Zhejiang Dahua Technology Co., Ltd. 2019 Annual Report Stock code: 002236 Stock Abbreviation: Dahua Date of Disclosure: April 2020 This document is a translated version of the Chinese version 2019Annual Report (“2019 年年度报告全文”), and the published annual report in the Chines e vers ions hall prevail. The complete published Chinese 2019Annual Report maybe obtained at .cn. 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 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 liabilityfor suchi nfo rmatio n. 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 the annual report are authentic, accurate and complete. All directors attended the meeti ng of the Board of Directors for deliberation of this annual report. 1. Risk of technology upgrading: the video IoT industryis a typical techno logy -intensive industry, which is c ha nging 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. 2. Risk of b usi ness model change: with the development of network communications, cloud computing, and big data, AIand other technologies, the business model in the IoT era may have an impact on the traditional industry development. If an enterprise cannot grasp opportunities brought about by the business model transformation in a timely manner, it may face the risk that the original market structure becomes broken. 3. Risk of product safety: 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 security risks on the Internet. However, hackers’ attacks, computer viruses, physical security vulnerabilities, natural disasters, accidents, power interruptions, telecommunications failures, terrorism, and warfare events may still occur from time to time, resulting in security vulnerabilities, system failures, or service interruptions. 4. Intellectual property risk: the promotion of the company's globalization and self-owned brand strategy will likely bring about intellectual property risks and patent infringement, which may cause fluctuation in business relations and public opinions, increasing lawsuits and rising costs. 5. Risk of exchange rate: the company's export transactions are mostly settled in United States Dollars ("USD"), therefore, fluctuations in the exchange rate may affect the profits of the Company. 6. Risk of declined local fiscal capacity: affected by the COVID -19 outbreak, we see the rising uncertainty of macro-economic, more downward pressure in the global economy, decreased local fiscal revenues, and a high debt level. If the local fiscal paying capacity is reduced, it may lead to the slowdown in the growth of some industry demands, extensions of project time, longer periods for companies to withdraw capitals, and customers' payment delay. 7. Risk of international operation: at present, the i nternational political and economic situation is complicated, and there are more uncertain and uncontrollable factors in the international market. The company's products and solutions cover 180 countries and regions, and international business may be exposed to the risks of trade protection in the countries and regions where it is located; In October 2019, the company was listed on the "entity list" by the US Department of Commerce. If the trade frictionbetweenChina and US continues to escalate or US trade protection policy intensifies in the future, it would bring some uncertainty about the potential impact on the company's business; The COVID-19 epidemic is still spreading overseas, which mayslow down market demands, or will have a negative impact on the company's local business. 8. Risk of global COVID-19 epidemic: As COV ID -19 epidemic is still spreading around the world, many countries locks down cities and even borders. As a result, global demand falls at the stage, customer demand is deferred or reduced, and export business wi ll face the risk of decline; In the domestic market, affected by the epidemic situati