Beijing Chunlizhengda Medical Instruments Co., Ltd.* (a joint stock limited company incorporated in the People's Republic of China with limited liability)

Management Discussion and Analysis 3 Corporate Governance and Other Information 12 Consolidated Balance Sheet 15 Parent Company Balance Sheet 17 Consolidated Income Statement 19 Parent Company Income Statement 21 Consolidated Cash Flow Statement 23 Parent Company Cash Flow Statement 26 Consolidated Statement of Changes in Equity 28 Parent Company Statement of Changes in Equity 30 Notes to Financial Statements 32

CORPORATE INFORMATION AUTHORISED REPRESENTATIVES Executive Directors Mr. Yuan Rui Mr. Ip Pui Sum (CPA (Practising), FCCA, ACMA, ACIS, ACS) Mr. Shi Chunbao (Chairman) Ms. Yue Shujun Mr. Zhang Zhendong (resigned on 27 June 2016) Mr. Wang Jianliang (appointed on 1 September 2016) Non-executive Director Mr. Lin Yiming Independent non-executive Directors Ms. Xu Hong Mr. Tong Xiaobo Mr. Cheung Ying Kwan SUPERVISORS Mr. Qi Yi (Chairman) (resigned on 22 July 2016) Mr. Xie Fengbao (resigned on 22 July 2016) Ms. Zhang Lanlan Mr. Zhang Jinyong (appointed on 22 July 2016) Ms. Pei Xiaohui (appointed on 22...

MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY OVERVIEW In recent years, the relevant policies or measures adopted at national level are becoming more favorable for the development of the medical device industry in China. The domestic medical device enterprises will eventually be benefited from measures such as the medical care insurance reimbursement proportion and the selection of domestic medical devices led by the National Health and Family Planning Commission of the People’s Republic of China (the “NHFPC”). The orthopedic implant (note) market, a segment of the medical device market, has experienced...

Management Discussion and Analysis New products and new technologies During the reporting period, the Company launched XN knee joint system (a new knee joint prosthesis products), targeting at high-end knee joint market. With the significant improvement in design philosophy, specifications and mechanical engineering as compared to most of the knee joint prosthesis products in the market, such system has already been applied in more than a hundred of clinical cases. As the commercialization of new prosthesis products may require some time for promotion, training and application, the Company expects...

Management Discussion and Analysis Spinal products The Group achieved its target of expanding the model and enhancing the tools of special products, for example, “Posterior lamina in cervical vertebra” ( ) and “U-type screw 21” (U 21) which were applied in clinical cases. The Group also achieved the target of enhancing and upgrading the tools of 3.5 screw fixation system in posterior cervical fixation system and 5.5 screw fixation system in lumbar vertebrae fixation system sold by the Group, and this boosted the Group’s competitiveness and helped provide better services for the clinical applications....

Management Discussion and Analysis FINANCIAL REVIEW Revenue Our revenue increased by 18.9% from approximately RMB93.4 million for the six months ended 30 June 2015 to approximately RMB111.1 million for the six months ended 30 June 2016. The increase in revenue was mainly attributable to the sales growth of standard joint and ceramic hip joint prosthesis products and the expansion of sales network. The revenue of major products compared to the corresponding period of previous year is as follows: For the six months ended 30 June Product category Standard joint prosthesis products Custom joint prosthesis...

Management Discussion and Analysis Impairment loss of assets Our impairment loss of assets increased by 53.8% from approximately RMB1.3 million for the six months ended 30 June 2015 to approximately RMB2.0 million for the six months ended 30 June 2016. As there was an increase in trade receivables, according to the impairment policy of the Company, the impairment also increased when calculating the impairment loss of trade receivables. Non-operating income Our non-operating income increased by 125% from approximately RMB0.4 million for the six months ended 30 June 2015 to approximately RMB0.9...

Management Discussion and Analysis Fixed assets and construction in progress Our fixed assets and construction in progress increased by 3.9% from approximately RMB61.9 million as of 31 December 2015 to approximately RMB64.3 million as of 30 June 2016. The increase in fixed assets and construction in progress was mainly attributable to the increase of our investment for expansion of Daxing New Production Base and acquisition of production facilities in connection therewith in 2016. Net current assets Our net current assets increased by 9% from approximately RMB341.9 million as of 31 December 2015...

Management Discussion and Analysis SUBSEQUENT EVENTS From the end of the reporting period to the date of this report, the Group did not have any other significant events. USE OF PROCEEDS FROM THE GLOBAL OFFERING The H shares of the Company were listed on the Main Board on 11 March 2015 with net proceeds received by the Company from the global offering in the amount of approximately RMB185.86 million after deducting underwriting commissions and all related expenses. The net proceeds received from the global offering will be used by the Company in such manner as consistent with that mentioned in...

Management Discussion and Analysis Diversify our product series and develop advanced customised joint prosthesis products We will continue to conduct optimisation and modification of our existing products, and keep abreast of the technology development of the joint prosthesis sector and invest more resources in the research and development of new products. We will develop more products catering for patients’ needs through the application of new materials and the improvement of production processes, in order to build a more comprehensive product portfolio and to achieve product diversification....