PW Medtech Group Limited - Interim / Quarterly Report 2021

INTERIM REPORT 2021

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 01358.HK)

A TRUE PIONEER IN THE CHINESE MEDICAL DEVICE INDUSTRY

We are a leading medical device company with the focus on fast-growing and highmargin segments of China’s medical device industry. We have a leading market position in our current business segment of advanced infusion sets, with strong research and development capabilities and well-established distribution networks.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 01

02 Defnitions
04 Corporate Information
05 Management Discussion and Analysis
14 Supplementary Information
20 Report on Review of Condensed Consolidated Interim Financial Statements
21 Condensed Consolidated Statement of Comprehensive Income
23 Condensed Consolidated Statement of Financial Position
25 Condensed Consolidated Statement of Changes in Equity
26 Condensed Consolidated Statement of Cash Flows
27 Notes to the Condensed Consolidated Interim Financial Statements

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PW MEDTECH GROUP LIMITED 02 INTERIM REPORT 2021

DEFINITIONS

In this interim report, unless the context otherwise requires, the following expressions shall have the following meanings.

“Audit Committee”	the audit committee of the Company
“Board”	our board of Directors
“CBPO”	China Biologic Products Holdings, Inc., a Cayman Islands exempted company, which
	changed its domicile from Delaware to the Cayman Islands on 21 July 2017 (previously
	listed on the NASDAQ Stock Market, NASDAQ stock code: CBPO)
“CEO”	chief executive officer of the Company
“CG Code”	the “Corporate Governance Code” as contained in Appendix 14 to the Listing Rules
“China” or “PRC”	the People’s Republic of China, which for the purpose of this interim report and for
	geographical reference only, excludes Hong Kong, Macau and Taiwan
“Company”, “Group”,	PW Medtech Group Limited (普華和順集團公司), an exempted company
“PW Medtech” or “we”	incorporated under the laws of the Cayman Islands with limited liability on 13 May
	2011 and except where the context indicated otherwise its subsidiaries
“Director(s)”	the director(s) of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Infusion Set Business”	the R&D, manufacturing and sale of advanced infusion set, intravenous cannula
	products, insulin needles etc.
“IPO”	the Company’s initial public offering of its Shares
“Listing Date”	8 November 2013, on which the Shares are listed and from which dealings therein
	are permitted to take place on the Stock Exchange
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange (as amended
	from time to time)
“Model Code”	the “Model Code for Securities Transactions by Directors of Listed Issuers” set out in
	Appendix 10 to the Listing Rules
“Pre-IPO Share Option Scheme”	the pre-IPO share option scheme adopted by the Company on 3 July 2013 and
	amended on 14 October 2013
“Prospectus”	the prospectus of the Company dated 28 October 2013
“R&D”	research and development
“Relevant Period”	the six months ended 30 June 2021
“RMB”	Renminbi, the lawful currency of the PRC

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 03

DEFINITIONS

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “Share(s)” ordinary share(s) of par value US$0.0001 each in the issued share capital of our Company

“Share Option Scheme” the share option scheme conditionally adopted by the Company on 14 October 2013 “Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent

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PW MEDTECH GROUP LIMITED 04 INTERIM REPORT 2021

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Director

Ms. Yue’e ZHANG (Chairman and CEO)

Non-executive Directors

Mr. JIANG Liwei Mr. LIN Junshan

Independent Non-executive Directors

Mr. WANG Xiaogang Mr. CHEN Geng Ms. WANG Fengli

HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN THE PRC

Building 1, No. 23 Panlong West Road Pinggu District Beijing, PRC 101204

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

PRINCIPAL BANKERS

COMPANY SECRETARY

Mr. WONG Tin Yu, ACG, ACS

AUTHORISED REPRESENTATIVES UNDER THE LISTING RULES

Ms. Yue’e ZHANG Mr. WONG Tin Yu

AUDIT COMMITTEE

Mr. WANG Xiaogang (Chairman) Mr. LIN Junshan Mr. CHEN Geng

REMUNERATION COMMITTEE

Mr. CHEN Geng (Chairman) Mr. LIN Junshan Ms. WANG Fengli

NOMINATION COMMITTEE

Ms. Yue’e ZHANG (Chairman) Mr. WANG Xiaogang Ms. WANG Fengli

AUDITOR

BDO Limited 25th Floor, Wing On Centre 111 Connaught Road Central Hong Kong

REGISTERED OFFICE

The Grand Pavilion Commercial Centre Oleander Way, 802 West Bay Road P.O. Box 32052 Grand Cayman KY1-1208 Cayman Islands

Morgan Stanley & Co International PLC 31/F, International Commerce Centre 1 Austin Road West, Kowloon Hong Kong

China CITIC Bank Wanliu Branch 5–32, Xing Biao Garden Wanliu Central Road Haidian District Beijing, PRC

HONG KONG LEGAL ADVISOR

Wilson Sonsini Goodrich & Rosati Suite 1509, 15/F, Jardine House 1 Connaught Place, Central Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Ocorian Trust (Cayman) Limited P.O. Box 1350 Clifton House, 75 Fort Street Grand Cayman KY1-1108 Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

STOCK CODE AND BOARD LOT

Stock code: 1358 Board lot: 1,000

WEBSITE

www.pwmedtech.com

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 05

MANAGEMENT DISCUSSION AND ANALYSIS

MARKET AND BUSINESS REVIEW

In the first half of 2021, China’s measures to prevent and control the pandemic led to positive results. As enterprises resumed production and operation, the economy and society returned to normal in an orderly manner. Due to travel restrictions during the pandemic, the sales and the demand for medical consultation and treatment from the hospital market have not restored to the pre-pandemic level, but are gradually recovering.

In the first half of 2021, the National Medical Products Administration issued the latest “Regulations on the Supervision and Administration of Medical Devices” (醫療器械監督管理條例) and the “Working Plan for the Mandatory Standardization and Optimization of Medical Devices” (醫療器械強制性標準優化工作方案), which marked the beginning of medical device supervision. These supervision measures gradually enhanced the quality of development of the medical device industry and laid a solid foundation for its innovation and growth under the “14th Five Year Plan”. Driven by the population aging trend and increasing health awareness, China’s medical device industry continues to have much room for future growth.

The rising demand for medical consultation and medical devices drove the gradual recovery of business in medical device market segments such as the infusion set segment. In the first half of 2021, the Group’s revenue was RMB133.5 million, representing an increase of 31.5% over the corresponding period of the previous year. The gross profit was RMB82.5 million, representing an increase of 38.6% over the corresponding period of the previous year. The overall gross profit margin for the period was 61.8%. For the Relevant Period, the profit attributable to owners of the Company amounted to RMB761.1 million, representing an increase of 439.2% over the corresponding period of the previous year. Benefitting from the resumption of work and production in an orderly manner as well as the rebound in the demand for outpatient and surgical services at hospitals, revenue from operating activities rallied gradually.

The improvement in the fundamentals and operation of the medical and healthcare industry was attributable to rapid economic growth, rising living standards, national policy support and reform of the medical and healthcare system. Currently, China is pushing for the thorough implementation of the “Healthy China” strategy. Given the growth in the ageing population and the changing people’s lifestyle and spectrum of disease, the society needs effective and precise medical and healthcare services, enhanced quality of medical services and more advanced technology for medical devices.

However, China’s centralized procurement regime for medical consumables brought a number of challenges to the Group and the industry. Since the adoption of this policy, the ex-factory price and gross profit of products in the sector were affected to a certain extent. In spite of that, the regime will accelerate the industrial consolidation towards major players with economies of scale, well-established technology and strong innovation capability in the long run. Domestic medical consumables with substantial room for import substitution and better value for money will show upside potential.

The Group has developed in-depth insight into the new norm of the medical industry and actively responded to it through the targeted adjustment to the bidding strategies. As a leader in China’s medical device industry, the Group continued to improve quality control of its products, expand product R&D and enhance its own strengths, so as to provide strong support to the industry. Given that pandemic prevention and control became a part of the normal operation, the Group monitored the market closely, capitalized on favorable policies and fine-tuned business strategies in a timely manner, thereby maintaining its leading position in China’s medical device industry.

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PW MEDTECH GROUP LIMITED 06 INTERIM REPORT 2021

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS STRATEGIES AND FUTURE OUTLOOK

Under the normalized pandemic prevention and control and the new situation of trade friction, the medical device industry had high growth potential. In the post-pandemic era, product localization progressed more rapidly. Pandemicdriven regional lockdown and the shortage of medical devices played a role in accelerating the localization of medical devices. In May 2021, the latest “Regulations on the Supervision and Administration of Medical Devices” (醫療器械監督管理條例) was implemented to fully support the innovation of medical devices, encourage the clinical trial of such devices by medical institutions and accelerate import substitution with domestic products, which provided further tailwinds for the industry.

National policy created a favorable environment for domestic medical device manufacturers to compete. The medical consumables segment also benefitted from supportive policies, the substitution of high-quality domestic consumables for similar imported goods and the increase in industry concentration. According to the statistics from the Medical Device Institute, China’s low-value medical consumables market grew at a compound annual growth rate of 19.78% from 2015 to 2018, which was far higher than the global level. Based on the prediction, the market is expected to reach RMB92.73 billion by 2021. Hence, China’s low-value medical consumables market still has tremendous room for growth.

In the first half of 2021, China achieved steady economic growth, which is likely to continue in the second half of the year. After eliminating the shortcomings of the national public healthcare system, the medical consumables industry was benefitted with more growth space. In addition, the sector gradually consolidated towards major players with economies of scale, well-established technology and strong innovation capability. Domestic medical consumables with substantial room for import substitution and better value for money will have a large growth potential at home and abroad.

PW Medtech has been focusing on China’s fast-growing and high-margin medical device market. The Group keeps tabs on the latest industry development and gains in-depth insights into the future trend. It actively promotes industrial upgrade, enhances product innovation and R&D capabilities, and expands the mix of production capacity.

The Group maintained a stable and sound financial position and cash flows. In October 2020, it entered into three share purchase agreements with independent third parties for the disposal of 5,321,000 shares of CBPO. The closing of these transactions were completed on December 30, 2020 and January 6, 2021, respectively. The proceeds of the disposal totaled US$638.52 million. In February 2021, approximately 50% of the proceeds were used for the distribution of a special dividend as the investment return to shareholders of the Company. The remaining proceeds will be used for corporate working capital and future strategic and development purposes, so that the Group could pursue M&A and investment projects with promising outlooks and potential for sustainable growth.

The Group will continue to leverage its leading position in China’s medical device industry. In addition to its main businesses of infusion set and intravenous cannula, it will further expand the business in the diabetes therapy sector, actively facilitate the marketing and promotion of insulin injection needles and pens, and conduct R&D of medical devices in other therapy sectors so as to expand revenue sources, give play to business synergies and further optimize business coverage. As of June 30, 2021, the Group had obtained 34 registration certificates for products covering, among others, infusion set, intravenous cannula, intestinal feeding device, insulin injection pen, insulin injection needle and blood transfusion set.

Emphasis on Innovation and R&D

As an industry leader in the development of innovative products, the Group has an R&D team consisting of experienced members. The team closely cooperates with surgeons, hospitals (especially Class III Grade A hospitals), first-class university research centers and other research institutions.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 07

MANAGEMENT DISCUSSION AND ANALYSIS

As of June 30, 2021, the Group had commenced a number of R&D projects. It supported the expansion and further R&D of new products in the diabetes therapy sector through substantial investment. In the first half of 2021, it advanced the project in relation to the smart cap and supporting application for insulin injection pens, where it designed a new cap structure for the advantages of accurate data transformation and low cost. With the help of the supporting application, the pen cap could connect with smart terminals to record and analyze the dosage of insulin injection and blood sugar level. Meanwhile, these records could also be uploaded to the cloud for checking by medical professionals.

Apart from diabetes products, the Group stepped up its R&D efforts in business lines such as its intravenous cannula products. Currently, it is developing a new kind of disposable dialysis cannulas that allows the users to remove the steel needle after injection. The new product minimizes damage to blood vessels by leaving only the flexible polymer cannula inside. Unlike traditional cannulas, there are asymmetrical side holes at the duct tip of the new product, which are uniquely designed to prevent insufficient blood flow due to contact with the vascular wall. The new dialysis cannula developed by the Group is expected to be launched in the second half of 2022. It aims to provide better treatment experience and safety assurance for patients with kidney failure, while promoting import substitution. This project facilitates the transformation of the Group from intravenous to intraarterial treatment, marking its first step to the hemodialysis market with promising prospects.

Thus far, vaccination is the most effective way to prevent the spread of COVID-19. Hence, market demand for vaccine syringes has increased drastically. In view of the market trend, the Group initiated the disposable vaccine syringe project in January 2021. By offering a comprehensive mix of syringes and ancillary adaptors, it meets the needs of different age groups. At the same time, the Group has the best equipment and molds for production in the country, which enables the fully automated manufacturing of high-quality vaccine syringes at low cost.

Furthermore, in order to promote automation and smart product manufacturing, the Group developed a smart defect detection system with precision filters in collaboration with AInnovation Ltd. (創新奇智公司), which is a leading artificial intelligence company in China. Based on computer vision, the system adopts machine learning and artificial intelligence algorithms to improve defect detection efficiency and lower the detection cost of the precision filters significantly.

As of June 30, 2021, the Group had owned 97 patents for products and had applied for 34 new patents. The Group will continue its investment in product innovation and R&D. Following the R&D strategy of “produce and focus our R&D efforts for a leading next generation of products”, it will focus on the safety and effectiveness as well as R&D and innovation of medical devices so as to enhance its overall competitiveness in the industry.

Expansion of Distribution Network

The Group has an experienced, strong and dedicated team of professional sales and marketing staff to support and consolidate its distribution networks in 31 provinces, municipalities and autonomous regions in China, and enhance the promotion of products from all business segments. The Group continued to optimize its sales channels and expand its distribution network, actively promoted the Company’s strategic product layout in centralized procurement market and non-centralized procurement market, and closely monitored national medical policies to timely adjust the bidding strategies. In the first half of 2021, the Group won the bids for its products in regions such as Jiangsu, Henan, Hebei and Xinjiang. Adhering to the strategic approach of “low cost, high quality” continuously, it conducted a comprehensive review of daily management and corporate strategy to introduce innovative plans and measures.

Meanwhile, the Group extended the sales network in multiple channels and sectors to cover hospitals in key provinces. It strived to develop new business sectors that could bring synergy to existing businesses in terms of clinical application and sales channels, thereby promoting business growth and network expansion.

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PW MEDTECH GROUP LIMITED 08 INTERIM REPORT 2021

MANAGEMENT DISCUSSION AND ANALYSIS

The Group’s core salesmen have an average of ten years of experience in their respective fields. Nearly half of our sales and marketing team have medical education backgrounds, which enable them to communicate with doctors and nurses in a professional and effective manner.

Strategic Acquisitions

In 2021, China actively implemented the “Opinions on Promoting In-depth Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices” (關於深化審評審批制度改革鼓勵藥品醫療器械創新的意見), which was published by the General Office of the Central Committee, the Chinese Communist Party and the General Office of the State Council. The Opinions stated that quality and safety control and innovation development of drugs and medical devices provided a crucial safeguard for building a healthy China. The reform of the evaluation and approval system is expected to inspire the innovative development of the medical sector and encourage businesses to enhance their innovation and R&D capabilities. Given China’s support for innovation, the acceleration of the evaluation and approval process for medical devices and the increasing post-pandemic health awareness of people, the medical device industry will see exceptional growth and innovation-driven development.

The Group will seize the strategic development opportunities in the medical device industry and make full use of the ample funds generated from previous strategic acquisitions to actively carry out strategic projects. Amongst the proceeds from the disposal of CBPO shares in December 2020 and January 2021, approximately US$310 million will be used for, among others, capital expenditure, long-term investment in the future and M&A opportunities in medical and related industries. The Group will continue to seek M&A and investment projects with promising outlooks and potential for sustainable growth. It will also look for investment and M&A targets that can bring synergy, while promoting marketoriented development and sustainability. Through M&A activities, it will achieve integration of resources and advantages for satisfactory investment return.

FINANCIAL REVIEW

Overview

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Six months ended June 30,
2021 2020 Change
RMB’000 RMB’000
Revenue 133,492 101,536 31.5%
Gross profit 82,480 59,513 38.6%
Gain on disposal of assets held for sale/interest in an associate 731,750 122,938 495.2%
Profit for the period 761,089 141,151 439.2%
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Revenue

The revenue of the Group increased by 31.5% from approximately RMB101.5 million for the six months ended June 30, 2020 to approximately RMB133.5 million for the Relevant Period, as a result of the increase in sales of the infusion set business. Such increase was mainly due to relief of the COVID-19 pandemic and gradual recovery of the hospital traffic in the PRC.

Gross Profit

The Group’s gross profit increased by 38.6% from approximately RMB59.5 million for the six months ended June 30, 2020 to approximately RMB82.5 million for the Relevant Period. The gross profit margin increased from 58.6% for the six months ended June 30, 2020 to 61.8% for the Relevant Period. The increase was mainly due to the increase of sales volume which led to the decrease of the unit fixed cost.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 09

MANAGEMENT DISCUSSION AND ANALYSIS

Selling and Marketing Expenses

Selling and marketing expenses decreased by 26.8% from approximately RMB46.5 million for the six months ended June 30, 2020 to approximately RMB34.1 million for the Relevant Period. This decrease was mainly attributable to the decrease of the sales and promotion expenses as well as the labor cost which was due to the restructure of distribution network.

General and Administrative Expenses

General and administrative expenses decreased by 18.7% from approximately RMB33.1 million for the six months ended June 30, 2020 to approximately RMB26.9 million for the Relevant Period. The decrease was mainly due to: (i) the write off of trade receivables by RMB4.4 million for the six months ended June 30, 2020, while there was no such write off for the Relevant Period; (ii) the decrease of the labor cost and energy expenses.

Provision for Impairment Losses Recognized in Respect of Trade Receivables

Provision for impairment losses recognised in respect of trade receivables amounted to approximately RMB4.1 million for the Relevant Period, decreased by approximately RMB2.2 million from approximately RMB6.3 million for the six months ended June 30, 2020. The detailed information regarding the impairment losses recognised in respect of trade receivables could be found in Note 18 to the condensed consolidated interim financial statements.

R&D Expenses

R&D expenses decreased by 31.1% from approximately RMB10.7 million for the six months ended June 30, 2020 to approximately RMB7.4 million for the Relevant Period, which was mainly due to the decrease of direct materials used during the R&D programs, since some newly launched programs in 2021 have not entered into the testing process.

Other Losses — Net

Net other losses decreased by 14.5% from approximately RMB6.4 million for the six months ended June 30, 2020 to approximately RMB5.5 million for the Relevant Period, which was mainly the net result of: (i) the loss on deemed disposal of an associate for the six months ended June 30, 2020 was approximately RMB18.1 million while there was no such loss for the Relevant Period due to the completion of disposal of all the CBPO shares held by the Group in January 2021; (ii) the increase of the net foreign exchange loss amounted to RMB17.3 million in the Relevant Period, which was caused by the change of the exchange rate for the US dollar deposits denominated in RMB.

Gain on Disposal of Assets Held for Sale/Interest in an Associate

The Group had a gain on disposal of interest in an associate of RMB731.8 million for the Relevant Period, being the capital gain from the disposal of 3,750,000 CBPO shares completed in January 2021, as disclosed in Note 16 to the condensed consolidated interim financial statements. While for the six months ended June 30, 2020, the capital gain from the disposal of 1,000,000 CBPO shares completed in May 2020 was approximately RMB122.9 million.

Fair Value Loss on Investment Properties

Fair value loss on investment properties decreased by 90.3% from approximately RMB14.0 million for the six months ended June 30, 2020 to approximately RMB1.4 million for the Relevant Period, which was mainly due to decline in the rental market in an epidemic environment.

Operating Profit

Operating profit increased by RMB669.6 million from RMB65.4 million for the six months ended June 30, 2020 to RMB735.0 million for the Relevant Period, mainly due to: (i) the gains on the transaction of disposal of 3,750,000 CBPO shares completed in January 2021 amounted to RMB731.8 million; (ii) the increase of the sales of infusion sets which have been gradually recovered from the impact of the COVID-19 pandemic.

PW MEDTECH GROUP LIMITED 10 INTERIM REPORT 2021

MANAGEMENT DISCUSSION AND ANALYSIS

Finance Income/(Cost) — Net

The Group had a net finance income of RMB30.9 million for the Relevant Period which generated from the interest income of bank deposits after the disposal of CBPO shares. While for the six months ended June 30, 2020, there was a net finance cost of approximately RMB9.3 million. The finance cost was interest expense of bank borrowing which was repaid in May 2020.

Share of Result of an Associate

For the six months ended June 30, 2020, the investment in CBPO was classified as interest in an associate and had been accounted for using equity method, and the share of result of CBPO amounted to RMB79.1 million, after deducting amortization of intangible assets arising from the acquisition of RMB20.1 million. There was no share of result of an associate after the disposal of all the remaining CBPO shares held by the Group during the Relevant Period.

Income Tax (Expenses)/Credits

Income tax expenses for the Relevant Period was approximately RMB4.8 million, as compared with income tax credits of approximately RMB6.0 million for the six months ended June 30, 2020, which was mainly due to the increase of taxable profit. While for the six months ended June 30, 2020, the record of the deferred income tax assets related to impairment loss of trade receivables and fair value loss on investment properties led to the income tax credits.

Net Profit

The net profit of the Group increased by RMB619.9 million from approximately RMB141.2 million for the six months ended June 30, 2020 to RMB761.1 million for the Relevant Period. The increase of the net profit was mainly due to: (i) the increase of the gains amounted by approximately RMB608.8 million on the disposal of CBPO shares; (ii) the increased profit generated from the increased sales of infusion sets.

Trade and Other Receivables

The Group’s trade receivables primarily comprised the outstanding payment from credit sales. As of June 30, 2021, the trade receivables of the Group was approximately RMB97.1 million, representing a decrease of approximately RMB10.8 million as compared to approximately RMB107.9 million as of December 31, 2020, which was mainly due to the increase in collection of trade receivables and the increase of impairment allowance of trade receivables by RMB4.1 million.

The Group has selected to measure loss allowances for trade receivables using HKFRS 9 simplified approach and established a provision matrix that was based on the Group’s historical credit loss experience, adjusted for forwardlooking factors specific to the debtors and the economic environment. The details are disclosed in Note 18 to the condensed consolidated interim financial statements for the Relevant Period.

The Group reviews the financial performance of the customers with long aging receivables periodically and revises the credit terms granted to the customers based on credit risk analysis. Besides review of account receivables, the management may also use letter of collection and lawyer’s letter to collect the receivables. The Group would also negotiate with customers to explore the use of debt agreement if there are higher risk of recoverability. In some circumstances, the internal legal department of the Group would be involved in collection of receivables to explore the availability of legal actions, and to issue formal communication to the customer before escalating the actions. Out of the trade receivables aged over 6 months which amounted to RMB65.7 million at December 31, 2020, a total of RMB34.8 million was subsequently received up to June 30, 2021.

As at June 30, 2021, the Group had made loss allowances of RMB38.9 million (as at December 31, 2020: RMB34.8 million) on the trade receivables with a gross amount of RMB136.0 million (as at December 31, 2020: RMB142.7 million).

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 11

MANAGEMENT DISCUSSION AND ANALYSIS

Inventories

Inventories decreased by 9.6%, from approximately RMB39.0 million as at December 31, 2020, to approximately RMB35.3 million as at June 30, 2021, which was mainly due to the enhancement in effectiveness of the purchase process and inventory management.

Property, Plant and Equipment

Property, plant and equipment mainly include buildings and facilities, machinery and equipment and construction in progress. As at June 30, 2021, the property, plant and equipment of the Group amounted to approximately RMB686.6 million, representing a decrease of approximately RMB11.8 million as compared to approximately RMB698.4 million as at December 31, 2020. The decrease was mainly due to the depreciation for the Relevant Period which amounted to RMB13.7 million.

Investment Properties

Investment properties, mainly comprising factories and offices, are held by the Group for long-term rental yields, which are located at No. 23 Panlong West Road, Pinggu District, Beijing, with approximately 39,714.5 square meters construction area. The properties are held on a leasehold land with land use right granted to the Group for 47 years until May 26, 2059. As at June 30, 2021, the investment properties of the Group amounted to approximately RMB273.4 million, decreased by RMB1.3 million compared to approximately RMB274.7 million as at December 31, 2020. The decrease was mainly due to the recognition of the fair value loss on investment properties of RMB1.4 million for the Relevant Period.

Intangible Assets

The Group’s intangible assets mainly include goodwill, technology know-how, trademarks, computer software and customer relationship. The Group’s goodwill, technology know-how and trademarks are mainly identified and recorded during the purchase accounting process for the acquisitions of subsidiaries in prior years. The goodwill is subject to impairment test at each period end, while the technology know-how and trademarks are amortised with straight line method for 15 years. As at June 30, 2021, the net value of the Group’s intangible assets was approximately RMB176.3 million, representing a decrease of approximately RMB1.6 million as compared to RMB177.9 million as at December 31, 2020. The decrease was primarily due to the amortisation charged during the Relevant Period.

Assets Classified as Held for Sale

As at June 30, 2021, there was no Company’s assets classified as held for sale, since all the CBPO shares which the Company owned have been disposed by January 2021. As at December 31, 2020, the Company’s share of the net assets of CBPO amounted to RMB2,166.0 million which classified as assets classified as held for sale, representing 41.0% of total assets as at December 31, 2020.

Loan Receivable

As at June 30, 2021, the Company’s loan receivable was RMB180.0 million which was a loan granted to an independent third party on April 12, 2021 as disclosed in the announcement of the Company dated April 12, 2021. The detailed information regarding the loan receivable could be found in Note 19 to the condensed consolidated interim financial statements.

Financial Assets at Fair Value through Other Comprehensive Income

Financial assets at fair value through other comprehensive income was RMB10.0 million for the Relevant Period which was a new investment in a fund on May 15, 2021. The detailed information regarding the financial assets could be found in Note 17 to the condensed consolidated interim financial statements.

PW MEDTECH GROUP LIMITED 12 INTERIM REPORT 2021

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Resources and Liquidity

As at June 30, 2021, the Group’s cash and bank balances amounted to approximately RMB2,410.8 million (December 31, 2020: RMB1,701.8 million). As at June 30, 2021, the Group’s bank borrowing balance was RMB16.4 million (December 31, 2020: RMB28.0 million).

The Board is of the opinion that the Group is in a healthy financial position and has sufficient resources to support its operations and meet its foreseeable capital expenditures.

Cash Flows from Operating Activities

During the Relevant Period, the net cash generated from operating activities amounted to RMB47.4 million, representing an increase by RMB7.4 million as compared to RMB40.0 million for the six months ended June 30, 2020. The increase of the net operating cash flow was mainly due to the collection of the trade and other receivables and the delay of the payment.

Pledge of Assets

During the Relevant Period, the Group did not enter into any off-balance sheet guarantees or other commitments to guarantee the payment obligations of any third party. The Group did not have any interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to it or engages in leasing or hedging, R&D or other services with it.

Commitments

As of June 30, 2021, the Group had a total capital commitment of approximately RMB18.3 million (December 31, 2020: RMB28.6 million), comprising mainly contracted capital expenditure for construction or acquisition of property, plant and equipment.

Capital Expenditure

During the Relevant Period, the Group incurred capital expenditure of RMB1.8 million (for the six months ended June 30, 2020: RMB15.0 million) on the expansion of the plants and procurement of equipments.

Gearing Ratio

The Group monitors capital on the basis of gearing ratio. This ratio is calculated as total borrowing divided by total capital. Total borrowing is current bank borrowing as shown in the condensed consolidated statement of financial position. Total capital is calculated as “total equity” as shown in the condensed consolidated statement of financial position plus total borrowing.

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As at As at
June 30, December 31,
2021 2020
RMB’000 RMB’000
Total borrowing 16,360 28,000
Total equity 3,825,590 5,108,279
Total capital 3,841,950 5,136,279
Gearing ratio 0.43% 0.55%
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 13

MANAGEMENT DISCUSSION AND ANALYSIS

Foreign Exchange Risk

The Group mainly operates its business in the PRC and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States dollar and the Hong Kong dollar. Foreign exchange risk arises from foreign currencies held by certain overseas subsidiaries. The Group did not hedge against any fluctuation in foreign currency during the Relevant Period. Management may consider entering into currency hedging transactions to manage the Group’s exposure towards fluctuations in exchange rates in future.

Cash Flow and Fair Value Interest Rate Risk

Other than bank balances with variable interest rates, the Group has no other significant interest-bearing assets. The management does not anticipate any significant impact to interest-bearing assets resulting from the changes in interest rates because the interest rates of bank balances are not expected to change significantly.

The Group’s interest rate risk arises from bank borrowings. Borrowing issued at variable rates and fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively.

As at June 30, 2021, it was estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would not decrease/increase the Group’s profit for the Relevant Period (for the six months ended June 30, 2020: nil).

The sensitivity analysis above has been determined by assuming that the change in interest rates had occurred at the end of Relevant Period and had been applied to the exposure to interest rate risk for the borrowings in existence on that date. The increase/decrease of the 100 basis points represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.

Credit Risk

The carrying amounts of cash and cash equivalents and trade and other receivables represent the Group’s maximum exposure to credit risk in relation to its financial assets. The objective of the Group’s measures to manage credit risk is to control potential exposure to recoverability problems.

The credit risk of bank balances is limited because the counterparties are banks with good reputation and most of them are state-owned commercial banks in China or public listed companies. Most of the bank deposits of the Group are placed with commercial banks with an acceptable credit rating.

For trade and other receivables, management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Most of these balances are due from stated-owned enterprises or major customers with good repayment history. Details of the Group’s trade and other receivables credit management are also discussed above under the heading of “Trade and Other Receivables”.

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PW MEDTECH GROUP LIMITED 14 INTERIM REPORT 2021

SUPPLEMENTARY INFORMATION

HUMAN RESOURCES

As at June 30, 2021, the Group had a total of approximately 748 employees (December 31, 2020: 756 employees). The Group enters into employment contracts with its employees to cover matters such as position, term of employment, wage, employee benefits, liabilities for breaches and grounds for termination. Remuneration of the Group’s employees includes basic salaries, allowances, bonus and other employee benefits, and is determined with reference to their experience, qualifications and general market conditions. The Group has designed an evaluation system to assess the performance of its employees. This system forms the basis of the Group’s determination on employees’ salaries, bonuses and promotions. We believe the salaries and bonuses that the Group’s employees received are competitive with market rates. Under applicable PRC laws and regulations, the Group is subject to social insurance contribution plans, workrelated injury insurance and maternity insurance schemes.

We place a strong emphasis on providing training to our employees in order to enhance their technical and product knowledge as well as comprehension of industry quality standards and work place safety standards. We also provide regular on-site and off-site trainings to help our employees to improve their skills and knowledge. These training courses range from further educational studies in basic product process and skill trainings to professional development courses for its management personnel.

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend for the Relevant Period (for the six months ended June 30, 2020: nil).

CORPORATE GOVERNANCE PRACTICES

The Company recognizes the importance of good corporate governance for enhancing the management of the Company as well as preserving the interests of the Shareholders as a whole. The Company has adopted the code provisions as set out in the CG Code as contained in Appendix 14 to the Listing Rules as its own code to govern its corporate governance practices.

In the opinion of the Directors, the Company has complied with the relevant code provisions contained in the CG Code during the Relevant Period, with the exception of code provision A.2.1 of the CG Code.

According to code provision A.2.1 of the CG Code, the roles of chairman and chief executive should be separate and should not be performed by the same person. Currently, Ms. Yue’e Zhang performs both the roles of the chairman of the Board and the chief executive officer of the Company. The Board believes that vesting the two roles in the same person provides the Company with strong and consistent leadership and facilitates the implementation and execution of the Group’s business strategies which is in the best interests of the Company. Under the leadership of Ms. Yue’e Zhang, the Board works effectively and performs its responsibilities with all key and appropriate issues discussed in a timely manner. In addition, as all major decisions are made in consultation with members of the Board and relevant Board committees, and there are three independent non-executive Directors on the Board offering independent perspectives, the Board is of the view that there are adequate safeguards in place to ensure sufficient balance of powers within the Board.

The Board shall nevertheless review the structure and composition of the Board from time to time in light of prevailing circumstances, to maintain a high standard of corporate governance practices of the Company.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 15

SUPPLEMENTARY INFORMATION

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code set out in Appendix 10 to the Listing Rules as its own code of conduct regarding dealings in the securities of the Company by each of the Directors and the Group’s senior management who, because of his/her office or employment, is likely to possess inside information in relation to the Company or its securities.

Upon specific enquiry, all Directors confirmed that they have complied with the Model Code during the Relevant Period. In addition, the Company is not aware of any non-compliance of the Model Code by the senior management of the Group during the Relevant Period.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the Relevant Period.

REVIEW OF FINANCIAL INFORMATION

Audit Committee

The Audit Committee (comprising Mr. Wang Xiaogang, Mr. Chen Geng and Mr. Lin Junshan) has discussed with the management and the external auditor and reviewed the unaudited condensed consolidated interim financial information of the Group for the Relevant Period.

Auditor

The Company’s external auditor, BDO Limited, has performed an independent review of the Group’s condensed consolidated interim financial information for the Relevant Period in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information performed by the Independent Auditor of the Entity”. Based on their review, BDO Limited confirmed that nothing has come to their attention that causes them to believe that the unaudited condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

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PW MEDTECH GROUP LIMITED 16 INTERIM REPORT 2021

SUPPLEMENTARY INFORMATION

INTERESTS OF DIRECTORS AND CHIEF EXECUTIVE IN SECURITIES

As at 30 June 2021, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or (c) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code, were as follows:

(A) Long position in ordinary Shares

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Approximate
percentage [+] of the
Number of ordinary Company’s issued
Name of Director Capacity Shares interested share capital
Ms. Yue’e ZHANG Beneficial owner 50,000 0.003%
Mr. JIANG Liwei Beneficial owner 2,638,714 0.17%
Mr. LIN Junshan Beneficial owner 1,673,427 0.11%
Mr. CHEN Geng Beneficial owner 636,943 0.04%
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(B) Long position in underlying Shares — physically settled unlisted equity derivatives

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Number of Approximate
underlying percentage [+] of
Shares in respect underlying Shares
of the share over the Company’s
Name of Director Capacity options granted issued share capital
Mr. WANG Xiaogang Beneficial owner 118,471 0.008%
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Note: Details of the above share options granted by the Company as required to be disclosed pursuant to the Listing Rules are set out in the section headed “Pre-IPO Share Option Scheme” below.

The percentage represents the number of ordinary Shares/underlying Shares interested divided by the number of the Company’s issued Shares as at 30 June 2021.

Save as disclosed above and in the section headed “Pre-IPO Share Option Scheme and Share Option Scheme” and to the best knowledge of the Directors, as at 30 June 2021, none of the Directors or the chief executive of the Company had any interests and/or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 17

SUPPLEMENTARY INFORMATION

SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SECURITIES

As at 30 June 2021, the following corporations/persons had interests of 5% or more in the issued Shares according to the register of interests required to be kept by the Company under section 336 of the SFO:

Long position in ordinary Shares

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Number of Approximate
ordinary percentage [+] of the
Shares Company’s issued
Name Note Capacity interested share capital
Cross Mark Limited Beneficial owner 575,061,863 36.65%
Ms. Yufeng LIU 1 Interest of a controlled corporation 575,061,863 36.65%
Mr. ZHANG Zaixian 2 Interest of spouse 575,061,863 36.65%
Right Faith Holdings Limited Beneficial owner 393,385,962 25.07%
Mr. Marc CHAN 3 Interest of controlled corporations 408,385,962 26.02%
Fidelity China Special Beneficial owner 78,471,000 5.00%
Situations PLC
FIL Limited 4 Interest of controlled corporations 78,515,000 5.00%
Pandanus Partners L.P. 4 Interest of controlled corporations 78,515,000 5.00%
Pandanus Associates Inc. 4 Interest of controlled corporations 78,515,000 5.00%
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Notes:

(1) The entire issued share capital of Cross Mark Limited is legally and beneficially owned by Ms. Yufeng LIU. Under the SFO, Ms. Yufeng LIU is deemed to be interested in the same number of Shares in which Cross Mark Limited is interested.
(2) Mr. ZHANG Zaixian is the spouse of Ms. Yufeng LIU. Under the SFO, Mr. ZHANG Zaixian is deemed to be interested in the same number of Shares in which Ms. Yufeng LIU is interested.
(3) The entire issued share capital of Right Faith Holdings Limited is legally and beneficially owned by Mr. Marc CHAN. In addition, Amplewood Resources Limited, a company wholly owned by Mr. Marc CHAN, held 15,000,000 Shares. Under the SFO, Mr. Marc CHAN is deemed to be interested in the same number of Shares in which Right Faith Holdings Limited and Amplewood Resources Limited are interested.
(4) As the Company is aware, FIL Limited was deemed to be interested in 78,515,000 Shares held by its controlled entities/corporations. Pandanus Partners L.P. owned 37.01% of the equity interest in FIL Limited. Pandanus Partners L.P. is wholly owned by Pandanus Associates Inc. Accordingly, Pandanus Partners L.P. and Pandanus Associates Inc. were also deemed to be interested in the aforesaid 78,515,000 Shares.

The percentage represents the number of ordinary Shares interested divided by the number of the issued Shares as at 30 June 2021.

Save as disclosed above and to the best knowledge of the Directors, as at 30 June 2021, no person had registered an interest or a short position in the Shares or underlying Shares as recorded in the register required to be kept by the Company under section 336 of the SFO.

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PW MEDTECH GROUP LIMITED 18 INTERIM REPORT 2021

SUPPLEMENTARY INFORMATION

PRE-IPO SHARE OPTION SCHEME AND SHARE OPTION SCHEME

Pre-IPO Share Option Scheme

The Company conditionally approved and adopted the Pre-IPO Share Option Scheme pursuant to the resolutions of the Shareholders passed on 3 July 2013 and has amended the same pursuant to the resolutions of the Shareholders passed on 14 October 2013.

The purpose of the Pre-IPO Share Option Scheme is to attract, retain and motivate employees and Directors, and to provide a means of compensating them through the grant of options for their contribution to the growth and profits of the Group, and to allow such employees and Directors to participate in the growth and profitability of the Group.

On 6 July 2013, options (exercisable for 10 years subject to vesting schedule as set out in the grant letter) to subscribe for an aggregate of 70,891,722 Shares were conditionally granted by the Company under the Pre-IPO Share Option Scheme to a total of 31 grantees, including one executive Director, two non-executive Directors, two independent non-executive Directors, five members of the senior management (excluding Directors) of the Group, one director of a subsidiary of the Company and 20 other employees of the Group. Such options were granted based on the performance of the grantees that have made important contributions or are important to the long term growth and profitability of the Group. Apart from the above share options, no options were granted under the Pre-IPO Share Option Scheme. In addition, no further options can be granted under the Pre-IPO Share Option Scheme on or after the Listing Date. The total number of Shares currently available for issue under the Pre-IPO Share Option Scheme is 118,471 Shares, representing approximately 0.008% of the issued share capital of the Company as at the date of this interim report.

Details of movement of the share options granted under the Pre-IPO Share Option Scheme for the Relevant Period are as follows:

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Number of options
Exercised
Outstanding Granted during the Cancelled Lapsed Outstanding
as at during the Relevant during the during the as at
1 January Relevant Period Relevant Relevant 30 June
Name of option holder 2021 Period (Note) Period Period 2021
Director
— — — —
Mr. WANG Xiaogang 118,471 118,471
Total 118,471 — — — — 118,471
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Note: The exercise price per Share of the above options granted is RMB0.626.

The Directors and the director of the Company’s subsidiary who have been granted options under the Pre-IPO Share Option Scheme, have undertaken to the Company that they will not exercise the options granted to them under the Pre-IPO Share Option Scheme if as a result of which the Company would not be able to comply with the public float requirements of the Listing Rules.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 19

SUPPLEMENTARY INFORMATION

A detailed summary of the terms (including the terms of the Pre-IPO Share Option Scheme, the calculation method of the exercise price, exercise periods, and vesting periods and conditions) of the Pre-IPO Share Option Scheme has been set out in the section headed “D. Pre-IPO Share Option Scheme” in Appendix IV of the Prospectus.

The Pre-IPO Share Option Scheme does not fall within the ambit of, and is not subject to, the regulations under Chapter 17 of the Listing Rules.

SHARE OPTION SCHEME

On 14 October 2013, the Company adopted the Share Option Scheme, which falls within the ambit of, and is subject to, the regulations under Chapter 17 of the Listing Rules. The purpose of the Share Option Scheme is to attract, retain and motivate employees, Directors and other participants, and to provide a means of compensating them through the grant of options for their contribution to the growth and profits of the Group, and to allow such employees, Directors and other persons to participate in the growth and profitability of the Group.

Qualified participants of the Share Option Scheme include the Directors (including executive, non-executive and independent non-executive Directors) and employees (whether full-time or part-time) of the Company or any of its subsidiaries or any other person who in the absolute discretion of the Board has contributed or will contribute to the Group.

The total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme is 160,000,000 Shares, representing 10% of the total number of issued Shares on the Listing Date, and approximately 10.20% of the total number of issued Shares as at the date of this interim report.

The total number of Shares issued and to be issued upon the exercise of the options granted to or to be granted to each eligible person under the Share Option Scheme (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the Shares in issue.

The offer of a grant of share options under the Share Option Scheme may be accepted within 14 days from the date of offer upon payment of a consideration of HK$1 by the grantee.

The Share Option Scheme will remain in force for a period of 10 years from 14 October 2013 and the options granted have a 10-year exercise period. Options may be vested over such period(s) as determined by the Board in its absolute discretion subject to compliance with the requirements under any applicable laws, regulations or rules.

The exercise price of share options under the Share Option Scheme is determined by the Board, but shall not be less than the higher of (i) the closing price of the Shares as stated in the daily quotation sheet of the Stock Exchange on the date of grant, which must be a business day; (ii) the average closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange for the five business days immediately preceding the date of grant; and (iii) the nominal value of a Share.

No share option has been granted under the Share Option Scheme since its adoption and up to the date of this interim report.

A summary of the terms of the Share Option Scheme has been set out in the section headed “E. Share Option Scheme” in Appendix IV of the Prospectus.

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PW MEDTECH GROUP LIMITED 20 INTERIM REPORT 2021

REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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TO THE BOARD OF DIRECTORS OF PW MEDTECH GROUP LIMITED

(incorporated in the Cayman Islands with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated interim financial statements set out on pages 21 to 44, which comprise the condensed consolidated statement of financial position as of 30 June 2021 of PW Medtech Group Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) and the related condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes (the “ condensed consolidated interim financial statements ”). The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“ HKAS 34 ”) issued by the Hong Kong Institute of Certified Public Accountants. The directors are responsible for the preparation and presentation of the condensed consolidated interim financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements is not prepared, in all material respects, in accordance with HKAS 34.

BDO Limited

Certified Public Accountants

Ng Wai Man

Practising Certificate Number P05309 Hong Kong, 26 August 2021

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2021

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Unaudited
Six months ended 30 June
2021 2020
Notes RMB’000 RMB’000
Revenue 5(b) 133,492 101,536
Cost of sales (51,012) (42,023)
Gross profit 82,480 59,513
Other losses 6 (5,496) (6,427)
Fair value loss on investment properties 14 (1,350) (13,987)
Gain on disposal of assets held for sale/interest in an associate 16 731,750 122,938
Selling and marketing expenses (34,053) (46,522)
General and administrative expenses (26,919) (33,111)
Provision for impairment loss recognised in respect
of trade receivables 18 (4,093) (6,344)
Research and development expenses (7,366) (10,694)
Operating profit 734,953 65,366
Finance income/(cost) — net 7 30,891 (9,267)
Share of result of an associate — 79,084
Profit before income tax 8 765,844 135,183
Income tax (expenses)/credits 9 (4,755) 5,968
Profit for the period 761,089 141,151
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 9,466 (6,320)
—
Share of exchange differences reserve of an associate 28,883
Reclassification from exchange differences reserve to
profit or loss on
—
— Deemed disposal of an associate (23)
— Disposal of an associate 8,944 1,464
Other comprehensive income for the period 18,410 24,004
Total comprehensive income for the period 779,499 165,155
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PW MEDTECH GROUP LIMITED 22 INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2021

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Unaudited
Six months ended 30 June
2021 2020
Note RMB’000 RMB’000
Profit attributable to:
Owners of the Company 761,091 141,153
Non-controlling interests (2) (2)
761,089 141,151
Total comprehensive income for the period attributable to:
Owners of the Company 779,501 165,157
Non-controlling interests (2) (2)
779,499 165,155
Earnings per share attributable to owners of the Company for
the period
(expressed in RMB cents per share)
Basic earnings per share 10 48.50 8.99
Diluted earnings per share 10 48.50 8.99
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

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30 June 31 December
2021 2020
Notes RMB’000 RMB’000
(Unaudited) (Audited)
Assets
Non-current assets
Property, plant and equipment 12 686,562 698,441
Right-of-use assets 13 22,205 22,465
Investment properties 14 273,390 274,740
Intangible assets 15 176,290 177,898
Deferred income tax assets 15,395 14,726
Long-term prepayments 10,577 9,140
Loan receivable 19 180,000 —
Financial asset at fair value through other comprehensive income 17 10,000 —
1,374,419 1,197,410
Current assets
Inventories 35,311 39,041
Amount due from an associate — 27,505
Trade and other receivables 18 132,764 151,370
Cash and cash equivalents 2,410,788 1,701,783
2,578,863 1,919,699
Assets classified as held for sale 16 — 2,166,486
Total current assets 2,578,863 4,086,185
Total assets 3,953,282 5,283,595
Current liabilities
Amount due to an associate — 27,829
Trade and other payables 20 85,413 92,602
Lease liabilities 2,442 2,461
Bank borrowings 21 — 10,000
Tax payables 5,041 5,049
Total current liabilities 92,896 137,941
Net current assets 2,485,967 3,948,244
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PW MEDTECH GROUP LIMITED 24 INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

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30 June 31 December
2021 2020
Notes RMB’000 RMB’000
(Unaudited) (Audited)
Liabilities
Non-current liabilities
Bank borrowings 21 16,360 18,000
Deferred tax liabilities 2,111 2,728
Deferred government grants 16,325 16,647
Total non-current liabilities 34,796 37,375
NET ASSETS 3,825,590 5,108,279
Equity
Share capital 22 965 965
Share premium 1,492,937 1,492,937
Reserves 390,374 371,964
Retained earnings 1,941,478 3,242,575
Equity attributable to owners of the Company 3,825,754 5,108,441
Non-controlling interests (164) (162)
TOTAL EQUITY 3,825,590 5,108,279
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

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Attributable to owners of the Company
Non-
Share Share Other Retained controlling Total
capital premium reserves earnings Total interests equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 22)
Balance at 1 January 2021 965 1,492,937 371,964 3,242,575 5,108,441 (162) 5,108,279
Comprehensive income
Profit for the period — — — 761,091 761,091 (2) 761,089
Other comprehensive income
Currency translation differences — — 9,466 — 9,466 — 9,466
Reclassification from exchange
differences reserve to profit
or loss on disposal of interest
in an associate — — 8,944 — 8,944 — 8,944
Total comprehensive income — — 18,410 761,091 779,501 (2) 779,499
— — — —
Dividend paid (note 11) (2,062,188) (2,062,188) (2,062,188)
Total transaction with
owners — — — (2,062,188) (2,062,188) — (2,062,188)
Balance at 30 June 2021
(unaudited) 965 1,492,937 390,374 1,941,478 3,825,754 (164) 3,825,590
Attributable to owners of the Company
Non-
Share Share Other Retained controlling Total
capital premium reserves earnings Total interests equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 22)
Balance at 1 January 2020 965 1,492,937 503,985 2,610,761 4,608,648 (159) 4,608,489
Comprehensive income
— — —
Profit for the period 141,153 141,153 (2) 141,151
Other comprehensive income
— — — —
Currency translation differences (6,320) (6,320) (6,320)
Share of exchange differences
reserve of an associate — — 28,883 — 28,883 — 28,883
Reclassification from exchange
differences reserve to profit or
loss on deemed disposal of an
associate — — (23) — (23) — (23)
Reclassification from exchange
differences reserve to profit or
loss on disposal of interest in
an associate — — 1,464 — 1,464 — 1,464
— —
Total comprehensive income 24,004 141,153 165,157 (2) 165,155
Balance at 30 June 2020
(unaudited) 965 1,492,937 527,989 2,751,914 4,773,805 (161) 4,773,644
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Cash flows from operating activities
Cash generated from operations 53,408 42,654
Income tax paid (6,049) (2,617)
Net cash generated from operating activities 47,359 40,037
Cash flows from investing activities
Purchases of property, plant and equipment (9,687) (1,540)
—
Purchase of financial asset through other comprehensive income (10,000)
Payments for development costs of construction in progress (2,256) (4,874)
Proceeds from disposal of interest in an associate 2,907,180 714,232
—
Proceeds from disposal of property, plant and equipment 4,510
Interest received 31,432 1,591
—
Loan to independent third party (180,000)
Net cash generated from investing activities 2,736,669 713,919
Cash flows from financing activities
—
Dividend paid (2,062,188)
Repayment of lease liabilities (19) (186)
Repayment of bank borrowings (11,640) (585,401)
Interest paid on bank borrowings (541) (10,437)
Net cash used in financing activities (2,074,388) (596,024)
Net increase in cash and cash equivalents 709,640 157,932
Cash and cash equivalents at beginning of period 1,701,783 132,598
Exchange (loss)/gains (635) 88
Cash and cash equivalents at end of period 2,410,788 290,618
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

1. GENERAL

PW Medtech Group Limited (the “ Company ”) was incorporated in the Cayman Islands on 13 May 2011 as an exempted company with limited liability under the Companies Law (2010 Revision) of the Cayman Islands. The address of the Company’s registered office is The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands. The Company’s shares have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) since 8 November 2013.

The Company is an investment holding company. The Company and its subsidiaries (together referred to as the “ Group ”) are principally engaged in the R&D, manufacturing and sale of advanced infusion set, intravenous cannula products, insulin needles etc. (the “ Infusion Set Business ”) in the People’s Republic of China (the “ PRC ”).

2. BASIS OF PREPARATION

These condensed consolidated interim financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 (“ HKAS 34 ”), issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and the applicable disclosure provisions of Rules Governing the Listing of Securities on the Main Board of the Stock Exchange. These condensed consolidated interim financial statements were authorised for issue on 26 August 2021.

These condensed consolidated interim financial statements have been prepared with the same accounting policies adopted in the 2020 annual financial statements.

The preparation of these condensed consolidated interim financial statements in compliance with HKAS 34 requires the use of certain judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 4.

These condensed consolidated interim financial statements are presented in Renminbi (“ RMB ”), unless otherwise stated. These condensed consolidated interim financial statements contain condensed consolidated interim financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the group since the 2020 annual consolidated financial statements. These condensed consolidated interim financial statements and notes do not include all of the information required for a complete set of financial statements prepared in accordance with HKFRSs and should be read in conjunction with the 2020 annual consolidated financial statements.

These condensed consolidated interim financial statements are unaudited, but has been reviewed by BDO Limited in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, issued by the HKICPA. BDO Limited’s independent review report to the board of directors is included on page 20.

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PW MEDTECH GROUP LIMITED 28 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

3. CHANGE IN ACCOUNTING POLICIES

Except as described below, the accounting policies applied are consistent with those of preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2020, as described therein.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Amendment to HKFRS 16 Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16

Covid-19-related rent concessions beyond 30 June 2021 Interest Rate Benchmark Reform — phase 2

The new or amended HKFRSs that are effective from 1 January 2021 did not have any significant impact on the Group’s accounting policies.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial statements, the significant judgements made by the management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to 2020 annual financial statements.

5. SEGMENT REPORTING

(a) Business segments

The chief operating decision-makers have been identified as the executive director of the Company. The executive directors review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Group has only one reportable operating segment which is Infusion Set Business. Thus, no operating segments have been aggregated to form the above reportable operating segment.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

5. SEGMENT REPORTING (Continued)

(b) Disaggregation of revenue

In the following table, revenue is disaggregated by customer segments and timing of revenue recognition.

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Customer segments
Revenue from hospitals 20,158 12,549
Revenue from medical products distributors 113,334 88,987
133,492 101,536
Timing of revenue recognition
Recognised at a point of time 133,492 101,536
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As the primary geographical market solely represents the PRC, no disaggregation of revenue by primary geographical market is disclosed.

6. OTHER LOSSES

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Government grants 543 3,292
Rental income 5,788 5,996
—
Loss on disposal of property, plant and equipment (1,536)
Loss on guarantee liability (Note) (364) (366)
—
Loss on deemed disposal of an associate (18,127)
—
Written off of property, plant and equipment (1,926)
—
Net foreign exchange (17,262)
Others 5,799 6,240
Other losses (5,496) (6,427)
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PW MEDTECH GROUP LIMITED 30 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

6. OTHER LOSSES (Continued)

Note:

The guarantee liability mainly related to a joint guarantee liability of the Group’s subsidiary, Xuzhou Yijia Medical Device Co., Ltd (“ Xuzhou Yijia ”). Based on the judgement from the Supreme People’s Court of the PRC in 2018, Xuzhou Yijia is liable to the principal of RMB10 million and accumulated interest for a defaulted loan granted by a bank, which Xuzhou Yijia had undertaken a joint guarantee with another independent guarantor.

After assessing the risk relating to the joint guarantee liability, the directors of the Company accrued a provision to guarantee liability which included the principal and accumulated interest of the above loan in 2018. The loss recognised during period ended 30 June 2021 and 2020 represents the interest accrued for the period on the guarantee liability.

7. FINANCE INCOME/(COST) — NET

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Finance income
Interest income on short-term bank deposits 29,561 1,591
Loan interest income 1,871 —
31,432 1,591
Finance costs
—
Interest expenses on lease liabilities (5)
Interest expenses on bank borrowings (541) (10,437)
—
Net foreign exchange loss (416)
(541) (10,858)
Finance income/(cost) — net 30,891 (9,267)
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

8. PROFIT BEFORE INCOME TAX

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Provision for impairment loss on trade receivables 4,093 6,344
Bad debt written off — 4,427
Amortisation of intangible assets 1,608 1,607
Depreciation of property, plant and equipment 13,658 13,960
Depreciation of right-of-use-assets
— Properties 18 177
— Leasehold land and land use right 242 241
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9. TAXATION

The amount of tax recognised in the condensed consolidated statement of comprehensive income represents:

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Current income tax
—
PRC income tax for the period (6,041)
Overprovision of PRC income tax of prior year — 756
Deferred income tax 1,286 5,212
Income tax (expenses)/credits (4,755) 5,968
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Below are the major tax jurisdictions that the Group operates during the period.

(a) Cayman Islands profits tax

The Company has not been subject to any taxation in the Cayman Islands.

(b) Hong Kong profits tax

Companies incorporated in Hong Kong are subject to the Hong Kong profits tax at a rate of 16.5% (six months ended 30 June 2020: 16.5%).

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PW MEDTECH GROUP LIMITED 32 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

9. TAXATION (Continued)

(c) PRC corporate income tax (the “CIT”)

Under the Law of the PRC on CIT (the “ CIT Law ”) and Implementation Regulation of the CIT Law, the tax rate of the PRC subsidiaries is 25% (six months ended 30 June 2020: 25%).

Two subsidiaries (six months ended 30 June 2020: two subsidiaries) of the Group have been qualified as “High and New Technology Enterprises” under the CIT Law. Therefore, they were entitled to a preferential income tax rate of 15% on their estimated assessable profits during the period (six months ended 30 June 2020: 15%). They will continue to enjoy the preferential tax rate in the subsequent periods, provided that they continue to be qualified as “High and New Technology Enterprises” during such periods.

(d) Withholding tax (“WHT”)

According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after 1 January 2008 are generally subject to WHT. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant WHT rate will be reduced from 10% to 5%.

The Group does not have any plan to require its PRC subsidiaries to distribute their retained earnings and intends to retain them to operate and expand the Group’s business in the PRC. Accordingly, no deferred income tax liability on WHT was accrued as of the end of the period.

10. EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period ended 30 June 2021.

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Profit attributable to owners of the Company 761,091 141,153
Weighted average number of ordinary shares in issue (thousands) 1,569,246 1,569,246
Basic earnings per share (RMB cents per share) 48.50 8.99
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021 33

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

10. EARNINGS PER SHARE (Continued)

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share options.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding by the assumption of the conversion of all dilutive potential ordinary shares arising from share options granted by the Company (collectively forming the denominator for computing the diluted earnings per share). No adjustment is made to earnings (numerator).

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Profit attributable to owners of the Company 761,091 141,153
Weighted average number of ordinary shares in issue (thousands) 1,569,246 1,569,246
Adjustments for:
— Share options (thousands) 4 26
Weighted average number of ordinary shares for diluted earnings
per share (thousands) 1,569,250 1,569,272
Basic earnings per share (RMB cents per share) 48.50 8.99
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11. DIVIDENDS

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Unaudited
Six months
ended 30 June
2021
RMB’000
Special dividend declared and paid of HK$1.5766 per share (2020: Nil) 2,062,188
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The board does not propose an interim dividend for the six months ended 30 June 2021 (six months ended 30 June 2020: nil).

The special dividend of HK$1.5766 per share of RMB2,062,188,000 was declared on 8 December 2020 and was paid on 25 February 2021.

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PW MEDTECH GROUP LIMITED 34 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

12. PROPERTY, PLANT AND EQUIPMENT

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
At beginning of year 698,441 725,214
Additions 1,779 17,248
—
Disposals (19,603)
Depreciation (13,658) (24,418)
At end of period/year 686,562 698,441
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During the Period, the Group acquired property, plant and equipment of approximately RMB1,779,000 (Six months ended 30 June 2020: RMB15,023,000) and no disposal of property, plant and equipment during the period (Six months ended 30 June 2020: RMB9,855,000).

13. RIGHT-OF-USE ASSETS

The recognised right-of-use assets relate to the following types of assets:

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Leasehold
land and land
Properties use rights Total
RMB’000 RMB’000 RMB’000
Balance at 1 January 2020 98 22,929 23,027
Addition 240 — 240
Depreciation charge for the year (320) (482) (802)
At 31 December 2020 (Audited) and 1 January 2021 18 22,447 22,465
Depreciation for the period (18) (242) (260)
—
At 30 June 2021 (Unaudited) 22,205 22,205
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

14. INVESTMENT PROPERTIES

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
FAIR VALUE
At beginning of period/year 274,740 276,493
Fair value adjustment (1,350) (1,753)
At end of period/year 273,390 274,740
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The above investment properties mainly comprising factories and offices, are held by the Group for long-term rental yields, which are located at No.23 Panlong West Road, Pinggu District Beijing, with approximately 39,714.5 square meters construction area. The Group’s property interest held to earn rentals is measured using the fair value model and is classified and accounted for as investment properties.

The fair value of the Group’s investment properties as at 30 June 2021 was approximately RMB273,390,000 (31 December 2020: RMB274,740,000).

The fair value was determined based on the income approach, where capitalising the estimated net income derived from the investment properties with reference to the lease agreement and taking into account the future growth potential. The discount rate was determined by reference to weighted average cost of capital of the listed companies with similar business portfolio. Key assumptions used in calculating the recoverable amount are as follows:

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30 June 31 December
2021 2020
Occupancy rate 60.0% to 60.0% to
86.8% 86.8%
Rental growth rate 3.0% 3.0%
Discount rate 6.0% 6.0%
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The fair value of the investment property at 30 June 2021 and 31 December 2020 were measured using valuation techniques with significant unobservable inputs and hence were classified as Level 3 of the fair value hierarchy. There were no transfer into or out of Level 3 during the period.

A significant increase/decrease in the rental value in isolation would result in a significant increase/decrease in the fair value of the investment properties. A significant increase/decrease in the discount rate in isolation would result in a significant decrease/increase in the fair value of the investment properties. Generally, a change in the assumption made for the rental value is accompanied by a directionally similar change in the rent growth per annum.

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PW MEDTECH GROUP LIMITED 36 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

14. INVESTMENT PROPERTIES (Continued)

In addition, as a result of the increased uncertainty, significant judgement is required when evaluating the inputs used in the fair value estimate. Reasonably possible changes at the reporting date to any of the relevant assumptions would have affected the fair value of the investment property as presented below:

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30 June
2021
RMB’000
Discount rate increased by 1% (40,410)
Expected occupancy rate decreased by 3% (12,090)
Rental growth rate decreased by 0.5% (24,350)
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15. INTANGIBLE ASSETS

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
At beginning of period/year 177,898 181,113
Amortisation charge (1,608) (3,215)
At end of period/year 176,290 177,898
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Goodwill was acquired through business combinations and it is related to the Infusion Set Business. Goodwill is monitored by the management at the operating segment level.

The management is in the opinion that the Infusion Set Business has operating profit during the period. As at 30 June 2021, management determines that there is no impairment on goodwill.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

16. ASSETS CLASSIFIED AS HELD FOR SALE

As at 31 December 2020, the remaining 9.67% equity of interest in an associate, China Biologic Products Holdings, Inc. (“ CBPO ”), being 3,750,000 CBPO shares, are classified as assets and liabilities of a disposal group classified as held for sale. The transaction of selling the remaining interest was completed on 6 January 2021 and detailed in the Company’s announcement dated on 7 January 2021.

The gain on disposal of interest in CBPO is calculated as below:

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Cash consideration received 2,907,180 714,232
Share of interest disposed of (2,166,486) (589,830)
Exchange alignments (8,944) (1,464)
Gain on disposal of assets held for sale/interest in an associate 731,750 122,938
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17. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Financial assets at fair value through other comprehensive income include the following:

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30 June
2021
RMB’000
(Unaudited)
Non-current asset
Unlisted investment fund (note) 10,000
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On 15 May 2021, the Company’s wholly owned subsidiary, PW Medtech (Beijing) Limited entered into a Limited Partnership Agreement (the “ Agreement ”) to subscribe for the interests in the Fund, as a limited partner, in the total amount of RMB20,000,000 of 分宜昊達投資合夥企業（有限合夥） (the “ Company ”). Amounted of RMB10,000,000 required capital contribution of the investment was paid during the period ended 30 June 2021. The underlying assets of the Company represent a private equity fund of investing into medical industry.

This Fund was established principally to achieve long-term capital appreciation primarily through privatelynegotiated investments in companies and/or its affiliates which is/are engaged in the research and development and sales of medical devices. The Group is a limited partner in this Fund and does not have control nor significant influence in the Fund’s operational and financing decisions.

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PW MEDTECH GROUP LIMITED 38 INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

17. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Continued)

The directors of the Company have determined the fair value of the remaining interest held in the Fund as at 30 June 2021 with reference to the valuation report issued by Flagship Appraisals and Consulting Limited, an independent professional valuer who has professional qualifications and relevant experience. The fair value of the Fund is determined by market approach, with references to comparable companies benchmark multiples.

18. TRADE AND OTHER RECEIVABLES

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Trade receivables (i) 97,108 107,880
Bills receivable (ii) 27 2,026
Prepayments and deposits 3,947 6,488
Value added tax recoverable 17,849 19,713
Interest receivable 1,872 —
Other receivables 11,961 15,263
Trade and other receivables 132,764 151,370
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(i) Included in trade and other receivables are trade receivables (net of impairment losses) with the following ageing analysis, based on invoice dates, as of the end of reporting period.

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Up to 3 months 28,998 26,345
3 months to 6 months 22,307 15,825
6 months to 12 months 20,277 15,478
1 year to 2 years 5,487 29,191
2 years to 3 years 20,039 21,041
97,108 107,880
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The Group and the Company recognised impairment loss based on the expected credit loss model.

Trade and bills receivables are due within 180 days from the date of billing. The Group does not hold any collateral as security.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

18. TRADE AND OTHER RECEIVABLES (Continued)

(i) (Continued)

On 1 January 2020, the Group has entered into the second repayment agreements individually with three credit-impaired customers with significant risk of default (“ Group D ”). Pursuant to the second repayment agreements, approximately RMB28,000,000 (the “ Overdue Debts ”) are identified as amount that exceeding the line of credit being granted. The Overdue Debts will be settled in cash by monthly instalment of RMB1.4 million for a period within two years commencing from 1 January 2020, and all the debtors paid on time on the monthly basis as of the date of this report. During the period ended 30 June 2021, the repayments made by the customers for the Overdue Debts have been consistent with the agreed schedule.

(ii) The ageing of bills receivable is within 180 days, which is within the credit term.

(iii) Impairment assessment

The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix. As the Group’s historical credit loss experience indicated significantly different loss patterns for different customer segments, the grouping for trade receivables for the assessment of ECLs is by customer segments, while Group C represents distributor customers who identified as having significant increase in risk of default and Group D represents three credit-impaired customers with significant risk of default.

The following table provides information about the Group’s exposure to credit risk and ECLs for trade receivables:

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30 June 2021 Group A Group B Group C Group D
Expected credit loss rate (%) 5.72 1.48 55.45 45.70
Gross carrying amount (RMB’000) 25,855 33,251 18,351 58,562
Loss allowance (RMB’000) 1,480 492 10,177 26,762
31 December 2020 Group A Group B Group C Group D
Expected credit loss rate (%) 5.20 1.46 46.15 39.20
Gross carrying amount (RMB’000) 28,369 32,754 12,791 68,784
Loss allowance (RMB’000) 1,475 477 5,903 26,963
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Expected loss rates are based on actual loss experience over the past 3 years. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.

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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

18. TRADE AND OTHER RECEIVABLES (Continued)

(iii) Impairment assessment (Continued)

Movement in the loss allowance account in respect of trade receivables during the year is as follows:

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RMB’000
Balance at 1 January 2020 25,047
Provision for impairment losses recognised during the year 9,771
Balance at 31 December 2020 34,818
Provision for impairment losses recognised during the period 4,093
Balance at 30 June 2021 38,911
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19. LOAN RECEIVABLE

On 12 April 2021, a loan advance with principal of RMB180,000,000 was granted to Beijing Tianxia Pule Medical Investment Co., Ltd., which is a third party independent of the Company. The loan is interest bearing at 5.5% per annum. The interest is repayable on a half-yearly basis and the outstanding principal amount in full on 11 April 2023.

Impairment assessment

It is considered to be low risk as the loans are collateralised by the real properties owned by the Borrower located in Beijing with fair value amounted RMB297,874,000 and therefore the impairment provision is determined as 12 months expected credit losses. As at 30 June 2021, the management assess that the effect of applying the expected credit risk model on loan receivable was immaterial.

PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

20. TRADE AND OTHER PAYABLES

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Trade payables 15,545 15,019
Salary and staff welfare payables 20,538 18,942
Advances from customers 9,664 16,051
Deposits received 3,718 3,955
Value added tax and other taxes 400 303
Professional service fee 1,131 2,922
Provision for loss from guarantee liability (Note 6) 18,844 18,480
Deferred government grants-current portion 642 642
Other payables 14,931 16,288
85,413 92,602
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As at 30 June 2021 and 31 December 2020, except for the advances from customers, deposit received, value added tax and other taxes and deferred government grants which are not financial liabilities, all trade and other payables of the Group were non-interest bearing, and their fair value approximated their carrying amounts due to their short maturities.

Included in trade payables are trade creditors with the following ageing analysis, based on invoice dates, as of the end of reporting period:

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Up to 6 months 5,370 3,591
6 months to 12 months 2,143 3,847
1 year to 2 years 2,685 4,924
2 years to 3 years 3,593 972
Over 3 years 1,754 1,685
15,545 15,019
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

21. BANK BORROWINGS

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Current
Trade finance borrowings due to repayment within
—
one year which contained a repayable on demand clause (Note (a)) 10,000
Non-current liability — Secured
Bank borrowing (Note (b)) 16,360 18,000
Total bank borrowings 16,360 28,000
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Notes:

(a) The bank borrowings represents trade finance advanced from the Bank of Beijing. As at 30 June 2020, bank facilities in total of RMB10,000,000 were granted to the Group’s subsidiary, Beijing Fert Technology Co., Ltd.

All of the banking facilities are subject to the fulfillment of covenants relating to certain of the Company’s financial position ratios, as are commonly found in lending arrangements with financial institutions. If the Company was to breach the covenants the drawn down facilities would become repayable on demand.

The borrowing is secured by corporate guarantee and bears interest at 0.91% plus the prime rate of the Central Bank in the PRC. The borrowing is carried at amortised cost. As at 30 June 2021, the amount was repaid in full.

(b) On 29 February 2020, the Company was granted a new bank facilities from the Industrial and Commercial Bank of China amounted to RMB220,000,000 up to 2025.

The borrowing is secured by the leasehold land and building of approximately RMB274,673,000 owned by the Group’s subsidiary and bears interest at prime rate of Central Bank in the PRC minus 0.10%. The borrowing is carried at amortised cost. The balance was fully repaid in July 2021.

22. SHARE CAPITAL

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Number of
ordinary Share
shares capital
RMB’000
Issued and fully paid:
Balance at 1 January 2020, 31 December 2020 and 30 June 2021 1,569,246,098 965
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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2021

23. CAPITAL COMMITMENTS

Capital expenditure contracted for at the end of the period but not yet incurred is as follows:

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Commitments for the:
—
Capital contribution on an unlisted investment fund (note 17) 10,000
Acquisition of property, plant and equipment 18,349 28,593
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24. RELATED PARTY DISCLOSURES

Compensation of key management personnel

During the period, the Group had the following material related party transactions:

The remuneration of directors of the Group during the period was as follows:

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Unaudited
Six months ended 30 June
2021 2020
RMB’000 RMB’000
Salaries and other allowances 2,605 1,102
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The remuneration of directors is determined by the remuneration committee having regard to the level and composition of pay and the general market conditions in the respective countries and businesses.

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PW MEDTECH GROUP LIMITED INTERIM REPORT 2021

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

25. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts of the financial assets and financial liabilities recognised at the end of reporting period were categorised as follows:

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30 June 31 December
2021 2020
RMB’000 RMB’000
(Unaudited) (Audited)
Financial assets
— at amortised cost 2,704,473 1,854,457
—
— at fair value through other comprehensive income 10,000
Financial liabilities
Financial liabilities at amortised cost 87,628 129,941
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The fair values of financial assets and financial liabilities are determined as follows:

the fair value of investments held for trading with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market price; and
the fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

HKFRS 13 requires disclosures for financial instruments that are measured at fair value by level of the following fair value measurement hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3: Inputs for the asset or liability that are not based on observable market data.

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30 June 2021
Level 1 Level 2 Level 3
RMB’000 RMB’000 RMB’000
Financial assets at fair value through
other comprehensive income — — 10,000
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For the financial assets at fair value through other comprehensive income, it consisted of unlisted investment fund as detailed in Note 17, the fair value is arrived at based on a valuation carried out by Flagship Appraisals and Consulting Limited, an independent valuer not connected to the Group. The fair value was determined based on market approach, where fair value estimated with references to comparable companies’ benchmark multiples.

AI assistant

PW Medtech Group Limited — Interim / Quarterly Report 2021

49875_rns_2021-09-23_5df6f10a-904c-48d4-9035-b701086f4721.pdf

A TRUE PIONEER IN THE CHINESE MEDICAL DEVICE INDUSTRY

CONTENTS

DEFINITIONS

DEFINITIONS

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Director

Non-executive Directors

Independent Non-executive Directors

HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN THE PRC

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

PRINCIPAL BANKERS

COMPANY SECRETARY

AUTHORISED REPRESENTATIVES UNDER THE LISTING RULES

AUDIT COMMITTEE

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

AUDITOR

REGISTERED OFFICE

HONG KONG LEGAL ADVISOR

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

STOCK CODE AND BOARD LOT

WEBSITE

MANAGEMENT DISCUSSION AND ANALYSIS

MARKET AND BUSINESS REVIEW

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS STRATEGIES AND FUTURE OUTLOOK

Emphasis on Innovation and R&D

MANAGEMENT DISCUSSION AND ANALYSIS

Expansion of Distribution Network

MANAGEMENT DISCUSSION AND ANALYSIS

Strategic Acquisitions

FINANCIAL REVIEW

Overview

Revenue

Gross Profit

MANAGEMENT DISCUSSION AND ANALYSIS

Selling and Marketing Expenses

General and Administrative Expenses

Provision for Impairment Losses Recognized in Respect of Trade Receivables

R&D Expenses

Other Losses — Net

Gain on Disposal of Assets Held for Sale/Interest in an Associate

Fair Value Loss on Investment Properties

Operating Profit

MANAGEMENT DISCUSSION AND ANALYSIS

Finance Income/(Cost) — Net

Share of Result of an Associate

Income Tax (Expenses)/Credits

Net Profit

Trade and Other Receivables

MANAGEMENT DISCUSSION AND ANALYSIS

Inventories

Property, Plant and Equipment

Investment Properties

Intangible Assets

Assets Classified as Held for Sale

Loan Receivable

Financial Assets at Fair Value through Other Comprehensive Income

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Resources and Liquidity

Cash Flows from Operating Activities

Pledge of Assets

Commitments

Capital Expenditure

Gearing Ratio

MANAGEMENT DISCUSSION AND ANALYSIS

Foreign Exchange Risk

Cash Flow and Fair Value Interest Rate Risk

Credit Risk

SUPPLEMENTARY INFORMATION

HUMAN RESOURCES

INTERIM DIVIDEND

CORPORATE GOVERNANCE PRACTICES

SUPPLEMENTARY INFORMATION

MODEL CODE FOR SECURITIES TRANSACTIONS

PW Medtech Group Limited Interim / Quarterly Report 2021