||||over previous year|over previous|
|||||previous year|||
|||||||year|
|Classified by product|||||||
|Front-end|15,881,528,158.70|8,186,413,345.14|48.45%|19.26%|16.58%|1.18%|
|equipment|||||||
|Back-end|5,197,388,761.80|2,705,461,109.51|47.95%|19.33%|14.51%|2.19%|
|equipment|||||||
|Central control|3,988,683,952.14|2,069,135,295.77|48.12%|69.33%|68.21%|0.34%|
|equipment|||||||
|Construction|1,451,424,275.00|1,328,601,510.98|8.46%|-14.16%|-16.38%|2.43%|
|projects|||||||
|Innovative|647,651,465.10|394,446,839.95|39.10%|191.83%|135.74%|14.49%|
|business|||||||
||4,757,344,259.70|3,965,635,974.09|16.64%|42.84%|43.37%|-0.31%|
|Others|||||||
|Classified by region|||||||
||22,563,636,220.37|13,744,528,947.19|39.09%|21.21%|20.05%|0.59%|
|Domestic|||||||
||9,360,384,652.07|4,905,165,128.25|47.60%|40.62%|33.02%|2.99%|
|Overseas|||||||

 Adjusted statistics of principal business are based on the caliber at the end of the reporting period of last year, if the statistics caliber of principal business has been changed during the reporting period
□ Applicable√ Inapplicable
(3) If revenue from physical products sales greater than revenue from providing services
√ Yes□ No
|||||||
|-|-|-|-|-|-|
||||||Increase/ decrease|
|Industry|Item|Unit|2016|2015||
||||||over previous year|
||||68,801,020|47,778,446|44.00%|
||Sales volume|Per unit||||
|Video products and|||70,402,646|48,643,670|38.15%|
||Output volume|Per unit||||
|video content services||||||
||||5,024,772|3,423,146|46.79%|
||Inventory|Per unit||||

 Explanation on why the related data varied by more than30% on a YOY basis
√ Applicable□Inapplicable
During the reporting period, theCompany’s sales volume, output volume and inventory grew with the increase of the operating performance.
(4) Fulfillment of signed significant sales contracts by the reporting period
□ Applicable√ Inapplicable
(5) Operating cost structure
Classified by industry and products
Hikvision 2016 Annual Report Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||2016||2015||Increase/|
|Industry|Item||Proportion to||Proportion to|decrease over|
|||Amount||Amount|||
||||operating cost||operating cost|previous year|
|Video products|||||||
|||18,649,694,075.44|100.00%|15,136,793,517.44|100.00%|23.21%|
|and video content|Operating cost||||||
|services|||||||

Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||2016||2015||Increase/|
|Product|Item||Proportion to||Proportion to|decrease over|
|||Amount||Amount|||
||||operating cost||operating cost|previous year|
|Front-end||8,186,413,345.14|43.90%|7,021,910,915.24|46.39%|16.58%|
||Operating cost||||||
|equipment|||||||
|Back-end||2,705,461,109.51|14.51%|2,362,654,134.89|15.61%|14.51%|
||Operating cost||||||
|equipment|||||||
|Central control||2,069,135,295.77|11.09%|1,230,092,234.52|8.13%|68.21%|
||Operating cost||||||
|equipment|||||||
|Construction||1,328,601,510.98|7.12%|1,588,821,153.01|10.50%|-16.38%|
||Operating cost||||||
|projects|||||||
|Innovative||394,446,839.95|2.12%|167,322,253.16|1.11%|135.74%|
||Operating cost||||||
|business|||||||
|||3,965,635,974.09|21.26%|2,765,992,826.62|18.27%|43.37%|
|Others|Operating cost||||||

 (6) Any change in consolidation scope during the reporting period
√Yes□ No
During the reporting period, the Company has newly set up five wholly-owned subsidiaries, i.e., Hikvision Kazakhstan Limited Liability Partnership, Hangzhou Hikvision Investment Management Co., Ltd., Hikvision Colombia SAS, Hikvision Turkey Technology and Security Systems Commerce Corporation and Tianjin Hikvision System Technology Co., Ltd., five holding subsidiaries, including Hangzhou Hikvision Robotics Technology Co., Ltd., Hangzhou Hikvision Automotive Technology Co., Ltd., Hangzhou Hikvision Communication Technology Co., Ltd., Hangzhou HIK Weiying Sensor Technology Co., Ltd. and Henan Hikvision Huaan Secure Electronics Co., Ltd., and acquired two companies: Hangzhou Hikvision Zhicheng Investment Development Co., Ltd., Secure Holdings Limited and its subsidiaries, which have caused the increase of consolidation scope. For more details, please refer to note (VI) “Changes in consolidation scope” of the financial statement.
(7) Significant change or adjustment of theCompany’s business, products or services during the reporting period:
□ Applicable√ Inapplicable
(8) Major customers and suppliers:
Sales to major customers of the Company
|||
|-|-|
|Sales to top five customers (RMB)|1,164,470,830.53|
|Total sales to top five customers as a percentage of the total sales for||
||3.64%|
|the year (%)||
|Total sales to the related parties in top five customers as a percentage||
||1.20%|
|of the total sales of the year (%)||

Hikvision 2016 Annual Report Information on top five customers
|||||
|-|-|-|-|
|No.|Name of Customer|Sales Amount (RMB)|Percentage of total sales for the year|
|1|First (related party)|383,212,609.06|1.20%|
|2|Second|256,048,950.53|0.80%|
|3|Third|194,822,374.32|0.61%|
|4|Fourth|181,997,469.43|0.57%|
|5|Fifth|148,389,427.19|0.46%|
|Total|--|1,164,470,830.53|3.64%|

Other information of major customers
√ Applicable□ Inapplicable
The first customer is a related party of the Company: the subordinate research institute and company of China Electronics Technology Group Corporation (CETC) (controlled by a same actual controller CETC, and consolidated and listed as required).
Major suppliers of the Company
|||
|-|-|
|Total purchases from top five suppliers (RMB)|7,016,429,539.28|
|Total purchases from top five suppliers as a percentage of the total||
||33.43%|
|purchases for the year||
|Total purchases from the related parties in the top five suppliers as a||
||0.00%|
|percentage of the total purchases for the year||

Information on top five suppliers of the Company
|||||
|-|-|-|-|
|No.|Supplier Name|Purchase Amount (RMB)|Percentage of total purchase for the year|
|1|First|3,399,273,169.12|18.40%|
|2|Second|1,076,252,752.97|5.83%|
|3|Third|682,569,996.73|3.69%|
|4|Fourth|549,680,099.36|2.98%|
|5|Fifth|468,217,191.75|2.53%|
|Total|--|6,175,993,209.93|33.43%|

Other information on major suppliers
□ Applicable√ Inapplicable
3. Expense
Unit: RMB
||||||
|-|-|-|-|-|
||||Increase/decrease||
||2016|2015|over previous|Note of significant change|
||||year||
||2,991,273,819.81|2,179,045,314.71|37.27%|Improve sales network, increase|
|Sales expense|||||
|||||personnel contribution|
||3,106,761,432.94|2,211,221,871.15|40.50%|Expansion of the scale of operation,|
|Administrative expense|||||
|||||increase of R&D expense|
||-226,063,754.62|-152,896,391.70|-47.85%||
|Financial expense||||Increase of exchange gains|

Hikvision 2016 Annual Report 4.R&D Investment
Benefited from the professional intellectual property management system, the Company has newly applied for 907 patents (including 435 patents for invention, 139 utility models and 333 product design patents), and added 124 software copyrights. As of the end of 2016, the Company had accumulatively applied for 2530 patents, and had been granted 1245 patents (including 286 invention patents, 317 utility models and 642 product design patents), and owned 605 software copyrights.
During the reporting period, the Company invested RMB 2.43 billion inR&D, which accounted for7.62% of the operating income. Owing to the continuous highR&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 theCompany’s performance.
R&D investment of the Company
|||||
|-|-|-|-|
||2016|2015|Change Percentage|
||9,366|7,181|30.43%|
|Number of R&D headcount||||
||46.80%|47.18%|-0.38%|
|Percentage of Total headcount||||
||2,433,400,645.23|1,722,638,163.98|41.26%|
|Amount of R&D expenses (RMB)||||
|R&D investment as a percentage of|7.62%|6.82%|0.80%|
|operating income||||
||0.00|0.00|0.00%|
|Capitalized R&D expenses (RMB)||||
|Capitalized R&D expenses as a|0.00%|0.00%|0.00%|
|percentage of R&D expenses||||

Reason of significant change of totalR&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 capitalizedR&D expenses
□ Applicable√ Inapplicable
5. Cash flow
Unit: RMB
|||||
|-|-|-|-|
||||Increase/decrease over|
|Item|2016|2015||
||||previous year|
|Subtotal of cash inflows from|35,741,107,180.68|25,304,603,442.59|41.24%|
|operating activities||||
|Subtotal of cash outflows from|29,527,415,020.12|22,087,881,273.42|33.68%|
|operating activities||||
|Net cash flows from operating|6,213,692,160.56|3,216,722,169.17|93.17%|
|activities||||
|Subtotal cash inflows from investing|5,071,127,419.52|3,125,701,099.57|62.24%|
|activities||||
|Subtotal of cash outflows from|8,454,271,190.61|3,200,901,506.74|164.12%|
|investing activities||||
|Net cash flows from investing|-3,383,143,771.09|-75,200,407.17|-4,398.84%|
|activities||||
|Subtotal of cash inflows from|8,480,182,623.37|2,794,211,998.69|203.49%|
|financing activities||||
|Subtotal of cash outflows from|8,037,387,072.16|2,913,002,779.73|175.91%|
|financing activities||||
|Net cash flows from financing|442,795,551.21|-118,790,781.04|472.75%|
|activities||||

Hikvision 2016 Annual Report
|||||
|-|-|-|-|
||||Increase/decrease over|
|Item|2016|2015||
||||previous year|
|Net increase in cash and cash|3,486,219,235.60|2,921,778,750.70|19.32%|
|equivalents||||

Explanation of why the related data varied significantly on a YOY basis
√ Applicable□ Inapplicable
The fluctuation of net cash flows from operating activities is mainly due to the increase in payment collection; the fluctuation of net cash flows from investing activities is mainly due to the increase of investment in principal-guaranteed financial products; the fluctuation of net cash flows from financing activities is mainly due to the increase of euro bonds financing.
Explanation of reasons leading to the material difference between cash flow from operating activities during the reporting period and net profit for the year
□ Applicable√ Inapplicable
III. Non-core business analysis:
□ Applicable√ Inapplicable
IV. Analysis of assets and liabilities
1. Material changes of asset items
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||End of 2016||End of 2015||||
|||Percentage||Percentage|Increase/D|Note of significant change|
||||||ecrease||
||Amount|of total|Amount|of total|||
|||assets||assets|||
|Cash and bank|13,634,993,154.18||10,106,500,588.53|||Increase in sales payment|
|||32.98%||33.34%|-0.36%||
|balances||||||collection|
|Accounts|11,242,812,902.86||8,125,932,742.98|||Increase follows the increase in|
|||27.20%||26.80%|0.40%||
|receivable||||||sales revenue|
|Inventory|3,825,159,212.28|9.25%|2,818,665,737.11|9.30%|-0.05%|Inventory increases as sales|
|||||||increase|
|Long-term equity|35,000,000.00||0.00|||Increase of investment in|
|||0.08%||-|0.08%||
|investment||||||associated companies|
||2,853,743,612.67||1,887,240,766.08|||Increase of fixed assets & Decrease|
|Fixed assets||6.90%||6.23%|0.67%||
|||||||of construction in progress due to|
||316,482,522.36||844,631,051.21|||the completion of Hikvision|
|Construction in|||||||
|||0.77%||2.79%|-2.02%|Tonglu Security Industrial Base|
|process|||||||
|||||||Project Phase I|
||32,291,324.85||876,600,473.94|||Balance decreased by bank loan|
|Short-term loans||0.08%||2.89%|-2.81%||
|||||||expiring reimbursements|
|Long-term loans|1,722,207,584.33|4.17%|675,753,935.00|2.23%|1.94%|Increase of revolving loan|

Hikvision 2016 Annual Report 2. Assets and liabilities measured at fair value
√ Applicable□ Inapplicable
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||Profit or loss|Effect of foreign||||
||Opening|from change in|currency|Purchase during|Sales during||
|Item||||||Closing balance|
||balance|fair value during|exchange|the period|the period||
|||the period|difference||||
|Financial assets|||||||
|1.Financial assets measured|||||||
|at their fair values and of|||||||
|which the changes are|6,160,279.18|9,387,258.16|0|0|0|15,547,537.34|
|recorded into the current|||||||
|profits and losses(exclude|||||||
|derivative financial assets)|||||||
|3.Available-for-sale|||||||
||56,033,513.00|0|0|227,802,500.00|0|283,836,013.00|
|financial assets|||||||
|Subtotal of financial assets|62,193,792.18|9,387,258.16|0|227,802,500.00|0|299,383,550.34|
|Financial Liabilities|19,281,989.69|-49,558,836.96|-948,676.32|0|0|69,789,502.97|

 Whether there were any material changes on the measurement attributes of major assets of the Company during the Reporting Period:
□ Yes√ No
3. Assets right restrictions as of the end of reporting period
||||
|-|-|-|
|Item|Closing Book Value|Reasons for being restricted|
|Monetary fund|115,740,442.28|Various cash deposits and deposit pledge for long-term loan|
|Notes receivable|421,356,552.77|Pledge for issuance of bank acceptance|
|Accounts receivable|95,128,752.51|Pledge for long-term loan|
|Total|632,225,747.56||

V. Analysis of Investments
1. Overview
||||
|-|-|-|
|Investment during the reporting|Investment during the prior reporting||
|||Fluctuation|
|period(RMB)|period(RMB)||
|884,389,030.00|1,469,102,728.38|-39.80%|

2. Significant equity investment during the reporting period:
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report 3. Significant non-equity investment during the reporting period
√ Applicable□ Inapplicable
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||||||Cumulative|||
|||||Investment||||
|||Fixed|||amount of|||
|Project name|Invest|assets|Project industry|during the|investment by the|Source of|Project|
||method|investment||reporting||funds|schedule|
|||or not||period|end of reporting|||
||||||period|||
|Hikvision Tonglu Security|||Video product and|||Company’s|88.00%|
||Self-built|YES||34,070,087.02|635,259,705.43|||
|Industrial Base-Phase 1|||service|||own funds||
|Hikvision Tonglu Security|||Video product and|||||
||Self-built|YES||2,713,228.89|2,713,228.89|Bond|0.40%|
|Industrial Base-Phase 2|||service|||||
||||Video product and|||||
|Internet Security Industry Base|Self-built|YES||67,195,526.75|238,269,427.37|Bond|24.00%|
||||service|||||
|Total|--|--|--|103,978,842.66|876,242,361.69|--|--|

 4. Financial assets measured at their fair values
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||Profits or losses|Cumulative||||Closing balance||
||||||Sales||||
|||on the|fair value|||Cumulative|||
||Initial investment|||Purchase during the|during the|||Source of|
|Category||changes in fair|change|||investment|||
||cost|||reporting period|reporting|||funds|
|||value in this|charged to|||income|||
||||||period||||
|||period|equity||||||
||||||||2,485,985,565.37o|Company's|
|Derivative|||||||||
||1,701,837,006.10|-40,171,578.80|0.00|3,373,718,586.16|0.00|-8,280,159.82|||
|instruments||||||||wn funds|
|Total|1,701,837,006.10|-40,171,578.80|0.00|3,373,718,586.16|0.00|-8,280,159.82|2,485,985,565.37|--|

 5. Use of raised funds
□ Applicable√ Inapplicable
During the reporting period, there was no use of raised fund
Hikvision 2016 Annual Report VI. Disposal of significant assets and equity
1. Disposal of significant assets:
□ Applicable√ Inapplicable
During the reporting period, there was no disposal of significant assets
2. Sale of significant equity:
□ Applicable√ Inapplicable
VII. Analysis of major subsidiaries and investees
√ Applicable□ Inapplicable
Major subsidiaries and investees accounts for10% net profit or above
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Company|Company||Registered|||Revenue from|||
|||Principal business||Total assets|Net assets||Operating profit|Net profit|
|name|type||capital|||operation|||
|||Technology development and service:|||||||
|||computer system integration, electronic|||||||
|||product, communication product;|||||||
|Hangzhou|||||||||
|||service: the installation of electric|||||||
|Hikvision|||||||||
|System|Subsidiary|security engineering, the design,|150 million|1,525,884,858.45|633,702,598.42|1,749,071,730.75|67,316,380.11|31,035,084.20|
|||construction and maintenance of|||||||
|Technology.||intelligent system; manufacturing:|||||||
|Co., Ltd.|||||||||
|||video surveillance system, selling its|||||||
|||own products, import and export its|||||||
|||own products and technology.|||||||
|||Manufacturing: security electronic|||||||
|Hangzhou||product, intelligent hardware products,|||||||
|||explosion-proof electric products., IC|||||||
|Hikvision|||||||||
|Science and|Subsidiary|card and IC card RW device, mobile|100 million|16,058,562,853.55|548,487,159.53|30,128,507,312.77|190,957,553.33|118,923,073.97|
|||phone, cordless phone, handheld|||||||
|Technologies||wireless terminal, hand held mobile|||||||
|Co. Ltd.|||||||||
|||police terminal; import and export|||||||
|||business|||||||
|||The R&D, production, sale, technical|||||||
|Chongqing||service of electronic products and|||||||
|Hikvision||software; the installation of electronic|||||||
|Science and|Subsidiary|devices, the design, construction and|100 million|593,799,194.36|157,217,223.41|916,464,419.74|31,706,591.55|26,145,794.81|
|Technologies||maintenance of intelligent system;|||||||
|Co., Ltd.||import and export products and|||||||
|||technology.|||||||

Hikvision 2016 Annual Report Acquisition and disposal of subsidiaries during the reporting period
||||
|-|-|-|
||Equity acquisition and disposal||
|Company name||Impact on overall production results|
||mode||
|Hikvision Kazakhstan limited liability partnership|Cash contribution|Expand overseas sales channels|
|Hangzhou Hikvision Investment Management Co., Ltd.|Cash contribution|Business development|
|Hangzhou Hikvision Robotic Technology Co., Ltd.|Cash contribution|Business development|
|Hikvision Colombia SAS|Cash contribution|Expand overseas sales channels|
|Hikvision Turkey Technology And Security Systems|Cash contribution||
|||Expand overseas sales channels|
|Commerce Corporation|||
||Cash contribution|Business development|
|Tianjin Hikvision System Technology Co., Ltd.|||
||Cash contribution|Business development|
|Hangzhou Hikvision Automotive Technology Co., Ltd.|||
|Hangzhou Hikvision Communication Technology Co.,|Cash contribution|Business development|
|Ltd.|||
|Hangzhou HIK Weiying Sensor Technology Co., Ltd.|Cash contribution|Business development|
||Cash contribution|Business development|
|Henan HIK Hua’an Baoquan Electronics Co., Ltd.|||
|Hangzhou Haikang Zhicheng Investment and||Business development|
||Equity Transfer settled by Cash||
|Development Co., Ltd.|||
|Secure Holdings Limited|Equity Transfer settled by Cash|Expand overseas sales channels|

 VIII. Structural entities Controlled by the Company:
□ Applicable√ Inapplicable
IX. Outlook for the Future Development of the Company
1. Industry developing trends
(1) Stable growth in the traditional security business needs with increasing technical complexity
As video surveillance acts as important infrastructure and data sources of stability and security, along with constant advancement of China's new urbanization, as well as sustainable construction of safe city and smart city, the demand for traditional security business will continue to grow steadily. At the same time, the deep learning is driving the technological reform. The computer's processing capacity of video content will greatly enhance the
efficiency of video data utilization. Combined with multi-dimensional means of perceptions, the security
protection and defense technology will be greatly improved.
Hikvision 2016 Annual Report (2) Overseas security market competition is further intensified
The influence of Chinese manufacturers in the security industry continued to strengthen and the domestic market competition was relatively stable. The competition of Chinese manufacturers for overseas market share further intensified. Overseas competition between overseas high-end brand manufacturers and Chinese manufacturers, as well as among Chinese manufacturers will further intensify.
(3) Video technology applications expanded the development capacity of the industry, leading to new industrial landscape
Artificial intelligence will drive revolutions in the video technology industry and computer processing technology for video images will greatly increase the efficiency and utilization of video. The function of image capture by camera will not be limited to the purpose of security protection and the application of video technology into business management will be further expanded.
2. Development strategy of the Company
As a provider of IoT solutions and data operations service based on the video, Hikvision continues to develop video technology for serving human beings, adhering to the mission of "new vision and new world". It is committed to "becoming a respectable global enterprise".
The Company adheres to the business philosophy of "professionalism, honesty, and integrity" and implements the core values of "customer success, value-orientation, integrity and practicability, and pursuit of excellence". It will provide high-quality products and services for global customers and create greater value for customers worldwide through continuous innovation.
3. Key operation emphases in year 2017
(1) Continuous innovation and increasing investment in technology. The Company will continue to increaseR&D investment and maintain its leading position in key technologies of video image processing, structuring, big data and intelligent analysis relying on the ability of Research Institutes and productR&D center. It will continuously conduct research and development of excellent technologies and products to satisfy customer demand.
(2) To accelerate the application of technology into products and continue to promote the performance
Hikvision 2016 Annual Report growth. Through years of in-depth research on market segments and practical experience, the Company will focus on the industry's intelligent application scenarios, make in-depth integration of intelligent products, software technology and industry applications to introduce standardized products and solutions which are easy for promotion to meet the intelligent application needs of the industry and continue to create new value for users. (3) To expand the overseas project market for more breakthrough in regional coverage. The Company will enrich its product line for overseas markets, optimize the user experience, and strengthen the local support ability of overseas team to enhance the competitiveness of overseas products and solutions driven by advantageous products.
(4) To strengthen the strategic guidance and continuously deepen management reform. The Company will continue to learn from the world-class enterprises about the successful practical experience and continue to deepen management reform through the adoption of BLM (business leading model) and IPD (integrated product development). The Company also accelerates the decentralized flat organization construction and its transition from the functional organization(职能化组织) to the procedure organization(流程化组织) to achieve the strategic objectives.
(5) To constantly develop innovative business and cultivate the driving force for sustainable development. The Company will continue to develop EZVIZ, robotics and automotive technology and other innovative businesses and seize the development opportunities from extension of video technology to smart home, industrial automation and automotive electronics. The Company will continue to make strategic layout into emerging markets and emerging business with a promising prospect to offer a new impets into the sustainable development of the Company in the future.
X. Reception of activities including research, communication and interviews
√ Applicable□ Inapplicable
1. Schedule for the reception of activities including research, communication and interviews during the report period
|||||
|-|-|-|-|
|||Type of||
||Method of|||
|Time of reception||reception|Basic situation of the research|
||reception|||
|||object||
||||CNINF, Investor Relations Activity Record: From April 11th 2016 to|
|From April 11th 2016 to|Site Research|Institutional||
||||April 15th2016|

Hikvision 2016 Annual Report
|||||
|-|-|-|-|
|||Type of||
||Method of|||
|Time of reception||reception|Basic situation of the research|
||reception|||
|||object||
|April 15th 2016||investors||
|From April 18th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From April 18th 2016 to|
||Site Research|||
|April 22nd 2016||investors|April 22nd 2016|
|From April 25th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From April 25th 2016 to|
||Site Research|||
|April 29th 2016||investors|April 29th 2016|
|||Institutional||
|May 5th 2016|Site Research||CNINF, Investor Relations Activity Record: May 5th 2016|
|||investors||
|From May 9th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From May 9th 2016 to May|
||Site Research|||
|May 13th 2016||investors|13th 2016|
|From May 16th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From May 16th 2016 to|
||Site Research|||
|May 20th 2016||investors|May 20th 2016|
|From May 31st 2016 to||Institutional|CNINF, Investor Relations Activity Record: From May 31st 2016 to|
||Site Research|||
|June 3rd 2016||investors|June 3rd 2016|
|From June 13th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From June 13th 2016 to|
||Site Research|||
|June 17th 2016||investors|June 17th 2016|
|From June 20th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From June 20th 2016 to|
||Site Research|||
|July 1st 2016||investors|July 1st 2016|
|From July 4th 2016 to July||Institutional|CNINF, Investor Relations Activity Record: From July 4th 2016 to July|
||Site Research|||
|8th 2016||investors|8th 2016|
|From July 11th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From July 11th 2016 to July|
||Site Research|||
|July 15th 2016||investors|15th 2016|
||Telephone|Institutional||
|July 27th 2016|||CNINF, Investor Relations Activity Record: July 27th 2016|
||Communication|investors||
|From July 28th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From July 28th 2016 to|
||Site Research|||
|August 5th 2016||investors|August 5th 2016|
|From August 8th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From August 8th 2016 to|
||Site Research|||
|August 12th 2016||investors|August 12th 2016|
|From August 15th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From August 15th 2016 to|
||Site Research|||
|August 19th 2016||investors|August 19th 2016|
|From August 22nd 2016 to||Institutional|CNINF, Investor Relations Activity Record: From August 22nd 2016 to|
||Site Research|||
|August 26th 2016||investors|August 26th 2016|
|From August 29th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From August 29th 2016 to|
||Site Research|||
|September 1st 2016||investors|September 1st 2016|
|From September 6th 2016||Institutional|CNINF, Investor Relations Activity Record: From September 6th 2016|
||Site Research|||
|to September 14th 2016||investors|to September 14th 2016|
|From September 19th 2016|Site Research|Institutional|CNINF, Investor Relations Activity Record: From September 19th 2016|

Hikvision 2016 Annual Report
|||||
|-|-|-|-|
|||Type of||
||Method of|||
|Time of reception||reception|Basic situation of the research|
||reception|||
|||object||
|to September 23rd 2016||investors|to September 23rd 2016|
|From September 26th 2016||Institutional|CNINF, Investor Relations Activity Record: From September 26th 2016|
||Site Research|||
|to September 30th 2016||investors|to September 30th 2016|
||Telephone|Institutional||
|October 14th 2016|||CNINF, Investor Relations Activity Record: October 14th 2016|
||Communication|investors||
|From October 17th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From October 17th 2016 to|
||Site Research|||
|October 21st 2016||investors|October 21st 2016|
|From October 27th 2016 to||Institutional|CNINF, Investor Relations Activity Record: From October 27th 2016 to|
||Site Research|||
|October 28th 2016||investors|October 28th 2016|
|From November 1st 2016||Institutional|CNINF, Investor Relations Activity Record: From November 1st 2016 to|
||Site Research|||
|to November 11th 2016||investors|November 11th 2016|
|From November 14th 2016||Institutional|CNINF, Investor Relations Activity Record: From November 14th 2016|
||Site Research|||
|to November 25th 2016||investors|to November 25th 2016|
|From November 28th 2016||Institutional|CNINF, Investor Relations Activity Record: From November 28th 2016|
||Site Research|||
|to December 9th 2016||investors|to December 9th 2016|
|From December 12th 2016||Institutional|CNINF, Investor Relations Activity Record: From December 12th 2016|
||Site Research|||
|to December 23rd 2016||investors|to December 23rd 2016|
|From December 26th 2016||Institutional|CNINF, Investor Relations Activity Record: From December 26th 2016|
||Site Research|||
|to December 30th 2016||investors|to December 30th 2016|

2. Participation of conferences for investor relationship activities
||||||
|-|-|-|-|-|
|Time of|||Type of reception|Method of reception|
||Location|Conference Name|||
|conference|||object||
||||Institutional and|One-on-One, One-on-multi, small|
|January 2016|Shanghai|UBS Great China Conference|||
||||individual investors|group Meetings, and etc.|
|||Goldman Sachs Shenzhen A-Share|Institutional and|One-on-One, One-on-multi, small|
|January 2016|Hongkong||||
|||Corporate Day|individual investors|group Meetings, and etc.|
|||Haitong Securities A-Share|Institutional and|One-on-One, One-on-multi, small|
|April 2016|Hangzhou||||
|||Corporation Forum|individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|May 2016|Shenzhen|Macquarie Greater China Conference|||
||||individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|May 2016|Chengdu|CLSA China Forum|||
||||individual investors|group Meetings, and etc.|
|May 2016||BNP Paribas 7th Asia Pacific TMT|Institutional and|One-on-One, One-on-multi, small|
||Hongkong||||
|||Conference|individual investors|group Meetings, and etc.|

Hikvision 2016 Annual Report
||||||
|-|-|-|-|-|
|Time of|||Type of reception|Method of reception|
||Location|Conference Name|||
|conference|||object||
|May 2016||Nomura China A/H TMT Corporate|Institutional and|One-on-One, One-on-multi, small|
||Hongkong||||
|||Day|individual investors|group Meetings, and etc.|
|May 2016|||Institutional and|One-on-One, One-on-multi, small|
||Shenzhen|HSBC China Conference|||
||||individual investors|group Meetings, and etc.|
|May 2016||Goldman Sachs Tech-net Conference|Institutional and|One-on-One, One-on-multi, small|
||Hongkong||||
|||Asia Pacific|individual investors|group Meetings, and etc.|
|||Morgan Stanley Second Annual China|Institutional and|One-on-One, One-on-multi, small|
|May 2016|Beijing||||
|||Summit|individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|June 2016|Shenzhen|Credit Suisse A-shares Corporate Day|||
||||individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|June 2016|Beijing|J.P. Morgan Global China Summit|||
||||individual investors|group Meetings, and etc.|
|||Huatai Securities 2016 Half Year|Institutional and|One-on-One, One-on-multi, small|
|June 2016|Shanghai||||
|||Conference|individual investors|group Meetings, and etc.|
||New York||Institutional and|One-on-One, One-on-multi, small|
||Boston||individual investors|group Meetings, and etc.|
|June 2016||US NDR Roadshow-via JP Morgan|||
||San||||
||Fransisco||||
|||China Merchants Securities 2016 Half|Institutional and|One-on-One, One-on-multi, small|
|June 2016|Beijing||||
|||Year Conference|individual investors|group Meetings, and etc.|
|||China Galaxy Securities 2016 Half|Institutional and|One-on-One, One-on-multi, small|
|June 2016|Qingdao||||
|||Year Conference|individual investors|group Meetings, and etc.|
|September|||Institutional and|One-on-One, One-on-multi, small|
||London|Morgan Stanley China Corporate Day|||
|2016|||individual investors|group Meetings, and etc.|
|September||“China Feature” 4th CICC London|Institutional and|One-on-One, One-on-multi, small|
||London||||
|2016||Forum|individual investors|group Meetings, and etc.|
|September||Credit Suisse 17th Annual Asian|Institutional and|One-on-One, One-on-multi, small|
||Taibei||||
|2016||Technology Conference|individual investors|group Meetings, and etc.|
|September||Haitong Securities 2016 Fall A-share|Institutional and|One-on-One, One-on-multi, small|
||Hangzhou||||
|2016||Corporation Forum|individual investors|group Meetings, and etc.|
|September|||Institutional and|One-on-One, One-on-multi, small|
||New York|CITI Asia Corporate Forum 2016|||
|2016|||individual investors|group Meetings, and etc.|
|||Jefferies 6th Annual Greater China|Institutional and|One-on-One, One-on-multi, small|
|October 2016|Hongkong||||
|||Summit|individual investors|group Meetings, and etc.|
|||Shenwan Hongyuan Listed Company|Institutional and|One-on-One, One-on-multi, small|
|October 2016|Singapore||||
|||Forum|individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|November 2016|Shenzhen|CITI China Investor Conference 2016|||
||||individual investors|group Meetings, and etc.|

Hikvision 2016 Annual Report
||||||
|-|-|-|-|-|
|Time of|||Type of reception|Method of reception|
||Location|Conference Name|||
|conference|||object||
|||Credit Suisse 7th Annual China|Institutional and|One-on-One, One-on-multi, small|
|November 2016|Shenzhen||||
|||Investment Conference|individual investors|group Meetings, and etc.|
||New York|HSBC 8th Annual Asia Investor|Institutional and|One-on-One, One-on-multi, small|
|November 2016|||||
||||individual investors|group Meetings, and etc.|
||Boston|Forum|||
||||Institutional and|One-on-One, One-on-multi, small|
|November 2016|Beijing|CICC A-share Corporation Forum|||
||||individual investors|group Meetings, and etc.|
|||Bank of America Merrill Lynch 2016|Institutional and|One-on-One, One-on-multi, small|
|November 2016|Beijing||||
|||China Conference|individual investors|group Meetings, and etc.|
|||J.P. Morgan Global TMT Conference|Institutional and|One-on-One, One-on-multi, small|
|November 2016|Hongkong||||
|||in Asia 2016|individual investors|group Meetings, and etc.|
||||Institutional and|One-on-One, One-on-multi, small|
|November 2016|Hongkong|HK NDR Roadshow-via BNP Paribas|||
||||individual investors|group Meetings, and etc.|
|||Morgan Stanley Fifteenth Annual Asia|Institutional and|One-on-One, One-on-multi, small|
|November 2016|Singapore||||
|||Pacific Summit|individual investors|group Meetings, and etc.|
|||Guosen Securities SZHKconnection|Institutional and|One-on-One, One-on-multi, small|
|November 2016|Hongkong||||
|||Forum|individual investors|group Meetings, and etc.|
|||Fangzheng Securities Annual Investor|Institutional and|One-on-One, One-on-multi, small|
|December 2016|Hangzhou||||
|||Forum|individual investors|group Meetings, and etc.|
|December 2016||Morgan Stanley China A Share|Institutional and|One-on-One, One-on-multi, small|
||Hongkong||||
|||Corporate Day|individual investors|group Meetings, and etc.|
|December 2016||China Merchants Securities Annual|Institutional and|One-on-One, One-on-multi, small|
||Shenzhen||||
|||Investor Forum|individual investors|group Meetings, and etc.|
|December 2016|||Institutional and|One-on-One, One-on-multi, small|
||Shenzhen|Huatai Annual Investor Forum|||
||||individual investors|group Meetings, and etc.|
|December 2016||KGI Securities 2016 Q4 Investro|Institutional and|One-on-One, One-on-multi, small|
||Taibei||||
|||Forum|individual investors|group Meetings, and etc.|
|December 2016||2016 Guotai Securities Q4 Investor|Institutional and|One-on-One, One-on-multi, small|
||Taibei||||
|||Summit|individual investors|group Meetings, and etc.|
|December 2016||Caitong Securities Annual Investor|Institutional and|One-on-One, One-on-multi, small|
||Hangzhou||||
|||Forum|individual investors|group Meetings, and etc.|

3. Investor relations activity statistics during the reporting period
|||
|-|-|
||185|
|Number of daily research received (Site and telephone conference)||
|Number of institutional investors received (times)|665|
||36|
|Number of individual investors received (ppl)||
|Number of investor relations conference participated|39|

Hikvision 2016 Annual Report Section V Significant Events
I. Profit distribution of ordinary shares and capitalization of share premium
Profit distribution of ordinary shares in the reporting period, the formulation, implementation and adjustment of cash dividend policy
□ Applicable√ Inapplicable
Profit Appropriation and Capitalizing of Capital Reserves Plan or Proposal in Last Three Years
(1) Profit distribution plan for the year 2014: Based on the total share capital of 4,069,128,026 shares at the end of 2014, a final cash dividend of RMB 4 (tax inclusive) per 10 ordinary shares, bonus shares is nil, share distribution from capital reserves is nil.
(2) Profit distribution plan for the year 2015: Based on the total share capital of 4,068,772,253 shares of the Company at the end of 2015, all shareholders will be distributed a cash dividend of RMB 7 (tax inclusive) per 10 ordinary shares. The Company proposed bonus issue of 3 shares (tax inclusive) for each 10 ordinary shares to all shareholders by way of debiting retained profit and share distribution of 2 shares for each 10 ordinary shares to all shareholders from capital reserves.
(3) Profit distribution plan for the year2016：Based on the total share capital on the actual date of record when implementing the proposal, all shareholders will receive a cash dividend of RMB 6 (tax inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive) for each 10 ordinary shares; share distribution from capital reserve is nil.
Cash dividend of ordinary shares in recent 3 years (including current reporting period)
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||Ratio of net profit|Amount of cash||
|||Net profit attributable|||Ratio of cash|
||||attributable to|||
||Cash dividends|to shareholders of||dividends in other||
|Year|||shareholder of Company||dividends in|
||(including tax)|listed Company in||||
||||in consolidated financial|ways|other ways|
|||consolidated statements||||
||||statements (%)|||
|||7,422,261,983.16||||
|2016|3,691,546,045.80||49.74%|0.00|0.00%|
|||5,869,049,646.23||||
|2015|2,848,140,577.10||48.53%|0.00|0.00%|
|2014|1,627,651,210.40|4,665,368,689.94|34.89%|0.00|0.00%|

 II. Profit distribution and Capitalizing of Capital Reserves Plan or Proposal for the reporting period
|||
|-|-|
|Bonus issue per 10 shares (share)|5|
|Cash dividend per 10 shares (RMB) (tax||
||6.00|
|inclusive)||
|Additional shares converted from capital reserves||
||0|
|for every 10 shares (share)||

Hikvision 2016 Annual Report
|||
|-|-|
|Total shares as the basis for the distribution plan||
||6,152,576,743|
|(share)||
|Total cash dividend (RMB) (tax inclusive)|3,691,546,045.80|
|Distributable profits (RMB)|14,138,569,341.95|
|Percentage of cash dividends in the total||
||54.55%|
|distributed profit (%)||
|Cash dividend policy:||
|The Company is in the development stage and has a substantial plan of cash expenditure. In profit distribution, cash dividends shall||
|account for at least 20%.||
|Details about the plan for profit distribution and capitalizing capital reserves into share capital||
|As audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, in 2016, the parent company of the Company recorded||
|net profit of RMB 7,203,768,180.57. After deducting the statutory surplus reserve of RMB 720,376,818.06, which was provided at||
|10%, plus the undistributed profit of the parent company at the beginning of the year of RMB 11,686,702,731.96, deducting the||
|cash dividends of RMB 2,810,893,076.52 in 2015, and the stock dividend of RMB 1,220,631,676.00, as of December 31, 2016, the||
|profits attributable to shareholders of the parent company amounted to RMB 14,138,569,341.95. As of December 31, 2016, the||
|profits attributable to shareholders in the consolidated statement were RMB 14,866,457,856.65 (consolidated). To sum up,||
|according to the principle of “whichever is lower”, the profits attributable to shareholders this year was RMB 14,138,569,341.95.||
|Based on the total share capital on the actual date of record when implementing the proposal (Note), all shareholders will receive a||
|cash dividend of RMB 6 (tax inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive)||
|for each 10 ordinary shares; share distribution from capital reserve is nil. The Company guaranteed, considering the future changes||
|in equity, the total expected distribution will not exceed the allocatable range in the financial statements. From the above proposal,||
|total cash dividend in 2016 is RMB 3,691,546,045.80. The remaining undistributed profit shall be carried forward to the following||
|year. Total bonus shares are 3,076,288,371, so the total share capital will be 9,228,865,114 shares from 6,152,576,743 shares||
|originally.||
|Note: the most updated total capital share of the Company is 6,155,033,743 shares, however, the procedure for the first repurchase||
|and cancelation of the 2014 Restricted Stocks Scheme is underway currently and 2,457,000 restricted shares should be repurchased||
|and cancelled before the date of record of the implementation of the future profit distribution. By that point of time, the total share||
|capital of the Company will be changed from 6,155,033,743 shares to 6,152,576,743 shares.||

III. Performance of commitments
1. Complete and incomplete commitments of the Company, Shareholders, Actual Controller, Acquirer, Directors, Supervisor, Senior Executives or other related parties
√ Applicable□ Inapplicable
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
|Commitments inofferingdocuments orshareholdingalterations|CETHIK Group Co., Ltd.|1. Commitments in non-competitionwithin the industry: In the period ascontrolling shareholders of theHikvision, CETHIK and its controllingsubsidiaries (excluding Hikvision andits subsidiaries, the same below) will|29 October,2013|Long-term|Strictperformance|

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
|||not be engaged in such business that iscompetitive to Hikvision and itssubsidiaries directly or indirectly.2. Commitments in decrease andregulation of transactions with relatedparty: Zhejiang Haikang Group Co., Ltd(hereinafter referred to as HaikangGroup or actual controller) as thecontrolling shareholders of HangzhouHikvision Digital Technology Co., Ltd(hereinafter referred to as "Hikvision"or "Listed Company") are commited asbelow for the transactions withHikvsion:(1) Haikang Group will not make use ofthe controlling power to offer morefavorable conditions to Hikvision thanthose to any independent third party inany fair market transactions in thecooperation with Hikvision.(2) Haikang Group will not make use ofthe controlling power to obtain the priorright to complete the transaction withHikvision.(3) Haikang Group will not deal withHikvsion in not fair terms comparing tothe market prices to prejudice theCompany’s interests.For unavoidable related transactions,the Company will observe the principlesof justice and fairness to deterimineprices according to the market on thebasis of equality, voluntarily. TheCompany will obey the Articles ofAssociation and other regulatorydocuments related to the avoiding ofissues about related transactions. Therelated transactions will go throughapproval procedures in accordance withrelated rules and complete legalprocedures, fulfilling the informationdisclosure obligations in respect to therelated transactions3. Commitment to the maintenance ofthe independence of the listed Company3.1 Commitment to PersonnelIndependence of the listed Company(1) Commitment that our generalmanager, deputy general manager, chieffinancial officer, secretary of the boardand other members of seniormanagement shall not assume anypositions other than directors and||||

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
|||supervisors or get any remuneration inCETHIK and/or any of its controlledentities; (2) Commitment in keeping themanagement of labor, human resourcesand issues related to remuneration of thelisted Company independent from thatof CETHIK;3.2 Commitment to the independence ofthe asset of the listed Company(1) Commitment to independent andcomplete asset of the listed Company(2) Commitment free of unlawful use ofcash and asset of the listed Company bythe controlling shareholders3.3 Commitment to financialindependence of the listed Company(1) Commitment to an independentfinance department with a team andaccounting system;(2) Commitment to a regulated,independent accounting system andfinancial management system of thebranches and subsidiaries(3) Commitment to maintainingaccounts with banks independently ofand not sharing any bank account withour controlling shareholders(4) Commitment that the financial staffshall not assume any positions inCETHIK(5) Commitment to paying taxesindependently according to the law;(6) Commitment to implementingfinancial decisions independently3.4 The Company has set up anindependent organizational structurewhich maintains its independentoperations which is independent fromthat of CETHIK.3.5 Commitment to businessIndependence of the listed Company(1) The Company has the asset,personnel, aptitude and managementcapability for independent and completebusiness operation. The Company hasthe ability to operate independently inthe market.(2) Commitment in independence inboth business and operations4. Regarding plans for the developmentand relevant commitment for the listed||||

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
|||Company, Haikang Group hascommitted as below for the subsequentdevelopment of Hikvsion according tothe Securities Acts and relevant lawsand rules,4.1 Currently the Company has no planto change or make significantadjustments for principal business in thenext 12 months;4.2 Currently the Company has no planto sell, merge or operate with anotherCompany for the assets and business ofthe listed Company or its subsidiaries inthe next 12 months.4.3 Currently the Company has no planto alter the Board of the Directors andsenior management and no agreementwith other shareholders about theappointment and removal of thedirectors or senior management. Theteam of Board of Directors and seniormanagement will remain unchanged forthe foreseeable future.4.4 Currently the Company has no planto make significant changes to theArticles of Association for the listedCompany.4.5 Currently the Company has no planto make significant changes to theexisting employee recruitment for thelisted Company.4.6 Currently the Company has no planto make significant changes for thedividend distribution plan for the listedCompany.4.7 Currently the Company has no planto make significant changes for businessand organizational structure for thelisted Company.||||
|Commitments inInitial Public|Hangzhou WeixunInvestment Management|During Hu Yangzhong, Wu Weiqi,JiangHaiqing, Zhou Zhiping, Xu|17 May, 2010|Long term|Strictperformance|

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
|Offering orre-financing|Limited Partnership（laterrenamed as Xinjiang WeixunInvestment ManagementLimited Partnership）|Lirong, Cai Dingguo, He Hongli, ZhengYibo, Hu Dan,、Jiang Yufeng, LiuXiang, Wang Ruihong, Chen Junke’stenure of the Company’s board ofdirectors, supervisors and seniormanagement personnel, the annualtransfer of Hikvision’s total sharesshould not exceed 25% of total numberof shares held under Weixun; within 6months after abovementionedpersonnel’s dimission, should nottransfer hikvision’s shares held underWeixun.||||
||Hangzhou Pukang InvestmentLimited Partnership（laterrenamed as Xinjiang PukangInvestment LimitedPartnership）|During Hu Yangzhong, Wu Weiqi,Gong Hongjia’s tenure of theCompany’s board of directors,supervisors and senior managementpersonne, the annual transfer ofHikvision’s total shares should notexceed 25% of total number of sharesheld under Pukang; whithin 6 monthsafter abovementioned personnel’sdimission, should not transferhikvision’s shares held under Pukang.|17 May, 2010|Long term|Strictperformance|
||The Company's directors,supervisors and executive:HuYangzhong,Wu Weiqi,Jiang Haiqing, ZhouZhiping，Xu Lirong, CaiDingguo, He Hongli, ZhengYibo, Hu Dan, Jiang Yufeng,Liu Xiang, Wang Ruihong,Chen Junke|During their tenure of the Company’sboard of directors, supervisors andsenior management personnel, theannual shares transfer should not exceed25% of total number of shares heldunder Weixun; whthin 6 months aftertheir dimission, they should not transfertheir shares held under Weixun.|17 May, 2010|Long term|Strictperformance|
||Directors, executive officersof the Company:Hu Yangzhong, Wu Weiqi|During their tenure of the Company’sboard of directors, supervisors andsenior management personnel, theannual shares transfer should not exceed25% of total number of shares heldunder Pukang; whthin 6 months aftertheir dimission, they should not transfertheir shares held under Pukang.|17 May, 2010|Long term|Strictperformance|

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Date of|Term of||
|Commitments|Giver of commitments|Details of commitments|||Performance|
||||commitments|commitments||
||The Company’s directorGong Hongjia’s spouse, ChenChunmei|During Gong Hongjia’s tenure of theCompany’s board of directors,supervisors and senior managementpersonnel, Chen’s annual shares transfershould not exceed 25% of total numberof shares held under Pukang; whthin 6months after the dimission of GongHongjia,Chen should not transfer hershares held under Pukang.|17 May, 2010|Long-term|Strictperformance|
||China Electronics TechnologyGroup Corporation|To avoid any loss of the Company andother shareholders arising from anycompeting business, China ElectronicsTechnology Group Corporation, theactual controller of the Company, issuedLetters of non-competition on 18September, 2008.|18September,2008|Long term|Strictperformance|
||Gong Hongjia；XinJiang WeiXun InvestmentManagement LimitedPartnership；XinJiang KangPu InvestmentManagement LimitedPartnership；ZheJiang OrientHoldings Co., Ltd.|To avoid any loss of the Company andother shareholders arising from anycompeting business, Gong Hongjia,Hangzhou WeiXun InvestmentManagement Limited Partnership,ZheJiang Orient Holdings Co., Ltd andHangzhou KangPu InvestmentManagement Limited Partnership, thepromoters of the Company, issuedLetters of non-competition on 10 July,2008.|10 July, 2008|Long term|Strictperformance|
|Whether theundertaking isfulfilled in time|Yes|||||

2. Where any profit forecast was made for any of theCompany’s assets or projects and the Reporting Period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the profit forecast and why:
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report IV. TheCompany’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-standardauditor’s report” issued by the CPA firm for the reporting period
□ Applicable√ Inapplicable
VI. For changes in accounting policies, accounting estimates and accounting methods as compared to the financial report for the prior year
□ Applicable√ Inapplicable
No such case in the reporting period.
VII. Reason for retrospective restatement of major accounting errors during the reporting period□ Applicable√ Inapplicable
No such case in the reporting period.
VIII. Reason for changes in scope of the consolidated financial statements as compared to the financial report for the prior year
√ Applicable□ Inapplicable
During the reporting period, the Company has newly set up five wholly-owned subsidiaries, i.e., Hikvision Kazakhstan Limited Liability Partnership, Hangzhou Hikvision Investment Management Co., Ltd., Hikvision Colombia SAS, Hikvision Turkey Technology and Security Systems Commerce Corporation and Tianjin Hikvision System Technology Co., Ltd., five holding subsidiaries, including Hangzhou Hikvision Robotics Technology Co., Ltd., Hangzhou Hikvision Automotive Technology Co., Ltd., Hangzhou Hikvision Communication Technology Co., Ltd., Hangzhou HIK Weiying Sensor Technology Co., Ltd. and Henan Hikvision Huaan Secure Electronics Co., Ltd., and acquired two companies: Hangzhou Hikvision Zhicheng
Hikvision 2016 Annual Report Investment Development Co., Ltd., Secure Holdings Limited and its subsidiaries, which have caused the increase of consolidation scope. For more details, please refer to note (VI) “Changes in consolidation scope” of the financial statement.
IX. Engagement and disengagement of the CPA firm
CPA firm engaged at present
|||
|-|-|
||Deloitte Touche Tohmatsu CPA LLP|
|Name of the domestic CPA firm||
|Remuneration for the domestic CPA firm||
||230|
|(RMB’0000)||
|Consecutive years of the audit service provided by||
||1|
|the domestic CPA firm||
|Name of the certified public accountants from the||
||Mou Zhengfei, Huang Yan|
|domestic CPA firm||

Whether the CPA firm was changed in the current period
√ YES□NO
Whether the CPA firm was changed during the auditing period
□ YES√ NO
Whether the Change of CPA firm performed approval process
√ YES□NO
Details about changing CPA firm in the current period
On May 5, 2016, the Company's general meeting of shareholders for 2015 examined and approved the Proposal on Engaging Certified Public Accountants in 2016, and agreed to appoint Deloitte Touche Tohmatsu Certified Public Accountants LLP (Special General Partnership) as the auditor for 2016. For details, please refer to the Announcement on Engaging Certified Public Accountants in 2016 issued by the Company on April 9, 2016 (Announcement No.: No. 2016-012).
Engagement of any CPA firm for internal control audit, financial advisor or sponsor
□ Applicable√ Inapplicable
X. Listing suspension and termination after disclosure of this annual report
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report XI. Bankruptcy and restructuring
□ Applicable√ Inapplicable
No such case in the reporting period.
XII. Material litigation and arbitration
□ Applicable√ Inapplicable
No such case in the reporting period.
XIII. Punishments and rectifications
□ Applicable√ Inapplicable
No such case in the reporting period.
XIV. Integrity of the Company and its controlling shareholders and actual controllers
□ Applicable√ Inapplicable
XV. The implementation of an Equity Incentive Plan, Employee Stock Ownership Plan, or other incentive plan
√Applicable□Inapplicable
During the reporting period, the Company has for the third time unlocked, repurchased and cancelled shares for the 2012 Restricted Share Incentive Scheme: On 29 August 2016, “Resolution for the fulfillment of the unlocking conditions of the third unlock period for the first batch of Restricted Share Incentive Schemes” and the “Resolution for the repurchase and cancelation of a portion of locked shares that already granted to personnel not fulfilling the incentive conditions in the year” were approved by the fifteenth meeting of the third Board. Authorized by the first special general meeting for2012，a total of 7,620,714 restricted shares of 539 grantees was vested and circulated on 13 September 2016. Meanwhile, 451,494 restricted shares held by a portion of grantees not fulfilling the incentive conditions were repurchased and cancelled. On 16 November 2016, repurchase and cancelation of restricted shares was completed. For details, please refer to in the “Indicative notice of the unlocking conditions of the third unlock period for the first batch of Restricted Share Incentive Schemes” (No. 2016-045) and the “Notice of the completion of repurchase and cancelation of a portion of locked shares that already granted to personnel not fulfilling the incentive conditions in the year” (No. 2016-057) issued on 9
Hikvision 2016 Annual Report September 2016 and 17 November 2016 respectively.
During the reporting period, the restricted shares granted under the 2014 Restricted Share Incentive Scheme of the Company were still in lockup period.
The Accounting Treatment in Relation to the Restricted Share Incentive Schemes is based on the Accounting Standard for Business Enterprises No. 11– Share-based Payment(企业会计准则第11号-股份支付）and other accounting standards. Costs in relation to the shares granted under 2012 and 2014 Restricted Share Incentive Schemes are amortized over the waiting period for vesting. During the reporting period, costs amortized in relation to the Restricted Share Incentive Schemes of the Company have no material impact on the financial position and operating results of the Company.
XVI. Significant related-party transaction
1. Related-party transactions arising from routine operation
□ Applicable√ Inapplicable
No such case in the reporting period.
2. Related-party transactions regarding purchase and disposal of assets or equity
□ Applicable√ Inapplicable
No such case in the reporting period.
3. Significant related-party transactions arising from joint investments with external parties
□ Applicable√ Inapplicable
No such case in the reporting period.
4.Related-parties’ creditor's rights and debts
□ Applicable√ Inapplicable
No such case in the reporting period.
Hikvision 2016 Annual Report 5. Other significant related party transactions
□ Applicable√ Inapplicable
No such case in the reporting period.
XVII. Significant contracts and their execution
1. Trusteeship, contracting and leasing
1.1 Trusteeship
□ Applicable√ Inapplicable
No such case in the reporting period.
1.2 Contracting
□ Applicable√ Inapplicable
No such case in the reporting period.
1.3 Leasing
□ Applicable√ Inapplicable
No such case in the reporting period.
2. Significant guarantees
2.1 Details of guarantees
Unit:RMB’0000
||||||||||
|-|-|-|-|-|-|-|-|-|
|Guarantees provided by the Company for subsidiaries|||||||||
||||||||Term of||
||Term of|||Term of|Term of|Term of||Term of|
|Term of guarantee||Term of guarantee|Term of guarantee||||guarante||
||guarantee|||guarantee|guarantee|guarantee||guarantee|
||||||||e||
|Hangzhou|||||||||
|Hikvision Science|October||||Joint|2015.12.15|||
|||850,000|December 25th 2015|200,036.88|||NO|YES|
|and Technologies|21st 2016||||guarantee|-2018.5.4|||
|Co. Ltd.|||||||||
|Hangzhou|||||||||
||December||||||||
|Hikvision|||||Joint|2016.7.14-|||
||23rd|170,000|July 14th 2016|370.17|||NO|YES|
|Electronics Co.|||||guarantee|2017.3.31|||
||2015||||||||
|Ltd.|||||||||

Hikvision 2016 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|Chongqing|||||||||
||December||||||||
|Hikvision Science|||||||||
||23rd|30,000|has not occurred during the reporting period||||||
|and Technologies|||||||||
||2015||||||||
|Co., Ltd|||||||||
|HIKVISION|||||||||
||October||||Joint|2016.9.8-|||
|INTERNATIONA||160,800|September 8th 2016|2,168.80|||NO|YES|
||21st 2016||||guarantee|2017.9.8|||
|L CO., LTD.|||||||||
|||||Total actual guarantee|||||
|Total guarantee cap for|||||||||
|||309,200||amount for subsidiaries||395,172.74|||
|subsidiaries approved during|||||||||
|||||during the reporting|||||
|the reporting period(B1)|||||||||
|||||period(B2)|||||
|||||Total actual guarantee|||||
|Total approved guarantee cap|||||||||
|||1,210,800||balance for subsidiaries at||202,575.85|||
|for subsidiaries at the end of|||||||||
|||||the end of the reporting|||||
|the reporting period(B3)|||||||||
|||||period(B4)|||||
|Guarantees provided between subsidiaries|||||||||
||Announce||||||||
||ment|||||||Guarante|
||date of||Actual occurrence|Actual||||e for a|
||||||Type of|Term of|Due or||
|Guaranteed party|disclosure|Guarantee|date( date of|guarantee||||related|
||||||guarantee|guarantee|not||
||of the||agreement signing)|amount||||party or|
||guarantee|||||||not|
||cap||||||||
|COÖPERATIEF|||||||||
||April 9th||||Joint|2015.4.8-|||
|HIKVISION||32,500|April 8th 2015|0|||YES|YES|
||2016||||guarantee|2016.6.21|||
|EUROPE U.A.|||||||||
|||||Total actual guarantee|||||
|Total guarantee cap for|||||||||
|||26,050||amount for subsidiaries||0|||
|subsidiaries approved during|||||||||
|||||during the reporting|||||
|the reporting period (C1)|||||||||
|||||period (C2)|||||
|||||Total actual guarantee|||||
|Total approved guarantee cap|||||||||
|||32,500||balance for subsidiaries at||0|||
|for subsidiaries at the end of|||||||||
|||||the end of the reporting|||||
|the reporting period (C3)|||||||||
|||||period (C4)|||||
|Total guarantee amount provided by the Company (total of the above-mentioned kinds of guarantees)|||||||||
|||||Total actual guarantee|||||
|Total guarantee cap approved|||||||||
|||335,250||amount during the||395,172.74|||
|during the reporting period|||||||||
|||||reporting period|||||
|(A1+B1+C1)|||||||||
|||||(A2+B2+C2)|||||
|||||Total actual guarantee|||||
|Total approved guarantee cap|||||||||
|||1,243,300||balance at the end of the||202,575.85|||
|at the end of reporting period|||||||||
|||||reporting period|||||
|(A3+B3+C3)|||||||||
|||||(A4+B4+C4)|||||
|Portion of the total actual guarantee amount (A4+B4+C4) in net assets|||||||||
|||||8.27%|||||
|of the Company|||||||||
|Of which|||||||||
|Amount of guarantees provided for shareholders, the actual controller||||0|||||

Hikvision 2016 Annual Report
|||
|-|-|
|and their related parties (D)||
|Amount of debt guarantees provided directly or indirectly for entities||
||202,205.68|
|with a liability-to-asset ratio over 70% (E)||
|Portion of the total guarantee amount in excess of 50% of net assets (F)|0|
|Total guarantee amount (D+E+F)|202,205.68|

 Illustration of compound method guarantee
As required by the project owner, China Electronics Technology Group Corporation has provided a joint guarantee to responsibility and duties of 41 construction projects of “Safe Chongqing, Emergency Control System Digital Construction Project,” signed by Chongqing Hikvision System Technology Co., Ltd. Meanwhile, the Company provides a counter guarantee to China Electronics Technology Group Corporation.
2.2 Illegal provision of guarantees for external parties
□ Applicable√ Inapplicable
No such case in the reporting period.
3. Entrusting others to execute any cash asset management
3.1 Entrust finances
□ Applicable√ Inapplicable
No such case in the reporting period.
3.2 Entrusted loans
□ Applicable√ Inapplicable
No such case in the reporting period.
4. Other significant contracts
□ Applicable√ Inapplicable
No such case in the reporting period.
XVIII. Social responsibility
1．Fulfillment of the social responsibility of targeted poverty alleviation
The Company did not conduct any targeted poverty alleviation during the reporting period and had no future
arrangement for targeted poverty alleviation.
Hikvision 2016 Annual Report2．Fulfillment of other social responsibilities
While seeking for economic benefits and protectingshareholders’ interests, Hikvision proactively fulfilled corporate social responsibilities by treating suppliers, customers and consumers in good faith, caringemployees’ remuneration benefits, professional development and other legal rights and actively engaging in environment protection and affairs for public welfare, in order to make contribution to the sustainable development of society, economy and environment.
For details, please refer to its “Annual Social Responsibility Report 2016” disclosed in CNINFO (www.cninfo.com.cn)
Whether the listed Company and its subsidiaries are critical pollutant enterprises regulated by national environmental protection department
□ YES√ NO
Whether issued social responsibility report
□ YES√ NO
|||||||
|-|-|-|-|-|-|
|Corporate Social Responsibility Report||||||
||||Whether included|Standards of disclosure||
||Whether included|Whether||||
||||Corporate|||
|Nature|environmental|included social|||Overseas|
||||Governance|Domestic standards||
||information|information|||standards|
||||informatiom|||
|||||Guidance on Corporate Social Responsibilities for||
|||||Listed Companies on Shenzhen Stock Exchange||
||Yes|Yes|Yes||N/A|
|Other||||Place (《深圳证券交易所上市公司社会责任指||
|||||引》) and other relevant documents||

Details
|||
|-|-|
|1. Whether the Company has obtained the Environmental Management||
||Yes|
|System Certification (ISO14001)||
|2. Annual investment and expenditure in respect of environment protection||
||263.48|
|(RMB’ 0000)||
|3. The Company’s performance in the emission of waste gas, waste|In compliance with relevant emission requirements|
|water and waste residue|of the state|
|4. The Company’s investment for improving employees’ knowledge||
||928.20|
|and skills to promote their professional development (RMB’ 0000)||
|5. The Company’s donation for public welfare (including money,|0|

Hikvision 2016 Annual Report
||
|-|
|material and free professional service) (RMB’ 0000)|

XIX. Other significant events
□ Applicable√ Inapplicable
No such case in the reporting period.
XX. Significant events of subsidiaries
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report Section VI Changes in Shares and Information about
Shareholders
I. Changes in Share Capital
1. Table of changes in share capital
Unit: Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before the change||Changes in the period (+, -)|||||After the change||
||||Shares||Share|||||
|||||Bonus||||||
||Shares|Ratio|newly||transferred|Others|Sub-total|Shares|Ratio|
|||||share||||||
||||issued||from reserve|||||
|1. Shares subject to||||||||||
||913,364,679|22.45%||276,368,829|184,245,886|43,946,639|504,561,354|1,417,926,033|23.23%|
|conditional||||||||||
|restriction(s)||||||||||
|(3) Other domestic||||||||||
||355,377,179|8.73%||108,972,579|72,648,386|43,946,639|225,567,604|580,944,783|9.52%|
|shares||||||||||
|Including: held by||||||||||
|domestic|296,885,625|7.30%||69,496,836|46,331,224|7,864,752|123,692,812|420,578,437|6.89%|
|nonstate-owned||||||||||
|enterprises||||||||||
|Including: held by||||||||||
||58,491,554|1.44%||39,475,743|26,317,162|36,081,887|101,874,792|160,366,346|2.63%|
|domestic natural||||||||||
|person||||||||||
|(4) Foreign shares|557,987,500|13.71%||167,396,250|111,597,500|0|278,993,750|836,981,250|13.71%|
|Including: held by||||||||||
||0|0.00%||0|0||0|0|0.00%|
|foreign enterpirses||||||||||
|Including: held by||||||||||
||557,987,500|13.71%||167,396,250|111,597,500||278,993,750|836,981,250|13.71%|
|foreign natural person||||||||||
|2. Shares without||||||||||
||3,155,407,574|77.55%||944,262,847|629,508,564|-44,398,133|1,529,373,278|4,684,780,852|76.77%|
|restriction||||||||||
|(1) RMB ordinary||||||||||
||3,155,407,574|77.55%||944,262,847|629,508,564|-44,398,133|1,529,373,278|4,684,780,852|76.77%|
|shares||||||||||
|3. Total|4,068,772,253|100.00%||1,220,631,676|813,754,450|-451,494|2,033,934,632|6,102,706,885|100.00%|

 Reason for the changes in share capital
√ Applicable□ Inapplicable
(1) Annual Implementation of Equity Distribution for 2015
The Company distributed the cash dividend of RMB 7 (tax included) for every 10 shares to all shareholders
Hikvision 2016 Annual Report on the basis of the Company's total share capital of RMB 4,068,772,253 as at 31 December 2015 according to the Company's annual profit distribution plan for 2015, and at the same time transferred capital reserve to all
shareholders for every 10 shares by 2 shares. The ex-dividend date was May 18, 2016, and the total share capital of the Company increased by 2,034,386,126 shares from 4,068,772,253 shares to 6,103,158,379 shares.
(2) The Third Repurchase and Cancelation of the 2012 Restricted Share Incentive Scheme
On August
29th,
2016, at the
15th
Session of the Third Board of Directors of the Company, the Board reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were already granted to personnel not fulfilling the incentive conditions in the year(关于回购注销部分已不符合激励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the
1st
Extraordinary General Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme. On November
16th,
2016, after the completion of cancelation procedures for 451,494 shares, the total share capital of the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
Approval for changes in share capital
√ Applicable□ Inapplicable
(1) Annual Implementation of Profit Distribution for 2015
On April 8, 2016, the Tenth Meeting of the Third Board of Directors of the Company reviewed and approved the Annual Profit Distribution Plan for 2015. On May 5, 2016, the Annual General Meeting of 2015 reviewed and approved the Annual Profit Distribution Plan for 2015.
(2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
On August
29th,
2016, at the
15th
Session of the Third Board of Directors of the Company, the Board reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were already granted to personnel not fulfilling the incentive conditions in the year(关于回购注销部分已不符合激励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the
1st
Extraordinary General Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme. Transfer for changes in share capital
√ Applicable□ Inapplicable
(1) Annual Implementation of Profit Distribution for 2015
May
18th
2016 was the ex-dividend date of Annual Implementation of Profit Distribution for 2015, the total capital share of the company increased by 2,034,386,126 shares from 4,068,772,253 shares to 6,103,158,379 shares.
(2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
Hikvision 2016 Annual Report On November
16th,
2016, after the completion of cancelation procedures of 451,494 shares, the total share capital of the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
Effects of changes in share capital on the basic earning per share ("EPS"), diluted EPS, net assets per share attributable to common shareholders of the Company, and other financial indexes over the last year and last period□ Applicable√ Inapplicable
Other contents that the Company considers necessary or required by the securities regulatory authorities to disclose
□ Applicable√ Inapplicable
2. Changes in restricted shares
√ Applicable□ Inapplicable
Unit: Share
||||||||
|-|-|-|-|-|-|-|
||Opening|Unlocked in|Increased in|Closing restricted|Reason for||
|Name of shareholder||||||Date of unlocking|
||restricted shares|current period|current period|shares|unlocking||
|||||||According to the|
||||||Executives|relevant provisions|
|Gong Hongjia|836,831,250|0|0|836,831,250|||
||||||locked shares|of executives|
|||||||shares management|
||||||Institution||
|Xinjiang Weixun|||||||
|Investment Management|336,780,000|12,375,000|0|324,405,000|restricted share|April 25th 2016|
|Limited Partnership|||||before IPO||
||||||Institution||
|Xinjiang Pukang|||||||
|Investment Limited|108,548,437|12,375,000|0|96,173,437|restricted share|April 25th 2016|
|Partnership|||||before IPO||
||||||Restricted||
|Targets of restricted share|||||shares of|September 13th|
||87,437,331|7,620,714|0|79,365,123|||
|incentive plan (summary|||||||
||||||equity|2016|
|statistic)|||||||
||||||incentive plan||
|||||||According to the|
||||||Executives|relevant provisions|
|Hu Yangzhong|0|0|61,166,741|61,166,741|||
||||||locked shares|of executives|
|||||||shares management|
|||||||According to the|
||||||Executives|relevant provisions|
|Wu Weiqi|0|0|5,480,945|5,480,945|||
||||||locked shares|of executives|
|||||||shares management|
||||||Executives|According to the|
|Jiang Haiqing|0|0|5,481,442|5,481,442|||
||||||locked shares|relevant provisions|

Hikvision 2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|||||||of executives|
|||||||shares management|
|||||||According to the|
||||||Executives|relevant provisions|
|Zhou Zhiping|0|0|3,550,938|3,550,938|||
||||||locked shares|of executives|
|||||||shares management|
|||||||According to the|
||||||Executives|relevant provisions|
|Jia Yonghua|0|0|2,745,873|2,745,873|||
||||||locked shares|of executives|
|||||||shares management|
|||||||According to the|
||||||Executives|relevant provisions|
|Li Pan|450,000|0|2,245,284|2,695,284|||
||||||locked shares|of executives|
|||||||shares management|
|||||||According to the|
||||||Executives|relevant provisions|
|Huang Fanghong|0|0|30,000|30,000|||
||||||locked shares|of executives|
|||||||shares management|
|Total|1,370,047,018|32,370,714|80,701,223|1,417,926,033|--|--|

 Note: In respect of changes in shares due to the implementation of equity distribution for 2015, the number of shares with restrictions on sale lifted and increased at the beginning and in the current period has been adjusted accordingly. II. Issuance and listing of securities
1. Securities (exclude preferred share) issued during the reporting period
□Applicable√Inapplicable
2. Explanation on changes in share capital& the structure of shareholders, the structure of assets and liabilities
√ Applicable□ Inapplicable
(1) Annual Implementation of Equity Distribution for 2015
The Company distributed the cash dividend of RMB 7 (tax included) for every 10 shares to all shareholders on the basis of the Company's total share capital of RMB 4,068,772,253 as at 31 December 2015 according to the Company's annual profit distribution plan for 2015, and at the same time transferred capital reserve to all
shareholders for every 10 shares by 2 shares. The ex-dividend date was May 18, 2016, and the total share capital
of the Company increased by 2,034,386,126 shares from 4,068,772,253 shares to 6,103,158,379 shares.
Hikvision 2016 Annual Report (2) The Third repurchase and cancelation of the 2012 Restricted Share Incentive Scheme
On August
29th,
2016, at the
15th
Session of the Third Board of Directors of the Company, the Board reviewed and approved the Resolution for the repurchase and cancelation of a portion of locked shares that were already granted to personnel not fulfilling the incentive conditions in the year(关于回购注销部分已不符合激励条件的激励对象已获授但尚未解锁的限制性股票的议案). As mandated by the
1st
Extraordinary General Meeting of 2012, the Board of Directors agreed to repurchase and cancell 451,494 shares already granted to the participant who was no longer eligible to be a participant under the 2012 Restricted Shares Incentive Scheme. On November
16th,
2016, after the completion of cancelation procedures for 451,494 shares, the total share capital of the Company decreased to 6,102,706,885 Shares from 6,103,158,379 Shares.
3. Existent shares held by internal staff of the Company
□ Applicable√ Inapplicable
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholdings
Unit: Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Total number of common||||||||||
||||Total number of common shareholders at the end of|||||||
|shareholders at the end of the|94,712||the previous month before the disclosure date of the|||||72,835||
|reporting period|||annual report|||||||
|Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them||||||||||
|||||||Increase/||||
|||||Share-||||||
|||Nature of||holding|Total shares|decrease|Number of||Number of|
|Name of shareholder|||||held at the|during the|non-tradable||tradable shares|
|||shareholder||percenta||||||
||||||period-end|reporting|shares held||held|
|||||ge (%)||||||
|||||||period||||
|China Electronics Technology HIK GroupCo., Ltd.||State-ownedcorporation||39.91%|2,435,783,304|0|0||2,435,783,304|
|Gong Hongjia||Foreign individual||16.30%|994,500,000|-121,275,000|836,831,250||157,668,750|
|Xinjiang Weixun Investment ManagementLimited Partnership||Domesticnon-state-ownedcorporation||6.38%|389,540,000|-43,000,000|324,405,000||65,135,000|
|Xinjiang Pukang Investment LimitedPartnership||Domesticnon-state-ownedcorporation||2.10%|128,231,250|0|96,173,437||32,057,813|
|UBS AG||Foreigncorporation||2.02%|123,315,671|-|0||123,315,671|

Hikvision 2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
|The 52nd Research Institute at ChinaElectronics TechnologyGroup Corporation|State-ownedcorporation|1.97%|120,516,696|0|0|120,516,696|
|Hu Yangzhong|DomesticIndividual|1.34%|81,750,651|+81,750,651||20,388,910|
|JPMORGAN CHASE BANK,NATIONAL ASSOCIATION|Foreigncorporation|0.90%|55,066,504|-|0|55,066,504|
|Citic Securities Co., Ltd.|Domesticnon-state-ownedcorporation|0.74%|45,292,085|-|0|45,292,085|
|Zhejiang Orient Holdings Co., Ltd.|Domesticnon-state-ownedcorporation|0.74%|45,236,800|-31,367,132|0|45,236,800|
||China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute atChina Electronics Technology Group Corporation are all subject to control of ChinaElectronics Technology Group Corporation. Ms. Chen Chunmei, controlling shareholderof Xinjiang Pukang Investment Limited Partnership, is the spouse of Mr. Gong Hongjia,foreign individual shareholder of the Company. Hu Yangzhong, domestic individual, isholding shares in both Xinjiang Weixun Investment Management Limited Partnershipand Xinjiang Pukang Investment Limited Partnership.Except for these, the Company does not know whether the other shareholders are relatedparties and whether they are acting-in-concert parties in accordance with the Measuresfor Management of the Disclosure (《上市公司股东持股变动信息披露管理办法》) ofthe Shareholding changes of shareholders of the listed Company.||||||
|Explanation on associated relationship|||||||
|or/and persons acting in concert among|||||||
|the above-mentioned shareholders:|||||||

|||||
|-|-|-|-|
|Particulars about shares held by the Top 10 shareholders holding shares not subject to trading restriction(s)||||
|||Type of shares||
||Number of tradable shares held at the|||
|Name of shareholder||||
||period-end|Type|Number|
|China Electronics Technology HIK GroupCo., Ltd.|2,435,783,304|||
|||RMB ordinary shares|2,435,783,304|
|Gong Hongjia|157,668,750|RMB ordinary shares|157,668,750|
|UBS AG|123,315,671|RMB ordinary shares|123,315,671|
|The 52nd Research Institute at ChinaElectronics Technology GroupCorporation|120,516,696|RMB ordinary shares||
||||120,516,696|
|Xinjiang Weixun Investment ManagementLimited Partnership|65,135,000|RMB ordinary shares||
||||65,135,000|
|JPMORGAN CHASE BANK,NATIONAL ASSOCIATION|55,066,504|RMB ordinary shares||
||||55,066,504|
|Citic Securities Co., Ltd.|45,292,085|RMB ordinary shares|45,292,085|

Hikvision 2016 Annual Report
|||||
|-|-|-|-|
|Zhejiang Orient Holdings Co., Ltd.|45,236,800|RMB ordinary shares|45,236,800|
|Central Huijin Investment Ltd.|43,879,200|RMB ordinary shares|43,879,200|
|GIC PRIVATE LIMITED|38,001,648|RMB ordinary shares|38,001,648|
||China Electronics Technology HIK Group Co., Ltd. and The 52nd Research Institute at|||
|Explanation on associated relationship|China Electronics Technology Group Corporation are all subject to control of China|||
|or/and persons acting in concert among|Electronics Technology Group Corporation.|||
||Except for these, the Company does not know whether the other shareholders are related|||
|the top ten tradable shareholders and||||
||parties and whether they are acting-in-concert parties in according to the Measures for|||
|between the top ten tradable shareholders||||
||Management of the Disclosure (《上市公司股东持股变动信息披露管理办法》) of the|||
|and the top ten shareholders||||
||Shareholding changes of shareholders of the listed Company.|||

Any of theCompany’s top 10 common shareholders or top 10 non-restricted common shareholders conduct any agreed buy-back in the reporting period?
□ Applicable√ Inapplicable
2. Particulars about the controlling shareholder
Nature of the controlling shareholder: Central State-owned
Type of the actual controller: Corporation
||||||
|-|-|-|-|-|
||Legal||||
||Representati||||
|Name of controlling||Date of|||
||ve /||Organization code|Business scope|
|shareholder||establishment|||
||Company||||
||Principal||||
|||||Industrial investment, R&D of environmental protection|
|||||products, network products, intelligent products and|
|China Electronics|||||
||Chen|November||electronic products, technology transfer, technical|
|Technology HIK|||9133000014306073XD||
||Zongnian|29th, 2002||services, manufacturing and sales, business consulting|
|Group Co., Ltd.|||||
|||||services, rentel services of own real estate, import and|
|||||export businesses.|
|Shares held by the controlling shareholder|||||
|||||Indirect control of Phoenix Optical Co. LTD., domestic|
|in other listed companies|||||
|||||listed companie|
|by controlling or holding during the reporting period|||||

Change of the controlling shareholder during the reporting period
□ Applicable√ Inapplicable
3. Particulars about the actual controller
Nature of the actual controller: Central State-owned assets management agency
Type of the actual controller: Corporation
Hikvision 2016 Annual Report
||||||
|-|-|-|-|-|
||Legal||||
|||Date of|||
|Name of the actual|Representative||Organization||
|||establishm||Business scope|
|controller|/ Company||code||
|||ent|||
||Principal||||
|||||The Company is responsible for the military electronic|
|||||equipment and systems integration, the development and|
|||||manufacturing weapons platform electronic equipment,|
|||||military software and electronic basic products, and the|
|||||construction of national defense electronic information|
|||||infrastructure and safeguard conditions; construction of|
|||||national major electronic information system; the|
|||||research, development, production and sales of civil|
|China Electronics||January|||
|||||electronic information software, materials, components,|
|Technology Group|Xiong Qunli|1st,|91110000710929498G||
|||||machine and system integration and related common|
|Corporation||2002|||
|||||technology; the self-management and agency of import|
|||||and export business of all types of goods and|
|||||technology; the operation of feed processing and|
|||||"processing and compensation trades"; the operation of|
|||||counterpart trade and re-export trade; industrial|
|||||investment; asset management; engages in e-commerce|
|||||information services; and organizes enterprises in the|
|||||industry to participate in and hold overseas exhibitions.|
|||China Electronics Technology Group Corporation is the actual controller of a total of seven|||
|Shares held by the actual|||||
|||domestic listed companies including Anhui Sun Create Electronic Co., Ltd, Shanghai East|||
|controlling shareholder in|||||
|other listed companies by||China Computer Co., Ltd, Chengdu Westone Information Industry Co., Ltd., GCI Science &|||
|controlling or holding during the||Technology Co., Ltd., Taiji Computer Corporation Limited, GLARUN Technology Co., Ltd.|||
|reporting period||and Phenix Optics Co., Ltd.|||

Change of the actual controller during the reporting period
□ Applicable√ Inapplicable
The ownership and controlling relationship between the actual controller of the Company and the Company is detailed as follows:
Hikvision 2016 Annual Report The actual controller controls the Company via trust or other ways of asset management
□ Applicable√ Inapplicable
4. Particulars about other corporate shareholders with shareholding proportion over10%
□ Applicable√ Inapplicable
5. Particulars on shareholding decrease plan during the reporting period proposed or implemented by the controlling shareholders, actual controller, restructurer or other parties
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report Section VII Information of Preferred Shares
□ Applicable√ Inapplicable
No such cases in the Reporting Period.
Hikvision 2016 Annual Report Section VIII Information about Directors, Supervisors, Senior Management and Employees
I. Shareholding changes of directors, supervisors, senior management personnel
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Shares|||
|||||||||Shares||||
|||||||Termination|Shares held at||decreased|Other|Shares held at|
|||Tenure|||Commencement||the beginning|increased||||
|Name|Title||Gender|Age||of term of|||during the|changes|the end of the|
|||status|||of term of office||of the Period|during the||||
|||||||office|||Period|（Shares）|Period (Shares)|
||||||||(Shares)|Period||||
||||||||||(Shares)|||
|Chen||||||||||||
||Chairman|Incumbent|M|52|June 19th, 2008||0|0|0|0|0|
|Zongnian||||||||||||
|Gong|Vice|||||||||||
|||Incumbent|M|52|June 19th, 2008||1,115,775,000|0|-121,275,000|0|994,500,000|
|Hongjia|Chairman|||||||||||
|Liu Xiang|Director|Incumbent|M|45|May 24th, 2014||0|0|0|0|0|
||Director,|||||||||||
|Hu|||||December 28th,|||||||
||General|Incumbent|M|52|||195,000|81,555,651|0|0|81,750,651|
|Yangzhong|||||2001|||||||
||Manager|||||||||||
||Director,|||||||||||
||Standing|||||||||||
|Wu Weiqi|Deputy|Incumbent|M|53|March 1st, 2003||174,000|7,307,926|0|0|7,481,926|
||General|||||||||||
||Manager|||||||||||
|Cheng|Independent|||||||||||
|||Incumbent|M|65|March 6th, 2015||0|0|0|0|0|
|Tianzong|Director|||||||||||
|Lu|Independent|||||||||||
|||Incumbent|M|63|March 6th, 2015||0|0|0|0|0|
|Jianzhong|Director|||||||||||
|Wang|Independent|||||||||||
|||Incumbent|M|50|March 6th, 2015||0|0|0|0|0|
|Zhidong|Director|||||||||||
|Hong|Independent||||December 22nd,|||||||
|||Incumbent|M|51|||-|-|-|-|0|
|Tianfeng|Director||||2016|||||||
|Cheng|Supervisor|||||||||||
|||Incumbent|F|64|March 6th, 2015||0|0|0|0|0|
|Huifang|Chairman|||||||||||
|Wang||||||||||||
||Supervisor|Incumbent|M|66|March 6th, 2015||0|0|0|0|0|
|Qiuchao||||||||||||

Hikvision 2016 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Shares|||
|||||||||Shares||||
|||||||Termination|Shares held at||decreased|Other|Shares held at|
|||Tenure|||Commencement||the beginning|increased||||
|Name|Title||Gender|Age||of term of|||during the|changes|the end of the|
|||status|||of term of office||of the Period|during the||||
|||||||office|||Period|（Shares）|Period (Shares)|
||||||||(Shares)|Period||||
||||||||||(Shares)|||
|Chen||||||||||||
||Supervisor|Incumbent|M|46|June 19th, 2008||0|0|0|0|0|
|Junke||||||||||||
||Deputy|||||||||||
|Jiang||||||||||||
||General|Incumbent|M|48|March 1st, 2003||150,000|7,308,588|0|0|7,458,588|
|Haiqing||||||||||||
||Manager|||||||||||
||Deputy|||||||||||
|Zheng|General|||||||||||
|||Incumbent|M|55|June 3th,0 2004||135,000|0|0|0|135,000|
|Yibo|Manager|||||||||||
||Deputy||||December 18th,|||||||
|Cai||||||||||||
||General|Incumbent|M|50|||135,000|0|0|0|135,000|
|Dingguo|||||2005|||||||
||Manager|||||||||||
||Deputy||||December 18th,|||||||
|He Hongli|General|Incumbent|F|44|||129,000|0|0|0|129,000|
||||||2005|||||||
||Manager|||||||||||
||Deputy|||||||||||
||||||January 20th,|||||||
|Fu Baijun|General|Incumbent|M|45|||129,000|0|0|0|129,000|
||||||2009|||||||
||Manager|||||||||||
||Deputy|||||||||||
|Xu Lirong|General|Incumbent|M|54|March 1st, 2007||129,000|0|0|0|129,000|
||Manager|||||||||||
||Deputy||||December 18th,|||||||
|Zhou||||||||||||
||General|Incumbent|M|52|||129,000|4,734,584|0|0|4,863,584|
|Zhiping|||||2005|||||||
||Manager|||||||||||
||Deputy|||||||||||
|Jiang|||||December 18th,|||||||
||General|Incumbent|M|46|||135,000|0|0|0|135,000|
|Yufeng|||||2005|||||||
||Manager|||||||||||
||Deputy|||||||||||
|Jin Duo|General|Incumbent|M|52|March 10th, 2015||0|0|0|0|0|
||Manager|||||||||||
||Deputy|||||||||||
||General|||||||||||
|Jin Yan|Manager,|Incumbent|F|38|July 22th, 2015||0|0|0|0|0|
||Chief|||||||||||
||Finance|||||||||||
||Deputy|||||||||||
|Jia||||||||||||
||General|Incumbent|M|40|July 22th, 2015||0|3,661,163|0|0|3,661,163|
|Yonghua||||||||||||
||Manager|||||||||||
||Deputy|||||||||||
|Li Pan|General|Incumbent|M|39|July 22th, 2015||600,000|2,993,712|0|0|3,593,712|
||Manager|||||||||||
||Deputy|||||||||||
|Cai||||||||||||
||General|Incumbent|M|46|April 8th, 2016||-|-|-|-|0|
|Changyang||||||||||||
||Manager|||||||||||

Hikvision 2016 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Shares|||
|||||||||Shares||||
|||||||Termination|Shares held at||decreased|Other|Shares held at|
|||Tenure|||Commencement||the beginning|increased||||
|Name|Title||Gender|Age||of term of|||during the|changes|the end of the|
|||status|||of term of office||of the Period|during the||||
|||||||office|||Period|（Shares）|Period (Shares)|
||||||||(Shares)|Period||||
||||||||||(Shares)|||
||Deputy|||||||||||
||General|||||||||||
||Manager|||||||||||
|Huang|Board|||||||||||
|||Incumbent|F|35|April 8th, 2016||-|-|-10,000|-|195,000|
|Fanghong|Secretary|||||||||||
||Internal|||||||||||
||audit|||||||||||
||director|||||||||||
||Deputy|||||||||||
||||||October 11th,|||||||
|Xu Ximing|General|Incumbent|M|44|||-|-|-|-|0|
||||||2016|||||||
||Manager|||||||||||
||Deputy|||||||||||
||||||October 11th,|||||||
|Bi Huijuan|General|Incumbent|F|46|||-|-|-|-|0|
||||||2016|||||||
||Manager|||||||||||
|Total|--|--|--|--|--|--|1,117,815,000|107,561,624|-121,285,000||1,104,296,624|

 Note:
(1) Number of shares held by directors, supervisors, and seniormanagement personnel above are all shares directly held by them accordingly.
(2) During the reporting period, number shares held at the beginning of the period, shares increased during the period, shares decreased during the period for newly appointed executives are all calculated after their appointment.
(3) During the reporting period, in respect of changes in the number of shares due to the implementation of equity distribution for 2015, the number of shares at the beginning, increased, and reduced has been adjusted accordingly.
II. Changes of directors, supervisors and senior management personnel
□ Applicable√ Inapplicable
III. Positions of directors, supervisors and senior management personnel
1. Directors
Mr. Chen Zongnian(陈宗年), born in 1965, Chinese nationality with no overseas residence permission, PhD in management, senior engineer, served as a assistant to the head of 52nd Research Institute at China Electronics
Technology Group Corporation(中国电子科技集团公司第五十二所, the 52nd Institute), a deputy head of the
52nd Institute. Chen currently serves as the head of 52nd Institute, the chairman and the Communist Party
Hikvision 2016 Annual Report secretary of China Electronics Technology HIK Group Co., Ltd.(中电海康集团, CETHIK) and chairman of the Company.
Mr. Gong Hongjia(龚虹嘉), foreign shareholder of the Company, permanent resident of HKSAR ofPeople’s Republic of China, took part in the establishment of the Company in 2011 and served as a director and vice chairman of Hikvision. Gong currently serves as a vice chairman of the Company.
Mr. Liu Xiang(刘翔), Chinese nationality with no overseas residence permission, master of management, economist, served as a deputy general manager, secretary of the board and finance chief of Hikvision since June 2007. Liu has been appointed as a director of the Company since May 2015, and currently serves as Chairman of Phenix Optical CO.,LTD, a director of the Company, and a deputy general manager of CETHIK.
Mr. Hu Yangzhong(胡扬忠), Chinese nationality with no overseas residence permission, master of engineering, senior engineer with institute grade, served as an engineer and a head engineer of the 52nd Institute from June 1989 to December 2001. He has been appointed as a director of the Company and general manager of the company since December 2001. Hu currently serves as a director and the general manager of the Company. Mr. Wu Weiqi(邬伟琪), Chinese nationality with no overseas residence permission,bachelor’s degree, senior engineer, held various positions at the 52nd Institute, including technician, assistant manager, engineer and senior engineer, from July 1986 to December 2001 He joined the Company since December 2001, and has been appointed as a deputy general manager, a standing deputy general manager, and a director of Hikvision. Wu currently serves as a director and standing deputy general manager of the Company.
Mr. Cheng Tianzhong(程天纵), with nationality of Taiwan, China,master’s degree in business administration, served as president and a director of Hewlett-Packard Development Company, L.P.(China) from 1992 to 1997; served as the president of the Asia Pacific of Texas Instruments Incorporated(德州仪器) from 1997 to 2007; served as a vice-president of Hon Hai Corporation(鸿海集团) from July 2007 to 2012, and the chief executive officer of FIH Mobile Limited, a subsidiary of Hon Hai Corporation(鸿海集团), a company listed on the Hong Kong Stock Exchange in 2011. He retired in June 2012 and devoted himself to China Maker Campaign(中国创客运动) to help and guide those start-up companies. Cheng currently served as an independent director of the Company.
Mr. Wang Zhidong(王志东), permanent resident of HKSAR ofPeople’s Republic of China, graduated withbachelor’s degree in engineering. He served as a deputy general manager and chief engineer of Suntendy Electronic Technology and Research Institute(新天地电子信息技术研究所) from April 1992 to August 1993; He served as a general manager of Richwin Information Technology Co., Ltd.(四通利方信息技术有限公司), and served as chief executive officer and a director of SINA Corporation(新浪网) from December 1993 to June 2001; He served as chairman and chief executive officer of Beijing Dianji Technology, Ltd.(北京点击科技有限公司) from December 2001 to July 2013. Mr. Wang currently serves as a founding director or Peking University Entrepreneurs Club and an independent director of the Company.
Hikvision 2016 Annual Report Mr. Lu Jianzhong(陆建忠), Chinese nationality, obtained abachelor’s degree in economics and CPA certificate. Lu served as a lecturer and an associate professor of finance and accounting at the Shanghai Maritime University(上海海事大学) from September 1986 to September 1997; he was a partner and a chartered accountant of the auditing department of PricewaterhouseCoopers, from October 1997 to June 2012; he was a director of marketing development and a chartered accountant of ShanghaiDe’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 July2014；He was a partner and a chartered accountant of Zhongxinghua Certificated Public Accountants LLP(中兴华会计师事务所) from August 2014 5o January 2016. Lu currently serves as a chartered accountant of Dahua Certificated Public Accountants LLP(大华会计师事务所), MPAcc/Maud Enterprise Mentor of Antai College of Economics& Management,Shanghai Jiao Tong University(上海交通大学安泰管理学院), and an independent director of the Company.
Mr. Hong Tianfeng（洪天峰）, Chinese nationality, obtained a master degree in engineering. Hong was an engineer in Nanjing University of Posts and Telecommunication(南京邮电大学) from July 1990 to June 1993; He served as an executive deputy general manager, chief executive of Operation and Delivery, chairman of investment decision committee, vice chairman of Huawei technologies co., LTD(华为技术有限公司) from July 1993 to September2011；Hong currently serve as a managing partner of Suzhou Fangguang Venture Investment Management (LimitedPartnership)(苏州方广创业投资管理合伙企业（有限合伙）), a executive director of Shanghai Fangguang Venture Investment Management Co., Ltd.(上海方广创业投资管理有限公司), and an independent director of the Comypany.
2. Supervisors
Ms. Cheng Huifang(程惠芳), Chinese nationality, obtained PhD in international finance. She was a member of the
8th
and
9th
Zhejiang CPPCC(浙江省政协). Cheng currenly serve as principal of the Zhejiang Institute of Innovation Management of Zhejiang University of Technology(浙江工业大学浙商创新管理研究院), vice president of the Zhejiang Institute of Science and Technology Development Strategy(浙江省科技发展战略研究院), president of Zhejiang Yangtze River Delta of the Institute of Innovation Management(浙江长三角创新管理研究院), president of the Zhejiang Financial Engineering Society(浙江省金融工程学会), and a supervisor of the Company.
Mr. Wang Qiuchao(王秋潮), Chinese nationality, a lawyer with master degree in law, served as chairman of the Zhejiang Lawyers Association(浙江省律师协会) and vice-president of the Zhejiang Law Society(浙江省法学会). Wang currently serves as arbitrator of the China International Economic and Trade Arbitration Commission(中国国际经济贸易仲裁委员会, “CIETAC”), a member of the Stratgy Committee of the China Lawyers Association(全国律协战略委员会), a committee member of the HangzhouPeople’s Congress Legislative Advisory Committee(杭州市人大常委会立法咨询委员会), an arbitrator of Shanghai International Arbitration Center(上海国际仲裁中心) , South China International Economic and Trade Arbitration Commission(华南国际仲裁中心), and a supervisor of the Company.
Mr. Chen Junke(陈军科), Chinese nationality with no overseas residence permission, a bachelor degree in engineering, senior engineer, began to work since 1994 and held various positions in the 52nd Institute, including assistant engineer, engineer and senior engineer. He joined the Company in 2001 and has been appointed as the
Hikvision 2016 Annual Report technical director of the Digital Video Recorder (DVR) Division of the Technology Management Center. Chen currently serves as a supervisor of the Company and the general manager of the supply chain management center. 3. Senior management personnel
Mr. Hu Yangzhong(胡扬忠), Please refer to his profile in preceding part of the report.
Mr Wu Weiqi(邬伟琪), Please refer to his profile in preceding part of the report.
Mr. Jiang Haiqing(蒋海清), Chinese nationality with no overseas residence permission, abachelor’s graduate in engineering, senior engineer, joined the Company in November 2001 and served as an assistant of the general manager and a deputy general manager. Mr. Jiang currently serves as a deputy general manager of the Company.
Mr. Zheng Yibo(郑一波), Chinese nationality with no overseas residence permission, abachelor’s graduate in engineering, senior engineer, joined Hikvision in June 2004 and served as a deputy general manager and board secretary of the Company. Mr. Zheng currently serves as a deputy general manager of the Company.
Mr. Cai Dingguo(蔡定国), Chinese nationality with no overseas residence permission, master degree in business administration, joined Hikvision in May 2002 and served as a manager of the Marketing Division, an assistant to the general manager and a deputy general manager. Mr. Cai currently serves as a deputy general manager of the Company.
Ms. He Hongli(何虹丽), Chinese nationality with no overseas residence permission,master’s degree in business administration, joined Hikvision in December 2001 and served as a manager of the Human Resource Division, an assistant to the general manager and a deputy general manager. Ms. He currently serves as a deputy general manager of the Company.
Mr. Fu Baijun(傅柏军), Chinese nationality with no overseas residence permission, obtained bachelor degree in economics, Chinese Certificated Public Accountant, and is a senior accountant. He served as an accountant of the Financial Division of the 52nd Institute, from July 1996 to January 2009, and a deputy general manager of Zhejiang Haikang Information(浙江海康信息技术股份有限公司). He joined Hikvision in January 2009, and served as financial manager, deputy general manager and chief financial officer. Mr. Fu currently serves as a deputy general manager of the Company.
Mr. Xu Lirong(徐礼荣), Chinese nationality with no overseas residence permission, obtained master degree in engineering, and is a senior engineer. He joined Hikvision in January 2002 and served as a manager of theR&D Center, a board secretary and a deputy general manager. Mr. Xu currently serves as a deputy general manager of the Company and the secretary of Commuist Party of the Company Division.
Hikvision 2016 Annual Report Mr. Zhou Zhiping(周治平), Chinese nationality with no overseas residence permission, obtained master degree in engineering, and is a senior engineer. He joined Hikvision in January 2002 and served as the chief technical officer and a deputy general manager. Mr. Zhou currently serves as a deputy general manager of the Company.
Mr. Jiang Yufeng(蒋玉峰), Chinese nationality with no overseas residence permission, obtained bachelor degree in engineering, and is an engineer. He joined Hikvision in January 2005 and held various positions in our Beijing branch, including general manager, director of marketing, assistant to the general manager, deputy general manager and marketing director. Mr. Jiang currently serves as a deputy general manager of the Company. Mr. Jin Duo(金铎), Chinese nationality with no overseas residence permission, obtained bachelor degree in engineering, is a senior engineer. He served as a technical officer, assistant to engineers, an engineer and a senior engineer of the 52nd Institute, from July 1986 to June 2004. He joined Hikvision in July 2004 and served as a general manager of our Hangzhou Branch. Mr. Jin currently serves as a deputy general manager of the Company. Ms. Jin Yan(金艳), Chinese nationality with no overseas residence permission, obtained master degree in management, and is an accountant. She joined Hikvision in 2004 and held various positions at the Company, including financial manager and the general manager of the Financial Management Center. Ms. Jin currently serves as a deputy general manager and chief financial officer of the Company.
Mr. Jia Yonghua(贾永华), Chinese nationality with no overseas residence permission, obtained bachelor degree in engineering, and is a senior engineer. He joined Hikvision in January 2002 and held various positions at the Company, including the president to the Image Process and Analysis Division of theR&D Center, the president to the Strategy and Marketing Division, a deputy general manager of the Supply Chain Management Center. Mr. Jia currently serves as a deputy general manager of the Company.
Mr. Li Pan(礼攀), Chinese nationality with no overseas residence permission, obtained master degree in engineering, and is a senior engineer. He served as an engineer of the 52nd Institute, from August 2000 to December 2001. He joined Hikvision in December 2001 and held various positions at the Company, including engineer, product manager,R&D manager, the general manager of the Transportation Division, the general manager of our Hangzhou Branch. Mr. Li currently serves as a deputy general manager of the Company.
Ms. Huang Fanghong（黄方红）, Chinese nationality with no overseas residence permission, master degree in law, served in Hangzhou Silan Microelectronics Co.,Ltd. legal team from 2004 to 2008. She joined Hikvision in June 2009 and held various positions at the Company including legal department director, internal audit director, and internal control director. Ms. Huang currently serves as deputy general manager, board secretary, and internal audit director of the Company.
Mr. CaiChangyang（蔡昶阳）, Chinese nationality with no overseas residence permission, obtained bachelor degree in engineering. He joined Hikvision in 2004, and held various positions of the Company, including general manager of Beijing branch, director for government and enterprise corporation department, director for investment department, director for strategy and marketing department, and deputy general manager of the Company, Mr. Cai currently serves as deputy general manager of the Company.
Hikvision 2016 Annual Report Mr. Xu Ximing(徐习明), Chinese nationality with no overseas residence permission, obtained bachelor degree in engineering. From July 1996 to September 2016, he was held various postions in IBM, including engineer, department manager,director，cusulting service partner, consulting service senior partner, and deputy general manager. He joined Hikvision in September 2016. Mr. Xu currently serves as deputy general manager of the Company.
Ms. Bi Huijuan(毕会娟), Chinese nationality with no overseas residence permission, obtained doctor in engineering. From April 1999 to August 2016, she held various positions in the
15th
Research Institute at China Electronics Technology Group Corporation, including engineer, senior engineer, senior research engineer, head ofR&D department, vice chief engineer, and deputy director. She joined Hikvision in August 2016. Ms. Bi currently serves as deputy general manager of the Company.
Position held in shareholders entities
||||||
|-|-|-|-|-|
||||Commencement|Remuneration from the|
|Name|Shareholder's entity|Position|||
||||of term of office|shareholders' entity|
||China Electronics||||
|Chen Zongnian|Technology HIK Group Co.,|Chairman, Party Secretary|November 2013|Y|
||Ltd.||||
||China Electronics||||
|Liu Xiang|Technology HIK Group Co.,|Deputy General Manager|December 2013|Y|
||Ltd.||||
||China Electronics||||
|Hu Yangzhong|Technology HIK Group Co.,|Director|December 2013|N|
||Ltd.||||
||China Electronics|Supervisor, Member of|||
|Xu Lirong|Technology HIK Group Co.,|Commission for Discipline|December 2013|N|
||Ltd.|Inspection|||
||China Electronics||||
|Zheng Yibo|Technology HIK Group Co.,|Party member|December 2015|N|
||Ltd.||||

Post held in otherentities（Exluede subsidiaries included in the consolidatedreports）
|||||||
|-|-|-|-|-|-|
||||Commencement of|Termination of|Remuneration from|
|Name|Shareholder's entity|Position||||
||||term of office|term of office|the other entities|
|Cheng||||||
||The 52nd Institutes|Head|May 2009||N|
|Zongnian||||||
|Cheng||Legal|||N|
||Zhejiang Periodical Office||Feburary 2004|||
|Zongnian||Representative||||
|Cheng|Director of CETC Finance Co., Ltd.|Director|December 2012||N|

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Commencement of|Termination of|Remuneration from|
|Name|Shareholder's entity|Position||||
||||term of office|term of office|the other entities|
|Zongnian||||||
|Cheng|Shanghai Fuel Cell Vehicle Powertrain||||N|
|||Director|November 2013|||
|Zongnian|Co., Ltd.|||||
|Gong|Guangzhou Funian Electronic|||||
|||Chairman|November 2011||Y|
|Hongjia|Technology Co., Ltd.|||||
|Gong|||||N|
||FunVio Co., Ltd.|Chairman|Feburary 2004|||
|Hongjia||||||
|Gong|Shanghai Fullhan Microelectronics Co.,||||N|
|||Director|April 2013|||
|Hongjia|Ltd.|||||
|Gong|||||N|
||Fuce Holdings Co., Ltd.|Director|October 2014|||
|Hongjia||||||
|Gong|||||N|
||Chuangjia Chuangtou Co., Ltd|Director|October 2014|||
|Hongjia||||||
|Gong|Shenzhen Jiadao Gongcheng Equity|Executive|||N|
||||November 2014|||
|Hongjia|Investment Fund (Limited Partnership)|Partner||||
|Gong|Shenzhen Jiadao Valley Investment|General|||N|
||||October 2014|||
|Hongjia|Management Co., Ltd.|Manager||||
|Gong|Shenzhen Innovative Valley Investment||||N|
|||Director|July 2014|||
|Hongjia|Management Co., Ltd|||||
|Gong||Director|||N|
||JiuBaYao Health Technology Co., Ltd.||November 2014|||
|Hongjia||||||
|Gong||Director|||N|
||Shanghai Pukun Information||September 2014|||
|Hongjia|Technology Co., Ltd|||||
|Gong||Director|||N|
||Beijing Woqi Co., Ltd.||July 2011|November 2016||
|Hongjia||||||
|Gong|Wuhan YouXinGuang communication|Director|||N|
||||January 2016|||
|Hongjia|equipment co., LTD|||||
||Xinjiang Weixun Investment|Executive|||N|
|Liu Xiang|||May 2011|||
||Management Limited Partnership|Partner||||
|Liu Xiang|Phoenix Optical Co. LTD|Chairman|Jualy 2015||N|
|Liu Xiang|Phoenix Optical Holding Co. LTD|Chairman|July 2015||N|
|Hu|||||N|
||Zhejiang Tuxun Technology Co.,Ltd.|Director|January 2016|||
|Yangzhong||||||
||Xinjiang Pukang Investment|Executive|||N|
|Wu Weiqi|||May 2011|||
||Management Limited Partnership|Partner||||
|Wang||||||
||Beijing Yilian Yisheng Technology Co.,|||||
|||Chairman, CEO|July 2013||Y|
|Zhidong|Ltd.|||||
|Cheng|Wenhui Technology Co., Ltd.|Independent|June 2016||Y|

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Commencement of|Termination of|Remuneration from|
|Name|Shareholder's entity|Position||||
||||term of office|term of office|the other entities|
|Tianzhong||Director||||
|Cheng|||||Y|
||Hechun Technology Co., Ltd.|Director|June 2014|||
|Tianzhong||||||
|Cheng|||||Y|
||Zuozhen Co., Ltd.|Director|January 2015|||
|Tianzhong||||||
|Lu|Dahua Certificated Public Accountants|Chartered|||Y|
||||January 2016|||
|Jianzhong|LLP|Accountant||||
|Lu|Antai College of Economics &||||Y|
|Jianzhong|Management,Shanghai Jiao Tong|Mentor|December 2013|||
||University|||||
|Hong|Shanghai Fangguang Venture|Executive|||Y|
||||Feburary 2012|||
|Tianfeng|Investment Management Co., Ltd.|Director||||
|Hong|Suzhou Fangguang Venture Investment|Managing|||N|
||||September 2012|||
|Tianfeng|Management (Limited Partnership)|Partner||||
|Hong|Suzhou Fangguang Venture Investment||||N|
|||Managing||||
|Tianfeng|Management-Phase 2 (Limited||Jualy 2016|||
|||Partner||||
||Partnership)|||||
|Hong|Shenzhen Fangguang Enterprise|General|||N|
||||May 2016|||
|Tianfeng|Mangement Consulting Co.,Ltd.|Manager||||
|Hong|Shenzhen Pengfenghui Venture|General|||N|
||||Juen 2014|||
|Tianfeng|Investment Co., Ltd.|Manager||||
|Hong|Shanghai Guangfang Venture Capital||||N|
|||Managing||||
|Tianfeng|Investment Partnership (Limited||August 2012|||
|||Partner||||
||Partnership)|||||
|Hong|Shanghai Guangerqi Venture Capital||||N|
|||Managing||||
|Tianfeng|Investment Partnership (Limited||September 2016|||
|||Partner||||
||Partnership)|||||
|Hong|Shanghai Huace Navigation Technology||||N|
|||Director|Feburary 2015|||
|Tianfeng|Co., Ltd.|||||
|Hong||Director|||N|
||Sannuo Biology Sensor Co., Ltd.||September 2013|||
|Tianfeng||||||
|Hong|Shanghai Chuangyuan Equipment|Director|||N|
||||August 2014|||
|Tianfeng|Technology Co., Ltd.|||||
|Hong|Shenzhen ShiYunZhiXun Network|Director|||N|
||||May 2014|||
|Tianfeng|Technology Co., Ltd.|||||
|Hong||Director|||N|
||Jiangsu JiTaiKe Electronics Co., Ltd.||July 2015|||
|Tianfeng||||||

Hikvision 2016 Annual Report
|||||||
|-|-|-|-|-|-|
||||Commencement of|Termination of|Remuneration from|
|Name|Shareholder's entity|Position||||
||||term of office|term of office|the other entities|
|Hong|Shanghai Baishitong Information|Director|||N|
||||September 2016|||
|Tianfeng|Technology Co., Ltd.|||||
|Hong|Changjiang Shidai YidongZhuanshou|Director|||N|
||||June 2014|||
|Tianfeng|Communication Co., Ltd.|||||
|Hong|Zhongwei DaheYun Network|Director|||N|
||||November 2016|||
|Tianfeng|Connection Technology Co., Ltd.|||||
|Hong|Shenzhen Fuzhi Software Technology|Director|||N|
||||November 2016|||
|Tianfeng|Co., Ltd.|||||
|Hong|Shenzhen DongfengMingTu||||N|
|||Supervisor|August 2016|||
|Tianfeng|Corporation Management Co., Ltd.|||||
|Cheng||||||
|||Independent||||
||Zhejiang Furun Company Limited||April 2014||Y|
|Huifang||Director||||
|Cheng||Independent|||Y|
||China Kings Resources Group Co., Ltd||March 2014|||
|Huifang||Director||||
|Cheng||Independent|||Y|
||Hangzhou HangYang Co., Ltd.||January 2015|||
|Huifang||Director||||
|Cheng||Independent|||Y|
||Zhejiang Huace Media Co., Ltd.||Feburary 2016|||
|Huifang||Director||||
|Cheng||External|||Y|
||Zhejiang Commercial Bank Co., Ltd.||June 2016|||
|Huifang||Supervisor||||
|Wang|||||Y|
||ZhejiangT&C Law Firm|Partner|-|||
|Qiuchao||||||
|Wang||External|||Y|
||Sanbian Sci-Tech Co., Ltd.||August 2014|||
|Qiuchao||Supervisor||||
|Wang||Independent|||Y|
||Zhejiang Kaishan Compressor Co., Ltd.||May 2015|||
|Qiuchao||Director||||
|Wang|Zhejiang Jingsheng Mechanical &|Independent|||Y|
||||April 2015|||
|Qiuchao|Electrical Co.,ltd|Director||||
|Wang|Zhejiang Hanjia Design Co., Ltd.|Independent|||Y|
||||Jualy 2015|||
|Qiuchao|Independent Director|Director||||

Incumbent or Outgoing Directors, Supervisors and Senior management personnel in the reporting period that have been imposed administrative penalties by the CSRC during the last three years
□ Applicable√ Inapplicable
IV. Remuneration of directors, supervisors and senior management personnel
The following describes the decision-making program, determination basis and actual remuneration payment of
Hikvision 2016 Annual Report directors, supervisors and senior management personnel.
The remuneration of directors, supervisors and senior management personnel will be received preliminarily by the Remuneration and Appraisal Committee of the Board, then submitted to the Board for further review and finally approved by the shareholders at a general meeting. As for those directors (exclude independent directors), supervisors (exclude external supervisors) and senior management personnel who receive remuneration from the Company directly, they will receive according to the existing Salary Management System and Performance Appraisal Policies.
Remuneration of directors, supervisors and senior management personnel Unit: RMB 0,000
||||||||
|-|-|-|-|-|-|-|
||||||Total remuneration||
|||||||Remuneration from|
|Name|Title|Gender|Age|Tenure status|from the Company||
|||||||related parties (Y/N)|
||||||(RMB'0,000)||
|Chen Zongnian|Chairman|M|52|Incumbent|0|Y|
|Gong Hongjia|Vice Chairman|M|52|Incumbent|0|Y|
|Liu Xiang|Director|M|45|Incumbent|0|Y|
|Hu Yangzhong|Director, General Manager|M|52|Incumbent|308|N|
||Director, Standing Deputy General|M||Incumbent||N|
|Wu Weiqi|||53||290||
||Manager||||||
|Cheng Taizong|Independent Director|M|65|Incumbent|15|N|
|Lu Jianzhong|Independent Director|M|63|Incumbent|15|N|
|Wang Zhidong|Independent Director|M|50|Incumbent|15|N|
|Hong Tianfeng|Independent Director|M|51|Incumbent|1.25|N|
|Cheng Huifang|Supervisor Chairman|F|64|Incumbent|10|N|
|Wang Qiuchao|External Supervisor|M|66|Incumbent|10|N|
|Chen Junke|Employeed Supervisor|M|46|Incumbent|172|N|
|Jiang Haiqing|Deputy General Manager|M|48|Incumbent|244.5|N|
|Zheng Yibo|Deputy General Manager|M|55|Incumbent|213|N|
|Cai Dingguo|Deputy General Manager|M|50|Incumbent|217|N|
|He Hongli|Deputy General Manager|F|44|Incumbent|273|N|
|Fu Baijun|Deputy General Manager|M|45|Incumbent|263|N|
|Xu Lirong|Deputy General Manager|M|54|Incumbent|215|N|
|Zhou Zhiping|Deputy General Manager|M|52|Incumbent|210|N|
|Jiang Yufeng|Deputy General Manager|M|46|Incumbent|240|N|

Hikvision 2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
||||||Total remuneration||
|||||||Remuneration from|
|Name|Title|Gender|Age|Tenure status|from the Company||
|||||||related parties (Y/N)|
||||||(RMB'0,000)||
|Jin Duo|Deputy General Manager|M|52|Incumbent|260|N|
|Jin Yan|Deputy General Manager, CFO|女|38|Incumbent|170.97|N|
|Jia Yonghua|Deputy General Manager|M|40|Incumbent|202.73|N|
|Li Pan|Deputy General Manager|M|39|Incumbent|202.12|N|
|Cai Changyang|Deputy General Manager|M|46|Incumbent|141.79|N|
||Deputy General Manager|||Incumbent||N|
|Huang Fanghong|Board Secretary|F|35||119.95||
||Internal audit directo||||||
|Xu Ximing|Deputy General Manager|M|44|Incumbent|90.22|N|
|Bi Huijuan|Deputy General Manager|F|46|Incumbent|41.75|N|
|Total|--|--|--|--|3,941.28|--|

 Share incentives for directors, supervisors and senior executives in the Reporting Period
√ Applicable□ Inapplicable
Unit: share
||||||||
|-|-|-|-|-|-|-|
||||Shares||||
||||||Price for restricted||
|||Restricted Shares|unlocked in|Shares granted in||Restricted Shares|
|Name|Title||||shares granted||
|||held at year-begin|the current|the current period||held at year-end|
||||||(RMB per share)||
||||period||||
||Director, General||||||
|Hu Yangzhong||195,000|0|0||195,000|
||Manager||||||
||Director, Standing||||||
|Wu Weiqi|Deputy General|174,000|0|0||174,000|
||Manager||||||
||Deputy General||||||
|Jiang Haiqing||150,000|0|0||150,000|
||Manager||||||
||Deputy General||||||
|Zheng Yibo||135,000|0|0||135,000|
||Manager||||||
||Deputy General||||||
|Cai Dingguo||135,000|0|0||135,000|
||Manager||||||
||Deputy General||||||
|He Hongli||129,000|0|0||129,000|
||Manager||||||
||Deputy General||||||
|Fu Baijun||129,000|0|0||129,000|
||Manager||||||
||Deputy General||||||
|Fu Baijun||129,000|0|0||129,000|
||Manager||||||
||Deputy General||||||
|Zhou Zhiping||129,000|0|0||129,000|
||Manager||||||
|Jiang Yufen|Deputy General|135,000|0|0||135,000|

Hikvision 2016 Annual Report
||||||||
|-|-|-|-|-|-|-|
||Manager||||||
|Total|--|1,440,000|0|0|--|1,440,000|

注：(1) This personnels listed above are executives who were included in 2014 restricted shares incentive plan, and shares held represented above are all 2014 granted restricted shares.
(2) The granted date of 2016 restricted incentive shares scheme was December 23rd, 2016; however the listing date of the restricted shares was January 20th 2017, therefore, was not covered in the above chart.
(3) During the reporting period, in respect of changes in the number of shares due to the implementation of equity distribution for 2015, the number of shares at the beginning has been adjusted accordingly.
V. Staff in the Company
1. Statistics of employees, professional structure of the staff, and educational background structure
|||
|-|-|
|Number of incumbent employees in the Company|10,192|
|Number of incumbent employees in major subsidiaries|9,821|
|Number of incumbent employees|20,013|
|Number of employees with salaries in current period|20,013|
|Number of retired employees requiring the Company and its||
||0|
|subsidiaries to bear costs||
|Professional structure||
|Tier|Number of employees|
|Administrative staff|293|
|R&D staff|9,366|
|Sales staff|4,061|
|Functional staff|589|
|Production staff|5,704|
|Total|20,013|
|Educational background structure||
|Education background|Number of employees|
|Master and/or doctor/or above|2,535|
|Bachelor|10,315|
|College, technical secondary school|1,890|
|Other|5,273|
|Total|20,013|

Hikvision 2016 Annual Report 2. Staff remuneration policy
Hikvision has always adhered to the core value of "employee-focused, growing together", emphasizing the corporate culture of "respecting and caring for the individual". While strengthening and optimizing organization management as well as enhancing the professional work of human resources, the Company provides employees with competitive compensation and benefits, incentives and supporting work, living facilities and environment in industry. It is also concerned about the growth and development of employees, and provides them with good career development paths and platforms.
3. Staff training plans
The Company is committed to creating a viable training system, focusing on key staff training and cultural transmission, in order to create a learning organization. In 2016, the Company continued to focus on construction and investment in key projects such as cadre training and reserve, new staff systemic training, etc. The Company is also fully focused on internal learning resources development and other aspects, closely aligning with organizational business development andorganization’s requirements foremployees’ capabilities and promoting the continuous development of business. In 2016, the Company trained 3406 employees internally, including 2574 new employees, 832 management staff, with the total training hours exceeding 180,000 hours and the investment of more than RMB 9 million in training costs. Through continuous investment and team focus, the Company's training and development efforts align with long-term strategic objectives, annual development plans, job responsibilities and performance improvement, as well as theemployees’ own ability gap and career development, helping to achieve the overall goal of Hikvision from multiple dimensions, while meeting the needs of employees for personal capabilities and career development, leading to a win-win result.
In the future, the Company will stick to the goal of constructing a viable training system, build a capacity training channel system from new employees, junior management staff to middle and senior management staff, and support more employees in growth and learning with professionalism as the team's primary requirement.
4. Labor outsourcing
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report Section IX Corporate Governance
I. Basic situation of corporate governance
During the reporting period, in accordance with the CompanyLaw（公司法）, SecuritiesLaw（证券法）, Code of Corporate Governance for Listed Companies inChina（上市公司治理规则）, Listing Rules of Shenzhen Stock ExchangeStock（深圳证券交易所股票上市规则）, Guidelines of the Shenzhen Stock Exchange for the Standard Operation of ListedCompanies（深圳证券交易所中小板上市公司规范运作指引） on the Small and Medium-sized Enterprise Board and related regulation, the Company is constantly improving its corporate governance, optimizing the internal control systems, in order to standardize the management and operation. The actual situation of corporate governance is in line with laws, regulations and normative documents regarding corporate governance of listed companies issued by China Securities Regulatory Commission and Shenzhen Stock Exchange.
During the reporting period, the improvement of corporate governance is mainly reflected in the following aspects:
1. Improvement in internal management. On the basis of the governance structure where the shareholders' general meeting, the board of directors and its subordinate committees and the board of supervisors as the highest power, the decision-making, the supervisory organs respectively, have a clear division of responsibilities and coordinated operation with the management, the Company has established professional committees internally for professional division of labor and business decision. The newly established investment committee is responsible for reviewing investment decisions, and further regulating investment matters and strictly controlling risk. The newly established human resources management committee is responsible for reviewing decisions on human resources matters audit to meet the development and management needs of human resources. The newly established change management and steering committee is responsible for the management and guidance of various projects promotion. It aims to achieve a transformation from a function-oriented organization to a process-oriented organization through a series of management changes, comprehensively enhancing the internal management efficiency and support the Company's strategic objectives.
2. Implementation of long-term incentives. According to the Management Measures for CoreStaff’s Investment in Innovative Business, the Company has set up an investment partnership as the innovative business
Hikvision 2016 Annual Report investment platform for the core staff. The investment partnership and Hikvision have established joint ventures including Hik Automobile Technology and Hik Weiying, and made capital increase to EZVIZ Network Inc. and Hik Robot. The Company has implemented the innovative business investment mechanism for core staff, and built business partners mechanism while cultivating and developing innovative business, so as to align the interests of employees and the Company, and form a risk-sharing and benefit-sharing structure to establish long-term protection mechanism for theCompany’s sustained and healthy development.
3. Continuous improvement in investor relations management. After the annual report, semi-annual report, three quarterly reports and other disclosures, the Company took the initiative to hold a public performance briefing (including conference call), to make necessary explanation on contents of the regular reports and the development of the Company within the scope of the rules, and to maintain effective communication with all investors. The Company also timely released Investor Relations Activity Record Form, and did a good job in appropriate information disclosure, to increase the transparency of information and protect the interests of small and medium investors. Meanwhile, general meetings of shareholders held by the Company all provided all shareholders with online voting platform to ensure that the interests of investors could be reasonably and effectively achieved. During the reporting period, the Company's information disclosure was approved by the regulatory authorities: In June 2016: Shenzhen Stock Exchange issued the evaluation results of the information disclosure of small and medium enterprise board listed companies in 2015, and Hikvision ranked in the A-level (for the sixth consecutive year). The company has also received some honors in the capital market: “Chinese Listed Companies Investor Relations Tianma Award - Best Board of Directors in China Small and Medium Board Listed Companies Investor Relations” by Securities Times and China Fund,"China’s Top 50 Listed Companies in Outstanding Value Creation in 2016" by Economic Observer, Shanghai Advanced Institute of Finance of Shanghai Jiaotong University and China Scope, "Golden Bull Top 100 Listed Companies", "Golden Bull Most Efficient Company", "Golden Bull Best Small and Medium-Sized Growth Company" in the 18th Golden Bull Award for listed companies by China Securities News, "Top 10 of the Top 50 Chinese Small and Medium Board Listed Companies in Value", "Top 10 Management Team of Chinese Small and Medium Board Listed Companies" in the 10th Chinese Listed Companies Value Award by Securities Times and New Fortune Magazine, NO.1 in “Future Value Ranking of A-share Listed Companies in 2016”and“Best A-share Listed Companies” of the 3rd future growth value ranking list of A-share listed companies in 2016 sponsored by Value Line Magazine, Sina.com, China Economic Net and China Reform Daily, "Best Corporate Governance Practice Award" in the 6th reputation ranking of Chinese listed companies by
Hikvision 2016 Annual Report National Business Daily, and "CCTVChina’s Top Ten Listed Companies in 2016" by China Central Television. Any incompliance of relevant requirements of China Securities Regulatory Commission in respect of corporate governance:
□ Yes√ No
II.Company’s Independence in Businesses, Management, Assets, Institutions and Finance from Controlling Shareholders
The Company is completely independent in business, management, assets, organization, and finance from its shareholders. The Company has established a sound internal control system, being capable of operating independently with its complete and independent business.
(1) Business independence: The Company has its own production, purchases and sales systems, which are completely independent from controlling shareholders. Therefore, there is no competition among the Company, controlling shareholders, and related parties.
(2) Personnel independence: The Company has independent personnel. The management has set up various independent departments, includingR&D, production, administration, finance and operation management divisions, etc., and established complete management methods for labor, personnel, and salary management. Personnel of the Company are independent from controlling shareholders, e.g. the Chairman is elected through the general meetings of the Board. In addition, the General Manager, Deputy General Managers, the Secretary of the Board, CFO, and other senior management personnel of the Company are only employed and remunerated by the Company, and do not hold any position in controlling shareholders and is not remunerated by controlling shareholders.
Directors, Supervisors and Senior Management Personnel are appointed through legal procedures strictly in accordance with relevant regulations stipulated in Company Law and Articles of
Association. There is no controlling shareholder intervention in theCompany’s personnel decisions in general meetings of the Board or shareholders.
(3) Asset independence& Completeness: The property rights of assets are explicitly between the Company and the controlling shareholders, and no assets, funds, or other resources owned by the Company are illegally and irregularly occupied or controlled by the controlling shareholders. Assets of the Company are integrated, including complete property rights of fixed assets for production, supporting assets for production, and intangible assets of patents, etc. The Company has the full control and ownership of all assets.
(4) Independence in organizations: TheCompany’s Board, Supervisor Committee, Management and other internal organizations operates independently, and each functional department is independent from controlling shareholders in duty and personnel. There is no superior-subordinate relation
Hikvision 2016 Annual Report between functional departments of controlling shareholders and those of the Company, which would have an impact on theCompany’s independent operations.
(5) Financial Independence: The Company have established an independent financial department, as well as a sound and independent financial and accounting system. The Company makes financial decisions independently. There is no controlling shareholder intervention in theCompany’s financial and accounting activities. The Company has maintained accounts with banks independently of and do not share any bank account with our Controlling Shareholders. The Company has undertaken independent tax registration in accordance with applicable laws, and paid tax independently. III. Competing Business
□ Applicable√ Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings convened during the Reporting Period
1. Annual General Meeting convened during the Reporting Period
|||||||
|-|-|-|-|-|-|
|||Proportion||||
|||of||||
|Meeting|Nature||Convened Date|Disclosure Date|Disclosure Index|
|||participating||||
|||investors||||
|2016 First Extraordinary|Extraordinary||||No. 2016-001号；|
|||70.63%|January 8th 2016|January 9th 2016||
|General Meeting 2016|General Meeting||||www.cninfo.com.cn|
||Annual General||||No. 2016-025号；|
|2015 Annual General Meeting||71.29%|May 5th 2016|May 6th 2016||
||Meeting||||www.cninfo.com.cn|
|2016 Second Extraordinary|Extraordinary||||No. 2016-066号；|
|||69.25%|December 22nd 2016|December 23rd 2016||
|General Meeting|General Meeting||||www.cninfo.com.cn|

 2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting rights:
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report V. Performance of duties by independent directors during the Reporting Period
1. Attendance of independent directors in board meetings and general meetings
||||||||
|-|-|-|-|-|-|-|
|Attendance of independent directors in Board meetings|||||||
||||Presence by||||
||Presence due in|||||Absence for two|
|Name of Independent||Presence on site|telecom-|Presence through|||
||the Reporting||||Absence (times)|consecutive|
|Director||(times)|munication|a proxy (times)|||
||Period (times)|||||times|
||||(times)||||
|Cheng Tianzong|12|1|11|0|0|N|
|Wang Zhidong|12|1|11|0|0|N|
|Lu Jianzhong|12|1|11|0|0|N|
|Hong Tianfeng|1|0|1|0|0|N|
|Presence of independent directors ingeneral meetings (times)||1|||||

Note: Mr Hong Tianfeng was elected as theCompany’s independent director on December 22nd 2016 during 2016 Second
Extraordinary General Meeting. After he took office, the Company held total one time of general board meeting of directors during the reporting period.
2. Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors?
□ Yes√ No
3. Other details about the performance of duties by independent directors
Were there any suggestions from independent directors accepted by the Company?
√ Yes□ No
During the Reporting Period, independent directors strictly followed related rules, regulations, including CompanyAct(《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 theCompany’s systems, daily operations and decision making. They provided fair advice during the Reporting Period and played an effective role in improving the Company supervisory systems and protecting the legal rights of the Company and
the shareholders as a whole.
Hikvision 2016 Annual ReportVI．Performance of duties by special committees under the Board during the Reporting Period 1. Strategy Committee
During the reporting period, the Strategy Committee has studied and put forward a proposal with regard to operating items of the Company assets and significant investment decisions, and carried out inspection and evaluation on the implementation situation of the above matters. Meanwhile, the Strategy Committee has actively discussed long-term strategic development plans of the Company in the future in accordance with industrial characteristics and developmental stage combing with production and operation situation of the Company, and provided valuable and constructive suggestions for steady development of the Company.
2. Audit Committee
During the reporting period, the Audit Committee has carefully audited the Company's financial information and its disclosure, proposed to replace, select and employ external audit institutions. This committee has been responsible for communication between internal audit and external audit, and supervising internal audit system of the Company and its implementation. During the reporting period, the Audit Committee has convoked special meetings to carefully listen to reports of the internal audit of the Company and the external audit institution which was newly employed, audited scientificity, rationality, effectiveness and implementation situation of internal control system of the Company, all subsidiaries and branches, and given guiding opinions on conscientiousness and job examination of internal audit personnel.
3. Nomination Committee
During the reporting period, the Nomination Committee has strictly audited qualifications of independent directors and senior managers to be elected and employed, and nominated one independent director and four senior managers and submitted to the Board Directors for review. This Nomination Committee has perfected management structure of the Company, continuously improved the Company's management level, and carried out earnestly its responsibilities.
4. Remuneration and Assessment Committee
During the reporting period, in strict accordance with provisions of Articles of Association, the Remuneration and Assessment Committee has carefully researched and reviewed remuneration policies and plans of directors, senior managers and other staff, and proposed profession assessment and suggestion on assessment criterion of the above personnel. During the reporting period, the Remuneration and Assessment Committee has researched and reviewed the implementation situations of incentive plans for two main kinds of long-term employees who involved in core employees investing innovation business and restricted share plan, and given important guiding opinions and suggestions.
Hikvision 2016 Annual Report VII. Performance of duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties during the Reporting Period?
□ Yes√ No
The Supervisory Board of the Company had no objection to the matters of supervision during the Reporting Period.
The Board of Supervisors of the Company will strictly abide by provisions of the Company Law, Standard Operation Guidelines on Enterprises Listed on SMEs Board at Shenzhen Stock Exchange, Articles of Association, Rules of Procedures for Board of Supervisors, and relevant laws, regulations and rules, diligently perform its duties, supervise behaviors of senior managers conforming to relevant laws, regulations relevant provisions and implementing the Company position, and practically safeguard the legitimate rights and interests of the Company, staff and shareholders.
In 2016, the Company's Board of Supervisors convoked a total of 7 meetings, and reviewed a total of 27 proposals which mainly involved in aspects of the Company daily operation, financial information and its disclosure, and implementation of restricted share plan. In 2016, the Company's Board of Supervisors organized one special meeting, and deeply understood measures in the aspects of the Company's financial situation, employee rights protection and process construction via communication with the management level and other relevant personnel; The Company's Board of Supervisors has attended the special meeting of the Audit Committee, carefully listened to reports of the internal audit of the Company and the external audit institution which was newly employed, and understood scientificity, rationality, effectiveness and implementation situation of internal control system of the Company, all subsidiaries and branches. Supervision situation of relevant issues of the Company's Board of Supervisors in 2016:
1. Normative Operation Conditions of the Company
During the reporting period, the Board of Supervisors members have supervised the Company's daily operation situation by means of attending the board meeting and the shareholders' meeting, listening to special report about review, interview and other forms. The Board of Supervisors thinks that the Company has established a comparatively perfect internal control system, all significant decisions are scientific and reasonable, and decision-making processes are legal. Directors and senior management personnel of the Company are diligent and responsible when executing duties, and behaviors of violating laws and regulations, damaging interests of the Company and legitimate rights and interests of shareholders.
Hikvision 2016 Annual Report 2. Situation about Checking the Company Finance
During the reporting period, the Board of Supervisors has convoked special meetings to carefully listen to reports of annual financial works by financial headers, understood audit work arrangement of external auditors, and carried out meticulous inspection regarding financial systems and financial conditions of the Company, and it thinks that preparation and deliberation procedure of the Company's periodic report conforms to provisions of laws, administrative regulations and CSRC (China Securities Regulatory Commission), the report contents truly, correctly and completely reflects actual conditions of the Company, and any false record, misleading statement or important omission doesn't exist. There is no behavior violating confidentiality provisions of personnel who participated in preparation and deliberation procedure of periodic report
3. Self-evaluation report about internal control of year 2016
During the reporting period, the Board of Supervisors has convoked special meetings to listen to reports regarding construction and implementation situations for the internal control system of the Company, all branches and subsidiaries by directors of Internal Audit Department, Process Management Department After a careful study and discussion, the Board of Supervisors thinks that the Company has established a comparatively perfect internal control system which conforms to relevant national laws and regulations requirements, and actual demand of the Company's production and operation management, and is obtained effective implementation, and has a better risk prevention and control effect on each section of the Company's production and operation management. The self-evaluation report about internal control of the Board of Directors can truthfully and objectively reflect the internal control system construction and operation conditions of the Company.
4. External Guarantee Situation of the Company
During the reporting period, the Board of Supervisors has known about demand of guarantees items and relevant implementation situations of the Company and subsidiaries by means of interviewing financial headers, and researched and reviewed relevant proposals regarding additional guarantees for wholly-owned subsidiaries by the Company. Board of Supervisors thinks that: The Company provides guarantees for wholly-owned subsidiaries, which is beneficial to further improve its production and operation abilities, fully meets fund demand required by its production and management, and effectively improves management benefit. The financial risk of the guarantee provided by the Company is in the controllable scope of the Company, and has no significant impact on normal operation of the Company. There is no contravention between relevant provisions of CSRC and Articles of Association. The guarantee conforms to interests of the Company and general shareholders, and won't have any
Hikvision 2016 Annual Report adverse effect on the Company.
5. Related-party transaction Conditions of the Company
During the reporting period, the Board of Supervisors has supervised decision-making process of transactions, including daily related-party transaction of the Company and related-party transaction with investment and partnership enterprise, and the follow-up implementation situations by means of attending the Board of Directors and interviewing the management level. The Board of Supervisors thinks that related-party transactions happened to the Company are subject to the principles of voluntariness, equity, reasonableness, and consensus of the transaction parties, and conform to relevant laws and regulations and provisions of Articles of Association. The Board of Directors reviewed related-party transactions according to legal procedures, affiliated directors avoid votes. Decision-making processes of related-party transactions are legal and compliant. There is no situation damaging interests of the Company and medium and small shareholders.
6. Implementation of resolutions of shareholders' meeting
During the reporting period, the Board of Supervisors has carefully reviewed each proposal of the shareholders' meeting submitted by the Board of Directors, and further inspected practical implementation of each proposal. The Board of Supervisors thinks that the Company's Board of Directors can carefully perform relevant resolutions of the Shareholders' Meeting.
7. Situations about restricted share plan of the Company
During the reporting period, the Board of Supervisors has researched and reviewed relevant proposals unlocking of 2012 and 2014 restricted share plans, and relevant proposals of implementation of 2016 restricted share plan. The Board of Supervisors thinks that: The implementation process of the Company's restricted share plan is legal and valid, and the launch of the restricted share plan is beneficial to further perfect the Company's governance structure, and form a favorable and balanced value distribution system; Fully arouse positivity of core employees, and support realization of the Company strategy and long-term sustainable development; Attract and retain core employees, and ensure long-term development and competitive advantage of the Company. At the same time, the Board of Supervisors has carried out special audit regarding Incentive Object List of 2016 Restricted Share Plan, it thinks that: The incentive objects listed in the 2016 restricted share plan of the Company conform to incentive object conditions stipulated by laws, regulations and normative documents, and incentive object scope and condition stipulated by 2016 restricted share plan of the Company, which acting as subject qualification of incentive object of 2016 restricted share plan is legal and valid.
Hikvision 2016 Annual Report During the Reporting Period, the Company strictly followed relevant rules and regulations, strengthened management of information insiders in preparation of the report, resolution and disclosure, and announcement of significant affairs, and other matters related to inside information. The Company respectfully submitted the registration form for information insiders, and reported to Shenzhen Stock Exchange Place in time.
VIII. Assessment and incentive mechanism for the senior management
The Company established a complete appraisal system on the basis of its target-oriented responsibility system and adopted a fair and transparent appraisal mechanism for senior management members and other employees. TheCompany’s board of dirctors has carried out appraisals of senior management members on the basis of its annual target-oriented responsibility system and the appraisal result was reflected in the annual performance-based incentive rewards. The Board carried out appraisals of the general manager and the general manager carried out appraisals of other senior management members with the duty, capacity and performance of operation and management objectives.
In the year 2016, senior management personnel carried out their duties with good performance, and completed their objectives and missions set at the beginning of the year.
IX. Evaluation report on internal control
1. Any significant internal control deficiencies during the reporting period
□ Yes√ No
2. Self-evaluation report on internal control
|||||
|-|-|-|-|
|Disclosure date of full text of self-evaluation report on internal control||April 4th 2017||
|Disclosure index of full text of self-evaluation report on internal control||www.cninfo.com.cn||
|Proportion of assets evaluated in total assets||100.00%||
|Proportion of revenue evaluated in total revenue per consolidated financial||||
|||100.00%||
|statement||||
|Recognition standard of deficiencies||||
|Nature|Financial report level||Non-financial report level|
||Significant deficiency:||Internal control deficiencies at non-financial|
|Qualitative||||
||A deficiency or a combination of deficiencies in internal control||report level are mainly identified by the|

Hikvision 2016 Annual Report
|||||
|-|-|-|-|
|criteria|may prevent significant errors in financial reports from being||likelihood of occurrence and the extent of|
||identified or prevented, e.g.:||impacts on operating effective in business.|
||A. Invalid internal control environment;||Significant deficiency: the high likelihood|
||B. Fraud of directors, supervisors and senior management||leading to significant reduction of working|
||personnel on the financial report ;||efficiency, or significant increase of|
||C. Significant errors identified by external auditors but not||uncertainty, or significant deviation from the|
||identified during the Company is operating;||expected target;|
||D. Invalid supervision of audit committee and internal audit|||
||||Important deficiency: a higher likelihood|
||system;|||
||||leading to remarkable reduction of working|
||E. Other deficiencies that may lead to the wrong judgement of|||
||||efficiency, or remarkable increase of|
||financial statement reporter.|||
||||uncertainty, or remarkable deviation from the|
||Important deficiency:|||
||||expected target;|
||A deficiency or a combination of deficiencies in internal control||Normal deficiency: a low likelihood leading to|
||may prevent errors in financial report from being identified or||reduction of working efficiency, or increase of|
||prevented, although such deficiency is not significant, but require||uncertainty, or deviation from the expected|
||attention of the Board and Management, e.g.:||target;|
||A. Application of accounting policies does not follow the enterprise|||
||accounting standard;|||
||B. No internal control systems for fraud;|||
||C. No control systems or system not effective for unusual or special|||
||transactions or no compensatory relevant control;|||
||D. One or more deficiencies which prevent the preparation of true|||
||and fair financial statements.|||
||Normal deficiency: Not significant and not important deficiency.|||
||Significant deficiency|potential errors||
||||direct losses of assets is 5% or more of total|
|||5% or more of||
||||profits|
|||total profits||
||Important deficiency|potential errors||
|Quantitative||2% or more but|direct losses of assets is over 2% but below|
|||below 5% of|5% of total profits|
|criteria||||
|||total profits||
||Normal deficiency|potential errors||
||||direct losses of assets is below 2% of total|
|||is 2% or less of||
||||profits|
|||total profits||
|Number of significant deficiencies in financial report level|||0|
|Number of significant deficiencies in non-financial report level|||0|
|Number of important deficiencies in financial report level|||0|
|Number of important deficiencies in non-financial report level|||0|

X．Auditor’s report on internal control
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report Section X Coporate Bonds
Whether the Company has publicly issued corporate bonds on stock exchange place, which has not terminated or terminated but fail to collect the full payment before the annual report authorized disclosure date.
□ Applicable√ Inapplicable
Hikvision 2016 Annual Report Section XI Financial Report
I. Audit report
|||
|-|-|
|Audit Opinion|Unmodified unqualified audit opinion|
|Audit Report sign-off Date|April 12th 2017|
|Audit Institution Name|Deloitte Touche Tohmatsu CPA LLP|
|Audit Report Number|Deloitte Auditors’ Report (Audit) No. 17-P01795|
|Certified Public Accounts Name|Mou Zhengfei, Huang Yan|

To the shareholders of Hangzhou Hikvision Digital Technology Co., Ltd.
We have audited the accompanying financial statements of Hangzhou Hikvision Digital Technology Co., Ltd. (the "Company"), which comprise the Company's and consolidated balance sheets as of 31 December 2016, and the Company's and consolidated income statements, the Company's and consolidated statements of changes in shareholders' equity, and the Company's and consolidated cash flow statements for the year then ended, and the notes to the financial statements.
1. Management's responsibility for the financial statements
Management of the Company is responsible for the preparation and fair presentation of these financial statements. This responsibility includes: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and maintaining internal control which is necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error.
2. Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. China Standards on Auditing require that we comply with the Code of Ethics for Chinese Certified Public Accountants, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, Certified Public Accountants consider the internal control relevant to the preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the
Hikvision 2016 Annual Report reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. Opinion
In our opinion, the financial statements of the Company present fairly, in all material respects, the company's and consolidated financial position as of 31 December 2016, and the company's and consolidated results of operations and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.
Hikvision 2016 Annual Report December
31st
2016
Consolidated Balance Sheet
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item||Notes||Closing balance||Opening balance|
||Current Assets:||||||
||Cash and bank balances|(V)1|13,634,993,154.18||10,106,500,588.53||
||Financial assets at fair value through|(V)2|15,547,537.34||6,160,279.18||
||profit or loss||||||
||Notes receivable|(V)3|2,843,404,415.52||3,044,148,064.81||
||Accounts receivable|(V)4|11,242,812,902.86||8,125,932,742.98||
|Prepayments||(V)5|278,971,025.67||132,662,264.81||
|Other receivables||(V)6|528,600,591.43||335,274,098.54||
|Inventories||(V)7|3,825,159,212.28||2,818,665,737.11||
|Other current assets||(V)8|4,153,992,276.78||2,113,013,249.46||
|Total Current Assets|||36,523,481,116.06||26,682,357,025.42||
|Non-current Assets:|||||||
|Available-for-sale financial assets||(V)9|283,836,013.00||56,033,513.00||
|Long-term receivables||(V)10|251,588,919.15||105,903,265.79||
|Long-term equity investment||(V)11|35,000,000.00||-||
||Fixed assets|(V)12|2,853,743,612.67||1,887,240,766.08||
||Construction in progress|(V)13|316,482,522.36||844,631,051.21||
|Intangible assets||(V)14|410,256,469.09||343,200,704.36||
|Goodwill||(V)15|248,364,401.47||117,860,200.59||
|Deferred tax assets||(V)16|375,255,076.61||261,215,909.72||
|Other non-current assets||(V)17|40,999,684.42||18,000,000.00||
|Total Non-current Assets|||4,815,526,698.77||3,634,085,410.75||
|Total Assets|||41,339,007,814.83||30,316,442,436.17||

Hikvision 2016 Annual Report December
31st
2016
Consolidated Balance Sheet - continued
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item||Notes||Closing balance||Opening balance|
|Current Liabilities:|||||||
|Short-term borrowings||(V)18|32,291,324.85||876,600,473.94||
||Financial liabilities at fair value|(V)19|69,789,502.97||19,281,989.69||
||through profit or loss||||||
|Notes payable||(V)20|876,804,536.72||209,741,787.71||
|Accounts payable||(V)21|7,008,335,023.47||5,869,739,370.78||
|Receipts in advance||(V)22|469,691,437.39||395,510,795.73||
||Payroll payable|(V)23|1,084,529,374.71||788,069,735.32||
||Taxes payable|(V)24|1,205,675,099.74||822,299,350.08||
||Interests payable||-||4,668,652.09||
||Dividends payable|(V)25|20,105,831.16||24,128,481.48||
|Other payables||(V)26|1,033,169,123.84||159,857,666.08||
||Non-current liabilities due within|(V)27|15,340,813.03||586,430,847.08||
||one year||||||
|Other current liabilities||(V)28|300,177,750.17||518,074,596.90||
|Total Current Liabilities|||12,115,909,818.05||10,274,403,746.88||
|Non-current Liabilities:|||||||
|Long-term borrowings||(V)29|1,722,207,584.33||675,753,935.00||
|Bonds payable||(V)30|2,954,449,528.77||-||
|Long-term payables|||7,000,000.00||7,000,000.00||
|Provisions||(V)31|41,933,212.54||61,833,874.59||
|Deferred income||(V)32|10,833,745.99||-||
|Total non-current liabilities|||4,736,424,071.63||744,587,809.59||
|Total liabilities|||16,852,333,889.68||11,018,991,556.47||
|Owner’s Equity|||||||
|Share capital||(V)33|6,102,706,885.00||4,068,772,253.00||
|Capital reserves||(V)34|1,045,440,853.66||1,639,607,652.22||
|Less: Treasury stock||(V)35|300,177,750.17||518,074,596.90||
|Other comprehensive income||(V)36|(41,230,777.21)||(27,660,017.70)||
|Surplus reserve||(V)37|2,615,437,822.15||1,895,061,004.09||
|Retained profits||(V)38|14,866,457,856.65||12,196,097,444.07||
||Total owners' equity attributable to owner||24,288,634,890.08||19,253,803,738.78||
||of the Company||||||
|Minority interests|||198,039,035.07||43,647,140.92||
|Total owners' equity|||24,486,673,925.15||19,297,450,879.70||
|Total liabilities and owners' equity|||41,339,007,814.83||30,316,442,436.17||

Notes are parts of the financial statements.
Financial statements signed by the following responsible officer:
Legal Representative: ChenZongnian；Person in Charge of the Accounting Organization: JinYan； Chief Accountant: Jin Yan
Hikvision 2016 Annual Report December
31st
2016
Balance sheet of the Company
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Notes|Closing balance|Opening balance|
|Current Assets:|||||
||Cash and bank balances||10,249,118,159.19|6,554,624,806.82|
||Financial assets at fair value through||5,284,890.86|-|
||profit or loss||||
||Notes receivable||221,542,747.41|285,916,430.68|
||Accounts receivable|(XV)1|10,128,753,520.42|9,120,541,604.04|
|Prepayments|||8,256,040.04|3,975,968.87|
|Other receivables||(XV)2|417,963,245.46|344,944,956.54|
|Inventories|||566,168,466.17|354,607,355.65|
|Other current assets|||3,889,519,711.57|1,475,771,382.66|
|Total Current Assets|||25,486,606,781.12|18,140,382,505.26|
|Non-current Assets:|||||
|Available-for-sale financial assets|||283,221,700.00|55,429,200.00|
|Long-term receivables|||72,153,363.60|27,000,000.00|
|Long-term equity investment||(XV)3|1,714,688,703.42|1,175,799,927.25|
||Fixed assets||1,720,579,461.05|1,759,900,661.47|
||Construction in progress||248,447,641.34|179,392,535.51|
|Intangible assets|||131,566,733.76|137,328,714.00|
|Deferred tax assets|||177,568,964.27|153,437,862.78|
|Other non-current assets|||10,782,858.00|-|
|Total Non-current Assets|||4,359,009,425.44|3,488,288,901.01|
|Total Assets|||29,845,616,206.56|21,628,671,406.27|

Hikvision 2016 Annual Report December
31st
2016
Balance sheet of the Company - continued
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Notes|Closing balance|Opening balance|
|Current Liabilities:|||||
|Short-term borrowings|||-|432,500,194.74|
||Financial liabilities at fair value||58,858,697.43|-|
||through profit or loss||||
|Accounts payable|||138,851,152.86|116,211,859.13|
|Receipts in advance|||233,831,105.17|171,072,708.07|
||Payroll payable||811,701,475.85|633,419,309.99|
||Taxes payable||998,754,860.91|642,749,926.57|
||Dividends payable||20,105,831.16|24,128,481.48|
|Other payables|||787,861,780.95|91,301,389.43|
||Non-current liabilities due within||-|162,340,000.00|
||one year||||
|Other current liabilities|||300,177,750.17|518,074,596.90|
|Total Current Liabilities|||3,350,142,654.50|2,791,798,466.31|
|Non-current Liabilities:|||||
|Bonds payable|||2,954,449,528.77|-|
|Provisions|||28,799,848.84|56,788,335.77|
||Total non-current liabilities||2,983,249,377.61|56,788,335.77|
||Total liabilities||6,333,392,032.11|2,848,586,802.08|
|Owners’ Equity|||||
|Share capital|||6,102,706,885.00|4,068,772,253.00|
|Capital reserves|||955,687,875.52|1,647,623,212.04|
|Less: Treasury stock|||300,177,750.17|518,074,596.90|
|Surplus reserve|||2,615,437,822.15|1,895,061,004.09|
|Retained profits|||14,138,569,341.95|11,686,702,731.96|
|Total owners' equity|||23,512,224,174.45|18,780,084,604.19|
|Total liabilities and owners' equity|||29,845,616,206.56|21,628,671,406.27|

Hikvision 2016 Annual Report For fiscal year period from January
1st
2016 to December
31st
2016
Consolidated Income Statement
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Notes|||Amount for the current||Amount for the prior|
||||||period||period|
|I. Total operating income||(V)39||31,924,020,872.44||25,271,390,273.42||
||Less：Total operating costs||(V)39||18,649,694,075.44||15,136,793,517.44|
|Business taxes and surcharges||(V)40||255,078,931.50||196,876,622.43||
|Selling expenses||(V)41||2,991,273,819.81||2,179,045,314.71||
||Administrative expenses|(V)42||3,106,761,432.94||2,211,221,871.15||
||Financial expense|(V)43||(226,063,754.62)||(152,896,391.70)||
|Impairment losses of assets||(V)44||317,497,358.88||338,874,649.43||
||Add: Gains from changes in fair values (Losses are indicated|(V)45||(40,171,578.80)||(16,154,643.25)||
||by "－")|||||||
||Investment income (Loss is indicated by "－")|(V)46||40,493,287.66||148,673,437.25||
||II. Operating profit (Loss is indicated by "－")|||6,830,100,717.35||5,493,993,483.96||
|Add: Non-operating income||(V)47||1,510,919,327.24||1,293,978,970.29||
||Including: Gains from disposal of non-current assets|||203,854.22||2,829,117.71||
|Less: Non-operating expenses||(V)48||30,841,696.08||37,930,721.86||
|Including: Losses from disposal of non-current assets||||940,003.24||1,113,694.67||
|III. Total profit (total losses expressed with "-")||||8,310,178,348.51||6,750,041,732.39||
|Less: Income tax expenses||(V)49||889,905,208.07||867,643,887.69||
||IV. Net profit (net loss expressed with "-")|||7,420,273,140.44||5,882,397,844.70||
||Net profit attributable to owners of parent company|||7,422,261,983.16||5,869,049,646.23||
|Profit or loss attributable to minority shareholders||||(1,988,842.72)||13,348,198.47||
|V. Other comprehensive income, net of income tax||||(12,687,807.98)||(17,989,248.27)||
||Other comprehensive income attributable to owners of|||(13,570,759.51)||(18,822,600.24)||
||the Company, net of tax|||||||
||(I) Items that will not be reclassified subsequently|||-||-||
||to profit or loss|||||||
||(II) Other comprehensive income to be|||(13,570,759.51)||(18,822,600.24)||
||reclassified to profit or loss in subsequent periods|||||||
||1. Exchange differences arising on conversion of|||(13,570,759.51)||(18,822,600.24)||
||financial statements denominated in foreign|||||||
||currencies|||||||
||Other comprehensive income attributable to minority|||882,951.53||833,351.97||
||interests, net of tax|||||||
|VI. Total comprehensive income||||7,407,585,332.46||5,864,408,596.43||
||Total comprehensive income attributable to owners of|||7,408,691,223.65||5,850,227,045.99||
||the parent company|||||||
||Total comprehensive income attributable to minority|||(1,105,891.19)||14,181,550.44||
||shareholders|||||||
|VII. Earnings per share||||||||
||(I) Basic earnings per share|(XVI)2||1.227||0.977||
||(II) Diluted earnings per share|(XVI)2||1.221||0.971||

Hikvision 2016 Annual Report For fiscal year period from January
1st
2016 to December
31st
2016
Income statement of the Company
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item||Notes||Amount for the||Amount for the prior|
|||||current period||period|
||I. Total operating income|(XV)4|17,165,449,311.27||14,247,382,172.06||
||Less: Operating Cost|(XV)4|5,967,138,876.83||5,635,878,721.53||
||Business taxes and surcharges||222,640,567.03||163,525,293.31||
||Selling expenses||1,923,037,271.14||1,560,498,015.69||
||Administrative expenses||2,331,920,426.33||1,824,491,151.65||
||Financial expense||(67,337,491.29)||(66,657,382.50)||
|Impairment losses of assets|||151,838,196.39||310,847,916.44||
||Add: Gains from changes in fair values (Losses are indicated by||(53,573,806.57)||-||
||"－")||||||
||Investment income (Loss is indicated by "－")|(XV)5|57,191,401.59||346,511,489.93||
||II. Operating profit (Loss is indicated by "－")||6,639,829,059.86||5,165,309,945.87||
|Add: Non-operating income|||1,372,223,454.12||1,201,709,022.19||
|Including: Gains from disposal of non-current assets|||154,566.50||2,710,672.80||
|Less: Non-operating expenses|||7,973,687.35||11,191,064.63||
|Including: Losses from disposal of non-current assets|||370,396.59||976,769.69||
||III. Total profit (Total loss is indicated by "－")||8,004,078,826.63||6,355,827,903.43||
|Less: Income tax expenses|||800,310,646.06||801,193,702.77||
||IV. Net profit (Net loss is indicated by "－")||7,203,768,180.57||5,554,634,200.66||
|V. Other comprehensive income, net of income tax|||-||-||
|VI. Total comprehensive income|||7,203,768,180.57||5,554,634,200.66||

Hikvision 2016 Annual Report For fiscal year period from January
1st
2016 to December
31st
2016
Consolidated Cash Flow Statement
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Item|Notes||Amount for the current period||Amount for the prior period|
||I. Cash flows from operating activities:||||||
||Cash received from sale of goods or rendering of services||32,660,216,112.46||22,777,510,666.14||
||Refund of tax and levies||2,592,008,277.39||2,001,179,512.70||
||Other cash received relating to operating activities|(V)50(1)|488,882,790.83||525,913,263.75||
||Sub-total of cash inflows from operating activities||35,741,107,180.68||25,304,603,442.59||
||Cash payments for goods purchased and services received||20,889,389,503.82||15,694,627,971.95||
||Cash paid to and on behalf of employees||3,404,886,547.11||2,501,048,931.40||
||Payments of various types of taxes||2,913,713,175.75||2,455,175,034.68||
||Other cash paid relating to operating activities|(V)50(2)|2,319,425,793.44||1,437,029,335.39||
||Sub-total of cash outflows from operating activities||29,527,415,020.12||22,087,881,273.42||
|Net Cash Flow from Operating Activities||(V)51(1)|6,213,692,160.56||3,216,722,169.17||
||II. Cash Flows from Investing Activities:||||||
|Cash receipts from disposals and recovery of investments|||4,989,550,266.43||2,928,000,000.00||
||Cash receipts from investment income||48,773,447.48||148,673,437.25||
||Net cash receipts from disposals of fixed assets, intangible||19,404,765.15||13,030,975.34||
||assets and other long-term assets||||||
||Other cash received relating to investing activities|(V)50(3)|13,398,940.46||35,996,686.98||
||Sub-total of cash inflows from investing activities||5,071,127,419.52||3,125,701,099.57||
||Cash payments to acquire or construct fixed assets,||911,376,475.87||1,330,084,112.50||
||intangible assets and other long-term assets||||||
||Cash paid to acquire investments||7,335,420,926.25||1,870,817,394.24||
||Net cash payments for acquisitions of subsidiaries and other|(V)51(2)|172,473,788.49||-||
||business units||||||
||Other cash paid relating to investing activities||35,000,000.00||-||
||Sub-total of cash outflows from investing activities||8,454,271,190.61||3,200,901,506.74||
|Net Cash Flow from Investment Activities|||(3,383,143,771.09)||(75,200,407.17)||
||III. Cash flows from financing activities:||||||
|Cash receipts from capital contributions|||247,269,466.66||-||
||Including: cash receipts from capital contributions from||247,269,466.66||-||
||minority owners of subsidiaries||||||
||Cash receipts from borrowings||4,668,904,940.17||2,790,211,998.69||
||Cash receipts from bond issue||2,903,120,000.00||-||
||Other cash receiptsd relating to financing activities|(V)50(4)|660,888,216.54||4,000,000.00||
||Sub-total of cash inflows from financing activities||8,480,182,623.37||2,794,211,998.69||
||Cash repayments of amounts borrowed||5,104,870,545.06||1,258,504,731.78||
||Cash payments for distribution of dividends or profits or||2,930,913,722.75||1,652,404,056.80||
||settlement of interest expenses||||||
||Including: payments for distribution of dividends or profits||-||5,121,125.61||
||to minority owners of subsidiaries||||||
||Other cash payments relating to financing activities|(V)50(5)|1,602,804.35||2,093,991.15||
||Sub-total of cash outflows from financing activities||8,037,387,072.16||2,913,002,779.73||
||Net Cash Flow from Financing Activities||442,795,551.21||(118,790,781.04)||
||IV. Net foreign exchange differences||212,875,294.92||(100,952,230.26)||
||V. Net Increase (Decrease) in Cash and Cash Equivalents|(V)51(1)|3,486,219,235.60||2,921,778,750.70||
||Add: Opening balance of Cash and Cash Equivalents|(V)51(1)|10,033,033,476.30||7,111,254,725.60||
||VI. Closing Balance of Cash and Cash Equivalents|(V)51(3)|13,519,252,711.90||10,033,033,476.30||

Hikvision 2016 Annual Report For fiscal year period from January
1st
2016 to December
31st
2016
Cash Flow Statements of the Company
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item||Notes||Amount for the||Amount for the prior|
|||||current period||period|
||I. Cash Flows from Operating Activities::||||||
||Cash receipts from the sale of goods and the rendering of services||18,882,254,702.72||10,803,039,228.70||
||Refund of tax and levies||1,284,036,478.69||1,074,852,534.11||
||Other cash receipts relating to operating activities||322,630,474.75||324,140,950.48||
||Sub-total of cash inflows from operating activities||20,488,921,656.16||12,202,032,713.29||
||Cash payments for goods acquired and services received||7,375,020,750.77||6,903,906,913.83||
||Cash payments to and on behalf of employees||1,998,015,491.73||1,584,444,500.81||
||Payments of all types of taxes||2,349,110,778.76||2,032,510,607.05||
||Other cash payments relating to operating activities||2,003,975,502.85||1,239,471,585.53||
||Sub-total of cash outflows from operating activities||13,726,122,524.11||11,760,333,607.22||
||Net Cash Flow from Operating Activities|(XV)8(1)|6,762,799,132.05||441,699,106.07||
||II. Cash Flows from Investing Activities:||||||
||Cash receipts from disposals and recovery of investments||3,871,026,616.63||2,858,000,000.00||
||Cash receipts from investment income||49,164,784.96||347,490,333.16||
||Net cash receipts from disposals of fixed assets, intangible assets||3,129,852.68||9,847,896.80||
||and other long-term assets||||||
||Net cash receipts from disposals of subsidiaries and other business||-||6.77||
||units||||||
||Other cash receipts relating to investing activities||3,389,327,585.78||2,344,996,750.40||
||Sub-total of cash inflows from investing activities||7,312,648,840.05||5,560,334,987.13||
||Cash payments to acquire or construct fixed assets, intangible assets||255,328,076.51||502,365,875.50||
||and other long-term assets||||||
||Cash payments to acquire investments||6,996,128,459.52||1,482,672,227.26||
||Other cash payments relating to investing activities||3,403,968,158.86||1,366,590,091.86||
||Sub-total of cash outflows from investing activities||10,655,424,694.89||3,351,628,194.62||
|Net Cash Flow from Investment Activities|||(3,342,775,854.84)||2,208,706,792.51||
||III. Cash Flows from Financing Activities||||||
|Cash receipts from borrowings|||-||600,084,089.00||
||Cash receipts from issue of bonds||2,903,120,000.00||-||
||Other cash receipts relating to financing activities||1,334,260,247.19||518,560,000.00||
||Sub-total of cash inflows from financing activities||4,237,380,247.19||1,118,644,089.00||
||Cash repayments of amounts borrowed||597,065,694.74||159,210,925.14||
||Cash payments for distribution of dividends or profits or settlement||2,898,933,448.56||1,616,845,537.75||
||of interest expenses||||||
||Other cash payments relating to financing activities||654,145,840.87||531,454,491.15||
||Sub-total of cash outflows from financing activities||4,150,144,984.17||2,307,510,954.04||
||Net Cash Flow from Financing Activities||87,235,263.02||(1,188,866,865.04)||
||IV. Net foreign exchange differences||190,636,781.99||(28,926,650.38)||
||V. Net increase in cash and cash equivalents|(XV)8(1)|3,697,895,322.22||1,432,612,383.16||
||Add: Beginning balance of cash and cash equivalents|(XV)8(1)|6,548,073,680.91||5,115,461,297.75||
||VI. Closing Balance of Cash and Cash Equivalents|(XV)8(2)|10,245,969,003.13||6,548,073,680.91||

Hikvision 2016 Annual Reports For fiscal year period from January
1st
2016 to December
31st
2016
Consolidated Statement of Changes in Owners' Equity
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|||Amount for the current period||||||||||
||||Owner’s Equity Attributable to owners of the Company||||||||Minority interests|Total owners' equity|
|||Share capital||Capital reserves||Less:Treasury||Other comprehensive|Surplus reserve|Retained profits|||
|||||||share||income|||||
||I. Closing balance of the preceding year|4,068,772,253.00||1,639,607,652.22|518,074,596.90||(27,660,017.70)||1,895,061,004.09|12,196,097,444.07|43,647,140.92|19,297,450,879.70|
||II. Increase or decrease in the current year|2,033,934,632.00||(594,166,798.56)|(217,896,846.73)||(13,570,759.51)||720,376,818.06|2,670,360,412.58|154,391,894.15|5,189,223,045.45|
||(decrease indicated with “-”)||||||||||||
||(I) Total comprehensive income||||||(13,570,759.51)|||7,422,261,983.16|(1,105,891.19)|7,407,585,332.46|
||(II) Owners’ contributions and reduction in|(451,494.00)||219,587,651.44|(217,896,846.73)||||||155,497,785.34|592,530,789.51|
||capital||||||||||||
||1. Capital contribution from owners|||97,768,537.96|||||||155,497,785.34|253,266,323.30|
||2. Share-based payment recognised in|||122,970,423.83||||||||122,970,423.83|
||owners’ equity||||||||||||
||3. Others (Note(V)33)|(451,494.00)||(1,151,310.35)|(217,896,846.73)|||||||216,294,042.38|
||(III) Profit distribution|1,220,631,676.00|||||||720,376,818.06|(4,751,901,570.58)||(2,810,893,076.52)|
||1. Transfer to surplus reserve||||||||720,376,818.06|(720,376,818.06)|||
||2. Distributions to owners (or shareholders)|||||||||(2,810,893,076.52)||(2,810,893,076.52)|
||3. Others|1,220,631,676.00||||||||(1,220,631,676.00)|||
||(IV) Transfers within owners’ equity|813,754,450.00||(813,754,450.00)|||||||||
||1. Capitalisation of capital reserve|813,754,450.00||(813,754,450.00)|||||||||
||(V) Others||||||||||||
||III. Closing balance of the current year|6,102,706,885.00||1,045,440,853.66|300,177,750.17||(41,230,777.21)||2,615,437,822.15|14,866,457,856.65|198,039,035.07|24,486,673,925.15|
|Item|||Amount for the same period of last year||||||||||
||||Owner’s Equity Attributable to owners of the Company||||||||Minority interests|Total owners' equity|
|||Share capital||Capital reserves||Less: Treasury||Other comprehensive|Surplus reserve|Retained profits|||
|||||||share||income|||||
||I. Closing balance of the preceding year|4,069,128,026.00||1,480,046,325.41|547,853,280.23||(8,837,417.46)||1,339,597,584.02|8,510,162,428.31|36,912,881.21|14,879,156,547.26|
||II. Increase or decrease in the current year|(355,773.00)||159,561,326.81|(29,778,683.33)||(18,822,600.24)||555,463,420.07|3,685,935,015.76|6,734,259.71|4,418,294,332.44|
||(decrease indicated with “-”)||||||||||||
||(I) Total comprehensive income||||||(18,822,600.24)|||5,869,049,646.23|14,181,550.44|5,864,408,596.43|
||(II) Owners’ contributions and reduction in|(355,773.00)||157,235,161.69|(29,778,683.33)|||||||186,658,072.02|
||capital||||||||||||
||1. Capital contribution from owners||||||||||||
||2. Share-based payment recognised in|||158,773,879.84||||||||158,773,879.84|
||owners’ equity||||||||||||
||3. Others|(355,773.00)||(1,538,718.15)|(29,778,683.33)|||||||27,884,192.18|
||(III) Profit distribution||||||||555,463,420.07|(2,183,114,630.47)|(5,121,125.61)|(1,632,772,336.01)|
||1. Transfer to surplus reserve||||||||555,463,420.07|(555,463,420.07)|||
||2. Distributions to owners (or shareholders)|||||||||(1,627,651,210.40)|(5,121,125.61)|(1,632,772,336.01)|
||3. Others||||||||||||
||(IV) Transfers within owners’ equity||||||||||||
||1. Capitalisation of capital reserve||||||||||||
||(V) Others|||2,326,165.12|||||||(2,326,165.12)||
||III. Closing balance of the current year|4,068,772,253.00||1,639,607,652.22|518,074,596.90||(27,660,017.70)||1,895,061,004.09|12,196,097,444.07|43,647,140.92|19,297,450,879.70|

Hikvision 2016 Annual Reports For fiscal year period from January
1st
2016 to December
31st
2016
Statement of Changes in Owners' Equity of the Company
Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|||Amount for the current period|||||||||||
||||Share capital||Capital reserves||Less: Treasury share||Surplus reserve||Retained profits||Total owners' equity|
||I. Closing balance of the preceding year|4,068,772,253.00||1,647,623,212.04||518,074,596.90||1,895,061,004.09||11,686,702,731.96||18,780,084,604.19||
||II. Increase or decrease in the current year|2,033,934,632.00||(691,935,336.52)||(217,896,846.73)||720,376,818.06||2,451,866,609.99||4,732,139,570.26||
||(decrease indicated with “-”)|||||||||||||
||(I) Total comprehensive income|||||||||7,203,768,180.57||7,203,768,180.57||
||(II) Owners’ contributions and reduction in|(451,494.00)||121,819,113.48||(217,896,846.73)||||||339,264,466.21||
||capital|||||||||||||
||1.share-based payment recognised in owners’|||122,970,423.83||||||||122,970,423.83||
||equity|||||||||||||
||2. Others|(451,494.00)||(1,151,310.35)||(217,896,846.73)||||||216,294,042.38||
||(III) Profit distribution|1,220,631,676.00||||||720,376,818.06||(4,751,901,570.58)||(2,810,893,076.52)||
||1.Transfer to surplus reserve|||||||720,376,818.06||(720,376,818.06)||||
||2. Distributions to owners (or shareholders)|||||||||(2,810,893,076.52)||(2,810,893,076.52)||
||3. Others|1,220,631,676.00||||||||(1,220,631,676.00)||||
||(IV) Transfers within owners’ equity|813,754,450.00||(813,754,450.00)||||||||||
||1. Capitalisation of capital reserve|813,754,450.00||(813,754,450.00)||||||||||
||III. Closing balance of the current year|6,102,706,885.00||955,687,875.52||300,177,750.17||2,615,437,822.15||14,138,569,341.95||23,512,224,174.45||
|Item|||Amount for the same period of last year|||||||||||
||||Share capital||Capital reserves||Less: Treasury share||Surplus reserve||Retained profits||Total owners' equity|
||I. Closing balance of the preceding year|4,069,128,026.00||1,490,388,050.35||547,853,280.23||1,339,597,584.02||8,315,183,161.77||14,666,443,541.91||
||II. Increase or decrease in the current year|(355,773.00)||157,235,161.69||(29,778,683.33)||555,463,420.07||3,371,519,570.19||4,113,641,062.28||
||(decrease indicated with “-”)|||||||||||||
||(I) Total comprehensive income|||||||||5,554,634,200.66||5,554,634,200.66||
||(II) Owners’ contributions and reduction in|(355,773.00)||157,235,161.69||(29,778,683.33)||||||186,658,072.02||
||capital|||||||||||||
||1.share-based payment recognised in|||158,773,879.84||||||||158,773,879.84||
||owners’ equity|||||||||||||
||2. Others|(355,773.00)||(1,538,718.15)||(29,778,683.33)||||||27,884,192.18||
||(III) Profit distribution|||||||555,463,420.07||(2,183,114,630.47)||(1,627,651,210.40)||
||1.Transfer to surplus reserve|||||||555,463,420.07||(555,463,420.07)||||
||2. Distributions to owners (or shareholders)|||||||||(1,627,651,210.40)||(1,627,651,210.40)||
||3. Others|||||||||||||
||(IV) Transfers within owners’ equity|||||||||||||
||1. Capitalisation of capital reserve|||||||||||||
||III. Closing balance of the current year|4,068,772,253.00||1,647,623,212.04||518,074,596.90||1,895,061,004.09||11,686,702,731.96||18,780,084,604.19||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
I. Basic Information About the Company
Hangzhou Hikvision Digital Technology Co., Ltd. (hereinafter referred to as "the Company" or "Company"), is a Sino-foreign Equity Joint Venture Company, formerly known as "Hangzhou Hikvision Digital Technology Ltd", established on December
30th
2001 in Hangzhou upon the approval letter of Hangzhou High-tech No.604[2001] issued by Hangzhou High-tech Industrial Development Zone Management Committee. On June
25th
2008, with approval of Shang Zi No.598[2008] issued by the MOFCOM, the company was renamed as “Hangzhou Hikvision Digital Technology Co., Ltd.”, headquartered in Hangzhou, and obtained the business license of enterprise No.91330000733796106P. On May
28th
2010, the Company was listed on the Shenzhen Stock Exchange.
On May
5th
2016, theCompany’s 2015 Annual General Meeting approved 2015 Annual Profit Distribution Proposal（2015年年度利润分配预案）. On May
18th
2016, based upon the total capital shares of 4,068,772,253 shares on December
31st
2015, the Company issued bonus shares of 1,220,631,676 shares, and distributed 813,754,450 shares through capitalization of capital reserve, as result, resulted in total capital share of 6,103,158,379 shares. By the end of November 16th, 2016, the Company completed cancelation procedures for 451,494 shares that already granted to the participant who was no longer eligible to be a participant, authorized by the 1st Extraordinary General Meeting of 2012. After the completion of cancelation procedures for 451,494 shares, the total share capital of the Company decreased to 6,102,706,885 shares. For detail of capital share, please refer to Note (V) 33.
By the end of December 31st, 2016, theCompany’s registered capital is RMB 6,102,706,885, with total capital share of 6,102,706,885 shares (RMB 1 per share), including 1,417,926,033 restricted A-shares, and 4,684,780,852 tradable A-shares.
The Company is engaged in electronic equipment manufacturing business mainly including development, production and sales of electronic products (including explosion-proof electrical products, communications equipment and its ancillary equipment, multimedia equipment). Business scope of the Company includes distribution of self-manufactured products, technical service, electronic equipment installation, electronic engineering and design of intelligent systems, construction, and maintenance. For details about business scope of the Company and its subsidiaries, please refer to Note (VII) 1.
This financial report was approved for issue by the
22nd
meeting of the third session Board of Directors of the Company as of April
12th,
2017.
For consolidation scopt of the financial statements, please refer to Note (VII) “Interest in other entities”. For changes in consolidation scope of the financial statements, please refer to “changes in the consolidation scope” in Note (VI).
II. Basis for preparation of financial statements
Basis of preparation
The Company and its subsidiaries (hereinafter referred to as "the Group") implement Accounting
Standards for Business Enterprises issued by Ministry of Finance and relevant provisions. In addition,
the Group also discloses relevant financial information in accordance with No. 15 Preparation
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Regulations regarding Information Disclosure of Company Public Issuing Securities - General Provisions of Financial Statement (revised in 2014).
Bookkeeping base and valuation principles
The Group measures the accounting elements in accordance with the accrual accounting basis. Except certain financial instruments are measured by fair value, these financial statements are prepared in accordance with the measurements basis of historical costs. If the asset decreases in value, the provision for impairment of assets should be made according to relevant regulations.
According to the historical cost measurement, the assets shall be measured as per the amount of cash or cash equivalent paid at the time of purchase, or the fair value of consideration paid for the purchase of such assets. The liabilities shall be measured in accordance with the amount of funds or assets actually received when undertaking current obligations, or the contract amount when undertaking the current obligations, or the amount of cash or cash equivalents required for paying back the debts in daily activities.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(II) Basis for Preparation of Financial Statements - continued
Bookkeeping base and valuation principles - continued
The fair value is a price received by the market participants from selling asset or transferring liability during orderly transaction at the measurement date. No matter the fair value is observable or estimated by using valuation technique, the measured and disclosed fair value in the financial statement shall be determined on this basis.
Based on the observable extent of the input value of the fair value, and the importance of such input value to the fair value measurement, the fair value measurement is divided into three levels:
• Level 1: The input value is the offer of the same assets or liabilities on active market acquired on measurement date;
• Level 2: The input value is the input value of relevant assets or liabilities observable directly or indirectly in addition to level 1 input value;
• Level 3: The input value is the non-observable input value of assets or liabilities.
Sustainability concern
The Group has evaluated the sustainable operation ability within 12 months from December 31, 2016, and there is no matter or condition that has significant doubt on the sustainable operation ability. Therefore, the financial statements are prepared on the basis of going-concern assumption.
III. Important accounting policies and accounting estimates
1. Statement for Compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company comply with requirements of the Accounting Standards for Business Enterprises, truly and completely reflect situations of the Company and consolidated financial on December 31, 2016, the Company and consolidated operating results as well as the Company and consolidated cash flow in year 2016.
2. Accounting Period
The fiscal year of the Group is January 1 to December 31 each year.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
3. Business Cycle
The business cycle refers to the period from purchase of assets used for processing to realization of cash or cash equivalents. The Group business cycle is usually 12 months.
4. Recording Currency
RMB is the currency in the primary economic environments in which the Company and its domestic subsidiaries are operated. The Company and its domestic subsidiaries take RMB as the recording currency. Overseas subsidiaries of the Company determine their recording currency based on the main economic environment in the place of operation. For recording currency of overseas subsidiaries of the Company, see Note (V) 53. The currency adopted by the Company for preparing the financial statements is RMB.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
5. Accountant arrangement method for business merger under the common control and under the different control
Business merges are classified into the business merger under the common control and the business merger under the different control.
5.1 Business Merger under the Common Control
Business merger under the common control refers to the enterprise participating in the merger, which is subject to the final control of the same party or the same parties before and after the merger, and such control is not temporary.
The assets and liabilities obtained during business merger shall be measured on the basis of their carrying amount of the combined party on the merger date. Adjust capital share premium of the capital reserve based on the differences between book value of net assets and that of the paid combination consideration (or total face value of issued shares); if the capital share premium is insufficient to be written down, the retained earnings shall be adjusted.
Costs incurred directly attributable to the business combination are recorded in the profits and losses of the current period.
5.2 Business Merger and Goodwill under the Different Control
It suggests that business involved in the combination is free from the final control of one and the same party or more than one same parties before and after the combination.
Combination cost refers to asset paid by the purchaser to buy the control power from the purchased party, liabilities incurred or assumed and fair value of equity instrument issued. The expenses made by the purchaser for audit, legal service, assessment and other management related expenses during the business merger should be included into the current profit and loss as it happens.
The identifiable assets, liabilities and contingent liabilities that are achieved by the purchaser in merger and confirmed by the purchased party shall be measured with the fair value on the purchase day. When combination cost is higher than fair value of the identifiable net assets acquired from the purchased party due to combination, the difference will be confirmed as goodwill and measured initially at cost. When combination cost is lower than air value of the identifiable net assets acquired from the purchased party due to combination, reexamination shall be made to the measurement of fair value of all
identifiable net assets acquired from the purchased party and combination cost. If combination cost is
still lower than the said air value, the difference shall be included into current profit or loss.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Goodwill arising on a business combination is stated separately in the consolidated financial statement, and the measurement is made its costs minus the accumulative impairment provisions.
6. Preparation method of consolidated financial statements
6.1 Preparation method of consolidated financial statements
The scope of consolidated financial statements shall be confirmed based on the control. Control right means that an investor may control an investee; the investor may participate in relevant activities of the investee to obtain variable rewards and also be able to use the control rights for the investee to influence its amount of returns. The Group will re-evaluate, if the change of the relevant facts and circumstances leading to the change of the relevant elements involved in the above definition of control.
The merger of subsidiary starts from the Group obtaining the control power of the subsidiary, and terminates when the Group loses the control power of the subsidiary.
As for subsidiaries disposed by the Group, operating results and cash flow prior to the disposal date (date of losing control right) have been properly included in the consolidated profit statement and consolidated cash flow statement.
For the subsidiary achieved through business merger under different control, the business performance and cash flow since the purchase day (date from obtaining the control power) have been properly included in the consolidated profit statement and consolidated cash flow statement.
For a subsidiary acquired through business combination under the same control, regardless of the time of business combination in the reporting period, which is regarded to which included in the Group since the date of finally controlled by the controller, its operating results and cash flows since the beginning of the reporting period have been included in the Consolidated Income Statement and the Consolidated Cash Flow Statement.
The principal accounting policies adopted by the subsidiary and the accounting policies will be specified by the Company, and determination of the accounting period.
The impact of internal transaction of the Company and subsidiary, and between the subsidiaries on the consolidated financial statement shall be offset during mergers.
Share inowner’s equity of subsidiaries that is not accounted for as equity of parent Company shall be recorded as the minority shareholder's interest and shall be stated as "Minority Shareholder's Interest" under shareholder's equity in the consolidated Liability Statement. Amount in subsidiaries' current profit and loss accounted for as equity of minority shareholder shall be stated as “Minority Shareholder
Interest” under the net profits in the consolidated Liability Statement.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Where subsidiaries' loss shared by minority shareholders exceeds the amount ofowner’s interests shared by minority shareholders at the beginning of a year, the balance shall be written down to minority shareholder's equity.
For the transaction of the control power of the subsidiary not lost due to purchase of minority equity of the subsidiary or disposal of partial equity investment in the subsidiary, it shall be accounted as equity transaction, and the book value attributable to the parent Company's owners' equity and minority shareholders' equity shall be adjusted to reflect the changes of related equity in the subsidiary. The capital reserve shall be adjusted by difference between the adjustment amount of the minority shareholders' equity and the fair value of payment /receipt of consideration. Retained earnings can be adjusted for the enough offset of the capital reserve.
7. Determination Standards of Cash and Cash Equivalents
The term “cash” refers to cash on hand and deposits that are available for payment at any time. The term “cash equivalents” refers to short-term and highly liquid investments that could be readily convertible to known amounts of cash and which are subject to an in significant risk of change in value.
8. Foreign Currency Transaction and Conversion of Foreign Currency Statements
8.1 Foreign Currency Transaction
Foreign currency transaction adopts the exchange rate conversion similar to the spot rate of transaction date during the initial recognition; the exchange rate similar to the spot rate of transaction date is calculated according to the market rate middle price of the transaction at the beginning of the month. On the balance sheet date, foreign currency monetary items are converted to recording currency by spot rate. The exchange balance between the spot rate on that day and initial spot rate or spot rate on former balance sheet date is included into current profits and losses besides the exchange balance of foreign currency borrowings meeting capitalization conditions is included into the capital cost upon capitalization during capitalization period.
Where the preparation of consolidated financial statements is involved in overseas operation, in case of any foreign currency monetary items of net investment in an overseas operation substantially, then the exchange balance occurred due to exchange rate movement shall be listed in "Foreign Currency Statement Conversion Balance" of shareholders' equity. When disposing overseas operation, it is included into the profits and losses of the current period.
For foreign currency non-monetary items measured by historic cost, spot rate on date of transaction occurrence shall be used for conversion and its recording currency amount. For foreign currency non-monetary items measured by fair value, spot rate on the fair value determination day will be used
for conversion. The difference between the converted recording currency amount and original recording
currency amount shall be taken as the fair value fluctuation (including exchange rate fluctuation) and
included into current profits and losses or other comprehensive income.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
8.2 Conversion of Foreign Currency Financial Statement
In order to prepare the consolidated financial statements, the foreign currency financial statement of overseas operation shall be converted as RMB statement according to the following methods: All assets and liabilities items in the balance sheet shall be converted according to the spot rate of the balance sheet date; The shareholders' equity item shall be converted according to spot rate at the time of occurrence; All items in profit statement and all items of reflecting the income distribution amount shall be converted according to the exchange rate similar to spot rate of transaction date; The difference between the converted assets items and total number of liabilities items and shareholders' equity items is determined as other comprehensive incomes and is included in the shareholder's equity.
The foreign currency cash flow and cash flow of overseas subsidiaries adopt the exchange rate similar to the spot rate at the date of cash flow for conversion. The affected amount of cash and cash equivalents due to the change of exchange rate, as an adjustment item, shall be separately listed as "the impact of cash and cash equivalents due to the change of exchange rate" in the cash flow statement. Opening amount of the year and actual amount last year are presented according to the amount after conversion of financial statement last year.
In case of loss of control power of foreign operation due to disposal of the Group's entire owners' equity in foreign operation, or the disposal of part of the equity investment or other reasons, the translation reserve listed in the shareholders' equities items in the balance sheet, related to the foreign operation and attributable to foreign currency conversion balance of the owners' equity of the parent company shall be totally converted into the current disposal profit and loss.
In case of the decrease of the ratio of overseas business, but no loss of control power due to disposal of part of the equity investment or other reasons, the conversion balance related to the disposal of part of related currency in the overseas business shall be attributable to the minority shareholders' equities, and not converted into the current profit and loss. In case of disposal of part of equity of the associated enterprises or joint enterprise in the overseas business, the conversion balance related to the overseas business shall be converted into the current profit and loss based on the ratio to dispose overseas business.
9. Financial Instruments
A financial asset or financial liability shall be recognized when the Group becomes a party of financial instrument contract. Financial asset or financial liability shall be measured at the fair value when initially recognized. For financial assets and financial liabilities measured at fair value, the change of which is included into current profits and losses, relevant transaction expenses shall be directly included into the profits and losses; for other categories of financial assets and liabilities, the relevant transaction expenses shall be included into the initial recognition amount.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.1 Effective Interest Method
The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different installments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset or financial liability.
For calculation of actual interest, the Group shall predict the future cash flow on the basis of taking into account all the contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account), and take into account various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected by the parties to a financial asset or financial liability contract and which form a part of the actual interest rate.
9.2 Classification, Confirmation and Measurement of the Financial Assets
Financial asset shall be classified into the following four categories when they are initially recognized: the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, the investments which will be held to their maturity, loans and the account receivables and financial assets available for sale. Financial asset bought and sold by regular means shall be recognized and derecognized in accordance with accounting at the transaction date.
9.2.1 Financial Assets Measured at the Fair Value with Their Changes Included into Current Profit and Loss
The financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses, include transactional financial liabilities and the designated financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses.
The financial assets or liabilities meeting any of the following requirements shall be classified as transactional financial assets or financial liabilities: (1) The purpose to acquire the said financial assets or undertake the financial liabilities is mainly for selling or repurchase of them in the near future; (2) Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; (3) Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments.
Financial assets which are measured at fair value and of which the variation is included in the current
profits and losses shall be measured at the fair value subsequently. Profits and losses generated from
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
variation of fair value and earnings from dividend and interest related to the financial assets shall be included into profits and losses of the current period.
9.2.2 Investments Held To Maturity
The term "held-to-maturity investment" refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the Group holds for a definite purpose or the enterprise is able to hold until its maturity.
For held-to-maturity investments measured at the post-amortization costs by using actual interest method, the profits and losses that arise when such financial assets are terminated from recognition, or are impaired or amortized, shall be recorded into the profits and losses of the current period.
9.2.3 Loans and Receivables
"Loans and accounts receivables" refers to the non-derivative financial assets for which there is no quoted price in the active market and of which the repo amount is fixed or determinable. The Group's financial assets that are divided into the loan and receivables include notes receivables, accounts receivables, other receivables, other current assets and long-term receivables, etc.
The loan and receivables adopt the effective interest method, and shall conduct subsequent measurement according to amortized costs. The gains or losses arising from derecognition, impairment or amortization should all be included into the current profits and losses.
9.2.4 Available-for-sale Financial Assets
The "sellable financial assets" include the non-derivative financial assets which are designated as sellable when they are initially recognized as well as the financial assets other than financial assets measured at their fair values and of which the variation is recorded into the profits and losses of the current period, loans and accounts receivables and investments held until their maturity.
The subsequent measurement may be conducted for the available-for-sale financial assets by the fair value; the gains or losses formed from the changes of fair value, except that the impairment losses as well as the relevant exchange balance between foreign currency monetary financial assets and amortized cost are included into current profits and losses, are determined as other comprehensive incomes which shall be transferred out during the derecognition of such financial assets and included into current profits and losses.
Interest acquired from salable financial asset during the holding time and cash dividend that has been the investee announces to distribute shall be recorded into investment income.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument shall be measured on the basis of their costs.
9.3 Financial Asset Impairment
On the balance sheet date, the Group will inspect the book value of all financial assets except the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made. The objective evidences showing the impairment of financial assets refer to the matters that happen after the initial recognition of financial assets and influence the expected future cash flows of financial assets, and the influence can be reliably measured by the Company.
The objective evidences that can prove the impairment of financial asset shall include
(1) A serious financial difficulty occurs to the Issuer or debtor;
(2) The debtor breaches any of the contractual stipulations, for example, failing to pay the interests or the principal or delay, etc.;
(3) The Group makes a concession to the debtor considering the economic or legal factors;
(4) The debtor will probably become bankrupt or carry out other financial restructuring;
(5) The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the issuer;
(6) The cash flow decrease of some property in a group of financial assets is indefinable, but after the general assessment with the public data, the predicted future cash flow of this group of financial assets has definitely decreased from the initial recognition, and the decreased amount is calculable, including: -The payment capacity of Debtor in this group of financial assets gets worse gradually;
- The country or region's economy of the Debtor may lead to the financial assets unable to pay; (7) Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. operated by the issuers of the equity instruments, which makes the investor of an equity instrument unable to take back its cost of investment;
(8) The fair value of the equity instrument investments drops significantly or non-contemporarily; (9) Other objective evidences showing the impairment of the financial asset.
- The financial assets impairment measured by the amortized costs
When impairment occurs, the financial assets counted as amortized cost will write-down its book value to predict present value of future cash flow confirmed as the primary actual rate of this financial assets
(except for the future credit losses that not happened yet), the write-down cash will be confirmed as the
impairment loss, and will be counted into the current gains and loss. Where any financial asset is
recognized as having suffered from any impairment loss, if there is any objective evidence proving that
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.3 Impairment of Financial Asset -continued
the value of the said financial asset has been restored, and it is objectively related to the events that occur after such loss is recognized, the impairment-related loss as originally recognized shall be reversed and be recorded into the profiles and losses of the current period. However, the reversed carrying amounts shall not be paid more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment.
An independent impairment test shall be made by the Group on the financial assets with significant single amounts. Regarding the financial assets with insignificant single amounts, an independent impairment test shall be carried out, or they shall be included in a combination of financial assets with similar credit risk features so as to carry out an impairment-related test. Where, upon independent test, the financial asset (including those financial assets with significant amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar risk features so as to conduct another impairment test. The financial assets which have suffered from an impairment loss in any single amount shall not be included in any combination of financial assets with similar risk features for any impairment test.
- Available-for-sale financial assets impairment
In case of impairment in available-for-sale financial assets, transfer out the accumulated losses originally included into other comprehensive incomes and formed due to fair value depreciation and include into current profits and losses. The transferred-out accumulated losses are the balance of initial asset acquisition cost, deducting recovered principal, amortized amount, current fair value and impairment loss originally included into profits and losses.
After the confirmation of impairment loss, if the objective evidence shows that the value of the financial assets is recovered after the period and it is objectively related with events happening after the confirmation of the loss, the originally confirmed impairment loss will be switched back; the impairment loss for the available-for-sale equity instrument investment is switched back and confirmed as other comprehensive incomes and the impairment loss for available-for-sale debt instrument is switched back and included into current profits and losses.
- The financial assets impairment measured by the costs
When equity instrument investment which is not quoted in an active market and whose fair value cannot be measured reliably, or derivative financial assets which is linked with the equity instrument and has to make settlement by delivering the equity instrument has asset depreciation, the book value shall be reduced to the present value determined by discounted cash flow based on market return of similar financial asset at that time which is recognized as impairment loss and shall be included into the current profits and losses. The impairment loss of such financial asset shall not be reversed once confirmed.
9.4 Transfer of Financial Assets
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Where a financial asset satisfies any of the following requirements, the recognition of is shall be terminated: (1) where the contractual rights for collecting the cash flow of the said financial asset are terminated; (2) where the said financial asset has been transferred and all of the risks and rewards related to the ownership of the said asset has been transferred to the transferee; or (3) where the financial asset has been transferred and the Group has waives its control over the financial asset though it retained nearly all of the risks and rewards related to the ownership of the said asset.
If the Group does not transfer or retain nearly all of the risks and rewards related to the ownership of the financial asset, and does not waive its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. The term "continuous involvement in the transferred financial asset" shall refer to the risk level that the enterprise faces resulting from the change of the value of the financial assets.
If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) the book value of the transferred financial asset, and (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period: (1) the sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities, and (2) the said apportioned book value.
9.5 Classification, Confirmation and Measurement of the Financial Liabilities
The group shall classify financial instruments or its components into financial liabilities or equity instruments during the initial recognition in accordance with contract terms of the issued financial instruments and reflected economic essence in legal forms and others, in combination with definitions of financial liabilities and equity instruments.
Financial liability is classified into the financial liability measured at their fair values and of which the variation is included in the current profits and losses and other financial liabilities.
9.5.1 Financial Liabilities Measured at the Fair Value with Their Changes Included into Current Profit and Loss
The financial liabilities which are measured at their fair values and of which the change is included in
the current profit and loss, including transactional financial liabilities and the designated financial
liabilities which are measured at their fair values and of which the change is included in the current
profit and loss.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
9.5 Classification, Recognition and Measurement of Financial Liability- continued
9.5.1 Financial Debts Which Are Measured on the Fair Value and Whose Variations Are Recorded in the Current Profit and Loss - continued
The financial liability meeting one of the following conditions will be classified as trading financial liabilities: (1) The purpose for bearing the financial liability is mainly to buy back in the near future; (2) Forming a part of the identifiable combination of financial instruments, initial recognition is managed in a centralized way and has objective evidences proving that the Group may manage the combination by way of short-term profit making in the near future; (3) Belong to derivative instruments excluding derivative instruments that are designated as the effective hedging instruments, derivative instruments belonging to financial guarantee contracts, and derivative instruments which are connected with the equity instrument investment, for which there is no quotation in the active market, whose the fair value cannot be measured reliably, and which shall be settled by delivering the said equity instruments. In case of meeting one of the following conditions, the financial liabilities can be measured by fair value during initial recognition and the changes can be included in the financial liabilities of current profits and losses: (1) The appointment can eliminate or obviously decrease the inconformity of gains or losses in confirmation or measurement caused by inconformity in the measurement basis of financial liabilities; (2) The official written documents on risk management or investment strategies of the Group concerned have recorded that the portfolio of said financial liabilities, or the portfolio of said financial assets and liabilities will be managed and evaluated on the basis of their fair values and be reported to the key management personnel; (3) Eligible mixed instruments, including embedded derivatives;
The current profits and losses and expenses of dividends and interests, arising from the change in the fair value of the financial liabilities which is follow-up measured at its fair value and of which the change is included in the current profit and loss, shall be included in the current profit and loss. 9.5.2 Other Financial Liability
The derivative financial liabilities which are connected to the equity instrument for which there is no quotation in the active market and whose fair value cannot be reliably measured, and which must be settled by delivering the equity instrument, shall be measured subsequently on the basis of the cost. These kinds of financial liabilities should be calculated subsequently with the effective rate method and in accordance with the amortized cost. The profits and losses result from the derecognition or amortization should be put in the current profit and loss.
9.5.3. Financial Guarantee Contracts
The financial guarantee contract means an agreement pursuant to which a surety and a creditor agree that the surety shall perform the obligation or bear the liability according to the agreement, when the
debtor fails to perform his obligation. Financial guarantee contract thatdoesn’t belong to financial
liabilities that are specified to be measured according to fair value and the changes of which are
included in the current profit and loss is initially confirmed according to fair value; after the initial
confirmation, conduct subsequent measurement with the higher remaining balance after deducting the
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
accumulated amortization amount in accordance with principles provided in Accounting Standards for Business Enterprises No. 14 - Income by the amount confirmed according to Accounting Standards for Business Enterprises No. 13 - Contingency and the initial confirmation amount.
9.6 Derecognition of Financial Liabilities
For financial asset whose present obligation has been fully or partially relieved, all or part of the financial asset is derecognized. The Group (the Obligor) and the Obligee sign the agreement to substitute the new financial liability mode for the existing financial liability. The essences of the contract provisions for the new financial liability and existing financial liability are different, so the recognition of existing financial liability can be terminated and the new financial recognition be recognized at the same time.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period the gap between the carrying amount which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.
9.7 Derivative Instruments and Embedded Derivative Instruments
Derivative financial instruments include forward foreign exchange contract, monetary exchange rate swap contract, interest rate swap contract and foreign exchange option contract. Conduct initial measurement and subsequent measurement for the derivative instruments on the related contract signing date based on fair value. The changes in the fair value of derivatives shall be included into the current profits and losses.
If mixed instruments that include embedded derivative instruments are not designated as financial assets or liabilities measured based on fair value with the changes being included into the current profits and losses, the embedded derivative instruments are not closely related to the main contract concerning economic characters and risks and the independent instruments conforming to the definition of derivative instruments that have the same conditions with the embedded derivative instruments are broken out from the embedded derivative instruments to be disposed as independent derivative financial instruments. Where it is unable to separately measure the embedded derivative instrument at acquisition or subsequent balance sheet date, the hybrid instruments shall be designated in whole as the financial assets or liabilities measured at fair value with changes included in current profits and losses.
9.8 Offset of Financial Assets and Financial Liabilities
When the group has the legal right to offset the confirmed financial assets and financial liabilities and is entitled to perform the aforesaid legal right at the present, and meanwhile when the group intends to settle or sell off the financial assets and pay off the financial liabilities by the net amount, the financial
assets and financial liabilities shall be presented in the balance sheet with the amount after the mutual
offset. In all other situations, they are presented separately in the balance sheet and are not offset.
9.9 Equity instrument
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Equity instrument refers to a contract specifying the instrumentholder’s share in the remaining equity of theGroup’s asset less all its liabilities. Consideration received from issuing equity instrument less transaction cost is recorded inowners’ equity. That the group issues (including refinancing), repurchases, sells or cancels equity instruments is taken as the change treatment of rights and interests. The group does not confirm the changes of fair value of equity instruments. Transaction fees relevant to the equity transaction shall be deducted from the equity.
The Group considers the allocation of the equity holder as the allocation of profits; issued share dividends do not influence the total equity of the shareholders.
10. Receivables
10.1 Receivables accounts of single significant amount and individual provision for bad debts:
|||
|-|-|
|Judgment basis or amount standardfor financial assets with singlesignificant amount|The Group deems that the fund with amount of morethan RMB 4 million (inclusive) and accounting formore than 10% of the receivables book balance is thereceivables with single significant amount.|
|Withdrawing method of singlewithdrawing of bad-debt provisionwith significant amount|The Group separately conducts the impairment test onthe accounts receivables with single significant amountand other receivables, the accounts receivables andother receivables without impairment after the separatetest include the impairment test in the financial assetportfolio with similar credit risk characteristics. Theaccounts receivables and other receivables with theconfirmed impairment loss after the separate test onlonger include the impairment test in the financial assetportfolio with similar credit risk characteristics.|

 10.2 Accounts receivables of withdrawing bad-debt provision as per credit risks feature combination:
|||
|-|-|
|Method of combined bed-debt provision based on credit exposure characteristics||
|Accounts receivables with|The method of aging accounting receivables|
|insignificant single amount and||
|significant single amount but no||
|single test impairment||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
||||
|-|-|-|
|Aging (more than credit period)|Calculation andwithdrawal proportion ofreceivables (%)|Withdrawing percentageof other receivables (%)|
|Within 1 year (inclusive, the samebelow)|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 Receivables accounts of single non-significant amount except individual provision for bad debts:
|||
|-|-|
|Reasons for single withdrawing ofbad-debt provision|There are significant differences between the presentvalue of future cash flow of the receivables and thepresent value of future cash flow of the receivables ascredit risk feature by ageing.|
|Withdrawing method for bad-debtprovision|By respective impairment test, it carries out the baddebts preparation according to the difference of thepresent value of future cash flows lower than bookvalue|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
realizable value refers to the amount derived by deducting the potential cost, estimated selling expense and relative taxes to the completion date from the estimated sales price of inventory in daily activities. When determining net realizable value of inventories, take the obtained conclusive evidence as basis and consider the purposes of holding inventories and influence of events after the balance sheet date. Provision for inventories is generally made as the excess of the cost of single inventory item over its net realizable value.
After provision for inventory depreciation reserves is made, if the factors resulting in the write-down of inventory impairment have disappeared and causing the net realizable value higher than its book value, such inventory impairment provision are recovered and reversed, and the reversed amount recorded in profits and losses of the current period.
11.4 Inventory System for Inventory
The inventory system is a perpetual inventory system.
11.5 Amortization Method for Low-value Consumables and Packaging
Packing materials and low-price easily-worn materials are amortized by the one-time writing-off process.
12. Long-term Equity Investment
12.1 Judgment Standard of Joint Control and Significant Impact
Control right means that an investor may control an investee; the investor may participate in relevant activities of the investee to obtain variable rewards and also be able to use the control rights for the investee to influence its amount of returns. Joint control means that joint control for certain arrangement in accordance with relevant agreements; activities relevant to the arrangement cannot be decided until obtaining the unanimous approval of participants sharing the control right. The significant influence refers to having the power to participate in the formulation of financial and operating policies of the invested entity, but no power to control or jointly control the formulation of these policies together with other parties. When it is confirmed whether or not the invested unit can be controlled or significantly influenced, the following potential vote power factors have been considered: transferable bond and warrants executable in the current period by the investing enterprise and other invested units held by it, etc.
12.2 Confirmation of Initial Investment Costs
For the long-term equity investment acquired through the enterprise merger under the common control,
the shares of merged party's book value of owners' equity in the final controlling party consolidated
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
financial statements obtained on the merger date shall act as the initial investment cost of long-term equity investment. The differences between the initial investment cost of long-term equity investment and the paid cash, the transferred non-cash assets and the book value of the assumed debts are adjusted against the capital surplus; if the capital surplus is not sufficient to be offset, the remaining balance is adjusted against retained earnings. In the case of issued equity securities treated as consolidation consideration, share of book value of owner's equity of merged party in a combined financial statement of the final controlling party is regarded as initial investment cost of long-term equity investments on the date of consolidation; capital reserve shall be adjusted in accordance with taking total nominal value of issued share as capital share, the difference between the initial investment cost of long-term equity investments and total book value of issued shares; In case the capital reserve is not enough for writing down, the retained earnings shall be adjusted.
The long-term equity investments obtained by the combination of controlling interests under different control and the merger cost confirmed on the purchased date are regarded as the initial investment cost. The expenses made by the combining party or purchaser for audit, legal service, assessment and other management related expenses during the business merger should be included into the current profit and loss as it happens.
Conduct initial measurement according the cost for other equity investment other than the long-term equity investment formed in business merger. In case that the investor may post a significant impact on the investee or execute joint control but not constitute the control right, long-term equity investment cost is the sum of fair value of original and determined held equity investment and newly-increased investment cost in accordance with No. 22 Accounting Standards for Business Enterprises----Recognition and Measure of the Financial Instruments.
12.3 Subsequent Measurement and Profit and Loss Confirmation Method
12.3.1 Long-term Equity Investments of Cost Method Accounting
Financial statement shall be calculated through the cost method, in relation to the long-term equity investments of subsidiaries. Subsidiary corporation means the investee body which can be controlled by the Group.
The long-term equity investment accounted by the cost method shall be measured at its initial investment cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be adjusted. Income from the investment in the current period shall be recognized in accordance with the cash dividends or profits declared and issued by the investee.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
12.3 Subsequent Measurement and Profit and Loss Confirmation Method - Continued
12.3.2 Long-term Equity Investments of Equity Method Accounting
Investment in consortium and joint venture is accounted for using the equity method. Consortium refers to investee on which the Group has significant influence; joint venture refers to investee over which the Group is able to jointly exercise control together with other investors. Associated enterprise means that the investee which can be greatly influenced by the group; joint enterprise means a kind of joint arrangement and the group only has control rights of such net assets.
When the equity method is adopted, where exceeding theCompany’s share of the fair value of the investedparty’s identifiable net assets at investment date, the initial investment cost of the long-term equity investment is kept unadjusted; where the initial investment cost of the long-term equity investment is less than theCompany’s share of the fair value of the investedparty’s identifiable net assets at the investment date, the differences are recorded as profit& loss for the current period and the costs of long-term equity investment are adjusted simultaneously.
When the equity method is used for the accounting, in accordance with the shares in the net profits and losses, and other comprehensive incomes of the invested unit which the Company is entitled to share or bear, the investment income and other comprehensive incomes are determined separately, and meanwhile the book value of the long-term equity investment shall be adjusted; The Company shall accordingly reduce the book value of the long-term equity investment in terms of the part that shall be enjoyed according to the profit or cash dividends declared by the invested unit to be distributed; For other changes in the owners' equity of the invested unit other than net profits and losses, other comprehensive incomes and the profit distribution, the book value of long-term equity investment shall be adjusted and be included into the capital reserves. The Company shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policies and accounting periods adopted by the invested unit are different from those adopted by the Company, the adjustment shall be made for the financial statements of the invested unit in accordance with the accounting policies and accounting periods of the Company to recognize the investment income and other comprehensive incomes. For the transaction incurred between the group and associated enterprises and joint ventures, invested or sold assets don't constitute a business, the part that doesn't achieve internal transaction profit or loss or belongs to the group calculated according to the enjoyed ratio will be offset, and the profit or loss on investment will be confirmed on this basis. But for the unrealized loss arising from the internal transaction between the group and the invested unit, if such transaction loss is defined as the impairment loss of the transferred asset, they cannot be offset. When the Company determines the net loss of the invested unit which shall be shared, it is necessary to write-down the book value of the long-term equity investment and other long-term equities substantially constituting the net investment of the invested unit to zero as a limit. Besides, if the group is obliged to bear extra loss for the investment unit, it shall be necessary to determine provisionsf and record them to current investment loss in compliance with obligations expected to be assumed. If the invested unit realizes any net profits later, the group shall, after the amount of its attributable share of profits offsets
its attributable share of the un-confirmed losses, resume to recognize its attributable share of profits.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
12.4 Disposing of Long-term Equity Investment
When disposing of a long-term equity investment, the difference between its book value and the actual purchase price shall be recorded into the current profits and losses.
13. Fixed Assets
13.1 The Conditions of Recognition
The fixed assets refer to tangible assets held for commodity production, rendering of labor service, renting or operation management, having a service life of more than one accounting year. The fixed asset can be confirmed only when the economic interest related to a fixed asset is likely to flow into the group, and the cost of such fixed asset can be reliably measured. Fixed assets are measured initially in accordance with costs.
Subsequent expenditures related to fixed assets are included in costs of fixed assets when the associated economic benefits are likely to flow to the Group and the costs can be measured reliably, and the book value of the replaced part is derecognized; all other subsequent expenditures are included in profits and losses in the current period when incurred. Other subsequent expenditures except for the above said subsequent expenditure shall be included into the current profit and loss once occurred.
13.2 Depreciation Method
From the following month when fixed assets reach the estimated applicable status on, the counting and withdrawing depreciation shall be conducted in its service life using age limit average method. The service lives, expected rates of net residual value and annual depreciation rates of the fixed assets are as follows:
||||||
|-|-|-|-|-|
|Class|Depreciationlife (year)|Salvage valuerate (%)||Annual|
|||||depreciation|
|||||rate (%)|
|Houses and buildings|20 years|10|4.5||
|Common facilities|3-5 years|10|18.0-30.0||
|Special-purposeequipment|3-5 years|10|18.0-30.0||
|Transport equipment|5 years|10|18.0||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
On the commencement date of the lease term, record the fair value of the leasing asset or the present value of the minimum lease payments on the lease commencement date, whichever is lower, as the entry value of the leased asset, make the amount of the minimum lease payments as the entry value of long-term account payable, and recognize the balance between the entry value of the leased asset and that of the long-term account payables as unrecognized financing charges. In addition, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be included into the asset value of the rent.
The Group applies depreciation policy consistent with its own fixed assets to depreciate the rented fixed assets under financing lease. If it is reasonable to be certain that the Company will obtain the ownership of the leased asset when the lease term expires, the leased asset may be fully depreciated over its useful life. If it is not reasonable to be certain that the Company will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset may be fully depreciated over the shorter one of the lease term or its useful life. If the ownership of the leased asset can be reasonably confirmed on the lease term expiry, the accrual depreciation shall be conducted within the service life of the lease asset; if not, the accrual depreciation shall be conducted within the shorter of two periods, namely the lease term and the service life of lease asset.
13.4 Other Instructions
The fixed assets are derecognized when the fixed assets are in disposed state or no future economic benefits are expected from their use or disposal. The amount of proceeds on sale and transfer of a fixed asset as well as disposal of a scrapped or damaged fixed asset less its book value and related taxes, are recognized in profits and losses of the current period.
The Group performs review on service life, predicted net residual value and depreciation method of fixed assets at the end of the year, any changes will be treated as changes in accounting estimates. 14. Construction in Process
The cost of construction in process shall be measured as per actual costs, including various engineering expenditures in the construction process, capitalized borrowing expenses for making the engineering reach the expected serviceable condition, other relevant costs, etc. No depreciation calculated and withdrawn arises from construction in process. The construction in process shall be transferred to the fixed assets when it reaches the expected serviceable condition. For those that could reach to the expected serviceable condition, but haven't gone through the procedures for the final accounts of the completed projects, they will be converted to fixed assets according to the estimated value. When they have gone through the final accounts of the completed projects, the provisional estimate value of the original fixed assets will be adjusted according to the actual costs.
15. Borrowing Expenses
Borrowing costs directly attributable to the acquisition& construction or production of assets eligible
for capitalization shall be capitalized when assets expenditure, borrowing costs and necessary
construction or production for bringing assets to expected conditions for use or marketing have taken
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
place; when construction or production of assets ready for capitalization reach to expected conditions for use or marketing, capitalization shall be ceased. Other borrowing expenses are recognized as expenses in the current period.
After actual interest expense generated from the specific loan for current period, minus interest income from the yet unused borrowed money kept in the bank or investment income made from temporary investment, these amounts are capitalized; The capitalizing amount is determined after the weighted average of excess part of accumulative asset expenditures compared to the asset expenditure of special borrowing multiplied by the capitalization rate of the general borrowing. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. In the capitalization period, all exchange balance of special foreign currency borrowing shall be capitalized; Exchange balance of general foreign currency borrowing shall be included in the current profit and loss. 16. Intangible Assets
16.1 Intangible Assets
Intangible assets include land use right, intellectual property and application software, etc.
The initial measurement of intangible assets shall be made at its cost. The intangible assets with the limited service life can be amortized evenly for the original value by installment through the straight-line method within its predicted service life since the time available for using. The service life and predicted net residual value of various intangible assets are shown as follows:
|||||||
|-|-|-|-|-|-|
||Class||Service life (year)||Salvage value rate (%)|
|Land utilization right||50 years||-||
|IP Rights||10 Years||-||
|Application Software||5-10 years||-||

At the end of the period, the service life and amortization method of intangible assets whose service life is limited shall be reviewed and adjusted when necessary.
16.2 Internal Research and Development Expenditure
Expenditures at research stage are included in current profit and loss when incurred.
Expenditures at development stage that meet all the following conditions are recognized as intangible
assets, otherwise included in current profit and loss:
(1) Complete the intangible asset so that it can be used or sold and has feasibility in technology;
(2) Have the intents to complete, use or sell the intangible assets;
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(3) The usefulness of methods for intangible assets to generate economic benefits can be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally;
(4) There are sufficient technical, financial and other resources to complete the development of the intangible assets, and there is ability to use or sell the intangible assets;
(5) The expenditures of the intangible assets in the development stage can be reliably measured. The expenditures in the research stage and development stage, if failing to be classified, shall be totally included into the current profit and loss.
17. Long-term Assets Impairment
The Group checks whether the intangible assets determined by a long-term equity investment, fixed assets, construction in process and service life have any signs of possible impairment at each balance sheet date. For the assets with signs of impairment, their recoverable amount will be estimated. The intangible assets with uncertain service life and the intangible assets which have not yet reached serviceable condition shall be give impairment test every year no matter whether there are signs of impairment.
The recoverable amount of estimated assets shall be based on single assets; if it is difficult to estimate the recoverable amount of single assets, the recoverable amount of the asset group shall be determined based on its belonging asset group. The recoverable amount shall be determined in light of the higher one between the net amount of the fair value of the assets or asset group deducted by the disposal expenses and the present value of the expected future cash flow.
If the recoverable amount of assets is lower than its book value, assets impairment preparation shall be counted and drawn based on its balance and be included in the current profits and losses.
Goodwill impairment test shall be conducted at the end of each year at least. Goodwill impairment test shall be conducted in accordance with the concerned asset group or asset portfolio. That is to allocate the book value of goodwill to the asset group or asset portfolio that is expected to benefit from the synergies of the combination in a reasonable way from the date of purchasing. When recoverable amount of apportion-included asset group or asset portfolio of goodwill is less than book value of goodwill, impairment loss shall be confirmed. Firstly, amount of impairment loss shall be apportioned to the book value of goodwill of the said asset group or asset portfolio, and then book value of other assets, except for goodwill, in asset group or asset portfolio shall be abated in proportion.
Once above asset impairment losses are confirmed, they are not reversed in subsequent accounting periods.
18. Employee compensation
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
18.1 Accountant Arrangement Method of Short-term Remuneration
During accounting period when the Group's employees provide services, actual short-term remuneration shall be recognized as the liabilities which are included in current profit and loss or relevant asset cost. For the employee services and benefits of the Group, they are included into current profit and loss or relevant asset cost according to actual amount during the actual period. If the staff welfare is non-monetary welfare, it shall be measured according to its fair value.
During the period when the employees service the Group, the Group pays social insurance premiums such as medical insurance premium, industrial injury insurance premium, birth insurance premium and housing accumulation fund for its employees, as well as labor union expenditure and employee education expenses calculated and withdrawn according the regulations, corresponding employee remuneration amount shall be calculated and determined in accordance with specified calculation and withdrawal basis and proportion to recognize corresponding liabilities which are included into the current profit and loss or relevant asset cost.
18.2 Accountant Arrangement Method of Post-employment Benefits
All post-employment benefits shall be considered as the defined contribution plan.
In the accounting period when the employee serves for the Group, the deposited amount calculated based on defined contribution plan shall be recognized as liabilities and included in the current profit and loss or relevant asset cost.
18.3 Accountant Arrangement Method of the Termination Benefits
Where the Group provides termination benefits, the employee remuneration liabilities caused by such termination benefits will be determined as the following date, whichever is earlier, and will be included in the current profit and loss: When the Group cannot unilaterally withdraw the termination benefits provided due to labor relation cancellation plan or employee lay-off suggestion; When the Group determines costs or expenses in relation with the restructuring of the paid termination benefits. 19 19. Provisions
When the contingency obligation related to product quality guarantee and others is the present obligation of the Group, and the obligation performance may cause the outflow of economic profits, of which the amount can be measured reliably, the amount shall be confirmed as provisions.
The estimated liabilities are measured at balance sheet date in accordance with the best estimate of the necessary expenses for the performance of the current obligation and factors pertinent to contingencies
such as the risks, uncertainties and the time value of money are taken into account as a whole. If the
time value of money generates a great influence, the best estimate shall be determined in accordance
with discounted amount of the expected future cash outflow.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
20. Share-based Payment
Share-based payment refers to a transaction in which the Group grants the equity instruments or undertakes the equity-instrument-based liabilities in return for services from employees. The Group's share-based payment is an equity-settled share-based payment.
20.1 Equity-settled Share-based Payment
Equity-settled share-based payment granted to employees
For the equity-settled share-based payment in exchange of services provided by employees, the fair value shall be measured with the equity instrument granted to the employees on the grant date. The fair value's amount is based on the optimal estimation of the number of vesting equity instruments within the waiting period, and shall be included in relevant cost or expense at the time of the granted immediate vesting according to the straight-line method, the fair value's amount is included in relevant cost or expense with a corresponding increase of capital reserve at the grant date.
As for each balance sheet date in the waiting period, the Group can make best estimate according to the variations in the number of vesting staff and other subsequent information, in order to amend the amount of equity instrument of the predicated vesting right. The stated effects of evaluation shall be included into the current relevant cost or fees, and the capital reserves shall be adjusted correspondingly. When receiving the restricted share subscription fund paid the incentive object that the equity incentive plan granted, then the Group shall confirm the equity and capital reserve (capital share premium) according to the obtained subscription fund, meanwhile, fully confirm a liability and confirm treasury stock in terms of repurchase obligations incurred because the Company's incentive object fails to meet unlocking condition specified in relevant equity incentive plan.
20.2. Related Accounting Treatment of Implementation, Modification and Termination of The Share-Based Payment Plan
When the Group modifies the share-based payment plan, if the modification increases the fair value of equity instrument granted, the increase of service shall be recognized according to the increase of fair value of equity instrument accordingly; If the number of equity instrument granted is modified to increase, the Group shall confirm the fair value of equity instrument increased as the increase of service obtained. The increment of fair value for equity instrument refers to the difference in fair value of the equity instrument before and after the modification on the modification date. If the modification decreases the total amount of share-based payment fair value or adopts other ways which are adverse to the employees to modify terms and conditions of share-based payment plan, unless the Group cancels the part or all of the granted equity instruments, it shall conduct the further accounting treatment of the
services acquired, and it shall be deemed that such change never happens.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
If the conferred equity instruments are cancelled during the waiting period, the Group shall accelerate exercising the rights of the equity instruments. The amount recognized during the remaining waiting period shall be included into current profit and loss immediately and the capital reserve shall be determined simultaneously. If the employees may meet non-exercisable conditions, but fail to not meet within the waiting period, the Group may cancel them as conferred equity instruments.
21. Income
21.1 Income From Commodity Sales
The Group has transferred the main risk and remuneration from the commodity ownership to the buyer; the Group retains neither the management rights usually associated with ownership, nor the effective control of the sale of goods; the amount of incomes can be measured reliably; the related economic benefits may flow to the enterprise; when the related cost has occurred or will be occur can be measured reliably, the realization on income from commodity sales shall be confirmed.
21.2 Income From Provision of Labor Service
The realization of incomes for providing labor service shall be confirmed when the amount of incomes for providing labor service can be reliably measured, relevant economic interests can probably flow into the enterprise, completion degree of transaction can be reliably determined, costs that have occurred and will occur in the transaction can be reliably measured. The Group shall confirm the labor service income provided at the balance sheet date according to the completion percentage method. The completion process of labor service transaction is determined by the ratio of the already accrued labor service cost to the total costs.
In the event that result of labor service cannot be estimated reliably, revenue from such labor service is recognized in accordance with the incurred labor cost which is estimated to be compensated, and such labor cost is recognized as expenses for current period; where the incurred labor cost is estimated not to be compensated, revenue from such labor service shall not be recognized. If the labor service cost already accrued is estimated not to be compensated as predicted, its income shall not be confirmed. 21.3 Construction Contract
If the results of the construction contracts can be reliably estimated, the enterprise can confirm the contract income and expenses as achieved by the completion percentage method on the balance sheet date.
Progress of contract completion will be determined based on the proportion of finished contractual amount of work covering estimated total amount of work.
If the results of the construction contract cannot be estimated reliably: where the contract costs can be
recovered, the contract revenue shall be recognized according to the actual contract costs that can be
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
recovered and the contract costs shall be recognized as the expenses incurred in the current period; when the contract costs cannot be recovered, the contract costs shall be recognized as the expenses once they are incurred and the revenue shall not be recognized. Where the uncertain factors affecting the reliable estimation of the results of the construction contract have no longer been in existence, contract revenue and expenses shall be recognized based on the percentage-of-completion method. If the uncertain factors in that results of construction contracts cannot be reliably estimated disappear, the relevant incomes and expenses to construction contract shall be confirmed according to the completion percentage method.
If the expected total contract costs exceed the total contract revenue, the expected loss is recognized as current expenses.
The accumulative cost accrued and accumulative gross profits (losses) confirmed and already settled payments in the construction contract shall be presented as net amount after offsetting in the balance sheet. If the sum of accumulative cost accrued and accumulative gross profits (losses) confirmed is surplus settled part of payments in the construction contract, this part is listed as inventory; If the settled part of payment is surplus the sum of accumulative cost accrued and accumulative gross profits (losses) confirmed in the construction contract, this part is listed as prepayment.
As for the construction business of public infrastructures in BOT, the Group will recognize the relevant income and expenses of the construction services according to Accounting Standards for Business Enterprises No. 15- Construction Contract in the project construction period; After the completion of infrastructure, the income and expenses related to the follow-up operation services will be recognized according to Accounting Standards for Business Enterprises No. 14 - Income.
22. Governmental Subsidy
Governmental subsidies are the monetary and non-monetary assets obtained by the Group from the government for free. According to the subsidy object regulated in government documents, the government subsidy will be divided into government subsidy related to assets and income.
The government subsidy shall be recognized when the attached conditions of government subsidies can be met and obtained. The government subsidy which is monetary assets shall be calculated by the actually received amount.
22.1 Judgment Basis and Accountant Arrangement Method of Government Subsidy Related to the Assets
Asset-related government subsidy, shall be recognized as deferred income, evenly spread to the service life of corresponding assets, and included as profit or loss of the current period.
22.2 Judgment Basis and Accountant Arrangement Method of Government Subsidy Related to the
Income
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The income-related government subsidies shall be recognized as the deferred incomes if it is used to compensate the relevant expenses and losses in the later period and included into the current profit and loss in the period of confirming the related expenses; Those used for compensating the related expenses and losses incurred shall be included into the current profit and loss directly.
23. Deferred Income Tax Assets / Deferred Income Tax Liabilities
The current income tax expenses include income tax and deferred income tax.
23.1. Current Income Tax
On the balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured on the basis of the expected payable (or refundable) amount of income tax, which is calculated according to the tax law.
23.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities
In case of temporary differences including the difference between the book value of assets and liabilities and the tax base and difference between the book value and the tax base of the items which are not recognized as assets and liabilities, however, the tax base of which can be determined in accordance with tax law, the deferred income tax assets and liabilities shall be recognized by adopting the balance sheet liability method.
In general, all temporary differences shall be recognized as relevant deferred income taxes. For deductible temporary differences, the Group shall confirm the related deferred income tax assets when the taxable income amount of deductible temporary differences that is likely to be deducted in future is regarded as the limit. In addition, related to the initial recognition of goodwill, and the taxable temporary differences related to the initial recognition of assets or liabilities occurred in the transaction which will not influence the accounting profit and taxable income (or deduction loss), and not the business merger, shall not confirm the deferred income tax assets or liabilities.
As for any deductible loss or tax deduction that can be carried forward to the subsequent years, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss and tax deduction to be likely obtained.
The Group can confirm deferred income tax liabilities arisen by the taxable temporary differences related to investment invested with its subsidiary, except that it can control the timing of reversal of temporary differences, and the temporary differences in the foreseeable future is unlikely to be reversed. For deductible temporary differences related to the investment of the subsidiary, if it's possible that the
temporary difference shall be switched back in the foreseeable future and obtain sufficient taxable
income for deducting the deductible temporary difference in the future, the Group will confirm it as the
deferred income tax assets.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
23.2 Deferred Income Tax Assets and Deferred Income Tax Liabilities - continued
On the balance sheet date, the deferred income tax assets and deferred income tax liabilities shall, under the tax law, be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.
Except that the current income tax and deferred income tax which are confirmed as other comprehensive incomes or those related to transactions and events directly included into the shareholders' equities shall be included into other comprehensive incomes or shareholders' equities, as well as the book value of deferred income tax for goodwill adjustment arising from business merger, the remaining current income tax and deferred income tax expenses or revenues shall be included into current profit and loss.
At balance sheet date, it shall recheck the book value of deferred income tax assets. If taxable income is likely to fail to cover the profits generated from the deferred income tax assets, then it is necessary to write down the book value of deferred income tax assets. When adequate taxable income is likely to obtain, recover the deducted amount. When adequate taxable income is likely to obtain, the deducted amount shall be recovered.
23.3 Offset of Income Tax
When having the legal rights settled at a net amount are owned and it is intended to make settlement at a net amount, obtain assets or repay liabilities simultaneously, the Group's current income tax assets and current income tax liabilities shall be presented at a net amount after offsetting.
The deferred income tax assets and liabilities of the Group shall be presented at the net amount after deducting when having the legal right of settling income tax assets and liabilities in current period at net amount and the deferred income tax assets and liabilities are pertinent to income tax of the same taxation subject or different subjects collected by the same tax collection and administration department, however during each period of significance when the deferred income tax assets and liabilities are reversed, the taxation subjects involved intend to settle the income tax assets and liabilities in current period at net amount or obtain assets and settle liabilities simultaneously.
24. Lease
Transfer the financing lease of all risks and remunerations related to the ownership of assets in essence. Operating leases refer to the leases other than finance leases.
24.1 Accountant Arrangement Method of The Operating Lease
24.1.1 The Group will record operating leasing business as the lessee.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Any rental payment from operating leases shall be recognized in relevant asset costs or current profit and loss in accordance with the straight-line method in each period within the lease term. Initial direct expenses shall be included in current profit and loss while the contingent rents shall be included in current profit and loss when they actually occur. The initial direct costs shall be included into the current profit and loss. The contingent rental shall be included into the current profit and loss when it is actually incurred.
24.1.2 The Group will record operating leasing business as the lesser.
The rental income of operating lease during each period within the lease term will be recognized as the current profit and loss according to the straight-line method. A large amount of initial direct costs shall be capitalized when occurring and be included into current profit and loss according to the same installment of rental income in the entire lease term; the other initial direct costs of smaller amount will be included into the current profit and loss when it occurs. The contingent rental shall be included into the current profit and loss when it is actually incurred.
24.2. Accountant Arrangement Method of the Financing Lease
24.2.1 The Group will record operating leasing business as the lessee.
For relevant accountant arrangement method, see Note (III) "15.3 Identification basis, valuation and depreciation method of fixed assets of financing lease".
Where the unrecognized financing costs are within the lease term, the current financing costs shall be recognized in accordance with the effective interest method. Contingent rents shall be included in current profit and loss when they actually occur. The minimum rental payment shall be presently respectively as long-term liabilities and long-term liabilities due within one year after deducting the unrecognized financing costs. The contingent rental shall be included into the current profit and loss when it is actually incurred. The remaining balance of the minimum leasing payment deducting unrecognized financing charges is respectively presented as long-term liability and long-term liability due in one year.
24.2. Accountant Arrangement Method of The Financing Lease
24.2.2 The Group will record operating leasing business as the lesser.
At the beginning date of the lease term, a lessor shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entry value in an account of the financing lease values receivables, and record the un-guaranteed residual value at the same time; The balance between the sums of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the sum of their present values shall be recognized as unrealized financing income.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
The unrealized financing incomes adopt the effective interest method during each lease term to calculate and recognize the current financing incomes. The contingent rental shall be included into the current profit and loss when it is actually incurred.
The balance of the receivables financing lease amount deducting unrealized financing revenue is respectively presented as long-term creditor's rights and long-term creditor's rights due in one year. 25. Buy-back Its Own Shares
When repurchasing this Company shares, the treatment of treasury stock shall be implemented according to actually-paid amount and the future reference shall be registered at the same time. If the repurchased shares are cancelled, then the difference between the total amount of cancelled share face value and share face value of cancelled number of shares and the consideration amount paid by the actual repurchase shall offset the capital reserve, if the capital reserve is insufficient, then the retained earnings shall be offset.
If the transaction expense paid in the process of repurchasing this Company shares reduces the shareholders' equity, then gains or losses shall not be determined.
26. Important judgments used during accounting policy process and key assumptions and uncertainty factors used in accounting estimate
During the process of using accounting policy described in note (III), due to the uncertainty in operation activities, the group should judge, estimate and assume the book value which may not be metered accurately. These judgments, estimates and assumptions are based on the historical experience of the Group's management level and other key factors. Differences may exist in the actual results and the group estimate.
The Group regularly reviews the above judgments, assumptions and estimations on the basis of continuous operation. If the changes of accounting estimate only influence current period, the influence number will be affirmed during the changing period; if it influences the current period and future period, the influence number will be recognized in the current period and future period.
- Key assumptions and uncertainties used in accounting estimate
On balance sheet date, key assumptions and uncertainties in book value of assets and liabilities in future period caused by the accounting estimate mainly are
Impairment of the fixed assets
At the balance sheet date, the Group will check whether fixed assets have signs that depreciation is
likely to occur. When the signs indicate that the carrying amount cannot be repurchased, then the
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
impairment test shall be implemented. The impairment occurred when the book value of assets or asset group is higher than the recoverable amount, namely the net amount of fair value minus the disposal expenses or the present value of expected future cash flow (which is higher). The net amount of fair value minimum disposal expenses is determined by deducting the incremental cost which directly belongs to the assets disposal referring to the price of sales agreement of similar assets in fair transaction or the observable market price. When predicting present value of future cash flows, management level must estimate the predicted future cash flows of the said asset or asset portfolio, and shall select proper discount rate to confirm the present value of future cash flows. Based on the above procedure, the Group's management level deems that fixed assets shall not need to calculate and withdraw the impairment reserve.
Service life and predicted net residual value of fixed asset
The Group's estimation of fixed assets serviceable life is based on the historical experience of actual usable term of fixed assets with similar properties and functions, the estimation of predicted net residual value is the amount obtained currently by the Group from the assets after deducting the anticipated disposal expense based on the anticipated status assuming that fixed assets' predicted service life expires and fixed assets are at the end of service life. The Group shall conduct the review on the predicted service life and predicted net residual value of fixed assets at least at the end of each year, this year the Group's management level fails to find the conditions to make the Group's fixed asset service life shortened or extended and need to change predicted net residual value.
Impairment of accounts receivables
When there is a clear evidence to make the accounts receivables recovery in doubt, then the Group will calculate and withdraw the impairment preparation to the accounts receivables. Because the Group's management level needs to decide the historic payment collection, aging, debtor's financial condition and overall economic environment when considering the impairment reserve, so the calculation of impairment reserve has the uncertainty. Although there is no reason to believe that the based estimation will have a major change in the future when calculating the impairment of accounts receivables, the book value and impairment loss of accounts receivables will change when the future actual result is different from the anticipated and original estimation.
Accrued liabilities of product quality assurance
Accrued liabilities of product quality assurance are an estimation made by the Group according to the repair and replacement cost of predicted relevant products. The estimation is involved in the product claim rate trend, history defect rate, industry practice and other major estimations. The management level deems that the current estimation on accrued liabilities of product quality assurance is reasonable, but the Group will continue to review the product after-sales service, the Group will conduct adjustment during the period of sign occurrence once there are indications that the accounting assumptions need to be adjusted
Provision for impairment of inventories
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Inventories are stated at the lower of cost and net realizable value. The Group will regularly conduct a comprehensive inventory to determine whether there are outmoded and dull inventory and to review the impairment circumstances, in addition, the Group's management level will regularly review the impairment circumstance of inventory with long storage time according to the inventory storage time list. The review procedure includes the comparison between book value of outmoded, dull inventory and inventory with long storage time and its corresponding net realizable value in order to determine whether the outmoded, dull inventory and inventory with long storage time need to calculate and withdraw reserve in the financial statements. Based on the above procedure, the Group's management level deems that the full falling price reserves have been calculated and withdrawn for the outmoded, dull inventory and inventory with long storage time
Assets from deferred income tax
The realization of deferred income tax assets mainly depends on the future actual profit and the effective tax rate of temporary difference in the future use year. If the actual profit in the future is less than the estimation, or actual tax rate is lower than the estimation, then the confirmed deferred income tax assets will be turned back and be confirmed in the income statement during the period of return-back. If the actual profit in the future is more than the estimation, or actual tax rate is higher than the estimation, then the corresponding deferred income tax assets will be adjusted and be confirmed in the income statement during the condition occurrence.
Goodwill impairment
When the goodwill conducts the impairment test, this needs to calculate the predicted present value of future cash flow of relevant asset group or asset group combination included in the goodwill, and needs to predict the future cash flow of relevant asset group or asset group combination, and needs to determine a proper pretax rate that reflects the current market time value of money and specific asset risk. When the future actual result is different from the original estimation, then the goodwill impairment loss will change.
IV. Taxes
Major tax categories and rates
|||||||
|-|-|-|-|-|-|
||Tax category||Taxation basis||Tax rate|
||Enterprise income tax|Taxable income||25% (Note 1)||
|VAT||For the taxable product salesrevenue or taxable laborrevenue, the Company andits domestic subsidiaries arean ordinary VAT payer; theVAT payable is the balanceafter the substituted moneyon VAT minus deductible||6%, 11%, 17% and simplecollection rate of 3% (Note2)||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
||||
|-|-|-|
||input tax.||
|Business tax|Assessable Income|5%, 3% (Note 3)|
|Urban maintenance and|Actual payable turnover tax|7%|
|construction tax|||
|Education surcharges|Actual payable turnover tax|3%|
|Local education surcharges|Actual payable turnover tax|2%|

Note 1: Except that this Company and subsidiaries in China are applicable to the following tax preference, this Company's other subsidiaries in China are applicable to25% of enterprise income tax rate, the overseas subsidiaries are applicable to local tax rate.
(1) In accordance with the Notice on Publishing the List of First Batch of 722 identified High-tech Enterprises of Zhejiang Province in 2014 (ZGQR[2014] No. 03) issued by Zhejiang high-tech enterprise identification management work leading group on September 19, 2014, this Company was identified as the high-tech enterprise with a valid term of 3 years from 2014 to 2016. This year the enterprise income tax shall be calculated and paid according to tax rate of15%.
In accordance with the Notice on Printing and Distributing the List of Key Software Enterprise and Integrated Circuit Design Enterprise within 2013- 2014 Annual National Planning Layout (FGGJ[2013] No. 2458), in 2013 this Company was identified as the national key software enterprise. In accordance with the Notice on Relevant Problems of Income Tax Preferential Policy of Software and Integrated Circuit Industry Enterprise (CS[2016] No. 49), the 2015 annual enterprise income tax shall be calculated and paid according to tax rate of10% after this Company was approved by the tax authority in May 2016. As at approval date of this report, the income tax preferential policy has not been approved in 2016, so this year the enterprise income tax shall still be calculated and withdrawn according to tax rate of15%.
(2) Zhejiang Province Economic and Information Management Committee identified that the wholly-owned subsidiary - Hangzhou Hikvision System Technology Co., Ltd. ("Hangzhou System") is a software enterprise. In accordance with the tax law, the software enterprise shall enjoy the preferential policy of exemption for the next first two years and half rate reduction for the next subsequent three years, the 2016 is the fifth year of profit-making year. Hangzhou System's income tax rate shall be calculated and paid according to12.5% after the review for the record in 2015, but this year Hangzhou System fails to pass the software enterprise review, so this year this Company cannot enjoy the tax preferential policy of half rate reduction of software enterprise income tax.
In accordance with the Letter of Reply on Publishing the Registration of First Batch of High-tech Enterprises of Zhejiang Province in 2016 (GKH ZI[2016] No. 149) issued by Zhejiang high-tech enterprise identification management work leading group on December 9, 2016, this Company was identified as the high-tech enterprise with a valid term of 3 years from 2016 to 2018. Therefore, the enterprise income tax this year shall be calculated and paid according to tax rate of15%.
(3) In accordance with the Notice on Publishing the List of First Batch of Reviewed High-tech
Enterprises of Shanghai in 2014 issued by Shanghai high-tech enterprise identification office, the
wholly-owned subsidiary - Shanghai Gaodewei Intelligent Transportation Systems Co., Ltd. ("Shanghai
Gaodewei") passed the review of the high-tech enterprise with a valid term of 3 years from 2014 to
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
2016. Therefore, this year the enterprise income tax shall be calculated and paid according to tax rate of15%.
(4) In accordance with the Notice on Publishing the List of Second Batch of Reviewed High-tech Enterprises of Shanghai in 2013 issued by Shanghai high-tech enterprise identification office, the wholly-owned subsidiary - Hundure Intelligent Systems (Shanghai) Co., Ltd. ("Shanghai Hundure") passed the review of the high-tech enterprise with a valid term of 3 years from 2013 to 2015. But this year Shanghai Hundure fails to pass the review of the high-tech enterprise, so this year the enterprise income tax shall be calculated and paid according to tax rate of25%.
(5) In accordance with CS[2011] No. 58 Document of Ministry of Finance, SAT and General Administration of Customs, the wholly-owned subsidiaries - Chongqing Hikvision Science and Technology Co., Ltd. and Chongqing Hikvision System Technology Co., Ltd. Can enjoy the west development preferential tax policy from 2011 to 2020, this year the enterprise income rate shall be calculated and paid on the basis of15%.
Note 2: In accordance with the Notice on Software Product Value-added Tax Policy (CS[2011] No. 100) of Ministry of Finance and SAT, as for the sales of software products developed by this Company and its all wholly-owned subsidiaries, such as Shanghai Gaodewei, Hangzhou System, Shanghai Hundure, Beijing Brainaire Storage Technology Co., Ltd., Hangzhou EZVIZ Network Co., Ltd. and Hangzhou HIK Robot Technology Co., Ltd., The VAT shall be calculated and paid by tax rate of17%, the part with actual tax bearing more than3% shall be refunded after the approval of the SAT.
Note 3: In accordance with the Notice on Fully Implementing the Change from Business Tax to Value-Added Tax (CS[2016] No. 36) the Group's business tax has been changed as VAT since May 1, 2016, of which the engineering integration income is applicable to the11% of VAT rate, engineering project management income is applicable to the VAT rate with a simple collection rate of3%.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements
1. Cash and bank balances
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||Closing Balance|||||Opening Balance|||||
|Item|||Foreign currency||Exchange rate for|RMB amount||Foreign currency||Exchange rate for|RMB amount|
||||amount||conversion|||amount||conversion||
||Cash：|||||||||||
||RMB|-||-||71,546.66|-||-||535,951.44|
||USD|54,518.00||6.9370||378,191.37|6,298.00||6.4936||40,896.69|
||EUR|9,914.76||7.3665||73,036.78|12,310.84||7.0952||87,347.87|
||GBP|3,194.57||8.5094||27,183.87|499.57||9.6159||4,803.82|
||ZAR|20,000.00||0.5083||10,165.18|20,000.00||0.4177||8,354.00|
||INR|648,250.61||0.1023||66,308.91|1,838,768.00||0.0977||179,666.02|
||RUB|700,327.10||0.1151||80,584.44|300,216.10||0.0884||26,539.10|
||AED|22,038.00||1.8876||41,599.39|-||-||-|
||Bank balance：|||||||||||
||RMB|-||-||9,008,949,518.02|-||-||8,366,477,608.69|
||USD|557,895,047.74||6.9370||3,870,112,669.33|233,090,986.16||6.4936||1,513,599,627.73|
||EUR|63,105,958.57||7.3086||461,213,364.03|10,995,696.90||7.0952||78,016,668.65|
||GBP|1,162,906.87||8.5162||9,903,554.55|940,967.10||9.6159||9,048,245.53|
||JPY|408.00||0.0596||24.31|-||-||-|
||CHF|4,350.83||6.7989||29,580.86|-||-||-|
||ZAR|479,939.35||0.5083||243,938.69|1,426,641.29||0.4177||595,908.07|
||INR|741,278,806.84||0.1023||75,824,667.94|202,153,791.00||0.0977||19,752,446.92|
||RUB|376,048,117.90||0.1149||43,219,734.70|410,300,913.83||0.0884||36,270,600.79|
||HKD|113,182.52||0.8945||101,242.90|247,198.58||0.8378||207,098.03|
||AUD|358,996.02||5.0157||1,800,616.34|91,861.63||4.7276||434,285.04|
||AED|8,811,007.21||1.8876||16,631,825.02|1,837.50||1.7684||3,249.44|
||BRL|8,453,226.09||2.1336||18,035,803.19|178,201.98||1.6445||293,060.28|
||SGD|34,035.93||4.7995||163,355.45|1,655.21||4.4426||7,353.44|
||PLN|1,403,342.82||1.6569||2,325,147.58|1,047,350.78||1.5841||1,659,108.37|
||KRW|120,990,676.00||0.0058||696,509.57|359,794,675.00||0.0055||1,978,870.71|
||CAD|42,307.32||5.1406||217,485.01|-||-||-|
||KZT|27,890,915.57||0.0207||577,341.95|-||-||-|
||COP|261,841,960.55||0.0023||604,226.04|-||-||-|
||TRY|21,242.60||1.9702||41,851.47|-||-||-|
||Other currency|||||||||||
||funds:|||||||||||
||RMB|-||-||102,586,217.99|-||-||77,272,897.90|
||USD|3,019,477.89||6.6811||20,173,564.54|-||-||-|
||EUR|108,432.98||7.3068||792,298.10|-||-||-|
||Total|||||13,634,993,154.18|||||10,106,500,588.53|
||including: deposited|||||565,682,133.09|||||331,732,952.04|
||in overseas banks|||||||||||

As of 31 December 2016, other currency funds book value of the Group in RMB totalled RMB 123,552,080.63,
including a RMB closing balance of RMB 102,586,217.99 (opening balance: RMB 77,272,897.90). The balance of
other currency funds mainly includes cash deposit guaranteed for letter of guarantee of RMB 4,659,173.02 (opening
blance: RMB 13,638,274.27), cash deposit guaranteed for forward foreign exchange transaction of RMB
3,100,000.00 (opening balance RMB 19,643,521.37), cash deposit guaranteed for bank acceptance bill of RMB
57,015,406.62 (opening balance RMB 39,665,967.24), bank deposit of RMB 30,000,000.00 (opening blance: nil)
pledged for long-term borrowing. Other currency funds book value in US Dollar totaled USD 3,019,477.89
(equivalent to RMB 20,173,564.54), cash deposit guaranteed for letter of credit.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
2. Financial assets as fair value through profit and loss
Unit: RMB
||||||
|-|-|-|-|-|
||Item|Closing Balance||Opening Balance|
|Held-for-trading financial assets||15,547,537.34|6,160,279.18||
|including: derivative financial assets||15,547,537.34|6,160,279.18||
|Total||15,547,537.34|6,160,279.18||

 Derivative financial assets includes forwards and interest rate swap contracts, not designated as a hedging instrument, gains or losses due to changes in fair value is directly included in the current period profits and losses.
3. Notes receivable
3.1 Categories of notes receivable
Unit：RMB
|||||||
|-|-|-|-|-|-|
||Category||Closing Balance||Opening Balance|
|Bank acceptance bill||2,762,741,337.04||2,962,863,236.66||
|Commercial acceptance bill||80,663,078.48||81,284,828.15||
|Total||2,843,404,415.52||3,044,148,064.81||

 3.2 Notes receivable pledged at the closing of the year
Unit：RMB
|||||
|-|-|-|-|
||Category||Pledged amount by December 31st, 2016|
|Bank acceptance bill||421,356,552.77||
|Commercial acceptance bill||-||
|Total||421,356,552.77||

 3.3 Notes receivable discounted or endorsed at the closing of the year
Unit：RMB
|||||||
|-|-|-|-|-|-|
||Category||Derecognised amount (Note)||Not Derecognised amount|
|Bank acceptance bill||2,941,986,624.94||-||
||Commercial acceptance bill|-||-||
||Total|2,941,986,624.94||-||

Note：After the notes receivable discounted was discounted or endorsed, the main risk such as interest rate has been transferred to bank or others, therefore, all discounted and endorsed bank acceptance bills have been derecognised by the Group.
3.4 As of December 31st, 2016, there is no such case the Group has to transfer the defaulted note receivable into account receivable.
Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
4. Account Receivable
4.1 Disclosure of accounts receivable by categories
Unit: RMB
||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Category|||Closing Balance|||||||Beginning Balance|||||||
||||Carrying amount|||Bad debt provision||Carrying Value||Carrying amount|||Bad debt provision|||Carrying Value|
|||Amount||Proportion (%)|Amount||Proportion (%)||Amount||Proportion (%)|Amount|||Proportion||
||||||||||||||||(%)||
||Accounts receivable that are|-||-|-||-|-|-||-|-||-||-|
||individually significant and for||||||||||||||||
||which bad debt provision has been||||||||||||||||
||assessed individually||||||||||||||||
||Accounts receivable with provision|12,103,912,990.83||100|861,100,087.97||7.11|11,242,812,902.86|8,742,595,008.97||100.00|616,662,265.99||7.05||8,125,932,742.98|
||accrued collectively on a portfolio||||||||||||||||
||basis||||||||||||||||
||Accounts receivable that are not|-||-|-||-|-|-||-|-||-||-|
||individually significant but for which||||||||||||||||
||bad debt provision has been assessed||||||||||||||||
||individually||||||||||||||||
|Total||12,103,912,990.83||100|861,100,087.97||7.11|11,242,812,902.86|8,742,595,008.97||100.00|616,662,265.99||7.05||8,125,932,742.98|

 Note: The group categorizes account receivable above RMB 4 million or account for more than10% of the total account receivable closing balance as accounts receivable that are individually significant.
The aging analysis of bad debt provision of account receivable in portfolio basis
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Aging||Closing BalanceCarrying amount Bad debt provision Proportion (%)|Closing Balance|||||
||||Carrying amount||Bad debt provision||Proportion (%)|
||Within 1 year|10,523,500,387.08||526,175,019.34||5.00||
||More than 1 year but not exceeding 2 years|1,079,076,499.37||107,907,649.94||10.00||
||More than 2 year but not exceeding 3 years|248,963,670.23||74,689,101.07||30.00||
||More than 3 year but not exceeding 4 years|173,515,249.59||86,757,624.79||50.00||
||More than 4 year but not exceeding 5 years|66,432,458.64||53,145,966.91||80.00||
||More than 5 years|12,424,725.92||12,424,725.92||100.00||
||Subtotal|12,103,912,990.83||861,100,087.97||7.11||

Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
4.2 Provision, re-collection, or reverse of the bad debt allowance in current fiscal year
In current fiscal year, the Company recorded a bad debt allowance of RMB 263,333,762.07, an increase of RMB 20,723.58 bed debt allowance due to coversion from statements in foreign currency. There is no such case as reversed bad debt allowance or recovered bad debts.
4.3 Actual write-off of accunt receivable during current fiscal year
In current fiscal year, the amount of accounts receivable write-off is RMB 18,916,663.67.
4.4 Top five debtors based on corresponding closing balance of account recievable
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name of the Party|||Relationship with the||Book balance of account||Closing balance for bed debt|Proportion (%)|
||||Company||receivable||provision||
|Related party A||Related Party||271,544,092.90||13,577,204.64||2.24|
|Company A||3rd party||95,128,752.51||10,365,230.34||0.79|
|Company B||3rd party||75,975,206.52||3,798,760.33||0.63|
|Company C||3rd party||68,562,052.33||3,428,102.62||0.57|
|Company D||3rd party||68,263,870.00||9,010,073.50||0.56|
||Total|||579,473,974.26||40,179,371.43||4.79|

 4.5 As of December 31, 2016, there is no termination of account receivable booking due to transfer of a financial asset.
4.6 As of December 31, 2016, the Group has no assets/liabilities booked due to transferred account receivable that the Group still keep recourse or retain part of the corresponding rights or interests.
5. Prepayments
5.1 Aging analysis of prepayments is as follows
Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Aging||Closing Balance||||Opening Balance||||
||||Carrying amount||Proportion (%)||Carrying amount||Proportion (%)|
||Within 1 year|259,834,265.50||93.14||120,408,286.44||90.76||
||More than 1 year|16,963,135.17||6.08||5,340,047.37||4.03||
||but not exceeding 2|||||||||
||years|||||||||
||More than 2 year|122,880.00||0.04||452,917.80||0.34||
||but not exceeding 3|||||||||
||years|||||||||
||More than 3 years|2,050,745.00||0.74||6,461,013.20||4.87||
|Total||278,971,025.67||100.00||132,662,264.81||100.00||

 5.2 Closing balances of top five prepayments parties
As of December 31, 2016, theGroup’s top five balances of prepayments amounted to RMB 96,905,107.31, accounting for35% of total closing balance of prepayments.
Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
6. Other receivables
6.1 Disclosure of other receivables by categories
Unit: RMB
||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Category|||Closing Balance||||||||Opening Balance||||||
||||Carrying amount||||Bad debt provision||Carrying Value||Carrying amount|||Bad debt provision||Carrying Value|
|||Amount|||Proportion|Amount||Proportion||Amount||Proportion (%)|Amount||Proportion (%)||
||||||(%)|||(%)|||||||||
||Other receivables that are|-||-||-||-|-|-||-|-||-|-|
||individually significant and for||||||||||||||||
||which bad debt provision has been||||||||||||||||
||assessed individually||||||||||||||||
||Other receivables with provision|572,194,253.84||100.00||43,593,662.41||7.62|528,600,591.43|374,811,641.46||100.00|39,537,542.92||10.55|335,274,098.54|
||accrued collectively on a portfolio||||||||||||||||
||basis||||||||||||||||
||Other receivables that are not|-||-||-||-|-|-||-|-||-|-|
||individually significant but for||||||||||||||||
||which bad debt provision has been||||||||||||||||
||assessed individually||||||||||||||||
|Total||572,194,253.84||100.00||43,593,662.41||7.62|528,600,591.43|374,811,641.46||100.00|39,537,542.92||10.55|335,274,098.54|

 Note: The group categorizes other receivables above RMB 4 million or accounts for more than10% of the total other receivables closing balance as other receivables that are individually significant.
The aging analysis of bad debt provision of other receivables in portfolio basis
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Aging||Closing BalanceCarrying amount Bad debt provision Proportion (%)|Closing Balance|||||
||||Carrying amount||Bad debt provision||Proportion (%)|
||Within 1 year|426,374,987.93||21,318,749.40||5.00||
||More than 1 year but not exceeding 2 years|113,891,466.06||11,389,146.61||10.00||
||More than 2 year but not exceeding 3 years|26,634,966.16||7,990,489.85||30.00||
||More than 3 year but not exceeding 4 years|4,517,320.69||2,258,660.35||50.00||
||More than 4 year but not exceeding 5 years|694,484.00||555,587.20||80.00||
||More than 5 years|81,029.00||81,029.00||100.00||
||Total|572,194,253.84||43,593,662.41||7.62||

Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
6. Other receivables - continued
6.2 Provision, re-collection, or reverse of the bad debt allowance in current fiscal year
For the year, the Company recorded a bad debt allowance of RMB 4,056,119.49, there is no such case as reversed bad debt allowance or recovered bad debts.
6.3 Actual write-off of other receivables during current fiscal year
In current fiscal year, there is no actual write-off of other receivables
6.4 Nature of other receivables
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Nature of other receivables||Closing balance||Beginning balance|
|Guarantee deposits||120,485,983.73||75,198,326.73||
|Prepaid expenses||397,044,897.11||267,265,944.95||
|Investment intention fund||35,000,000.00||-||
|Tax rebate||17,096,975.74||22,671,403.61||
|Others||2,566,397.26||9,675,966.17||
||Total|572,194,253.84||374,811,641.46||

 6.5 Top five debtors based on corresponding closing balance of other receivables
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Entities||Nature||Carrying amount||Aging||Proportion of total (%)|Bad debt Provision|
|Company E||Investment intentionfund||35,000,000.00||Within 1 year||6.12||1,750,000.00|
|Company F||Guarantee deposits||20,873,680.00||Within 2 year||3.65||1,480,128.00|
|The government taxauthorities||Tax rebate||17,096,975.74||Within 1 year||2.99||854,848.79|
|Company G||Prepaid expenses||7,945,422.84||Within 1 year||1.39||397,271.14|
|Company H||Guarantee deposits||6,858,813.80||Within 1 year||1.20||342,940.69|
||Total|||87,774,892.38||||15.35||4,825,188.62|

 (1) As of December 31,2016，the Group does not have other receivables related to government subsidies. (2) As of December 31, 2016, there is no termination of other receivables booking due to transfer of a financial asset.
(3) As of December 31, 2016, 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.
Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
7. Inventories
7.1 Categories of inventories
Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Category|||Closing Balance|||Opening Balance||||
|||Carrying amount||Provision fordecline in valueof inventories|Carrying value|Carrying amount||Provision for|Carrying value|
|||||||||decline in value||
|||||||||of inventories||
||Raw materials|873,060,183.25||1,516,317.17|871,543,866.08|494,856,446.00|2,975,568.73||491,880,877.27|
||Work-in-progress|159,844,928.42||-|159,844,928.42|227,201,050.82|-||227,201,050.82|
|Finished goods||2,677,500,696.17||86,718,096.08|2,590,782,600.09|2,159,539,421.37|59,955,612.35||2,099,583,809.02|
||Completed but|202,987,817.69||-|202,987,817.69|-|-||-|
||unsettled assets|||||||||
||formed by|||||||||
||construction|||||||||
||contracts|||||||||
|Total||3,913,393,625.53||88,234,413.25|3,825,159,212.28|2,881,596,918.19|62,931,181.08||2,818,665,737.11|

 7.2 Provision for decline in value of inventories
Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Category||Opening balance|Increase in thecurrent period||Decrease in the current period|||Effect of foreigncurrencyexchangedifference|Closing Balance|
|||||Reversals||write-offs||||
||Raw materials|2,975,568.73|990,675.54|2,164,915.83||285,011.27|-||1,516,317.17|
||Finished goods|59,955,612.35|52,932,575.97|1,650,858.36||26,264,532.36|1,745,298.48||86,718,096.08|
||Subtotal|62,931,181.08|53,923,251.51|3,815,774.19||26,549,543.63|1,745,298.48||88,234,413.25|

 At the closing of the year, the Company determined provision for inventory on a divididual basis, with net realizable value calculated based on estimated selling price for finished goods, and estimated selling price less all estimated cost of completion and costs necessary to make the sale for inventories.
For the year, the reversals or write-of of provision for inventories is due to those inventories being used or sold. 7.3 Completed but unsettled assets formed by construction contracts at the end of December 31, 2016 Unit: RMB
||||
|-|-|-|
|Item||Amount|
|Accumulated occurred costs of construction|682,071,033.77||
|Accumulated booked gross profit margin|40,661,975.97||
|Less: estimated losses|-||
|Settled amounts|519,745,192.05||
|Completed but unsettled assets formed by construction contracts|202,987,817.69||

 8 Other current assets
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Principal-garanteed bank finance products (Note)|3,820,000,000.00||1,450,212,000.00||
|Principal-garanteed trust products|-||295,000,000.00||
|Deductible VAT input|293,158,008.82||328,407,108.19||
|Prepaid income tax|40,834,267.96||39,394,141.27||
|Total|4,153,992,276.78||2,113,013,249.46||

Note：The management team agreed that therewon’t be significant differences between the estimated interests and risks of those bank entrusted financial products and the book value of those products, because those financial products are all principal-garanteed, with a termination period less than one year.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
9 Available-for-sale financial assets
9.1 Available-for-sale financial assets
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item||Closing Balance||||||Opening Balance|||||
|||Carrying amount||Provision for decline in value||Carrying Value||Carrying amount|P|rovision for decline in value||Carrying Value|
|Available-for-sale equity instruments||283,836,013.00|-||283,836,013.00||56,033,513.00||-||56,033,513.00||
|Cost method||283,836,013.00|-||283,836,013.00||56,033,513.00||-||56,033,513.00||
||Total|283,836,013.00|-||283,836,013.00||56,033,513.00||-||56,033,513.00||

9.2 Closing balance of available-for-sale financial assets using cost method
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||Carrying Balance||||Provision for decline in value||||||
|||||||||||Proportion of shareholding in||
|The invested entity (Note 1)|Opening balance||||Closing||||Closing||Cash Dividend in 2016|
||||Increase|Decrease||Opening balance|Increase|Decrease||the invested entity (%)||
||||||balance||||balance|||
|Zhejiang Topinfo Technology Co.,Ltd. (浙江图讯科技股份有限公司)|28,800,000.00||-|-|28,800,000.00|-|-|-|-|9.5238|-|
|Confirmware Technology(Hangzhou) Co., Ltd.（康奋威科技(杭州)有限公司）|26,629,200.00||-|-|26,629,200.00|-|-|-|-|10.0000|-|
|Nanwang Group Co., Ltd （南望信息产业集团有限公司）|604,313.00||-|-|604,313.00|-|-|-|-|0.2518|-|
|Hangzhou Hikvision EquityInvestment Partnership (LimitedPartnership) （杭州海康威视股权投资合伙企业(有限合伙)）|-||10,000.00|-|10,000.00|-|-|-|-|0.0017|-|
|CETC Finance Co., Ltd (Note2) （中国电子科技财务有限公司）|-||227,792,500.00|-|227,792,500.00|-|-|-|-|3.8300|-|
|Total|56,033,513.00||227,802,500.00|-|283,836,013.00|-|-|-|-||-|

Note1： TheGroup’s equity investments listed are all non-listed companities; therefore, 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 theCompany’s controlling shareholder.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
10 Long-term receivables
10.1 Long-term receivables
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|||Closing balance|||||Opening balance|||||
|||Carrying amount||Pd|rovision for|Carrying value|Carrying amount|||Provision for|Carrying value|Range of discount rate|
||||||ecline in value|||||decline in value|||
|Financial leases receivables||74,504,325.33||-||74,504,325.33|78,903,265.79||-||78,903,265.79|2.08% - 2.52%|
|including:Unrealized finance income||1,513,690.63||-||1,513,690.63|2,935,532.33||-||2,935,532.33||
|Borrowings for project||18,000,000.00||-||18,000,000.00|27,000,000.00||-||27,000,000.00||
|Instalment payment for selling products||159,084,593.82||-||159,084,593.82|-||-||-||
||Total|251,588,919.15||-||251,588,919.15|105,903,265.79||-||105,903,265.79||

10.2 As of December 31, 2016, there is no termination of long-term receivables booking due to transfer of a financial asset.
10.3 As of December 31, 2016, 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.
11 Long-term Equity Investments
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||Decrease/Increase in the current||||||||||
|||period|||||||||Closing Blance|
|The invested entity|Opening|||Investment|Adjustment:||Declaration of|P rovision||Closing|For Provision|
||Balance||Investment|Profit/Loss|Other|Other|cash dividends|for||Balance|for decline|
|||Additional Investments|reduction|confirmed under the|comprehensive|Changes|or profit|decline in|others||in value|
|||||Equity Method|income|in equity|distribution|value||||
|Associated Companies||||||||||||
|Wuhu Sensor Technology Co, Ltd.|-|35,000,000.00|-|-|-|-|-|-|-|35,000,000.00|-|
|Subtotal|-|35,000,000.00|-|-|-|-|-|-|-|35,000,000.00|-|
|Total|-|35,000,000.00|-|-|-|-|-|-|-|35,000,000.00|-|

 Note: In December 2016, the Company has completed additional RMB 35 million investments in Wuhu Sensor Technology Co., Ltd, according to the investment agreement, and obtained35% of the equity of Wuhu Sensor Technology Co., Ltd.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
12 Fixed Aseets
12.1 Fixed assets
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Items||Building||Office and other|Machinery and||Transportation|Total|
|||||equipment|Equipment||vehicles||
||Total original carrying amount||||||||
||1. Opening balance|1,832,355,405.85|100,912,863.97||254,313,497.22|61,175,244.19||2,248,757,011.23|
||2. Increased|730,345,969.38|63,826,427.66||403,948,263.93|3,102,392.97||1,201,223,053.94|
||1) purchase|12,794,675.30|57,181,244.75||385,654,061.73|2,757,499.49||458,387,481.27|
||2) transferred from|680,589,592.06|-||13,970,786.06|-||694,560,378.12|
||construction in progress||||||||
||3) Acquisition of|36,961,702.02|6,645,182.91||4,323,416.14|344,893.48||48,275,194.55|
||subsidiaries||||||||
|3.Decrease||-|10,008,740.86||22,137,069.63|2,131,873.40||34,277,683.89|
|1) disposal||-|10,008,740.86||22,137,069.63|2,131,873.40||34,277,683.89|
||4. Effect of foreign currency|(5,437,745.99)|(1,790,633.07)||(1,533,576.85)|(285,015.92)||(9,046,971.83)|
||exchange difference||||||||
||5.Closing Balance|2,557,263,629.24|152,939,917.70||634,591,114.67|61,860,747.84||3,406,655,409.45|
||Accumulated depreciation||||||||
||1. Opening blance|185,571,688.47|44,094,468.22||89,429,125.29|42,420,963.17||361,516,245.15|
||2. Increased|89,792,580.18|24,486,731.10||92,061,655.69|5,204,041.28||211,545,008.25|
||(1) provided|89,792,580.18|24,486,731.10||92,061,655.69|5,204,041.28||211,545,008.25|
||3. Decreased|-|6,125,371.16||6,950,635.37|1,792,308.86||14,868,315.39|
||(1) disposal|-|6,125,371.16||6,950,635.37|1,792,308.86||14,868,315.39|
||4. Effect of foreign currency|(303,468.70)|(4,009,802.80)||(799,877.32)|(167,992.41)||(5,281,141.23)|
||exchange difference||||||||
||5.Closing balance|275,060,799.95|58,446,025.36||173,740,268.29|45,664,703.18||552,911,796.78|
||Provision for decline in value||||||||
||1.Opening balance|-|-||-|-||-|
||2.Increased|-|-||-|-||-|
||3. Decreased|-|-||-|-||-|
||4.Closing balance|-|-||-|-||-|
||Total carrying amount||||||||
||1. Closing balance|2,282,202,829.29|94,493,892.34||460,850,846.38|16,196,044.66||2,853,743,612.67|
||2. Opening balance|1,646,783,717.38|56,818,395.75||164,884,371.93|18,754,281.02||1,887,240,766.08|

 12.2 As of December 31, 2016, the Group does not have any idle fixed assets.
12.3 As of December 31, 2016, the Group has not leased any fixed asset through financial leasing.
12.4 As of December 31, 2016, the Group has not rent out any fixed asset through operating leasing.
12.5 Fixed assets of which certificates of title have not been granted as of December 31,2016。
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Carrying amount||Reason for certificates of title not granted|
|Office building for branches||131,669,513.22||In the process of obtaining the real estate certificates||
|Hikvision Tonglu Security Industrial Base (Phase 1)-the factory and dormitory||617,155,169.94||In the process of obtaining the real estate certificatesafter transferred from construction in process||
||Total|748,824,683.16||||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
13 Construction in progress
13.1 Details of construction in progress
Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|||Closing balance||||||Opening balance|||||
||||Carrying amount||Provision||Carrying value||Carrying amount||Provision||Carrying value|
||Security industrial base (Phase 1)|18,104,535.49||-||18,104,535.49||601,189,618.41||-||601,189,618.41||
||Security industrial base (Phase 2)|2,713,228.89||-||2,713,228.89||-||-||-||
||Internet Security Industry Base|238,269,427.37||-||238,269,427.37||171,073,900.62||-||171,073,900.62||
||Building for Coop in Netherland|-||-||-||46,742,574.64||-||46,742,574.64||
||Public Security Monitoring Site Project|42,542,379.61||-||42,542,379.61||7,521,288.04||-||7,521,288.04||
||Others|14,852,951.00||-||14,852,951.00||18,103,669.50||-||18,103,669.50||
||Total|316,482,522.36||-||316,482,522.36||844,631,051.21||-||844,631,051.21||

 13.2 Changes in significant construction in progress
Unit: RMB
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item||Budget(RMB0,000)|Opening balance|Increased|Transferred tofixed assets||||Amount|ConstructionProgress(%)|Accumulatedcapitalized interestand profit/loss onexchange|Including:capitalizedinterest andprofit/loss onexchange for thecurrent period|Capitalizationrate for thecurrent period(%)|Source of funds|
||||||||||invested||||||
|||||||Effect of foreign|||||||||
||||||||||as a||||||
|||||||currency|Closing balance||proportion||||||
|||||||exchange|||||||||
|||||||difference|||of budget||||||
||||||||||amount||||||
||||||||||(%)||||||
||Security|72,000.00|601,189,618.41|34,070,087.02|617,155,169.94|-|18,104,535.49|88%||88%|-|-||Self-financing|
||industrial base||||||||||||||
||(Phase 1)||||||||||||||
||Security|74,100.00|-|2,713,228.89|-|-|2,713,228.89|0.4%||0.4%|-|-||Bond|
||industrial base||||||||||||||
||(Phase 2)||||||||||||||
||Internet|100,000.00|171,073,900.62|67,195,526.75|-|-|238,269,427.37|24%||24%|(105,000,000.00)|(105,000,000.00)|1.25%|Bond|
||Security||||||||||||||
||Industry Base||||||||||||||
||Building for|5,500.00|46,742,574.64|4,842,895.14|54,777,175.09|3,191,705.31|-|100%||100%|-|-||Self-financing|
||Coop in||||||||||||||
||Netherland||||||||||||||
|Others||-|25,624,957.54|54,377,310.93|22,628,033.09|21,095.23|57,395,330.61||||-|-||Self-financing|
|Total|||844,631,051.21|163,199,048.73|694,560,378.12|3,212,800.54|316,482,522.36||||-|-|||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
14 Intangible assets
14.1 Details of Intangible assets
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item||||Intellectual property||Total|
||Item|Land use right||right|Software||
||Total original carrying amount||||||
||Opening balance|249,350,758.88|22,393,162.60||126,156,590.60|397,900,512.08|
||Increased|74,180,711.48|6,030,269.56||16,647,629.71|96,858,610.75|
|Purchase||74,180,711.48|6,030,269.56||16,647,629.71|96,858,610.75|
|Decreased||-|500,000.00||319,547.72|819,547.72|
|Disposal||-|500,000.00||319,547.72|819,547.72|
|Effect of foreign currency exchange||-|-||287,801.45|287,801.45|
|Closing balance||323,531,470.36|27,923,432.16||142,772,474.04|494,227,376.56|
||Closing balance||||||
||Total accumulated amortization||||||
||Opening balance|6,730,624.81|5,950,332.99||42,018,849.92|54,699,807.72|
||Increased|5,357,900.11|3,244,132.35||20,525,743.32|29,127,775.78|
|Provided||5,357,900.11|3,244,132.35||20,525,743.32|29,127,775.78|
||Provided||||||
||Decreased|-|72,881.35||15,120.70|88,002.05|
||Disposal|-|72,881.35||15,120.70|88,002.05|
|Effect of foreign currency exchange||-|-||231,326.02|231,326.02|
|Closing balance||12,088,524.92|9,121,583.99||62,760,798.56|83,970,907.47|
||Closing balance||||||
||Provision for decline in value||||||
|1.Opening balance||-|-||-|-|
|2.Increased||-|-||-|-|
|3. Decreased||-|-||-|-|
|4.Closing balance||-|-||-|-|
||Total carrying amount||||||
||Closing balance|311,442,945.44|18,801,848.17||80,011,675.48|410,256,469.09|
||Opening balance|242,620,134.07|16,442,829.61||84,137,740.68|343,200,704.36|

 15 Goodwill
15.1 Goodwill book value
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|The invested entity||Opening balance|Increased||Decreased|Closing balance|
||||Acquisition of subsidiaries||Disposal||
|ZAO Hikvision||67,349.64|-|-||67,349.64|
|Beijing Brainaire Storage TechnologyCo., Ltd. (北京邦诺存储科技有限公司)||42,695,573.44|-|-||42,695,573.44|
|Henan HuaAn Intelligence DevelopmentCo., Ltd. (河南华安保全智能发展有限公司) and its subsidiaries||61,322,871.63|-|-||61,322,871.63|
|Hundure Technology (Shanghai) Co.,Ltd.( 汉军智能系统(上海)有限公司)||13,774,405.88|-|-||13,774,405.88|
|Hangzhou Hikvision ZhichengInvestment and Development Co. Ltd.(杭州海康智城投资发展有限公司)||-|12,573.42|-||12,573.42|
|Secure Holdings Limited||-|130,491,627.46|-||130,491,627.46|
||Total|117,860,200.59|130,504,200.88|-||248,364,401.47|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
15. Goodwill - continued
15.2 Provision of decline in value for goodwill
The key assumptions used in theGroup’s annual impairment test performed for goodwill at the end of the reporting period:
The recoverable amounts of the the relevant assets have been determined on the discounted present value of the future cash flow projections. The cash flow projections are based on 2017-2021 Financial Budgets approved by management covering a 5-year period, with discount rates of18% to20%. 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, which include 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. The Group's annual impairment test was performed at the end of the reporting period. There was no case recognized that the recoverable amount of the goodwill is less than the carrying value of the goodwill, therefore, no provision for impairment loss was booked during the period.
16. Deferred tax assets/deferred tax liabilities
16.1 Deferred tax assets that are not presented at net off basis
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|||Closing balance|||Opening balance||
||||Deductible temporary|Deferred tax assets||Deductible temporary|Deferred tax assets|
||||differences|||differences||
|Provision for impairmentlosses of assets||856,826,652.25||182,964,493.73|621,958,693.00||116,738,792.78|
|Payroll payables||174,795,783.91||26,219,367.59|98,503,043.33||14,775,456.50|
|Share-based compensation||136,678,690.94||18,118,078.96|215,174,074.10||31,717,007.59|
|Provisions||28,799,848.84||4,319,977.33|56,788,335.77||8,518,250.37|
|Unrealized profit frominter-group transactions||918,416,162.13||137,762,424.32|606,709,815.23||91,006,472.28|
|Changes in the fair valueof derivative financialinstruments||60,459,998.68||9,229,129.93|-||-|
||Total|2,175,977,136.75||378,613,471.86|1,599,133,961.43||262,755,979.52|

 16.2 Deferred tax liabilities that are not presented on net off basis
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|||Closing balance|||Opening balance||
||||Taxable temporary|Deferred tax liabilities||Taxable temporary|Deferred tax liabilities|
||||differences|||differences||
|Changes in the fair valueof derivative financialinstruments||15,547,537.34||3,358,395.25|6,160,279.18||1,540,069.80|
||Total|15,547,537.34||3,358,395.25|6,160,279.18||1,540,069.80|

 16.3 Deferred tax assets and deferred tax liabilities that are presented at the net amount after offset
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|Closing balance||Opening balance|||
||Offset amount|Deferred tax assets orliabilities|Offset amount||Deferred tax assets orliabilities|
|Deferred tax assets|3,358,395.25|375,255,076.61|1,540,069.80|261,215,909.72||
|Deferred tax liabilities|3,358,395.25|-|1,540,069.80|-||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
16.4 Details of unrecognized deferred tax asset
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Deductible temporary differences|389,553,597.09||62,680,292.86||
|Deductible losses|190,776,067.72||20,829,758.80||
|Total|580,329,664.81||83,510,051.66||

 16.5 Deductible tax losses, for which no deferred tax assets are recognized, will expire in the following years Unit: RMB
||||||
|-|-|-|-|-|
|Year||Closing balance||Opening balance|
|2016|-||2,975,163.34||
|2017|9,029,371.83||9,029,371.83||
|2018|4,063,278.80||4,063,278.80||
|2019|1,125,886.45||1,125,886.45||
|2020|3,636,058.38||3,636,058.38||
|2021|172,921,472.26||-||
|Total|190,776,067.72||20,829,758.80||

 17. Other non-current assets
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Prepayments for land use right|-||18,000,000.00||
|Prepayments for acquisition of real estate|10,782,858.00||-||
|Prepayments for purchase of equipments|30,216,826.42||-||
|Total|40,999,684.42||18,000,000.00||

 18. Short-term loans
18.1 Categories of short-term loans
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Fiduciary loan|1,448,732.40||876,600,473.94||
|Guaranteed loans|21,842,592.45||-||
|Secured loans (pledged)|9,000,000.00||-||
|Total|32,291,324.85||876,600,473.94||

 18.2 As of December 31, 2016, the Group did not have any overdue short-term loans that were failed to repay.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
19. Financial liabilities booked at fair value, and differences in fair value booked through profit or loss in the current period
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Held-for-trading financial liabilities||69,789,502.97||19,281,989.69||
||Including: derivative financial liabilities|69,789,502.97||19,281,989.69||
||total|69,789,502.97||19,281,989.69||

 Derivative financial assets includes forwards and foreign currency 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
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Bank acceptance Bill|876,804,536.72||209,741,787.71||
|Total|876,804,536.72||209,741,787.71||

 As of December 31,2016, the Group did not have any unpaid matured notes payables.
21. Accounts payable
21.1 List of accounts payable
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Payment for purchase of materials||6,943,222,170.36||5,739,694,866.97||
|Payment for construction||65,112,853.11||130,044,503.81||
||Total|7,008,335,023.47||5,869,739,370.78||

 21.2 As of December 31, 2016, the Group did not have any significant account payable with aging above one year. 22. Receipts in advance
22.1 List of receipts in advance
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Advanced payments from sales of goods||356,988,890.83||209,906,293.91||
|Advanced payments from construction contracts||112,702,546.56||185,604,501.82||
||Total|469,691,437.39||395,510,795.73||

 22.2 As of December 31, 2016, the Group did not have any significant receipts in advance with aging above one year.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
23. Employee remuneration payable
23.1 Details of payroll payables
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Opening balance||Increase in the current||Decrease in the current|Closing balance|
|||||period||period||
|Short-term remuneration||787,135,461.87|3,501,255,777.95||3,204,381,640.06||1,084,009,599.76|
||Dimission benefits – defined contribution|934,273.45|200,090,408.55||200,504,907.05||519,774.95|
||scheme|||||||
||Total|788,069,735.32|3,701,346,186.50||3,404,886,547.11||1,084,529,374.71|

 23.2 List of Short-term remuneration
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Opening balance||Increase in the||Decrease in the current|Closing balance|
|||||current period||period||
||Wages or salaries, bonuses, allowances|762,387,741.64|3,039,020,136.88||2,752,347,892.20||1,049,059,986.32|
||and subsidies|||||||
|Staff welfare||3,423,195.78|139,024,951.35||139,480,585.41||2,967,561.72|
|Social insurance contributions||530,831.39|139,920,598.86||140,232,439.82||218,990.43|
|Including: medical insurance||519,876.87|122,325,270.24||122,642,968.89||202,178.22|
|injury insurance||5,644.46|6,831,757.91||6,834,874.10||2,528.27|
|maternity insurance||5,310.06|10,763,570.71||10,754,596.83||14,283.94|
|Housing funds||181,432.50|124,991,155.02||124,360,187.52||812,400.00|
|Labor union and education fund||20,612,260.56|58,298,935.84||47,960,535.11||30,950,661.29|
|subtotal||787,135,461.87|3,501,255,777.95||3,204,381,640.06||1,084,009,599.76|

 23.3 Dimission benefits– defined contribution scheme (Note)
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Opening balance||Increase in the||Decrease in the current|Closing balance|
|||||current period||period||
||Basic pension insurance|889,516.48|186,247,235.35||186,672,029.53||464,722.30|
||Unemployment insurance|44,756.97|13,843,173.20||13,832,877.52||55,052.65|
||Subtotal|934,273.45|200,090,408.55||200,504,907.05||519,774.95|

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.
During the current reporting year, the Group has contributed a total of RMB 186,247,235.35 to retirement benefit scheme, and a total of RMB 13,843,173.20 to unemployment insurance scheme (2015: RMB 140,449,058.43 contributed to retirement benefit scheme and RMB 12,231,236.60 to unemployment insurance plan). As of December
31st,
2016, the Group still has RMB 464,722.30 payable and RMB 55,052.65 payable to
retirement benefit plan and unemployment insurance plan accordingly (as of December
31st,
2015, RMB
889,516.48 and RMB 44,756.97 payable to retirement benefit plan and unemployment insurance plan
accordingly). All relative benefit payables have been subsequently paid off accordingly after the reporting
period.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
24. Taxes payable
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Enterprise income tax||898,545,866.96||589,856,504.15||
|Value-added tax||229,182,589.15||190,693,283.18||
|City construction and maintenance tax||28,164,988.43||13,750,953.28||
|Education surcharges||15,154,509.84||5,914,984.60||
|Local education surcharges||8,216,807.76||3,944,121.49||
|Others||26,410,337.60||18,139,503.38||
||Total|1,205,675,099.74||822,299,350.08||

 25. Dividends payable
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Dividends of restricted shares (Share Incentive Scheme)||20,105,831.16||24,128,481.48||
||Total|20,105,831.16||24,128,481.48||

 26. Other payables
26.1 List of other payables according to the nature of the payment
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Subscription proceeds for restricted shares (Note)||660,888,216.54||-||
|Accrued expenses||127,849,041.50||-||
|Guarantee and deposit fees||110,163,462.78||98,303,864.14||
|Collection and payment on behalf||85,898,444.67||52,790,947.67||
|Others||48,369,958.35||8,762,854.27||
||Total|1,033,169,123.84||159,857,666.08||

Note：At December 31, 2016, the Company has not completed the share registration and formalities for the shares granted under Share Incentive Scheme in 2016(Note (XI)), therefore, the subscription proceeds have been recorded as other payables. The relevant registration process has been subsequently completed on January
20th,
2017.
26.2 As of December
31st,
2016, the Group does not have any significant other payables aging over one year. 27. Non-current liabilities due within one year
Unit：RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Long-term borrowings due within one year (Note (V)29)||15,340,813.03||586,430,847.08||
||Total|15,340,813.03||586,430,847.08||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
28. Other current liabilities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Payment for subscription of restricted shares||300,177,750.17||518,074,596.90||
|Total||300,177,750.17||518,074,596.90||

 29. Long-term borrowings
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Opening balance|
|Pledged loan (Note 1)||31,421,001.00||52,368,335.00||
||Guaranteed loans|1,500,000,000.00||162,340,000.00||
||Fiduciary loan|16,127,396.36||1,047,476,447.08||
||Other borrowing (Note 2)|190,000,000.00||-||
||Less：Long-term loans due within one year (Note (V) 27)|15,340,813.03||586,430,847.08||
||Total|1,722,207,584.33||675,753,935.00||

 As of December
31st,
2016, the GBP loans, with book value RMB 16,127,396.36, carry annual interest rate ranging from1.20% to3.50% (as of December
31st
2015:nil)；the RMB loans, with book value RMB 1,721,421,001.00, carry annual interest rate ranging from 2.65 to5.00% (as of December
31st
2015: range from4.36% to5.00%).
Note1：The Group pledged RMB 95,128,752.51 account receivables for this pledged loan, maturity date September 21st
2018, annual rate5%.
Note 2: During the reporting period, the Group entered into an agreement with CDB DevelopmentFund(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 or take part in decision-making. The Group shall pay a1.2% annualized return to CDBDF by way of dividends or interest payments, and the Group is required to redeem the CDBDF's equity investment by instalment each year from 2021 to 2024. Therefore, the capital injection by CDBDF is treated as a long-term loan. As of December 31st 2016, CDBDF has aggregately invested RMB 190 million (December
31st
2015: nil).
Hikvision 2016 Annual Reports Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
30. Bonds payable
30.1 Bonds payable
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Closing balance||Beginning balance|
|Euro Bond (Note)||2,954,449,528.77||-||
||Total|2,954,449,528.77||-||

 30.2 Change in bond payable balance
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item||Face value|Issue Date|||||||Amortizati|||
||||||||||Interests expenses|on of|||
|||||||Opening|Issuance in current|Foreign exchange|||Payments in||
|||||Maturity|Issuance||||accrued for the|premiums||Closing balance|
|||||||blance|period|effects|||current year||
||||||||||year|or|||
|||||||||||discounts|||
|Irish Euro Bond(Note)||Euro 400,000,000.00|Feburary 18th 2016|3 years|2,903,120,000.00|-|2,903,120,000.00|19,600,000.00|31,729,528.77|-|-|2,954,449,528.77|
||Total|Euro 400,000,000.00|||2,903,120,000.00|-|2,903,120,000.00|19,600,000.00|31,729,528.77|-|-|2,954,449,528.77|

 Note: On February
3rd,
2016, the Company publicaly 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 Feburary
18th,
2019, the issuance price of the bond is99.959% of the nominal value, interest rate is1.25% per annum, with interest payment date of Feburary
18th
per annum, and one-time principal repayment on maturity date. The Euro Bonds are mainly used for the company's security industry base construction and the Internet video industry base construction.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
31. Provisions
Unit: RMB
||||||
|-|-|-|-|-|
||Item|Closing balance||Beginning balance|
|Sales warranty||41,933,212.54|61,833,874.59||
||Total|41,933,212.54|61,833,874.59||

 32. Deferred income
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|Beginning balance|Increase in current|Decrease in current|Closing balance|Details|
|||Period|period|||
|Cloud storage service income|-|19,902,201.63|9,068,455.64|10,833,745.99|Note|
|Total|-|19,902,201.63|9,068,455.64|10,833,745.99||

As of December
31st
2016, the Company has no deferred income related to government subsidies.
Note: This is revenue related to the cloud storage service the Company provides to its customers; and the Company will recognize the revenue accordingly during the period the service is actually provided. 33. Share capital
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Opening balance|Changes for the period（”-” represents decrease）||||||Closing balance|
|||New|Bonus issue(Note1)||Changes for the period|Others(Note2)|Subtotal||
|||issue of|||（”-” represents||||
|||shares|||decrease）(Note 1)||||
|2016：|||||||||
|Total|4,068,772,253.00|-|1,220,631,676.00|813,754,450.00||(451,494.00)|2,033,934,632.00|6,102,706,885.00|
|shares|||||||||
|2015：|||||||||
|Total|4,069,128,026.00|-|-|-||(355,773.00)|(355,773.00)|4,068,772,253.00|
|shares|||||||||

Note1：Pursuant to shareholder's resolution of 2015 annual General Meeting dated on May
5th
2016, based upon the total capital share of 4,068,772,253 shares on December
31st
2015, the company proposed distributing bonus 3 shares for each 10 ordinary shares (tax inclusive), and distributing 2 shares for each 10 ordinary shares to the existing shareholders by the way of capitalization of capital reserve. As a result, 2,034,386,126 shares were distributed, with face value RMB 1, and a total increase in capital share of RMB 2,034,386,126.00.
Note2：On August
29th,
2016, pursuant to the Articles of Association of the Company revised by the resolution of
15th
General Meeting of
3rd
Board of Directors authorized in the first Extraordinary General Meeting in 2012, the Company repurchased and cancelled 451,494 granted but restricted treasury shares by cash, and the total share capital of the Company decreased by RMB 451,494, capital reserve decreased by RMB 1,151,310.35. The registration procedures were completed on November 16th,
2016.
On August
24th,
2015, pursuant to the Articles of Association of the Company revised by the resolution of the
24th
General Meeting of the
2nd
Board of Directors authorized in the first Extraordinary General Meeting in 2012, the Company repurchased and cancelled 355,773 granted but restricted treasury
shares by cash, reducing the paid-up capital of RMB 355,773 and capital reserve of RMB 1,538,718.15.
The registration procedures were completed on December
3rd,
2015.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
34. Capital reserves
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Opening balance||Increased in the current||Decreased in the|Closing balance|
|||||period (Note 1)||current period (note 2)||
||2016：|||||||
||Share premium|1,324,347,275.17|393,718,317.67||814,905,760.35||903,159,832.49|
||Other capital reserves|315,260,377.05|122,970,423.83||295,949,779.71||142,281,021.17|
||Total|1,639,607,652.22|516,688,741.50||1,110,855,540.06||1,045,440,853.66|
||2015：|||||||
||Share premium|1,325,885,993.32|-||1,538,718.15||1,324,347,275.17|
||Other capital reserves|154,160,332.09|161,100,044.96||-||315,260,377.05|
||Total|1,480,046,325.41|161,100,044.96||1,538,718.15||1,639,607,652.22|

注1： The increase of RMB 122,970,423.83 in other capital reserves is due to recognition of equity investment payments into capital reserve, please refer to Note VI; The minority shareholders inject capitals into theCompany’s subsidiaries resulted in the change in equity of share premium increase of RMB 97,768,537.96; in the current year, due to the restricted shares vested through equity settlement, RMB 295,949,779.71 was transferred from other capital reserves to share premium.
Note2： The decrease of RMB 813,754,450.00 in share premium is due to theCompany’s distribution of 2 shares for each 10 ordinary shares to all existing shareholders by the way of capitalization of capital reserve, for detail, please refer to Note (V) -33-Note 1; the decrease of RMB 1,151,310.35 in share premium is due to the theCompany’s repurchase and cancellation of 451,494 granted but restricted treasury shares by cash, for detail, please refer to Note (V)-33-Note 2.
35. Treasury shares
Unite: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Opening Balance||Increased in the||Decreased in the|Closing balance|
|||||current year||current year (Note)||
||2016：|||||||
||Restricted shares incentive scheme|518,074,596.90|-||217,896,846.73||300,177,750.17|
||Total|518,074,596.90|-||217,896,846.73||300,177,750.17|
||2015：|||||||
||Restricted shares incentive scheme|547,853,280.23|-||29,778,683.33||518,074,596.90|
||Total|547,853,280.23|-||29,778,683.33||518,074,596.90|

注： For the year, treasury shares decreased of RMB217,896,846.73，including a decrease of RMB 1,602,804.35 due to the repurchase and cancellation of 451,494.00 restricted ordinar shares of 2012 Restricted Share IncentiveScheme；Due to the
3rd
vesting of 7,620,714.00 shares of 2012 restricted incentive shares, treasury shares decreased by RMB 27,053,534.05; due to the
1st
vesting of 30,687,650 shares of 2014 restricted incentive shares, treasury shares decreased by RMB 189,240,508.33.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
36. Other comprehensive income
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Item||Openingbalance||Change for the period||||||Closingbalance|
||||Before taxbalance|||Less: transfer|Less:incometaxexpense|Attributable tothe owner ofthe company(after tax)|Minorityinterest(aftertax)||
|||||||to current|||||
|||||||period P/L|||||
|||||||from previous|||||
|||||||other|||||
|||||||comprehensive|||||
|||||||income|||||
||2016：||||||||||
||Items that may be reclassified|(27,660,017.70)|(12,687,807.98)||-||-|(13,570,759.51)|882,951.53|(41,230,777.21)|
||subsequently to profit or loss||||||||||
||Included: Effect on conversion of|(27,660,017.70)|(12,687,807.98)||-||-|(13,570,759.51)|882,951.53|(41,230,777.21)|
||financial statements denominated||||||||||
||in foreign currencies||||||||||
||Other comprehensive income|(27,660,017.70)|(12,687,807.98)||-||-|(13,570,759.51)|882,951.53|(41,230,777.21)|
||2015：||||||||||
||Items that may be reclassified|(8,837,417.46)|(17,989,248.27)||-||-|(18,822,600.24)|833,351.97|(27,660,017.70)|
||subsequently to profit or loss||||||||||
||Included: Effect on conversion of|(8,837,417.46)|(17,989,248.27)||-||-|(18,822,600.24)|833,351.97|(27,660,017.70)|
||financial statements denominated||||||||||
||in foreign currencies||||||||||
||Other comprehensive income|(8,837,417.46)|(17,989,248.27)||-||-|(18,822,600.24)|833,351.97|(27,660,017.70)|

 37. Surplus reserve
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item||Surplus reserve||Increased in the currentperiod||Decreased in the curren|t|Closing balance|
|||||||period|||
||2016：||||||||
||Statutory surplus reserve (Note)|1,895,061,004.09|720,376,818.06||-|||2,615,437,822.15|
||Total|1,895,061,004.09|720,376,818.06||-|||2,615,437,822.15|
||2015：||||||||
||Statutory surplus reserve (Note)|1,339,597,584.02|555,463,420.07||-|||1,895,061,004.09|
||Total|1,339,597,584.02|555,463,420.07||-|||1,895,061,004.09|

Note：In accordance with the relevant Company Laws and Articles of Association, the Company is required to transfer10% of its net profit reported in its financial statements to the statutory surplus reserve.
38. Retained earnings
Unit: RMB
|||||
|-|-|-|-|
|Item|2016||2015|
|Retained earnings at the beginning of the year|12,196,097,444.07|8,510,162,428.31||
|Add: Net profit attributable to owners of the Company for the period|7,422,261,983.16|5,869,049,646.23||
|Less: Appropriation to statutory surplus reserve|720,376,818.06|555,463,420.07||
|Dividends on ordinary shares (Note)|2,810,893,076.52|1,627,651,210.40||
|Share bonus (Note)|1,220,631,676.00|-||
|Retained earnings at the end of the year|14,866,457,856.65|12,196,097,444.07||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
39. Operating income and operating cost
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|||Amount recognized in the current period|||Amount recognized in the prior period||
||||Revenue|Cost||Revenue|Cost|
||Operating income|31,532,624,321.90||18,409,762,817.40|24,904,906,357.72||14,923,684,371.21|
||Other operating income|391,396,550.54||239,931,258.04|366,483,915.70||213,109,146.23|
||Total|31,924,020,872.44||18,649,694,075.44|25,271,390,273.42||15,136,793,517.44|

 40. Business Taxes and Surcharges
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Items (Note)|||Amount recognized in the curren|t||Amount recognized in the prior|
||||period|||period|
||Business tax|6,916,646.96|||10,358,293.68||
||City construction and maintenance tax|125,998,134.00|||108,520,043.75||
||Education surcharges|54,199,792.53|||46,369,832.12||
||Local education surcharges|35,740,953.63|||31,628,452.88||
||Real estate tax|15,606,172.07|||-||
||Tax on use of land|2,021,501.93|||-||
||Stamp duty|14,595,730.38|||-||
||Total|255,078,931.50|||196,876,622.43||

 Note: According to the Value-added Tax Accounting Regulations(《增值税会计处理规定》) issued by Ministry of Finance (Finance and Accounting[2016] no. 22), the company accounted real eastate tax, tax on use of land, and stamp duty under “Business taxes and Surcharges” starting from May
1st,
2016
41. Selling expenses
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|||Amount recognized in the curren|t||Amount recognized in the prior|
||||period|||period|
||Payroll|1,332,043,554.70|||932,721,054.77||
||Sales service expense|501,175,676.22|||412,626,103.85||
||Shipping, transportation, and vehicle expense|380,955,773.46|||255,783,844.00||
||Advertising & Marketing expenses|178,161,704.10|||132,169,700.29||
||Office expenses|129,539,773.52|||119,290,840.12||
||Travelling expenses|145,061,251.90|||112,622,885.66||
||Business entertainment|105,803,110.64|||84,988,494.49||
||Depreciation and amortization expenses|59,486,700.85|||43,558,983.17||
||Rental expenses|73,763,291.06|||43,221,123.58||
||Others|85,282,983.36|||42,062,284.78||
||Total|2,991,273,819.81|||2,179,045,314.71||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
42. Administrative expenses
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Items|||Amount recognized in the curren|t||Amount recognized in the prior|
||||period|||period|
||Research and development expenses|2,433,400,645.23|||1,722,638,163.98||
||Payroll|351,416,561.96|||268,762,872.47||
||Office expenses|58,716,173.49|||43,570,661.37||
||Professional Intermediary expenses|55,076,770.55|||42,544,328.08||
||Depreciation and amortization expenses|54,545,967.89|||22,476,104.17||
||Property rental expenses|22,794,345.33|||18,532,592.63||
||Shipping, transportation, utility expense|27,839,083.20|||14,950,639.38||
||Travelling expenses|26,661,671.48|||13,799,325.65||
||Business entertainment|8,543,977.49|||3,546,690.91||
||Others|67,766,236.32|||60,400,492.51||
||Total|3,106,761,432.94|||2,211,221,871.15||

 43. Financial Expenses
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Items|||Amount recognized in the curren|t||Amount recognized in the prior|
||||period|||period|
||Interest expenses|143,058,881.09|||75,833,874.33||
||Less：Interest income|184,537,947.93|||159,433,094.76||
||Effect on foreign exchange|(301,689,249.60)|||(86,990,601.69)||
||Less﹕Foreign exchange effect on specific loan and the|(105,000,000.00)|||-||
||capitalization of specific loan interests||||||
||Others|12,104,561.82|||17,693,430.42||
||Total|(226,063,754.62)|||(152,896,391.70)||

 44. Impairment losses of assets
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Items|||Amount recognized in the curren|t||Amount recognized in the prior|
||||period|||period|
||Bad debt provision|267,389,881.56|||324,402,411.70||
||Inventory provision|50,107,477.32|||14,472,237.73||
||Total|317,497,358.88|||338,874,649.43||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
45. Gains from changes in fair values (losses)
Unit: RMB
||||||
|-|-|-|-|-|
|Sources of gains/losses from changes in fair values|||Amount recognized in thecurrent period|Amount recognized in theprior period|
||Financial assets measured by fair value and their changes recognized in the|9,387,258.16||3,127,346.44|
||gains and losses during the current period||||
||Including: Profits or losses on the changes in fair value of derivative|9,387,258.16||3,127,346.44|
||financial asset||||
||Financial liabilities measured by fair value and their changes recognized in the|(49,558,836.96)||(19,281,989.69)|
||gains and losses during the current period||||
||Including: Profits or losses on the changes in fair value of derivative financial|(49,558,836.96)||(19,281,989.69)|
||asset||||
||Total|(40,171,578.80)||(16,154,643.25)|

 46. Investment income
46.1 Details of investment income
Unit: RMB
||||||
|-|-|-|-|-|
|Item|||Amount recognized in thecurrent period|Amount recognized in theprior period|
||Disposal G/L of financial assets measured by fair value and their changes|(8,280,159.82)||6,165,969.68|
||recognized in the gains and losses during the current period||||
||Investment income on matured financial product redemption|48,773,447.48||142,507,467.57|
||Total|40,493,287.66||148,673,437.25|

 47. Non-operating income
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item||Amount recognized in th|e||Amount recognized in th|e|Amount incurred in nonrecurring gains and|
|||current period|||prior period||loss in the current period|
|Profits from disposal of non-current|203,854.22|||2,829,117.71|||203,854.22|
|assets||||||||
|Government subsidies|1,490,866,107.85|||1,274,249,562.08|||171,321,088.31|
|Fines and confiscations|11,819,624.33|||15,774,511.98|||11,819,624.33|
|Others|8,029,740.84|||1,125,778.52|||8,029,740.84|
|Total|1,510,919,327.24|||1,293,978,970.29|||191,374,307.70|

 Government subsidies recognized in current period P/L:
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|||Amount for the current||Amount for the prior||Pertinent to assets or|
||||period||period||Pertinent to incomes|
|VAT Refund10||1,319,545,019.54||1,104,970,075.27||Pertinent to incomes||
|Grants and subsidies11||151,794,448.39||131,114,119.17||Pertinent to incomes||
|Refund of tax and levies12||19,526,639.92||8,452,467.64||Pertinent to incomes||
|Subtotal||1,490,866,107.85||1,244,536,662.08||/||
|Amortization of deferred assets relatedto government subsidies13||-||29,712,900.00||Pertinent to assets||
||Total|1,490,866,107.85||1,274,249,562.08||/||

10 VAT Refund: Standard VAT tax rebate regulated by Ministry of Finance and State Administration of Taxation. (Finance and Tax
No.[2011]100)
11 Grants and subsidies: local government incentives provided to businesses (including foreign-owned businesses) that promote employment
and economic development.
12 Refund of tax and levies: Standard tax rebate, such as tax rebate for local water conservancy constructions.
13 Amortization of deferred assets related to government subsidies: government supports to encourage companies to make high-tech project
investment.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
48. Non-operating expenses
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|||Amount for the current||Amount for the prior|Amount recorded into the current|
||||period||period|non-recurring profit|
||Total losses from disposal of non-current|940,003.24||1,113,694.67||940,003.24|
||assets||||||
||Local water conservancy construction fund|28,329,199.04||35,398,037.38||-|
||Others|1,572,493.80||1,418,989.81||1,572,493.80|
||Total|30,841,696.08||37,930,721.86||2,512,497.04|

 49. Income tax expenses
49.1 List of income tax expenses
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Amount for the current period||Amount for the prior period|
|Current income tax|1,285,412,458.83||1,017,022,940.12||
|Deferred income tax|(114,039,166.89)||(165,132,413.90)||
|Differences on final settlements of preivious years’ income tax|(281,468,083.87)||15,753,361.47||
|Total|889,905,208.07||867,643,887.69||

 49.2 Reconciliation of accounting profits and income tax expenses
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|||Amount for the current period|||Amount for the prior period|
|Total profit||8,310,178,348.51|||6,750,041,732.26||
|Income tax expenses calculated at applicable tax rates of 15%||1,246,526,752.28|||1,012,506,259.84||
|Impact of non-deductible costs, expenses and losses||6,943,034.59|||-||
|Tax effect of non-taxable income||-|||-||
|Impact of deductible temporary differences or deductible losses for||61,857,869.72|||-||
|which no deferred income tax assets is recognised for the year|||||||
|Impact of deductible temporary differences or deductible losses for||(317,945.53)|||-||
|which no deferred income tax assets is recognised for the prior periods|||||||
||Differences of income tax annual filing (Note)|(281,468,083.87)|||15,753,361.47||
|Impact by different tax rates applicable to subsidiaries||38,291,539.47|||33,535,330.76||
||Impact of additional deduction of R&D expenses|||(155,040,484.90)|(114,430,437.11)||
|others||(26,887,473.69)|||(79,720,627.27)||
|Income tax expenses||889,905,208.07|||867,643,887.69||

 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 (Cai Shui[2016] No. 49), the Company was approved by the tax authorities in May 2016 to reduce the enterprise income tax for 2015 at the rate of10% and the enterprise income tax for 2015 was reduced by RMB 281,468,083.87. As at the approval date of this report, the income tax benefits for 2016 have not yet been approved, and the corporate income tax for the year is still calculated at the rate of15%.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
50. Notes to consolidated cash flow statement
50.1 Other cash receipts relating to operating activities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Amount for the current period||Amount for the prior period|
|Interest income||184,537,947.93||159,433,094.76||
|Government subsidies14||151,794,448.39||153,047,857.74||
|Others||152,550,394.51||213,432,311.25||
||Total|488,882,790.83||525,913,263.75||

 50.2 Other cash payments relating to operating activities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Amount for the current period||Amount for the prior period|
|Office expenses and business entertainment||536,275,608.23||251,396,686.89||
|Advertising and Selling services||436,719,048.45||212,619,040.28||
|R&D expense||334,367,206.73||204,578,023.31||
|Shipping and transportation expense||422,076,453.97||270,734,483.38||
|Travelling expense||245,280,426.97||126,422,211.31||
|Rental expense||110,722,987.56||61,753,716.21||
|Taxes, Intermediary fee and other expenses||174,383,961.34||97,643,005.30||
|Others||59,600,100.19||211,882,168.71||
||Total|2,319,425,793.44||1,437,029,335.39||

 50.3 Other cash receipts relating to investing activities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Amount for the current period||Amount for the prior period|
|Receipts of finance leases||4,398,940.46||26,996,686.98||
|Receipts of project loan||9,000,000.00||9,000,000.00||
||Total|13,398,940.46||35,996,686.98||

 50.4 Other cash receipts relating to financing activities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Amount for the current period||Amount for the prior period|
|Receipts of the Company’s subsidiary’s borrowings||-||4,000,000.00||
|Receipts of subscriptions for share incentives||660,888,216.54||-||
||Total|660,888,216.54||4,000,000.00||

14 Please refer to Note (V) 47 for details about government subsidy closely related to regular course of business of the Company and
government subsidy based on standard quota or quantitative continuous application according to the state industrial policy.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
50.5 Other cash payments relating to financing activities
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Item||Amount for the current period||Amount for the prior period|
|Repurchase of shares||1,602,804.35||1,894,491.15||
|Payment of interests on the Company’s subsidiary’s borrowings||-||199,500.00||
||Total|1,602,804.35||2,093,991.15||

 51. Supplementary information about cash flow statement
51.1 Supplementary information about cash flow statement
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Supplementary information|||Amount for the current||Amount for the prior|
||||period||period|
||Reconciliation of net profit to cash flows from operating activities:|||||
||Net profit|7,420,273,140.44||5,882,397,844.70||
||Add: Impairment of assets|317,497,358.88||338,874,649.43||
||Fixed assets depreciation|211,545,008.25||132,614,495.73||
||Amortization of intangible assets|29,127,775.78||22,864,330.36||
||Losses on disposal of fixed assets, intangible assets and other long-term assets|736,149.02||(1,679,868.58)||
||(gains expressed with “-”)|||||
||Losses on discarding of fixed assets (gains expressed with “-”)|-||(35,554.46)||
||Losses from changes in fair value (gains expressed with “-”)|40,171,578.80||16,154,643.25||
||Financial expenses (incomes expressed with “-”)|63,806,734.82||(42,631,526.31)||
||Investment losses (gains expressed with “-”)|(40,493,287.66)||(148,673,437.25)||
||Equity-settled share-based payment|122,970,423.83||155,695,500.62||
||Change in other currency funds|(42,273,330.05)||-||
||Decrease in deferred income tax assets (increase expressed with “-”)|(114,039,166.89)||(165,132,413.90)||
||Decrease in inventories (increase expressed with “-”)|(1,018,145,212.13)||(541,203,699.08)||
||Decrease in operating receivables (increase expressed with “-”)|(3,605,922,579.57)||(5,385,319,432.61)||
||Increase in operating payables (decrease expressed with “-”)|2,817,603,821.05||2,952,796,637.27||
||Decrease in deferred income (increase expressed with “-”)|10,833,745.99||-||
||Net cash flow from operating activities|6,213,692,160.56||3,216,722,169.17||
||Major investing and financing activities not involving cash receipts and payment:|||||
||Net changes in cash and cash equivalents:|||||
||Ending balance of cash|13,519,252,711.90||10,033,033,476.30||
||Less: Beginning balance of cash|10,033,033,476.30||7,111,254,725.60||
||Add: Ending balance of cash equivalents|-||-||
||Less: Beginning balance of cash equivalents|-||-||
||Net increase (decrease) in cash and cash equivalents|3,486,219,235.60||2,921,778,750.70||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
51.2 Net cash payments on obtaining subsidiaries
Unit: RMB
||||
|-|-|-|
|||Amount|
|Payments of cash or cash equivalents for acquisition during the current period|202,268,141.07||
|Including﹕ Secure Holding Limited and its subsidiaries|178,268,141.07||
|Hangzhou Hikvision Zhicheng Investment and Development|24,000,000.00||
|Co,. Ltd.|||
|Less：Cash or cash equivalents held by the subsidiaries on acquisition settlement date|29,794,352.58||
|Including﹕ Secure Holding Limited and its subsidiaries|99,069.36||
|Hangzhou Hikvision Zhicheng Investment and Development Co,. Ltd.|29,695,283.22||
|Add：Payments of cash or cash equivalents for acquisition during the previous period|-||
|Net cash payments on acquisition of subsidiaries|172,473,788.49||

 51.3 Constituents of cash and cash equivalents
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|Cash|13,519,252,711.90||10,033,033,476.30||
|Including: Cash on hand|748,616.60||883,558.94||
|Bank deposit for payment at any time|13,510,692,456.95||10,028,344,131.69||
|Other monetary capital for payment at any time|7,811,638.35||3,805,785.67||
|Cash equivalents|||||
|Ending balance of cash and cash equivalents|13,519,252,711.90||10,033,033,476.30||

 Among the total of RMB 123,552,080.63 of the balance of other monetary fund(s) at the end of the period, RMB 115,740,442.28 are various guarantee deposits, not cash and cash equivalents.
52. Assets with restriction in ownership or use rights
Unit: RMB
||||
|-|-|-|
|Item|Amount|Cause of restriction|
|Cash and bank balances|115,740,442.28|Various guarantee deposits, Collateral for obtaining long-term borrowing|
|Notes receivable|421,356,552.77|Collateral of bank acceptance bill|
|Accounts receivable|95,128,752.51|Collateral for obtaining long-term borrowing|
|Total|632,225,747.56||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
53. Monetary items of foreign currencies
53.1 foreign currencies
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Item|||Balance in foreign currency at the|Exchange rate for conversion||Balance of RMB converted at|
||||end of period|||the end of period|
||Monetary funds||||||
||Including: USD|537,141,219.83||6.9370|3,726,148,641.96||
||EUR|60,338,825.08||7.3068|440,883,727.09||
||GBP|309,910.29||8.5094|2,637,150.62||
||JPY|408.00||0.0596|24.31||
||CHF|4,350.83||6.7989|29,580.86||
||Accounts receivable||||||
||Including: USD|236,808,660.76||6.9370|1,642,741,679.69||
||EUR|2,560,554.70||7.3068|18,709,461.08||
||Short-term borrowing||||||
||Including: GBP|2,500,000.00||8. 7370|21,842,592.45||
||Accounts Payable||||||
||Including: USD|123,741,576.65||6.9370|858,395,317.22||
||Bond Payable||||||
||Including: EUR|404,342,465.75||7.3068|2,954,449,528.77||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
V. Notes to items in the consolidated financial statements- continued
53． Monetary items of foreign currencies-continued
53.2 Details of Overseas Operational Entities
||||||
|-|-|-|-|-|
|Name of overseas subsidiaries||Main overseas|Recording Currency|Basis of selection|
|||operational office|||
|Hikvision USA,Inc.|USA||USD|Selection based on localeconomic environment|
|HDT International Ltd.|Hongkong||HKD|Selection based on localeconomic environment|
|Prama Hikvision Indian Private Limited|India||INR|Selection based on localeconomic environment|
|Hikvision Europe BV|Netherlands||EUR|Selection based on localeconomic environment|
|Hikvision FZE|Dubai||USD|Selection based on localeconomic environment|
|Hikvision Singapore Pte. Ltd|Singapore||SGD|Selection based on localeconomic environment|
|Hikvision South Africa (Pty) Ltd.|South Africa||ZAR|Selection based on localeconomic environment|
|Hikvision Italy (S.R.L.)|Italy||EUR|Selection based on localeconomic environment|
|Hikivision do Brasil Comercio de Equipamentos deSegurança Ltda.|Brazil||BRL|Selection based on localeconomic environment|
|Hikvision Australia PTY Ltd.|Australia||AUD|Selection based on localeconomic environment|
|Hikvision International Co., Limited|Hongkong||HKD|Selection based on localeconomic environment|
|Hikvision France SAS|France||EUR|Selection based on localeconomic environment|
|Hikvision Spain,S.L.|Spain||EUR|Selection based on localeconomic environment|
|ZAO Hikvision|Russia||RUB|Selection based on localeconomic environment|
|Hikvision Uk Limited|UK||GBP|Selection based on localeconomic environment|
|Hikvision Poland Spolka Z ograniczona Odpowiedzialnoscia.|Poland||PLN|Selection based on localeconomic environment|
|Cooperative Hikvision Europe U.A.|Netherlands||USD|Selection based on localeconomic environment|
|Hikvision Canada INC.|Canada||CAD|Selection based on localeconomic environment|
|Hikvision LLC|Russia||RUB|Selection based on localeconomic environment|
|Hikvision Korea Limited|Korea||KRW|Selection based on localeconomic environment|
|Ezviz Inc.|USA||USD|Selection based on localeconomic environment|
|Hikvision Kazakhstan limited liability partnership|Kazakhstan||KZT|Selection based on localeconomic environment|
|Secure Holdings limited|UK||GBP|Selection based on localeconomic environment|
|Pyronix Ltd|UK||GBP|Selection based on localeconomic environment|
|Microwave Solutions.Limited|UK||GBP|Selection based on localeconomic environment|
|Hikvision Turkey Technology And Security SystemsCommerce Corporation|Turkey||TRL|Selection based on localeconomic environment|
|Hikvision Colombia SAS|Columbia||COP|Selection based on localeconomic environment|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VI) Changes in consolidation scope
1. Business combinations not involving enterprises under common control
(1) Business combinations not involving enterprises under common control for the year
Hangzhou Hikvision Zhicheng Investment Development Co., Ltd(杭州海康智城投资发展有限公司)(“Hangzhou Zhicheng”)
On 20 January 2016, the Company entered into a PPP Project Investment Construction Contract on the Tonglu Wisdom Governance Information Platform(《桐庐智慧治理信息平台PPP项目投资建设合同》)with the TongLu Wisdom Governance Information Center, pursuant to which, the Company agreed to acquire80% of Hangzhou Zhicheng by a capital increase of RMB 24,000,000. This acquisition was completed on 26 January 2016.
Secure Holdings Limited (“SHL”)
On 19 May 2016, Cooperative Hikvision Europe U.A., one of the subsidiaries, entered into the Share Sales and Purchase Agreement Related to Secure Holdings Limited with two independent third parties, pursuant to which, it agreed to acquire the entire equity interests of SHL and its subsidiaries, Pyronix Ltd and Microwave Solutions Limited, at the consideration of£ 18,914,800 (equivalent to approximately RMB 178,268,141.07). This acquisition was completed on 31 May 2016.
Unit：RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||||||Net profit from date|
||||Equity|||Basis for|Income of acquiree||
|||||Equity||||of acquisition to the|
|Name of the|Time of equity|Equity acquisition|acquisition||Date of acquisition|determining|from date of||
|||||acquisition||||end of the year|
|acquiree|acquisition|cost|ratio|||date of|acquisition to the||
|||||mode||||(loss)|
||||(%)|||acquisition|end of the year||
|HangzhouZhicheng|January 2016|24,000,000.00|80|Payment incash|26 January 2016|Equity transferdate ofacquiring thecontrol of|-|(165,241.41)|
|SHL|May 2016|178,268,141.07|100|Payment incash|31 May 2016|Equaictyq utirraenes ferdate ofacquiring thecontrol of|160,382,908.22|7,192,967.25|

acquiree
(2) Cost of combination and goodwill
Unit：RMB
||||
|-|-|-|
|Cost of combination|Hangzhou Zhicheng|SHL|
|- Cash|24,000,000.00|178,268,141.07|
|Total cost of combination|24,000,000.00|178,268,141.07|
|less：fair value of identifiable net assets acquired|23,987,426.58|47,776,513.61|
|Goodwill|12,573.42|130,491,627.46|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VI) Changes in consolidation scope- Continued
1. Business combinations not involving enterprises under common control - Continued
(3)Acquiree’s identifiable assets and liabilities at the date of acquisition
Unit: RMB
||||||
|-|-|-|-|-|
||Hangzhou Zhicheng||SHL||
||Fair value at the date of|Carrying value at||Carrying value at|
||||Fair value at the||
||acquisition|the date of||the date of|
||||date of acquisition||
|||acquisition||acquisition|
|Assets：|||||
|Cash and bank balances|29,695,283.22|29,695,283.22|99,069.36|99,069.36|
|Accounts receivable|||48,599,229.99|48,599,229.99|
|Inventories|304,000.00|304,000.00|39,897,038.84|39,897,038.84|
|Prepayments|||2,735,883.80|2,735,883.80|
|Other receivables|||1,582,824.69|1,582,824.69|
|Fixed assets|||48,275,194.55|48,275,194.55|
|Liabilities：|||||
|Accounts payable|||33,212,325.66|33,212,325.66|
|Short-term borrowings|||29,166,419.88|29,166,419.88|
|Long-term borrowings|||19,353,939.08|19,353,939.08|
|Other payables|||11,680,043.00|11,680,043.00|
|Taxes payable|15,000.00|15,000.00|||
|Net assets|29,984,283.22|29,984,283.22|47,776,513.61|47,776,513.61|
|less：minority interests|5,996,856.64|5,996,856.64|-|-|
|Net assets acquired|23,987,426.58|23,987,426.58|47,776,513.61|47,776,513.61|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VI) Changes in consolidation scope- continued
2. Changes of consolidation scope due to other causes
The subsidiaries newly established and incorporated in the consolidation scope for the year are as follows:
||||||
|-|-|-|-|-|
||Time of||Amount of contribution|Ratio of|
|Company Name||Registered capital|||
||establishment||of the Company|contribution (%)|
|Hikvision Kazakhstan limited liability partnership(“哈萨克斯坦子公司”)|January 2016|KZT 250,000|KZT 250,000|100|
|Hangzhou Hikvision Investment Management Co., Ltd.(“Hangzhou Investment Management”)|March 2016|RMB 100,000|RMB 100,000|100|
|Hangzhou Hikvision Robtics Technology Co. Ltd. (“HangzhouRobotic Technology”) (Note 1)|April 2016|RMB 31.7283 million|RMB 19.037 million|60|
|Hikvision Colombia SAS(“哥伦比亚子公司”)|June 2016|USD 200,000|USD 200,000|100|
|Hikvision Turkey Technology And Security Systems CommerceCorporation(“土耳其子公司”)|July 2016|TRL 500,000|TRL 500,000|100|
|Tianjin Hikvision System Technology Co., Ltd.,.(天津海康威视系统技术有限公司)(“Tianjin System”)(Note 2)|July 2016|RMB 50 million|RMB 50 million|100|
|Hangzhou Hikvision Automotive Technology Co. Ltd. (杭州海康汽车技术有限公司) (“Hangzhou Automotive Technology”)(Note3)|July 2016|RMB 150 million|RMB 90 million|60|
|Hangzhou Hikvision Communication Technology Co., Ltd(杭州海康威视通讯技术有限公司) (“Hangzhou Communication”)|August 2016|RMB 10 million|RMB 7 million|70|
|Hangzhou Hikvision Weiying Sensor Technology Co. Ltd (杭州海康微影传感科技有限公司)(“Hangzhou Weiying Sensory”)|September 2016|RMB 100 million|RMB 60 million|60|
|Henan Hikvision Huaan Secure Electronics Co., Ltd. (河南海康华安保全电子有限公司)(“Henan Hik Hua’an”)(Note4)|October 2016|RMB 30 million|RMB 15.30 million|51|

Note：
(1) At the end of the year, the paid-up capital of Hangzhou Robot Technology was RMB 16,666,667.00, of which, RMB 10,000,000.00 was contributed by the Company who holds60% equity interests.
(2) At the end of the year, Tianjin System has not completed capital contribution yet, therefore its paid-up capital was nil.
(3) At the end of the year, the paid-up capital of Hangzhou Automotive Technology wasRMB120,000,000.00， of which, RMB 72,000,000.00 was contributed by the Company who holds60% equity interests. (4) At the end of the year, Henan HikHua’an has not completed capital contribution yet, therefore its paid-up capital was nil.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VII) Interest in other entities
1. Equity in subsidiaries
(1) Composition of corporate group
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Name|Location ofoperation|Place ofregistration|Nature of business||Shareholding|||||AcquisitionMethod|
||||||ratio (%)||||||
||||||Direc|t||Indirec|t||
|Hangzhou Hikvision System Technology Co.,Ltd.|Hangzhou|Hangzhou,Zhejiang|System integration,Technologydevelopment|100.00||||||Establishment|
|Hangzhou Hikvision System Technology Co.,Ltd.|Hangzhou|Hangzhou,Zhejiang|System integration,Technologydevelopment|100.00||||||Establishment|
|Hangzhou Hikvision Security EquipmentLeasing Services Ltd.|Hangzhou|Hangzhou,Zhejiang|Finance lease|100.00||||||Establishment|
|Chongqing Hikvision System TechnologyCo., Ltd.|Chongqing|Chongqing|System integration|100.00||||||Establishment|
|Hikvision USA, Inc.|USA|Los Angeles|Sales|100.00||||||Establishment|
|HDT International Ltd.|Hong Kong|Hong Kong|Sales|95.00|||5.00|||Establishment|
|Prama Hikvision Indian Private Limited|India|Mumbai|Sales|58.00||||||Businesscombination notunder commoncontrol|
|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 TechnologyCo., Ltd.|Chongqing|Chongqing|Manufacturing|100.00||||||Establishment|
|Beijing Hikvision Security Technology ServicesCo., Ltd.|Beijing|Beijing|Services|100.00||||||Establishment|
|Hangzhou Fuyang Hikvision Baotai SecurityTechnology Services Co., Ltd. (Note 1)|Hangzhou|Hangzhou,Zhejiang|Construction||||51.00|||Establishment|
|Hikvision South Africa (Pty) Ltd.|South Africa|South Africa|Sales|100.00||||||Establishment|
|Hikvision Italy (S.R.L.)|Italy|Milan|Sales||||100.00|||Establishment|
|Hikvision do Brasil Comercio de Equipamentosde Segurança Ltda.|Brazil|Brazil|Sales|95.00|||5.00|||Establishment|
|Hikvision Australia PTY Ltd.|Australia|Australia|Sales|100.00||||||Establishment|
|Hikvision International Co., Limited|Hong Kong|Hong Kong|Sales|100.00||||||Establishment|
|Hikvision France SAS|France|France|Sales||||100.00|||Establishment|
|Hikvision Spain,S.L.|Spain|Spain|Sales||||100.00|||Establishment|
|Shanghai Goldway Intelligent Traffic SystemCo., Ltd.|Shanghai|Shanghai|Manufacturing|100.00||||||Businesscombination notunder commoncontrol|
|ZAO Hikvision|Russia|St. Peterburg|Sales||||100.00|||Businesscombination notunder commoncontrol|
|Beijing Brainaire Storage Technology Co., Ltd.|Beijing|Beijing|Manufacturing|100.00||||||Businesscombination notunder commoncontrol|
|Wuhan Hikvision SystemTechnology Co., Ltd.|Wuhan|Wuhan, Hubei|Technologydevelopment|100.00||||||Businesscombination notunder commoncontrol|
|Henan Hua’an Intelligence|Zhengzhou|Zhengzhou|Construction|51.00||||||Business|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
||||||||
|-|-|-|-|-|-|-|
|Development Co., Ltd.||||||combination notunder commoncontrol|
|Henan Hua’an Security Services Co., Ltd. (Note2)|Zhengzhou|Zhengzhou|Services||90.00|Businesscombination notunder commoncontrol|
|Hundure Technology (Shanghai) Co., Ltd.|Shanghai|Shanghai|Manufacturing|100.00||Businesscombination notunder commoncontrol|
|Hikvision Uk Limited|UK|UK|Sales||100.00|Establishment|
|Hikvision Poland Spolka Z ograniczonaOdpowiedzialnoscia|Poland|Poland|Sales||100.00|Establishment|
|Hangzhou Hikvision Electronics Co., Ltd.（Note3）|Hangzhou|Hangzhou|Manufacturing|71.30||Establishment|
|Cooperative Hikvision Europe U.A.|Netherlands|Netherlands|Sales|99.00|1.00|Establishment|
|Hikvision Canada INC.|Canada|Canada|Sales|100.00||Establishment|
|Hikvision LLC|Moscow|Moscow|Sales|100.00||Establishment|
|Hikvision Korea Limited|Korea|Korea|Sales|100.00||Establishment|
|Hangzhou EZVIZ Network Co., Ltd.|Hangzhou|Hangzhou|Technologydevelopment|60.00||Establishment|
|Ezviz Inc.|USD|Los Angeles|Sales||100.00|Establishment|
|Hangzhou Hikvision Zhicheng InvestmentDevelopment Co., Ltd|Hangzhou|Hangzhou|System integration|80.00||Businesscombination notunder commoncontrol|
|Hangzhou Hikvision Robtics Technology Co.Ltd.|Hangzhou|Hangzhou|Technologydevelopment|60.00||Establishment|
|Hangzhou Hikvision Investment ManagementCo., Ltd.|Hangzhou|Hangzhou|InvestmentManagement|100.00||Establishment|
|Hangzhou Hik Automotive Technology Co.,Ltd.|Hangzhou|Hangzhou|Technologydevelopment|60.00||Establishment|
|Hangzhou Hikvision CommunicationTechnology Co., Ltd.|Hangzhou|Hangzhou|Technologydevelopment|70.00||Establishment|
|Hangzhou Hikvision Weiying SensoryTechnology Co., Ltd.|Hangzhou|Hangzhou|Technologydevelopment|60.00||Establishment|
|Hikvision Turkey Technology And SecuritySystems Commerce Corporation|Turkey|Istanbul|Sales|100.00||Establishment|
|Hikvision Colombia SAS|Columbia|Santa FeBogota|Sales|100.00||Establishment|
|Hikvision Kazakhstan limited liabilitypartnership|Kazakhstan|Astana|Sales|100.00||Establishment|
|Secure Holding Limited|British|Sheffield|Manufacturing||100.00|Businesscombination notunder commoncontrol|
|Pyronix Limited|British|Sheffield|Manufacturing||100.00|Businesscombination notunder commoncontrol|
|Microwave Solutions Limited|British|Sheffield|Manufacturing||100.00|Businesscombination notunder commoncontrol|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VII) Interest in other entities - continued
1、 Equity in subsidiaries - continued
Note 1: Hangzhou Fuyang Hikvision Baotai Security Technology Services Co., Ltd. is a subsidiary controlled by Hangzhou Hikvision System Co., Ltd who holds51% equity interests. According to the Articles of Association, the dividend payout ratio of Hangzhou Hikvision Systems Co., Ltd. was50% in the said company.
Note 2: HenanHua’an Security Services Co., Ltd. is a subsidiary controlled by HenanHua’an Intelligence Development Co., Ltd.
Note 3: The remaining29.70% equity interests of Hangzhou Hikvision Electronics Co., Ltd.is held by China Development Bank Fund. Please refer to Note (V), 29 for details.
2. Changes in share ofshareholders’ equity of the subsidiary and still control over the subsidiary
(1) Changes in share ofshareholders’ equity of the subsidiary
On 26 July 2016, the Company passed the Resolution on Increasing Capital Contribution to and the Connected Transactions with Hangzhou EZVIZ Network Co., Ltd. and Hangzhou Hikvision Robotic Technology Co., Ltd. at the 14th meeting of the third session of the Board of Directors held by the Company, pursuant to which, the Company and Hangzhou Hikvision Equity Investment Partnership (limited partnership) (“Hangzhou Equity Investment”) jointly increased capital contribution to Hangzhou EZVIZ Network Co., Ltd. (“Hangzhou EZVIZ”) and Hangzhou Hikvision Robotic Technology Co., Ltd. (“Hangzhou Robotic Technology”), two wholly-owned subsidiaries of the Company. Following the completion of the capital increase, the registered capital of Hangzhou EZVIZ and Hanzhou Robotic Technology amounted to RMB 2.06 million and RMB 31.73 million, respectively, and the Company and Hangzhou Equity Investment held60% and40% in the abovementioned companies, respectively. The above transaction was completed on August 2016.
(2) Impact on equity interest of minority shareholders and attributable to the owner's equity
Unit：RMB
||||
|-|-|-|
||Hangzhou EZVIZ|Hangzhou Robotic Technology|
|Purchase of cost consideration - cash|-|-|
|Less：Net assets proportion of subsidiary calculated by equity|79,570,259.77|18,198,278.19|
|proportion acquired|||
|Balance|79,570,259.77|18,198,278.19|
|Including: Capital reserves adjusted|79,570,259.77|18,198,278.19|

 3. Equity in joint ventures or associates
(1) Aggregated financial information of insignificant joint ventures or associates
Unit：RMB
||||
|-|-|-|
||Closing balance / amount for|Opening balance / amount for|
||the current period|the prior period|
|Associates：|||
|The aggregate carrying amount of investments in associates|35,000,000.00|-|
|The aggregate amount of its share percentage of the associates|||
|--Total net profit and comprehensive income|-|-|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VIII) Risks associated with financial instrument
The Group's principal financial instruments include cash and bank balances, equity investments, notes receivable, accounts receivable, other receivables, long-term receivables, borrowings, accounts payable, interest payable, other payables, other current assets, note payables, dividends payable, 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 analyse 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 theGroup’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 theGroup’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. TheGroup’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. TheGroup’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 and RUB. As at 31 December 2016, 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 translated into RMB) as follows may affect the operating results of the Group.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Currencies||Assets||||Liabilities|||
|||Closing balance||Opening balance||Closing balance||Opening balance|
|USD|5,368,890,321.65||2,965,032,142.69||858,395,317.22||3,329,034,880.88||
|EUR|459,593,188.17||103,749,600.32||2,954,449,528.77||58,524,378.39||

 The Company 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 andshareholders’ equity for the current period:
Unit: RMB
||||||
|-|-|-|-|-|
||This year||Prior year||
|Change in interest rates|||||
||Effect on profit|Effect on shareholders’ equity|Effect on profit|Effect on shareholders’ equity|
|5% appreciation of USD against functional currency|225,524,750.22|225,524,750.22|(18,200,136.91)|(18,200,136.91)|
|5% depreciation of USD against functional currency|(225,524,750.22)|(225,524,750.22)|18,200,136.91|18,200,136.91|
|5% appreciation of EUR against functional currency|(1 24,742,817.03)|(124,742,817.03)|2,261,261.10|2,261,261.10|
|5% depreciation of EUR against functional currency|124,742,817.03|124,742,817.03|(2,261,261.10)|(2,261,261.10)|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VIII) Risks associated with financial instrument - continued
1. Objectives and policies of risk management-continued
1.1 Market risks– continued
1.1.2. Interest raterisk－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.
Sensitivity analysis on interest rate risk
The sensitivity analysis on interest rate risk is carried out based on following assumptions:
 Changes in market interest rate have influence on the interest revenue or cost of financial instruments with variable rate;
 For the financial instruments with fixed rate and measured with fair value, changes in market interest rate only have influence on their interest revenue or cost;
Based on the above assumptions, with other variables unchanged, the interest rate might float within a reasonable range, and has the following before tax effect on profit or loss andshareholders’ equity for the current period:
Unit：RMB
||||||
|-|-|-|-|-|
||This year||Prior year||
|Change in interest rates|||||
||Effect on profit|Effect on shareholders’|Effect on profit|Effect on profit|
|Increase by 50 basis points of the borrowing rates|(8,772,494.55)|equity(8,772,494.55)|(7,761,772.04)|(7,761,772.04)|
|Decrease by 50 basis points of the borrowing|8,772,494.55|8,772,494.55|7,761,772.04|7,761,772.04|

1.2 Credit risk
As at 31 December 2016, the biggest credit risk exposure that may cause financial loss suffered by the Group was mainly due to the otherparty’s inability to fulfill obligations that caused the loss on theGroup’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 theGroup’s exposure to credit risk has been significantly lowered.
The Group only deposit 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 theGroup’s risk exposure exists in several parties to the contract and certain customers, the Group has no
other significant concentration of credit risk.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(VIII) Risks associated with financial instrument - continued
1. Objectives and policies of risk management-continued
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
||||||||
|-|-|-|-|-|-|-|
|31 December 2016|||||||
||Within one year|1-5 years||More than five||Total|
|||||years|||
|Non-derivative financial|||||||
|liabilities|||||||
|Short-term borrowings|32,766,082.38|-|-||32,766,082.38||
|Notes payables|876,804,536.72|-|-||876,804,536.72||
|Accounts payables|7,008,335,023.47|-|-||7,008,335,023.47||
|Other payables|1,033,169,123.84|-|-||1,033,169,123.84||
|Other current liabilities|300,177,750.17|-|-||300,177,750.17||
|Bonds payable|36,534,000.00|2,995,788,000.00|-||3,032,322,000.00||
|Dividends payable|20,105,831.16|-|-||20,105,831.16||
|Long-term borrowings|61,262,121.69|1,584,004,441.99|182,040,000.00||1,827,306,563.68||
|Long-term payables|-|7,466,200.00|-||7,466,200.00||
|Derivative financial liabilities|||||||
|Forward foreign exchange|||||||
|contracts- settled in the gross|||||||
|- Cash inflow|524,641,699.49|1,644,330,386.16|-||2,168,972,085.65||
|- Cash outflow|538,124,140.45|1,704,998,092.28|-||2,243,122,232.73||
|- Net cash outflow|13,482,440.96|60,667,706.12|-||74,150,147.08||

 (IX) Fair value disclosure
1. The financial assets and financial liabilities measured at fair value at the balance sheet date:Unit：RMB
||||||
|-|-|-|-|-|
||Closing fair value||||
|Items||||Total|
||Level 1|Level 2|Level 3||
|I. Continuous fair value measurement|-|(54,241,965.63)|-|(54,241,965.63)|
|(I) Financial assets designated as fair value through profit and|||||
|loss|||||
|1. Financial assets available for sale|-|15,547,537.34|-|15,547,537.34|
|-- Derivative financial assets|-|15,547,537.34|-|15,547,537.34|
|Total assets measured continuously at fair value|-|15,547,537.34|-|15,547,537.34|
|(II) Financial liabilities available for sale||69,789,502.97||69,789,502.97|
|Derivative financial liabilities|-|69,789,502.97|-|69,789,502.97|
|Total liabilities measured continuously at fair value|-|69,789,502.97|-|69,789,502.97|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(IX) Fair value disclosure -continued
2. Information on the estimation technique and important parameters adopted as for continuous Level 2 fair value measurement items
||||||
|-|-|-|-|-|
|||Fair value at 31|Estimation technique|Inputs|
|||December 2016|||
|Forward ForeignExchange Contracts(Assets)|14,956,812.38||Discounted cash flowapproach|Forward exchange ratediscounted rate that reflects the credit risk ofcounterparties|
|Interest rate swapcontracts (Assets)|590,724.96||Discounted cash flowapproach|Forward exchange ratediscounted rate that reflects the credit risk ofcounterparties|
|Forward ForeignExchange Contracts(Liabilities)|(4,152,936.67)||Discounted cash flowapproach|Forward exchange ratediscounted rate that reflects the credit risk ofcounterparties|
|Foreign exchangestructural options(Liabilities)|(65,636,566.30)||Discounted cash flowapproach|Forward exchange ratediscounted rate that reflects the credit risk ofcounterparties|

3. Items measured at continuous fair value. There were no transfers between levels for the year. There was no estimation technique change for the year.
4. Fair values of financial assets and financial liabilities that not measured at fair value
Our 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 small.
(X) Related parties and related transactions
1. Information on parent company of the Company
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Place ofregistration|Nature ofbusiness||Registered capital|Shareholding ratio ofparent company in theCompany (%)||Percentage of voting|
||||||||rights of parent|
||||||||company to the|
||||||||Company (%)|
|China Electronics TechnologyHIK Group Co., Ltd. (CETHIK)|Hangzhou,Zhejiang||Investment|RMB 660 million|39.91|39.91||
||||and asset|||||
||||management|||||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(X) Related parties and related transactions–continued
4. Information on other related parties
|||||
|-|-|-|-|
||Name||Relationship|
|Gong Hongjia||Director of the company, holds 16.30% of theshare of the Company||
|Shanghai Fullhan Microelectronics Co., Ltd. (“Shanghai Fullhan”)||Gong Hongjia or his relative(s) serve(s) as thedirector(s)||
|Beijing Woqi Co., Ltd.(“Beijing Woqi”)||Gong Hongjia or his relative(s) serve(s) as thedirector(s)||
|The 52nd Research Institute at China Electronics Technology GroupCorporation (“The 52nd Institute”)||Under common control of the ultimatecontrolling party of the Company||
|Subsidiaries of CETE||Under common control of the ultimatecontrolling party of the Company||

5. Related party transactions
(1) 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 the currentyear||
|||||Amount for the prior year|
|Subsidiaries of CETE||Purchase of materials andreceiving of services|254,200,197.75|234,499,687.16|
|Shanghai Fullhan||Purchase of materials andreceiving of services|125,473,819.16|58,420,461.61|
|Beijing Woqi||Purchase of materials|3,910,029.08|510,256.42|
||Total||383,584,045.99|293,430,405.19|

 Sales of commodities/rendering of services:
Unit: RMB
||||||
|-|-|-|-|-|
|Related party||Transaction content|Amount for the currentyear||
|||||Amount for the prior year|
|Subsidiaries of CETE||Sales of products|383,212,609.06|87,703,472.80|
||Total||383,212,609.06|87,703,472.80|

 The above transactions are executed at market prices.
(2) Guaranteed by the related party
The CETE (as guarantor) and the wholly-owned subsidiary of the Company, Chongqing Hikvision System Technology Co., Ltd.(“Chongqing System”) (as contractor) entered into a principal contractor agreement (the “Chongqing Framework Agreement”) with Chongqing Municipal Public Security Bureau in respect of the projects carried out in that location (the “Chongqing Project”). Pursuant to the Chongqing Framework Agreement, the CETE provided joint liability guarantee for the total responsibilities and obligations of the contractor under the Chongqing Principal Contractor Agreement. The Company, therefore, provided counter-guarantee to CETE for the before mentioned guarantee.
(3) Remuneration of key management personnel
Unit: RMB
|||||
|-|-|-|-|
|Item|Amount for the currentyear||Amount for the prior|
||||year|
|Compensation of key management personnel|39,400,274.73|31,822,802.42||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(X) Related parties and related transactions–continued
(4) Other related party transactions
In the current period, the Company made a capital contribution of RMB 227.79 million to CETC Finance Co., Ltd. (“Finance Co.”), therefore, the Company held the increased registered capital of Finance Co. of RMB 153.2 million. Upon completion of the Capital Increase, the shareholding of the Company in Finance Co. is3.83%. For details, please see Note (V) 9.
6. Amounts due from& to related parties
(1) Amounts due from related parties
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item||Related Party||Closing balance|||Opening balance||
||||Carrying balance||||Carrying||
||||||Bad debt provision|||Bad debt provision|
||||||||balance||
|Accountsreceivable||Subsidiaries of CETE|417,423,058.74||21,711,986.75|74,575,642.07||4,162,116.30|
||Total||417,423,058.74||21,711,986.75|74,575,642.07||4,162,116.30|

 (2) Amounts due to related parties
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Item||Related Party||Closing balance||Opening balance|
|Accounts payable||Subsidiaries of CETE||144,521,684.68||47,605,386.38||
|Accounts payable||Shanghai Fullhan||40,115,748.45||41,807,051.41||
|Accounts payable||Beijing Woqi||888,807.70||515,564.11||
||Total|||185,526,240.83||89,928,001.90||
|Receipts in advance||Subsidiaries of CETE||22,293,294.23||280,421.80||
||Total|||22,293,294.23||280,421.80||
|Other payables||Subsidiaries of CETE||13,328,829.07||11,185,580.98||
||Total|||13,328,829.07||11,185,580.98||

 (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.(關於杭州海康威視數位技術股份有限公司實施限制性股票激勵計劃的批復)” (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. (關於杭州海康威視數位技術股份有限公司限制性股票激勵計劃的意見)” (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 theCompany’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 theCompany’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 Participants 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 Participants under the Scheme. However, all the provisions of the Scheme remain valid to
the restricted shares granted under the Scheme.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
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 exceed10% 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 exceed1% 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 than50% of the following price, whichever is the highest: (I) The closing price of the subject shares of the Company for the 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.
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 Participants their 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 Participants 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 23 August 2012, after consideration and approval by the general meeting, the Company granted 8,611,611 restricted shares to Participants 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 Participants 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 Participants 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.
On 24 October 2014, after consideration and approval by the general meeting, the Company granted 52,910,082 restricted shares to Participants 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 Participants 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 Participants 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 be40% 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 be30% 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 be30% of the aggregate number of the Subject Shares granted.
On 23 December 2016, after consideration and approval by the general meeting, the Company granted 52,326,858 restricted shares to Participants 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 Participants 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 Participants 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 be40% of the
aggregate number of the Subject Shares granted; the second unlocking period shall be the 36 to 48 months
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
following the grant date and the number of shares to be unlocked shall be30% 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 be30% of the aggregate number of the Subject Shares granted. The registration of restricted shares under 2016 Share Incentive Scheme was completed on 20 January 2017. Unit: share
||||
|-|-|-|
|2012 Share Incentive Scheme|Current year|Prior year|
|Total of equity instruments outstanding at the beginning of the year|5,381,472|10,973,713|
|Total of equity instruments granted in the year|2,690,736|-|
|Total of equity instruments vested in the year|7,620,714|5,236,468|
|Total of equity instruments forfeited in the year|451,494|355,773|
|Total of equity instruments outstanding at the end of the year|-|5,381,472|
|The exercise price and the remaining period of the contract of the|N/A|RMB 5.33 per share and20 months|
|outstanding Share-based payments of the Company (ex-rights) issued at the|||
|end of the year|||

Unit: share
||||
|-|-|-|
|2014 Share Incentive Scheme|Current year|Prior year|
|Total of equity instruments outstanding at the beginning of the year|52,910,082|52,910,082|
|Total of equity instruments granted in the year|26,455,041|-|
|Total of equity instruments exercised in the year|30,687,650|-|
|Total of equity instruments forfeited in the year|2,457,000|-|
|Total of equity instruments outstanding at the end of the year|46,220,473|52,910,082|
|The exercise price and the remaining period of the contract of the|RMB 6.17 per share and34 months|RMB 9.25 per share and46 months|
|outstanding Share-based payments of the Company (ex-rights) issued at the|||
|end of the year|||

Unit: share
||||
|-|-|-|
|2016 Share Incentive Scheme|本年|上年|
|Total of equity instruments outstanding at the beginning of the year|-|-|
|Total of equity instruments granted in the year|52,326,858|-|
|Total of equity instruments exercised in the year|-|-|
|Total of equity instruments forfeited in the year|-|-|
|Total of equity instruments outstanding at the end of the year|52,326,858|-|
|The exercise price and the remaining period of the contract of the|RMB 12.63 per shareand 60 months|N/A|
|outstanding Share-based payments of the Company (ex-rights) issued at|||
|the end of the year|||

2. Information of the equity settled share-based payment
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||2012 Share Incentive Scheme|2014 Share Incentive Scheme|2016 Share Incentive Scheme|
||Method of determing the fair|Determined based on stock price atthe grant date and the costs ofrestricted shares during Lock-upPeriod||Determined based on stock price at thegrant date and the costs of restrictedshares during Lock-up Period|Determined based on stock price at thegrant date and the costs of restrictedshares during Lock-up Period|
||value of equity instruments at the|||||
||grant date|||||
||Recognition basis of the number|Determined based on the resultsestimation of each release period||Determined based on the resultsestimation of each release period|Determined based on the resultsestimation of each release period|
||of the vested equity instruments|||||
|t|Reasons of the significant|N/A||N/A|N/A|
||difference between the estimates|||||
||of the current year with that of|||||
||he prior year|||||
||Accumulative amount of the|142,306,946.24||290,321,524.41|-|
||equity settled share-based|||||
||payment and included in the|||||
||capital reserve|||||
|r|Total amount of the expenses|4,071,205.43||118,899,218.40|-|
||ecognized according to the|||||
||equity settled share-based|||||
||payment in the current year|||||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
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 recognised in financial statements|||||
|- Commitment on acquisition and construction of long-term assets|490,098||630,128||
|Total|490,098||630,128||

 (2) Operating lease commitments
At the balance sheet date, the Group had the following 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 from the balance sheet date|61,829||39,789||
|Second year from the balance sheet date|40,469||22,041||
|Third year from the balance sheet date|23,452||11,523||
|Subsequent years|42,010||23,536||
|Total|167,760||96,889||

 (3) As of 31 December 2016, the Group has no other commitments to be disclosed.
2. Contingencies
The Group has no important 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. Profits distribution
Pursuant to the proposal of
22nd
meeting of the
3rd
session Board of Directors of the Company dated April 12th, 2017, all shareholders will receive a cash dividend of RMB 6 (tax inclusive) per each 10 shares; and the Company proposed to bonus issue of 5 shares (tax inclusive) for each 10 ordinary shares; The profit distribution plan is yet to be approved by the general meeting of shareholders.
(XIV) Other significant events
1. Management Measures for CoreStaff’s Co-Investment in Innovative Business
According to Management Measures for CoreStaff’s Investment in Innovative Business (Draft) approved by
The fifth meeting of the third board and the second provisional shareholders' meeting in 2015, core employees
can invest at the innovation business of Company via Hangzhou Hikvision Equity Investment Partnership
(Limited Partnership). The Group will assess the fair values of the investee companies before employees make
investments at the fair values. Hangzhou Hikvision Equity Investment Partnership (Limited Partnership) was
established in the year,99.9983% of which is hold by core employees. Hangzhou Hikvision Equity Investment
Partnership (Limited Partnership) holds40% of its subsidiaries Hangzhou EZVIZ, Hangzhou Robotic
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Technology Co., Ltd., Hangzhou Hikvision Automotive Technology Co., Ltd., and Hangzhou Hikvision Weiying Sensory Technology Co., Ltd., respectively.
2. Segment information
2.1 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 i.e. the development, production and sales of security products.
2.2 Segment reporting
External revenue by product or business
Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|||Amount for the current year|||
||||Operating income|Operating cost|Operating cost|
||Front-end equipment|15,881,528,158.70||8,186,413,345.14||
||Back-end equipment|5,197,388,761.80||2,705,461,109.51||
||Central control equipment|3,988,683,952.14||2,069,135,295.77||
||Construction project(s)|1,451,424,275.00||1,328,601,510.98||
||Innovative business|647,651,465.10||394,446,839.95||
||Others|4,365,947,709.16||3,725,704,716.05||
||Total|31,532,624,321.90||18,409,762,817.40||

 Unit: RMB
|||||||
|-|-|-|-|-|-|
|Item|||Amount for the prior year|||
||||Operating income|Operating cost|Operating cost|
||Front-end equipment|13,317,160,183.14||7,021,910,915.24||
||Back-end equipment|4,355,419,527.94||2,362,654,134.89||
||Central control equipment|2,355,593,484.09||1,230,092,234.52||
||Construction project(s)|1,690,863,504.02||1,588,821,153.01||
||Innovative business|221,928,671.32||167,322,253.16||
||Others|2,963,940,987.21||2,552,883,680.39||
||Total|24,904,906,357.72||14,923,684,371.21||

 External revenue by geographical area of source and non-current assets by geographical location
Unit: RMB
||||||
|-|-|-|-|-|
|Item||Amount for the current year||Amount for the prior year|
|External revenue generated in PRC|22,563,636,220.37||18,614,982,772.42||
|External revenue generated in foreign countries|9,360,384,652.07||6,656,407,501.00||
|Total|31,924,020,872.44||25,271,390,273.42||

 Unit: RMB
||||||
|-|-|-|-|-|
|Item (Note)||Closing balance||Opening balance|
|External revenue generated in PRC|3,524,816,425.20||3,119,825,230.34||
|External revenue generated in foreign countries|345,030,264.81||91,107,491.90||
|Total|3,869,846,690.01||3,210,932,722.24||

 Note: the non-current assets above exclude available-for-sale financial assets, long-term receivables, long-term equity investment and deferred tax assets.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company
1. Accounts receivable
(1) Accounts receivable disclosed by categories:
Unit: RMB
|||||||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Category|||Closing balance||||||||||Opening balance|||||||||
||||Carrying balance||||Bad debt provision|||Carrying value|||Carrying balance||||Bad debt provision|||Carrying value||
|||Amount|||Percentage|Amount|||Percentage|||Amount|||Percentage|Amount|||Percentage|||
||||||(%)||||(%)||||||(%)||||(%)|||
||Accounts receivable that are individually significant and|-||-||-||-||-||-||-||-||-||-||
||for which bad debt provision has been assessed|||||||||||||||||||||
||individually|||||||||||||||||||||
||Accounts receivable with provision accrued collectively|10,908,625,274.90||100||779,871,754.48||7.15||10,128,753,520.42||9,788,537,454.70||100.00||667,995,850.66||6.82||9,120,541,604.04||
||on a portfolio basis|||||||||||||||||||||
||Accounts receivable that are not individually significant|-||-||-||-||-||-||-||-||-||-||
||but for which bad debt provision has been assessed|||||||||||||||||||||
||individually|||||||||||||||||||||
||Total||10,908,625,274.90||100||779,871,754.48||7.15||10,128,753,520.42||9,788,537,454.70||100.00||667,995,850.66||6.82||9,120,541,604.04|

 The Group recognizes accounts receivable of over RMB 4 million (representing over10% of balance in total) as accounts receivables that are individually significant.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
1. Accounts receivable -continued
(1) Accounts receivable disclosed by categories: -continued
Accounts receivable with bad debt provision provided by aging analysis on portfolio basis:
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Aging|||Closing balance|||||
||||Amount||Bad debt provision||Percentage (%)|
||Within 1 year|10,139,343,508.72||506,967,175.44||5.00||
||1–2 years|302,585,218.30||30,258,521.83||10.00||
||2–3 years|147,228,938.41||44,168,681.52||30.00||
||3–4 years|196,861,164.57||98,430,582.28||50.00||
||4–5 years|112,798,257.48||90,238,605.99||80.00||
||Over 5 years|9,808,187.42||9,808,187.42||100.00||
||Total|10,908,625,274.90||779,871,754.48||7.15||

 (2) Bad debt provision provided, recovered or reversed during the year
The amount of bad debt provision provided by the Company in the current year was RMB 125,127,719.89, and there was no recovered or reversed bad debt provision.
(3) Accounts receivable actually written off in this year
TheCompany’s accounts receivable actually written off in this year was RMB 13,251,816.07.
(4) The five largest accounts receivable assembled by debtors
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Company name||Relationship withthe Company|Carrying balance|Ending balance of baddebt provision||Proportion of ending|
|||||||balance of accounts|
|||||||receivables in total (%)|
|Subsidiary A||Subsidiary|8,183,835,087.36|409,191,754.37|75.02||
|Subsidiary B||Subsidiary|199,792,635.48|96,999,530.67|1.83||
|Company D||Third party|68,263,870.00|9,010,073.50|0.63||
|Company I||Third party|54,237,512.53|10,004,272.85|0.50||
|Company J||T h i rd party|52,098,683.71|36,336,484.77|0.48||
||Total||8,558,227,789.08|561,542,116.16|78.46||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
2. Other receivables
(1) Other receivables disclosed by category
Unit：RMB
|||||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Category|||Closing balance|||||||||Opening balance||||||||
||||Carrying amount||||Bad debt provision|||Carrying value||Carrying amount||||Bad debt provision|||Carrying value|
|||Amount|||Percentage|Amount|||Percentage||Amount|||Percentage|Amount|||Percentage||
||||||(%)||||(%)|||||(%)||||(%)||
||Other receivables that are|-||-||-||-||-|-||-||-||||-|
||individually significant and for|||||||||||||||||||
||which bad debt provision has been|||||||||||||||||||
||assessed individually|||||||||||||||||||
||Other receivables with provision|449,863,926.01||100||31,900,680.55||7.09||417,963,245.46|384,713,774.78||100.00||39,768,818.24||10.34||344,944,956.54|
||accrued collectively on a portfolio|||||||||||||||||||
||basis|||||||||||||||||||
||Other receivables that are not|-||-||-||-||-|-||-||-||-||-|
||individually significant but for|||||||||||||||||||
||which bad debt provision has been|||||||||||||||||||
||assessed individually|||||||||||||||||||
|Total||449,863,926.01||100||31,900,680.55||7.09||417,963,245.46|384,713,774.78||100.00||39,768,818.24||10.34||344,944,956.54|

 The Group determined that a single other receivable in an amount of RMB 4 million or more and representing more than10% of the total amount was considered individually significant.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
2. Other receivables - continued
(1) Other receivables disclosed by category - continued
Other receivables with bad debt provision provided by aging analysis on portfolio basis:
Unit：RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Aging|||Closing balance||||||
||||Carrying amount||Bad debt provision||Percentage of appropriation (%|)|
||Within 1 year|361,848,764.55||18,092,438.23||5.00|||
||1–2 years|64,282,406.25||6,428,240.63||10.00|||
||2–3 years|22,431,879.52||6,729,563.86||30.00|||
||3–4 years|1,300,875.69||650,437.83||50.00|||
||4–5 years|-||-||80.00|||
||Over 5 years|-||-||100.00|||
||Total|449,863,926.01||31,900,680.55||7.09|||

 (2) The provision, recovery and reversal of bad debt allowance for the year
No provision or recovery of bad debt allowance was recorded for the year. The reversal of bad debt allowance for the year amounted to RMB 7,868,137.69.
(3) The write-off of other receivables for the year
No write-off of other receivables was recorded for the year.
(4) Other receivables by nature
Unit：RMB
|||||||
|-|-|-|-|-|-|
||Nature||Closing balance||Opening balance|
|Guarantee deposit||31,242,843.36||22,791,711.87||
|Other lending||149,296,781.06||160,656,207.98||
|Temporary receivables||232,789,859.54||184,614,836.14||
|Investment deposit||35,000,000.00||-||
|Others||1,534,442.05||16,651,018.79||
||Total|449,863,926.01||384,713,774.78||

 (5) Top 5 debtors of other receivables in terms of closing balance
Unit：RMB
|||||||||
|-|-|-|-|-|-|-|-|
|The name of entity||Nature|Closing balance|Aging||Percentage to total other||
||||||||Bad debt provision|
|||||||receivables (%)||
|Subsidiary C||Other lending|119,088,800.98|Within 1 year|26.47||5,954,440.05|
|Company E||Investment deposit|35,000,000.00|Within 1 year|7.78||1,750,000.00|
|Company G||Temporaryreceivables|7,945,422.84|Within 2 years|1.77||505,765.95|
|Subsidiary B||Other lending|7,551,407.03|Within 1 year|1.68||377,570.35|
|Company K||Temporaryreceivables|6,663,076.00|Within 1 year|1.48||333,153.80|
||Total||176,248,706.85||39.18||8,920,930.15|

 (6) At the end of the year, the Group has no other receivables derecognized due to the transfer of financial assets. (7) At the end of the year, the Group has no assets or liabilities formed by continuing involvement in derecognised other receivables.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
3. Long-term equity investment
Details of long-term equity investment:
Unit：RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name of investee|Accountingmethod|Opening balance|Change for the year|||Closing balance|Provision forimpairmentlosses|Provision forimpairmentlosses for theyear|
||||Additionalinvestment||Increase due to||||
||||||the grant of||||
||||||share options||||
|Hikvision SystemTechnology Co. Ltd.|Costmethod|206,316,540.02|-|27,062,129.29||233,378,669.31|-|-|
|Hangzhou HikvisionScience andTechnologiesCo. Ltd.|Costmethod|104,939,871.48|-|3,490,687.36||108,430,558.84|-|-|
|Hangzhou HikvisionSecurity EquipmentLeasing Services Ltd.|Costmethod|200,000,000.00|-|-||200,000,000.00|-|-|
|Chongqing HikvisionSystem TechnologyCo., Ltd.|Costmethod|200,000,000.00|-|-||200,000,000.00|-|-|
|Hikvision USA,Inc.|Costmethod|1,546,160.00|-|-||1,546,160.00|-|-|
|HDT InternationalLtd.|Costmethod|87,786.14|-|-||87,786.14|-|-|
|Prama HikvisionIndian Private Limited|Costmethod|1,585,696.80|-|-||1,585,696.80|-|-|
|Hikvision Dubai FZE|Costmethod|1,870,351.40|-|-||1,870,351.40|-|-|
|Hikvision SingaporePte. Ltd|Costmethod|1,900,590.00|-|-||1,900,590.00|-|-|
|Chongqing HikvisionScience andTechnologies Co.,Ltd.|Costmethod|100,000,000.00|-|-||100,000,000.00|-|-|
|Beijing HikvisionSecurity TechnologyServices Co., Ltd.|Costmethod|10,000,000.00|-|-||10,000,000.00|-|-|
|Shanghai GoldwayIntelligent TrafficSystem Co., Ltd.|Costmethod|23,000,000.00|-|-||23,000,000.00|-|-|
|Beijing BrainaireStorage TechnologyCo., Ltd.|Costmethod|96,482,439.85|-|-||96,482,439.85|-|-|
|Hikvision SouthAfrica (Pty) Ltd.|Costmethod|1,578,650.00|-|-||1,578,650.00|-|-|
|Wuhan HikvisionSystem TechnologiesCo., Ltd.|Costmethod|10,000,000.00|-|-||10,000,000.00|-|-|
|Henan Hua’anIntelligenceDevelopment Co.,Ltd.|Costmethod|67,475,000.00|-|-||67,475,000.00|-|-|
|Hikvision do BrasilComercio deEquipamentos deSegurança Ltda.|Costmethod|4,579,750.50|-|-||4,579,750.50|-|-|
|Hikvision AustraliaPTY Ltd.|Costmethod|2,866,850.00|-|-||2,866,850.00|-|-|
|HikvisionInternational Co.,Limited|Costmethod|79,423.52|-|-||79,423.52|-|-|
|Hundure Technology(Shanghai) Co., Ltd.|Costmethod|37,247,790.28|-|-||37,247,790.28|-|-|
|Hangzhou HikvisionElectronics Co. Ltd.|Costmethod|100,000,000.00|297,745,645.00|-||397,745,645.00|-|-|
|Cooperative HikvisionEurope U.A.|Costmethod|65,485.53|-|-||65,485.53|-|-|
|Hikvision Canada inc.|Costmethod|994,442.54|-|-||994,442.54|||
|ООО Hikvision.|Costmethod|647,249.19|-|-||647,249.19|-|-|
|HIKVISION KoreaLimited|Costmethod|1,535,850.00|-|-||1,535,850.00|-|-|
|Hangzhou EZVIZNetwork Co., Ltd.|Costmethod|1,000,000.00|-|-||1,000,000.00|-|-|
|Hangzhou Hikvision|Cost|-|24,000,000.00|-||24,000,000.00|-|-|

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Zhicheng Investment method
and Development Co.,
Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Hangzhou Hikvisionrobotic TechnologyCo., Ltd.||Costmethod|-|10,000,000.00|-|10,000,000.00|-|-|
|Hangzhou HikvisionInvestmentManagement Co., Ltd.||Costmethod|-|100,000.00|-|100,000.00|-|-|
|Hangzhou HikAutomotiveTechnology Co., Ltd.||Costmethod|-|72,000,000.00|-|72,000,000.00|-|-|
|Hangzhou HikvisionCommunicationTechnology Co. Ltd.||Costmethod|-|7,000,000.00|-|7,000,000.00|-|-|
|Hangzhou HikvisionWeiying SensoryTechnology Co., Ltd.||Costmethod|-|60,000,000.00|-|60,000,000.00|-|-|
|Hikvision TurkeyTechnology AndSecurity SystemsCommerceCorporation||Costmethod|-|1,148,115.83|-|1,148,115.83|-|-|
|Hikvision ColombiaSAS||Costmethod|-|1,337,440.00|-|1,337,440.00|-|-|
|Hikvision Kazakhstanlimited liabilitypartnership||Costmethod|-|4,758.69|-|4,758.69|-|-|
|Wuhu SensorTechnology Co. Ltd.||Equitymethod|-|35,000,000.00|-|35,000,000.00|-|-|
||Total||1,175,799,927.25|508,335,959.52|30,552,816.65|1,714,688,703.42|-|-|

 As at 31 December 2016, there were no restrictions on the capability of transferring fund to the Company from investees in which the Company held long-term equity investment.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
4. Operating income and operating cost
Unit：RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|||Amount for the current year|||Amount for the previous year||
||||Income|Cost||Income|Cost|
||Operating income|15,892,497,158.98||5,715,197,290.78|13,683,833,283.76||5,484,902,791.62|
||Other operating|1,272,952,152.29||251,941,586.05|563,548,888.30||150,975,929.91|
||income|||||||
||Total|17,165,449,311.27||5,967,138,876.83|14,247,382,172.06||5,635,878,721.53|

 5. Investment income
(1) Details of investment income
Unit：RMB
||||||
|-|-|-|-|-|
|Item||Amount for the current year||Amount for the previous|
|||||year|
||Long-term equity investment income measured by cost method|959,775.84|205,259,854.04||
||Derivatives not designated as hedging instruments|8,026,616.63|659,100.00||
||Including: net income (loss) from settlement of forward exchange|8,026,616.63|659,100.00||
||contract upon expiry||||
||Investment income from redemption of finance products of banks|48,205,009.12|140,592,535.89||
||upon expiry||||
||Total|57,191,401.59|346,511,489.93||

 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 the current year|Amount for the previous|
|||||year|
|Subsidiaries of Hikvision (note)||Purchase of materials andreceiving of services|6,792,502,379.98|5,423,542,705.52|
|Subsidiaries of CETE||Purchase of materials andreceiving of services|253,499.98|-|
|Shanghai Fullhan||Purchase of materials andreceiving of services|-|1,776,844.10|
||Total||6,792,755,879.96|5,425,319,549.62|

 Note: Subsidiaries of Hikvision are subsidiaries of the Company. See Note (VII) for details.
Sales of goods/rendering of services:
Unit：RMB
||||||
|-|-|-|-|-|
|Related party||Transaction type|Amount for the current year|Amount for the previous|
|||||year|
|Subsidiaries of Hikvision||Sales of products andrendering of services|11,103,336,262.90|8,358,561,098.74|
|Subsidiaries of CETE||Sales of products|21,567,521.50|25,032,230.90|
||Total||11,124,903,784.40|8,383,593,329.64|

Those transactions above were effected at the prices agreed by both parties.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
6. Related party transactions - continued
(2) Guarantee with related parties
During the year, the Company has provided guarantee for its wholly-owned subsidiaries in an amount not exceeding an equivalent of RMB 10.5 billion or 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 1.2 billion or USD 40 million and the joint liability guarantee for the general credit limit applied from commercial banks and other financial institutions or financing through other agreed methods in an amount not exceeding an equivalent of RMB 9.3 billion or USD 210 million.
See Note (X) 5 for details in relation to the guarantee provided for Safe Chongqing Project by the Company. (3) Transfer of assets with related parties
Unit：RMB
||||||
|-|-|-|-|-|
|Related party|Transaction type||Amount for the current|Amount for the previous|
||||year|year|
|Subsidiaries of Hikvision|Transfer of fixed assets|-||14,641,912.09|
|Total||-||14,641,912.09|

7. Amounts due from& to related parties
(1) Amounts due from related parties
Unit：RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item||Related party||Closing balance|||Opening balance||
|||||Carrying balance|Provision||Carrying balance|Provision|
|Accountsreceivable||Subsidiaries ofHikvision|8,421,896,636.50||508,104,730.72|7,320,578,476.79||525,062,573.54|
|Accountsreceivable||Subsidiaries of CETE|16,029,332.62||1,171,983.59|14,561,824.12||970,634.51|
||Total||8,437,925,969.12||509,276,714.31|7,335,140,300.91||526,033,208.05|
|Otherreceivables||Subsidiaries ofHikvision|149,296,781.06||7,569,789.81|147,609,644.21||12,956,333.63|
||Total||149,296,781.06||7,569,789.81|147,609,644.21||12,956,333.63|

 (2) Amounts due to related parties
Unit：RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Item||Related party||Closing balance||Opening balance|
|Accounts payable||Subsidiaries of Hikvision||20,487,397.93||51,573,521.62||
|Accounts payable||Subsidiaries of CETE||152,222.25||199,700.00||
|Accounts payable||Shanghai Fullhan||100,000.00||2,178,907.60||
|Total||||20,739,620.18||53,952,129.22||
|Receipts in advance||Subsidiaries of Hikvision||32,447,875.96||49,069,223.93||
|Receipts in advance||Subsidiaries of CETE||23,208.01||38,953.00||
|Total||||32,471,083.97||49,108,176.93||
|Other payables||Subsidiaries of Hikvision||35,388,680.03||14,559,685.90||
|Other payables||Subsidiaries of CETE||146,300.00||-||
||Total|||35,534,980.03||14,559,685.90||

Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
(XV) Notes to major items of financial statements of the parent company -continued
8. Supplementary information to the cash flow statement
(1) Supplementary information to the cash flow statement
Unit：RMB
||||||
|-|-|-|-|-|
|Supplementary information||Amount for the current year||Amount for the previous year|
|1. Reconciliation of net profit to cash flows from|||||
|operating activities:|||||
|Net profit|7,203,768,180.57||5,554,634,200.66||
|Add: Assets impairment|151,838,196.39||310,847,916.44||
|Depreciation of fixed assets|123,434,024.41||102,821,241.01||
|Amortization of intangible assets|18,916,588.53||14,499,107.28||
|Losses on disposal of fixed assets, intangible assets|215,830.09||(1,733,903.11)||
|and other long-term assets (incomes expressed with “-”)|||||
|Losses on retirement of fixed assets (incomes|-||-||
|expressed with “-”)|||||
|Losses from change in fair value (incomes|53,573,806.57||-||
|expressed with “-”)|||||
|Financial expenses (incomes expressed with “-”)|51,935,968.50||36,493,662.93||
|Investment losses (incomes expressed with “-”)|(57,191,401.59)||(346,511,489.93)||
|Equity settled share-based payment|92,417,607.18||158,773,879.84||
|Change in other monetary funds|3,401,969.85||-||
|Decrease (increase) in deferred income tax assets|(24,131,101.49)||(73,855,655.06)||
|Decrease (increase) of inventories|(246,139,724.71)||(38,987,241.13)||
|Decrease (increase) in operating receivables|(1,168,908,965.92)||(5,819,679,324.00)||
|Increase (decrease) in operating payables|559,668,153.67||544,396,711.14||
|Net cash flow from operating activities|6,762,799,132.05||441,699,106.07||
|2. Major investing and financing activities not involving|-||-||
|cash receipt and payment:|||||
|3. Net change in cash and cash equivalents:|||||
|Closing balance of cash|10,245,969,003.13||6,548,073,680.91||
|Less: Opening balance of cash|6,548,073,680.91||5,115,461,297.75||
|Add: Closing balance of cash equivalents|-||-||
|Less: Opening balance of cash equivalents|-||-||
|Net increase (decrease) in cash and cash equivalents|3,697,895,322.22||1,432,612,383.16||

 (2) Composition of cash and cash equivalents
Unit：RMB
||||||
|-|-|-|-|-|
|Item||Closing balance||Opening balance|
|I. Cash|10,245,969,003.13||6,548,073,680.91||
|Including: Cash on hand|384,972.67||623,698.24||
|Bank deposit for payment at any time|10,245,584,030.46||6,543,644,197.00||
|Other monetary funds for payment at any time|-||3,805,785.67||
|II. Cash equivalents|-||-||
|III. Closing balance of cash and cash equivalents|10,245,969,003.13||6,548,073,680.91||

 TheCompany’s closing balance of other monetary funds was RMB 3,149,156.06, all of which were various guarantee deposits, not cash and cash equivalents.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Supplementary information
1. Details of current non-recurring gains and losses
Unit：RMB
|||||
|-|-|-|-|
|Item||Amount|Description|
|Profit or loss from disposal of non-current assets|(736,149.02)|||
|The government subsidies included in the current profits|171,321,088.31|||
|and losses (excluding the government subsidy15 closely||||
|related to regular course of business of the Company and||||
|government subsidy based on standard quota or||||
|quantitative continuous enjoyment according to the state||||
|industrial policy)||||
|Held- for-trading financial assets, profits and losses from|321,708.86|||
|change in fair value of held-for-trading financial liabilities,||||
|and investment income from disposal of held-for-trading||||
|financial assets and liabilities and available-for-sale||||
|financial assets excluding the effective hedging business||||
|related to the regular business operation of the Company||||
|Other non-operating income and expense except the items|18,276,871.37|||
|mentioned above||||
|Impact of income tax|(36,000,258.26)|||
|The impact of minority interests|(1,664,040.58)|||
|Total|151,519,220.68|||

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
|||||||||
|-|-|-|-|-|-|-|-|
|Profit for the reporting period|||Weighted average||Earnings per share|||
||||return on net assets||Basic earnings per||Diluted earnings per|
||||(%)||share||share|
||Net profit attributable to ordinary shareholders of the|34.56%||1.227||1.221||
||Company|||||||
||Net profit excluding non-recurring items of profit or loss|33.86%||1.202||1.196||
||attributable to ordinary shareholders of the Company|||||||

15 Please refer to Note (V) 47 for details about government subsidy closely related to regular course of business of the Company and
government subsidy based on standard quota or quantitative continuous application according to the state industrial policy.
Hikvision 2016 Annual Report Notes on Financial Statements
For fiscal year period from January 1st 2016 to December 31st 2016
Section XII Documents Available for Reference
1. The financial statements signed and sealed by the Company's legal representative, responsible person in charge of accounting work and person in-charge of accounting organization.
2. The original copy of theauditor’s report with the seal of the Certified Public Accountants Firm, and signed and stamped by Certified Public Accountants.
3. Original copy of all the Company's documents and announcements published on the newspapers designated by CSRC within the Reporting Period.
The above documents are completely placed at the company's board ofdirectors’ office.
HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD. Chairman: Chen Zongnian 14 April 2017