大华股份:2018年半年度报告(英文版)

                   2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




Zhejiang Dahua Technology Co., Ltd.

        2018 Interim Report




             August 2018




                                                                           1
                                           2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




           Section I Important Notes, Contents and Definitions


    The Board of Directors, Board of Supervisors, Directors, Supervisors and

Senior Management of Zhejiang Dahua Technology Co., Ltd. (hereinafter

referred to as the "Company") hereby guarantee that the information presented

in this interim report shall be authentic, accurate and complete and free of any

false records, misleading statements or material omissions, and they will bear

joint and several liabilities for such information.

    Fu Liquan, the Company's legal representative, Wei Meizhong, chief

accountant, and Xu Qiaofen, person in charge of accounting institution

(Accounting Officer) hereby declare and warrant that the financial statements in

this interim report are authentic, accurate and complete.

    All directors attended the meeting of the Board of Directors for deliberation

of this interim report.

    The Company describes the significant risks that may be faced with by the

Company in its future operations in “X. Risks of the Company and Risk

Response Solutions” in Section IV “Operation Discussion and Analysis” of this

report, and the investors are requested to pay attention to the risks.

    The Company plans not to distribute cash dividends, send bonus shares,

and not to convert capital reserves to share capital.




                                                                                                   2
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     The Company invites each investor to carefully read the interim report and pay particular attention to the

following risk factors:

     1. Risk of technology upgrade

     The video surveillance industry is a typical technology-intensive industry, which is changing extremely fast.

The Company has always attached importance to technical innovation and R&D of new products, with a strong

ability of continuous innovation. If the Company is unable to keep up with development trends in the industry's

technology, to pay full attention to customers' diversified individual needs, and to be followed by sufficient R&D

investments, it will still face the risk of losing market competitiveness due to discontinuous innovation.

     2. Risk of business model transformation

     With the development of network communications, cloud computing, and big data, as well as the popularity

of smart phones, the business model in the IoT era may have an impact on the traditional industry development

model. If an enterprise cannot timely grasp opportunities brought about by the business model transformation, it

may face the risk that the original market structure becomes broken.

     3. Risk of product information security

     The Company attaches great importance to and continuously strengthens resource investment to ensure safe

and reliable operations of the security system so as to respond to the product information security risks on the

Internet. However, there may still exist hackers, computer viruses, physical security vulnerabilities, natural

disasters, accidents, power interruptions, telecommunications failures, and other terrorism or warfare events,

which exert influences such as security vulnerabilities, system failures, or service interruptions.

     4. Risk of intellectual property rights

     The acceleration of the Company's globalization and self-owned brand strategy will likely bring intellectual

property risks such as IP rights protection and patent infringement. Preventions of and responses to the above risk

such as rights claims or lawsuits, whether active or passive, all feature high costs, long cycles and high uncertainty,

and may bring about risks such as fluctuations in business relations and public opinions environment, increased

legal litigations and rising costs.

     5. Risk of exchange rate

     The Company's export transactions are mostly settled in United States Dollars ("USD"), while overseas sales



                                                                                                                     3
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have increased continuously. Therefore, fluctuations in the foreign exchange rate have the potential to affect the

profits of the Company.

    6. Risk of decline in local fiscal spending power

    At present, local fiscal earnings are declining, while debt is relatively high. If the local fiscal spending power

falls, it may lead to a slowdown in the growth of industry demand, extensions to project time, long periods needed

for companies to withdraw capital, and delays in customer' payments.

    7. Risk of international operation

    The Company's products and solutions cover as many as over one hundred countries and regions and

international business may face the protectionism risk there, which may bring adverse impact on the Company’s

local business development.




                                                                                                                    4
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                                                                                  Contents




Section I Important Notes, Contents and Definitions ..............................................................................................................................2
Section II Corporate Profile and Key Financial Indicators ......................................................................................................................9
Section III Corporate Business Summary ..............................................................................................................................................12
Section IV. Operation Discussion and Analysis .....................................................................................................................................13
Section V Significant Events .................................................................................................................................................................25
Section VI Changes in Shares and Information about Shareholders ......................................................................................................38
Section VII Information of Preferred Shares .........................................................................................................................................43
Section VIII Information about Directors, Supervisors and Senior Management ..................................................................................44
Section IX Corporate Bonds ..................................................................................................................................................................47
Section X Financial Reports ..................................................................................................................................................................48
Section XI Documents Available for Inspection ..................................................................................................................................168




                                                                                                                                                                                              5
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                                                    Definitions


                       Term                                                  Definition

Reporting Period                               January 1, 2018 to June 30, 2018

Dahua, Company, This Company                   Zhejiang Dahua Technology Co., Ltd.

Dahua System Engineering, System Engineering
                                               Zhejiang Dahua System Engineering Co., Ltd.
Company

Dahua Vision Technology                        Zhejiang Dahua Vision Technology Co., Ltd.

Dahua Security Network, Operation Company      Zhejiang Dahua Security Network Operation Service Co., Ltd.

Dahua Ju'an                                    Zhejiang Dahua Ju'an Technology Co., Ltd.

Guangxi Dahua Information                      Guangxi Dahua Information Technology Co., Ltd.

Dahua Security                                 Zhejiang Dahua Security Service Co., Ltd.

Wuxi Ruide, Wuxi Dahua                         Wuxi Dahua Ruide Electronic Technology Co., Ltd.

Guangxi Security                               Guangxi Dahua Security Service Co., Ltd.

Huatu Microchip                                Zhejiang Huatu Microchip Technology Co., Ltd.

Dahua Zhongzhi                                 Guangxi Dahua Zhongzhi Technology Co., Ltd.

Xiaohua Technology, Hangzhou Xiaohua           Hangzhou Xiaohua Technology CO., LTD.

Dahua Zhilian                                  Zhejiang Dahua Zhilian Co., Ltd.

Tecomore Technology                            Hangzhou Tecomore Technology Co., Ltd.

Yancheng Zhongchuang                           Yancheng Zhongchuang Dahua IoT Technology Co., Ltd.

Dahua Investment                               Zhejiang Dahua Investment Management Co., Ltd.

South North United                             South North United Information Technology Co., Ltd.

Guangxi Zhicheng, Dahua Zhicheng               Guangxi Dahua Zhicheng Co., Ltd.

Hangzhou Huacheng, Huacheng Network            Hangzhou Huacheng Network Technology Co., Ltd.

Xinjiang Information                           Xinjiang Dahua Zhixin Information Technology Co., Ltd.

HuaRay Technology                              Zhejiang HuaRay Technology Co., Ltd.

Fuyang Hua'ao                                  Hangzhou Fuyang Hua'ao Technology Co., Ltd.

Huafei Intelligent                             Zhejiang Huafei Intelligent Technology CO., LTD.

Huachuang Vision                               Zhejiang Huachuang Vision Technology Co., Ltd.

Guizhou Huayi                                  Guizhou Huayi Shixin Technology Co., Ltd.

Hunan System Technology                        Hunan Dahua System Technology Co., Ltd.




                                                                                                                        6
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Xinjiang Dahua Information                 Xinjiang Dahua Information Technology Co., Ltd.

Xinjiang Intelligence                      Xinjiang Dahua Intelligence Technology Co., Ltd.

Guizhou Intelligence                       Guizhou Dahua Intelligence Technology Co., Ltd.

Xinjiang Zhihe                             Xinjiang Dahua Zhihe Information Technology Co., Ltd.

China Standard Intelligent Security        China Standard Intelligent Security Technology Co., Ltd.

Guangxi Huacheng                           Guangxi Huacheng Technology Co., Ltd.

Meitan Dahua Technology                    Guizhou Meitan Dahua Information Technology Co., Ltd.

Inner Mongolia Zhimeng                     Inner Mongolia Dahua Zhimeng Information Technology Co., Ltd.

Xinjiang Zhitian                           Xinjiang Dahua Zhitian Information Technology Co., Ltd.

Xinjiang Xinzhi                            Xinjiang Dahua Xinzhi Information Technology Co., Ltd.

Xinjiang Huayue                            Xinjiang Dahua Huayue Information Technology Co., Ltd.

Dahua HK                                   Dahua Technology (HK) Limited

Dahua Intelligence (IoT) Industrial Park   Dahua Intelligence (IoT) Industrial Park Construction Project

Leapmotor Technology                       Zhejiang Leapmotor Technology Co., Ltd.

Leapmotor Automobile                       Leapmotor Automobile Co., Ltd.

Tianjin Dahua Information                  Tianjin Dahua Information Technology Co., Ltd.

Hunan Dahua Zhilong                        Hunan Dahua Zhilong Information Technology Co., Ltd.

Huaxiao Technology                         Zhejiang Huaxiao Technology Co., Ltd.

Vision Technology                          Zhejiang Vision Technology Co., Ltd.

Beijing Dahua Zhongcheng                   Beijing Dahua Zhongcheng Technology Co., Ltd.

Xi’an Dahua Zhilian                       Xi’an Dahua Zhilian Technology Co., Ltd.

Dahua USA                                  Dahua Technology USA Inc.

Dahua Europe                               Dahua Europe B.V.

Dahua Middle East                          Dahua Technology Middle East FZE

Dahua Mexico                               Dahua Technology Mexico S.A. DE C.V

Dahua Chile                                Dahua Technology Chile SpA

Dahua Malaysia                             Dahua Security Malaysia SDN. BHD.

Dahua Korea                                Dahua Technology Korea Company Limited

Dahua Indonesia                            PT. Dahua Vision Technology Indonesia

Dahua Colombia                             Dahua Technology Colombia S.A.S

Dahua Australia                            Dahua Technology Australia PTY LTD

Dahua Singapore                            Dahua Technology Singapore Pte. Ltd.

Dahua South Africa                         Dahua Technology South Africa Proprietary Limited

Dahua Peru                                 Dahua Technology PerúS.A.C



                                                                                                                    7
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Dahua Russia                Dahua Technology Rus Limited Liability Company

Dahua Brazil                Dahua Technology Brasil Comercio Serv Em Seguranca Eletronica Ltda

Dahua Canada                Dahua Technology Canada INC.

Dahua Panama                Dahua Technology Panama S.A.

Dahua Hungary               Dahua Technology Hungary Kft

Dahua Poland                Dahua Technology Poland Sp. z o.o.

Dahua Italy                 Dahua Italy S.R.L.

Dahua Tunisia               Dahua Technology Tunisia

Dahua Kenya                 Dahua Technology Kenya Limited

Dahua UK                    Dahua Technology UK Limited

Dahua Bulgaria              Dahua Technology Bulgaria EOOD

Dahua Germany               Dahua Technology GmbH

Dahua Serbia                Dahua Technology SRB d.o.o.

Dahua India                 Dahua Technology India Private Limited

Dahua Turkey                Dahua Guvenlik Teknolojileri Sanayi ve Ticaret A.S.

Dahua Czech                 Dahua Technology Czech s.r.o.

Dahua Argentina             Dahua Argentina S.A.

Dahua Spain                 Dahua Iberia, S.L.

Dahua Kazakhstan            Dahua Technology Kazakhstan LLP

Dahua Denmark               Dahua Technology Denmark Aps.

Dahua France                Dahua Technology France

American Lechange           Lorex Corporation

Dahua Technology Holdings   Dahua Technology Holdings Limited

Dahua New Zealand           Dahua Technology New Zealand Limited

Dahua Netherlands           Dahua Technology Netherlands B.V.

Dahua Morocco               Dahua Technology Morocco SARL

Dahua Romania               Dahua Technology S.R.L

Dahua Uzbekistan            DAHUA VISION LLC

Dahua Technology Italy      Dahua Technology Italy S.R.L.

Dahua Lorex                 Lorex Technology Inc.




                                                                                                     8
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




            Section II Corporate Profile and Key Financial Indicators

I. Corporate Information

Stock Abbreviation                Dahua                                   Stock Code                    002236

Stock Exchange Where the
Shares of the Company are         Shenzhen Stock Exchange
Listed

Company Name in Chinese           浙江大华技术股份有限公司

Abbr. of the Company Name
                                  大华股份
in Chinese (If Any)

Company Name in English (If
                                  ZHEJIANG DAHUA TECHNOLOGY CO.,LTD
Any)

Legal Representative              Fu Liquan


II. Contacts and Contact Information

                                                           Board Secretary                     Securities Affairs Representative

Name                                          Wu Jian                                     Lou Qiongyu

                                              No. 1199, Bin'an Road, Binjiang District,   No. 1199, Bin'an Road, Binjiang District,
Address
                                              Hangzhou City, Zhejiang Province            Hangzhou City, Zhejiang Province

Tel.                                          0571-28939522                               0571-28939522

Fax                                           0571-28051737                               0571-28051737

E-mail                                        zqsw@dahuatech.com                          zqsw@dahuatech.com


III. Other Relevant Information

1. Contact information of the Company

Are there any changes in the registered address, office address, postal code, website and email of the Company during the reporting
period
□ Applicable √ Not applicable
There are no changes in the registered address, office address, postal code, website and email of the Company during the reporting
period. For details, refer to 2017 Annual Report.


2. Information disclosure and place of the report

Are there any changes in the information disclosure and place for report preparation during the reporting period



                                                                                                                                      9
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


□ Applicable √ Not applicable
There are no changes in the newspaper designated by the Company for information disclosure, website specified by CSRC for release
of the interim report and place for interim report preparation during the reporting period. For details, refer to 2017 Annual Report.


IV. Key Accounting Data and Financial Indicators

Whether the Company needs performed retroactive adjustment or restatement of accounting data in prior years or not
□ Yes √ No

                                                 The current reporting       The corresponding period
                                                                                                               YoY Change(%)
                                                         period                    of last year

Operating Revenue (RMB)                                 9,814,041,352.48             7,464,664,934.38                           31.47%

Net Profit Attributable to Shareholders of
                                                        1,081,916,886.52               983,001,211.23                           10.06%
the Listed Company (RMB)

Net Profit Attributable to Shareholders of
the Llisted Company after Deducting                     1,107,484,389.00               970,581,936.99                           14.11%
Non-recurring Gains and Losses (RMB)

Net Cash Flow Generated by Operational
                                                       -1,096,356,837.00              -921,403,890.23                          -18.99%
Activities (RMB)

Basic Earnings per Share (RMB/Share)                                  0.37                          0.34                          8.82%

Diluted Earnings per Share (RMB/Share)                                0.37                          0.34                          8.82%

Weighted Average ROE                                                9.91%                         11.29%                         -1.38%

                                                   At June 30, 2018           At December 31, 2017             YoY Change (%)

Total Assets (RMB)                                     22,227,058,009.68            21,333,478,563.97                             4.19%

Net Assets Attributable to Shareholders of
                                                       10,976,288,947.34            10,466,434,375.19                             4.87%
the Listed Company (RMB)


V. 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 √ Not applicable
There are no differences of net profits and net assets in the financial reports disclosed according to the international accounting
standards and Chinese accounting standards during 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 √ Not applicable
There are no differences of net profits and net assets in the financial reports disclosed according to the overseas accounting standards
and Chinese accounting standards during the reporting period.


                                                                                                                                        10
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


VI. Items and Amounts of Non-recurring Gains and Losses

√ Applicable □ Not applicable
                                                                                                                            Unit: RMB

                                  Item Name                                              Amount                      Note

Profits or Losses From Disposal of Non-Current Assets (Including the
                                                                                               -268,972.91
Write-Off for the Accrued Impairment of Assets)

The Government Subsidies Included in The Current Profits and Losses
(Excluding the Government Subsidies Closely Related to Regular Businesses
                                                                                              3,694,113.32
of The Company and Issued in the Quota or Quantity Based on the National
Standards

Profits and Losses Resulting From the Changes in Fair Value for Holding
Trading Financial Assets and Trading Financial Liabilities, and Investment
Income from Disposal of Trading Financial Assets, Trading Financial
                                                                                            -37,233,326.63
Liabilities, and Financial Assets Available for Trading, Excluding the
Effective Hedging Businesses Related to the Regular Business Operation of
the Company

Non-operating Revenue and Expenses Other Than the Above                                       3,277,285.64

Other Gains and Losses Items that Fit the Definition of Non-recurring Gains
                                                                                                599,965.97
and Losses

Less: Impact of Income Tax                                                                   -4,631,091.16

     Impact of Minority Equity (after tax)                                                      267,659.03

Total                                                                                       -25,567,502.48             --

For items defined as non-recurring gains and losses according to the No. 1 Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to Public - Non-recurring Gains and Losses, or non-recurring gains and losses items listed in the
said document defined as recurring ones, please specify the reasons.
□ Applicable √ Not applicable
In the reporting period, the Company did not define any non-recurring gains and losses items defined and listed in the No. 1
Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to Public - Non-recurring Gains and
Losses, as recurring gains and losses items.




                                                                                                                                   11
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                            Section III Corporate Business Summary

I. The Principal Business of the Company during the Reporting Period

There are no significant changes in the principal business of the Company during the reporting period. For details, refer to 2017
Annual Report.


II. Major Changes in Main Assets

1. Major changes in main assets


Major Assets                      Explanation of Material Changes


                                  Decrease by 55.25% compared with the beginning of the year mainly due to equity transfer of
Equity Assets
                                  joint-stock companies and confirmation of investment gains and losses by joint-stock companies

Fixed Assets                      No Significant Change

Intangible Assets                 No Significant Change

Construction in Progress          No Significant Change


2. Major overseas assets

□ Applicable √ Not applicable


III. Core Competitiveness

There are no significant changes in the core competitiveness of the Company during the reporting period. For details, refer to
2017Annual Report.




                                                                                                                                   12
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                       Section IV. Operation Discussion and Analysis

I. Overview

     During the first half year of 2018, despite geopolitical headwinds overseas, the Company has been focusing on technological
innovation as its foundation, customer demands as its guidance and customer success as its objective. Supported by its constant
technological innovation, extensive industry experience and wide customer coverage, the Company unceasingly improves its
video-centric smart IoT solutions and actively grasps the market and industry trends to promote its stable growth of business
performance. During the reporting period, the Company has achieved RMB 9.814 billion in operating revenue, a year-over-year
increase of 31.47% and RMB 1.082 billion in net profits attributable to shareholders of the listed company, a year-over-year increase
of 10.06%.
     Main business strategies of the Company include:
     1. Strengthening the precise investment of R&D, and continuously improving the ability of core technologies and end to end
comprehensive solutions
     The Company gains deep insight into the industry and technology trends, strengthens the precise investment of R&D, and
continuously improves and completes the ability of core technologies, platforms, products and end to end comprehensive solutions.
During the reporting period, the Company has actively implemented its AI strategy of "intelligence computing, ecosystem, and
ecosystem sensing", focused on customers' business scenarios and enriched the cooperative ecosystem, forming full range of AI
products and solutions for actual practice.
     2. Further developing customer interface, and gaining insight into customers' business demands to create value for customers
     The Company continuously takes customers' demands as the orientation, and deeply explores the market and the customers'
business demands to provide customers with better value. Based on the properties and business values of different customer groups,
the Company has formed tiered and hierarchical customer management strategies and refined customer management mechanisms,
and provided targeted products and solutions by getting closer to customers and deeply exploring and segmenting customer groups'
demands to support customers' business success.
     3. Optimizing the construction of the global marketing network and continuously expanding domestic and foreign markets
     In the domestic market, the Company actively promotes refined channel operation to improve channel quality and efficiency,
and explores city and industry markets to improve the ability to offer solutions closer to customer's business scenarios. In the
overseas market, the Company continues to optimize construction of the global marketing network, expand overseas markets,
gradually improve overseas subsidiaries' ability in localized operation and service to optimize the revenue structure; at the same time,
the Company continuously perfects the compliance operation system and the management and control mechanism, and deepens the
management of intellectual property rights to lower the operational risks
     4. Continuously promoting systematic management optimization and improving organizational ability and operation efficiency
     The Company takes customer success as the goal, continuously carries out systematic management reforms, and improves
internal management level and operation efficiency by carrying out LTC, IPD, ISD and ITR and other core business process reform
projects to lay the foundation for subsequent high-quality development.




II. Core Business Analysis

Overview

                                                                                                                                     13
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


The same as the overview disclosed in "Discussion and Analysis of Business Circumstance"
√ Yes □ No
See "I. Overview" in "Discussion and Analysis of Business Circumstance".
Changes in key financial data over the corresponding period of last year
                                                                                                                                Unit: RMB

                                               Corresponding
                       Current Reporting                          YoY Change
                                               Period of Last                                          Reason of Changes
                              Period                                   (%)
                                                    Year

Operating Revenue         9,814,041,352.48 7,464,664,934.38                31.47% Sales grow as market demands steadily increase.

Operating Cost            6,230,120,445.06 4,520,040,801.14                37.83% Costs grow as sales increase.

                                                                                     Due to growth of fees such as market charges as
Sales Expenses            1,252,741,900.83      946,818,977.03             32.31%
                                                                                     sales revenue increases.

Management Fees           1,134,328,456.62 1,018,690,379.20                11.35%

                                                                                     Mainly due to exchange gain growth in the current
Financial Expenses          -22,880,395.85       48,639,551.95         -147.04%
                                                                                     period as a result of exchange rate fluctuation.

Income Tax Expense          165,721,533.63      153,360,669.71               8.06%

R&D Investment              865,129,052.09      796,493,894.36               8.62%

Net Cash Flow
Generated by
                         -1,096,356,837.00     -921,403,890.23           -18.99%
Operational
Activities

Net Cash Flow
Generated by                                                                         Mainly due to increase in asset buyout in the
                           -349,648,911.60     -236,542,897.00           -47.82%
Investment                                                                           current period.
Activities

                                                                                     Mainly due to repayment of bank loans and
Net Cash Flow
                                                                                     increase in distributed dividend in the current
Generated by                233,280,496.68      673,997,688.77           -65.39%
                                                                                     period compared with the corresponding period of
Financing Activities
                                                                                     last year.

Net Additions to                                                                     Mainly due to increase in asset buyout, loan
Balance of               -1,197,623,717.25     -506,029,390.46         -136.67% repayment and distributed dividend in the current
Equivalents                                                                          period.

Significant changes in the profit structure or profit source of the Company in the reporting period
□ Applicable √ Not applicable
There are no significant changes in the profit structure or profit source of the Company during the reporting period.
Operating revenue structure
Operating revenue structure
                                                                                                                                Unit: RMB

                                  Current Reporting Period              Corresponding Period of Last Year             YoY Change (%)


                                                                                                                                        14
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                  Proportion to                                  Proportion to
                              Amount                                         Amount
                                               Operating Revenue                              Operating Revenue

Total Operating
                           9,814,041,352.48                   100%         7,464,664,934.38                 100%                31.47%
Revenue

Classified by Industry

Security Industry          9,814,041,352.48               100.00%          7,464,664,934.38              100.00%                31.47%

Classified by Product

Solutions                  5,018,508,530.50                 51.13%         3,744,380,956.32               50.16%                34.03%

Product                    4,054,905,104.84                 41.32%         3,179,984,475.04               42.60%                27.51%

Other                        740,627,717.14                  7.55%           540,299,503.02                7.24%                37.08%

Classified by Region

Domestic                   6,375,294,969.60                 64.96%         4,783,576,921.83               64.08%                33.27%

Overseas                   3,438,746,382.88                 35.04%         2,681,088,012.55               35.92%                28.26%

The industry, product, or region that accounts for over 10% of the Company's operating revenue or profit
√ Applicable □ Not applicable
                                                                                                                              Unit: RMB

                                                                                   Increase or        Increase or        Increase or
                                                                                   Decrease of        Decrease of        Decrease of
                                                                                    Operating       Operating Cost    Gross Profit over
                         Operating                            Gross Profit
                                         Operating Cost                         Revenue over the        over the             the
                         Revenue                                  Margin
                                                                                 Corresponding      Corresponding      Corresponding
                                                                                Period of the Last Period of the Last Period of the Last
                                                                                      Year               Year               Year

Classified by Industry

Security Industry 9,814,041,352.48 6,230,120,445.06                   36.52%              31.47%             37.83%                -2.93%

Classified by Product

Solutions           5,018,508,530.50 2,911,635,789.84                 41.98%              34.03%             36.48%                -1.04%

Product             4,054,905,104.84 2,603,756,661.09                 35.79%              27.51%             39.02%                -5.31%

Classified by Region

Domestic            6,375,294,969.60 4,051,920,136.45                 36.44%              33.27%             28.26%                -1.06%

Overseas            3,438,746,382.88 2,178,200,308.61                 36.66%              28.26%             42.32%                -6.26%

When the statistical caliber of the Company's main business data is adjusted during the reporting period, the Company's main
business data should be subject to the one after the statistical caliber at the end of the reporting period is adjusted in the most recent
year
□ Applicable √ Not applicable
Reasons for over 30% changes in related data on year-on-year basis
√ Applicable □ Not applicable



                                                                                                                                        15
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


See details in "II Analysis of Main Business, Changes in Key Financial Data over the Corresponding Period of Last Year" in this
section.




III. Non-core Business Analysis

□ Applicable √ Not applicable


IV. Analysis of Assets and Liabilities

1. Major changes in assets

                                                                                                                              Unit: RMB

                                                         At the End of the
                     At the End of the Current
                                                    Corresponding Period of Last
                         Reporting Period
                                                               Year                  Proportio
                                                                                                      Note on Significant Changes
                                       Proportion                      Proportion n Change
                        Amount          to Total        Amount          to Total
                                        Assets                           Assets

Cash and Bank
                    2,382,180,540.73      10.72% 3,612,937,164.14         16.94%       -6.22% No Significant Change
Balances

Accounts                                                                                         Grow as the Company expands and
                    9,081,550,539.87      40.86% 7,539,944,756.69         35.34%        5.52%
Receivable                                                                                       revenue increases.

                                                                                                 Mainly due to company expansion and
Inventory           3,386,228,156.72      15.23% 2,806,142,598.65         13.15%        2.08%
                                                                                                 increased stock.

Investment
                     176,630,008.83         0.79%     181,050,142.29         0.85%     -0.06% No Significant Change
Property

                                                                                                 Mainly due to equity transfer of
Long-term                                                                                        joint-stock companies and
Equity                 27,418,099.40        0.12%      61,272,885.41         0.29%     -0.17% confirmation of investment gains and
Investment                                                                                       losses by the joint-stock companies in
                                                                                                 the current period.

Fixed Assets        1,269,148,988.00        5.71% 1,248,305,165.77           5.85%     -0.14% No Significant Change

Construction in
                       67,137,899.76        0.30%      58,779,225.41         0.28%      0.02% No Significant Change
Progress

Short-term
                    2,541,402,275.54      11.43% 1,770,924,255.90            8.30%      3.13% Mainly due to increase in bank loans.
Loans

Long-term
                     179,500,000.00         0.81%     230,000,000.00         1.08%     -0.27% No Significant Change
Loans




                                                                                                                                          16
                                                                              2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


2. Assets and liabilities measured at fair value

√ Applicable □ Not applicable
                                                                                                                                             Unit: RMB

                                                                                                            Purchase      Sales
                                          Changes in Fair                                   Impairment
                      At the Beginning                                 Cumulative Fair                      Amount of Amount of At the End of
                                          Value Gains and                                   Loss of the
   Item Name          of the Reporting                              Value Changes in                           the         the        the Reporting
                                              Losses in the                                     Reporting
                           Period                                          Equity                           Reporting Reporting             Period
                                           Current Period                                        Period
                                                                                                             Period      Period

Financial
Assets

Financial
                         62,450,000.00          41,332,765.27                                                                        103,782,765.27
Liabilities

Are there any significant changes in the measurement attributes of the company's main assets during the reporting period?
□ Yes √ No


3. Assets right restrictions as of the end of reporting period

     As of June 30, 2018, the Company has pledged money funds amounting to RMB 517,125,264.10 for bank borrowings and
issuance of L/G, notes receivable amounting to RMB 1,592,282,191.90 for issuance of bank acceptance and long-term account
receivable amounting to RMB 351,064,980.00 for bank borrowings.


V. Analysis of Investments

1. Overview

√ Applicable □ Not applicable

  Investment during the Reporting Period           Investment over the Corresponding Period
                                                                                                                      Fluctuation (%)
                      (RMB)                                            of Last Year

                                433,638,796.38                                        923,706,452.54                                          -53.05%


2. Significant equity investments acquired during the reporting period

□ Applicable √ Not applicable


3. Major non-equity investments underway during the reporting period

√ Applicable □ Not applicable
                                                                                                                                             Unit: RMB

              Investme    Fixed                Investme Cumulati                                 Anticipat Cumulati Reasons Date of Disclosu
 Project                            Project                              Source       Project
                 nt       Assets               nt during       ve                                   ed        ve        for       Disclosu re Index
  Name                              industry                             of funds Progress
               Method Investme                    the         Actual                              Income    Income Unreach         re (If     (If Any)


                                                                                                                                                     17
                                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                         nt or not                  Current Investme                                             by the        ed           Any)
                                                    Reportin nt by the                                           End of     Planned
                                                    g Period    End of                                               the    Progress
                                                                Reportin                                        Reportin      and
                                                                g Period                                        g Period Anticipat
                                                                                                                               ed
                                                                                                                            Income

                                                                                                                                                      Juchao
Dahua                                                                                                                                                 Informati
                                     Video
Intellige                                                                                                                                             on
            Self-cons                surveilla 24,760,1 842,801, Self-rais                                                                Decembe
nce (IoT)               Yes                                                              42.14%                             N/A                       Website
            truction                 nce               22.04       701.88 ed funds                                                        r 2, 2014
Industria                                                                                                                                             http://cni
                                     industry
l Park                                                                                                                                                nfo.com.
                                                                                                                                                      cn/

                                                    24,760,1 842,801,
Total          --             --           --                                   --            --                                  --         --             --
                                                       22.04       701.88


4. Financial assets measured at fair value

□ Applicable √ Not applicable


5. Securities investments

□ Applicable √ Not applicable
There are no securities investment during the current reporting period.


6. Derivatives investments

√ Applicable □ Not applicable
                                                                                                                                       Unit: ten thousand RMB

                                                                                                                                         Ratio of
                                                                                                                                         Closing
                                                                                                                                         Investme
 Name of
                                                         Initial                                                                            nt         Actual
    the                                                                                                      Provision
                                           Type of     Amount                                                                            Amount       Amount
 Operator                                                                                          Opening      for        Closing
                          Affiliated Derivativ             of                                                                            over the     of Gain
    of       Associati                                               Starting        Expiry        Investme Impairme Investme
                          Transacti             e      Derivativ                                                                        Company' or Loss
Derivativ       on                                                     Date           Date            nt        nt           nt
                          on or Not Investmen              e                                                                             s Closing during the
     e                                                                                             Amount    Accrued       Amount
                                                t      Investme                                                                          Net Asset Reporting
Investme                                                                                                     (If Any)
                                                           nt                                                                           at the End     Period
    nt
                                                                                                                                          of the
                                                                                                                                        Reporting
                                                                                                                                          Period


                                                                                                                                                                 18
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


             Non-asso             Exchange               May 29,    June 17,                           165,415.0
Bank                    No                                                                                           15.07% -3,823.83
             ciated               contract               2018       2019                                        0

                                                                                                       165,415.0
Total                                                        --         --                                           15.07% -3,823.83
                                                                                                                0

Source of Derivative Investment Fund         Equity Fund

Legal Actions (If Applicable)                N/A

Disclosure Date of Derivative Investment
Approval Announcement by Board of            May 9, 2018
Directors (If Any)

Disclosure Date of Derivative Investment
Approval Announcement by Board of            May 29, 2018
Shareholders (If Any)

Analysis of Derivatives Position Risk and
Control Measure Explanation during the
                                             Please see Announcement on Adjusting Foreign Exchange Hedging Transactions
Reporting Period (Including but Not
                                             (announcement No.: 2018-040) disclosed on May 9, 2018 for details of risk analysis
Limited to Market Risk, Liquidity Risk,
                                             and control measures
Credit Risk, Operation Risk, Legal Risk
and so on)

As for Variations in Market Prices or Fair
                                             The Company’s accounting of derivatives’ fair value is mainly based on the unexpired
Values of the Invested Derivatives during
                                             future foreign exchange settlement contract between the Company and the bank during
the Reporting Period, Detailed Method
                                             the reporting period and the transactional financial assets or transactional financial
Used and Related Presumptions and
                                             liabilities are confirmed by the difference between the closing contract price and future
Indicator Settings Should Be Disclosed in
                                             foreign exchange rate.
the Analysis of Fair Value of Derivatives

Is There Any Material Change in
Accounting Polices and Specific Principles
of Accounting Policies for the Company's
                                             N/A
Derivatives during the Reporting Period
Compared with the Previous Reporting
Period

Independent Director’s Opinion of the
Company's Derivative Investment and Risk N/A
Control


7. Use of raised funds

□ Applicable √ Not applicable
No use of funds in the reporting period of the Company


8. Significant non-fundraising investment during the reporting period

√ Applicable □ Not applicable

                                                                                                                                      19
                                                                              2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                                                                                 Unit: ten thousand RMB

                                 Amount
                     Total       Invested Cumulative Actual
                                                                                                    Disclosing
                    Planned       In The      Investment As Of        Project          Project
  Item Name                                                                                          Date (If             Disclosing Index (If Any)
                   Investme      Current          The End Of         Progress          Profit
                                                                                                       Any)
                         nt     Reporting Reporting Period
                                  Period

                                                                                                                   Announcement on Investing in
Dahua
                                                                                                  Tuesday,         Constructing Smart (Internet of
Intelligence                                                                       Not
                     200,000      2,476.01              84,280.17      42.14%                     December 2, Things) Industrial Park in Fuyang,
(IoT) Industrial                                                                   applicable.
                                                                                                  2014             Juchao information website
Park
                                                                                                                   http://www.cninfo.com.cn

Total                200,000      2,476.01              84,280.17        --              --              --                            --


VI. Major Assets and Equity Sales

1. Major assets sales

□ Applicable √ Not applicable
No major assets sales in the reporting period of the Company


2. Major equity sales

□ Applicable √ Not applicable


VII. Analysis of Major Subsidiaries and Investees

√ Applicable □ Not applicable
Major subsidiaries and joint-stock companies with a net profit impact of over 10%.
                                                                                                                                                 Unit: RMB

               Comp
  Company                                          Registered                                                 Operating        Operating
                   any        Main Business                         Total Assets         Net Assets                                             Net Profit
    Name                                             Capital                                                  Revenue           Profit
                Type

                         The development,
                         production,
Zhejiang                 installation and sales
               Subsi
Dahua                    of electronic and
               diary
System                   communication            500,000,000.00    3,090,517,925.08      1,177,782,652.03    593,924,044.97   -27,865,022.59   -23,883,776.79
               Comp
Engineering              products; the design,
               any
Co., Ltd.                construction and
                         installation of
                         computer system



                                                                                                                                                             20
                                                                             2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                       integration and
                       automated control
                       engineering

                       The development,
                       sales, and technical
                       services related to
                       computer software,
                       as well as the
Zhejiang       Subsi
                       design,
Dahua Vision diary
                       development,            646,810,000.00     15,836,190,423.08   936,528,476.52    8,714,821,756.14   230,367,871.68   173,389,531.85
Technology     Comp
                       production and sales
Co., Ltd.      any
                       of security
                       equipment,
                       electronic products
                       and communications
                       products

                       Production and sales
                       of electronic
                       products and
                       auxiliary equipment;
                       technological
                       development,
                       technical
                       consultation and
Zhejiang       Subsi services,
Dahua          diary achievement
                                               1,110,000,000.00    2,849,688,414.76   978,253,012.88      235,219,679.35    20,569,939.02    15,535,000.52
Zhilian Co.,   Comp transference of
Ltd.           any     computer software,
                       electronic products,
                       communications
                       products, and digital
                       security products;
                       self-owned house
                       lease; catering
                       service; import and
                       export of goods.

Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ Not applicable

                                                   Method of Acquisition and Disposal of               Impact on Overall Production Management
               Company Name
                                                 Subsidiaries during the Reporting Period                             and Performance

Tianjin Dahua Information Technology                                                                   No significant impact on overall
                                                Established with investment
Co., Ltd.                                                                                              production and performance



                                                                                                                                                        21
                                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Hunan Dahua Zhilong Information                                                         No significant impact on overall
                                              Established with investment
Technology Co., Ltd.                                                                    production and performance

                                                                                        No significant impact on overall
Zhejiang Huaxiao Technology Co., Ltd.         Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Zhejiang Vision Technology Co., Ltd.          Established with investment
                                                                                        production and performance

Beijing Dahua Zhongcheng Technology                                                     No significant impact on overall
                                              Established with investment
Co., Ltd.                                                                               production and performance

                                                                                        No significant impact on overall
Dahua Technology New Zealand Limited          Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Dahua Technology Netherlands B.V.             Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Dahua Technology Morocco SARL                 Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Dahua Technology S.R.L                        Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
DAHUA VISION LLC                              Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Xi’an Dahua Zhilian Technology Co., Ltd. Established with investment
                                                                                        production and performance

                                                                                        No significant impact on overall
Dahua Technology Italy S.R.L.                 Equity acquisition
                                                                                        production and performance

                                                                                        No significant impact on overall
Lorex Technology Inc.                         Equity acquisition
                                                                                        production and performance

Jiangsu Dahua Zhiyun Information                                                        No significant impact on overall
                                              Deregistration
Technology Co., Ltd.                                                                    production and performance

                                              Established with investment and           No significant impact on overall
1151551 B.C.LTD
                                              deregistered                              production and performance




VIII. Structured Entities Controlled by the Company


□ Applicable √ Not applicable


IX. Guidance on Company’s Business Performance from January 1, 2018 to September 30,
2018

Forecast of operation performance in January - September 2018: net profits attributable to shareholders of the Company is positive
and this is not returning to profitability.



                                                                                                                                     22
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Variation in Net Profits Attributable to Shareholders of
                                                                                        0%       to                                     15%
the Company in January - September 2018

Variation Scope in Net Profits Attributable to
Shareholders of the Company (Ten Thousand RMB) in                               144,449.38       to                            166,116.79
January - September 2018

Net Profits Attributable to Shareholders of the Company
                                                                                                                              144,449.38
(Ten Thousand RMB) in January - September 2017

                                                              With the Company's sales and operation revenue growing, it is
                                                              forecasted that the net profits attributable to the owner of the parent
Reasons for Changes in Performance
                                                              company increases by 0%-15% compared with the corresponding period
                                                              of last year.


X. Risks of the Company and Risk Response Solutions

In the reporting period, there are no changes in the risks faced with by the Company, and the Company has always been striving to
identify all the risks, and actively taking the countermeasures to avoid and lower the risks:
     1. Risk of technology upgrade: The video surveillance industry is a typical technology-intensive industry, which is changing
extremely fast. If the Company is unable to keep up with development trends in the industry's technology, to pay full attention to
customers' diversified individual needs, and to be followed by sufficient R&D investments, it will still face the risk of losing market
competitiveness due to discontinuous innovation. The Company continuously enhances researches on core technologies in AI, video
cloud, chip design and other fields by enhancing R&D investment, reserves product, technology, management and talent resources to
gear to the broader market in the future, thus realizing sustained and steady development of the Company's businesses.
     2. Risk of business model transformation: With the development of network communications, cloud computing, and big data, as
well as the popularity of smart phones, the business model in the IoT era may have an impact on the traditional industry development
model. If an enterprise cannot timely grasp opportunities brought about by the business model transformation, it may face the risk
that the original market structure becomes broken. The Company pays constant attention to and studies the significant changes in the
global economy, industry and technological fields, analyzes the development logics of the industry, continuously integrates the
evolution and video technologies in the global security industry and IoT industry with the information communication technologies
and digital technologies, pre-judges diversification and uncertainty of customers' demands, consolidates the original advantage
markets, actively explores and conducts experiments on new businesses and new business models, and makes layouts in businesses
and technologies.
     3. Risk of product information security: The Company attaches great importance to and continuously strengthens resource
investment to ensure safe and reliable operations of the security system so as to respond to the product information security risks on
the Internet. However, there may still exist hackers, computer viruses, physical security vulnerabilities, natural disasters, accidents,
power interruptions, telecommunications failures, and other terrorism or warfare events, which exert influences such as security
vulnerabilities, system failures, or service interruptions. The Company has set up a network security committee and a professional
network security team as well as developed product security programs at the company level, ensuring safety across the whole process
including demand, design, coding and testing. At the same time, actively carry out technical exchanges and cooperation with external
mainstream security manufacturers, security evaluation institutions and corresponding industry security associations to ensure the
provision of security products and solutions for customers.
     4. Risk of intellectual property rights: The acceleration of the Company's globalization and self-owned brand strategy will likely
bring intellectual property risks such as IP rights protection and patent infringement. The Company attaches great importance to
technical innovation and has established the mechanisms for protection and management of innovation achievements, private brands,


                                                                                                                                          23
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


trade secrets and other intangible assets to constantly concentrate advantageous intellectual property right assets; established the
system for compliance and risk control of the intellectual property rights to constantly enhance the Company's ability in
understanding and grasping the intellectual property right laws and regulations and administrative judicial environments in the region
where the Company's businesses are located.
     5. Risk of exchange rate: The Company's export transactions are mostly settled in United States Dollars ("USD"), while
overseas sales have increased continuously. Therefore, fluctuations in the foreign exchange rate have the potential to affect the profits
of the Company. The Company,considering that US dollars is mainly adopted as the settlement currency, hedges and avoids risks of
exchange rate by centralized management of foreign exchange funds, procurement payment hedging and other approaches.
     6. Risk of decline in local fiscal spending power: At present, local fiscal earnings are declining, while debt is relatively high. If
the local fiscal spending power falls, it may lead to a slowdown in the growth of industry demand, extensions to project time, long
periods needed for companies to withdraw capital, and delays in customer' payments. The Company continuously perfects internal
control system and optimizes project review methods, and reduces the risks of delay in payment by prudently selecting local
engineering projects and systematically evaluating the project risks and reasonably conducting risk management and control.

     7. Risk of international operation: The Company's products and solutions cover as many as over one hundred countries and
regions and international business may face the protectionism risk there, which may bring adverse impact on the Company’s local
business development. The Company actively prevents and deals with international operation risks, establishes overseas compliance
and risk control system and continuously advances understanding and adaptability of laws and regulations as well as political and
economical environment in the regions where the Company’s business is involved.




                                                                                                                                       24
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                                             Section V Significant Events

I. Annual General Meetings and Extraordinary General Meetings Convened during the
Reporting Period

1. Annual general meetings convened during the reporting period


                                              Proportion of
        Meeting              Nature           Participating     Convened Date        Date of Disclosure         Disclosure Index
                                                Investors

First Extraordinary    Extraordinary                                                                       Juchao Information
General Meeting in     General                        45.25% March 6, 2018         March 7, 2018           Website
2018                   Meeting                                                                             http://www.cninfo.com.cn/

                                                                                                           Juchao Information
2017 Annual General Annual General
                                                      49.53% April 27, 2018        April 28, 2018          Website
Meeting                Meeting
                                                                                                           http://www.cninfo.com.cn/

Second
                       Extraordinary                                                                       Juchao Information
Extraordinary
                       General                        42.05% May 28, 2018          May 29, 2018            Website
General Meeting in
                       Meeting                                                                             http://www.cninfo.com.cn/
2018


2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
rights

□ Applicable √ Not applicable


II. Proposals for Profit Distribution or Capitalization of Capital Reserves during the
Reporting Period

□ Applicable √ Not applicable
The Company plans not to distribute cash dividends, send bonus shares, or convert capital reserves to share capital for the first half
year.


III. Complete and Incomplete Commitments of the Company and Its Actual Controller,
Shareholders, Related parties, Acquirers, and Other Related Parties by the End of the
Reporting Period

√ Applicable □ Not applicable

                  Giver of     Commitments
Commitments                                                        Details                          Time         Term      Performance
                Commitments           Type



                                                                                                                                         25
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                               The number of shares transferred each year
                                                                                                                         As of the
                                               during his/her term of service shall not exceed 25
                                                                                                                         disclosure date
                                               percent of the total number of shares he/she
Commitments Fu Liquan,                                                                                                   of this
                                               holds in the Company; he/she shall not transfer
Made during Zhu                Commitment                                                                                announcement,
                                               his/her shares in the Company within half a year July 15,
Initial Public Jiangming,      on restricted                                                                   Long-term the
                                               after he/she leaves the Company; within the next 2007
Offerings or      Chen Ailing, shares                                                                                    aforementioned
                                               twelve months, the number of shares sold
Refinancing       Wu Jun                                                                                                 commitments
                                               through the stock exchange listing transactions
                                                                                                                         are still in strict
                                               shall not exceed 50% of the total shares he/she
                                                                                                                         execution.
                                               holds.

                                               (1) He/she will not directly engage in operational
                                               activities that constitute horizontal competition
                                                                                                                         As of the
                                               with the stock company's business; (2) for
                                                                                                                         disclosure date
Other                                          companies he/she held or indirectly held, he/she
                                                                                                                         of this
Commitments                                    will fulfill the obligations under this commitment
                               Commitment                                                                                announcement,
to Minority       Fu Liquan,                   through agencies and personnel (including but        June 30,
                               on horizontal                                                                   Long-term the
Shareholders Chen Ailing                       not limited to directors and managers); (3) if the 2007
                               competition                                                                               aforementioned
of the                                         stock company further expands its range of
                                                                                                                         commitments
Company                                        products and business scope, he/she and the
                                                                                                                         are still in strict
                                               company held by him/her will not compete with
                                                                                                                         execution.
                                               the expanded range of products or businesses of
                                               the stock company.

Whether the
Commitment
                  Yes
Is Fulfilled on
Time


IV. Engagement and Dismissal of the CPA Firm

Whether the interim report has been audited
□ Yes √ No
The interim report of the Company has not been audited.


V. Explanation Given by the Board of Directors and Supervisory Committee Regarding the
“Non-standard Auditor’s Report” Issued by the CPA Firm for the Reporting Period

□ Applicable √ Not applicable


VI. Explanation Given by the Board of Directors Regarding the “Non-standard Auditor’s
Report” Issued by the CPA Firm for the Prior Year

□ Applicable √ Not applicable




                                                                                                                                       26
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


VII. Bankruptcy and Restructuring

□ Applicable √ Not applicable
No such case as bankruptcy and reorganization related event during the reporting period.


VIII. Material Litigation

Significant litigation and arbitrations
□ Applicable √ Not applicable
No such case as significant lawsuit or arbitration during the reporting period.
Other lawsuits
□ Applicable √ Not applicable


IX. Media Queries

□ Applicable √ Not applicable
No such case as common challenge from media during the reporting period.


X. Punishments and Rectifications

□ Applicable √ Not applicable
No such case as penalty and rectification during the reporting period.


XI. Integrity of the Company and Its Controlling Shareholder and Actual Controllers

□ Applicable √ Not applicable


XII. Implementation of the Company’s Equity Incentive Plan, Employee Stock Incentive Plan
or Other Incentive Plans

√ Applicable □ Not applicable
     On May 16, 2017, the Company's 2016 Annual General Meeting of Shareholders reviewed and approved the Zhejiang Dahua
Technology Co., Ltd. Phase III Employee Stock Ownership Plan (Draft) and its summary, and decided to implement the Phase III
Employee Stock Ownership Plan. On June 1, 2017, the Company's Phase III Employee Stock Ownership Plan completed the
purchase of the shares through the Caitong Securities Asset Management Dahua No. 3 Directed Asset Management Plan, with an
average purchase price of RMB16.83 per share and a purchase volume of 47,000,000 shares. As of June 2, 2018, the lock-up period
of the Company's Phase III Employee Stock Ownership Plan expired.


XIII. Significant Related-Party Transactions

1. Related-party transactions arising from routine operation

□ Applicable √ Not applicable
No such case as related-party transactions connected with daily operations.

                                                                                                                            27
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


2. Related-party transactions regarding purchase and sales of assets or equity

□ Applicable √ Not applicable
No such case as related-party transactions arising from the acquisition or sale of assets or equity.


3. Significant related-party transactions arising from joint investments on external parties

√ Applicable □ Not applicable
For details, see "5. Other Significant Related-party Transactions" in this section.


4. Related-party creditor’s rights and debts

□ Applicable √ Not applicable
There are no related credits and debts during the reporting period.


5. Other significant related-party transactions

√ Applicable □ Not applicable
     1) On January 25, 2018, the Company's 5th session of the 6th Board of Directors' meeting reviewed and approved the Proposal
on Adjustment of Joint Investment Plan with Related Persons and Related-party Transactions (I). It's agreed to adjust the
contributions to Zhejiang Huaan Technology Co., Ltd. (temporary name) with the related legal person Zhejiang Huashi Investment
Management Co., Ltd., the related natural person Wei Meizhong and 15 unrelated natural persons. After the adjustment, the
Company will contribute RMB 25.5 million with its own funds, accounting for 51% of the registered capital. In March 2018, the
project company was established and the name of the company approved by the industrial and commercial bureau is Zhejiang
Huaxiao Technology Co., Ltd.
     2) On January 25, 2018, the Company's 5th session of the 6th Board of Directors' meeting reviewed and approved the Proposal
on Adjustment of Joint Investment Plan with Related Persons and Related-party Transactions (II). It's agreed to adjust the
contributions to Zhejiang Huazhi Technology Co., Ltd. (renamed as Zhejiang Dahua Robot Technology Co., Ltd.) with the related
legal person Zhejiang Huashi Investment Management Co., Ltd. and the unrelated persons. After the adjustment, the Company will
contribute RMB 25.5 million with its own funds, accounting for 51% of the registered capital; Huashi Investment will contribute
RMB 24.5 million in cash, accounting for 49% of the registered capital. In August 2018, the project company was established.
     3) On January 25, 2018 the Company's 5th session of the 6th Board of Directors' meeting reviewed and approved the Proposal
on Giving up the Shareholding Company's Right to Increase Capital with the Same Percentage and Related-party Transactions. It is
agreed to give up the right of 8 investors including Ningbo Jinghang Equity Investment Partnership, Ningbo Gulin Equity Investment
Partnership and Hangzhou Yixun Investment Management Partnership to increase the capital of Zhejiang Leapmotor Technology Co.,
Ltd. with the same percentage. The total amount of related-party transactions involved in giving up the right to increase the capital
with the same percentage is RMB 41,948,300. The change of industrial and commercial registrations for the above matter was
completed in March 2018.
     4) On April 17, 2018, the Company's 8th session of the 6th Board of Directors' meeting reviewed and approved the Proposal on
Increasing Capital in Holding Subsidiaries and Related-party Transactions. The Company and the related person Mr. Fu Liquan
increased capital in holding subsidiary Hangzhou Huacheng Network Technology Co., Ltd. with the same percentage. Among them,
the Company increased the capital by RMB 20.4 million. Upon completion of the capital increase, the registered capital of Huacheng
Network was increased from RMB19.6 million. Upon completion of the capital increase, the registered capital of Huacheng Network
was increased from RMB 10 million to RMB 50 million. The change of industrial and commercial registrations for the above matter


                                                                                                                                  28
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


was completed in April 2018.
     5). On May 31, 2018, the Company's 11th session of the 6th Board of Director's meeting reviewed and approved the Proposal on
Accepting Transfer of Part of the Equity of the Company and Giving up the Priority to Accept Transfer and Related-party
Transactions. It is agreed to: (1) Accept transfer of 6% equity in HuaRay Technology held by the related legal person Zhejiang
Huashi Investment Management Co., Ltd., and give up the priority to accept transfer of 49% equity in HuaRay Technology by the
related legal person Huashi Investment, the related natural person Zhang Xingming and other unrelated persons to the related legal
persons and the core employee venture capital investment new business shareholding platform Ningbo Huayu Investment
Management Partnership Enterprise (hereinafter referred to as "Ningbo Huayu"); (2) Give up the priority to accept transfer of 49%
equity in Zhejiang Huachuang Vision Technology Co., Ltd. held by the related legal person Huashi Investment and other unrelated
natural persons to Ningbo Huayu; (3) Give up the priority to accept proposed transfer of 49% equity in Zhejiang Dahua Security
Network Operation Service Co., Ltd. held by the related legal person Huashi Investment, the related natural person Wu Jun and other
unrelated persons to Ningbo Huayu. In July 2018, the above three matters about equity transfer were completed.
     6). On May 31, 2018, the Company's 11th session of the 6th Board of Director's meeting reviewed and approved the Proposal on
Making Joint Investment with the Related Persons and Related-party Transactions. It is agreed to jointly fund the establishment of
Wuxi Dahua Ruipin Technology Co., Ltd. with the related legal person Huashi Investment. Among them, the Company contributed
RMB 25.5 million with its own funds, accounting for 51% of the registered capital. Huashi Investment contributed RMB 24.5 million
by cash, accounting for 49% of the registered capital. In June 2018, the project company was established.
     7). On June 21, 2018, the Company's 12th session of the 6th Board of Director's meeting reviewed and approved the Proposal on
Giving up the Priority to Accept Transfer and Related-party Transactions. It is agreed to give up the priority to accept the proposed
transfer of 49% equity in Hangzhou Huacheng Network Technology Co., Ltd. held by the Company's controlling shareholder Fu
Liquan to the related legal persons and the core employee venture capital investment new business shareholding platform Ningbo
Huayu. In July 2018, this equity transfer was completed.
Website for disclosing the interim report on significant related-party transactions

                        Announcement Name                               Date of Disclosure         Website for the Disclosure

Announcement on adjustment of joint investment plan with related                             Juchao Information Website
                                                                       January 26, 2018
persons and related-party transactions (I)                                                   http://www.cninfo.com.cn/

Announcement on adjustment of joint investment plan with related                             Juchao Information Website
                                                                       January 26, 2018
persons and related-party transactions (II)                                                  http://www.cninfo.com.cn/

Announcement on giving up the shareholding company’s right to
                                                                                             Juchao Information Website
increase capital with the same percentage and related-party            January 26, 2018
                                                                                             http://www.cninfo.com.cn/
transactions

Announcement on increasing capital in holding subsidiaries and                               Juchao Information Website
                                                                       April 18, 2018
related-party transactions                                                                   http://www.cninfo.com.cn/

Announcement on accepting transfer of part of
                                                                                             Juchao Information Website
the equity of the Company and giving up the priority to accept         June 1, 2018
                                                                                             http://www.cninfo.com.cn/
transfer and related-party transactions

Announcement on joint investment with related persons and                                    Juchao Information Website
                                                                       June 1, 2018
related-party transactions                                                                   http://www.cninfo.com.cn/

Announcement on giving up the priority to accept transfer and                                Juchao Information Website
                                                                       June 22, 2018
related-party transactions                                                                   http://www.cninfo.com.cn/




                                                                                                                                  29
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


XIV. Significant Contracts and Their Execution

1. Trusteeship, contracting and leasing

(1) Trusteeship

□ Applicable √ Not applicable
No such case as custody during the reporting period.


(2) Contracting

□ Applicable √ Not applicable
No such case as contracting during the reporting period.


(3) Leasing

√ Applicable □ Not applicable
Explanations on leases
During the current reporting period, the Company used part of the properties located at No. 369, IoT Street, Binjiang District,
Hangzhou for rental, and the leased property was used for office, warehouse and production workshops. There were no other
significant property leases.
Cases that brought the profit and loss accounted for more than 10% of the Company's total profit during the reporting period
□ Applicable √ Not applicable
No such leases that brought the profit and loss accounted for more than 10% of the Company's total profit during the reporting
period.


2. Significant guarantees

√ Applicable □ Not applicable


(1) Guarantees

                                                                                                               Unit: ten thousand RMB

                         External Guarantees from the Company (Excluding Guarantees to the Subsidiaries)

                           Announcem
                                                                                                                           Guarantee
                               ent Date of              Actual Occurrence
                                                                             Actual                                            for
                               Disclosure Guarantee           Date                        Type of    Term of      Due or
    Guaranteed Party                                                        Guarantee                                       Related
                                 of the      Amount    (Date of Agreement               Guarantee   Guarantee       Not
                                                                            Amount                                         Parties or
                               Guarantee                    Signing)
                                                                                                                               Not
                                  Cap

                                                   Company's Guarantees to Subsidiaries

                           Announcem                                         Actual                                        Guarantee
    Guaranteed Party                         Guarantee Actual Occurrence                  Type of    Term of      Due or
                               ent Date of                                  Guarantee                                          for

                                                                                                                                      30
                                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                         Disclosure   Amount             Date            Amount      Guarantee     Guarantee         Not   Related
                           of the                (Date of Agreement                                                        Parties or
                         Guarantee                      Signing)                                                                Not
                            Cap

                                                                                                 Two years
                                                                                                 after the
                                                                                     Joint
                                                 Thursday,                                       maturity of the
                                                                            50,000 liability                       No      No
                                                 November 30, 2017                               debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract

                                                                                                 Two years
                                                                                                 after the
                                                                                     Joint
                                                 Tuesday, March 27,                              maturity of the
                                                                            50,000 liability                       No      No
                                                 2018                                            debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract

                                                                                                 Two years
                                                                                                 after the
                                                                                     Joint
                                                 Tuesday, November                               maturity of the
                                                                             5,000 liability                       No      No
                                                 28, 2017                                        debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract
                        Friday,
Zhejiang Dahua Vision                                                                            Two years
                        March 9,       500,000
Technology Co., Ltd.                                                                             after the
                        2018                                                         Joint
                                                 Friday, October 13,                             maturity of the
                                                                            22,000 liability                       No      No
                                                 2017                                            debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract

                                                                                                 Two years
                                                                                                 after the
                                                                                     Joint
                                                 Tuesday, May 23,                                maturity of the
                                                                            20,000 liability                       Yes     No
                                                 2017                                            debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract

                                                                                                 Three years
                                                                                                 after the
                                                                                     Joint
                                                 Monday, January                                 maturity of the
                                                                            11,000 liability                       No      No
                                                 15, 2018                                        debts in the
                                                                                     guarantee
                                                                                                 master
                                                                                                 contract

                                                 Friday, July 21,                    Joint       Two years
                                                                             8,000                                 No      No
                                                 2017                                liability   after the


                                                                                                                                      31
                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                   guarantee maturity of the
                                               debts in the
                                               master
                                               contract

                                               Two years
                                               after the
                                   Joint
Sunday, July 9,                                maturity of the
                            10,000 liability                     Yes   No
2017                                           debts in the
                                   guarantee
                                               master
                                               contract

                                               Three years
                                               after the
                                   Joint
Thursday,                                      maturity of the
                            20,000 liability                     No    No
November 30, 2017                              debts in the
                                   guarantee
                                               master
                                               contract

                                               Two years
                                               after the
                                   Joint
Thursday, August                               maturity of the
                            60,000 liability                     No    No
10, 2017                                       debts in the
                                   guarantee
                                               master
                                               contract

                                               Two years
                                               after the
                                   Joint
Friday, November                               maturity of the
                            30,000 liability                     No    No
24, 2017                                       debts in the
                                   guarantee
                                               master
                                               contract

                                               Two years
                                               after the
                                   Joint
Monday, December                               maturity of the
                            30,000 liability                     No    No
4, 2017                                        debts in the
                                   guarantee
                                               master
                                               contract

                                   Joint       June 6, 2016
Monday, June 6,
                            29,000 liability   to January 15, No       No
2016
                                   guarantee 2020

                                               Two years
                                   Joint       after the
Friday, April 13,
                            24,000 liability   maturity of the No      No
2018
                                   guarantee debts in the
                                               master


                                                                            32
                                                                2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                                           contract

                                                                                           Two years
                                                                                           after the
                                                                               Joint
                                              Wednesday, May                               maturity of the
                                                                        30,000 liability                     Yes   No
                                              17, 2017                                     debts in the
                                                                               guarantee
                                                                                           master
                                                                                           contract

                                                                                           Two years
                                                                                           after the
                                                                               Joint
                                                                                           maturity of the
                                              Friday, May 4, 2018       30,000 liability                     No    No
                                                                                           debts in the
                                                                               guarantee
                                                                                           master
                                                                                           contract

                                                                                           Two years
                                                                                           after the
                                                                               Joint
                                              Monday, May 7,                               maturity of the
                                                                      25,357.2 liability                     No    No
                                              2018                                         debts in the
                                                                               guarantee
                                                                                           master
                                                                                           contract

                                                                                           Two years
                                                                                           after the
                                                                               Joint
                                              Wednesday, January                           maturity of the
                                                                        30,000 liability                     Yes   No
                                              3, 2018                                      debts in the
                                                                               guarantee
                                                                                           master
                                                                                           contract

                         Friday,                                               Joint       June 6, 2016
Zhejiang Dahua Zhilian                        Monday, June 6,
                         March 9,    50,000                             20,000 liability   to June 30,       No    No
Co., Ltd.                                     2016
                         2018                                                  guarantee 2020

                                                                               Joint       June 6, 2016
                                              Monday, June 6,
                                                                        10,000 liability   to June 30,       No    No
                                              2016
                                                                               guarantee 2020
                         Friday,                                                           Two years
Zhejiang Dahua System
                         March 9,   100,000                                                after the
Engineering Co., Ltd.                                                          Joint
                         2018                 Tuesday, October                             maturity of the
                                                                         6,000 liability                     No    No
                                              10, 2017                                     debts in the
                                                                               guarantee
                                                                                           master
                                                                                           contract

                                                                                           December 15,
                         Friday,                                               Joint
Dahua Technology (HK)                                                                      2017 to
                         March 9,   200,000 December 15, 2017           32,671 liability                     No    No
Limited                                                                                    December 15,
                         2018                                                  guarantee
                                                                                           2020




                                                                                                                        33
                                                              2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                                          Two years
                                                                                          after the
                                                                              Joint
                                             Thursday, August                             maturity of the
                                                                      20,000 liability                      No   No
                                             24, 2017                                     debts in the
                                                                              guarantee
                                                                                          master
                                                                                          contract

                                                                                          Two years
                                                                                          after the
                                                                              Joint
                                             Monday, April 9,                             maturity of the
                                                                      20,000 liability                      No   No
                                             2018                                         debts in the
                                                                              guarantee
                                                                                          master
                                                                                          contract

                                                                              Joint       May 7, 2018
                                             Monday, May 7,
                                                                    25,357.2 liability    to May 6,         No   No
                                             2018
                                                                              guarantee 2019

Guangxi Dahua            Friday,
Information Technology March 9,     30,000                       No such case during the reporting period
Co., Ltd.                2018

                         Friday,
Dahua Technology USA
                         March 9,     350                        No such case during the reporting period
Inc
                         2018

                         Friday,
Dahua Europe B.V.        March 9,   30,000                       No such case during the reporting period
                         2018

                         Friday,
Dahua Technology
                         March 9,     200                        No such case during the reporting period
Singapore Pte. Ltd
                         2018

                         Friday,
Dahua Technology UK
                         March 9,     200                        No such case during the reporting period
Limited
                         2018

                         Friday,
Dahua Technology
                         March 9,     500                        No such case during the reporting period
Poland sp.zo.o.
                         2018

                         Friday,
Dahua Technology
                         March 9,     500                        No such case during the reporting period
Hungary Kft
                         2018

                         Friday,
Dahua Technology India
                         March 9,    1,000                       No such case during the reporting period
Private Limited
                         2018

Dahua Technology         Friday,
                                     1,000                       No such case during the reporting period
Brasil Comercio Serv     March 9,


                                                                                                                      34
                                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Em Seguranca                2018
Eletronica Ltda

                            Friday,
Dahua italy s.r.l.          March 9,        3,000                       No such case during the reporting period
                            2018

                                                                         Total Amount of
Total Amount of Guarantees to                                            Guarantees to
Subsidiaries Approved during the                               916,750 Subsidiaries Actually                                215,714.40
Reporting Period (B1)                                                    Occurred during the
                                                                         Reporting Period (B2)

                                                                         Total Balance of
Total Amount of Guarantees to                                            Guarantees Actually
Subsidiaries Approved by the End of                            916,750 Paid to Subsidiaries at                              528,385.40
the Reporting Period (B3)                                                the End of the
                                                                         Reporting Period (B4)

                                             Subsidiaries' Guarantees to Subsidiaries

                            Announcem
                                                                                                                            Guarantee
                            ent Date of             Actual Occurrence
                                                                           Actual                                               for
                             Disclosure Guarantee         Date                          Type of     Term of        Due or
    Guaranteed Party                                                     Guarantee                                           Related
                               of the     Amount    (Date of Agreement               Guarantee     Guarantee        Not
                                                                          Amount                                             Parties or
                             Guarantee                   Signing)
                                                                                                                                Not
                                Cap

The Total Amount of the Company's Guarantees (The Total of the Above Three Items)

                                                                         Total Amount of
Total Amount of Guarantees                                               Guarantees Actually
Approved during the Reporting                                  916,750 Occurred during the                                  215,714.40
Period (A1+B1+C1)                                                        Reporting Period
                                                                         (A2+B2+C2)

                                                                         Total Balance of
Total Amount of Guarantees                                               Guarantees Actually
Approved by the End of the Reporting                           916,750 Paid at the End of the                               528,385.40
Period (A3+B3+C3)                                                        Reporting Period
                                                                         (A4+B4+C4)

Total Amount of Actual Guarantees (A4+B4+C4) as a Percentage of the
                                                                                                                               48.14%
Company's Net Assets

Including:

Balance of Guarantees to the Shareholders, Actual Controllers and
Their Related Parties (D)

Balance of Debt Guarantees Directly or Indirectly Offered to
                                                                                                                            492,385.40
Guaranteed Objects with Asset-liability Ratio Exceeding 70% (E)



                                                                                                                                       35
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Total Amount of the Above Three Guarantees (D+E+F)                                                                           492,385.40

Notes on Possible Joint and Several Repayment Liability for Unexpired
                                                                                                                                    N/A
Guarantees (If Any)

Notes on Providing External Guarantees in Violation of Specified
                                                                                                                                    N/A
Procedures (If Any)

Notes on details of synthetic guarantees


(2) External guarantees in violation of laws and regulations

□ Applicable √ Not applicable
There are no external guarantees in violation of laws and regulations during the reporting period.


3. Other significant contracts

□ Applicable √ Not applicable
No such case as other significant contract during the reporting period.


XV. Social Responsibility

1. Significant environmental problems

Whether the listed company and its subsidiaries belong to the key pollutant discharging units announced by the environmental
protection department
No


2. Fulfillment of the social responsibility of targeted poverty alleviation

In the first half reporting year of the Company, there has been no targeted poverty alleviation activity, or follow-up targeted poverty
alleviation plan.


XVI. Explanation of Other Significant Events

     1. On January 24, 2017, the Company's holding sub-subsidiary South North United Information Technology Co., Ltd. and its
wholly-owned subsidiary Zhejiang Dahua System Engineering Co., Ltd. signed a Cooperation Agreement on PPP Investment in Safe
City Project of Shache County with the People's Government of Shache County in Kashgar, Xinjiang, which is just a framework
agreement on the PPP project. The agreement stipulates that the service content is the pre-feasibility study of the project and the
design of the project, etc. For the implementation of the specific project, it still needs to fulfill related decision-making and approval
procedures, such as government procurement.
     On July 21, 2017, the Company received the Notification of Award issued by the project purchasing unit, which confirmed that
the wholly-owned subsidiary Zhejiang Dahua System Engineering Co., Ltd. (the consortium leader), with the holding sub-subsidiary
South North United Information Technology Co., Ltd. (member of the consortium) was the winning bidder for the Safe City
Construction Project (PPP) in Shache County. The winning bid amount of the project is RMB 4,314,790,000 (the final amount is
based on the signed contract), which is the total amount for construction and operation within 10 years project cooperation period.



                                                                                                                                       36
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


      On August 4, 2017, the Company's 34th session of the 5th Board of Directors' meeting reviewed and approved the Proposal on
Investing to Establish a PPP Project Company in Shache County, Xinjiang, and the Company submitted a bid based on the
requirements for the Shache County City Construction Project (PPP). The winning consortium jointly funded the establishment of the
project company, with a registered capital of RMB 335,567,200. Among them, Zhejiang Dahua System Engineering Co., Ltd.
contributed RMB 234,897,040, accounting for 70% of the total contribution; South North United Information Technology Co., Ltd.
contributed RMB 100,670,160, accounting for 30%. In August 2017, the project company was established and the name of the
company approved by the industrial and commercial bureau was Xinjiang Dahua Xinzhi Information Technology Co., Ltd.
      On April 18, 2018, the winning bidder received the requirements of Shache Public Security Bureau to stop implementation of
Safe City Construction Project (PPP) in Shache County. Near a half of the construction progress in the project construction period
has been completed, but no expenses for subsequent equipment replacement, operation and maintenance have been incurred. The
actual investment in the construction period will be further accounted and confirmed with the government.
     The various activities and construction of this project engaged in by the winning bidder are in compliance with the requirements
in PPP-related laws and regulations, but the risk exists that the project will not be furthered and the identifiable income of the
Company in the future may be reduced. The Company will actively cooperate with relevant government departments in their work,
and timely perform the obligation of information disclosure in accordance with the subsequent progress of the project and the
provisions in relevant laws and regulations and the Articles of Association.
       2. On February 24, 2018, the Company disclosed the Announcement on Subsidiary's Release of External Guarantees. The
Company's subsidiaries, System Engineering, Dahua Zhicheng and Yunnan International Trust Co., Ltd. signed the Pledge Contract
on December 6, 2017. System Engineering and Dahua Zhicheng as a pledger provided a pledge guarantee for the debt under the Trust
Loan Contract signed between Guangxi Baixing Holdings Co., Ltd. as a debtor and Yunnan International Trust Co., Ltd. as a creditor
(with the trust loan principal of RMB 0.23 billion). The collateral in this guarantee was System Engineering and Dahua Zhicheng's
accounts receivable income rights. This guarantee responsibility was released on February 22, 2018.
      3. On May 17, 2017, the Company's 31st session of the 5th Board of Director's meeting reviewed and approved the Proposal
on Increasing Capital in Holding Subsidiaries, and it's agreed that the Company will increase its capital in Dahua Zhilian by RMB
610 million with its own funds. In this capital increase, China Development Bank Development Fund Co., Ltd. gives up the right to
increase the capital with the same percentage. Upon completion of the capital increase, the registered capital of Dahua Zhilian will be
increased from RMB 500 million to RMB 1.11 billion. The proportion of equity held by the Company will be 90.09%. This capital
increase was completed on June 26, 2018.
      4. On March 6, 2018, the Company's First Extraordinary General Meeting of Shareholders in 2018 reviewed and approved the
Management Measures for Core Employee Venture Capital Investment New Businesses (Draft), and decided to implement the core
employee venture capital investment new business plan of the Company.


XVII. Significant Events of the Company’s Subsidiaries

□ Applicable √ Not applicable




                                                                                                                                    37
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




   Section VI Changes in Shares and Information about Shareholders

I. Changes in Shares

1. Changes in shares

                                                                                                                               Unit: share

                            Before the Change                       Changes in the Period (+, -)                    After the Change

                                                                     Shares
                                                             Bon
                                                     New            Transfer
                                                              us
                             Shares        Ratio    Shares          red from      Others           Sub-total        Shares      Ratio
                                                             Shar
                                                    Issued           Capital
                                                              e
                                                                    Reserves

I. Shares Subject to
Conditional              1,196,864,751     41.29%                               -133,537,978 -133,537,978 1,063,326,773         36.68%
Restrictions

3. Other Domestic
                         1,196,864,751     41.29%                               -133,537,978 -133,537,978 1,063,326,773         36.68%
Shares

II. Shares without
                         1,701,891,379     58.71%                               133,537,978        133,537,978 1,835,429,357    63.32%
Restrictions

1. RMB Ordinary
                         1,701,891,379     58.71%                               133,537,978        133,537,978 1,835,429,357    63.32%
Shares

III. Total               2,898,756,130 100.00%                                              0                  0 2,898,756,130 100.00%

Reasons for changes in shares
√ Applicable □ Not applicable
1. The number of shares locked by executives of the Company shall be reverified according to 75% of the total number of shares held
by executives.
Approval for changes in shares
□ Applicable √ Not applicable
Transfer for changes in shares
□ Applicable √ Not applicable
Effects of changes in shares on the basic earnings per share ("EPS"), diluted EPS, net assets per share, attributable to common
shareholders of the Company, and other financial indexes over the last year and last period
□ Applicable √ Not applicable
Other contents that the Company considers necessary or are required by the securities regulatory authorities to disclose
□ Applicable √ Not applicable




                                                                                                                                        38
                                                                           2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


2. Changes in restricted shares

√ Applicable □ Not applicable
                                                                                                                               Unit: share

 Name of       Opening        Vested in         Increased      Closing
Sharehold     Restricted          Current       in Current    Restricted       Note on Restricted Shares        Date of Unlocking
      er        Shares            Period         Period        Shares

                                                                             According to the relevant     According to the relevant
Fu Liquan      919,748,180    77,786,195                  0    841,961,985 provisions of executives        provisions of executives
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Wu Jun          54,267,937        8,674,773               0     45,593,164 provisions of executives        provisions of executives
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Zhu
               145,096,117    28,425,000                  0    116,671,117 provisions of executives        provisions of executives
Jiangming
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Chen
                71,262,376    17,815,266                  0     53,447,110 provisions of executives        provisions of executives
Ailing
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Wu Jian            999,250          249,749               0        749,501 provisions of executives        provisions of executives
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Wei
                 1,078,351          103,351               0        975,000 provisions of executives        provisions of executives
Meizhong
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Zhang
                   938,560           90,000               0        848,560 provisions of executives        provisions of executives
Xingming
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Zhang Wei          140,625                  0             0        140,625 provisions of executives        provisions of executives
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Chen
                 1,181,963                  0             0      1,181,963 provisions of executives        provisions of executives
Yuqing
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Ying Yong          999,250          249,813               0        749,437 provisions of executives        provisions of executives
                                                                             shares management             shares management

                                                                             According to the relevant     According to the relevant
Wu
                   496,710          120,000               0        376,710 provisions of executives        provisions of executives
Yunlong
                                                                             shares management             shares management



                                                                                                                                       39
                                                                          2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                             According to the relevant       According to the relevant
Yan Gang            276,262      69,000              0             207,262 provisions of executives          provisions of executives
                                                                             shares management               shares management

                                                                             According to the relevant       According to the relevant
Zhu
                         0              0        45,169             45,169 provisions of executives          provisions of executives
Jiantang
                                                                             shares management               shares management

                                                                             According to the relevant       According to the relevant
Shen
                    379,170             0            0             379,170 provisions of executives          provisions of executives
Huiliang
                                                                             shares management               shares management

Total         1,196,864,751 133,583,147          45,169     1,063,326,773                   --                             --


3. Issuance and listing of securities

II. Total Number of Shareholders and Their Shareholdings

                                                                                                                                 Unit: share

                                                                       Total Number of Preferred Shareholders
Total Number of Common
                                                                       (If Any) (Refer to Note 8) Whose Voting
Shareholders at the End of the                                69,840                                                                      0
                                                                       Rights Have Been Recovered at the End
Reporting Period
                                                                       of the Reporting Period

      Particulars about Shares Held by Shareholders with a Shareholding Percentage over 5% or Top Ten Common Shareholders

                                                                                                     Number of       Pledged or Frozen
                                                     Total Shares      Increase/De Number of
                                                                                                      Common
                                       Shareholdi    Held at the          crease       Common
        Name of         Nature of                                                                    Shares Held
                                            ng        End of the         during the   Shares Held
      Shareholder      Shareholder                                                                     without       Status      Amount
                                       Percentage     Reporting          Reporting with Trading
                                                                                                       Trading
                                                          Period          Period      Restrictions
                                                                                                     Restrictions

                      Domestic
Fu Liquan                                   38.68% 1,121,181,880 -1434100             841,961,985    279,219,895 Pledge         81,602,000
                      Natural Person

                      Domestic
Zhu Jiangming                                5.37%    155,561,490 0                   116,671,117      38,890,373 Pledge        13,654,000
                      Natural Person

                      Domestic
Chen Ailing                                  2.46%        71,262,813 0                 53,447,110      17,815,703 Pledge         7,170,000
                      Natural Person

Hong Kong
                      Overseas
Securities Clearing                          2.10%        60,803,094 29512822                    0     60,803,094                         0
                      Legal Person
Co. Ltd.

                      Domestic
Wu Jun                                       2.10%        60,790,886 0                 45,593,164      15,197,722                         0
                      Natural Person

                      Domestic
China Securities
                      Non-state-own          1.35%        39,095,384 3545427                     0     39,095,384                         0
Finance Co., Ltd.
                      ed Legal

                                                                                                                                          40
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                       Person

Central Huijin Asset
                       State-owned
Management Co.,                                1.08%   31,448,750 0                        0      31,448,750                         0
                       Legal Person
Ltd.

Zhejiang Dahua
Technology Co.,
Ltd. - Phase III       Other                   0.98%   28,519,828 -18480172                0      28,519,828                         0
Employee Stock
Ownership Plan

Four One Eight
Combination of
                       Other                   0.70%   20,430,417 1588243                  0      20,430,417                         0
National Social
Security Fund

Citic Securities -
China Citic Bank -
Dynamic Growth
Stock Collection       Other                   0.67%   19,341,563 8580865                  0      19,341,563                         0
Asset Management
Plan Of Citic
Securities

Information about Strategic
Investors’ or General Legal Persons’
Becoming Top Ten Common                  N/A
Shareholders for Placement of New
Shares (If Any) (Refer to Note 3)

Explanation on Associated
Relationship or Concerted Actions        Mr. Fu Liquan And Ms. Chen Ailing Are Husband And Wife. The Company Is Unaware Of
among the Above-Mentioned                Whether Other Shareholders Have Associated Relationship Or Are Persons Acting In Concert.
Shareholders

  Particulars about Shares Held by Top Ten Common Shareholders Holding Shares That Are Not Subject to Trading Restrictions

                                         Number of Common Shares Held without Restrictions                  Type of shares
        Name of Shareholder
                                                   at the End of the Reporting Period                    Type           Number

                                                                                                 RMB common
Fu Liquan                                                                          279,219,895                           279,219,895
                                                                                                 stock

Hong Kong Securities Clearing Co.                                                                RMB common
                                                                                    60,803,094                               60,803,094
Ltd.                                                                                             stock

                                                                                                 RMB common
China Securities Finance Co., Ltd.                                                  39,095,384                               39,095,384
                                                                                                 stock

                                                                                                 RMB common
Zhu Jiangming                                                                       38,890,373                               38,890,373
                                                                                                 stock



                                                                                                                                     41
                                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Central Huijin Asset Management                                                                 RMB common
                                                                                   31,448,750                         31,448,750
Co., Ltd.                                                                                       stock

Zhejiang Dahua Technology Co.,
                                                                                                RMB common
Ltd. - Phase III Employee Stock                                                    28,519,828                         28,519,828
                                                                                                stock
Ownership Plan

Four One Eight Combination of                                                                   RMB common
                                                                                   20,430,417                         20,430,417
National Social Security Fund                                                                   stock

Citic Securities - China Citic Bank -
Dynamic Growth Stock Collection                                                                 RMB common
                                                                                   19,341,563                         19,341,563
Asset Management Plan Of Citic                                                                  stock
Securities

BOC - Core Growth Stock Type
                                                                                                RMB common
Security Investment Fund of China                                                  19,227,168                         19,227,168
                                                                                                stock
International Fund Management

One Zero Six Combination of                                                                     RMB common
                                                                                   18,688,071                         18,688,071
National Social Security Fund                                                                   stock

Explanation of Associated
Relationship or Concerted Actions
among Top Ten Common
Shareholders without Trading            Mr. Fu Liquan And Ms. Chen Ailing Are Husband And Wife. The Company Is Unaware Of
Restrictions, and among Top Ten         Whether Other Shareholders Have Associated Relationship Or Are Persons Acting In Concert.
Common Shareholders without
Trading Restrictions and Top Ten
Common Shareholders

Explanation of Top Ten Common
Shareholders’ Participation in
                                        N/A
Securities Margin Trading (If Any)
(Refer to Note 4)

Whether the Company’s top ten common shareholders or top ten common shareholders without limited shares agree on any
repurchase transaction in the reporting period
□ Yes √ No
None of the Company’s top ten common shareholders or top ten common shareholders without limited shares agreed on repurchase
in the reporting period.


III. Changes in Controlling Shareholders and Actual Controllers

There are no changes in controlling shareholder and actual controller during the reporting period.




                                                                                                                                42
                                                         2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                         Section VII Information of Preferred Shares

□ Applicable √ Not applicable
There are no preferred shares in the reporting period.




                                                                                                                43
                                                                   2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




      Section VIII Information about Directors, Supervisors and Senior

                                                      Management

I. Shareholding Changes of Directors, Supervisors and Senior Management

                                                                                                  Number of      Number of
                                                                                                                              Number of
                                                  Shares       Shares                             Restricted     Restricted
                               Shares Held at                                  Shares Held at                                  Restricted
                                                 Increased    Decreased                          Shares Held Shares Held
                       Tenure the Beginning                                    the End of the                                 Shares Held
    Name       Title                             during the   during the                            at the       during the
                       Status of the Period                                       Period                                      at the End of
                                                  Period       Period                             Beginning       Current
                                  (Shares)                                        (Shares)                                     the Period
                                                 (Shares)     (Shares)                           of the Period    Period
                                                                                                                                (Shares)
                                                                                                   (Shares)       (Shares)

Fu                     Incum
           Chairman            1,122,615,980                  -1,434,100 1,121,181,880
Liquan                 bent

           Vice
           Chairman,   Incum
Wu Jun                            60,790,886                               0      60,790,886
           Vice        bent
           President

           Director,   Incum
Li Ke                                        0    1,620,000                        1,620,000
           President   bent

           Director,
Zhu
           Executive   Incum
Jiangmi                          155,561,490                               0     155,561,490
           Vice        bent
ng
           President

Chen                   Incum
           Director               71,262,813                               0      71,262,813
Ailing                 bent

           Independent Incum
He Chao                                      0                             0                 0
           Director    bent

Wang       Independent Incum
                                             0                             0                 0
Zexia      Director    bent

Huang      Independent Incum
                                             0                             0                 0
Siying     Director    bent

Song
                       Incum
Maoyua Supervisor                            0                             0                 0
                       bent
n

                       Incum
Song Ke Supervisor                           0                             0                 0
                       bent



                                                                                                                                            44
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Zuo                       Incum
          Supervisor                           0                          0            0
Pengfei                   bent

          Secretary of
          the Board,      Incum
Wu Jian                                  999,335                          0      999,335
          Vice            bent
          President

Wei
          CFO, Vice       Incum
Meizhon                                1,300,000                   -50,000     1,250,000
          President       bent
g

Zhang
          Vice            Incum
Xingmin                                1,131,413                  -190,000       941,413
          President       bent
g

Zhang     Vice            Incum
                                         187,500                          0      187,500
Wei       President       bent

Chen      Vice            Incum
                                       1,575,951                          0    1,575,951
Yuqing    President       bent

Ying      Vice            Incum
                                         999,250                          0      999,250
Yong      President       bent

Wu        Vice            Incum
                                         502,280                          0      502,280
Yunlong President         bent

Yan       Vice            Incum
                                         276,349                          0      276,349
Gang      President       bent

Xu
          Vice            Incum
Zhichen                                        0                          0            0
          President       bent
g

Zhao      Vice            Incum
                                               0                          0            0
Yuning    President       bent

Zhu       Vice            Incum
                                          60,225                          0       60,225
Jiantang President        bent

Shen      Vice            Resign
                                         379,170                          0      379,170
Huiliang President        ed

Total            --            --   1,417,642,642    1,620,000   -1,674,100 1,417,588,542           0          0             0


Note: Mr. Li Ke increased its holding of the Company by 1,620,000 shares on July 9, 2018 through centralized competitive bidding
in the trading system of Shenzhen Stock Exchange


II. Changes of Directors, Supervisors and Senior Management

        Name                Title             Type                Date                              Reasons

Xu Zhicheng           Vice President    Appointed        March 22, 2018         Appointed As Vice President


                                                                                                                             45
                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Zhao Yuning     Vice President   Appointed   March 22, 2018        Appointed As Vice President

Zhu Jiantang    Vice President   Appointed   March 22, 2018        Appointed As Vice President

                                                                   Resigned voluntarily as vice president but still
Shen Huiliang   Vice President   Resigned    January 1, 2018
                                                                   undertook work in management of the Company




                                                                                                                      46
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                                        Section IX Corporate Bonds

Whether the Company has corporate bonds which have been publicly issued and listed at the stock exchange, and are unexpired or
expired but not honored in full on the date approved for issuance of the interim report
No




                                                                                                                            47
                                                                   2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.




                                        Section X Financial Reports

I. Audit Reports

The interim report has been audited or not
□ Yes √ No
The Company's interim financial report hasn't been audited.


II. Financial Statements

Units of financial reports in the notes: RMB


1. Consolidated Balance Sheet

Prepared by: Zhejiang Dahua Technology Co., Ltd.
                                                       Saturday, June 30, 2018
                                                                                                                          Unit: RMB

                                                                                                       Balance at the Start of the
                            Item Name                               Balance at the End of the Period
                                                                                                                 Period

Current Assets:

     Cash and Bank Balances                                                       2,382,180,540.73               3,612,937,164.14

     Deposit Reservation for Balance

     Loans to Banks and Other Financial Institutions

     Financial Assets at Fair Value through Profit or Loss

     Derivative Financial Assets

     Notes Receivable                                                             1,785,576,387.90               2,431,296,170.58

     Accounts Receivable                                                          9,081,550,539.87               7,539,944,756.69

     Prepayments                                                                    173,464,285.83                 154,357,171.13

     Premium Receivable

     Reinsurance Accounts Receivable

     Reinsurance Contract Reserves Receivable

     Interest Receivable                                                               8,229,227.29                   9,219,422.61

     Dividends Receivable

     Other Receivables                                                              380,598,257.84                 283,058,785.41

     Buying Back the Sale of Financial Assets

     Inventories                                                                  3,386,228,156.72               2,806,142,598.65



                                                                                                                                     48
                                                                 2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Assets Held for Sale

     Non-current Assets Due within 1 Year                                        496,698,290.79             367,302,811.80

     Other Current Assets                                                        327,435,863.79             352,055,656.65

Subtotal of Current Assets                                                    18,021,961,550.76          17,556,314,537.66

Non-current Assets:

     Loans and Advances

     Financial Assets Available for Sale                                          77,970,227.00              77,970,227.00

     Held-to-maturity Investments

     Long-term Receivables                                                     1,667,975,490.69           1,480,947,137.80

     Long-term Equity Investment                                                  27,418,099.40              61,272,885.41

     Investment Property                                                         176,630,008.83             181,050,142.29

     Fixed Assets                                                              1,269,148,988.00           1,248,305,165.77

     Projects under Construction                                                  67,137,899.76              58,779,225.41

     Construction Materials

     Disposal of Fixed Asset

     Productive Biological Assets

     Oil and Gas Assets

     Intangible Assets                                                           248,859,705.63             253,357,254.66

     Development Expenditure

     Goodwill                                                                     96,540,278.38              71,083,281.09

     Long-term Prepaid Expenses                                                   27,653,672.81

     Deferred Income Tax Assets                                                  340,756,450.52             251,453,971.05

     Other Non-current Assets                                                    205,005,637.90              92,944,735.83

Subtotal of Non-current Assets                                                 4,205,096,458.92           3,777,164,026.31

Total Assets                                                                  22,227,058,009.68          21,333,478,563.97

Current Liabilities:

     Short-term Borrowings                                                     2,541,402,275.54           1,770,924,255.90

     Borrowings from the Central Bank

     Deposit Taking and Interbank Deposit

     Borrowings from Banks and Other Financial Institutions

     Financial Liabilities Measured at Fair Value with Changes
                                                                                 103,782,765.27              62,450,000.00
Recorded into Current Profit and Loss

     Derivative Financial Liabilities

     Notes Payable                                                             3,556,883,216.28           3,434,822,334.46




                                                                                                                        49
                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Accounts Payable                                             2,671,866,224.34           2,701,785,054.57

     Received Prepayments                                           335,014,892.23             461,715,422.38

     Financial Assets Sold for Repurchase

     Service Charge and Commission Payable

     Employee Compensation Payable                                  343,428,173.69             851,146,379.97

     Tax Payable                                                    473,933,576.38             479,536,571.45

     Interest Payable                                                 6,806,258.42               3,694,476.25

     Dividends Payable

     Other Payables                                                 113,282,109.29             104,297,163.85

     Reinsurance Accounts Payable

     Insurance Contract Reserves

     Receiving from Vicariously Traded Securities

     Receiving from Vicariously Sold Securities

     Liabilities Held for Sale

     Non-current Liabilities Due within 1 Year                       25,500,000.00

     Other Current Liabilities                                       59,670,217.72              45,941,962.85

Subtotal of Current Liabilities                                  10,231,569,709.16           9,916,313,621.68

Non-current Liabilities:

     Long-term Borrowings                                           179,500,000.00             230,000,000.00

     Bonds Payable

        Including: Preferred Stocks

                Perpetual Bonds

     Long-term Payables

     Long-term Employee Compensation Payable

     Special Payables

     Expected Liabilities                                           174,205,449.70             127,998,889.61

     Deferred Income                                                 60,279,845.14              61,866,156.88

     Deferred Income Tax Liabilities                                 53,698,630.66              45,468,946.77

     Other Non-current Liabilities                                  390,395,461.44             358,600,936.54

Subtotal of Non-current Liabilities                                 858,079,386.94             823,934,929.80

Total Liabilities                                                11,089,649,096.10          10,740,248,551.48

Shareholders' Equity:

     Share Capital                                                2,898,756,130.00           2,898,756,130.00

     Other Equity Instruments



                                                                                                           50
                                                                2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


       Including: Preferred Stocks

               Perpetual Bonds

     Capital Reserves                                                            592,635,903.13                 593,340,751.52

     Less: Treasury Share

     Other Comprehensive Incomes                                                  15,053,949.06                    6,660,189.04

     Special Reserves

     Surplus Reserves                                                            971,547,268.36                 971,547,268.36

     General Risk Reserves

     Undistributed Profits                                                     6,498,295,696.79               5,996,130,036.27

Total Shareholders' Equity Attributable to the Parent Company                 10,976,288,947.34              10,466,434,375.19

     Minority Shareholders' Equity                                               161,119,966.24                 126,795,637.30

Total Shareholders' Equity                                                    11,137,408,913.58              10,593,230,012.49

Total Liabilities and Shareholders' Equity                                    22,227,058,009.68              21,333,478,563.97


Legal representative: Fu Liquan        Person in charge of accounting: Wei Meizhong        Person in charge of the accounting
institution: Xu Qiaofen


2. Balance Sheet of the Parent Company

                                                                                                                        Unit: RMB

                                                                                                    Balance at the Start of the
                             Item Name                           Balance at the End of the Period
                                                                                                              Period

Current Assets:

     Cash and Bank Balances                                                       78,202,040.09                 528,918,086.71

     Financial Assets at Fair Value through Profit or Loss

     Derivative Financial Assets

     Notes Receivable                                                            527,615,971.01                   28,625,396.43

     Accounts Receivable                                                       3,855,064,173.75               5,932,561,350.82

     Prepayments                                                                  24,328,386.80                   60,553,036.53

     Interest Receivable                                                                                               171,583.35

     Dividends Receivable

     Other Receivables                                                         5,437,876,107.27               2,745,786,953.01

     Inventories                                                                 187,535,948.99                 155,981,228.49

     Assets Held for Sale

     Non-current Assets Due within 1 Year                                         15,810,318.15                        721,747.17

     Other Current Assets                                                             561,921.39                       613,008.35



                                                                                                                                  51
                                                                 2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Subtotal of Current Assets                                                    10,126,994,867.45           9,453,932,390.86

Non-current Assets:

     Financial Assets Available for Sale                                          75,496,000.00              75,496,000.00

     Held-to-maturity Investments

     Long-term Receivables                                                        52,970,533.03               2,900,649.67

     Long-term Equity Investment                                               2,748,981,515.28           2,492,439,607.09

     Investment Property                                                         184,254,554.26             188,865,490.54

     Fixed Assets                                                                472,910,089.77             457,103,573.22

     Projects under Construction                                                  31,800,331.09              32,179,351.04

     Construction Materials

     Disposal of Fixed Asset

     Productive Biological Assets

     Oil and Gas Assets

     Intangible Assets                                                           179,163,779.09             183,721,662.56

     Development Expenditure

     Goodwill

     Long-term Prepaid Expenses                                                   24,088,562.65

     Deferred Income Tax Assets                                                   42,251,770.32              36,986,523.59

     Other Non-current Assets                                                      3,358,627.84               3,611,195.07

Subtotal of Non-current Assets                                                 3,815,275,763.33           3,473,304,052.78

Total Assets                                                                  13,942,270,630.78          12,927,236,443.64

Current Liabilities:

     Short-term Borrowings                                                     1,250,000,000.00             700,000,000.00

     Financial Liabilities Measured at Fair Value with Changes
Recorded into Current Profit and Loss

     Derivative Financial Liabilities

     Notes Payable                                                               267,736,159.25             337,673,745.47

     Accounts Payable                                                            604,981,686.81             186,514,626.79

     Received Prepayments                                                         47,485,587.62              87,898,434.50

     Employee Compensation Payable                                               241,575,394.06             632,166,128.79

     Tax Payable                                                                 363,121,905.81             346,992,152.22

     Interest Payable                                                              3,750,054.52                678,835.62

     Dividends Payable

     Other Payables                                                              129,303,491.21             136,344,314.93




                                                                                                                        52
                                                 2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Liabilities Held for Sale

     Non-current Liabilities Due within 1 Year

     Other Current Liabilities                                     1,916,650.38                  67,347.75

Subtotal of Current Liabilities                                2,909,870,929.66           2,428,335,586.07

Non-current Liabilities:

     Long-term Borrowings

     Bonds Payable

        Including: Preferred Stocks

                Perpetual Bonds

     Long-term Payables

     Long-term Employee Compensation Payable

     Special Payables

     Expected Liabilities                                           866,100.00                 925,500.00

     Deferred Income

     Deferred Income Tax Liabilities                                929,522.41                   43,435.80

     Other Non-current Liabilities                                 7,037,435.01                452,397.55

Subtotal of Non-current Liabilities                                8,833,057.42               1,421,333.35

Total Liabilities                                              2,918,703,987.08           2,429,756,919.42

Shareholders' Equity:

     Share Capital                                             2,898,756,130.00           2,898,756,130.00

     Other Equity Instruments

        Including: Preferred Stocks

                Perpetual Bonds

     Capital Reserves                                            589,258,331.39             589,895,836.49

     Less: Treasury Share

     Other Comprehensive Incomes

     Special Reserves

     Surplus Reserves                                            971,547,268.36             971,547,268.36

     Undistributed Profits                                     6,564,004,913.95           6,037,280,289.37

Total Shareholders' Equity                                    11,023,566,643.70          10,497,479,524.22

Total Liabilities and Shareholders' Equity                    13,942,270,630.78          12,927,236,443.64


3. Consolidated Income Statement

                                                                                                 Unit: RMB



                                                                                                        53
                                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                        This Period's Amount of      Previous Period's Amount of
                               Item Name
                                                                              Occurrence                     Occurrence

I. Total Operating Revenue                                                        9,814,041,352.48              7,464,664,934.38

     Including: Operating Revenue                                                 9,814,041,352.48              7,464,664,934.38

             Interest Income

             Earned Premiums

             Service Charge and Commission Income

II. Total Operating Cost                                                          8,785,298,691.03              6,677,841,591.33

     Including: Operating Cost                                                    6,230,120,445.06              4,520,040,801.14

             Interest Expenditures

             Service Charge and Commission Expenses

             Surrender Value

             Net Claims Paid

             Net Amount Withdrawn for Insurance Contract
Reserves

             Policyholder Dividend Expense

             Reinsurance Cost

             Taxes and Surcharges                                                    62,692,261.97                54,023,359.42

             Sales Expenses                                                       1,252,741,900.83               946,818,977.03

             Management Fees                                                      1,134,328,456.62              1,018,690,379.20

             Financial Expenses                                                     -22,880,395.85                48,639,551.95

             Losses on Assets Impairment                                            128,296,022.40                89,628,522.59

     Add: Incomes from Changes in Fair Value (Mark "-" for
                                                                                    -41,332,765.27
Losses)

           Investment Income (Mark "-" for Loss)                                    -20,867,876.31                -14,018,542.65

           Including: Investment Income from Affiliates and Joint
                                                                                    -25,567,280.91                -18,719,464.17
Ventures

           Exchange Gains (Mark "-" for Losses)

           Asset Disposal Income (Mark "-" for Loss)                                    -13,024.74                   234,565.47

           Other Incomes                                                            284,916,998.93               344,410,303.28

III. Operating Profit (Mark "-" for Loss)                                         1,251,445,994.06              1,117,449,669.15

     Add: Non-operating Revenues                                                      5,234,299.09                17,443,567.01

     Less: Non-operating Expenses                                                     2,194,887.35                  1,708,841.06

IV. Total Profit (Mark "-" for Total Loss)                                        1,254,485,405.80              1,133,184,395.10

     Less: Income Tax Expense                                                       165,721,533.63               153,360,669.71



                                                                                                                               54
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


V. Net Profit (Mark "-" for Net Loss)                                               1,088,763,872.17             979,823,725.39

     (I) Net Profit as a Going Concern (Mark "-" for Net Loss)                      1,088,763,872.17             979,823,725.39

     (II) Net Profit of Discontinued Operation (Mark "-" for Net
Loss)

     Net Profit Attributable to the Parent Company's Owner                          1,081,916,886.52             983,001,211.23

     Minority Shareholders' Profit and Loss                                             6,846,985.65              -3,177,485.84

VI. Net Amount of Other Comprehensive Incomes after Tax                                 8,393,760.02                366,120.29

  Net Amount of Other Comprehensive Incomes after Tax
                                                                                        8,393,760.02                366,120.29
Attributable to the Parent Company's Owner

     (I) Other Comprehensive Incomes that cannot be Subsequently
Reclassified as P/L

            1. Changes Arising from Remeasurement of Net
Liabilities or Net Assets in Defined Benefit Plans

            2. Share in Other Comprehensive Incomes of the
Investee that cannot be Reclassified as P/L under the Equity
Method

     (II) Other Comprehensive Incomes that will be Subsequently
                                                                                        8,393,760.02                366,120.29
Reclassified as P/L

            1. Share in Other Comprehensive Incomes of the
Investee that will be Subsequently Reclassified as P/L under the
Equity Method

            2. Profit or Loss Arising from Changes in the Fair
Value of Financial Assets Available for Sale

            3. Profit or Loss Arising from Reclassifying
Investments Held to Maturity as Financial Assets Available for Sale

            4. Effective Part of Profit or Loss From Cash Flow
Hedging

            5. Currency Translation Difference                                          8,393,760.02                366,120.29

            6. Others

  Net Amount of Other Comprehensive Incomes after Tax
Attributable to Minority Shareholders

VII. Total Comprehensive Income                                                     1,097,157,632.19             980,189,845.68

     Total Comprehensive Income Attributable to the Parent
                                                                                    1,090,310,646.54             983,367,331.52
Company's Owner

     Total Comprehensive Income Attributable to Minority
                                                                                        6,846,985.65              -3,177,485.84
Shareholders

VIII. Earnings per Share:

     (I) Basic Earnings per Share                                                               0.37                       0.34


                                                                                                                             55
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     (II) Diluted Earnings per Share                                                                0.37                           0.34

For consolidation under the same control in this period, the net profit realized by the consolidated party before consolidation is: 0.00
RMB. The net profit realized by the consolidated party in previous period is: 0.00 RMB.


Legal representative: Fu Liquan          Person in charge of accounting: Wei Meizhong             Person in charge of the accounting
institution: Xu Qiaofen


4. Income Statement of the Parent Company

                                                                                                                             Unit: RMB

                                                                           This Period's Amount of         Previous Period's Amount of
                             Item Name
                                                                                  Occurrence                       Occurrence

I. Operating Revenue                                                                  3,784,147,825.87                2,557,921,578.64

     Less: Operating Cost                                                             1,167,353,125.94                  196,545,410.39

           Taxes and Surcharges                                                           44,911,616.72                  43,972,070.19

           Sales Expenses                                                               684,873,752.77                  612,842,981.09

           Administrative Expenses                                                      883,017,961.09                  849,686,568.86

           Financial Expenses                                                            -10,918,444.75                  13,988,727.95

           Losses on Assets Impairment                                                    11,200,169.56                  11,193,190.65

     Add: Incomes from Changes in Fair Value (Mark "-" for
Losses)

           Investment Income (Mark "-" for Loss)                                         -23,467,410.68                 -13,038,601.16

           Including: Investment Income from Affiliates and Joint
                                                                                         -24,852,586.71                 -18,582,462.42
Ventures

           Asset Disposal Income (Mark "-" for Loss)                                         -13,523.79                     150,179.65

           Other Incomes                                                                272,484,387.90                  327,068,292.21

II. Operating Profit (Mark "-" for Loss)                                              1,252,713,097.97                1,143,872,500.21

     Add: Non-operating Revenues                                                           2,920,994.67                  12,499,056.55

     Less: Non-operating Expenses                                                            328,747.03                     293,648.71

III. Total Profit (Mark "-" for Total Loss)                                           1,255,305,345.61                1,156,077,908.05

     Less: Income Tax Expense                                                           148,829,495.03                  128,115,404.08

IV. Net Profit (Mark "-" for Net Loss)                                                1,106,475,850.58                1,027,962,503.97

     (I) Net Profit as a Going Concern (Mark "-" for Net Loss)                        1,106,475,850.58                1,027,962,503.97

     (II) Net Profit of Discontinued Operation (Mark "-" for Net
Loss)

V. Net Amount of Other Comprehensive Incomes after Tax

     (I) Other Comprehensive Incomes that cannot be Subsequently


                                                                                                                                      56
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Reclassified as P/L

            1. Changes Arising from Remeasurement of Net
Liabilities or Net Assets in Defined Benefit Plans

            2. Share in Other Comprehensive Incomes of the
Investee that cannot be Reclassified as P/L under the Equity
Method

     (II) Other Comprehensive Incomes that will be Subsequently
Reclassified as P/L

            1. Share in Other Comprehensive Incomes of the
Investee that will be Subsequently Reclassified as P/L under the
Equity Method

            2. Profit or Loss Arising from Changes in the Fair
Value of Financial Assets Available for Sale

            3. Profit or Loss Arising from Reclassifying
Investments Held to Maturity as Financial Assets Available for Sale

            4. Effective Part of Profit or Loss From Cash Flow
Hedging

            5. Currency Translation Difference

            6. Others

VI. Total Comprehensive Income                                                      1,106,475,850.58              1,027,962,503.97

VII. Earnings per Share:

     (I) Basic Earnings per Share                                                               0.38                          0.35

     (II) Diluted Earnings per Share                                                            0.38                          0.35


5. Consolidated Cash Flow Statement

                                                                                                                         Unit: RMB

                                                                          This Period's Amount of      Previous Period's Amount of
                            Item Name
                                                                                Occurrence                     Occurrence

I. Cash Flow from Operational Activities:

     Cash from Sales of Merchandise and Provision of Services                       9,194,169,425.67              6,660,197,246.65

     Net Increase in Customer's Bank Deposits and Interbank
Deposits

     Net Increase in Borrowings from the Central Bank

     Net Increase in Borrowings from Other Financial Institutions

     Cash Arising from Receiving Premiums for the Original
Insurance Contract

     Net Amount Arising from Reinsurance Business


                                                                                                                                 57
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Net Increase in Deposits and Investments from Policyholders

     Net Additions to Financial Assets from Disposal at Fair Value
Measurement and Its Inclusion in Current Profit or Loss

     Cash Arising from Interests, Service Charges and
Commissions

     Net Increase in Borrowings from Banks and Other Financial
Institutions

     Net Increase in Repurchase Business Funds

     Tax Refund                                                                      721,443,953.84             590,974,678.21

     Other Received Cashes Related to Operational Activities                          69,273,319.56              31,444,512.12

Subtotal of Operational Activities Free Cash Inflow                                9,984,886,699.07           7,282,616,436.98

     Cash Paid for Merchandise and Services                                        7,190,765,894.34           5,102,571,198.61

     Net Increase in Loans and Advances to Customers

     Net Increase in Deposits with Central Bank and Other
Financial Institutions

     Cash Paid for Original Insurance Contract Claims

     Cash Paid for Interests, Service Charges and Commissions

     Cash Paid for Policy Dividends

     Cash Paid to and for Employees                                                2,120,130,137.36           1,527,842,972.72

     Cash Paid for Taxes and Surcharges                                              722,939,607.07             671,609,480.53

     Other Paid Cashes Related to Operational Activities                           1,047,407,897.30             901,996,675.35

Subtotal of Operational Activities Free Cash Outflow                              11,081,243,536.07           8,204,020,327.21

Net Cash Flow from Operational Activities                                         -1,096,356,837.00            -921,403,890.23

II. Cash Flow from Investment Activities:

     Cash Arising from Disposal of Investments                                       140,950,000.00              46,000,000.00

     Cash Arising from Investment Incomes                                              1,604,974.66               5,698,233.87

     Net Cash Arising from Disposal of Fixed Assets, Intangible
                                                                                        330,762.69                 714,022.92
Assets and Other Long-term Assets

     Net Cash Arising from Disposal of Subsidiaries and Other
Business Units

     Other Received Cashes Related to Investment Activities                            2,404,123.87               1,592,642.22

Investment Activities Free Cash Inflow Subtotal                                      145,289,861.22              54,004,899.01

     Cash Paid for Purchase and Construction of Fixed Assets,
                                                                                     223,433,215.10             187,854,034.66
Intangible Assets and Other Long-term Assets

     Cash Paid for Investments                                                       139,300,000.00             101,696,449.00

     Net Increase in Pledge Loans


                                                                                                                            58
                                                                 2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Net Cash Paid for Acquisition of Subsidiaries and Other
                                                                                  56,408,605.39
Business Units

     Other Paid Cashes Related to Investment Activities                           75,796,952.33                   997,312.35

Investment activities free cash outflow subtotal                                 494,938,772.82               290,547,796.01

Net Amount of Cash Flow from Investment Activities                              -349,648,911.60               -236,542,897.00

III. Cash Flow from Financing Activities:

     Cash Arising from Absorbing Investments                                      28,410,000.00                33,003,538.00

     Including: Cash Arising from Subsidiaries Absorbing
                                                                                  28,410,000.00                33,003,538.00
Investments by Minority Shareholders

     Cash Arising from Borrowings                                              2,967,492,895.90              2,887,563,340.81

     Cash Arising from Bonds Issue

     Other Received Cashes Related to Financing Activities                       619,391,279.99               272,942,900.00

Financing Activities Free Cash Inflow Subtotal                                 3,615,294,175.89              3,193,509,778.81

     Cash Paid for Debts Repayment                                             2,210,534,089.02              1,569,019,325.26

     Cash Paid for Distribution of Dividends and Profits or
                                                                                 624,264,590.19               327,598,418.98
Payment of Interests

     Including: Dividends and Profits Paid to Minority
Shareholders by Subsidiaries

     Other Paid Cashes Related to Financing Activities                           547,215,000.00               622,894,345.80

Financing Activities Free Cash Outflow Subtotal                                3,382,013,679.21              2,519,512,090.04

Net Amount of Cash Flow from Financing Activities                                233,280,496.68               673,997,688.77

IV. Impact of Fluctuation in Exchange Rate on Cash and Cash
                                                                                  15,101,534.67                -22,080,292.00
Equivalents

V. Net Increase in Cash and Cash Equivalents                                  -1,197,623,717.25               -506,029,390.46

     Add: Cash and Cash Equivalents at the Start of the Period                 3,062,678,993.88              2,075,176,785.56

VI. Cash and Cash Equivalents at the End of the Period                         1,865,055,276.63              1,569,147,395.10


6. Cash Flow Statement of the Parent Company

                                                                                                                    Unit: RMB

                                                                     This Period's Amount of      Previous Period's Amount of
                            Item Name
                                                                           Occurrence                     Occurrence

I. Cash Flow from Operational Activities:

     Cash from Sales of Merchandise and Provision of Services                  5,620,171,988.98              1,823,558,684.64

     Tax Refund                                                                  271,139,112.45               327,068,292.21

     Other Received Cashes Related to Operational Activities                       5,648,274.89                  8,312,567.58



                                                                                                                            59
                                                                 2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Subtotal of Operational Activities Free Cash Inflow                            5,896,959,376.32           2,158,939,544.43

    Cash Paid for Merchandise and Services                                       974,190,280.44              68,721,278.76

    Cash Paid to and for Employees                                             1,369,457,901.39           1,078,207,624.24

    Cash Paid for Taxes and Surcharges                                           538,414,539.67             520,430,109.13

    Other Paid Cashes Related to Operational Activities                          544,751,757.29             467,741,676.05

Subtotal of Operational Activities Free Cash Outflow                           3,426,814,478.79           2,135,100,688.18

Net Cash Flow from Operational Activities                                      2,470,144,897.53              23,838,856.25

II. Cash Flow from Investment Activities:

    Cash Arising from Disposal of Investments                                    107,950,000.00              33,000,000.00

    Cash Arising from Investment Incomes                                           1,385,176.03               5,543,861.26

    Net Cash Arising from Disposal of Fixed Assets, Intangible
                                                                                  65,609,157.24                288,280.57
Assets and Other Long-term Assets

    Net Cash Arising from Disposal of Subsidiaries and Other
Business Units

    Other Received Cashes Related to Investment Activities                        28,221,407.92               1,592,642.22

Investment Activities Free Cash Inflow Subtotal                                  203,165,741.19              40,424,784.05

    Cash Paid for Purchase and Construction of Fixed Assets,
                                                                                  35,814,739.74              88,733,875.40
Intangible Assets and Other Long-term Assets

    Cash Paid for Investments                                                    389,982,000.00             731,085,000.00

    Net Cash Paid for Acquisition of Subsidiaries and Other
Business Units

    Other Paid Cashes Related to Investment Activities

Investment Activities Free Cash Outflow Subtotal                                 425,796,739.74             819,818,875.40

Net Amount of Cash Flow Generated by Investment Activities                      -222,630,998.55            -779,394,091.35

III. Cash Flow from Financing Activities:

    Cash Arising from Absorbing Investments

    Cash Arising from Borrowings                                                 850,000,000.00             834,655,000.00

    Cash Arising from Bonds Issue

    Other Received Cashes Related to Financing Activities                        110,534,201.15             152,942,750.22

Financing Activities Free Cash Inflow Subtotal                                   960,534,201.15             987,597,750.22

    Cash Paid for Debts Repayment                                                300,000,000.00             544,655,000.00

    Cash Paid for Distribution of Dividends and Profits or
                                                                                 592,580,560.69             304,409,943.88
Payment of Interests

    Other Paid Cashes Related to Financing Activities                          2,768,689,582.54             106,310,488.88

Financing Activities Free Cash Outflow Subtotal                                3,661,270,143.23             955,375,432.76



                                                                                                                        60
                                                                            2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Net Amount of Cash Flow from Financing Activities                                          -2,700,735,942.08                    32,222,317.46

IV. Impact of Fluctuation in Exchange Rate on Cash and Cash
                                                                                                -130,404.43                          -69,866.25
Equivalents

V. Net Increase in Cash and Cash Equivalents                                                 -453,352,447.53                  -723,402,783.89

       Add: Cash and Cash Equivalents at the Start of the Period                             524,670,812.68                    792,226,544.55

VI. Cash and Cash Equivalents at the End of the Period                                        71,318,365.15                     68,823,760.66


7. Consolidated Statement of Changes in Owners’ Equity

Amount of this period
                                                                                                                                        Unit: RMB

                                                                            Current Period

                                        Shareholders' Equity Attributable to the Parent Company's Owner

                                      Other Equity                                                                            Minorit
                                                                             Other                                                        Total
                                      Instruments                                                        General                 y
    Item Name                                                               Compre Special Surplus                                       Shareho
                       Share                              Capital   Less:                                          Undistri
                                                                                                          Risk                Shareho
                                Prefer                                                                                                    lders'
                       Capita            Perpet           Reserve Treasur hensive Reserve Reserve                   buted
                                                                                                         Reserve               lders'
                                 red                                                                                                     Equity
                         l                ual     Other      s      y Share Income     s         s                 Profits
                                Stock                                                                       s                 Equity
                                         Bonds                                 s
                                  s

                       2,898,                                                                                      5,996,1               10,593,
I. Balance at the                                         593,340            6,660,1          971,547                         126,795
                       756,13                                                                                      30,036.               230,012
End of Last Year                                          ,751.52              89.04           ,268.36                        ,637.30
                         0.00                                                                                           27                    .49

       Add:
Changes in
Accounting
Policies


Correction of
Errors in the
Previous Period


Consolidated
under the Same
Control

              Others

II. Balance at the     2,898,                                                                                      5,996,1               10,593,
                                                          593,340            6,660,1          971,547                         126,795
Beginning of This 756,13                                                                                           30,036.               230,012
                                                          ,751.52              89.04           ,268.36                        ,637.30
Year                     0.00                                                                                           27                    .49

III. Increases or
                                                          -704,84            8,393,7                               502,165 34,324, 544,178
Decreases in This

                                                                                                                                                   61
                             2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Period (Mark "-"      8.39      60.02                         ,660.52 328.94 ,901.09
for Decreases)

(I) Total                                                     1,081,9             1,097,1
                              8,393,7                                   6,846,9
Comprehensive                                                 16,886.             57,632.
                                60.02                                    85.65
Income                                                             52                 19

(II) Shareholders’
Contributions and                                                       27,410, 27,410,
Reduction in                                                            000.00 000.00
Capital

1. Ordinary Shares
                                                                        27,410, 27,410,
Invested by
                                                                        000.00 000.00
Shareholders

2. Capital Invested
by Holders of
Other Equity
Instruments

3. Amount of
Share-based
Payments
Recorded into
Shareholders'
Equity

4. Others

                                                              -579,75             -579,75
(III) Profit
                                                              1,226.0             1,226.0
Distribution
                                                                    0                  0

1. Appropriation
of Surplus
Reserves

2. Appropriation
of General Risk
Reserves

3. Distribution to                                            -579,75             -579,75
Owners (or                                                    1,226.0             1,226.0
Shareholders)                                                       0                  0

4. Others

(IV) Internal
Carry-forward of
Shareholders'
Equity



                                                                                       62
                                                                           2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


1. Capital
Reserves
Transferred into
Capital (or Share
Capital)

2. Surplus
Reserves
Transferred into
Capital (or Share
Capital)

3. Surplus
Reserves Covering
Losses

4. Others

(V) Special
Reserves

1. Withdrawal in
This Period

2. Used in This
Period

                                                         -704,84                                                              67,343. -637,50
(VI) Others
                                                            8.39                                                                     29      5.10

                      2,898,                                                                                       6,498,2                11,137,
IV. Balance at the                                       592,635            15,053,            971,547                        161,119
                      756,13                                                                                       95,696.                408,913
End of This Period                                       ,903.13            949.06             ,268.36                        ,966.24
                        0.00                                                                                            79                     .58

Amount of last year
                                                                                                                                        Unit: RMB

                                                                       Last Reporting Period

                                       Shareholders' Equity Attributable to the Parent Company's Owner

                                     Other Equity                                                                             Minorit
                                                                            Other                                                          Total
                                     Instruments                                                         General                 y
    Item Name                                                              Compre Special Surplus                                         Shareho
                      Share                              Capital   Less:                                           Undistri
                                                                                                          Risk                Shareho
                               Prefer                                                                                                      lders'
                      Capita            Perpet           Reserve Treasur hensive Reserve Reserve                    buted
                                                                                                         Reserve               lders'
                                red                                                                                                       Equity
                        l                ual     Other      s      y Share Income     s          s                 Profits
                               Stock                                                                        s                 Equity
                                        Bonds                                 s
                                 s

                      2,899,                                                                                       4,161,0                8,425,7
I. Balance at the                                        589,582 133,001 2,295,1               717,707                        188,773
                      411,40                                                                                       17,062.                84,635.
End of Last Year                                         ,012.29 ,534.15      21.72            ,331.98                        ,235.48
                        5.00                                                                                            96                     28

     Add:
Changes in

                                                                                                                                                    63
                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Accounting
Policies


Correction of
Errors in the
Previous Period


Consolidated
under the Same
Control

            Others

II. Balance at the    2,899,                                                           4,161,0             8,425,7
                               589,582 133,001 2,295,1                717,707                    188,773
Beginning of This 411,40                                                               17,062.             84,635.
                               ,012.29 ,534.15          21.72         ,331.98                    ,235.48
Year                   5.00                                                                96                  28

III. Increases or
                                          -133,00
Decreases in This     -655,2   7,414,9               366,120                          693,227 -80,744 752,610
                                          1,534.1
Period (Mark "-"      75.00      29.21                    .29                          ,300.70 ,377.88 ,231.47
                                                5
for Decreases)

(I) Total
                                                     366,120                          983,001 -3,177, 980,189
Comprehensive
                                                          .29                          ,211.23 485.84 ,845.68
Income

(II) Shareholders’
                                          -131,47
Contribution and      -655,2   7,418,4                                                           -76,996 61,242,
                                          5,684.9
Reduction in          75.00      99.17                                                           ,462.00 447.09
                                                2
Capital

1. Ordinary Shares                        -131,47
                      -655,2   -4,697,0                                                          -76,996 49,126,
Invested by                               5,684.9
                      75.00      11.20                                                           ,462.00 936.72
Shareholders                                    2

2. Capital Invested
by Holders of
Other Equity
Instruments

3. Amount of
Share-based
Payments                       12,115,                                                                     12,115,
Recorded into                   510.37                                                                     510.37
Shareholders'
Equity

4. Others

(III) Profit                              -1,525,8                                    -289,77              -288,24
Distribution                                49.23                                      3,910.5             8,061.3


                                                                                                                64
                                                    2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                                                           3                  0

1. Appropriation
of Surplus
Reserves

2. Appropriation
of General Risk
Reserves

3. Distribution to                                                                   -289,77             -289,77
Owners (or                                                                            3,910.5            3,910.5
Shareholders)                                                                              3                  3

                                         -1,525,8                                                        1,525,8
4. Others
                                           49.23                                                          49.23

(IV) Internal
Carry-forward of
Shareholders'
Equity

1. Capital
Reserves
Transferred into
Capital (or Share
Capital)

2. Surplus
Reserves
Transferred into
Capital (or Share
Capital)

3. Surplus
Reserves Covering
Losses

4. Others

(V) Special
Reserves

1. Withdrawal in
This Period

2. Used in This
Period

                              -3,569.9                                                          -570,43 -574,00
(VI) Others
                                    6                                                             0.04      0.00

IV. Balance at the   2,898,   596,996                2,661,2         717,707          4,854,2 108,028 9,178,3
End of This Period 756,13     ,941.50                  42.01         ,331.98          44,363. ,857.60 94,866.


                                                                                                              65
                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                        0.00                                                                                      66                      75


8. Statement of Changes in Owners’ Equity of the Parent Company

Amount of this period
                                                                                                                                Unit: RMB

                                                                        Current Period

                                 Other Equity Instruments                            Other                                        Total
                                                                          Less:                                     Undistri
    Item Name          Share                                 Capital                Compreh   Special   Surplus                 Sharehol
                                 Preferre Perpetu
                                                                         Treasury                                      buted
                      Capital       d       al      Other   Reserves                 ensive   Reserves Reserves                   ders'
                                                                          Share                                     Profits
                                 Stocks   Bonds                                     Incomes                                      Equity

                                                                                                                    6,037,2
I. Balance at the     2,898,75                              589,895,8                                   971,547,2               10,497,47
                                                                                                                    80,289.
End of Last Year      6,130.00                                  36.49                                      68.36                 9,524.22
                                                                                                                           37

       Add: Changes
in Accounting
Policies


Correction of
Errors in the
Previous Period

            Others

II. Balance at the                                                                                                  6,037,2
                      2,898,75                              589,895,8                                   971,547,2               10,497,47
Beginning of This                                                                                                   80,289.
                      6,130.00                                  36.49                                      68.36                 9,524.22
Year                                                                                                                       37

III. Increases or
Decreases in This                                           -637,505.                                               526,724 526,087,1
Period (Mark "-"                                                   10                                               ,624.58        19.48
for Decreases)

(I) Total                                                                                                           1,106,4
                                                                                                                                1,106,475
Comprehensive                                                                                                       75,850.
                                                                                                                                  ,850.58
Income                                                                                                                     58

(II) Shareholders’
Contribution and
Reduction in
Capital

1. Ordinary Shares
Invested by
Shareholders

2. Capital Invested


                                                                                                                                           66
                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


by Holders of
Other Equity
Instruments

3. Amount of
Share-based
Payments
Recorded into
Shareholders'
Equity

4. Others

                                                              -579,75
(III) Profit                                                            -579,751,
                                                              1,226.0
Distribution                                                              226.00
                                                                    0

1. Appropriation of
Surplus Reserves

2. Distribution to                                            -579,75
                                                                        -579,751,
Owners (or                                                    1,226.0
                                                                          226.00
Shareholders)                                                       0

3. Others

(IV) Internal
Carry-forward of
Shareholders'
Equity

1. Capital
Reserves
Transferred into
Capital (or Share
Capital)

2. Surplus
Reserves
Transferred into
Capital (or Share
Capital)

3. Surplus
Reserves Covering
Losses

4. Others

(V) Special
Reserves

1. Withdrawal in



                                                                               67
                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


This Period

2. Used in This
Period

                                                            -637,505.                                                          -637,505.
(VI) Others
                                                                   10                                                                    10

                                                                                                                    6,564,0
IV. Balance at the 2,898,75                                 589,258,3                                   971,547,2              11,023,56
                                                                                                                    04,913.
End of This Period 6,130.00                                     31.39                                      68.36                6,643.70
                                                                                                                         95

Amount of last year
                                                                                                                               Unit: RMB

                                                                        Previous Period

                                 Other Equity Instruments                            Other                                       Total
                                                                          Less:                                     Undistri
    Item Name          Share                                 Capital                Compreh   Special   Surplus                Sharehol
                                 Preferre Perpetu
                                                                         Treasury                                    buted
                      Capital       d       al      Other   Reserves                 ensive   Reserves Reserves                  ders'
                                                                          Share                                     Profits
                                 Stocks   Bonds                                     Incomes                                     Equity

                                                                                                                    4,042,4
I. Balance at the     2,899,41                              584,959,7 133,001,5                         717,707,3              8,111,571
                                                                                                                    94,772.
End of Last Year      1,405.00                                  99.88       34.15                          31.98                 ,775.16
                                                                                                                         45

       Add: Changes
in Accounting
Policies


Correction of
Errors in the
Previous Period

            Others

II. Balance at the                                                                                                  4,042,4
                      2,899,41                              584,959,7 133,001,5                         717,707,3              8,111,571
Beginning of This                                                                                                   94,772.
                      1,405.00                                  99.88       34.15                          31.98                 ,775.16
Year                                                                                                                     45

III. Increases or
Decreases in This     -655,27                               4,936,036 -133,001,                                     738,188 875,470,8
Period (Mark "-"          5.00                                    .61      534.15                                   ,593.44       89.20
for Decreases)

(I) Total                                                                                                           1,027,9
                                                                                                                               1,027,962
Comprehensive                                                                                                       62,503.
                                                                                                                                 ,503.97
Income                                                                                                                   97

(II) Shareholders’
Contribution and      -655,27                               4,936,036 -131,475,                                                135,756,4
Reduction in              5.00                                    .61      684.92                                                 46.53
Capital


                                                                                                                                          68
                                            2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


1. Ordinary Shares
                      -655,27   -4,697,01 -131,475,                                           126,123,3
Invested by
                         5.00        1.20      684.92                                            98.72
Shareholders

2. Capital Invested
by Holders of
Other Equity
Instruments

3. Amount of
Share-based
Payments                        9,633,047                                                     9,633,047
Recorded into                         .81                                                           .81
Shareholders'
Equity

4. Others

                                                                                    -289,77
(III) Profit                                 -1,525,84                                        -288,248,
                                                                                    3,910.5
Distribution                                     9.23                                           061.30
                                                                                          3

1. Appropriation of
Surplus Reserves

2. Distribution to                                                                  -289,77
                                                                                              -289,773,
Owners (or                                                                          3,910.5
                                                                                                910.53
Shareholders)                                                                             3

                                             -1,525,84                                        1,525,849
3. Others
                                                 9.23                                               .23

(IV) Internal
Carry-forward of
Shareholders'
Equity

1. Capital
Reserves
Transferred into
Capital (or Share
Capital)

2. Surplus
Reserves
Transferred into
Capital (or Share
Capital)

3. Surplus
Reserves Covering
Losses


                                                                                                     69
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


4. Others

(V) Special
Reserves

1. Withdrawal in
This Period

2. Used in This
Period

(VI) Others

                                                                                                                   4,780,6
IV. Balance at the 2,898,75                               589,895,8                                    717,707,3             8,987,042
                                                                                                                   83,365.
End of This Period 6,130.00                                   36.49                                        31.98               ,664.36
                                                                                                                        89


III. Basic Information about the Company

     Zhejiang Dahua Technology Co., Ltd. (hereinafter referred to as "Company" or "the Company") was incorporated under the
official approval document No. 18 [2002] Zhejiang Enterprise Listing by Zhejiang Provincial People's Government Work Leading
Group for Enterprise Listing in June 2002, and on the basis of overall change of the previous Hangzhou Dahua Information
Technology Co., Ltd. It was an incorporated company initiated and established jointly by five natural persons, Fu Liquan, Chen
Ailing, Zhu Jiangming, Liu Yunzhen and Chen Jianfeng as initiators. The Company's business license registration number as Legal
Entity is 330000000024078. On April 22, 2008, the Company issued 16.8 million shares of common stock in RMB to the general
public for the first time under the approval document No. 573 [2008] Securities Regulatory Issuance, issued by China Securities
Regulatory Commission ("CSRC"). It was listed on Shenzhen Stock Exchange on May 20, 2008 with a registered capital of RMB
66.8 million and the change registration filed with Administration for Industry and Commerce was completed on May 23, 2008. The
Company's unified social credit code is 91330000727215176K. The Company falls within the security video surveillance industry.
     As of June 30, 2017, the Company has issued a total of 2,898,756,130 shares, with a registered capital of RMB 2,898,756,130.
The registered address is No. 1187, Bin'an Road, Binjiang District, Hangzhou, and the headquarters address is No. 1199, Bin'an Road,
Binjiang District, Hangzhou.
     The Company's main operational activities include the development, services & sales of computer software, the design,
development, production, installation & sales of electronic products and communication products, the development, system
integration & sales of network products, the design & installation of electronic engineering products, import & export businesses, etc.
The actual controllers of the Company are Fu Liquan and Chen Ailing.
     This financial statement has been approved by Board of Directors on August 20, 2018.
     Please see note IX "Equity in Other Entities" for details of the consolidated scope of the financial statement for this reporting
period and note VIII "Change in Consolidation Scope" for details of scope variations in the financial statement for this reporting
period.


IV. Basis for Preparing Financial Statements

1. Basis for the preparation

The Company prepares the financial statement, as a going concern, based on transactions and matters that have actually occurred, in
accordance with Accounting Standards for Business Enterprises - Basic Standards issued by the Ministry of Finance and all specific


                                                                                                                                    70
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


accounting standards, application guidelines for accounting standards for business enterprises, explanations on the accounting
standards for business enterprises and other related regulations (hereinafter referred to as "Accounting Standards for Business
Enterprises" collectively), and the disclosure provisions in the Preparation Rules for Information Disclosures by Companies Offering
Securities to the Public No. 15 - General Provisions on Financial Reports issued by CSRC.


2. Going concern

The Company has the capability to continue as a going concern for at least 12 months as of the end of current reporting period,
without any significant item affecting the capability for continuing as a going concern.


V. Significant Accounting Polices and Accounting Estimates

Notes to specific accounting policies and accounting estimates:
The following disclosures cover the specific accounting policies and accounting estimates formulated by the Company according to
the characteristics of its production and operation.


1. Statement on compliance with Accounting Standards for Business Enterprises

The financial statements have been prepared by the Company in conformity with Chinese Accounting Standards for Business
Enterprises, and present truly and completely the Company’s financial position, operating results and cash flow, and other related
information in the reporting period.


2. Accounting period

The accounting period of the Company is from January 1 to December 31 of each calendar year.


3. Operating cycle

The Company’s operating cycle is 12 months.


4. Functional currency

For the domestic operating entities of the Company and its overseas operating entity Dahua Technology (HK) Limited, the reporting
currency is Renminbi (“RMB”). The remaining offshore operating entities use the local currency as the reporting currency.


5. The accounting treatment of business combinations involving enterprises under common control and
business combinations not involving enterprises under common control

     Business combinations involving entities under common control: The assets and liabilities acquired by the Company in business
combination shall be measured at the carrying value of the assets, liabilities of the acquiree (including goodwill incurred in the
acquisition of the acquiree by ultimate controlling party) in the consolidated financial statements of the ultimate controlling party on
the date of combination. The difference between the carrying amount of the net assets obtained and the carrying amount of the
consideration paid for the combination (or total nominal value of the issued shares) is adjusted to capital premium in capital reserve.
Adjustments shall be made to retained earnings in the event that the share premiums in the capital reserves are not sufficient for
write-down.

                                                                                                                                     71
                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


     Business combinations involving entities not under common control: The assets paid and liabilities incurred or committed as a
consideration of business combination by the Company were measured at fair value on the date of acquisition and the difference
between the fair value and its carrying value shall be charged to the profit or loss for the period. Where the cost of combination is
higher than the fair value of the identifiable net assets acquired from the acquire in business combination, the Company shall
recognize such difference as goodwill; where the cost of combination is less than the fair value of the identifiable net assets acquired
from the acquiree in business combination, such difference shall be charged to the profit or loss for the current period.
The agency fee such as audit, legal service and evaluation consultation and other fees which are directly related to the above matters
shall be recognized as the profit or loss in the period when the costs are incurred; the transaction costs for the equity securities issued
for corporate combination shall be written-off against equity.


6. Preparation method of consolidated financial statements

     The scope of consolidation of the consolidated financial statements of the Company is based on controlling interests, and all the
subsidiaries (including separate entities of the investee controlled by the Company) are included in the consolidated financial
statements.
     The consolidated financial statements are prepared by the Company based on the financial statements of the Company and its
subsidiaries and in accordance with the other relevant information. In preparation of the Company’s consolidated financial statements,
the Company will treat the enterprise group as a single accounting entity. The Group’s overall financial position, operating results and
cash flow are reflected based on the relevant accounting standards, measurement and presentation requirements and in accordance
with the unified accounting policy.
     The subsidiaries that are within the scope of the consolidation shall have the same accounting policies and the accounting
periods with those of the Company. In preparing the consolidated financial statements, where the accounting policies and the
accounting periods are inconsistent between the Company and subsidiaries, the financial statements of subsidiaries are adjusted in
accordance with the accounting policies and accounting period of the Company. For subsidiaries acquired from a business
combination involving entities not under common control, the individual financial statements of the subsidiaries are adjusted based
on the fair value of the identifiable net assets on the date of acquisition. For subsidiaries acquired from a business combination
involving entities under common control, the individual financial statements of the subsidiaries are adjusted based on the carrying
value of the assets, liabilities of the acquiree (including goodwill incurred in the acquisition of the acquiree by ultimate controlling
party) in the financial statements of the ultimate controlling party.
     The owner’s equity, the net profit or loss and the comprehensive income attributable to minority shareholders of a subsidiary of
the current period are presented separately under the owners’ equity in the consolidated balance sheet, the net profit and the total
comprehensive income in the consolidated income statement respectively. Where losses attributable to the minority shareholders of a
subsidiary of the current period exceed the minority shareholders’ interest entitled in the shareholders’ equity of the subsidiary at the
beginning of the period, the excess is allocated against the minority shareholders interest.
     (1) Acquisition of subsidiaries or business
     For acquisition of subsidiaries or business due to business combination involving entities under common control during the
reporting period, the opening balance of the consolidated balance sheet shall be adjusted; the revenue, expense and profit of such
subsidiaries or business from the beginning to the end of the reporting period when the merger occurs are included in the
consolidated income statement; the cash flows of such subsidiaries or business from the beginning to the end of the reporting period
when the merger occurs are included in the consolidated cash flow statement, and the comparative figures of the financial statements
should be adjusted simultaneously as if the consolidated reporting entity has been in existence since the beginning of the control by
the ultimate controlling party.
     An investor that may impose control over the investee under joint control due to additional investment shall be deemed a party
participating in the combination, and shall be adjusted at current status when the ultimate controlling party begins the control. The


                                                                                                                                        72
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


equity investment held before gaining the control of the combined party is recognized as relevant profit or loss, other comprehensive
income and changes in other net assets at the later of the date of acquisition of the original equity and the date when the combining
and the combined parties are under joint control, and shall be written down to the opening balance retained earnings or current profit
or loss in the comparative reporting period.
     For acquisition of subsidiaries due to business combination involving entities not under common control during the reporting
period, the opening balance of consolidated balance sheet needs not be adjusted; the revenue, expense and profit of such subsidiaries
or business from the date of acquisition to the end of the reporting period are included in the consolidated income statement; the cash
flows of such subsidiaries or business from the date of acquisition to the end of the reporting period are included in the consolidated
cash flow statement.
     In connection with imposing control over the investee not under joint control due to additional investment and other reasons, the
equity of acquiree held before acquisition date shall be remeasured by the Company at the fair value of such equity on the acquisition
date and the difference between fair value and carrying amount shall be recognized as investment income in current period. If the
acquiree’s equity held before the acquiring date contains other comprehensive income and the other changes of owner’s equity except
for net profits and losses, other comprehensive income and profit distributions under the equity method, the related other
comprehensive income and changes in other owner’s equity shall be transferred to investment gains or losses on the date of
acquisition, excluding the other comprehensive income derived from changes of net liabilities or net assets due to re-measurement on
defined benefit plan by the investee.
     (2) Disposal of subsidiaries or business
     ① General treatment
     For disposal of subsidiaries or business during the reporting period, the revenue, expense and profit of such subsidiaries or
business from the beginning of the period to the date of disposal are included in the consolidated income statement; the cash flows of
such subsidiaries or business from the beginning of the period to the date of disposal are included in the consolidated cash flow
statement.
     When losing control of the investee due to partial disposal of the equity investment, or any other reasons, the remaining equity
investment is remeasured at fair value at the date in which control is lost. The sum of consideration received from disposal of equity
investment and the fair value of the remaining equity investment, net of the difference between the sum of the Company’s previous
share of the subsidiary’s net assets recorded from the acquisition date or combination date and the sum of goodwill, is recognized in
investment income in the period in which control is lost. Other comprehensive income or net profit and loss related to the previous
equity investment in the subsidiary, changes in equity except the other comprehensive income and profit distribution, are transferred
to investment income of the current period when losing control, except the other comprehensive income as a result of the changes
arising from the remeasurement of the net assets and net liabilities of the investee’s defined benefit plan.
     In the event of losing control due to a decrease in the proportion of shares held by the Company as the capital increase in
subsidiaries by other investors, the accounting treatment shall be conducted in accordance with the above principles.
     ② Disposal of subsidiary achieved by stages
     When disposal of equity interests of subsidiaries through multiple transaction until the control is lost, generally transactions in
stages are treatment as a package deal in accounting if the transaction terms, conditions, and economic impact of disposal of the
subsidiary’s equity interests comply with one or more of the following:
     ⅰ. These transactions are achieved at the same time or the mutual effects on each other are considered;
     ⅱ. A complete set of commercial results can be achieved with reference to the series of transactions as a whole;
     ⅲ. Achieving a transaction depends on at least achieving of one of the other transaction;
     ⅳ. One transaction recognized separately is not economical, but it is economical when considered together with other
transactions.
     When losing control of a subsidiary in disposal of equity interests through multiple transactions is recognized as a package deals,
these transactions shall be in accounting treated as loss control of a subsidiary in disposal of equity interests achieved. However, the



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differences between price on each disposal and disposal of investment on the subsidiary’s net assets shall be recognized in other
comprehensive income in the consolidated financial statements, and included in profit or loss for the period when the control is lost.
     If all transactions in disposal of equity interests of subsidiaries until losing control are not a package deals, accounting treatment
for partial disposal of equity investments of subsidiary without losing control shall be applied before control is lost. When the control
is lost, general accounting treatment for disposal of a subsidiary shall be used.
     (3) Acquisition of minority interest of subsidiaries
     The Company shall adjust the share premium in the capital reserve of the consolidated balance sheet with respect to any
difference between the long-term equity investment arising from the purchase of minority interest and the net assets attributing to the
parent company continuously calculated on the basis of the newly increased share proportion as of the acquisition date (or date of
combination) or, adjust the retained earnings if the share premium in the capital reserve is insufficient for write-down.
     (4) Partial disposal of equity investment in subsidiaries without losing control
The difference between disposal consideration of long-term equity investment in subsidiaries partially disposed without losing
control and the share of net assets calculated from the date of acquisition or combination date shall be adjusted to share premium in
the capital reserve in the consolidated balance sheet. Adjustments shall be made to retained earnings in the event that the share
premiums in the capital reserves are not sufficient for write-down.


7. Classification of joint-venture arrangements and relevant accounting methods

Not applicable.


8. Recognition criteria of cash and cash equivalents

     In preparing the cash flow statement, the cash on hand and deposits that are available for payment at any time of the Company
are recognized as cash. The short-term (due within 3 months of the date of purchase) and highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of value change are recognized as cash
equivalents.


9. Conversion of transactions and financial statements denominated in foreign currencies

     (1) Foreign currency transactions
     Foreign currency transactions shall be translated into RMB at the spot exchange rate on the day when the transactions occurred.
     Balance sheet date foreign currency monetary items shall be translated using the spot exchange rate at the balance sheet date.
The resulting exchange differences are recognized in profit or loss for the current period, except for those differences related to the
principal and interest on a specific-purpose borrowing denominated in foreign currency for acquisitions, construction or production
of the qualified assets, which should be capitalized as cost of the assets.
     2. Translation of foreign currency financial statements
     All assets and liabilities items in balance sheet are translated based on spot exchange rate on the balance sheet date; owners’
equity items other than “undistributed profit” are translated at a spot exchange rate when accrued. Revenue and expense items in the
income statement are translated at a spot exchange rate at the transaction occurrence date.
For disposal of overseas operation, the translation difference as stated in the foreign currency financial statements relating to overseas
operation, is accounted for in the profit and loss account in the current period from owners’ equity items.




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10. Financial instruments

     Financial instruments include financial assets, financial liabilities and equity instruments.
     (1) Classification of the financial instruments
     The financial instruments was classified at the time of initial recognition as: financial assets or financial liabilities carried at fair
value through profit or loss for the current period, including financial assets or liabilities for trading and financial assets or financial
liabilities directly designated as measured at fair value and its changes are included in the profit or loss for the current period;
held-to-maturity investments; accounts receivable; available-for-sale financial assets and other financial liabilities.
     (2) Recognition and measurement of financial instruments
     ① Financial assets or financial liabilities carried at fair value through profit or loss for the current period
     When obtained, the financial assets or financial liabilities shall be initially measured at their fair value (except for cash
dividends which are declared but not distributed or interests on bonds of which the maturity interest is not drawn), its transaction
costs are included in the profit or loss for the period.
     The interest or cash dividend gained in the period are recognized as investment income. At the end of the period, the variation in
the fair value of the financial asset or financial liability shall be included in the profit or loss for the period.
     When being disposed, the difference between the fair value and the amount of initial recognition shall be recognized as
investment income; meanwhile, the profits and losses arising from the variation in fair value shall be adjusted.
     ② Held-to-maturity investments
     Held-to-maturity investments are initially measured at fair value when obtained (except for interests on bonds of which the
maturity interest is not drawn) plus relevant transaction costs.
     Interest income is calculated according to the amortized cost and effective interest rate and recorded into investment income.
The effective interest rate, ascertained when initially obtained, shall remain unchanged within the predicted term of existence or
within a shorter applicable term.
     When being disposed, the difference between the consideration obtained and the carrying amount of the investment shall be
recorded into investment income.
     ③ Accounts receivable
     The receivables that are formed in sale of goods or rendering of services to external parties, and the receivables, except for the
debt instruments quoted in an active market, due to the Company from other entities, including accounts receivable, other receivables,
etc., are initially recognized at the consideration of the contract or agreement to be received from the buyers. Accounts receivable that
are of a financing nature are initially recognized at their present value.
     Upon recovery or disposal of accounts receivable, the difference between the consideration obtained and the carrying amount is
charged to profit or loss for the period.
     ④ Available-for-sale financial assets
     Available-for-sale financial assets are initially measured at fair value when obtained (except for cash dividends which are
declared but not distributed or interests on bonds of which the maturity interest is not drawn) plus relevant transaction costs.
     The interests or cash dividends to be obtained during the period the available-for-sale financial assets are held shall be recorded
into investment income. By the end of the reporting period, financial assets are measured at fair value, and the change in fair value
shall be recorded into other comprehensive income. However, measurement at cost shall be used when there is no quoted price in an
active market and the fair value of investments in equity instruments cannot be reliably measured and derivative financial assets is
linked to equity instruments where equity instrument shall be settled by delivery.
     When being disposed, the difference between the consideration obtained and the carrying amount of the financial assets shall be
recorded into investment income; meanwhile, the corresponding portion of accumulated change in fair value previously recorded into
other comprehensive income shall be transferred to profit or loss.
     ⑤ Other financial liabilities



                                                                                                                                           75
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     Other financial liabilities are initially measured at fair value plus relevant transaction costs, and subsequently measured at
amortized cost.
     (3) Recognition basis and measurement of transfer of financial assets
     A financial asset recognition shall be terminated while the Company has transferred nearly all the risks and rewards related to
the ownership of the financial asset to the transferee, and it shall not be terminated if the Company has retained nearly all the risks
and rewards related to the ownerships of the financial asset.
     The substance-over-form principle shall be adopted while making judgment on whether the transfer of financial assets satisfies
the above conditions for termination of recognition. The transfer of financial assets can be classified into entire transfer and partial
transfer. If the transfer of an entire financial asset satisfies the conditions for termination of recognition, the difference between the
two amounts below shall be recorded into profit or loss for the period:
     ① The carrying amount of the financial asset transferred;
     ② The consideration received as a result of the transfer, plus the accumulative amount of the change in fair value previously
recorded into the owners’ equities (in cases where the transferred financial asset is available-for-sale financial asset).
     If the partial transfer of financial assets satisfies the conditions for termination of recognition, the overall carrying amount of the
transferred financial asset shall be apportioned according to their respective relative fair value between the recognition terminated
part and the remaining part, and the difference between the two amounts below shall be recorded into profit or loss for the current
period:
     ① The carrying amount of the recognition terminated portion;
     ② The sum of consideration of the recognition terminated portion and the corresponding portion of accumulated change in fair
value previously recorded into owners’ equity (in cases where the transferred financial assets are available for-sale financial assets).
     Financial assets will still be recognized if they fail to satisfy the conditions for termination of recognition, with the consideration
received recognized as a financial liability.
     (4) Recognition conditions for termination of financial liabilities
     When the current obligation under a financial liability is completely or partially discharged, the recognition of the whole or
relevant portion of the liability is terminated; an agreement is entered between the Company and a creditor to replace the original
financial liabilities with new financial liabilities with substantially different terms, terminate the recognition of the original financial
liabilities as well as recognize the new financial liabilities.
     If all or part of the contract terms of the original financial liabilities are substantially amended, the recognition of the original
financial liabilities will be terminated in full or in part, and the financial liabilities whose terms have been amended shall be
recognized as a new financial liability.
     When recognition of financial liabilities is terminated in full or in part, the difference between the carrying amount of the
financial liabilities terminated and the consideration paid (including transferred non-cash assets or new financial liability) is
recognized in profit or loss for the current period.
     Where the Company repurchases part of its financial liabilities, the carrying amount of such financial liabilities will be allocated
according to the relative fair value between the continued recognized part and terminated part on the repurchase date. The difference
between the carrying amount of the financial liabilities terminated and the consideration paid (including transferred non-cash assets
or new financial liability) is recognized in profit or loss for the current period.
     (5) Method of determining the fair values of financial assets and liabilities
     The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the active market.
The fair value of a financial instrument that is not traded in an active market is determined by using a valuation technique. The
Company uses the valuation technique when it is applicable under current conditions and there are enough available data and other
information to support and the technique should maximize the use of relevant observable. It chooses the inputs which are consistent
with the asset or liability’s characteristics considered by market participants in the transaction of the relevant asset or liability and
makes the maximum use of relevant observable inputs. Unobservable inputs are used under the circumstance that the relevant



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observable inputs cannot be obtained or not feasible.
        (6) Testing methodology and accounting treatment for impairment of financial assets (excluding accounts receivable)
        The Company shall assess the carrying amount of financial assets other than those at fair value through profit or loss at the
balance sheet date. If there is objective evidence that the financial asset is impaired, the Company shall make provision of any
impairment.
        ① Impairment provision for available-for-sale financial asset:
        While the fair value of available-for-sale financial asset falls significantly, or judged by the Company that descending trend is
not temporary after taking into account related data comprehensively at the end of the period, they will be recognized as impaired,
the cumulative loss arising from decline in fair value that had been recognized directly in the owners’ equity shall be removed from
the shareholders’ equity and recognized as impairment loss.
        If, after an impairment loss has been recognized on an available-for-sale debt instrument, the fair value of the debt instrument
increases in a subsequent period and the increase can be objectively related to an event occurring after the original impairment loss
was recognized, the impairment loss shall be reversed, with the amount of the reversal recognized in the profit or loss for the current
period.
        Impairment losses recognized for an investment in an available-for-sale equity instrument shall not be reversed through profit or
loss.
        ② Impairment provision for held-to-maturity investments:
The impairment losses of held-to-maturity investments shall be measured according to the method for measuring impairment losses
of accounts receivable.


11. Accounts receivable

(1) Accounts receivable which are individually insignificant but subject to separate bad debt provision


Bases for Making Judgment and Standard for
Calculation the Amount for the Accounts                 Within top five accounts receivable balances
Receivable That Are Individually Significant

                                                        When assessing provision for bad debts separately, if the objective evidence
                                                        shows that the accounts receivable has been impaired, the provision for bad
Recognition of Receivables with Amounts that are
                                                        debts will be made according to the difference of the present value of the
Individually Significant and Subject to Separate
                                                        expected future cash flow below its book value. When separately assessing the
Assessment for Provision for Bad Debts
                                                        accounts receivable that have not been devalued, it is classified into the
                                                        corresponding combinations for bad debt provision.


(2) Accounts receivable for which provision of bad debts made by portfolio of credit risk characteristics


                            Portfolio Name                                             Method of Provision of Bad Debts

                                                                      Related party accounts receivable within the scope of the
Portfolio 1: Related Parties Portfolio
                                                                      portfolio are not provided for bad debts

Portfolio 2: Aging Analysis Portfolio                                 Aging analysis

In this portfolio, the aging analysis method is used to make provision for bad debts:
√ Applicable □ Not applicable



                                                                                                                                       77
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


                                                  Provision Percentage for Accounts         Provision Percentage for Other Accounts
                   Aging
                                                             Receivable                                   Receivable

Within 1 year (including 1 year)                                                   5.00%                                        5.00%

1-2 years                                                                        10.00%                                       10.00%

2-3 years                                                                        30.00%                                       30.00%

3-4 years                                                                        50.00%                                       50.00%

4-5 years                                                                        80.00%                                       80.00%

5 years or above                                                                100.00%                                      100.00%

In this portfolio, the balance percentage method is used to make provision for bad debts:
□ Applicable √ Not applicable
In this portfolio, other methods are used to make provision for bad debts:
□ Applicable √ Not applicable


(3) Accounts receivable that are individually insignificant but are provided for bad debt on individual basis


Reasons for Making Bad Debt
                                   Long aging, with objective evidence of impairment
Provision Individually

                                   Impairment loss is recognized and bad debt provision is made by using the difference between the
Method for Bad Debt Provision
                                   present value of estimated future cash flows and the book value of receivables


12. Inventories

     (1) Category of inventory
     Inventories are classified as raw materials, work in progress, turnover materials, goods in product and commissioned processing
materials.
     (2) Determination of cost
     Cost of inventories is determined using the weighted average method.
     (3) Basis for the determination of net realizable value and provision method for decline in value of inventories
     Net realizable value of held-for-sale commodity stocks, such as finished goods, goods-in-stock, and held-for-sale raw materials,
during the normal course of production and operation, shall be determined by their estimated sales less the related selling expenses
and taxes; the net realizable value of material inventories, which need to be processed, during the normal course of production and
operation, shall be determined by the amount after deducting the estimated cost of completion, estimated selling expenses and
relevant taxes from the estimated selling price of finished goods; the net realizable value of inventories held for execution of sales
contracts or labor contracts shall be calculated on the ground of the contracted price. If an enterprise holds more inventories than the
quantity stipulated in the sales contract, the net realizable value of the exceeding part shall be calculated on the ground of general
selling price.
     Decline in value of inventories is made on an item-by item basis at the end of the period. For large quantity and low value items
of inventories, provision may be made based on categories of inventories; for items of inventories relating to a product line that is
produced and marketed in the same geographical area and with the same or similar end uses or purposes, which cannot be practicable
evaluated separately from other items in that product line, provision for decline in value of inventories may be determined on an
aggregate basis.


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                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


        Unless the evidence clearly shows that abnormality in market price exists as of the balance sheet date, the net realizable value of
inventories is determined based on the market price as of the balance sheet date.
        The net realizable value of inventories at the end of current period is determined based on the market price of the balance sheet
date.
        (4) Inventory system
        The perpetual inventory system is adopted.
        (5) Amortization of low-value consumables and packaging materials
        ① Low-value consumables are amortized using the immediate write-off method;
        ② Packaging materials are amortized using the immediate write-off method.


13. Holding for-sale assets

A non-current asset or disposed group is classified by the Company as holding for sale if it meets the following criteria at the same
time:
(1) Immediate sale could be made under the current circumstances in accordance with the convention of selling such kind of assets or
disposal groups in similar transactions;
(2) Selling is extremely likely to occur, i.e. the Company has made a resolution on a selling plan and obtained confirmed purchase
commitments, and the selling is predicted to be completed within 1 year. If required by relevant provisions that selling shall only be
made after approved by the relevant competent authority or supervision department of the Company, such approval should have been
obtained.


14. Long-term equity investments

        (1) Joint control or significant influence criterion
        Joint control is the contractually agreed sharing of control of an arrangement, and exists only when requiring the unanimous
consent of the parties sharing control before making decisions about the relevant activities of the arrangement. The Company
together with the other joint venture parties can jointly control over the investee and are entitled to the right of the net assets of the
investee, as the investee is joint venture of the Company.
        Significant influence refers to the power to participate in making decisions on the financial and operating policies of an
enterprise, but not the power to control, or jointly control, the formulation of such policies with other parties. Where the Company
can exercise significant influence over the investee, the investee is an associate of the Company.
        (2) Determination of initial investment cost
        ① Long-term equity investments formed through business combination of entities
        For business combinations involving entities under common control: where the Company pays cash, transfers non-cash assets,
bears debts or issues equity securities as consideration of combinations, the initial investment cost of long-term equity investments
are the share with reference to the book value of the shareholders’ equity of the combined party in the consolidated financial
statements of the ultimate controlling party on the date of combinations. In connection with imposing control over the investee under
joint control as a result of additional investment and other reasons, on the combination date, the initial cost of long-term equity
investments shall be determined based on share of carrying amounts in the consolidated financial statement of the ultimate
controlling party by net assets of the combined party after the combination. The difference between initial investment cost and the
carrying value of long term equity investment before combination and the sum of carrying value of newly paid consideration for
additional shares acquired on the date of combination is to adjust share premium. If the balance of share premium is insufficient, any
excess is adjusted to retained earnings.
        Business combinations involving entities not under common control: the cost of the combination ascertained on the date of



                                                                                                                                        79
                                                                         2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


acquisition shall be taken as the initial investment cost of the long-term equity investments. In connection with imposing control over
the investee not under joint control as a result of additional investment and other reasons, the initial investment cost when changing
to the cost method shall be the sum of the carrying value of the equity investment originally held and the newly increased initial
investment cost.
     ② Long-term equity investments acquired by other means
     The initial cost of a long-term equity investment obtained by cash payment shall be the purchase costs actually paid.
     The initial cost of investment of a long-term equity investment obtained by means of issuance of equity securities shall be the
fair value of the equity securities issued.
     If the non-monetary assets transaction is commercial in nature and the fair value of the assets received or surrendered can be
reliably measured, the initial cost of investment of a long-term equity investment received the nonmonetary assets transaction, shall
be determined on the basis of the fair value of the assets surrendered and the related tax payable, unless there are concrete evidences
that the fair value of the assets received is more reliable; For non-monetary assets transaction which does not meet the above
conditions, the initial cost of a long-term equity investment received shall be the book value of the assets surrendered and the relevant
taxes payable.
     The initial cost of a long-term equity investment through debt restructuring shall be ascertained based on their fair value.
     (3) Subsequent measurement and recognition of profit or loss
     ① Long-term equity investment calculated by cost method
     Long-term equity investment in subsidiaries of the Company is calculated by cost method, except for the actual consideration
paid for the acquisition of investment or the declared but not yet distributed cash dividends or profits which are included in the
consideration, investment gains are recognized as the Company’ shares of the cash dividends or profits declared by the investee.
     ② Long-term equity investment accounted for by equity method
     Long-term equity investments of associates and jointly controlled entities are calculated using equity method. Where the initial
investment cost of a long-term equity investment exceeds the investor’s interest in the fair value of the investee’s identifiable net
assets at the acquisition date, no adjustment shall be made to the initial investment cost; where the initial investment cost is less than
the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, the difference shall be charged to
profit or loss for the current period.
     The Company recognizes the investment income and other comprehensive income according to the shares of net profit or loss
and other comprehensive income realized by the investee which it shall be entitled or shared respectively, and simultaneously makes
adjustment to the carrying value of long-term equity investments; The carrying value of long-term equity investment shall be reduced
by attributable share of the profit or cash dividends for distribution declared by the investee. In relation to other changes of owner’s
equity except for net profits and losses, other comprehensive income and profit distributions of the investee, the carrying value of
long-term equity investments shall be adjusted and included in owner’s equity.
     When determining the amount of proportion of net profit or loss in the investee which it entitles, fair value of each identifiable
assets of the investee at the time when the investment is obtained shall be used as basis, and according to the accounting policies and
accounting period of the Company, adjustment shall be made to the net profit of the investee. During the period of holding
investments, when preparing consolidated financial statements by the investee, the accounting shall be based on the amounts
attributable to the investee in the net profit, other comprehensive income and other changes of the owner’s equity in the consolidated
financial statements.
     The unrealized profit or loss resulting from transactions between the Company and its associates or joint venture shall be
eliminated in portion to the investor’s equity interest of investee, based on which investment income or loss shall be recognized. Any
losses resulting from transactions, which are attributable to impairment of assets, shall be fully recognized. Where the transactions of
the assets invested and sold that are able to constitute businesses between the Company and associates and joint ventures, the assets
shall be dealt with in accordance with accounting policies disclosed in "Accounting method for business combination involving
enterprises under common control and not under common control" and "Preparation of consolidated financial statements" in this



                                                                                                                                              80
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note.
        In recognition of share of losses in the investee, the Company treats it in the following order: Firstly, the Company will write off
the carrying value of long-term equity investments. Secondly, in the event the aforesaid carrying value is insufficient for write off, it
shall continue to recognize investment loss and write off carrying values of long-term receivables to the extent of the carrying
amount of the long-term equity (Note: the specific contents and determining criteria of the long-term equity should be clearly defined)
which substantively constitutes the net investment in the investee. Finally, after the above treatment, for the additional obligations
which shall be still assumed by entities according to investment contract or agreement, the estimated liabilities shall be recognized
based on the obligations which are expected to assume and included in the investment loss for the current period.
        ③ Disposal of long-term equity investments
        For disposal of long-term equity investment, the difference between the book value and the consideration actually received shall
be included in the current profit or loss.
        For the long-term equity investment under the equity method, when disposing of such investment, part of amounts that shall be
originally included in other comprehensive income shall be accounted for in proportion by using the same basis as the investee used
for direct disposal of relevant assets or liabilities. The owner’s equity which is recognized due to other changes of owner’s equity
except for net profits and losses, other comprehensive income and profit distributions shall be transferred in proportion into the
current profit or loss, excluding the other comprehensive income derived from changes of net liabilities or net assets due to
re-measurement on defined benefit plan by the investee.
        When losing the controls or material influence over the investee due to partially disposal of equity investment and other reasons,
the remaining equities shall be accounted for in accordance with the standards on recognition and measurement of financial
instruments, and the difference between the fair value and the carrying value at the date of losing control or material influence shall
be included in current profit or loss. For other comprehensive income recognized in the original equity investment due to the equity
method is adopted, it shall be treated using the same accounting basis as the investee used for direct disposal of relevant assets or
liabilities when ceasing to use the equity method. All owner’s equities which are recognized due to other changes of owner’s equity
except for net profits and losses, other comprehensive income and profit distributions shall be transferred into the current profit or
loss when ceasing to use the equity method.
        When losing the controls over the investee due to partially disposal of equity investment and other reasons, the remaining
equities after disposal shall be accounted for under equity method in preparation of individual financial statements provided that
common control or material influence over the investee can be imposed, and shall be adjusted as if such remaining equities has been
accounted for under the equity method since they are obtained. Where the remaining equities after disposal cannot impose common
control or material influence over the investee, it shall be accounted for according to relevant provisions of the standards on
recognition and measurement of financial instruments, and the difference between fair value and the carrying value on the date of
losing control shall be included in the current profit or loss.
The disposed equity interest was acquired in a business combination as resulted from such as making additional investment, the
remaining equity interest after disposal will be accounted for using cost method or equity method when preparing the separate
financial statements. Other comprehensive income and other owners’ equity recognized when the equity interests held on the
acquisition date is accounted for using equity method and shall be transferred proportionally; For the remaining equity interest after
disposal accounted for using the recognition and measurement standard of financial instruments, other comprehensive income and
other owners’ equity shall be fully transferred.


15. Investment property

Investment property measurement model
Measurement by cost method
Depreciation or amortization method


                                                                                                                                         81
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Investment property measured at cost - buildings held for leasing shall adopt the same depreciation policy for fixed assets of the
company, land use rights held for leasing shall adopt the same amortization policy for the intangible assets.


16. Fixed assets

(1) Recognition conditions

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; and have a service life of more than one accounting year. Fixed asset is recognized when it meets the
following conditions: ① It is probable that the economic benefits associated with the fixed asset will flow to the enterprise; ② Its
cost can be reliably measured.


(2) Methods for depreciation


                                                                                                                Annual Depreciation
         Category             Depreciation Method           Depreciation Period      Residual Value Rate
                                                                                                                       Rate

Housing and building        Straight-line method       20                           5%                      4.75%

Machinery and
                            Straight-line method       5-10                         5%                      19.00%-9.50%
equipment

Means of transport          Straight-line method       4-8                          5%                      23.75%-11.88%

Electronic and other
                            Straight-line method       3-5                          5%                      31.67%-19.00%
equipment

     Fixed assets are depreciated by categories using the straight-line method, and the annual depreciation rates are determined by
categories based upon their estimated useful lives and their estimated residual values. Where the parts of a fixed asset have different
useful lives or cause economic benefits for the enterprise in different ways, different depreciation rates or depreciation methods shall
apply, and each part is depreciated separately.
     For fixed assets leased under finance lease, if it can be reasonably determined that the ownership of the leased asset can be
acquired upon the expiry of the lease term, depreciation policies in line with the fixed assets will be adopted for depreciation during
the remaining service life of the leased asset. If it cannot be reasonably determined that the ownership of the leased asset can be
acquired upon the expiry of the lease term, depreciation policies in line with the fixed assets will be adopted for depreciation during
the shorter of the lease term and the remaining service life of the leased asset.


(3) Recognition bases and measurement methods of fixed assets under finance lease

     Where any one of the following conditions is provided in the lease agreement between the Company and the lesser, assets under
finance lease will be recognized: ① upon the expiry of lease, the ownership of the leased asset is transferred to the Company; ②
the Company has the option to purchase the leased asset, the purchase consideration entered into is expected to be far less than the
fair value of the leased asset upon the exercise of the option; ③ the lease term accounts for the majority of the service life of the
leased asset; ④ the present value of the minimum lease payment upon the commencement of the lease is substantially the same as
the fair value of the leased asset. On the commencement of the lease, the leased asset shall be recorded at an amount equal to the
lower of the fair value of the leased asset and the present value of the minimum lease payments, and the minimum lease payments
shall be recorded as the carrying amount of long-term payables. The difference between the recorded amount of the leased asset and
the minimum lease payments shall be accounted for as unrecognized finance charge.


                                                                                                                                      82
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


17. Construction in progress

     Criteria and time point for construction in progress being transferred to the fixed asset Construction in progress is measured at
all the expenditures incurred to bring the fixed assets ready for their intended use. If the construction in progress of fixed assets
constructed are ready for their intended use but the final account of completed project has not been issued, it should be transferred to
fixed assets at an estimated cost according to the construction budget, construction price or actual cost, and depreciation should be
provided according to deprecation policy for fixed assets from the date when the assets are ready for their intended use. When the
final account of completed project is issued, the estimated cost will be adjusted according to the actual cost, while the original
depreciation charge will not be adjusted.


18. Borrowing costs

     (1) Criteria for recognition of capitalized borrowing costs
     Borrowing costs refers to the borrowing interests, amortization of discounts or premiums, ancillary costs and exchange
differences arising from foreign currency borrowings, etc.
     For borrowing costs incurred by the Company that are directly attributable to the acquisition, construction or production of
assets qualified for capitalization, the costs will be capitalized and included in the costs of the related assets. Other borrowing costs
shall be recognized as expense in the period in which they are incurred and included in profit or loss for the current period.
     Assets qualified for capitalization are assets (fixed assets, investment property, inventories, etc.) that necessarily take a
substantial period of time for acquisition, construction or production to get ready for their intended use or sale.
     Capitalization of borrowing costs begins when the following three conditions are fully satisfied:
     ① Expenditures for the assets (including cash paid, transferred non-currency assets or expenditure for holding debt liability for
the acquisition, construction or production of assets qualified for capitalization) have been incurred;
     ② Borrowing costs have been incurred;
     ③ Acquisition, construction or production that are necessary to enable the asset reach its intended usable or salable condition
have commenced.
     (2) Capitalization period of borrowing costs
     The capitalization period shall refer to the period between the commencement and the cessation of capitalization of borrowing
costs, excluding the period in which capitalization of borrowing costs is temporarily suspended.
     Capitalization of borrowing costs shall be suspended during periods in which the qualifying asset under acquisition and
construction or production ready for the intended use or sale.
     If part of an asset being acquired, constructed or produced has been completed respectively and put into use individually,
capitalization of borrowing costs should be suspended.
     If different parts of the assets acquired, constructed or produced are completed separately, but such asset will not be ready for
the intended use or sale until all parts have been completed, then the borrowing costs will be capitalized until the completion of all
parts of the said asset.
     (3) Suspension of capitalization period
     Capitalization of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a
qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months; if the interruption
is a necessary step for making the qualifying asset under acquisition and construction or production ready for the intended use or sale,
the capitalization of the borrowing costs shall continue. The borrowing costs incurred during such period shall be recognized as
profits and losses of the current period. When the acquisition and construction or production of the asset resumes, the capitalization
of borrowing costs commences.
     (4) Calculation of capitalization rate and amount of borrowing costs
     Specific borrowings for the acquisition, construction or production of assets qualified for capitalization, borrowing costs of the

                                                                                                                                      83
                                                                       2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


specific borrowings actually incurred in the current period minus the interest income earned on the unused borrowing loans as a
deposit in the bank or as investment income earned from temporary investment will be used to determine the amount of borrowing
costs for capitalization.
     General borrowings for the acquisition, construction or production of assets qualified for capitalization, the to-be-capitalized
amount of interests on the general borrowing shall be calculated and determined by multiplying the weighted average asset
disbursement of the part of the accumulative asset disbursements minus the specifically borrowed loans by the capitalization rate of
the general borrowing used. The capitalization rate shall be calculated and determined according to the weighted average interest rate
of the general borrowing.


19. Biological assets

Not applicable.


20. Oil and gas assets

Not applicable.


21. Intangible assets

(1) Valuation method, service life, impairment test

     A. Valuation method of intangible assets
     ① Intangible assets are initially measured at cost upon acquisition;
     The costs of an externally purchased intangible asset include the purchase price, relevant taxes and expenses paid, and other
expenditures directly attributable to putting the asset into condition for its intended use. If the payment for an intangible asset is
delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the intangible assets shall be
ascertained based on the present value of the purchase price.
     The amount of intangible assets acquired from debt restructuring should be recorded at the fair value of such intangible assets,
and the difference between the carrying amount of the restructured debt and the fair value of the intangible assets acquired from debt
restructuring should be included in the profit or loss for the current period.
     If the non-monetary assets transaction is commercial in nature and the fair value of the assets received or surrendered can be
reliably measured, the intangible assets received in the nonmonetary assets transaction, shall be measured on the basis of the fair
value of the assets surrendered, unless there are concrete evidence that the fair value of the assets received is more reliable; For
non-monetary assets transaction which does not meet the above conditions, the cost of intangible assets received shall be the book
value of the assets surrendered and the relevant taxes and expenses payable, and the profit or loss will not be recognized.
     ② Subsequent measurement
     The service life of intangible assets shall be analyzed and judged upon acquisition.
     As for intangible assets with a finite service life, they are amortized using the straight-line method over the term in which
economic benefits are brought to the firm; If the term in which economic benefits are brought to the firm by an intangible asset
cannot be estimated, the intangible asset shall be taken as an intangible asset with indefinite service life, and shall not be amortized.
     B. Estimated useful lives for the intangible assets with finite service life:

                   Item Name                                Estimated useful lives                               Basis

Land use rights                                                     50 years                             Land use certificate




                                                                                                                                        84
                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


Non-patented technology                                            5-10 years                           Expected benefited period

Softwares                                                          2-5 years                            Expected benefited period

Trademark rights                                                     6 years                            Expected benefited period

Software copyright                                                  10 years                            Expected benefited period

     For an intangible asset with a finite service life, review on its service life and amortization method is performed at the end of
each end.
     Upon review, service life and amortization method for the intangible assets are the same with the previous estimate at the end of
this period.
     C. The basis for the judgment of intangible assets with uncertain service life and the procedure for reviewing their service life:
As at the balance sheet date, the Company has no intangible assets with uncertain service life.


(2) Accounting policy for internal R&D expenditure

     A. Specific criteria for the division of research phase and development phase:
     The expenses for internal research and development projects of the Company are divided into expenses in the research phase
and expenses in the development phase.
     Research phase: Scheduled innovative investigations and research activities to obtain and understand scientific or technological
knowledge.
     Development phase: Apply the research outcomes or other knowledge to a plan or design prior to a commercial production or
use in order to produce new or essentially-improved materials, devices, products, etc.
     B. Specific criteria for development phase qualified for capitalization:
     The expenses in the development phase for internal R&D are recognized as intangible assets if the following conditions are
fulfilled:
     ① It is technically feasible to complete such intangible asset so that it will be available for use or for sale;
     ② There is intention to complete the intangible asset for use or sale;
     ③ The intangible asset can produce economic benefits, including there is evidence that the products produced using the
intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, there is evidence that
there exists usage for the intangible asset;
     ④ There is sufficient support in terms of technology, financial resources and other resources in order to complete the
development of the intangible asset, and there is capability to use or sell the intangible asset;
     ⑤ The expenses attributable to the development stage of the intangible asset can be measured reliably.
If the expenses in the development phase does not meet the above conditions, it shall be included in the profits and losses for the
current period at the time of occurrence. Expenses in the research phase are recorded into the profits and losses for the current period
when they occur.


22. Impairment of long-term assets

     Long-term assets, such as long-term equity investment, investment properties, fixed assets, construction in progress, intangible
assets that measured at cost are tested for impairment if there is any indication that an asset may be impaired at the balance sheet date.
If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for
impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows
expected to be derived from the asset. Provision for asset impairment is determined and recognized on the individual asset basis. If it

                                                                                                                                           85
                                                                        2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the
asset belongs to is determined. A group of assets is the smallest group of assets that is able to generate cash inflows independently.
     Impairment test to goodwill and the intangible assets whose using life is not certain shall be carried out at least at the end of
each year.
     When the Company carry out impairment test to goodwill, the Company shall, as of the purchasing day, allocate on a reasonable
basis the carrying value of the goodwill formed by merger of enterprises to the relevant asset groups, or if there is a difficulty in
allocation, to allocate it to the sets of asset groups. When the carrying value of goodwill is allocated to the related asset group or sets
of asset group, the allocation shall be made based on the proportion of the fair value of each asset groups or sets of asset groups to the
total fair value of the relevant assets groups or sets of asset group. If there is difficulty for the fair value to be reliably measured, the
allocation shall be made based on the proportion of the carrying value of each asset groups or sets of asset groups to the total carrying
value of the relevant assets groups or sets of asset groups.
For the purpose of impairment test on the relevant asset groups or the sets of asset groups containing goodwill, if any evidence shows
that the impairment of asset groups or sets of asset groups related to goodwill is possible, an impairment test will be made first on the
asset groups or sets of asset groups not containing goodwill, thus calculating the recoverable amount and comparing it with the
relevant carrying value so as to recognize the corresponding impairment loss. Then an impairment test will be made on the asset
groups or sets of asset groups containing goodwill, and compare the carrying value of these asset groups or sets of asset groups
(including the carrying value of the goodwill allocated thereto) with the recoverable amount. Where the recoverable amount of the
relevant assets or sets of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the
goodwill. Once the above asset impairment loss is recognized, it will not be reversed in the subsequent accounting periods.


23. Long-term prepaid expenses

     Long-term prepaid expenses are expenses which have occurred but will benefit over 1 year and shall be amortized over the
current period and subsequent periods. The long-term prepaid expenses of the Company include expenditures paid for improvement
of fixed assets under operating lease.
     (1) Amortization method
     Long-term prepaid expenses are amortized evenly over the estimated benefit period
     (2) Amortization period
Expenditures paid for improvement of fixed assets under operating lease, amortized evenly over the lease term or remaining service
life of the asset, whichever is shorter.


24. Employee compensation

(1) Accountant arrangement method of short-term remuneration

     During the accounting period when the staff provides service, the Company will recognize the short-term remuneration actually
incurred as liabilities, and the liabilities would be charged into current profits and loss or costs of assets.
     The Company will pay social insurance and housing funds, and will make provision of trade union funds and staff education
costs in accordance with the requirements. During the accounting period when the staff provides service, the Company will
determine the relevant amount of employee benefits in accordance with the required provision basis and provision ratios.
Non-currency employee benefits will be accounted for in accordance with their fair value if they can be measured reliably.




                                                                                                                                          86
                                                                      2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


(2) Accountant arrangement method of retirement benefit plan

     (1) Defined contribution scheme
     The Company will pay basic pension insurance and unemployment insurance in accordance with the relevant provisions of the
local government for the staff. During the accounting period when the staff provides service, the Company will calculate the amount
payable in accordance with the local stipulated basis and proportions which will be recognized as liabilities, and the liabilities would
be charged into current profits and loss or costs of assets.
     (2) Defined benefit scheme
The welfare responsibilities generated from defined benefit scheme based on the formula determined by projected unit credit method
would be vested to the service period of the staff and charged into current profits and loss or costs of assets.


(3) Accountant arrangement method of termination benefits

     The Company will pay termination benefits when the group can no longer withdraw the offer of termination plan or layoff
proposal or when the Group recognizes costs for restructuring which involving the payment of termination benefits (whichever the
earliest). The remuneration incurred by the termination benefits will be recognized as liabilities which would be charged into current
profits and loss.


(4) Accountant arrangement method of other long-term employee benefits

Not applicable.


25. Expected liabilities

     Where the Company is involved in litigations, guarantees provided to debts, loss-making contracts, restructuring and after-sale
maintenance cost, and if such matters are likely to require future assets delivery or the provision of labor services, the amount of
which can be reliably measured, such items shall be recognized as estimated liabilities.
     (1) Recognition criteria for estimated liabilities
     The Company shall recognize the obligations related to contingencies involving litigations, guarantees provided to debts,
loss-making contracts, restructuring and after-sale maintenance cost as estimated liabilities, when all of the following conditions are
satisfied:
     ① the obligation is a present obligation of the group;
     ② it is probable that an outflow of economic benefits will be required to settle the obligation;
     ③ the amount of the obligation can be measured reliably.
     (2) Method of measuring the various estimated liabilities
     Estimated liabilities shall be initially measured at the best estimate of the expenditure required to settle the related present
obligation.
     Factors pertaining to a contingency such as risk, uncertainties, and time value of money shall be taken into account as a whole in
reaching the best estimate. Where the effect of the time value of money is material, the best estimate shall be determined by
discounting the related future cash outflow.
     The best estimate will be dealt with separately in the following circumstances:
     The expenses required have a successive range (or band), in which the possibilities of occurrence of each result are the same,
and the best estimate should be determined as the middle value for the range, i.e. the average of the upper and lower limit.
     The expenses required does not have a successive range (or band), or although there is a successive range (or band), the
possibilities of occurrence of each result are different, if the contingency is related to individual item, the best estimate should be

                                                                                                                                     87
                                                                     2018 Interim Report of Zhejiang Dahua Technology Co., Ltd.


determined as the most likely amount; where the contingency is related to a number of items, the best estimate should be calculated
and determined according to the possible results&ens