Beijing Chunlizhengda Medical Instruments : ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

北京市春立正達醫療器械股份有限公司

Beijing Chunlizhengda Medical Instruments Co., Ltd.*

(A joint stock limited company incorporated in the People's Republic of China with limited liabilities)

(Stock Code: 1858)

ANNUAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

The board of directors (the "Board") of Beijing Chunlizhengda Medical Instruments Co., Ltd. (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2019. The results have been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the People's Republic of China ("PRC" or "China")'s Accounting Standards.

• For identification purposes only

- 1 -

CONSOLIDATED BALANCE SHEET OF THE GROUP
		As at	As at
		31 December	31 December
Item	Note	2019		2018
		RMB	RMB
Current Assets:		464,177,034.53
Monetary funds			414,911,994.08
Held-for-trading financial assets
Financial assets measured at fair value with		-
changes included in current profit or loss		-
Derivative financial assets		-	-
Notes receivable		91,125,434.24		68,551,854.01
Accounts receivable		161,641,978.16		70,091,230.68
Prepayment		15,893,149.87	6,059,478.60
Other receivables		4,357,283.91	1,931,307.18
Including: Interests receivable		-	1,299,364.38
Dividends receivable		-	-
Inventories		191,375,248.49		95,865,664.36
Contract assets		-	-
Assets held-for-sale		-	-
Non-current assets due within one year		-	-
Other current assets		6,826,402.79	3,788,415.00
Total current assets		935,396,531.99		661,199,943.91
Non-current assets:
	-
Debt investments		-
Available-for-sale financial assets		-	-
Other debt investments		-	-
Held-to-maturity investments		-	-
Long-term receivable		-	-
Long-term equity investments		-	-
Other investments in equity instruments		-	-
Other non-current financial assets		-	-
Investment property		-	-
Fixed assets		103,630,798.32	82,449,533.63
Construction in progress		52,395,024.57	21,046,594.23
Productive biological assets		-	-
Oil & gas assets		-	-
Intangible assets		103,158,996.78	33,114,313.21
Development expenditures		-	-
Goodwill		-	-
Long-term prepayments		568,333.43	788,333.39
Deferred income tax assets		14,164,164.60	9,010,246.12
Other non-current assets		-	7,131,040.62
Total non-current assets		273,917,317.70		153,540,061.20
Total assets		1,209,313,849.69		814,740,005.11

- 2 -

		As at	As at
		31 December	31 December
Item	Note	2019		2018
		RMB	RMB
Current liabilities:		-
Short-term borrowings		-
Held-for-trading financial liabilities		-	-
Financial liabilities measured at fair value with		-
changes included in current profit or loss		-
Derivative financial liabilities		-	-
Note payable	3	-	-
Accounts payable		86,403,666.10	51,930,070.41
Advances received		5,569,501.39	-
Contract liabilities		88,907,576.59	51,735,316.91
Employee remuneration payable		23,707,828.46	11,794,138.02
Taxes payable		44,606,035.12	16,107,861.02
Other payables		39,350,327.75	27,847,722.41
Including: Interests payable		-	-
Dividends payable		1,500,000.00	-
Liabilities held-for-sale		-	-
Non-current liabilities due within one year		-	-
Other current liabilities		22,507,731.18	12,653,045.87
Total current liabilities		311,052,666.59		172,068,154.64
Non-current liabilities:
	-
Long-term borrowings		-
Bonds payable		-	-
Including: Preferred shares		-	-
Perpetual bonds		-	-
Long-term payables		-	-
Long-term employee remuneration payable		-	-
Estimated liabilities		-	-
Deferred gains		88,600,151.62	12,690,682.43
Deferred income tax liabilities		3,070,394.97	1,841,282.15
Other non-current liabilities		-	-
Total non-current liabilities		91,670,546.59		14,531,964.58
Total liabilities		402,723,213.18		186,600,119.22

- 3 -

			As at	As at
			31 December	31 December
Item	Notes	2019		2018
			RMB	RMB
Shareholders' equity:		138,340,800.00
Share capital	4		69,170,400.00
Other equity instruments			-
Including: Preferred shares			-
Perpetual bonds			-	-
Capital reserve	5	230,039,180.01		230,039,180.01
Less: treasury shares			-	-
Other comprehensive income			-	-
Specific reserve			-	-
Surplus reserve	6	64,622,661.83	41,040,495.62
Undistributed profits	7	373,587,994.67	287,889,810.26
Total interests attributable to shareholders of the
	806,590,636.51
Parent Company			628,139,885.89
Minority interests			-	-
Total shareholders' equity		806,590,636.51		628,139,885.89
Total liabilities and/or shareholders' equity		1,209,313,849.69		814,740,005.11
Net current assets		624,343,865.40		489,131,789.27
Total assets less current liabilities		898,261,183.10		642,671,850.47

- 4 -

CONSOLIDATED INCOME STATEMENT OF THE GROUP
			Year ended 31 December
Item		Note	2019		2018
			RMB	RMB
I.	Revenue		855,326,545.91		497,927,159.92
	Less: Operational costs		261,867,173.66		180,003,222.25
	Taxes and surcharge		5,775,593.05		6,092,827.50
	Selling expenses		225,789,859.99		143,914,441.19
	Management expenses		23,573,104.53		18,307,825.67
	Research and development expenses		57,747,008.89		35,454,949.86
	Financial expenses		(4,893,097.26)	(7,222,544.60)
	Including: Interest expenses		6,206,000.14
	Interest proceeds			5,399,012.69
	Add: Other gains		3,253,883.17		2,515,131.60
	Investment gains/(losses)		-	-
	Including:Investment gains from
	associates and joint		-
	ventures		-
	Derecognition of gains/
	(losses) on financial
	assets measured at		-
	amortized cost		-
	Gains/(losses) on net exposure hedges		-	-
	Gains/(losses) from changes of fair		-
	value		-
	Impairment loss of credit		(6,214,330.40)	(2,388,968.15)
	Impairment loss of assets		(8,887,845.08)	(2,012,949.20)
	Gains/(losses) on disposal of assets		(78,981.08)	-
II.	Operational profits/(losses)		273,539,629.66		119,489,652.30
	Add: Non-operating incomes		387,827.01		110,000.00
	Less: Non-operating expenses		926,852.77		150,400.00
III.	Total profits/(losses)		273,000,603.90		119,449,252.30
	Less: Income tax expenses		36,239,206.08		13,803,182.23

- 5 -

		Year ended 31 December
Item	Note	2019	2018
		RMB	RMB
IV. Net profits/(losses)		236,761,397.82	105,646,070.07

1. Categorized by continuity of operations:

1.	Net profits attributable to	236,761,397.82
	continuing operations	105,646,070.07
2.	Net profits attributable to ceased	-
	operations		-
(II) Categorized by ownership:
1.	Net profits attributable to
	shareholders' of the Parent	236,761,397.82
	Company	105,646,070.07
2.	Minority profit or loss	-		-

1. Net other comprehensive income after

tax
	Net other comprehensive income after
	tax attributable to shareholders of	-
	the Parent Company		-
	Net other comprehensive income
	after tax attributable to minority	-
	shareholders		-
VI. Total comprehensive income	236,761,397.82	105,646,070.07
	Total comprehensive income
	attributable to shareholders of the	236,761,397.82
	Parent Company	105,646,070.07
	Total comprehensive income
	attributable to the minority	-
	shareholders		-
VII. Earnings per share
1.71
(I)	Basic earnings per share	0.76
(II) Diluted earnings per share	1.71		0.76

- 6 -

NOTES:

• GENERAL
  History and development
  Beijing Chunlizhengda Medical Instruments Co., Ltd. (hereinafter referred to as the "Company") was established as a limited liability company in the People's Republic of China (the "PRC") on 12 February 1998.
  The Company completed its initial public offering (the "Listing") of its overseas-listed foreign shares (the "H shares") on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 11 March 2015. Pursuant to the Listing, the Company offered a total of 16,670,000 new shares with a nominal value of RMB1.00 per share at the price of HK$13.88 per share to the public. The trading of H shares of the Company commenced on the Stock Exchange on 11 March 2015.
  Basis of preparation of financial statements
  The financial statements have been prepared on a going concern basis and include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance which for the year ended 31 December 2019 continued to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with the transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), "Accounts and Audit", which are set out in sections 76 to 87 of Schedule 11 of the Hong Kong Companies Ordinance.
  The financial statements have been prepared in accordance with the Company's accounting policies which conform to China Accounting Standards for Business Enterprises ("ASBE") issued by the Ministry of Finance of the PRC ("MOF"), the related specific standards, the Accounting Standards for Business Enterprises Application Guidance, China Accounting Standards for Business Enterprises Bulletins and other relevant regulations (hereinafter referred to as "China Accounting Standards for Business Enterprises", "CASBE").
  In preparing the financial statements of the Company for the year ended 31 December 2019, the Group has adopted all of the new and revised CASBE issued by MOF that are effective for the financial year beginning on 1 January 2019 and for the year ended 31 December 2019.
• • "Accounting Standards for Business Enterprises No. 21 - Lease" (Amendment published by Ministry of Finance in December 2018)
  • "Notice on Revision of the General Format of Financial Statements of Business Enterprises in 2019"(Cai Kuai [2019] No.6)

The Company has adopted the accrual basis of accounting and the financial statements have been prepared on a historical cost basis.

- 7 -

• ACCOUNTS RECEIVABLE Categories of trade receivable:

		Individually								Not individually
		significant		Determining							significant
		and for which		provision for							but for which
		provision is		bad debts by							provision is
		individually		grouping		By credit					individually
Item		assessed		basis		risk group		Sub-total		assessed		Total
As at 31 December 2018
Carrying amount	Amount (RMB)	-	82,664,137.05	82,664,137.05	82,664,137.05		-	82,664,137.05
	Percentage (%)	-	100.00	100.00	100.00		-	100.00
Provision	Amount (RMB)	-	12,572,906.37	12,572,906.37	12,572,906.37		-	12,572,906.37
	Percentage (%)	-	15.21	15.21	15.21		-	15.21
Net amount		-	70,091,230.68	70,091,230.68	70,091,230.68		-	70,091,230.68
As at 31 December 2019
Carrying amount	Amount (RMB)	-	181,637,104.18	181,637,104.18	181,637,104.18		-	181,637,104.18
	Percentage (%)	-	100.00	100.00	100.00		-	100.00
Provision	Amount (RMB)	-		19,995,126.02		19,995,126.02		19,995,126.02		-	19,995,126.02
	Percentage(%)	-		11.01		11.01		11.01		-	11.01
Net amount		-	161,641,978.16	161,641,978.16	161,641,978.16		-	161,641,978.16

- 8 -

Credit risk characteristics group:
		As at 31 December 2019	As at 31 December 2018
		Carrying amount	Provision	Carrying amount	Provision
Aging		Amount	Percentage			Amount		Percentage
		RMB	%	RMB	RMB	%		RMB
Within one year	162,741,929.10	89.60	8,137,096.46	64,320,449.77	77.81		3,216,022.49
1 to 2 years	6,284,887.18	3.46	942,733.08		7,658,880.68	9.27		1,148,832.10
2 to 3 years	3,389,982.85	1.87	1,694,991.43		4,953,509.65	5.99		2,476,754.83
More than 3 years	9,220,305.05	5.08	9,220,305.05		5,731,296.95	6.93		5,731,296.95
Total	181,637,104.18	100.00	19,995,126.02	82,664,137.05	100.00	12,572,906.37

Note: The aging analysis of accounts receivable is based on the month in which the amount actually occurs. The amount which occurs first has priority in settlement.

3	ACCOUNTS PAYABLE
		As at		As at
		31 December		31 December
	Item	2019	2018
		RMB		RMB
	Purchasing of materials	66,176,334.78	47,773,363.18
	Purchasing of machinery and equipment	20,227,331.32	4,156,707.23
	Total	86,403,666.10	51,930,070.41
	Aging analysis of accounts payable is as follows:
		As at		As at
		31 December		31 December
	Item	2019	2018
		RMB		RMB
	Within one year	81,576,425.16	50,623,375.80
	1 to 2 years	3,942,335.21	651,845.87
	2 to 3 years	231,606.99	29,924.43
	More than 3 years	653,298.74	624,924.31
	Total	86,403,666.10	51,930,070.41

Note: The aging analysis of accounts payable is based on the month in which the amount actually occurs. The amount which occurs first has priority in settlement.

- 9 -

4	SHARE CAPITAL
		As at		As at
		31 December		31 December
	Name	2019	2018
		RMB		RMB
	Mr. Shi Chunbao	48,474,174.00	24,237,087.00
	Ms. Yue Shujun	39,179,160.00	19,589,580.00
	Mr. Sun Weiqi	3,466,666.00	1,733,333.00
	Mr. Jin Jie	2,666,666.00	1,333,333.00
	Mr. Lin Yiming	2,320,000.00	1,160,000.00
	Ms. Wang Haiya	1,333,334.00	666,667.00
	Mr. Huang Dong	1,013,334.00	506,667.00
	Mr. Ni Xuezhen	800,000.00	400,000.00
	Mr. Zhang Zhaohui	533,332.00	266,666.00
	Mr. Chen Xusheng	213,334.00	106,667.00
	Overseas listed foreign shares	38,340,800.00	19,170,400.00
	Total	138,340,800.00	69,170,400.00

At the end of reporting period, the share capital of the Company is RMB138,340,800.00, representing 100,000,000 domestic shares and 38,340,800.00 H shares with a nominal value of RMB1.00 each in the Company. On 15 February 2019, the extraordinary general meeting passed the proposed bonus issue of a total of 69,170,400 shares from the undistributed profits as at 31 December 2017 by poll, on the basis of 1 bonus share for every 1 existing share (including tax) held by the shareholders whose names appear on the register of members of the Company on the record date (i.e. 28 February 2019), and the bonus shares have been issued by way of conversion of undistributed profits.

• CAPITAL RESERVE

		As at		As at
		31 December		31 December
	Item	2019	2018
		RMB		RMB
	Capital premium	228,239,180.01	228,239,180.01
	Other capital reserve	1,800,000.00	1,800,000.00
	Total	230,039,180.01	230,039,180.01
6	SURPLUS RESERVE
		As at		As at
		31 December		31 December
	Item	2019	2018
		RMB		RMB
	Statutory surplus reserve	64,622,661.83	41,040,495.62

As stipulated by the relevant laws and regulations for enterprises in the PRC, each of the entities comprising the Group is required to maintain a statutory reserve fund which is non-distributable. The appropriations to such reserve fund are made out of net profit after taxation of the statutory financial statements of the relevant PRC companies. The statutory surplus reserve can be used to make up prior year/period losses, if any, and can be applied in conversion into capital by means of capitalisation issue.

- 10 -

7	RETAINED EARNINGS
		As at		As at
		31 December		31 December
	Item	2019	2018
		RMB		RMB
	Closing balances of the preceding year	287,889,810.26	208,663,412.07
	Opening balances of the current year	287,889,810.26	208,663,412.07
	Add: Net profit attributable to equity owners of the Company	236,761,397.82	105,646,070.07
	Less: Transfer to statutory reserve fund	23,582,166.21	10,441,309.48
	Dividend declared	58,310,647.20	15,978,362.40
	Dividend of ordinary shares transferred to share capital	69,170,400.00		-
	Closing balances of the current year	373,587,994.67	287,889,810.26
	Declaration of dividends

1. Pursuant to the resolution passed at the meeting of the Board of Directors held on 27 August 2018 and the resolution passed at the extraordinary general meeting held on 15 February 2019, an interim dividend in respect of the six months ended 30 June 2018 of RMB0.231 per share (including tax charge), amounting to RMB15,978,362.40 was declared.
2. Pursuant to the resolution passed at the meeting of the Board of Directors held on 27 March 2019 and the resolution passed at the general meeting of the shareholders for the year ended 31 December 2018 held on 28 June 2019, a final dividend in respect of the year ended 31 December 2018 of RMB0.231 per share (including tax charge), amounting to RMB31,956,724.80 was declared.
3. Pursuant to the resolution passed at the meeting of the Board of Directors held on 27 August 2019 and the resolution passed at the extraordinary general meeting held on 20 November 2019, an interim dividend in respect of the six months ended 30 June 2019 of RMB0.075 per share (including tax charge), amounting to RMB10,375,560 was declared.

- 11 -

8	REVENUE AND COST OF SALES
		Year ended 31 December
	Item	2019	2018
		RMB		RMB
	Revenue from principal operation	855,120,280.32	497,847,611.12
	Revenue from other operations	206,265.59	79,548.80
	Cost of sales	261,867,173.66	180,003,222.25
	Revenue and cost of sales (classified by products)
		Year ended 31 December
	Item	2019	2018
		RMB		RMB
	Revenue
	Revenue from principal operation:
	- Medical Surgical Implants	855,120,280.32	497,847,611.12
	Cost of sales
	Cost of sales for principal operation:
	- Medical Surgical Implants	261,576,535.70	180,003,222.25

- 12 -

Revenue and cost of sales (classified by geographical areas)

The geographical areas of the revenue are based on the location of the customers at which the goods are delivered as follows:

		Year ended 31 December
	Area	2019		2018
		RMB	RMB
	The PRC	792,967,500.45		480,137,269.44
	Other than the PRC	62,152,779.87		17,710,341.68
	Total	855,120,280.32		497,847,611.12
9	INCOME TAX EXPENSES
		Year ended 31 December
	Item	2019		2018
		RMB	RMB
	Current income tax calculated in accordance with relevant tax laws
	and regulations	40,164,011.74		19,026,219.15
	Deferred income tax	(3,924,805.66)	(5,223,036.92)
	Total	36,239,206.08		13,803,182.23
	Applicable tax rate
		Year ended 31 December
	Item	2019		2018
	Standard tax rates:
	The Company	25%		25%
	Zhao Yi Te	25%		25%
	Chunli Hangnuo (春立航諾)	25%		25%
	Applicable tax rates:
	The Company	15%		15%
	Zhao Yi Te	5%		25%
	Chunli Hangnuo (春立航諾)	5%		25%

- 13 -

Reconciliation of current income tax expenses to the accounting profit is as follows:

	Year ended 31 December
Item	2019		2018
	RMB	RMB
Profit before tax	273,000,603.90		119,449,252.30
Income tax expenses based on statutory/applicable tax rate	40,950,090.59		17,917,387.85
Effect of different tax rate applicable to subsidiaries	(97,813.38)	132,462.96
Effect of prior income tax reconciliation	721,473.51		(312,497.98)
Effect of non-deductible costs, expenses and losses	948,592.01		294,014.34
Effect of using deductible temporary differences or deductible
losses of previously unrecognized deferred income tax assets	-	(245,467.35)
Effects of deductible research and development costs and others	(6,496,538.50)	(3,988,681.86)
Effect of deductible temporary differences or deductible losses not
recognized in the current period	213,401.85		5,964.27
Income tax expenses	36,239,206.08		13,803,182.23

10 CALCULATION PROCESS OF BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE

Calculation result

	Year ended 31 December
Item	2019			2018
	RMB	RMB
Earnings per share
Net profit attributable to equity owners of the Company	1.71			0.76
Diluted earnings per share
Net profit attributable to equity owners of the Company	1.71			0.76

Note: The bonus issue has been passed in an extraordinary general meeting during the reporting period. The earnings per share for the corresponding period last year were recalculated according to the "Accounting Standards for Enterprises - Earnings Per Share".

- 14 -

Calculation process of basic earnings per share
		Year ended 31 December
Item		2019	2018
Net profit attributable to equity owners of the		236,761,397.82
Company (RMB)	A	105,646,070.07
Number of shares at beginning of the year	B	138,340,800.00	138,340,800.00
Number of shares issued - Offer Shares	C1	-		-
Number of shares issued - Over-allotment
	-
Shares	C2
Number of shares at closing of the period	C3	-		-
Cumulated months after the increase of shares -
	-
Offer Shares	D1		-
Cumulated months after the increase of shares -
	-
Over-allotment Shares	D2		-
Number of months	D3	-		-
Weighted average number of ordinary shares	E=B+C1*D1/
138,340,800.00
outstanding	D3+C2* D2/D3	138,340,800.00
Basic earnings per share (RMB)	F=A/E	1.71	0.76

Calculation process of diluted earnings per share

The calculation process of diluted earnings per share is the same as the calculation process of basic earnings per share. As there were no dilutive potential ordinary shares, the diluted earnings per share equal to the basic earnings per share.

1. SEGMENT INFORMATION
   The Group is mainly engaged in the manufacture and trading of surgical implants, instruments and related products. Based on the Group's internal organisational structure, management requirements, internal reporting policies, the operation of the Company constitutes one single reportable segment, i.e. manufacture and trading of surgical implants, instruments and related products, which is under the provisions on segment information in business statements of the ASBE No. 35 "Segment Reporting" and Accounting Standards for Business Enterprises Bulletin No. 3 and accordingly, no separate segment information is prepared.
2. SUBSEQUENT EVENTS
   The Board has passed the relevant resolution on 23 January 2020 in relation to the proposed capitalization of RMB207,511,200 from the capital reserve of the Company as of 30 June 2019 to issue 207,511,200 Capitalization Shares to be allotted to the Shareholders on the basis of 15 Capitalization Shares for every 10 Shares held by the Shareholders whose names appear on the register of members of the Company on the Record Date (i.e. 24 April 2020) as well as the proposed payment of the Special Dividend of RMB0.075 per Share (inclusive of tax). The extraordinary general meeting will be held on 9 April 2020 to pass the above resolutions.

- 15 -

MANAGEMENT DISCUSSION AND ANALYSIS

In 2019, the medical device industry continued a stable and rapid development. The "Announcement on Adjusting the Examination and Approval Procedures for Clinical Trials of Medical Devices" (《關於調整醫療器械臨床試驗審批程序的公告》) was published by the National Medical Products Administration ("NMPA") on 29 March 2019 to refine clinical evaluation system of medical device. The "Provisions on the Supervision and Administration of Customized Medical Devices (for Trial Implementation)" (《定制式醫療器械監督管理 規定（試行）》) was jointly issued by the NMPA and National Health Commission ("NHC"), with effect from 1 January 2020, which clarified that customized medical devices are subject to administration by record-filing. The enterprise shall report its ownership in same types of medical device registration certificate and relevant licenses for conducting mass production in accordance with the standard specification. The "Guiding Principle for Registration and Technological Review on Medical Device of Non-electric implantable bone, joint and oral hard tissue under Customized Additive Manufacturing"(《無源植入性骨、關節及口腔硬組織 個性化增材製造醫療器械註冊技術審查指導原則》) was published by NMPA on 15 October 2019 to boost the innovative development of medical devices under customized additive manufacturing. Relevant industrial regulations and policies in the PRC are beneficial to the development of medical device industry.

The orthopedic implant(note) market is a segment of the medical device market that has been developing rapidly in recent years. The inclusion of medical devices in medical care insurance coverage under the healthcare reform in the PRC has increased the demand for and acceptance of orthopedic implants. Various favorable factors such as aging population, continuous growth in healthcare expenditure and improvements in public healthcare infrastructure have also propelled the growth of the orthopedic implant industry in the PRC.

Due to the wide range of medical device products offered in the medical device industry, the medical device market in the PRC is highly fragmented and most of the manufacturers are relatively small in scale. However, since the orthopedic implant industry has high entry barriers, such as strict regulatory measures on quality control and licensing, high-level of production technology and stringent production process, it is relatively concentrated. The orthopedic implant market is generally divided into three major segments, namely trauma, spine and joint. In particular, the joint implant market is highly concentrated with multinational corporations dominating the market share. However, with the advancement of the healthcare reform in the PRC and governmental support to Chinese companies through favourable policies, the domestic companies are expected to increase their market share in the joint implant market by upgrading their product offerings.

Note: Orthopedic implants refer to medical device products that are used for replacing or as an adjuvant treatment for injured bones and skeleton and implanted into human bodies, including joint implants (such as knee joints, hip joint, shoulder joints and elbow joints), spine implants and trauma implants (such as calcaneal plates and bone pegs), excluding dental fillings.

- 16 -

Comprehensive medical device registration certificates

According to the domestic joint prosthesis products registration index (國產關節類產品註冊 檢索) of the NMPA, we are one of the domestic enterprises that hold the most comprehensive medical device registration certificates for joint prosthesis products in China in terms of number and types of certificates.

In June 2019, we have received the registration certificate for "non-absorbable suture anchors" issued by the NMPA, which marked the entry into the field of sports medicine and further enriched our product portfolio. In September 2019, we have received the registration certificate for "metal cable fixation systems" issued by the NMPA. As at 31 December 2019, we held 18 registration certificates and recordation certificates in the PRC for the production of medical devices which cover joint prosthesis products for the four major joints and spinal products, of which 12 are Class III medical device registration certificates, 1 is Class II medical device registration certificate and 5 are Class I medical device recordation certificates. As the PRC adopts a strict product registration system for medical devices manufacturing enterprises, the possession of comprehensive product registration certificates and recordation certificates is the key factor for enterprises to be more competitive in the market.

In 2019, we received product registration certificates from Thailand and Indonesia. Obtaining foreign registration certificates ensures the continued growth of our international sales and reflects our strong competitiveness in the international market.

Diversified product portfolio

Being one of the earliest domestic enterprises in the PRC to engage in research and development as well as production of joint prosthesis products, we have established a broad portfolio comprising various joint prosthesis products and spinal products. Our joint prosthesis products cover four major joints of human bodies (namely hip, knee, shoulder and elbow) while our spinal products comprise a full-range product portfolio of spinal fixation systems, including fixation systems in the anterior and posterior cervical, thoracic and lumbar vertebrae. In addition, our joint prosthesis products are also divided into standard joint prosthesis products and custom joint prosthesis products. The standard joint prosthesis products mainly include hip joint prosthesis products and knee joint prosthesis products, while the custom joint prosthesis products are also divided into two categories, namely conventional custom joint prosthesis products and custom (modular) joint prosthesis products. The custom joint prosthesis products are applicable to the four major joints of human bodies, and are specifically designed and produced to cater for clinical needs.

- 17 -

Strong research and development capabilities

Our Company is a state-level high and new technology enterprise (國家級高新技術企 業) and G20 Engineering Enterprise (which is a progressive development advocated by the municipal government in Beijing aiming at promoting the biomedicine industry in Beijing as the backbone of the capital with its strategical value). Our research and development team consists of professionals who possess Doctoral degrees and Master's degrees and numerous talents who have over 10 years of experience in research and development of production, with adequate capabilities in the development of innovative products and sustainable improvement of research and development.

The Company attaches great importance to the combination of production, academics, research and development and clinical studies while conducting research and development. During the course of our research and development of new products and product improvement, we obtained advice from experts in relevant fields and worked closely together with experts, thereby ensuring that those products under research and development will meet the market demands and fulfill the requirement of clinical practicality. The "Research Program by Multiple Joint Surgical Centres in China" (中國關節外科多中心研究工程) initiated by us conducts clinical follow-ups and trackings on the joint prothesis products developed by us for the purpose of provision of clinical data for improvements in joint prothesis and instruments. Currently, there are over 300 hospitals from 31 provinces which joined the research program, being the first domestic program for follow-ups and trackings focused on the clinical effectiveness of joint prothesis of such a large scale.

The Company was named the "Beijing Engineering Laboratory of Joint Prosthesis" (人工關 節北京市工程實驗室) by Beijing Municipal Development and Reform Commission (北京市 發展和改革委員會). The Company's laboratory will take up major research and development projects of the PRC and Beijing, and will actively participate in science popularization campaigns throughout the PRC and in Beijing.

As of 31 December 2019, the Company has obtained 72 patents and has applied for 83 new patents and 4 PCT patents. As of 31 December 2019, the single knee joint prosthesis (單髁 膝關節假體) of the Company, which has obtained special approval for innovative medical instruments, (acceptance number: CQTS1700268) has entered the observation period.

In September 2019, the Company has been approved to establish an Academician Expert Work Station. Leveraging on the Academician Expert Work Station, the Company will enlarge its innovative effort to develop self-owned intellectual property rights and self-owned brands, conduct research on high-end domestic joint prosthesis products with international leading standard, and resolve current complications and difficult technical issues in joint prosthesis sector.

- 18 -

Advanced ceramic joint prosthesis products

In April 2015, the Company became the first enterprise in the PRC to obtain a medical device registration certificate for the fourth generation of BIOLOX®delta ceramic joint prosthesis products, covering both half-ceramics and full ceramics joint prosthesis products. The Company is also one of the earliest domestic enterprises to manufacture advanced joint prosthesis products. BIOLOX®delta, being the latest ceramic product of CeramTec, which is a German company, has the clinical advantages of lower abrasion rate and better strength and durability, and can be widely used in hip joint replacement surgeries. In March 2019, the "ceramic hip joint prosthesis" of the Company was awarded the "Certificate for New Technology and New Products in Beijing" (Certificate No.: XCP2018SY0171).

After the launch of ceramic joint prosthesis products to the market, we held numerous interactive activities such as academic conferences, doctor training sessions and distributor training sessions across the PRC, so that our clients (including doctors and distributors) are able to familiarize with the usage of our ceramic products.

As the tender offerings, re-tenderings or registrations with hospitals for our ceramic joint prosthesis products in various provinces proceed gradually, there will be more hospitals in the PRC using the Company's ceramic joints prosthesis products.

New products and new technologies

The Company has continued to promote DAMIS (Direct Anterior Minimally Invasive Surgery) and has yielded significant results, which in turn stimulated the sales of our minimal invasive products. The training centres for DAMIS have been set up in numerous hospitals across the PRC and a national project called "DAMIS Thousand Talents Program" (DAMIS千 人計劃) has been launched to provide training for DAMIS techniques in the next three years to a thousand doctors, who specialized in joint-related surgeries. During the reporting period, the Company is devoted to the continuous promotion of medium-to-high-end products, such as the new XN series knee joint and ceramic joint prothesis products, the growth of which contributed to the sales amount and enhanced the Company's brand as a whole.

In March 2019, the "knee joint prosthesis" of the Company was awarded the "Certificate for New Technology and New Products in Beijing" (Certificate No.: XCP2018SY0170).

Extensive distribution and sales network

We have built an extensive distribution network covering all provinces, municipalities and autonomous regions in the PRC (excluding Hong Kong, Macau and Taiwan), and our sales network has covered numerous hospitals located in these regions through our distributors. Most of our products are sold in the PRC and some are exported to 36 countries and regions in Asia, South America, Africa, Oceania and Europe under the brand name of "春立 Chunli".

- 19 -

FINANCIAL REVIEW

Revenue

Our revenue increased by 71.78% from approximately RMB497.9 million for the year ended 2018 to approximately RMB855.3 million for the year ended 2019, mainly attributable to the growth in sales of joint prosthesis products and expansion of sales network.

The revenue of our major products compared with that of the previous year is as follows:

					Growth over
					corresponding
Product category	Year ended 31 December		period
	2019	2018
	(RMB'000)		(RMB'000)
Joint prosthesis products	834,572	484,072	72.41%
Spinal products	20,549	13,775	49.18%
Other businesses	206	80	157.50%
Total	855,327	497,927	71.78%
Joint prosthesis products

Joint prosthesis products increased by 72.40% from approximately RMB484.1 million for the year ended 2018 to approximately RMB834.6 million for the year ended 2019, which was mainly attributable to the rapid growth of our primary high-end products, such as ceramic joint prosthesis products, XN series knee joint prosthesis products and minimal invasive hip joint prosthesis products, in the industry.

We are the first enterprise in China to obtain a registration certificate for the fourth generation of ceramic joint medical devices covering both half-ceramics and full-ceramics joint prosthesis products. The Company is also one of the first domestic enterprises to manufacture advanced joint prosthesis products. Our Company was awarded tenders of a large scale, which covered a comprehensive range of our various product lines, such that our joint prosthesis products enjoyed a growth in sales volume.

In addition, the Company is the first and the sole domestic enterprise to introduce DAMIS and advanced minimal invasive techniques from Europe. The Company also put a lot of efforts into the promotion and application of DAMIS products and techniques, which in turn drove the increase in sales volume of minimal invasion related products.

- 20 -

Gross profits

Our gross profit increased by 86.69% from approximately RMB317.9 million for the year ended 2018 to approximately RMB593.5 million for the year ended 2019, which was mainly attributable to the rapid growth of primary joint prosthesis products such as ceramic joint prosthesis products, XN series knee joint prosthesis products, which are medium-to-high-end products of relatively higher unit prices, and spine products in the industry.

Our gross profit margin increased from 63.85% for the year ended 2018 to 69.38% for the year ended 2019, which was mainly attributable to 1) the strengthening in bargaining power for procurement leading to a decrease in price for raw material and semi-finished products;

1. increase in direct sales to hospitals; and 3) mass production by the Company leading to the relative decrease in fixed cost.

Selling expenses

Our selling expenses increased from approximately RMB143.9 million for the year ended 2018 to approximately RMB225.8 million for the year ended 2019. The increase in selling expenses was mainly attributable to 1) the increase in number of sales staff as a result of the expansion in business scale, which led to the increase in employee remuneration and travelling expenses accordingly; 2) the hierarchical diagnosis policy introduced by the PRC government, which led to a sharp increase in patients undergoing surgeries and diagnoses in basic level hospitals. As a result, training sessions and orientations regarding clinical surgeries on joints and spines were offered to doctors from hospitals in various provinces, prefecture-level cities and counties; and 3) academic exchanges with renowned orthopedic surgeons across the country, clinical trainings for surgeries as well as publicity, promotion and trainings with respect to new products.

Administrative expenses

Our administrative expenses increased by 28.96% from approximately RMB18.3 million for the year ended 2018 to approximately RMB23.6 million for the year ended 2019, which was primarily due to the increase in number of management staff as well as the increase in daily operation.

Research and development expenses

Our research and development expenses increased by 62.54% from approximately RMB35.5 million for the year ended 2018 to approximately RMB57.7 million for the year ended 2019. Our research and development expenses in 2019 accounted for 6.75% of the annual revenue. It was mainly attributed to 1) the increase in the Company' investment in research and development which led to the increased number of staffs for research and development; 2) the engagement of domestic and foreign experts to improve our Chinese skeleton database (中國 國民骨骼數據庫) through clinical testings, and the research and development of new products which cater for the physical conditions of the domestic population as well as the significant progress achieved in the sample production trials, clinical testing and product registration of new products; and 3) the clinical testing for numerous high-end new products were underway to the follow-up periods, while the registrations for various new products were at the stage of supplementary review.

- 21 -

Impairment loss of assets

Our impairment loss of assets increased from approximately RMB2.0 million for the year ended 2018 to approximately RMB8.9 million for the year ended 2019, which was mainly attributable to the impairment of our inventory in accordance with the impairment policy of the Company.

Impairment loss of credits

Our impairment loss of credits increased from approximately RMB2.4 million for the year ended 2018 to approximately RMB6.2 million for the year ended 2019, which was mainly attributable to the impairment of accounts receivable in accordance with the impairment policy of the Company.

Income tax expenses

Our income tax expenses increased from approximately RMB13.8 million for the year ended 2018 to approximately RMB36.2 million for the year ended 2019, which was mainly attributable to the increase in profits from operations in 2019.

Net profit for the year

Our net profit increased by 124.24% from approximately RMB105.6 million for the year ended 2018 to approximately RMB236.8 million for the year ended 2019. The increase in net profit was mainly attributable to the increase in our revenue.

Liquidity and capital resources

Our liquidity increased by 11.88% from approximately RMB414.9 million for the year ended 31 December 2018 to approximately RMB464.2 million for the year ended 2019.

Our principal sources of liquidity are generated from our operations and the issue of H shares. The Board is of the opinion that we have sufficient resources to support our management and to meet our foreseeable capital expenditure demands.

- 22 -

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 in the manner consistent with that mentioned in the section headed "Future Plans and Use of Proceeds" of the prospectus of the Company dated 27 February 2015.

							Outstanding
					Expense as of		amount as of
			Amount		31 December		31 December
Use of Proceeds	Proportion	available	2019	2019
			(RMB million)		(RMB million)		(RMB million)
First-instalment expense for the
development of Daxing New
Production Base	50%		92.93	22.33	70.60
Research and development
activities	20.20%		37.54	0.8	36.74
Expansion of our existing
marketing and distribution
network, in order to enhance
our market penetration with
coverage of more distributors
and hospitals for increment
of market share	20%		37.17	9.93	27.25
Working capital and other
general corporate purposes	9.80%		18.21	18.21	0.00
Total
100%		185.86		51.27		134.59

- 23 -

Inventory

Our inventory increased from approximately RMB95.9 million for the year ended 2018 to approximately RMB191.4 million for the year ended 2019, which was mainly attributable to the increase in sales volume and reserve of inventory according to market needs.

Fixed assets and construction in progress

Our fixed assets and construction in progress increased by 50.72% from approximately RMB103.5 million for the year ended 31 December 2018 to approximately RMB156.0 million for the year ended 31 December 2019, which was mainly attributable to the increase in our investment in the acquisition of production facilities and construction works in 2019.

Net current assets

Our net current assets increased by 27.64% from approximately RMB489.1 million for the year ended 31 December 2018 to approximately RMB624.3 million for the year ended 31 December 2019, which was mainly attributable to the increase in inventory, notes receivable and monetary funds.

Working capital and financial resources

Cash flow analysis

As at 31 December 2019, our net cash inflows generated from operating activities was approximately RMB231.5 million, which was mainly due to receipts of cash from the sales of goods; our net cash outflows generated from investment activities was approximately RMB125.5 million, which was mainly due to the acquisition of fixed assets and construction in progress; our net cash outflows generated from financing activities was approximately RMB56.8 million, which was mainly due to the payment of dividends; and our cash and cash equivalents increased by approximately RMB49.3 million as compared to the end of last year.

Capital expenditure

Our capital expenditure was mainly used in the expansion of Daxing New Production Base and the acquisition of production facilities.

Contingent liabilities or guarantees

As of 31 December 2019, we did not have any significant contingent liabilities or guarantees.

- 24 -

SUBSEQUENT EVENTS

The Board has passed the relevant resolution on 23 January 2020 in relation to the proposed capitalization of RMB207,511,200 from the capital reserve of the Company as of 30 June 2019 to issue 207,511,200 Capitalization Shares to be allotted to the Shareholders on the basis of 15 Capitalization Shares for every 10 Shares held by the Shareholders whose names appear on the register of members of the Company on the Record Date (i.e. 24 April 2020) as well as the proposed payment of the Special Dividend of RMB0.075 per Share (inclusive of tax). The extraordinary general meeting will be held on 9 April 2020 to pass the above resolutions.

FUTURE PROSPECTS

Looking forward, various favourable factors such as aging population, increasing per capita income and enlarging scope of the medical insurance coverage will continue to sustain the rapid development of healthcare market in the PRC, especially the orthopedic medical device industry. We believe that the demand for our products will continue to increase along with the growth of the PRC joint prosthesis market. In the long run, we aim to become a leading enterprise in the market with a full range of orthopedic medical device products and to become one of the internationally renowned orthopedic medical device manufacturers. We plan to implement the following strategies:

Diversification of our product portfolio

We will continue to optimize and modify 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. In order to build a more comprehensive product portfolio and to achieve product diversification, we will develop more products catering for patients' needs through the application of new materials and the improvement of production processes. With our technical expertise, we will continue to diversify and expand the development of joint prosthesis products, knee joint prosthesis products, spinal products as well as sports medicine products.

We are currently developing a joint prosthesis product called advanced customized and individualized joint prosthesis. It is an advanced model of the conventional custom joint prosthesis products with the use of advanced technologies such as 3D reconstruction on the basis of the Chinese skeleton database (中國國民骨骼數據庫). The existing custom joint prosthesis products mainly target patients suffering from bone tumor and joint revision whereas the advanced customized and individualized joint prosthesis products have a wider range of application. They are high-end products which can better analyse and cater for specific needs of patients. As such, we believe that advanced customized and individualized joint prosthesis products can generate higher profit margin. At the same time, the relevant regulations published by the NMPA have benefited the development of customized joint prosthesis and we will grasp this opportunity to propel the rapid development of patent for customized products.

- 25 -

Strengthening our innovation ability and increasing research and development resources

In the future, we shall continue to focus on the research and development of standard joint prosthesis products, advanced customized and individualized joint prosthesis products, spinal products and sports medicine products. We plan to establish a product research and development center at our Daxing New Production Base, which is expected to consist of standard joint prostheses department, spinal products department, orthopedic trauma product department, biomechanics center and orthopedic devices standardization research and development center. Meanwhile, we would attract more research and development talents to join our research and development team. In addition, we will rely on academician workstations, postdoctoral working stations for scientific research and Beijing Municipal Enterprise Technology Centre and put effort in nurturing research and development team's ability in research and development as well as innovation for continuous optimization of the allocation of resources for research and development as well as iteration of enterprise innovation mechanism. With the Beijing Municipal Enterprise Technology Centre, postdoctoral working stations for scientific research and the academician workstations, we are able to enhance our collaboration with renowned Chinese medical institutes so as to strengthen our professional and technological knowledge and competitiveness.

Expand our brand influence

To further strengthen our brand, we will continue to implement strict supervision on product quality. At the same time, we will actively organise and participate in seminars for market practitioners including distributors and representatives from hospitals on orthopedic medical devices with well-known experts and professors in the industry from both China and overseas to promote our products during such seminars. We will also strengthen the cooperation with different academic institutes and hospitals, and organize academic seminars at different levels and in various aspects so as to further increase our brand influence.

Talent development and incentives

We continued to adhere to our existing talent development policy while establishing a new training system for talent development and attract high quality talents with competitive remuneration system. On the other hand, we have established an effective incentive and appraisal system to motivate the work initiative and enthusiasm of employees.

EMPLOYEE

As at 31 December 2019, our Group had approximately a total of 889 employees, which included management, production, quality and monitoring staff, research and development personnel, sales and marketing staff and general and administration staff. For the year ended 31 December 2019, the total salary and related cost paid to our employees were approximately RMB109.1 million. Our Group enters into individual employment contracts with employees to cover matters such as salaries, bonus, employee benefits, contract term, duties, location of workplace, working hours, leave policies, labour protection, confidentiality, non-competition and grounds for termination, etc.

- 26 -

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

Neither our Company, nor its subsidiaries purchased, redeemed or sold any of our Company's listed securities for the year ended 31 December 2019.

2019 FINAL DIVIDEND

The Board does not recommend the payment of a final dividend for the year ended 31 December 2019.

CORPORATE GOVERNANCE

Our Company has committed to delivering and maintaining a higher standard of corporate governance to meet business needs and shareholders' expectation. Our Company has adopted the principles and code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules as the basis of our Company's corporate governance practices. The Corporate Governance Code has been applicable to our Company with effect from the Listing Date. Pursuant to code provision A.2.1 of the Corporate Governance Code, the role of chairman and the chief executive should be segregated and should not be performed by the same individual. However, Mr. Shi Chunbao currently performs the roles as the chairman and general manager of the Company. The Board believes that vesting the roles of both chairman and general manager in the same person has the benefit of ensuring consistent leadership within our Group and enables more efficient overall strategic planning for our Group. The Board considers that the balance of power and authority will not be impaired by the present arrangement and this structure will enable our Company to make and implement decisions promptly and effectively. After taking into account the overall circumstances of our Group, the Board will continue to review and consider whether the duties of the chairman and general manager should be separated.

Save as disclosed above, our Company has complied with all applicable principles and code provisions of the Corporate Governance Code for the year ended 31 December 2019.

COMPLIANCE WITH MODEL CODE

Our Company has adopted the "Model Code for Securities Transactions by Directors of Listed Issuers" contained in Appendix 10 to the Listing Rules (the "Model Code") as its code of conduct for directors' and supervisors' securities transactions. Having made specific enquiry with the directors and supervisors, all of the Directors and Supervisors confirmed that they have complied with the required standard as set out in the Model Code throughout the year ended 31 December 2019.

REVIEW OF ANNUAL RESULTS BY AUDIT COMMITTEE

WUYIGE Certified Public Accountants LLP has reviewed the relevant financial statements.

The Audit Committee of the Board has reviewed our Company's consolidated financial statements for the year ended 31 December 2019, including the accounting principles and practices applied.

- 27 -

PUBLICATION OF THE ANNUAL RESULTS ANNOUNCEMENT AND THE ANNUAL REPORT

This results announcement is published on our Company's website (www.clzd.com) and the HKExnews website of the Stock Exchange (www.hkexnews.hk).

The Company's 2019 Annual Report containing all information required under the Listing Rules will be dispatched to the shareholders of the Company and will be published on the Company's website and the HKExnews website of the Stock Exchange in due course.

By order of the Board

Beijing Chunlizhengda Medical Instruments Co., Ltd.*

Shi Chunbao

Chairman

Beijing, the PRC, 16 March 2020

As at the date of this announcement, the executive directors of the Company are Mr. Shi Chunbao, Ms. Yue Shujun and Mr. Wang Jianliang; and the independent non-executive directors of the Company are Mr. Ge Changyin, Mr. Tong Xiaobo and Mr. Ho Wai Ip.

• For identification purposes only

- 28 -