1、Annual Report 2019 1/308 Stock Code:603899 Short Name:M&G Stationery Shanghai M&G Stationery Inc.Annual Report 2019 Annual Report 2019 2/308 Important Notice I.The Board of Directors,Supervisory Committee,directors,supervisors and senior management of the Company warrant that the contents of this re

2、port are true,accurate and complete,without any misrepresentation,misleading statements or material omissions,and severally and jointly bear the legal responsibilities thereof.II.All directors of the Company attended the Board meeting.III.BDO China Shu Lun Pan Certified Public Accounts LLP has issue

3、d the audit report with unqualified opinions to the Company.IV.Chen Huwen,the chairman of the Company,Zhang Qing,the CFO of the Company and Zhai Yu,the head of the accounting department(person in charge of accounting),warrant the truthfulness,accuracy and completeness of the financial report in this

4、 annual report.V.Profit distribution plan or plan to convert surplus reserves into share capital approved by the Board of Directors during the Reporting Period The Company will distribute cash dividend of RMB4.00(tax inclusive)per 10 shares based on the Companys total share capital registered as at

5、the registration date for the implementation of dividend distribution,with the distributed profit totaling RMB368,000,000.The remaining distributable profits in 2019 will be carried forward to the following year.VI.Risks statement of the forward-looking statements Applicable Not applicable Forward-l

6、ooking statements including future plans and development strategies involved in this annual report do not constitute the Companys substantive commitments to investors.The investors are advised to pay attention to investment risks.VII.Is there any non-operating misappropriation of funds of the Compan

7、y by any controlling shareholders and their related parties No VIII.Has the Company provided any external guarantees in violation of the decision-making procedures No Annual Report 2019 3/308 IX.Warning on significant risks The Company has illustrated various risks and corresponding measures that th

8、e Company might face in the production and operation.Please refer to the“Potential Challenges and Risks”set out in the“Discussion and Analysis of Operation”under Section IV.Investors are advised to pay attention to risk of investment.X.Others Applicable Not applicable 本报告分别以中、英本报告分别以中、英文编制，在对中外文编制，在

9、对中外文文本的理解上发生歧义时，以中文文本为准文文本的理解上发生歧义时，以中文文本为准。This English version is converted from the Chinese version.In case of any discrepancy between the Chinese version and the English version,the Chinese version shall prevail.Annual Report 2019 4/308 Contents Chapter I Definition.5 Chapter II Company Profile

10、and Key Financial Indicators.6 Chapter III Business Overview.14 Chapter IV Discussion and Analysis of Operation.21 Chapter V Major Events.50 Chapter VI Changes in Ordinary Shares and Shareholders.71 Chapter VII Preference Shares.78 Chapter VIII Directors,Supervisors,Senior Management and Employees.7

11、9 Chapter IX Corporate Governance.87 Chapter X Corporate Bonds.91 Chapter XI Financial Report.92 Chapter XII References.308 Annual Report 2019 5/308 Chapter I Definition I.Definition In this report,unless the content requires otherwise,the following terms shall have the following meanings:Definition

12、 of common terms The Report Annual Report 2019 Company,the Company,M&G Stationery Shanghai M&G Stationery Inc.M&G Group M&G Holdings(Group)Co.,Ltd.M&G Colipu Shanghai M&G Colipu Office Supplies Co.,Ltd.M&G Life (晨光生活馆)M&G Living Studio Enterprise Management Co.,Ltd.(晨光生活馆企业管理有限公司)/Large retail store

13、 of the Company M&G Technologies Shanghai M&G Information Technology Co.,Ltd.(上海晨光信息科技有限公司)Jiekui Investment Shanghai Jiekui Investment Management Firm(L.P.)Keying Investment Shanghai Keying Investment Management Office(L.P.)Chenguang Venture Capital Center(晨光创投)Shanghai Chenguang Venture Capital Ce

14、nter(L.P.)Chenguang Sanmei(晨光三美)Shanghai Chenguang Sanmei Property Investment Co.,Ltd.Jiumu Store(九木杂物社)Jiumu M&G Store Enterprise Management Co.,Ltd.(九木杂物社企业管理有限公司)/Large retail store of the Company M&G Office Supplies(晨光办公)Shanghai M&G Office Supplies Co.,Ltd.Office Depot Office Depot Network Tech

15、nology Co.,Ltd.Axus Stationery Axus Stationery(Shanghai)Company Ltd.KA Key Account,usually referring to large cross-regional retailers with large operating space and dense customer flow,including RT-MART,Walmart,Carrefour,Hualian Supermarket.Reporting period Year 2019,from 1 January 2019 to 31 Decem

16、ber 2019 Yuan,ten thousand Yuan,hundred million Yuan RMB,RMB10,000,RMB100 million Annual Report 2019 6/308 Chapter II Company Profile and Key Financial Indicators I.Company Information Chinese name of the Company 上海晨光文具股份有限公司 Short name of the Company in Chinese 晨光文具 English name of the Company SHAN

17、GHAI M&G STATIONERY INC.Abbreviation of English name of the Company M&G Legal representative of the Company Chen Huwen II.Contact Information Board Secretary Securities Affairs Representative Name Quan Qiang Bai Kai Office address Building C,Hanqiao Culture Science&Technology Park,No.455 Yanzhan Roa

18、d,Songjiang District,Shanghai Building C,Hanqiao Culture Science&Technology Park,No.455 Yanzhan Road,Songjiang District,Shanghai Telephone Fax E-mail irmg- irmg- III.Introduction to General Information Registered address Building 3,No.3469 Jinqian

19、Road,Fengxian District,Shanghai Postal code of registered address 201406 Office address Building C,Hanqiao Culture Science&Technology Park,No.455 Yanzhan Road,Songjiang District,Shanghai Postal code of office address 201612 Website of the Company http:/www.mg- E-mail irmg- IV.Information Disclosure

20、and Place for Obtaining the Report Media for the Companys information disclosure Shanghai Securities News,China Securities Journal,Securities Daily,Securities Times Annual Report 2019 7/308 CSRCs designated website for the Companys Annual Report disclosure The Companys Annual Report may be obtained

21、at Board of Directors Office V.Stock Information Stock Information Share class Exchanges on which the stocks are listed Stock short name Stock code Stock short name before change A share Shanghai Stock Exchange M&G 603899/VI.Other Relevant Information Auditor of the Company(domestic)Name BDO China S

22、hu Lun Pan CPAs(Special general partnership)Office address 4F No.61 Nanjing East Road,Shanghai Name of the signing accountant Gu Xuefeng,Wang Aijia VII.Major Accounting Data and Financial Indicators for the Past Three Years(1)Major accounting data Unit:Yuan Currency:RMB Major accounting data 2019 20

23、18 Year-on-year change(%)2017 Revenue 11,141,101,364.44 8,534,988,597.55 30.53 6,357,102,964.25 Net profit attributable to shareholders of the listed companies 1,060,083,625.03 806,847,308.41 31.39 634,040,991.46 Net profit attributable to shareholders of the listed 1,005,187,834.38 749,412,457.07 3

24、4.13 544,514,731.94 Annual Report 2019 8/308 companies,net of non-recurring gains and losses Net cash flow generated from operating activities 1,081,941,383.68 827,940,565.51 30.68 717,497,928.03 End of 2019 End of 2018 Year-on-year change(%)End of 2017 Net assets attributable to shareholders of the

25、 listed companies 4,201,500,384.99 3,410,808,445.41 23.18 2,833,961,137.00 Total asset 7,565,115,311.74 5,677,500,049.71 33.25 4,388,278,915.63 (2)Key financial indicators Key financial indicators 2019 2018 Year-on-year increase or decrease in the current period(%)2017 Basic earnings per share(Yuan/

26、share)1.1523 0.8770 31.39 0.6892 Diluted earnings per share(Yuan/share)1.1523 0.8770 31.39 0.6892 Basic earnings per share,net of non-recurring gains and losses(Yuan/share)1.0926 0.8146 34.13 0.5919 Weighted average ROE(%)28.17 26.16 Increase of 2.01 percentage points 24.45 Weighted average ROE,net

27、of non-recurring gains and losses(%)26.71 24.30 Increase of 2.41 percentage points 20.99 Explanation of major accounting data and financial indicators for the past three years by the end of the Reporting Period Annual Report 2019 9/308 Applicable Not applicable Revenue increased by 30.53%or RMB2,606

28、,112,800 over the same period of last year,primarily due to:(1)the Companys traditional core business grew a steadily 20%in 2019,as a leading company in the stationery and office supplies industry,we benefited from our competitive advantages of distribution channel,brand recognition,design and R&D,a

29、nd supply chains:(2)new business continued developing at a high speed in 2019,M&G Colipu and M&G Life grew by 51%compared with last year.VIII.Difference in the Accounting Information under the PRC Accounting Standards for Business Enterprise(“PRC GAAP”)and Overseas Accounting Standards(1)Difference

30、in net profit and net asset attributable to shareholders of the listed company in financial reports disclosed under International Accounting Standards and PRC GAAP Applicable Not applicable (2)Differences in net profit and net assets attributable to shareholders of the listed company in financial re

31、ports disclosed under overseas accounting standards and PRC GAAP Applicable Not applicable (3)Explanation on the differences between PRC GAAP and Overseas Accounting Standards:Applicable Not applicable IX.Key Financial Data for the Year of 2019 by Quarter Unit:Yuan Currency:RMB 1st Quarter(Jan-Mar)2

32、nd Quarter(Apr-Jun)3rd Quarter(Jul-Sept)4th Quarter (Oct-Dec)Revenue 2,355,613,820.98 2,483,009,195.91 3,108,721,445.78 3,193,756,901.77 Net profit attributable to shareholders of the listed companies 258,715,131.28 212,549,376.55 330,611,308.24 258,207,808.96 Net profit attributable to shareholders

33、 of the 232,639,806.85 194,719,722.78 333,199,496.91 244,628,807.84 Annual Report 2019 10/308 listed company after non-recurring profit or loss Net cash flow generated from operating activities 99,550,085.40 147,529,761.88 430,910,767.84 403,950,768.56 Explanation on difference between information b

34、y quarter and information disclosed in periodical reports Applicable Not applicable X.Items and Amounts of Non-recurring Gains or Losses Applicable Not applicable Unit:Yuan Currency:RMB Items of Non-recurring Gains or Losses Amounts in 2019 Notes(if applicable)Amounts in 2018 Amounts in 2017 Gains o

35、r losses on disposal of non-current assets 6,081,606.95 Mainly due to the disposal of certain old equipment by the subsidiaries held by the Company and the winding up of certain subsidiaries under the subsidiaries held by the Company,due to business needs-69,195.83-621,092.66 Government grants inclu

36、ded in profits and losses for the current period,excluding those closely related to the normal business and of fixed amount or fixed quantity granted on an on-going basis in accordance with certain standards and in compliance with the 42,747,681.46 Mainly including government grants received during

37、the Reporting Period and government grants transferred from deferred income 42,122,713.66 35,057,419.77 Annual Report 2019 11/308 State policies Gains arising from investment costs for acquisition of subsidiaries,associates and joint ventures less than the fair values of attributable identifiable ne

38、t assets of the invested entity at the time of acquisition 33,642,175.40 Gains or losses on entrusted investment or asset management 35,517,479.65 38,184,246.05 Investment income arising from changes in fair values held-for-trading financial assets and held-for-trading financial liabilities,and inve

39、stment gains on the disposal of held-for-trading financial assets,held-for-trading financial liabilities and available-for-sale financial assets,except the Company normal operations related to effective hedging business/-340,881.23 Investment income arising from changes in fair values held-for-tradi

40、ng financial assets,derivative financial assets,held-for-trading financial liabilities and derivative financial 29,184,868.54 Revenue generated from purchase of wealth management products /Annual Report 2019 12/308 liabilities,and investment gains on the disposal of held-for-trading financial assets

41、,derivative financial assets,held-for-trading financial liabilities,derivative financial liabilities and other debt investment,except the Company normal operations related to effective hedging business Reversal of provision for impairment of receivables which are individually tested for impairment 1

42、,803,027.63 Mainly due to the provision reversal of bad debts on individual receivables of the Company 7,460,100.24 Other net non-operating income and expenses,other than the above items-5,743,388.02 Mainly the expense of public donations and the losses arising from the winding up of certain subsidi

43、aries controlled by the subsidiaries of the Company-7,936,377.76-5,409,684.43 Effect of minority equity-4,764,697.27 -2,192,444.11-13,897,494.77 Effect of income tax-14,413,308.64 -10,007,324.27-4,548,528.85 Total 54,895,790.65 57,434,851.34 89,526,259.52 XI.Items Measured at Fair Values Applicable

44、Not applicable Unit:Yuan Currency:RMB Items Opening balance Closing balance Changes in the Period Effect on profit for the Period Held-for-trading financial assets 1,027,265,300.00 661,878,587.24-365,386,712.76 4,613,287.24 Receivables 1,894,232.00 29,549,924.83 27,655,692.83 Annual Report 2019 13/3

45、08 financing Derivative financial assets Other debt investments(including other current assets)Other non-current financial assets Investments in other equity instruments 3,600,000.00 3,909,179.93 309,179.93 Held-for-trading financial liabilities Derivative financial liabilities Total 1,032,759,532.0

46、0 695,337,692.00-337,421,840.00 4,613,287.24 XII.Others Applicable Not applicable Annual Report 2019 14/308 Chapter III Business Overview I.Description of the Companys principal business,operation model and industry condition during the Reporting Period(1)Principal business and operation model 1.Pri

47、ncipal business As a comprehensive stationery supplier,the Company integrates the value of creativity into its products and service advantages,advocates fashionable stationery lifestyle,and provides solutions for study and work.The traditional core businesses include designing,developing,manufacturi

48、ng and selling writing instruments,student stationery,office supplies and other products under brands;new businesses mainly comprise of one-stop direct office supplies service platformM&G Colipu and retail storesM&G Life and Jiumu Store,and online platform of M&G Technologies.During the Reporting Pe

49、riod,there were no significant changes in the Companys principal business and operation model.(2)Main Operation Model The Company has an independent and complete operation from design and development of brands and products,procurement of raw materials and accessories,product manufacturing,supply cha

50、in management and distribution network management,and warehouse and logistics.The Company is capable of performing independent operation of business in the market.For R&D and new products development model,the Company has an“entire design system”covering the whole process starting from customer valu

51、e proposal to product design,product mold development to brand image design,incorporating trend-,theme and experience-oriented development model to develop new products with a comprehensive categories approach based on consumer insight.For manufacturing model,the Company uses the brand manufacturing

52、 model that combines sales-driven production,in-house and OEM outsourcing,develops an independent system from raw material procurement to manufacturing and selling,and has established its brands in the market.We have the advantages from participating the whole value chain from design,research and de

53、veloping,manufacturing and selling stationery.For sales model,based on features of stationery products and current situations of domestic stationery consumption,the Company has developed its sales model that heavily relies on regional distributors,complemented by direct sales to offices 2B customers

54、,direct-sale store,KA sales,online sales,as well as international distribution.We are the one of pioneering companies in Chinas stationery business that engage in large-scale brand sales management and franchise management.In the direct office supplies service business，M&G Colipu is mainly responsib

55、le for providing governments,public institutions,Fortune Global 500 companies and other SMEs with cost-Annual Report 2019 15/308 effective one-stop service in procurement of office supplies.M&G Colipu has around 15 core categories of office supplies,ranging from office appliances,office equipment,IT

56、 digital products,office furniture,personal protective equipment,food and beverage,and business gifts.M&G Colipu ensures products are supplied by its factories directly,and provides customized value-added services.M&G Technologies mainly comprises of onlines businesses in Tmall and JD.Tmall business

57、 refers to M&G Technologies Tmall flagship store where customers can place orders on the store.For the business on JD platform,the system issues purchase order monthly based on inventory and shelf sales ratio,and M&G Technologies replies the purchase order in the system according to its actual inven

58、tory condition;after the order is confirmed,it will then be forwarded to our warehouse system,and warehouse will deliver goods to JD according to the confirmed purchase order.M&G retail store businesses include two store formats:the M&G Life stores and Jiumu stores.M&G Life stores mainly target stud

59、ents aged 8-15,selling stationery products complemented by daily necessity and entertainment products.M&G Life stores mostly locate in Xinhua Bookstore and compound boutique bookstores,representing the Companys exploration to move beyond the then-dominant traditional channels nearby schools.Jiumu St

60、ores mainly target the consumer group of young female consumers aged 15-35 and their families,and sells a more comprehensive products including stationery,cultural and recreative products,educational and entertainment products,and daily household and home products.Jiumu stores mostly locate in prime

61、 business districts in cities,it is an upgraded version based on experience learned from M&G Life stores and is an ongoing exploration in new retail model in lifestyle products with a distinct cultural element.Jiumu Store started franchising in July 2018,franchisees pays contract deposit and decorat

62、ion fee according to the contract,and store rent,store staff salary,utilities and other costs occurred in franchising stores are borne by franchisees.For its traditional core businesses,the Company faces challenge with changing demands from the more individualized population born after 1990 and 2000

63、.With the changing demographics of China particularly with the decreasing birth rate,unit volume growth contribution to revenue is set to decline going forward,the sustained growth of the stationery industry will comes mostly from consumption upgrade and product upgrade.Stationery consumption in Chi

64、na appears to become more brand conscious,innovative,individualized and premium.There is a clear growth in demand for better cultural and creative products,which promotes the industry moving from merely stationery products towards stationery products with more cultural and creativity.M&G Life stores

65、 and Jiumu stores both serve as the Companys bridgehead in upgrading its products and channels of its traditional core businesses,and they play important role in promoting the Annual Report 2019 16/308 Companys brands and upgrading products sales.M&G Colipus direct sales business to offices satisfac

66、torily meets demands for purchasing office supplies from large corporations and institutions,which helps boosting the sales of writing instruments and office supplies in traditional core business of the Company.3.Main driving forces in revenue growth(1)Social transformation and consumption upgrade;(

67、2)Greater investment from the state in education;(3)Favorable policy environment for development of culture industry;(4)Continued growth in household income;(5)Second-child policy;(6)Fragmented industry with low concentration.(2)Situations and features of industry where the Company operates,and indu

68、stry status of the Company 1.Situations of industry where the Company operates According to Guidelines for the Industry Classification of Listed Companies(revised in 2012)issued by China Securities Regulatory Commission,and results of industry classification of listed companies released by China Sec

69、urities Regulatory Commission,the Company is classified to manufacturing industry in products for stationery,arts,sports and entertainment.The Company is a member of China Stationery&Sporting Goods Association,and China Writing Instrument Association.In 2019,Chinas stationery and office supplies amo

70、unted to RMB152.2 billion,representing a growth of 6.7%from the previous year,industry profit reached RMB9.7 billion,representing a growth of 9.8%.In 2019,there are 1,027 enterprises above designated size in Chinas stationery and office supplies industry,and the number of those who suffered loss in

71、2019 increased compared with previous year.(Source:China Stationery&Sporting Goods Association)In 2019,member enterprises of China Writing Instrument Association recorded the revenue from principal business of RMB16.4 billion,representing a decrease of 1%from the previous year,and profit is RMB0.9 b

72、illion,representing a growth of 15%compared with previous year.According to the comprehensive assessment made by China National Light Industry Council,the prosperity index of writing instrument industry was in normal range overall.In 2019,writing instrument industry export amounted to USD2.8 billion

73、,decreased 0.5%from previous year.The pricing advantage of Chinas low-end rollerball pens and pencils was lessened.The writing instrument industry imports amounted to USD0.8 billion,decreased 2.2%from previous year.The import are mostly high-end pens.(Source:China Writing Instrument Association)2.Fe

74、atures of the industry Annual Report 2019 17/308 (1)Periodicity Writing instruments,student stationery and office supplies are slightly affected by economic fluctuations.With low unit price,writing instruments and student stationery are necessity goods with relatively low income elasticity,and there

75、fore are not much sensitive to economic fluctuations.(2)Seasonality There is a seasonality in demand for student stationery.Period before a new semester begins every year(summer and winter vacation)is what the stationery industry calls“schooling peak”season,during which sales for companies in the st

76、udent stationery industry usually peak.3.Development trend of the industry With the changing demographics of China particularly with the decreasing birth rate,stationery industry revenue growth is less driven by unit volume growth,and more from consumption upgrade and product upgrade.With the change

77、s in the way of life and consumption habit of consumers,retail industry started a new round of redevelopment and innovation.Stationery industry faces challenges with uncertainty of external environment,diversification of retail channels,and more individualized demands from the main customers group(p

78、ost-90s and post-00s).As domestic stationery market becomes more mature,demand for mid-to high-end stationery products keeps increasing,breaking the past market structure dominated by low-end products,this provides opportunities for mid-to high-end stationery products with good quality and good pric

79、e.Furthermore,Chinas population of 1.4 billion accounts for about 18%of global population,leading stationery companies in China have a big room for development in global stationery market.Traditional nearby school stationery retail channels are still the major retail format in China,and the other re

80、tail channels have higher growth rate,making channels of retail sales more diversified.New channels and forms of business are developed gradually,channel upgrade and competition across different channels become more pronounced.Domestic consumption for stationery in China becomes more brand conscious

81、,innovative,individualized and high-end.There is a growing demand for exquisite cultural and creative products,promoting stationery products moving from those primarily focus on functionality towards those with more cultural and creative elements that cater to customers.With continued development in

82、 the market,market concentration of stationery industry becomes greater,leaving more room for industry consolidation.Leading companies in the stationery industry with good brand recognition are in a strong position where the strong ones may become stronger,and more market share are gained by leading

83、 companies.The market of the direct office supplies service business has been growing very fast in China.According to industry research report from securities company,the scale of the market of broad Annual Report 2019 18/308 office supplies(including office furniture,equipment and other office supp

84、lies)in China reached more than RMB1 trillion.Regulation on the Implementation of the Government Procurement Law of the Peoples Republic of China in 2015 explicitly requires that the state shall promote the utilization of information networks for carrying out digital government procurement.In the sa

85、me year,General Office of the State Council issued the Notice of the General Office of the State Council on Issuing the Work Plan for Integrating and Establishing a Uniform Public Resources Trading Platform,requiring that a public resources trading platform with unified regulations,openness and tran

86、sparency,efficient service and standard supervision should be developed across the country to achieve digital transaction of public resources in the whole process.With such strong promotion and national policy supports,B2B office supplies procurement got the historical opportunities for rapid develo

87、pment.4.Company position in the industry The Company is a leading company of“own brand+domestic demand”in Chinas stationery industry.The Company has a strong first-mover advantage and leading advantage with its wide and deep coverage of its distribution network in stationery industry.As at the end o

88、f the Reporting Period,the Company has a national distribution network covering over 85,000 retail stationery shops across China,enabling the company to establish market leading position for its own brand products amidst fierce competitions of domestic market.The Company ranked first in“Top Ten Ente

89、rprises in Chinas Light Industry and Writing Instrument”for eight consecutive years.II.Explanation on substantial changes in major assets of the Company during the Reporting Period Applicable Not applicable Please refer to 2(3)Analysis on Assets and Liabilities set out in Discussion and Analysis of

90、Operation under Section IV for more details.III.Analysis on core competitiveness during the Reporting Period Applicable Not applicable 1.Brand advantage As a leading company of“own brand+domestic demand”in Chinas stationery industry,the Company has established a leading position for its own brand pr

91、oducts amidst fierce competitions of domestic market.The Company ranked first in“Top Ten Enterprises in Chinas Light Industry and Writing Instrument”for eight consecutive years.M&G brand has sound brand recognition among consumers,and served as the designated stationery brand for Boao Forum for Asia

92、 for 12 consecutive years.Annual Report 2019 19/308 2.Channel advantage The Company has a strong first-mover advantage and leading advantage with its wide and deep coverage of its distribution network in stationery industry,and the efficient management of the distribution system.As at the end of the

93、 Reporting Period,the Company has 35 tier-one distributor partners across China,and tier-two and tier-three distributor partners in about 1,200 cities,covering over 85,000 retail stationery shops across China.3.Design and R&D advantage The Company has the capability to respond timely to the market a

94、nd strong R&D capacity for new products.The Company will do market research for new product development to constantly spot and grasp the latest market trends.The Company launches about one thousand of new products each year,to meet different consumer needs.The continued development of new products h

95、elps the Company to accumulate resources in product design.In 2019,“Enjoy Writing”gel pen developed by the Company won IF Design Award and Good Design Award(G-Mark),product design of the Company received international recognition.4.Technology advantage The Company has learned core technologies of wr

96、iting instrument including nib,ink and its matching,as well as inhouse mold development technology,and has participated in preparation of national industry standards.The Company undertook several research projects in the 13th Five-Year National R&D Program.The Company won a second-grade prize in 201

97、9 China Innovation Award for industry-university-research collaborations.During the Reporting Period,testing laboratory of the Company got CNAS accreditation certificate,which means that test results of the Companys laboratory are recognized by over 100 countries,testing capability reached world lev

98、el.5.Manufacturing advantage The Company benefits from experience of large-scale manufacturing accumulated throughout the past years,independent mold development capability,stable supply chain,sound quality control system and introduction of various information management systems.The Company has the

99、 capability of large-scale manufacturing with high quality control standard.The good and stable product quality has won general recognition and favorable comments from consumers.China writing instrument industry base,China writing instrument center,national industry design center and China key labor

100、atory of light industry and writing instrument engineering technology all have physical presence in the Company.6.Supply chain advantage Annual Report 2019 20/308 Using the idea of partnership to run business operation,the Company has been striving to build a high standard supply chain ecosystem.The

101、 Company keeps iterating and upgrading its scientific management for supply chain,and has obtained new practice achievements in information collaboration across the value chain,inventory optimization,financial support for supply chain,management informatization of quality and order,and optimization

102、of supplier performance to help business partners get stronger operation system,both loyalty and operation capability of our business partners are improved simultaneously.Annual Report 2019 21/308 Chapter IV Discussion and Analysis of Operation I.Discussion and Analysis of Operation In 2019,with the

103、 background of increased uncertainties both at home and abroad,and more complication and changes in the market,the Company focused closely on development strategy and annual operation objective set by the Board of Directors.With the great efforts from the management and all employees,the Company mai

104、ntained a healthy,stable and high-quality development,achieved the annual operation target,operation performance continued to grow,and the Companys comprehensive strength was further improved.The Board of Directors of the Company paid close attention to external industry development,actively impleme

105、nted company strategies,continued to focus on“adjusting product structure and stimulating growth”as the theme for the year,continued to optimize retail channel,continued to push the four segments of its traditional core businesses,continued to grow direct office supplies business,accelerated growth

106、of self-owned large retail stores,continued to expand online sales,and continued to improve internal management.Operation of the Company in 2019 is summarized and reported as follows:1.Focus and Optimize Channels During the Reporting Period,the Company focused on key retail stationery shops,built mo

107、del stores,continued to push optimization and upgrading of distribution network,and better channel management:(1)improved single store quality with a focus on model stores;(2)facilitated the upgrading of franchising;(3)pushed the continued upgrading of distribution centers and optimizing operations;

108、(4)strengthened categories promotion and dedicated retail spaces for key products;(5)actively carried out exploration for new business,and improved market shares in key business districts.As at the end of the Reporting Period,the Company has 35 tier-one distributor partners across China,and tier-two

109、 and tier-three distributor partners in about 1,200 cities,covering over 85,000 retail stationery shops with“M&G”logo across China.The Company made efforts to roll out M&G Alliance APP,so as to build a stronger connection among the Company headquarters,multi-tier distribution partners and retail sta

110、tionery shops,and to improve digitization of business operations and information flow.Overall collaboration in sales activities of the Company can will be improved as retail stationery shops adopt M&G Alliance APP.On the one hand,information from the Company can flow to retail stationery shops witho

111、ut geographical and time limitation,on the other hand,response time can be shortened and order fulfillment rate improved.Headquarters can collect demand-side information as users pain Annual Report 2019 22/308 points and product feedback in a more timely and effective way,helping accuracy in new pro

112、duct development.2.Push the Four Segments of Traditional Core Business (1)Mass market stationery segment Each category and product is reviewed with grid analysis tool to further identify high potential products,collaborate and share resources across function departments including product,design,mark

113、eting and sales.Manage the number of SKUs to reduce quantity and increase quality,and develop a small number and high quality long-term products and hit products.(2)Premium stationery segment During the Reporting Period,the Company continued to expand the market for premium stationery segment.Growth

114、 of product portfolio was driven by best-selling products,product structure was upgraded,product mix became more balanced.Retail stationery shops suitable for premium stationery segment was uplifted by model shops,and premium stationery products sales in single store were improved by creating dedica

115、ted zone for such products.Suitable sales channel for premium stationery products were expanded across the country.With an integrated chain ranging from product development,business establishment,marketing,to brand promotion.Exclusive window for season-limited M&G products were well received by the

116、market.Market share of the Companys premium stationery products increased.(3)Office stationery segment During the Reporting Period,the Company continued development and promotion of office stationery,shifted focus from product breadth towards depth,formed overall solutions for office stationery prod

117、ucts,put core products on shelves,developed potential customers,increased store count for office stationery stores.Drive sales growth and increase market shares in office supplies market through seeking new customers continuously and improving sales in a single store with established customers.(4)Ar

118、ts and kids drawing segment During the Reporting Period,the Company focused on key categories of arts and kids drawing segment,continued to adjust product mix,emphasized on long-term products,and increased contribution from key products.The Company seized opportunities to build standard store shelve

119、s in dedicated zones,improved the capability to develop best-selling categories significantly with such popular products as marker pen,food-grade watercolor pen,wood-free erasable color pencil,and water-soluble oil pastel;and prepared MG-KIDS and MG-ARTS mid-end product lines.During the Reporting Pe

120、riod,the Company acquired Axus Stationery,and Annual Report 2019 23/308 established strategic cooperation with CARIOCA,a stationery brand in Italy which enriched mid-to high-end arts products offering for children.3.Continue to grow M&G Colipu Unit:0000 M&G Colipu 2019 2018 2017 3-year average Opera

121、ting revenue 365,806.17 258,604.90 125,515.91 249,975.66 Net profit 7,580.35 3,213.52 2,104.34 4,299.40 During the Reporting Period,M&G Colipu improved service quality and customer satisfaction,expanded product category,sought more customers,built national supply chain system,and enhanced service ca

122、pability of regional warehouses across the country.M&G Colipu maintained rapid growth,recorded revenue of RMB3,658,061,700,representing a year-on-year increase of 41.45%,and furthered increased its market shares and brand influence in direct sales of office supplies.More details are presented as fol

123、lows:(1)Customer Development As for government customers,the Company succeeded in shortlisting for e-commerce projects of the Peoples Government of Shanxi Province,the Peoples Government of Liaoning Province,the Peoples Government of Jilin Province,and Chongqing Municipal Peoples Government;as for c

124、entral state-owned enterprises,the Company succeeded in shortlisting for procurement projects of China Mobile,China Unicom,and China Post;as for customers of financial institutions,the Company succeeded in shortlisting for the project of SPD Bank and CGB;as for customers of companies listed on Globa

125、l Fortune 500 and other enterprises,the Company won the bidding for procurement projects of Xiaomi,Siemens,Dell,China Resources Land and Guangzhou Metro.During the Reporting Period,M&G Colipu launched convenient shopping service to expand the market of SMEs through sound products with low price and

126、low operation cost.(2)Warehouse Distribution and Logistics During the Reporting Period,M&G Colipu enhanced supervision on order,after-sale service,logistics and distribution,improved quality of basic delivery,took measures to address wrong delivery and damaged goods,and improved product packaging.Th

127、e Company enhanced delivery capability for“end-to-end”,and implemented supervision and operation management for the entire order process,so delivery acceptance rate was increased.Optimizing available areas and ranges of the four warehouses in East China,North China,South China and Central China,the

128、Company kept workload of different warehouses in good balance to improve overall delivery effectiveness,and set up delivery team in nine cities including Shanghai,Beijing,Guangzhou,Shenzhen and Tianjin,to improve customer experience.4.Accelerate Growth of self-owned Large Retail Stores Annual Report

129、 2019 24/308 Unit:0000 M&G Life(consolidated)2019 2018 2017 3-year average Revenue 60,063.70 30,592.14 20,510.96 37,055.60 Net profit-804.67-3,030.04-4,114.99-2,649.90 Of which,Jiumu Store 2019 2018 2017 Average in three years Revenue 46,043.51 15,299.61 3,515.35 21,619.49 Net profit-693.11-2,602.78

130、-989.07-1,428.32 During the Reporting Period,M&G Life(including Jiumu Store)recorded a total operation revenue of RMB600,637,000,increased 96.34%over the previous year.The Company actively improved product portfolio and service model,fully developed Jiumu Store and tried some remodeling for M&G Life

131、 stores,so as to better meet market demands from consumption upgrading,and let people better enjoy writing and recording.As at the end of the Reporting Period,the Company has 380 large retail stores in China,of which 119 are M&G Life,and 261 are Jiumu Stores(158 direct-sales stores and 103 franchisi

132、ng stores).For M&G Life stores,the Company kept optimizing operation management,focused on adjusting product mix and improving single store quality,continued to reduce loss and increase efficiency,losses from M&G Life was reduced significantly during the Reporting Period.For Jiumu Store,market expan

133、sion was accelerated,with new store opening in key cities,covering 55 cities in China.The Company made continuous effort to improve and adjust product category,positioned cultural and creative products more accurately and increased brand awareness of Jiumu Store.WeChat mini program was launched,cust

134、omer stickiness strengthened with membership programs.These efforts are meant to better satisfy consumer demand for cultural and creative products from consumption upgrading,increase market shares of the Company in premium stationery segment,and upgrade brand image of the Company.With increasing bra

135、nd influence of Jiumu Store,brands of M&G benefited better exposure to the public.5.Continue to expand M&G Technologies Unit:0000 M&G Technologies 2019 2018 2017 3-year average Operating revenue 29,668.20 23,434.15 18,530.70 23,877.68 Net profit-120.59 963.31 1,329.54 724.09 During the Reporting Per

136、iod,M&G Technologies followed the omni-channel strategy,and recorded revenue of RMB296,682,000,representing growth of 26.60%over the previous year.M&G products ranked the first in online retail value for student writing instruments,learning auxiliary,painting materials and paper book in Taobao syste

137、m.M&G Technologies facilitated the development and optimization of new products to penetrate the market and strengthen its brand position.The number and quality of online stores of the brand were increased to ensure Annual Report 2019 25/308 sustainable online development for M&G brand,while online

138、products were improved and promoted to explore online incremental categories.6.Promote Design and R&D As a national high-and new-tech enterprise,the Company has been striving to research and develop core technologies and production,and keep continuous innovation to provide consumers with good produc

139、ts using industry-leading technologies.During the Reporting Period,the Company kept innovating in all its product segments,optimized product mix in different categories,better linked products with supply chain,made some breakthroughs in certain key categories,further improved the product portfolio.P

140、rogress in R&D and manufacturing of full food-grade watercolor ink improved safety for arts and kids drawing segment.The successful development of formulas for several new oil pastels improved applicability and cost competitiveness of products.The needle nib with the smallest diameter was successful

141、ly developed,and put into lot production smoothly to fill the gap in the category of writing instruments.The Company developed Chinese lead-free material for nib manufacturing and processing to address safety problems in the supply of core materials,helping environmental protection in China.The thir

142、d and fifth research projects on the 13th Five-Year National Key R&D ProgramNew Environmentally Friendly Materials for Writing Instrument proceeded smoothly with several sub-projects completed.In October 2019,the Company again obtained High-and New-tech Enterprise Certificate jointly issued by Shang

143、hai Municipal Science and Technology Commission,Shanghai Finance Bureau and Shanghai Municipal Tax Service,State Taxation Administration with another term of three years.7.Continue to Improve Internal Management Production center focused its efforts on improving efficiency,eliminating bad practice,a

144、nd boosting morale.By implementing measures aimed at efficiency,quality,cost,delivery time,safety,morale and environment,operation capacity was improved.Various business team strengthened cross function coordination,for example,product and design team worked on improving pain points in consumer surv

145、ey,product planning,technological R&D,product design,manufacturing,logistics,and customer complaints,so as to improve product quality.Supply chain resources were further integrated to support development of hit products and high-value products.The Companys lean production program of MPS(M&G Producti

146、on System),which was launched in 2015,was upgraded to a comprehensive program of MBS(M&G Business System)in 2019.The Company continued to learn from advanced global management experience and to improve management capability.For human resources,the Company improved its position Annual Report 2019 26/

147、308 and title system,promoted performance by performance management,continued building talent training system and accelerated reserve of qualified managers.8.Continue Digitization During the Reporting Period,the Company continued to empower businesses with data,build in-house data middle platform,in

148、tegrated various existing information systems with data,mobilizing resources to solve prioritized business pain points,and met the growing demand from external businesses.For sales system,focus on rolling out M&G Alliance APP to push the digitalization of channel;for production system,better data co

149、nnection between quality inspection and MES backoffice system;for financial system,updated group financial reporting software and improved work efficiency.II.Financial Performance during the Reporting Period In 2019,the Company recorded revenue of RMB11,141,101,400,representing an increase of 30.53%

150、as compared to the corresponding period of last year.The net profit attributable to shareholders of the listed company amounted to RMB1,060,083,600,representing an increase of 31.39%as compared to the corresponding period of last year,while net profit attributable to shareholders of the listed compa

151、ny after deducting non-recurring profit and loss amounted to RMB1,005,187,800,representing an increase of 34.13%as compared to the corresponding period of last year.As at the end of 2019,total asset of the Company amounted to RMB7,565,115,300,representing an increase of 33.25%as compared to the corr

152、esponding period of last year.The net asset attributable to shareholders of the listed company amounted to RMB4,201,500,400,representing an increase of 23.18%as compared to the corresponding period of last year.The Company has maintained healthy and rapid growth,with sound operation of its asset.(1)

153、Analysis of principal operation 1.Analysis of change in certain items in income statement and cash flow statement Unit:Yuan Currency:RMB Item Amount in the current period Amount in the same period last year Change in the proportion(%)Revenue 11,141,101,364.44 8,534,988,597.55 30.53 Operation cost 8,

154、229,837,268.86 6,330,446,740.16 30.00 Selling expenses 980,166,101.18 789,386,543.37 24.17 Administrative expenses 469,262,188.13 379,618,754.18 23.61 R&D expenses 160,403,362.97 114,388,916.75 40.23 Financial expenses-8,397,277.65-7,959,449.65-5.50 Annual Report 2019 27/308 Net cash flow generated

155、from operating activities 1,081,941,383.68 827,940,565.51 30.68 Net cash flow generated from investing activities-74,352,686.18-295,966,108.35 74.88 Net cash flow from financing activities-364,300,101.66-225,100,000.00 61.84 2.Analysis of revenue and cost Applicable Not applicable During the Reporti

156、ng Period,the Company recorded revenue of RMB11,141,100,000,representing an increase of 30.53%as compared to the corresponding period of last year.The increase is mainly attributable to:(1)In 2019,the traditional core business achieved steady growth with a year-on-year increase of 20%.As a leading c

157、ompany in the stationery and office supplies industry,we benefited from our competitive advantages of distribution channel,brand recognition,design and R&D,and supply chains.Given that the stationery and office supplies industry in China are still quite fragmented,there is still room for the Company

158、 to increase its market share.(2)In 2019,new businesses continued rapid growth:M&G Colipu and M&G Life grew by 51%compared with last year.Among this,M&G Colipu grew 41.45%from last year,mainly due to the much larger scale of the market of direct office supplies service.According to industry research

159、 report from securities company,the scale of the market of broad office supplies(including office furniture,equipment and other office supplies)in China reached more than RMB1 trillion.Regulation on the Implementation of the Government Procurement Law of the Peoples Republic of China in 2015 explici

160、tly requires that the state shall promote the utilization of information networks for carrying out digital government procurement.In the same year,General Office of the State Council issued the Notice of the General Office of the State Council on Issuing the Work Plan for Integrating and Establishin

161、g a Uniform Public Resources Trading Platform,requiring that a public resources trading platform with unified regulations,openness and transparency,efficient service and standard supervision should be developed across the country to achieve transaction of public resources by digital in the whole pro

162、cess.With such strong promotion and national policy supports,B2B office supplies procurement got the historical opportunities for rapid development.Revenue from the principal business amounted to RMB11,139,921,600,accounting for 99.99%of the operation revenue and representing an increase of 30.54%as

163、 compared to the corresponding period of last year.Cost of the principal business amounted to RMB8,229,332,400,representing an increase of 30.00%as compared to the corresponding period of last year.The increase in cost is a main result of the growth in revenue.Annual Report 2019 28/308 With the deve

164、lopment in business,direct sales of office supplies and large retail store business of the Company gradually expanded.In order to better reflect product and business modules of the Company,the Company made segment disclosure for direct sales of office supplies,accordingly,principal business reportin

165、g format by industry and product was adjusted for the Reporting Period.(1).Result of principal business by industry,product and region Unit:Yuan Currency:RMB Result of principal business by industry By industry Revenue Operation cost Gross margin(%)Change in revenue from last year(%)Change in cost f

166、rom last year(%)Change in gross profit margin from last year(%)Manufacturing and sales of stationery and office supplies 7,085,012,384.59 4,856,789,638.83 31.45 21.62 19.75 Increase by 1.07 percentage points Retail industry 4,050,346,491.25 3,372,542,728.19 16.73 49.69 48.27 Increase by 0.80 percent

167、age points Service industry 4,562,765.09 /Result of principal business by product By product Revenue Operation cost Gross margin(%)Change in revenue from last year(%)Change in cost from last year(%)Change in gross profit margin from last year(%)Writing instruments 2,186,591,691.37 1,383,090,906.87 3

168、6.75 12.26 9.28 Increase by 1.72 percentage points Student stationery 2,645,275,497.55 1,781,278,080.67 32.66 42.35 44.14 Decrease by 0.83 Annual Report 2019 29/308 percentage points Office stationery 2,346,944,916.66 1,725,910,247.56 26.46 15.86 14.76 Increase by 0.70 percentage points Other produc

169、ts 298,485,107.73 159,902,745.78 46.43 233.85 238.49 Decrease by 0.73 percentage points Direct sales of office supplies 3,658,061,662.53 3,179,150,386.14 13.09 41.45 42.47 Decrease by 0.62 percentage points Management fee for franchising 4,562,765.09 68.41 Result of principal business by region By G

170、eography Revenue Operation cost Gross margin(%)Change in revenue from last year(%)Change in cost from last year(%)Change in gross profit margin from last year(%)China 10,949,351,918.16 8,098,106,055.92 26.04 30.15 29.53 Increase by 0.35 percentage points Other countries 190,569,722.77 131,226,311.10

171、 31.14 57.79 66.68 Decrease by 3.67 percentage points Explanation on result of principal business by industry,product and geography 1.Revenue from principal business of the Company includes revenue from manufacturing and selling stationery and office supplies,revenue from retail industry and revenue

172、 from service industry.Annual Report 2019 30/308 2.Revenue from retail industry refers to revenue gained by M&G Colipu and M&G Life through selling non-M&G products.During the Reporting Period,sales of the above categories grew continuously.3.Writing instruments refers to products of writing utensil

173、 sold by the Company(excluding M&G Colipu).4.Student stationery refers to products of student stationery sold by the Company(excluding M&G Colipu).During the Reporting Period,revenue from student stationery increased by 40.53%as compared to the corresponding period of last year,mainly because of sal

174、es increase and the acquisition of Axus Stationery.5.Office stationery refers to products of office supplies sold by the Company(excluding M&G Colipu).6.Other products refers to products sold by the Company(excluding M&G Colipu)apart from writing instruments,student stationery and office supplies.Du

175、ring the Reporting Period,revenue from other products increased by 233.85%as compared to the corresponding period of last year,mainly because large retail store expanded business quickly and sales increased.7.Direct sales of office supplies refer to products in all categories sold by M&G Colipu.Duri

176、ng the Reporting Period,business of M&G Colipu developed rapidly.8.Revenue from other countries increased by 57.79%,mainly because of the increase of overseas sales from Axus Stationery.Unit:0000 Result of revenue by business Businesses Revenue in 2019 Revenue in 2018 Change in amount Change Traditi

177、onal core business 665,068.98 551,090.85 113,978.13 21%Colipu Office Supplies business 365,806.17 258,604.90 107,201.27 41%Retail large store business 60,063.70 30,592.14 29,471.56 96%E-commerce business 29,668.20 23,434.15 6,234.05 27%Transactions offset -6,496.91 -10,223.18 3,726.27 Total 1,114,11

178、0.14 853,498.86 260,611.28 31%Annual Report 2019 31/308 (2).Analysis of production and sales volume Applicable Not applicable Major products Unit Production Sales Inventory Change in production from last year(%)Change in sales from last year(%)Change in inventory from last year(%)Writing instruments

179、 Piece 2,301,956,388 2,270,730,687 580,672,713 6.84 8.30 5.68 Student stationery Piece 5,494,359,548 5,305,245,796 644,449,966 36.85 33.01 41.53 Office stationery Piece 1,423,262,635 1,413,678,371 138,580,624 8.63 7.90 7.43 Other products Piece 12,576,071 9,178,022 5,410,802 192.28 197.66 168.83 Dir

180、ect sales of office supplies Piece 290,473,435 288,518,320 21,113,972 12.83 13.73 10.20 Explanation on production and sales volume Production volume increased with sales.The growth in the production and sales volume of student stationery is helped by the acquisition of Axus Stationery.The growth in

181、the production and sales volume of other products is mainly because large retail store expanded business quickly and sales increased.(3).Analysis of cost Unit:RMB Yuan By industry By industry Cost item Amount in the current period Percentage of total costs for the current period(%)Amount in the same

182、 period last year Percentage of total costs for the same period last year(%)Percentage change in the amount for the current period as compared to the same period last Explanation on the situation Annual Report 2019 32/308 year(%)Manufacturing and sales of stationery and office supplies Cost of princ

183、ipal business 4,856,789,638.83 59.02 4,055,859,578.58 64.07 19.75 Retail industry Cost of principal business 3,372,542,728.19 40.98 2,274,564,994.95 35.93 48.27 Service industry/By product By product Cost item Amount in the current period Percentage of total costs for the current period(%)Amount in

184、the same period last year Percentage of total costs for the same period last year(%)Percentage change in the amount for the current period as compared to the same period last year(%)Explanation on the situation Writing instruments Cost of principal business 1,383,090,906.87 16.81 1,265,617,160.50 19

185、.99 9.28 Student stationery Cost of principal business 1,781,278,080.67 21.65 1,235,797,751.80 19.52 44.14 Office stationery Cost of principal business 1,725,910,247.56 20.97 1,503,891,848.04 23.76 14.76 Other products Cost of principal business 159,902,745.78 1.94 47,239,918.50 0.75 238.49 Direct s

186、ales of office supplies Cost of principal business 3,179,150,386.14 38.63 2,231,387,838.70 35.25 42.47 Management fee for franchising Cost of principal business/Annual Report 2019 33/308 Explanation on other situations of cost analysis Cost increased simultaneously with sales.The growth in the costs

187、 of student stationery is mainly because of sales increase and the acquisition of Axus Stationery.The growth in the costs of other products is mainly because large retail store expanded business quickly and sales increased.(4).Major customers and suppliers Applicable Not applicable Sales of the top

188、5 customers amounted to RMB2,389,602,700,accounting for 21.45%of the total annual sales.Of the sales of the top 5 customers,sales of related parties amounted to RMB387,821,100,accounting for 3.48%of the total annual sales.Unit:RMB Yuan Rank Customer name Amount Related relationship 1 First 952,212,7

189、57.52 No 2 Second 477,565,530.73 No 3 Third 387,821,087.67 Yes 4 Fourth 288,003,073.21 No 5 Fifth 284,000,271.72 No Total 2,389,602,720.85 Related relationship between the Company and top five customers in 2019:the third customer is Nanjing Zhaochen Stationery Sales Co.,Ltd,a sales company controlle

190、d by Guo Weilong who is the younger brother of the spouse of Chen Huxiong,CEO of the Company.According to Article VIII and X set out in Guidelines for the Affiliated Transactions of Listed Companies,Guo Weilong is deemed as a related natural person of the Company,and the sales company controlled by

191、him is the related legal person of the Company.Purchase amount of the top 5 suppliers amounted to RMB1,087,111,000,accounting for 13.52%of the total annual purchase amount.Of the purchase amount of the top 5 suppliers,purchase amount of related parties amounted to RMB0,accounting for 0%of the total

192、annual purchase amount.Unit:RMB Yuan Rank Rank of supplier Amount Related relationship 1 First 380,013,748.41 No 2 Second 223,976,162.51 No 3 Third 180,407,188.66 No 4 Fourth 169,037,053.67 No 5 Fifth 133,676,870.68 No Annual Report 2019 34/308 Total 1,087,111,023.93 There was no related relationshi

193、p between the Company and the top 5 suppliers in 2019.Other explanation No 3.Expense Applicable Not applicable Unit:RMB Yuan Item in statement Amount in the current period Amount in the last period Change(%)Reason for change Selling expenses 980,166,101.18 789,386,543.37 24.17 Administrative expense

194、s 469,262,188.13 379,618,754.18 23.61 R&D expenses 160,403,362.97 114,388,916.75 40.23 Please see details below Financial expenses-8,397,277.65-7,959,449.65-5.50 Explanation on the reason for change in R&D expenses:R&D expenses increased by RMB46,014,400,representing an increase of 40.23%as compared

195、 to the corresponding period of last year.Reason for change:investment in R&D in traditional business,investment in development of Colipus new IT system,and increased R&D expenses from the acquisition of Axus Stationery.4.R&D investment(1).Table of R&D investment Applicable Not applicable Unit:RMB Y

196、uan Expensed R&D investment in the current period 160,403,362.97 Capitalized R&D investment in the current period 0.00 Total R&D investment 160,403,362.97 Percentage of total R&D investment to operation revenue(%)1.44 Number of the Companys R&D staff 459 Percentage of the number of R&D staff to the

197、Companys total number 8.12 Annual Report 2019 35/308 of employees(%)Percentage of capitalized R&D investment(%)0.00 (2).Explanation on the result Applicable Not applicable The total R&D investment accounts for 4.08%of operation revenue of the parent company 5.Cash flow Applicable Not applicable Unit

198、:RMB Yuan Item Amount in the current period Amount in the same period last year Change(%)Reason for change Net cash flow generated from operating activities 1,081,941,383.68 827,940,565.51 30.65 Mainly because of growth in sales and profit and benefit from effective management of cash flow from oper

199、ating activity.Net cash flow generated from investing activities-74,352,686.18-295,966,108.35 74.88 Mainly because of the net redemption of bank financial product.Net cash flow from financing activities-364,300,101.66-225,100,000.00 61.84 During the Reporting Period,growth achieved in distributed di

200、vidends and interest payments as compared to the same period last year,and Annual Report 2019 36/308 influence in change of borrowings repaid by Axus Stationery to financial institutions.(2)Explanation on significant change of profit caused by non-core business Applicable Not applicable (3)Analysis

201、of assets and liabilities Applicable Not applicable 1.Assets and liabilities Unit:RMB Yuan Items Amount as at the end of the current period Percentage of total assets at the end of current period(%)Amount as at the end of last period Percentage of total assets at the end of last period(%)Change in p

202、ercentage for the current period over the last period(%)Explanation Cash and equivalents 1,935,600,694.35 25.59 1,046,668,874.97 18.44 84.93 Increase in cash and equivalents brought by the growth of income and net profit Held-for-trading financial assets 661,878,587.24 8.75 0.00 According to require

203、ments in New Standards of Financial Instruments,bank financial product is reclassified into financial assets held for trading Bills receivable 0.00 1,894,232.00 0.03-100.00 According to requirements in New Standards of Financial Instruments,bills receivable are reclassified into receivable financing

204、 by nature Annual Report 2019 37/308 Receivables financing 29,549,924.83 0.39 0.00 According to requirements in New Standards of Financial Instruments,reclassification should be performed based on the nature of bills receivable and factoring of the accounts receivable Prepayment 85,371,444.73 1.13 4

205、2,336,973.71 0.75 101.65 Payment settled in advance for goods because of the business development of the Company Inventories 1,378,108,759.85 18.22 1,042,701,610.00 18.37 32.17 Inventories in the acquisition of Axus Stationery during the Reporting Period,and inventories prepared in advance for prima

206、ry schooling peak Other current assets 29,280,925.29 0.39 1,046,977,400.35 18.44-97.20 According to New Standards of Financial Instruments,bank financial product is reclassified into financial assets held for trading Available-for-sale financial assets 0.00 3,600,000.00 0.06-100.00 According to New

207、Standards of Financial Instruments,available-for-sale financial assets are reclassified to investment in other equity instruments Long-term receivables 6,624,590.00 0.09 0.00 Mainly from compensation for the Company made by original shareholders of Axus Stationery for audit adjustment and related lo

208、sses during the period according to the agreement Annual Report 2019 38/308 Investments in other equity instruments 3,909,179.93 0.05 0.00 According to requirements in New Standards of Financial Instruments,the item is the investment for Shanghai M&G Culture and Creativity(上海晨光文化创意)held by the Compa

209、ny for non-transaction purpose Fixed assets 1,163,702,352.12 15.38 876,617,888.99 15.44 32.75 Mainly due to the fixed assets in the acquisition of Axus Stationery during the Reporting Period Construction in progress 260,469,728.76 3.44 24,506,469.59 0.43 962.86 Mainly due to investment in the constr

210、uction project of new Qingcun production base during the Reporting Period Intangible assets 331,005,762.09 4.38 187,987,875.67 3.31 76.08 Mainly due to intangible assets of land use rights in the acquisition of Axus Stationery during the Reporting Period Goodwill 30,175,537.19 0.40 131,001.23 0.00 2

211、2,934.54 Consideration for the acquisition of Axus Stationery exceeded the assessed net assets during the Reporting Period Deferred income tax assets 36,623,535.59 0.48 25,525,520.98 0.45 43.48 Mainly due to deferred income tax assets recorded through deductible temporary differences arising from in

212、creased asset impairment provisions and unrealized profits from internal transactions Short-term borrowings 182,979,528.81 2.42 0.00 Mainly due to short-term borrowing of Axus Stationery from the bank and financial institutions Annual Report 2019 39/308 during the Reporting Period Accounts payable 1

213、,861,072,467.87 24.60 1,319,407,048.21 23.24 41.05 Mainly due to accounts payable for purchasing goods at primary schooling peak season and the acquisition of Axus Stationery as at the end of the Reporting Period Accounts received in advance 206,762,293.94 2.73 147,647,053.87 2.60 40.04 Mainly due t

214、o amounts received in advance from customers for primary schooling peak season during the Reporting Period Other payables 331,653,211.40 4.38 240,665,881.17 4.24 37.81 Mainly due to the collection of risk margin and provision of due unpaid marketing fees during the Reporting Period Deferred income t

215、ax liabilities 36,576,744.55 0.48 564,909.50 0.01 6,374.80 Mainly due to the acquisition of Axus Stationery at a premium during the Reporting Period Other comprehensive income 526,359.55 0.01 0.00 Mainly due to translation difference for Axus Stationerys financial statement with foreign currency and

216、 changes in fair value of investment in other equity instruments during the Reporting Period Minority equity 259,424,856.61 3.43 85,856,179.34 1.51 202.16 Mainly due to the new minority equity for the acquisition of Axus Stationery during the Reporting Period Annual Report 2019 40/308 Other explanat

217、ion No 2.Major restricted assets as at the end of the Reporting Period Applicable Not applicable (1)On 29 March 2017,Axus Stationery and Shanghai Pudong Development Bank Co.,Ltd.Songjiang Branch(hereinafter referred to as“SPD Bank”)entered into the Factoring Agreement under the contract No.980820132

218、80133 to provide factoring service through the pledge of accounts receivable(USD).As of 31 December 2019,Axus Stationerys unpaid factoring borrowing was USD427,099.11(equivalent to RMB2,979,528.81).(2)On 29 October 2019,Axus Stationery and China Merchants Bank Co.,Ltd.Shanghai Branch entered into th

219、e Facility Agreement(No.121XY2019028027)with facility amount of RMB180,000,000.00 for 12 months from 30 October 2019 to 29 October 2020.Pursuant to the agreement,Axus Stationery and China Merchants Bank entered into the Maximum Mortgage Contract(No.121XY2019028027)with the mortgage term from the eff

220、ective date of the mortgage contract to the termination of litigation for facility credit.The collaterals for mortgage include:Name of collateral Ownership No.Original value Accumulated depreciation Net value No.111 Xuezi South Road,Xianghuaqiao Street,Qingpu District HFDQ Zi(2013)No.015437 47,061,4

221、53.52 22,483,546.11 24,577,907.41 No.233 Xuezi South Road,Xianghuaqiao Street,Qingpu District HFDQ Zi(2013)No.013396 32,156,238.78 11,248,094.31 20,908,144.47 No.333 Xuezi South Road,Xianghuaqiao Street,Qingpu District HFDQ Zi(2015)No.015718 60,230,210.97 12,418,790.03 47,811,420.94 Total 139,447,90

222、3.27 46,150,430.45 93,297,472.82 3.Other explanation Applicable Not applicable (4)Analysis on industry operating information Applicable Not applicable Annual Report 2019 41/308 Please refer to“Description of the Companys Principle Business,Operation Model and Industry Condition During the Reporting

223、Period”set out in“Business Overview of the Company”of Section III.Annual Report 2019 42/308 (5)Analysis of investment 1.Overall analysis of external equity investment Applicable Not applicable During the Reporting Period,total external investment of the Company amounted to RMB211,038,100,representin

224、g a decrease of 41.52%as compared to the total investment of RMB360,875,700 in corresponding period of last year.(1)Significant equity investment Applicable Not applicable 1.In 2018,the Company increased capital by RMB322,000,000 for M&G Colipu in cash.The amount pledged but not yet contributed is R

225、MB322,000,000.For more details,please refer to the Announcement on Increasing Capital for Controlled Subsidiary(announcement No.:2018-034)disclosed by the Company on 9 November 2018.As at the end of the Reporting Period,the actual contribution of capital made by the Company amounted to RMB98,000,000

226、,of which premium is RMB28,000,000,and amount promised but not yet settled is RMB252,000,000;2.On 22 March 2019,the Company entered into the Equity Transfer Agreement of Axus Stationery(Shanghai)Company Ltd.with Axus Stationery(Shanghai)Company Ltd.and its shareholder Yilin Investment(Shanghai)Co.,L

227、td.(懿琳投资(上海)有限公司),Mr.Xu Peifeng and Mr.Andre FrancisViegas,the actual controllers of Beilin Investment(Shanghai)Co.,Ltd.(倍林投资(上海)有限公司)and Highton Limited respectively,to acquire 56%equity of Axus Stationery(Shanghai)Company Ltd.at the consideration of RMB177,038,100.As at the end of the Reporting Pe

228、riod,the actual contribution of capital made by the Company amounted to RMB170,006,000,and the amount promised but not yet settled is RMB7,032,100.For more details,please refer to the Announcement on the Acquisition of 56%of Equity of Axus Stationery(Shanghai)Company Ltd.,Announcement on Update on t

229、he Acquisition of 56%of Equity of Axus Stationery(Shanghai)Company Ltd.,and Announcement on Update on the Acquisition of 56%of Equity of Axus Stationery(Shanghai)Company Ltd.disclosed by the Company on 26 March 2019,9 April 2019 and 30 July 2019 respectively under the announcement No.2019-009,2019-0

230、11 and 2019-022 respectively.Acquisition was completed at the end of April 2019,and started to be included into the consolidated statement of the Company.(2)Significant non-equity investment Applicable Not applicable (3)Financial assets measured at fair value Applicable Not applicable Annual Report

231、2019 43/308 (6)Sale of significant assets and equity interests Applicable Not applicable (7)Analysis of major controlled companies and shareholding companies Applicable Not applicable Unit:0000 Currency:RMB Company Name Nature of the business Major products and services Registered capital Total asse

232、t Net assets Net profit Shanghai M&G Zhenmei Stationery Co.,Ltd.(上海晨光珍美文具有限公司)Wholesale and retail Stationery and office supplies 1,000.00 3,214.99-925.45-426.55 Shanghai M&G Colipu Office Supplies Co.,Ltd.Wholesale and retail Office supplies 30,000.00 167,576.19 41,157.70 7,580.35 Shanghai M&G Stat

233、ionery&Gift Co.,Ltd.(上海晨光文具礼品有限公司)Wholesale and retail Stationery and office supplies 19,941.94 100,954.21 38,718.02 4,987.75 M&G Living Studio Enterprise Management Co.,Ltd.(晨光生活馆企业管理有限公司)Wholesale and retail Stationery and office supplies 10,000.00 37,086.02-2,341.24-804.67 Shanghai M&G Jiamei Sta

234、tionery Co.,Ltd.(上海晨光佳美文具有限公司)Manufacturing,wholesale and retail Stationery and office supplies 3,000.00 6,505.17 3,737.62 127.68 Shanghai M&G Information Technology Co.,Wholesale and retail Office supplies 5,000.00 12,699.55 6,761.94-120.59 Annual Report 2019 44/308 Ltd.(上海晨光信息科技有限公司)Shenzhen Erya

235、Creative and Cultural Development Co.,Ltd.(深圳尔雅文化创意发展有限公司)Design and so forth Design,office supplies and so forth 2,000.00 1,983.22 1,053.25 3.10 Shanghai M&G Office Supplies Co.,Ltd.Wholesale and retail Office supplies 5,000.00 20,682.63 9,635.45 2,636.01 Axus Stationery(Shanghai)Company Ltd.Produc

236、tion,sale and so forth Stationery and office supplies 8,100.00 78,201.89 25,273.66-993.49 Note:Acquisition of 56%equity of Axus Stationery by the Company during the Reporting Period was completed at the end of April 2019,and started to be included into the consolidated statement of the Company.(8)St

237、ructured entities controlled by the Company Applicable Not applicable III.Discussion and analysis on future development of the Company(1)Industry pattern and trend Applicable Not applicable As the way of life and consumption habit of consumers change,retail industry started a new round of redevelopm

238、ent and innovation.Stationery industry faces the challenge that uncertainty of the external environment,decentralized diversification of consumption channel,individual demands of the target consumption group(post-90s and post-00s)stimulate the demand for new products.As population structure changes

239、in China and the birth rate declines,contributions of growth in sales volume only to revenue weakens in stationery industry,so more revenue growth will be contributed by consumption upgrading and product upgrading in the future.As domestic consumption market becomes increasingly mature,demand for mi

240、d-to high-end pen products in the Chinese market keeps increasing,helping enterprises to expand beyond the low-end pen products market,and providing opportunities and challenges for mid-to high-end products with high quality and high price.Annual Report 2019 45/308 Traditional business circles aroun

241、d the schools are still the leading ones,while other business circles and form of sales increase rapidly,and sales terminal becomes diversified.New channels and forms of business are developed gradually,with upgrading and competition in channels becoming increasingly obvious.Stationery consumption t

242、ends to be more brand-oriented,innovative,individualized and high-end in China,and there is a growing demand for exquisite cultural and creative products,promoting stationery upgrading and transforming to cultural and creative life.With the constant development in the market,stationery industry beco

243、mes gradually centralized in market with the M&A accelerating in upstream and downstream continuously,and integration space in the industry further opened.Excellent brand stationery enterprises are in a strong position in the market,so the strong will get stronger,and market shares will be quickly o

244、ccupied by leading enterprises.Market of direct sales to offices achieved prosperous development.According to industry research report made by the securities company,the scale of large market for office supplies(including office furniture,equipment and other office materials)in China reached more th

245、an RMB1 trillion.Regulation on the Implementation of the Government Procurement Law of the Peoples Republic of China implemented in 2015 expressly requires that the state shall promote the utilization of information networks for carrying out government procurement activities in electronic manners.In

246、 the same year,General Office of the State Council issued the Notice of the General Office of the State Council on Issuing the Work Plan for Integrating and Establishing a Uniform Public Resources Trading Platform,requiring that a public resources trading platform with unified regulations,openness a

247、nd transparency,efficient service and standard supervision should be developed across the country to basically realize electronic transaction of public resources in the whole process.Benefiting from the great promotion and support from national policies,B2B office supplies procurement got the histor

248、ical opportunities for rapid development.The 1.4 billion population in China accounts for 18%of the total population in the world,and excellent stationery enterprises in China have a vast space for greater development in global market.During the Reporting Period,98%revenue of the Company is contribu

249、ted by domestic market,and the international market share is expected to increase.(2)Development strategy of the Company Applicable Not applicable To further the competitive advantage of the core traditional business by continued emphasis on innovation of technology and products;to further develop n

250、ew businesses of one-stop office supplies service and direct retail;to actively expand international market;and to further integrate high-quality resources in the industry chain.With continued efforts in those four areas,to reach the goal of becoming the number one stationery brand(s)in China.Annual

251、 Report 2019 46/308 (3)Operation plan Applicable Not applicable In 2020,the Company plans to reach revenue of RMB12,812,266,600,an increase of 15%,mainly through the following approaches:1.Traditional core business Businesses in domestic stationery industry are relatively decentralized.There are man

252、y manufacturers with small average scale,so industrial concentration remains quite low.Thousands of stationery manufacturers in China are currently divided into different subdivided stationery categories.As there is no leading enterprise with relatively high market shares in most of the subdivided s

253、tationery categories,the Company has much room for greater improvement.Making good use of the existing advantages in channel,brand,design and R&D and supply chain,the Company is expected to maintain fast and stable growth in traditional core business.(1)Focus on and further develop channel The Compa

254、ny will focus on key terminals,and build perfect stores to improve quality in a single store,facilitate the optimization and upgrading of franchising stores and delivery centers,and upgrade channel.Besides,the Company will also strengthen promotion for categories and special zones for products to in

255、crease on-sale rate of the must-have products,and actively explore new business models to create driving force for sale,increase proportion in business circles and expand market share,making breakthroughs in both the existing stock market and increment market.(2)Promote four product sectors comprehe

256、nsively Consumer products The Company will continue to improve stronger product strategy,and set up the assurance process for quality of newly developed products to achieve target development with less quantity but higher quality,and increase contribution of individual product.Focus will be placed o

257、n product management of key categories to develop long-term products and high-quality products.Promotion for category will be carried out collaboratively with offline distribution channel to increase on-sale rate,while coordination will be made with online channel to increase online sales of consume

258、r products.Exquisite cultural and creative products The Company will optimize inventory of exquisite cultural and creative products,ameliorate development and presentation plan for key categories based on terminal sale to develop formations of exquisite cultural and creative products with strong fun

259、ction,and manage SKU to increase the contribution of individual product.Besides,the Company will also optimize marketing window and the timing of launching,and popularize key categories with breakthroughs through seizing market opportunities and collaborating research,production and sale.Brand of ex

260、quisite cultural and creative products will be popularized and customer stickiness will be enhanced through summit of exquisite cultural and creative products.Annual Report 2019 47/308 Office supplies The Company will enhance development and promotion of office supplies to put core products on sale,

261、and expand M&G stores for office supplies and establish perfect stores for office supplies on a continuous basis.Focus will be placed on key development and breakthrough of“mega customer”,“extensive category”and“large platform”to facilitate development of large office terminal customers.Moreover,the

262、 Company will focus on the development of online office supplies in all categories and multiple channels,and stimulate sales growth and increase market shares in office supplies market through seeking new customers continuously and improving sales in the single store of established customers.Arts pr

263、oducts for children The Company will optimize product structure and promote long-term products and new products.The Company will also increase brand influence,optimize development of new products and enhance contributions from individual product,and facilitate rapid growth in e-commerce to develop n

264、ew e-commerce categories and establish new e-commerce stores.CARIOCA products will be promoted through online and offline channel,and Marco products of Axus Stationery will be further developed and popularized.2.New business(1)Keep expanding operation of M&G Colipu Business in direct sales of office

265、 supplies continues to achieve booming development since M&G Colipu follows requirement on well-informed,open and transparent government procurement,and meets requirements that enterprises desire to increase procurement efficiency and reduce procurement cost for non-production office and administrat

266、ion supplies.Brand enterprise continues to enhance competitiveness through improving service quality,enriching product categories,seeking more customers and developing national supply chain system,so M&G Colipu is expected to maintain relatively rapid growth,and become one of the main competitors in

267、 the market of direct sales of office supplies.M&G Colipu will redouble its efforts to develop sales teams in the south China,north China and central China so that it can expand local market and increase coverage of large projects.Furthermore,the Company will also further improve its capacity in sup

268、plying products to enhance customer stickiness,get shortlisted in more new comprehensive e-commerce projects from state-owned enterprises and win bidding for the Groups comprehensive promotion to expand its existing shares.Efforts will be made to construct central warehouse in the northeast China,an

269、d start and facilitate construction and establishment of central warehouse in the northwest China.In addition,the Company will popularize Colipus convenient shopping service(省心购)to expand the market of small and micro businesses by providing sound products with low price and low operation cost.(2)Co

270、mbine direct sale with franchise to further explore the business model of large retail store Annual Report 2019 48/308 In terms of M&G Life,the Company will improve operation capacity of the stores and sales of per employee,optimize human resource cost for stores,and increase orders from customers a

271、nd quality of existing single store so as to improve new product launch strategy,accelerate iteration of products and increase efficiency of products.In terms of Jiumu Store,the Company will speed up channel layout,enhance the development of operation team and explore opportunity for new categories

272、to strengthen development capacity for original products,integrate high-quality supply chain resources,improve supply chain management,and upgrade channel and product.(3)Accelerate development of M&G Technologies The Company will continue to focus on making breakthroughs in e-commerce channel,and de

273、velop best-selling products of new categories to accelerate development for online distribution channel and improve key stores.Moreover,the Company will cultivate its capacity to develop online products,improve online product formations and promotion,and develop new scenes and categories so as to co

274、ntinuously create incremental online categories,improve promotion efficiency for categories and enhance brand exposure.Attention will be paid to management of market order to enhance control on distribution system.(4)Potential risks Applicable Not applicable 1.Risks in operation management With the

275、great growth in the scale of assets and sale of the Company,the Company faces new challenges in operation management system,internal control system and staff management.Although the Company has developed operation management system and internal control system that accord with features of its busines

276、s and technology in its development,and hired and cultivated stable core management team,operation of the Company will be adversely affected if the aforesaid management system and management staff fail to promptly adapt to the rapid expansion of the Company.Therefore,the Company will keep improving

277、its management system and internal control system,and adopt various measures to improve qualification of management staff.2.Market risks With social transformation and consumption upgrading,stationery market presents opportunities for structure-based development.If the Company is unable to anticipat

278、e market trends in time and adapt to market changes from aspects of product upgrading,quality management to sale strategy,the Company will encounter certain risks in market competition.Having been aware of the problem,the Company enhanced product R&D under the guidance of the market,optimized produc

279、t structure,and developed a sounder quality management and control system.Market strategies are formulated based on market survey,analysis of big data and management discussion.Annual Report 2019 49/308 3.Risks from fiscal and taxation According to Article 28 of Enterprise Income Tax Law of the Peop

280、les Republic of China,the enterprise income tax on important high-and new-tech enterprises that are necessary to be supported by the state shall be levied at the reduced tax rate of 15%.The Company was re-recognized as a national high-and new-tech enterprise on 28 October 2019,and started to impleme

281、nt the policy of reduced enterprise income tax rate of 15%on 1 January 2019 for 3 years.If the state adjusts preferential income tax policy for high-and new-tech enterprises,or the Company fails to pass the review after its qualification of high-and new-tech enterprise expires,operation performance

282、of the Company will be adversely affected.As such,the Company performs strict control according to assessment standards for high-and new-tech enterprises to ensure that it meets all indicators,and qualifies and passes the annual review and renewal for high-and new-tech enterprises.4.Risks from COVID

283、-19 Since the outbreak of novel coronavirus(hereinafter referred to as“COVID-19”)at the beginning of 2020,domestic economy growth and demand of foreign trade have slowed down significantly.Although demand of stationery industry is relatively rigid,it has been affected by macro-economy and delay in n

284、ew semester,especially for primary and middle schools.The impact of COVID-19 on the macro-economy is uncertain,adding uncertainties to the Companys operation in 2020.The Company pays close attention to the development of COVID-19,and adopt active measures to reduce risks and uncertainties brought by

285、 COVID-19.(5)Others Applicable Not applicable IV.Explanation on the failure to disclose as per rules due to inapplicability or special reasons such as state secrets and business secrets and the reasons thereof Applicable Not applicable Annual Report 2019 50/308 Chapter V Major Events I.Proposal for

286、profit distribution of ordinary shares or capitalization of capital reserve(1)Formulation,implementation or adjustment of the cash dividend policy Applicable Not applicable 1.The existing profit distribution policy of the Company is implemented after it was passed at the 16th meeting of the third Bo

287、ard meeting and 2016 annual general meeting.2.Principle in profit distribution of the Company:The Company implements the dividend distribution policy which entitles the shareholders to the same rights and same dividends,under which shareholders are entitled to receive dividends and other kinds of di

288、stribution of interests based on the number of shares held by them.The Company adopts active profit distribution policy,which emphasizes investors reasonable investment returns while maintaining sustainability and stability.The Company is allowed to distribute profit in cash or shares,but its profit

289、 distribution shall not exceed the range of the accumulated distributable profits or affect the Companys ability to continue as a going concern.3.Overall approaches to distribute profit of the Company:The Company distributes dividends in cash or shares,or cash-and-shares,and if the Company satisfies

290、 the conditions for cash dividends,priority should be given to profit distribution by means of cash dividends.4.Specific conditions and proportion for cash dividends:The Company primarily adopts cash dividend as its profit distribution policy.The Company may distribute cash dividend when it makes a

291、profit in the current year and the distributable profits are positive after making up losses,contributing to the statutory reserves and surplus reserves,but the profit distribution shall not exceed the range of the accumulated distributable profits.In general,if there are no material investment plan

292、s or significant cash expenditure,the Company may distribute profit in cash for a single year not less than 20%of the distributable profit realized in the current year.In addition,as for the proportion of cash dividends to the total profit distribution,the Board of Directors shall take into full acc

293、ount of various factors such as features of the industries where the Company operates,the stage of development,its own business model,level of profitability,and whether there is significant capital expenditure arrangement,to distinguish the following situations and determine differentiated cash divi

294、dend proportion in accordance with the procedures as required by the Articles of Association:(1)If the Company is at a mature stage of development and has no significant capital expenditure arrangement,the proportion of cash dividends in the profit distribution shall be at least 80%when the profit d

295、istribution is made;(2)If the Company is at a mature stage of development and has significant capital expenditure arrangement,the proportion of cash dividends in the profit distribution shall be at least 40%when the profit distribution is made;Annual Report 2019 51/308 (3)If the Company is at a grow

296、ing stage of development and has no significant capital expenditure arrangement,the proportion of cash dividends in the profit distribution shall be at least 30%when the profit distribution is made;(4)If the Company is at a growing stage of development and has significant capital expenditure arrange

297、ment,the proportion of cash dividends in the profit distribution shall be at least 20%when the profit distribution is made.The aforesaid“significant investment plans”or“significant cash expenditure”refers to one of the following:(1)The proposed external investment,acquisition of assets or purchase o

298、f equipment by the Company in the coming twelve months with accumulated expenses amounting to or exceeding 50%of the latest audited net assets of the Company and exceeding RMB50,000,000;(2)The proposed external investment,acquisition of assets or purchase of equipment by the Company in the coming tw

299、elve months with accumulated expenses amounting to or exceeding 30%of the latest audited total assets of the Company.Significant investment plans or significant cash expenditure that meets the above conditions shall be reviewed and approved at the general meeting after being reviewed by the Board me

300、eting.5.During the Reporting Period,the formulation and implementation of the cash dividend policy has complied with the Articles of Association and the resolutions of the general meetings.The dividend distribution standards and proportions are clearly stated,and relevant decision making procedures

301、and systems are complete.Independent directors have diligently served their obligations,and played their roles.As minority shareholders have opportunities to fully express their opinions and appeals,their legitimate interests have been fully protected.(2)Plan or proposal for dividend distribution of

302、 ordinary shares or transfer of capital reserve fund to share capital of the Company for the latest three years(including the reporting period)Unit:Yuan Currency:RMB Year of distribution Number of bonus shares per 10 shares(shares)Amount of dividends distributed per 10 shares(Yuan)(inclusive of tax)

303、Number of shares transferred per 10 shares(shares)Amount of cash dividends(inclusive of tax)Net profit attributable to the ordinary shareholders of the listed company in the consolidated financial statements for the distribution year Percentage of the net profit attributable to the ordinary sharehol

304、ders of the listed company in the consolidated financial statements(%)Annual Report 2019 52/308 2019 0 4 0 368,000,000.00 1,060,083,625.03 34.71 2018 0 3 0 276,000,000.00 806,847,308.41 34.21 2017 0 2.5 0 230,000,000.00 634,040,991.46 36.28 (3)The inclusion of shares repurchased through cash offer i

305、n cash dividend Applicable Not applicable (4)If the Company records profit distributable to ordinary shareholders of the Company during the Reporting Period is positive but there is no proposal for cash dividend,the Company shall disclose the reasons,the usage and the utilization plan of the undistr

306、ibuted profits in detail Applicable Not applicable II.Performance of undertakings(1)Undertakings by the Companys beneficial controllers,shareholders,related parties,acquirers,the Company and other related parties during or subsisted in the Reporting Period Annual Report 2019 53/308 Applicable Not ap

307、plicable Background of undertakings Type of undertakings Types Undertaking party Type of undertakings Contents of the undertaking Time and term of the undertaking Whether there is deadline for performance Whether strictly performed in a timely manner If not performed in time,describe the specific re

308、asons If not performed in time,describe plans in next steps Undertakings related to initial public offering Restriction on sale of shares M&G Group,Chen Huwen,Chen Huxiong,and Chen Xueling Undertaking for restriction on sale of shares and voluntary lockup undertaking by the controlling shareholderM&

309、G Group,and beneficial controllersChen Huwen,Chen Huxiong,and Chen Xueling(1)Within 36 months from initial public offering and listing of the Company,the shares of the Company issued prior to the offering or listing shall neither be transferred or entrusted to other person for management,nor be repu

310、rchased by the Company as required.(2)If the closing price of the shares has been lower than the issue price for 20 consecutive trading days within 6 months after shares of Company are issued in the initial public offering,or the closing price is lower than the issue price as at the end of the six-m

311、onth period upon the listing,the lockup period for shares of the Company held before the offering or listing shall be automatically extended by 6 months based on the 36 months of original undertaking period,in other words,the lockup period is 42 months from the date when shares of the Company are li

312、sted.If there are any ex-rights or ex-dividends events,such as the declaration of dividends,bonus issue,and capitalization from capital reserve to share capital,the above closing price refers to price after corresponding adjustment of price of shares of the Company;(3)Within 24 months after the term

313、ination of lockup period,if any attempt is made to reduce the shares of the Company that it had held prior to the offering and listing by any means,the price of the shareholding reduction shall not be lower than the offering price of the Companys initial public offering shares at the time of the off

314、ering and the listing.If there are any ex-rights or ex-dividends events,such as the declaration of dividends,bonus issue,and capitalization from capital reserve to share capital before the reduction of the aforesaid shares,the price of the shareholding reduction should not be lower than the adjusted

315、 offering price of the Companys initial public offering shares at the time of the offering and the listing.36 months Yes Yes Annual Report 2019 54/308 Restriction on sale of shares Keying Investment and Jiekui Investment Undertaking for restriction on sale of shares and voluntary lockup undertaking

316、by Keying Investment and Jiekui Investment,shareholders holding more than 5%of the equity(1)Within 36 months from initial public offering and listing of the Company,the shares of the Company issued prior to the offering or listing shall neither be transferred or entrusted to other person for managem

317、ent,nor be repurchased by the Company as required.(2)If the closing price of the shares has been lower than the issue price for 20 consecutive trading days within 6 months after shares of Company are issued in the initial public offering,or the closing price is lower than the issue price as at the e

318、nd of the six-month period upon the listing,the lockup period for shares of the Company held before the offering or listing shall be automatically extended by 6 months based on the 36 months of original undertaking period,in other words,the lockup period is 42 months from the date when shares of the

319、 Company are listed.If there are any ex-rights or ex-dividends events,such as the declaration of dividends,bonus issue,and capitalization from capital reserve to share capital,the above closing price refers to price after corresponding adjustment of price of shares of the Company;(3)After the afores

320、aid undertaking period expires,the proportion of shares unlocked every year shall not exceed 25%of the total shares of the Company held;(4)Within 24 months after the termination of lockup period,if any attempt is made to reduce the shares of the Company that it had held prior to the offering and lis

321、ting by any means,the price of the shareholding reduction shall not be lower than the offering price of the Companys initial public offering shares at the time of the offering and the listing.If there are any ex-rights or ex-dividends events,such as the declaration of dividends,bonus issue,and capit

322、alization from capital reserve to share capital before the reduction of the aforesaid shares,the price of the shareholding reduction should not be lower than the adjusted offering price of the Companys initial public offering shares at the time of the offering and the listing;(5)Notwithstanding any

323、change in the position of some of the partners in the joint venture or their departure from the joint venture,the joint venture will strictly perform the above undertakings.36 months Yes Yes Others M&G Group Shareholding and intention to reduce shareholding of the controlling shareholderM&G Group(1)

324、M&G Group advocates that shares of the Company should be held in the long term to ensure that M&G Group shares operation achievements of the Company on a continuous basis.Therefore,M&G Group has the intention to hold shares of the Company for a long term.(2)After the lockup period of the Companys sh

325、ares held by M&G Group expires,it is possible that M&G Group might reduce shareholding of the Company appropriately for the development requirement of M&G Group.In this situation,M&G Group is expected to reduce its shareholdings by no more than 5%of the total shares of the Company held by M&G Group

326、within the first year after the lockup period expires with the price of the shareholding reduction not lower than the offering price of the Companys initial public offering.The shareholding reduction shall not exceed 10%of the total shares of the Company held by M&G Group within the second year afte

327、r the lockup period expires with the price of the shareholding reduction not lower Not applicable No Yes Annual Report 2019 55/308 than the offering price of the Companys initial public offering.If there are any ex-rights or ex-dividends events,such as the declaration of dividends,bonus issue,and ca

328、pitalization from capital reserve to share capital in the Company before M&G Group reduces its holding of the aforesaid shares,the price of the shareholding reduction for M&G Group should not be lower than the adjusted offering price of the Companys initial public offering shares at the time of the

329、offering and the listing.(3)If M&G Group intends to reduce shareholding of the Company,it will announce its reduction plan 3 transaction days before reducing the shareholding.Furthermore,the reduction will be performed legally according to rules of Shanghai Stock Exchange in the form of block trade,

330、auction transaction as well as other methods recognized by China Securities Regulatory Commission.Others Keying Investment and Jiekui Investment Shareholding and intention to reduce shareholding of Keying Investment and Jiekui Investment,shareholders holding more than 5%of the equity(1)The joint ven

331、ture,which is an employee-owned enterprise established by officials and important business professionals of the Company,advocates that shares of the Company should be held in the long term to ensure that operation achievements of the Company are shared on a continuous basis.Therefore,the joint ventu

332、re has the intention to hold shares of the Company for a long term.(2)After the lockup period of the Companys shares held by joint venture expires,it is possible that the joint venture might reduce shareholding of the Company appropriately for the development requirement of the joint venture.In this

333、 situation,the joint venture is expected to reduce its shareholdings by no more than 25%of the total shares of the Company held by the joint venture within the first year after the lockup period expires with the price of the shareholding reduction not lower than the offering price of the Companys initial public offering.The shareholding reduction shall not exceed 25%of the total shares of the Comp