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1、Annual Report 2020 1/244 Stock Code:603899 Short Name:M&G Stationery SHANGHAI M&G STATIONERY INC.Annual Report 2020 Annual Report 2020 2/244 Going Forward with our Mission Dear shareholders,partners and friends,The year 2020 was an extraordinary year.Since the beginning of the year,the sudden outbre
2、ak of the COVID-19 pandemic has brought tremendous impacts to various industries.Due to such macroeconomic climate and the delay in school return date,many stationery shops faced grave challenges to resume operation.Among such uncertainties,what M&G can do is do things with certainty.The Company act
3、ed quickly to fight against the pandemic.On the one hand,we adopted pandemic prevention and control measures to protect our employees,provided PPE for front-line workers and donated money and materials.On the other hand,the Company took resolute steps to restart factories to resume production.In the
4、 first half of the year,the Company recorded a decrease in results.With our strenuous efforts,we achieved satisfactory performance in the second half.One of the most important things we learned in 2020 is that if you truly aspire something,you can always work out a way and if you persist enough,you
5、can make the seemingly impossible come true.In 2020,the Company recorded revenue of RMB13 billion,an increase of 17.9%,and net profit of RMB1.2 billion,an increase of 18.4%.For the past years since going public,M&G has maintained health growth and sound asset condition.The year 2020 was of great sig
6、nificance to M&G.Exploring with the spirit of a startup company,M&G has been founded for three decades,and it launched a new round of a five-year strategy plan.The year 2021 is the beginning of Chinas 14th Five-Year Plan,and also the start of M&Gs new five-year strategy.M&G will adhere to the new de
7、velopment thinking of growth with emphasis on quality and efficiency.Our new five-year strategy is formulated in line with the direction of the previous strategy,and reflects Chinas population trend and consumption upgrade in the new era.The new strategy calls for product mix upgrade and on-line bus
8、iness expansion,supported by digitalization,MBS,and merger and acquisition.The Companys mission is to make study and work more joyful and effective,and the Companys vision is to become a world-class M&G.We believe that good stationery has vitality,as a good book and stationery is temperate and can m
9、ake a positive difference.In China,we see great potential in the stationery and creative culture products industry.Every year,M&G launches thousands of new products based on Annual Report 2020 3/244 consumer insights.To deliver a better experience for consumers,we hope to include new features in our
10、 products,incorporating functionality and a sense of beauty and humor.According to the vision to become world-class M&G as set out in our new five-year strategy,M&G devotes to providing better products for China and the world,aiming to become a pioneer in global stationery industry when it comes to
11、products and technology.From stationery to creative culture products,M&G must have a more open mindset.M&G Colipu is committed to making work more joyful and effective,and becoming a leader in Chinas office supplies 2B industry with about one trillion RMB market.While promoting international busines
12、s and carrying out Dual Circulation,we will break various bottlenecks and strive for higher goals.Dear shareholders and partners,we will go forward with our mission in mind!M&G is inspired by grand national rejuvenation,yet we also take clue from ordinary people.We believe the best way to help us su
13、ccessfully is by helping related others successful,we believe that the success of individuals and companies depends on their“energy,will and spirit”.We believe in long-termism,choosing to do harder but right things,and doing daily work with excellence.The new era belongs to those who strive.Striving
14、 leads to happiness and striving in itself is a happiness.We would like to express our heartfelt thanks to our customers and partners,for your care and support for the development of the Company.M&G is willing to work together with all of you,remain true to our original aspiration,and forge ahead to
15、 promote a sustainable,sound and high-quality development,and create better value for all shareholders.Strive towards a world-class M&G.We look forward to working with you towards a bright future!Chairman:Chen Huwen 26 March 2021 Annual Report 2020 4/244 Important Notice I.The Board of Directors,Sup
16、ervisory Committee,directors,supervisors and senior management of the Company warrant that the contents of this report are true,accurate and complete,without any misrepresentation,misleading statements or material omissions,and severally and jointly bear the legal responsibilities thereof.II.All dir
17、ectors of the Company attended the Board meeting.III.BDO China Shu Lun Pan Certified Public Accounts LLP has issued the audit report with unqualified opinions to the Company.IV.Chen Huwen,the chairman of the Company,Quan Qiang,CFO of the Company and Zhai Yu,the head of the accounting department(pers
18、on in charge of accounting),warrant the truthfulness,accuracy and completeness of the financial report in this 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 proposes to distri
19、bute cash dividend of RMB5.00(tax inclusive)per 10 shares based on the Companys total share capital registered as at the registration date for the implementation of dividend distribution.The profit distribution plan is subject to being submitted the Companys 2020 annual general meeting of shareholde
20、rs for deliberation.VI.Risks statement of the forward-looking statements Applicable Not applicable Forward-looking 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
21、 to pay attention to investment risks.VII.Is there any non-operating misappropriation of funds of the Company 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 IX.Are there more than ha
22、lf of the directors who cannot warrant the truthfulness,accuracy and completeness of the annual report disclosed by the Company No X.Warning on significant risks The Company has illustrated various risks and corresponding measures that the Company might face in the production and operation.Please re
23、fer to the“Potential Challenges and Risks”set out in the“Discussion and Analysis of Operation”under Chapter IV.Investors are advised to pay attention to risk of investment.XI.Others Applicable Not applicable Annual Report 2020 5/244 本報告分別以中、英文編制，在對中外文文本的理解上發生歧義時，以中文文本為本報告分別以中、英文編制，在對中外文文本的理解上發生歧義時，以
24、中文文本為準。準。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 2020 6/244 Contents Pressing Forward with Mission in Mind.2 Chapter I Definition.7 Chapter II Company Pro
25、file and Key Financial Indicators.8 Chapter III Business Overview.13 Chapter IV Discussion and Analysis of Operation.18 Chapter V Major Events.39 Chapter VI Changes in Ordinary Shares and Shareholders.66 Chapter VII Preference Shares.76 Chapter VIII Directors,Supervisors,Senior Management and Employ
26、ees.77 Chapter IX Corporate Governance.84 Chapter X Corporate Bonds.88 Chapter XI Financial Report.89 Chapter XII References.244 Annual Report 2020 7/244 Chapter I Definition I.Definition In this report,unless the content requires otherwise,the following terms shall have the following meanings:Defin
27、ition of common terms The Report Annual Report 2020 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（晨光生活館）M&G Life Enterprise Management Co.,Ltd.（晨光生活館企業管理有限公司）/Large retail store of t
28、he 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（晨光創投）Shanghai Chenguang Venture Capital Center(
29、L.P.)Chenguang Sanmei（晨光三美）Shanghai Chenguang Sanmei Property Investment Co.,Ltd.Jiumu Store（九木雜物社）Jiumu M&G Store Enterprise Management Co.,Ltd.（九木雜物社企業管理有限公司）/Large retail store of the Company M&G Office Supplies（晨光辦公）Shanghai M&G Office Supplies Co.,Ltd.Office Depot Office Depot Network Technolog
30、y 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 2020,from 1 January 2020 to 31 December 2
31、020 Yuan,ten thousand Yuan,hundred million Yuan RMB,RMB10,000,RMB100 million Annual Report 2020 8/244 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 SHANGHAI
32、M&G STATIONERY INC.Abbreviation of English name of the Company M&G Stationery 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 Yanzh
33、an Road,Songjiang District,Shanghai Building C,Hanqiao Culture Science&Technology Park,No.455 Yanzhan Road,Songjiang District,Shanghai Telephone 021-57475621 021-57475621 Fax 021-57475621 021-57475621 E-mail irmg- irmg- III.Introduction to General Information Registered address Building 3,No.3469 Ji
34、nqian 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 Discl
35、osure and Place for Obtaining the Report Media for the Companys information disclosure Shanghai Securities News,China Securities Journal,Securities Daily,Securities Times CSRCs designated website for the Companys Annual Report disclosure the Companys Annual Report may be obtained at Board of Directo
36、rs 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 Shu Lun Pan Certifie
37、d Public Accounts LLP Office address 4F No.61 Nanjing East Road,Shanghai Name of the signing accountant Gu Xuefeng,Wang Aijia Annual Report 2020 9/244 VII.Major Accounting Data and Financial Indicators for the Past Three Years 1)Major accounting data Unit:Yuan Currency:RMB Major accounting data 2020
38、 2019 Year-on-year change(%)2018 Revenue 13,137,745,727.18 11,141,101,364.44 17.92 8,534,988,597.55 Net profit attributable to shareholders of the listed company 1,255,426,655.27 1,060,083,625.03 18.43 806,847,308.41 Net profit attributable to shareholders of the listed company,net of non-recurring
39、gains and losses 1,102,712,281.50 1,005,187,834.38 9.70 749,412,457.07 Net cash flow generated from operating activities 1,271,697,892.28 1,081,941,383.68 17.54 827,940,565.51 End of 2020 End of 2019 Year-on-year change(%)End of 2018 Net assets attributable to shareholders of the listed company 5,19
40、3,568,712.05 4,201,500,384.99 23.61 3,410,808,445.41 Total asset 9,709,908,436.32 7,565,115,311.74 28.35 5,677,500,049.71 2)Key financial indicators Key financial indicators 2020 2019 Year-on-year change(%)2018 Basic earnings per share(Yuan/share)1.3558 1.1523 17.66 0.8770 Diluted earnings per share
41、(Yuan/share)1.3558 1.1523 17.66 0.8770 Basic earnings per share，net of non-recurring gains and losses(Yuan/share)1.1908 1.0926 8.99 0.8146 Weighted average ROE(%)26.91 28.17 Decrease by 1.26 percentage points 26.16 Weighted average ROE,net of non-recurring gains and losses(%)23.63 26.71 Decrease by
42、3.08 percentage points 24.30 Explanation of major accounting data and financial indicators for the past three years by the end of the Reporting Period Applicable Not applicable VIII.Difference in the Accounting Information under the PRC Accounting Standards for Business Enterprise(“PRC GAAP”)and Ove
43、rseas Accounting Standards 1)Difference 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 Annual Report 2020 10/244 2)Differences in net profit and net assets a
44、ttributable to shareholders of the listed company in financial reports 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
45、 of 2020 by Quarter Unit:Yuan Currency:RMB 1st Quarter(January-March)2nd Quarter(April-June)3rd Quarter(July-September)4th Quarter(October-December)Revenue 2,083,587,295.14 2,677,836,377.15 3,776,378,538.71 4,599,943,516.18 Net profit attributable to shareholders of the listed company 230,373,494.44
46、 234,127,325.67 448,408,007.50 342,517,827.66 Net profit attributable to shareholders of the listed company after non-recurring profit or loss 173,986,745.54 213,134,322.82 405,711,591.63 309,879,621.51 Net cash flow generated from operating activities-258,692,211.83 385,237,644.11 767,509,677.24 37
47、7,642,782.76 Explanation on difference between information by quarter and information disclosed in periodical reports Applicable Not applicable Annual Report 2020 11/244 X.Items and Amounts of Non-recurring Gains or Losses Applicable Not applicable Unit:Yuan Currency:RMB Items of Non-recurring Gains
48、 or Losses Amounts in 2020 Notes(if applicable)Amounts in 2019 Amounts in 2018 Gains or losses on disposal of non-current assets 169,704.92 Mainly due to the Companys renewal of some old equipment 6,081,606.95-69,195.83 Government subsidies included in profits and losses for the current period,exclu
49、ding 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 State policies 135,222,930.01 Mainly including government subsidies received during the Reporting Period and government
50、 subsidies transferred from deferred income 42,747,681.46 42,122,713.66 Gains or losses on entrusted investment or asset management 35,517,479.65 Investment income arising from changes in fair values held-for-trading financial assets,derivative financial assets,held-for-trading financial liabilities
51、 and derivative financial liabilities,and investment gains on the disposal of held-for-trading financial assets,derivative financial assets,held-for-trading financial liabilities,derivative financial liabilities and other debt investment,except the Company normal operations related to effective hedg
52、ing business 37,743,018.95 Revenue generated from purchase of wealth management products 29,184,868.54 Reversal of provision for impairment of receivables and contractual assets which are individually tested for impairment 8,958,818.94 Mainly due to the provision reversal of bad debts on individual
53、receivables of the Company 1,803,027.63 Other net non-operating income and expenses,other than the above items 18,746,671.42 Mainly including the non-operating income transferred from the proceeds from the merger and acquisition of Office Depot,and the expenditure of charity donations.-5,743,388.02
54、-7,936,377.76 Effect of minority equity-18,957,557.36 -4,764,697.27-2,192,444.11 Effect of income tax-29,169,213.11 -14,413,308.64-10,007,324.27 Total 152,714,373.77 54,895,790.65 57,434,851.34 Annual Report 2020 12/244 XI.Items Measured at Fair Values Applicable Not applicable Unit:Yuan Currency:RM
55、B Items Opening balance Closing balance Changes in the Period Effect on profit for the Period Held-for-trading financial assets 661,878,587.24 1,428,277,848.33 766,399,261.09 32,281,250.23 Receivables financing 29,549,924.83 61,412,976.46 31,863,051.63 Derivative financial assets Other debt investme
56、nts(including other current assets)Other non-current financial assets Investments in other equity instruments 3,909,179.93 5,476,577.42 1,567,397.49 Held-for-trading financial liabilities Derivative financial liabilities Total 695,337,692.00 1,495,167,402.21 799,829,710.21 32,281,250.23 XII.Others A
57、pplicable Not applicable Annual Report 2020 13/244 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.Principal business M&G Stationery is a comprehensive station
58、ery supplier and an office servicer.The Company integrates the value of creativity into its products and service advantages,advocates fashionable stationery lifestyle,and provides solutions for study and work.Its traditional core businesses include designing,developing,manufacturing and selling writ
59、ing instruments,student stationery,office supplies and other products under brands,and also the e-commerce business M&G Technologies;its New businesses mainly comprise of own-operated retail stores-Jiumu Store and M&G Life,and direct office supplies service-M&G Colipu.During the Reporting Period,the
60、re were no significant changes in the Companys principal business and operation model.2.Principal 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 chain m
61、anagement and warehouse and logistics,to distribution network management.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 value pro
62、position to product design,product mold 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 model that fe
63、atures sales-driven production,in-house and OEM outsourcing.The Company has 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 in the whole value chain from design,research and develo
64、ping,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 relies on regional distributors,complemented by direct sales to offices 2B customers,direct-sale
65、 store,KA sales,online sales,as well as international distribution.We are the one of leading companies in Chinas stationery business that engage in large-scale brand sales management and franchise management.M&G Technologies mainly comprises of online businesses in Tmall and JD.Tmall business is M&G
66、 Technologies Tmall flagship store where customers can place orders.For the business on JD platform,it takes purchase order monthly based on inventory and shelf sales ratio,and responds to purchase order according to M&G Technologies actual inventory condition;after the order is confirmed,it will th
67、en be forwarded to the warehouse system where it then delivers goods to JD according to the confirmed purchase order.M&G Technologies is also responsible for online full platform marketing and management of authorized online stores.M&G retail store businesses include two store types:Jiumu stores and
68、 M&G Life stores.Targeting female consumers aged 15-29,Jiumu Stores primarily sell stationery,cultural and recreative products,educational and entertainment products,and daily household and home products.Jiumu stores are mostly located in high-quality shopping malls in prime urban districts.Jiumu st
69、ores represent the Companys ongoing exploration in new retail model in lifestyle products with a distinct cultural element.Jiumu Store started franchising in July 2018,where franchisees pay contract deposit and decoration fee according to contracts,and store rent,store staff salary,utilities and oth
70、er costs incurred in franchising stores.M&G Annual Report 2020 14/244 Life stores mainly target students aged 8-15,primarily selling stationery products.M&G Life stores mostly locate in Xinhua Bookstore and compound bookstores,M&G Life stores represent the Companys efforts to move beyond the dominan
71、t traditional channels of retail stationery shops nearby schools.In the direct office supplies service business，M&G Colipu provides governments,public institutions,Fortune Global 500 companies and other SMEs with cost-effective one-stop office supplies procurement service.M&G Colipu has a rich produ
72、ct offering,covering office supplies,MRO industrial products,marketing gifts,employee benefits and corporate services,more than one million products including office paper,office stationery,office supplies,office equipment,computers and accessories,digital and communications,office appliances,daily
73、necessities,labor protection industrial supplies,food and beverages,business gifts and office furniture.By shortening the supply chain,M&G Colipu provides customers with cost-effective procurement and customized value-added services.With changing demographics of China in particular the decreasing bi
74、rth rate,it becomes increasingly difficult to achieve revenue growth from unit volume growth in the future,and stationery industry growth is increasingly driven by consumption upgrade and product upgrade.The Companys traditional core businesses are challenged with changing demands from more individu
75、alized population born after 1990 and 2000.Stationery consumption in China is becoming more brand conscious,innovative,individualized and more premium.There is a clear growth in demand for better cultural and creative products,which accelerates industry transformation towards one with more cultural
76、and creative elements.M&G Technologies reflects channel diversification trend and helps the Companys omni-channel strategy by expansion of online business.Jiumu stores and M&G Life stores both serve as the Companys bridgehead to continue products and channels upgrading of its traditional core busine
77、sses,and they play an important role in promoting the Companys brands and products upgrade.M&G Colipus direct office supplies service business meets demands for purchasing office supplies from large corporations and institutions,which helps boosting the sales of writing instruments and office statio
78、nery of the Companys traditional core business.3.Major driver for revenue growth(1)Social transformation and consumption upgrade;(2)State investment in education;(3)Favorable policy environment for culture industry development;(4)Continued growth in household income;(5)Second-child policy;(6)Fragmen
79、ted industry with low concentration.2)Situations and features of industry where the Company operates,and industry 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 Secu
80、rities Regulatory Commission,and results of industry classification of listed companies released by China Securities Regulatory Commission,the Company is classified to stationery,arts,sports and entertainment products industry.The Company is a member of China Stationery&Sporting Goods Association,an
81、d China Writing Instrument Association.During January-November 2020,revenue of Chinas stationery and office supplies industry amounted to RMB136.7 billion,representing a decline of 1%from the previous year,and total profits amounted to RMB7.9 billion,representing a fall of 11%from the previous year.
82、There were 1,033 enterprises above designated size in Chinas stationery and office supplies industry(Source:China Stationery&Sporting Goods Association).In 2020,212 member enterprises of China Writing Instrument Association recorded revenue from principal business of RMB14.5 billion,representing a d
83、ecrease of 11%from the previous year,and realized profits of RMB0.7 billion,representing a decline of 20%from the previous year.In 2020,writing instrument industry exports amounted to USD2.4 billion,down 16%from previous year.Affected by the pandemic,the demand for writing instruments decreased acro
84、ss the world,and export was severely hit in Annual Report 2020 15/244 2020,reaching the lowest point in the past ten years.The writing instrument industry imports amounted to USD800 million,up 1%from the previous year.(Source:China Writing Instrument Association)2.Features of the industry(1)Periodic
85、ity Writing instruments,student stationery and office supplies are less affected by economic fluctuations.With low unit price,writing instruments and student stationery are more of necessity goods with relatively low income elasticity,relatively less sensitive to economic fluctuations.(2)Seasonality
86、 There is seasonality in the demand for student stationery.Months before a new semester(summer and winter vacation)is what the stationery industry calls“schooling peak season”,during which sales of student stationery usually peaks.3.Development trend of the industry With the changes in the way of li
87、fe and consumption habit of consumers,Chinas retail industry entered a new stage of redevelopment and innovation.Stationery industry faces challenges with uncertainty of external environment,diversification of retail channels,and more individualized demands from main customers group(now being the po
88、st-90s and post-00s).With the changing demographics of China in particular the decreasing birth rate,stationery industry revenue growth comes less from by unit volume growth,and more from consumption upgrade and product upgrade.Domestic market demand for mid-to high-end stationery products keeps inc
89、reasing,reshaping market structure dominated by low-end products.This provides opportunities for mid-to high-end stationery products with better quality and higher price.Chinas population of 1.4 billion accounts for about 18%of global population,while leading stationery companies in China can contin
90、ue to mostly rely on the huge domestic market,they also have room for international expansion in international markets,which could reinforce each other under favorable conditions.Traditional retail stationery shops nearby school are still the dominant channel for Chinas stationery industry,and share
91、s of other retail formats are increasing faster.Sales terminals and channels of the industry are becoming more diversified,upgrading and competition in channels becomes more obvious.Domestic consumption for stationery in China becomes more brand conscious,innovative,individualized and more premium.T
92、here is a growing demand for premium cultural and creative products,stationery products are moving from those primarily focus on functionality towards those with more cultural and creative elements catering to customers.There are around thousands of stationery manufacturers in Chinas domestic statio
93、nery industry and the industry is quite decentralized.There are a few leading companies for most sub-category stationery products,with continued development in the stationery industry,there could be higher industry consolidation,and leading companies could gain larger market shares.The market of the
94、 direct office supplies service has been growing fast in China.According to industry research report,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 Govern
95、ment 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 2019,the Notice on Promoting Fair Competition and Optimizing the Business Environment in Governmen
96、t Procurement clearly proposed to accelerate the promotion of electronic government procurement.With strong national policy supports,B2B office supplies procurement in China got a unique opportunity for rapid development.At present days,driven by favorable policies and leading large and medium-sized
97、 enterprises,various digital procurement service providers are entering the market,accelerating development of e-procurement with public purchasing.The continuous integration and development of public procurement and high technology has also promoted the development of public procurement towards mor
98、e professional,intelligent market-oriented and international.Annual Report 2020 16/244 During the pandemic,offline consumption was hindered,and consumption towards online accelerated.According to the National Bureau of Statistics,online retail sales across the country recorded RMB12 trillion in 2020
99、,a year-on-year increase of 11%.Leading consumer products companies seized opportunities of online consumption and achieved sustained growth through online and offline integration.Chinas digital economy accounts for 36%of the total economy(source:China Academy of Information and Communications Techn
100、ology).Data has become a new factor of production.Industrial digitization is becoming the main pillar of the digital economy.Traditional industries have gained growth momentum in the digital age.With smart technology and products upgrade,promotion of national education informatization and the develo
101、pment of the online education market,smart stationery products have developed rapidly in the past few years.Technology-empowered smart pens and smart books are widely adopted in online education,providing an increasingly better user experience.4.Company position in the industry As a leader of“own br
102、and+domestic demand”in Chinas stationery industry,the Company has a strong first-mover and leading advantage,with a wide and deep distribution network coverage in Chinas stationery market.At the end of the Reporting Period,the Company has a national distribution network covering over 80,000 retail s
103、tationery shops using the store sign“M&G Stationery”across China,enabling the Company to establish market leading position for its own brand products amidst competitions.The Company ranked first in“Top Ten Enterprises in Chinas Light Industry and Writing Instrument”for nine consecutive years.II.Expl
104、anation 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 Operation under Chapter IV for more details.III.Analysis on core competitiveness during the
105、 Reporting Period Applicable Not applicable 1.Brand advantage As a leader of“own brand+domestic demand”in Chinas stationery industry,the Company has established a leading position for its own brand products amidst competitions of domestic market.The Company ranked the first in“Top Ten Enterprises in
106、 Chinas Light Industry and Writing Instrument”for nine consecutive years.M&G brand has sound brand recognition among consumers,and served as the designated stationery brand for Boao Forum for Asia for many years.During the Reporting Period,the Company won the Shanghai Brand certification.2.Channel a
107、dvantage The Company has a strong first-mover and leading advantage with a wide and deep coverage of distribution network across China.The Company has established an efficient distribution management system and a domestic terminal network with deep penetration.At the end of the Reporting Period,the
108、Company has 36 tier-one distributor partners,and about 1,200 tier-two and tier-three distributor partners across China,covering over 80,000 retail stationery shops with“M&G Stationery”logo across China.3.Design and R&D advantage The Company has the capability to respond timely to market and strong R
109、&D capacity for new products.The Company conducts market research for new product development and identifies market trends.The Company launches about one thousand new products each year to meet consumer needs,covering writing instruments,writing pads,art materials,office supplies and other categorie
110、s.Through innovation,the Company has developed a variety of products such as quick-drying series,heat erasable series,and professional painting materials.The Company was awarded high profile industrial design Annual Report 2020 17/244 awards including German iF Award,Red Dot Design Award,G-mark,and
111、IDEA,also product design awards such as Gold Ideas Medal and Red Star Medal,reflecting the Companys design capabilities.The Company pioneered application of antibacterial,high-density,spray-free,and biodegradable materials,broadened stationery materials,helped the environmental protection and green
112、development of the industry.4.Technology advantage The Company has raw material formula and production process with intellectual property rights.The Company was recognized as a national high-tech enterprise since 2010.The Company hosts the“national industry design center”,“China key laboratory of li
113、ght industry and writing instrument engineering technology”,“Shanghai research center of writing instrument engineering technology”and other national,provincial and ministerial level technology centers.The testing laboratory of the Company obtained CNAS certification qualification and testing result
114、s are recognized by over 100 countries.The Company has undertaken a number of national,provincial and ministerial-level and independent research and development projects.The Company won two First Prizes for State Science and Technology Progress Award issued by China National Light Industry Council.5
115、.Manufacturing advantage The Company benefits from experience of large-scale manufacturing accumulated from past years,in-house mold capability,reliable supply chain,sound quality control system and adoption of information management systems.The Company has the capability of large-scale manufacturin
116、g with high quality control standard.Its product quality has won general recognition and favorable comments from consumers.The Company promotes the application of intelligent manufacturing technology in the production and inspection,and applies machine vision technology in various key links to impro
117、ve the efficiency.The Company sets itself as a model for transforming the stationery industry towards a leaner manufacturing model.6.Supply chain advantage With the idea of partnership in its business operation,the Company has strived to build a high standard supply chain ecosystem.The Company keeps
118、 upgrading the management for supply chain,and has information collaboration,inventory optimization,financial support,quality and order management,performance optimization to help supply chain partners to be stronger,improve consistency and operation capability of our supply chain partners.Annual Re
119、port 2020 18/244 Chapter IV Discussion and Analysis of Operation I.Discussion and Analysis of Operation In the first half of 2020,due to the impact of the COVID-19 pandemic,both domestic economic growth momentum and foreign trade demand significantly slowed down.The office stationery industry was se
120、verely affected by the macro economy and delayed school openings,especially primary and secondary schools.On the one hand,the Company actively complied with pandemic prevention and control measures;on the other hand,the Company steadily promoted resumption of factory and production,raced against tim
121、e to resume normal operations.In the second half of the year,thanks to the efforts of the state and local government,pandemic was largely brought under control,national GDP resumed positive growth.Company management paid close attention to market dynamics and actively took countermeasures.Guided by
122、company strategy,and driven by innovations,the Company continued to execute its growth strategy and business plans.Adhering to normalized pandemic control measures,the Company managed to maintain its growth momentum and further enhance its competitiveness through such measures as focused channel cul
123、tivation,rapid growth of online business,comprehensive advance of traditional core business and continuous expansion of new businesses.At the same time,the Companys internal management was continuously improved and the restricted stock incentive plan for 2020 was introduced,demonstrating confidence
124、in long-term development and determination to grow stronger.Operation of the Company in 2020 is summarized as follows:1.Push the Four Segments of Traditional Core Business(1)Mass market stationery segment With exploitation of potential,collaboration,product capability as the key words,continued the
125、strong product strategy,develop less and better products.This segment continued to optimize product structure and increase contribution of individual products.It established a mechanism to unleash the potential of long life cycle products and has achieved initial results in the development of long l
126、ife cycle and best-selling products.Promotion for category was carried out collaboratively with offline distribution channel to increase on shelf ratio,coordination was made with online channel to identify potential products and form individual best-selling products for distribution.Online product m
127、anagement and ordering procedures were formulated to meet customer ordering needs and increase online sales of consumer products.(2)Premium stationery segment Improved the development and presentation for key categories based on terminal sale to develop formations of premium stationery segment with
128、strong function;focused on top star products and core popular products to enhance the contribution of individual products,combined with mature serialized products and trendy stationery(such as blind boxes,products featuring IP and season-theme,etc.)to open up a situation where medium and high priced
129、 items coexist.With quality improved on the Companys single stores in key areas,the proportion of high-quality premium stationery products in traditional channels was enhanced.At the same time,the Company shortened the channels,continued to promote direct-to-customer business both at headquarters an
130、d at partner level,focused on quality domestic stationery retail terminals(bookstores,grocery retail and stationery retail terminals).(3)Arts and kids drawing segment Optimized product structure,promoted long life cycle products and new products,increased contribution from key products;made further
131、efforts to build dedicated areas for products of this segment in various channels,developed national art stores,explored big store business,and increased terminal on shelf rate of art products;accelerated the expansion of online product lines and opportunity categories,created online best-selling pr
132、oducts.The online sales of best-selling marker pens,clays,and pigments increased significantly,and professional art and puzzle categories were expanded.Through the promotion Annual Report 2020 19/244 of key product categories,the expansion of dedicated areas,and seminars,arts products for children w
133、ere promoted.Online and offline channels were integrated to promote CARIOCA brand products.The CARIOCA brand added new products to existing portfolios.(4)Office stationery segment Under the pandemic,product development cycle was shortened.Anti-pandemic office supplies were launched.The office statio
134、nery segment was further developed and integrated solutions were proposed so that core products could be put on shelves.The online sales of office supplies significantly increased.Focus was placed on development and breakthrough of“key customer”,“key category”and“key platform”.Developed large office
135、 stationery customers across the country.The segment made further efforts to develop the professional channel model of direct office supplies.2.Focus and Optimize Channels Due to the COVID-19 pandemic,the traditional core business was greatly restricted in the first half of the year.School opening w
136、as delayed,which impacted the operation of terminals near schools.The Companys sales team and partners worked together to actively maintain retail terminals and helped them to boost sales and confidence.With favorable policy support and as the pandemic was largely brought under control,market picked
137、 up during the schooling peak season,many business indicators steadily improved.During the Reporting Period,the Company adhered to its strategy,focused on key terminals,cultivated model stores,pushed optimization and upgrading of domestic channels:(1)improved single store quality,facilitated the upg
138、rading of distribution centers;(2)strengthened categories promotion and dedicated retail spaces for key products,promoted the optimization of the product mix of terminals across the country,opened up channels,and established a normal promotion mechanism for staple products;(3)built dedicated areas f
139、or key categories in the sales terminal,increased the on shelf ratio of staple products on the counter,and improved the quality of single stores;and(4)focused on improving single stores quality in key areas to improve shares in key business districts.At the end of the Reporting Period,the Company ha
140、s 36 tier-one distributor partners,and about 1,200 tier-two and tier-three distributor partners across China,covering over 80,000 retail stationery shops with“M&G Stationery”logo across China.The Company actively promoted M&G Alliance APP,to build a stronger connection among headquarters,multi-tier
141、distribution partners and retail stationery shops with the help of digital tools,improved digitization of business and flow of information.3.Increase Online Sales During the Reporting Period,facing declined demand from offline terminals,M&G Technologies accelerated the development of online distribu
142、tion channels,developed best-selling products based on demand and traffic flow.Growth rate of online business was significantly higher than the industry average:(1)collaborated with the four segments of traditional core business to launch many products for online sales;(2)enhanced online product dev
143、elopment capabilities and made breakthroughs in new products while continuing efforts for existing product portfolios;(3)carried out external and internal live streaming events to improve category promotion efficiency and brand exposure;(4)emphasized market management to strengthen collaboration of
144、the online distribution system;and(5)actively promoted key stores to increase market share and strengthened member operations.During the Reporting Period,M&G Technologies recorded revenue of RMB473 million,representing an increase of 59%from the previous year.During the Reporting Period,M&G Technolo
145、gies increased expenditure on brand promotion and online distribution channels.Unit:0000 M&G Technologies 2020 2019 2018 3-year average Revenue 47,368.78 29,668.20 23,434.15 33,490.38 Net profit-1,195.77-120.59 963.31-117.68 Annual Report 2020 20/244 4.Continue to Improve Brand Image During the Repo
146、rting Period,the Company made progress in corporate brand infrastructure,brand communication,and public relations.Launced a number of season-themed events such as cherry blossom season,children season and exam season.Brand and product information reached core audience.The Companys brand influence an
147、d reputation were enhanced.During such events,the Company gained tens of millions of exposures on social media platforms such as Weibo,Bilibili,and Xiaohongshu;the Company put product placement on websites,print media,WeChat,and Weibo,etc.,gaining tens of millions of exposures which increased brand
148、value.5.Promote Design and R&D During the Reporting Period,the Companys product segments continued innovations based on consumer insights,optimized online and offline products offerings,and improved its product portfolio based on market feedback.The successful development and production of new color
149、 series writing instruments expanded products application.The research projects under the 13th Five-Year National Key R&D Program-New Environmentally Friendly Materials for Writing Instrument,several sub-projects were completed and entered final review stage.The Company promoted cooperation with ext
150、ernal design resources,and launched M&G Global Design Center-Israel Studio,attracting more overseas outstanding designers to contribute the Companys products and brands.6.Steadily Develop Own-operated Retail Stores The Company actively improved product portfolio and service model of its own-operated
151、 retail stores,developed Jiumu Store and tried some remodeling for M&G Life stores.During the Reporting Period,the business of retail stores was greatly affected by the pandemic.In the first half of the year,retail stores were mostly closed or operated abnormally.Since the second half of the year,st
152、ores have gradually recovered operations,customer traffic has gradually picked up.M&G Life(including Jiumu Store)recorded revenue of RMB654 million,representing an increase of 9%.Jiumu Store recorded revenue of RMB558 million,representing an increase of 21%.At the end of the Reporting Period,the Com
153、pany had 441 large own-operated retail stores in China,of which 80 are M&G Life,and 361 are Jiumu Stores(237 own stores and 124 franchise stores).Jiumu Stores continued to optimize its product mix and explored new category opportunities.Jiumu Stores maintained steady development of offline channels,
154、promoted online businesses such as the opening of Tmalls official flagship store,live broadcast,and social media marketing,boosted customer repurchase through several season themed and holiday marketing.M&G Life continued to optimize store operation and management,improved efficiency and reduced sto
155、re labor costs,with single store quality improvement as its main target.During the Reporting Period,due to lower customer traffic and new stores opening,loss of the own-operated retail store business increased.Unit:0000 M&G Life(consolidated)2020 2019 2018 3-year average Revenue 65,484.36 60,063.70
156、30,592.14 52,046.73 Net profit-5,022.93-804.67-3,030.04-2,952.55 Of which,Jiumu Store 2020 2019 2018 3-year average Revenue 55,849.09 46,043.51 15,299.61 39,064.07 Net profit-4,207.86-693.11-2,602.78-2,501.25 7.Continue to Grow M&G Colipu M&G Colipu leveraged its channel advantages,optimized resourc
157、es,boosted supplies for epidemic prevention and control and helped other companies.Relying on its electronic transaction system,intelligent warehousing and logistics system,high-quality product supply chain and personalized service,M&G Colipus business continued to develop.During the Reporting Perio
158、d,M&G Colipu recorded Annual Report 2020 21/244 revenue of RMB5,000 million,representing an increase of 37%from the previous year.Its influence in the direct office supplies service market was further enhanced.(1)Customer Development For government customers,M&G Colipu was shortlisted for e-commerce
159、 projects of the Peoples Government of Shandong Province,Hunan Province,and Chongqing Municipal Peoples Government;for central state-owned enterprises,M&G Colipu was shortlisted for procurement projects of China Resources Group,China Railway,Aluminum Corporation of China and Commercial Aircraft Corp
160、oration of China(COMAC);for financial institutions,M&G Colipu was shortlisted for the branch project of CCB,CEB and SPD Bank;for other enterprises,M&G Colipu won the bidding for procurement projects of Shimao Group,SF Express and Lingang Group.M&G Colipu launched MRO online stores.(2)Warehouse and L
161、ogistics As of the end of the Reporting Period,M&G Colipu operates 6 central warehouses across the country,covering North China,South China,East China,West China,Central China,and Northeast China.The central warehouse in Northeast China was added to improve order responsiveness.At the same time,a ne
162、w central warehouse in East China was put into use,which adopted several intelligent processing systems such as the dense storage system,indicating M&G Colipu becomes one of leading companies with intelligent warehousing and logistics.Unit:0000 M&G Colipu 2020 2019 2018 3-year average Revenue 500,02
163、7.59 365,806.17 258,604.90 374,812.89 Net profit 14,382.86 7,580.35 3,213.52 8,392.24 8.Continue to Improve Internal Management During the Reporting Period,the Company focused on“pandemic prevention and control,production capacity restoration,cost reduction and efficiency enhancement,and quality imp
164、rovement”,established a pandemic prevention and control process,ensured product delivery.The Company actively promoted the MBS(M&G Management System)to implement multiple company-level improvement projects,including new product SKU control,channel efficiency improvement,APP order fulfillment rate im
165、provement,etc.,promoted lean management,formed standard processes,and continuously improved management capabilities.The Company paid equal attention to broadening revenues and saving costs.Costs were cut down and supply chain was improved through product value engineering and lean production.The Com
166、pany continued to advance the proactive prevention mechanism by using big data to analyze potential quality risks and tracking the implementation of improvement measures,to prevent production of defective products from the source and improve product quality.For human resources,through development me
167、thods such as the leadership curriculum system and internal trainer team,high-potential training projects,mentor guidance,job rotation learning,personal development path design,etc.,carried out talent training and ability enhancement.9.Continue Digitalization During the Reporting Period,the Company
168、continued to empower business with data,promoted the construction of data middle platform.The Company refactored the MDM(Commodity Master Data Management)system,and developed and launched the QMS(Quality Management)system and the IPQC(Production Quality Process Inspection)system to visualize quality
169、 inspection process;M&G Alliance APP was upgraded continuously to improve user experience.10.Implement Equity Incentive Plan During the Reporting Period,the Company implemented the 2020 restricted stock incentive plan with the first batch of stocks granted at the end of May 2020.The Companys impleme
170、ntation of the restricted Annual Report 2020 22/244 stock incentive plan is conducive to further improving the Companys governance structure,improving its incentive mechanism,enhancing management team and business backbones sense of responsibility and mission to achieve the Companys sustainable and
171、healthy development,and is also conducive to the Companys sustainable development.During the Reporting Period,the Companys share-based payment recognized as current year expenses was RMB8 million.11.Axus Stationery Export business accounts for more than 70%of the revenue of Axus Stationery.During th
172、e Reporting Period,export was severely affected by the pandemic and the overseas market suffered greatly.Particularly in South America,a key market of Axus Stationery,factories and schools were closed and export revenue declined.In China,the school opening was delayed in the first half of 2020,sales
173、 of the self-owned brand MARCO,which targets students and focuses on basic writing instruments,recorded a year-on-year decline.Through adjustments in the second half of the year,domestic sales were largely restored on par with the same period last year.Factories efficiency was at a multi-year low du
174、e to fluctuaration in capacity utiliazation.During the Reporting Period,Axus Stationery incurred significant losses,primarily due to high manufacturing cost resulting from under utilization of its factories.12.Actively Explore Overseas Markets The Companys products are exported to more than 50 count
175、ries and regions,with distribution and procurement networks in Thailand,Vietnam,Malaysia and other countries.During the Reporting Period,the Company actively explored overseas markets,and dispatched experienced project teams to Africa,promoted M&G products and business models based on local conditio
176、ns.With the mission of“providing affordable and quality stationery to local students”,the Company started to form a channel model and product development tailored to local conditions.II.Financial Performance during the Reporting Period In 2020,the Company recorded revenue of RMB13,137,745,700,repres
177、enting an increase of 17.92%from the previous year.The net profit attributable to shareholders of the listed company amounted to RMB1,255,426,700,representing an increase of 18.43%from the previous year,while net profit attributable to shareholders of the listed company after deducting non-recurring
178、 profit and loss amounted to RMB1,102,712,300,representing an increase of 9.70%as compared to the corresponding period of last year.As at the end of 2020,total asset of the Company amounted to RMB9,709,908,400,representing an increase of 28.35%from the previous year.The net asset attributable to sha
179、reholders of the listed company amounted to RMB5,193,568,700,representing an increase of 23.61%from the previous year.The Company has maintained health growth and sound asset condition.Annual Report 2020 23/244 1)Analysis of principal operation 1.1.Analysis of change in certain items in income state
180、ment 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 13,137,745,727.18 11,141,101,364.44 17.92 Operation cost 9,806,609,999.48 8,229,837,268.86 19.16 Selling expenses 1,103,184,023.51 980,166,101.
181、18 12.55 Administrative expenses 602,627,135.41 469,262,188.13 28.42 R&D expenses 160,178,941.89 160,403,362.97-0.14 Financial expenses 9,060,176.35-8,397,277.65 207.89 Net cash flow generated from operating activities 1,271,697,892.28 1,081,941,383.68 17.54 Net cash flow generated from investing ac
182、tivities-1,065,448,932.04-74,352,686.18-1,332.97 Net cash flow from financing activities-200,057,726.09-364,300,101.66-45.08 2.2.Analysis of revenue and cost Applicable Not applicable During the Reporting Period,the Companys traditional core business increased by 9%as compared to the corresponding p
183、eriod of last year,and new business increased by 32%as compared to the corresponding period of last year.(1).(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 rev
184、enue from last year(%)Change in cost from last year(%)Change in gross profit margin from last year(%)Manufacturing and sales of stationery and office supplies 7,745,854,967.03 5,165,288,162.73 33.32 9.33 6.35 Increase by 1.87 percentage points Retail industry 5,385,322,954.25 4,641,066,357.09 13.82
185、32.96 37.61 Decrease by 2.91 percentage points Annual Report 2020 24/244 Service industry 2,368,196.45/-48.10/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
186、 last year(%)Writing instruments 2,280,319,347.53 1,349,337,371.37 40.83 4.29-2.44 Increase by 4.08 percentage points Student stationery 2,705,879,062.04 1,801,327,917.08 33.43 2.29 1.13 Increase by 0.77 percentage points Office stationery 2,821,455,762.73 2,024,465,110.41 28.25 20.22 17.30 Increase
187、 by 1.79 percentage points Other products 323,247,832.92 180,119,757.57 44.28 8.30 12.64 Decrease by 2.15 percentage points Direct sales of office supplies 5,000,275,916.06 4,451,104,363.39 10.98 36.69 40.01 Decrease by 2.11 percentage points Management fee for franchising 2,368,196.45/-48.10/Result
188、 of principal business by region By geography 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 12,770,598,738.37 9,508,541,355.21 25.54 18.75 19.81 Decrease by 0.66 percentage points Other co
189、untries 362,947,379.36 297,813,164.61 17.95-5.91 1.57 Decrease by 6.04 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,reven
190、ue from retail industry and revenue from service industry.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.Revenue from service industry refers to manageme
191、nt fee for franchising.The reasons for the decrease during the Reporting Period were:(1)The number of franchise stores of Jiumu Stores decreased;(2)The franchise stores of traditional channels stopped charging franchise management fees since 2017,and the management fees that have been collected are
192、recognized in the benefit year.4.Writing instruments refer to products of writing utensil sold by the Company(excluding M&G Colipu).Annual Report 2020 25/244 5.Student stationery refers to products of student stationery sold by the Company(excluding M&G Colipu).6.Office stationery refers to products
193、 of office supplies sold by the Company(excluding M&G Colipu).7.Other products refer to products sold by the Company(excluding M&G Colipu)apart from writing instruments,student stationery and office supplies.8.Direct sales of office supplies refer to products in all categories sold by M&G Colipu.Dur
194、ing the Reporting Period,business of M&G Colipu developed rapidly.Unit:0000 Result of revenue by business Business Revenue in 2020 Revenue in 2019 Change in amount Change Traditional core business 757,611.01 694,737.18 62,873.83 9.05%Colipu Office Supplies business 500,027.59 365,806.17 134,221.42 3
195、6.69%Retail large store business 65,484.36 60,063.70 5,420.66 9.02%Transactions offset-9,348.39 -6,496.91-2,851.48 Total 1,313,774.57 1,114,110.14 199,664.43 17.92%(2).(2).Analysis of production and sales volume Applicable Not applicable Major products Unit Production Sales Inventory Change in produ
196、ction from last year(%)Change in sales from last year(%)Change in inventory from last year(%)Writing instruments Piece 2,327,748,721 2,313,385,523 595,035,911 1.12 1.88 2.47 Student stationery Piece 5,356,021,889 5,336,153,012 664,318,843-2.52 0.58 3.08 Office stationery Piece 1,621,574,646 1,605,11
197、5,091 155,040,179 13.93 13.54 11.88 Other products Piece 10,234,954 9,552,791 6,092,965-18.62 4.08 12.61 Direct sales of office supplies Piece 375,325,301 374,156,127 22,283,146 29.21 29.68 5.54 Explanation on production and sales volume No (3).(3).Analysis of cost Unit:RMB Yuan Annual Report 2020 2
198、6/244 By industry By industry Cost item Amount in the current period Percentage of total costs for the current period(%)Amount in 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
199、last year(%)Explanation on the situation Manufacturing and sales of stationery and office supplies Cost of principal business 5,165,288,162.73 52.67 4,856,789,638.83 59.02 6.35 Retail industry Cost of principal business 4,641,066,357.09 47.33 3,372,542,728.19 40.98 37.61 Service industry/By product
200、By product Cost item Amount in the current period Percentage of total costs for the current period(%)Amount in 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(%)Explana
201、tion on the situation Writing instruments Cost of principal business 1,349,337,371.37 13.76 1,383,090,906.87 16.81-2.44 Student stationery Cost of principal business 1,801,327,917.08 18.37 1,781,278,080.67 21.65 1.13 Office stationery Cost of principal business 2,024,465,110.41 20.64 1,725,910,247.5
202、6 20.97 17.30 Other products Cost of principal business 180,119,757.57 1.84 159,902,745.78 1.94 12.64 Direct sales of office supplies Cost of principal business 4,451,104,363.39 45.39 3,179,150,386.14 38.63 40.01 Management fee for franchising/Explanation on other situations of cost analysis Cost in
203、creased simultaneously with sales.The growth in the costs of direct office supplies service business is mainly because business of M&G Colipu developed rapidly and sales increased.Annual Report 2020 27/244 (4).(4).Major customers and suppliers Applicable Not applicable Sales of the top 5 customers a
204、mounted to RMB2,276,310,000,accounting for 17.33%of the total annual sales.Of the sales of the top 5 customers,sales of related parties amounted to RMB439,540,000,accounting for 3.35%of the total annual sales.Unit:RMB Yuan Rank Customer name Amount Related relationship 1 First 711,492,936.94 No 2 Se
205、cond 439,535,408.86 Yes 3 Third 382,832,718.47 No 4 Fourth 377,120,118.00 No 5 Fifth 365,330,048.64 No Total 2,276,311,230.91 Related relationship between the Company and top five customers in 2020:the second customer is Nanjing Zhaochen Stationery Sales Co.,Ltd,a sales company controlled by Guo Wei
206、long who is a close family member 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 him is the related legal
207、 person of the Company.Purchase amount of the top 5 suppliers amounted to RMB1,401,640,000,accounting for 15.39%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 annual purchase amount.U
208、nit:RMB Yuan Rank Rank of suppliers Amount Related relationship 1 First 381,920,265.59 No 2 Second 313,739,685.53 No 3 Third 304,078,713.52 No 4 Fourth 213,912,775.27 No 5 Fifth 187,985,398.96 No Total 1,401,636,838.87 There was no related relationship between the Company and the top 5 suppliers in
209、2020.Other descriptions No 3.3.Expense Applicable Not applicable Unit:RMB Yuan Item in statement Amount in the current period Amount in the last period Change in the proportion(%)Reason for change Selling expenses 1,103,184,023.51 980,166,101.18 12.55 Administrative expenses 602,627,135.41 469,262,1
210、88.13 28.42 R&D expenses 160,178,941.89 160,403,362.97-0.14 Financial expenses 9,060,176.35-8,397,277.65 207.89 Please see details below Explanation on the reason for change in financial expenses:Financial expenses increased by RMB17,450,000,representing an increase of 207%as compared to the corresp
211、onding period of last year.Reasons for change:(1)The exchange loss during the Reporting Period increased compared with the same period last year;(2)The interest income obtained decreased compared with the corresponding period of last year.Annual Report 2020 28/244 4.4.R&D investment(1).Table of R&D
212、investment Applicable Not applicable Unit:RMB Yuan Expensed R&D investment in the current period 160,178,941.89 Capitalized R&D investment in the current period 0.00 Total R&D investment 160,178,941.89 Proportion of total R&D investment in operating income(%)1.22 Number of the Companys R&D staff 462
213、 Percentage of the number of R&D staff to the Companys total number of employees(%)8.12 Percentage of capitalized R&D investment(%)0.00 (2).Explanation on the result Applicable Not applicable The total R&D investment accounted for 3.82%of the parent companys operating income.5.5.Cash flow Applicable
214、 Not applicable Unit:RMB Yuan Item Amount in the current period Amount in the same period last year Change in the proportion(%)Reason for change Net cash flow generated from operating activities 1,271,697,892.28 1,081,941,383.68 17.54 Net cash flow generated from investing activities-1,065,448,932.0
215、4-74,352,686.18-1,332.97 Mainly because the bank wealth management products were purchased at a higher price than they are redeemed during the Reporting Period,while the bank wealth management products were purchased at a lower price than they are redeemed in the corresponding period of last year.Ne
216、t cash flow from financing activities-200,057,726.09-364,300,101.66-45.08 1.The employee equity incentive was implemented during the Reporting Period,and the net equity investment absorbed increased by RMB132 million compared with the corresponding period of last year(the capital increase of M&G Col
217、ipu),which increased the inflow of the current period;2.During the Reporting Period,the dividends paid,the net amount of borrowed and repaid principals,and the interest paid on Axus Stationery loans decreased by RMB23 million as compared with the corresponding period of last year,which decreased the
218、 outflow in the current period.Annual Report 2020 29/244 2)Explanation on significant change of profit caused by non-core business Applicable Not applicable 3)Analysis of assets and liabilities Applicable Not applicable 1.1.Assets and liabilities Unit:RMB Yuan Items Amount as at the end of the curre
219、nt 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 percentage for the current period over the last period(%)Explanation Cash and equivalents 2,562,158,926.11 26.39 1,935,600,694.35 2
220、5.59 32.37 Increase in cash and equivalents brought by the growth of income and net profit.Held-for-trading financial assets 1,428,277,848.33 14.71 661,878,587.24 8.75 115.79 Mainly because the unredeemed bank wealth management products increased as compared with the corresponding period of last yea
221、r.Accounts receivable 1,561,211,468.90 16.08 1,026,094,724.15 13.56 52.15 The growth in sales in the second half of the year caused the accounts receivable to increase,of which M&G Colipu had a longer account period and the accounts receivable increased significantly.Receivables financing 61,412,976
222、.46 0.63 29,549,924.83 0.39 107.83 Mainly because M&G Colipu received more bank acceptance bills as compared with the corresponding period of last year.Prepayment 131,596,384.76 1.36 85,371,444.73 1.13 54.15 Mainly because the Company developed and was required to make more advance payments for good
223、s.Non-current assets due within one year 4,637,213.00 0.05 0.00 Compensation payable to the Company by the original shareholders of Axus Stationery according to the agreement will expire within one year.Long-term receivables 0.00 6,624,590.00 0.09-100.00 Compensation payable to the Company by the or
224、iginal shareholders of Axus Stationery according to the agreement was partially recovered during the Reporting Period,and the remaining receivables will be due within one year.Investments in 5,476,577.42 0.06 3,909,179.93 0.05 40.10 Increase in return on the investment for Shanghai M&G Annual Report
225、 2020 30/244 other equity instruments Culture and Creativity(上海晨光文化創意)held by the Company for non-transaction purpose Fixed assets 1,847,635,724.45 19.03 1,163,702,352.12 15.38 58.77 Mainly because Songjiang office house and Qingcun Production Base Construction Project were converted into fixed asse
226、ts.Construction in progress 54,946,300.66 0.57 260,469,728.76 3.44-78.90 Mainly because Qingcun Production Base Construction Project was converted into fixed assets.Goodwill 0.00 30,175,537.19 0.40-100.00 After the goodwill impairment test,the Company made provision for impairment of all the goodwil
227、l formed by the acquisition of Axus Stationery.Deferred income tax assets 99,939,414.58 1.03 36,623,535.59 0.48 172.88 Deferred income tax assets were mostly generated from the share-based payment expenses related to equity incentives,the asset depreciation and amortization difference between M&G Co
228、lipus parent company and subsidiary companies,deferred income,and deductible losses.Other non-current assets 6,258,468.47 0.06 315,153,408.27 4.17-98.01 Mainly because Songjiang office house was converted into fixed assets.Accounts payable 2,602,020,507.99 26.80 1,861,072,467.87 24.60 39.81 The Comp
229、anys sales growth in the fourth quarter also brought an increase in purchases,of which M&G Colipu increased significantly.Accounts received in advance 0.00 206,762,293.94 2.73-100.00 According to the requirements of the new revenue standards,the advance receipts that meet the requirements of the sta
230、ndards were transferred to contract liabilities.Taxes payable 477,240,219.10 4.91 258,583,118.14 3.42 84.56 1.The growth of revenue and total profit in the fourth quarter caused the turnover tax payable and corporate income tax payable to increase;2.Timing difference of tax payment for some companie
231、s.Other payables 625,468,675.97 6.44 331,438,976.35 4.38 88.71 Mainly because the obligation to repurchase restricted stocks,unpaid provisional estimate of the construction project of the Qingcun Production Base Construction Project,and the margins collected by M&G Colipu from suppliers increased.Co
232、ntract liabilities 114,100,035.35 1.18 0.00 According to the requirements of the new revenue standards,the advance receipts that meet the requirements of the standards were transferred to contract liabilities.Other current liabilities 13,746,089.97 0.14 0.00 Taxes and charges relating to contract li
233、abilities.Annual Report 2020 31/244 Estimated liabilities 12,211,357.80 0.13 0.00 Possible liabilities incurred by returned goods according to the requirements of the new revenue standards.Other descriptions No 2.2.Major restricted assets as at the end of the Reporting Period Applicable Not applicab
234、le On 24 September 2020,Axus Stationery and Industrial Bank Co.,Ltd.Shanghai Zhangyang Branch entered into the Line Credit Contract numbered Zhang Yang SXAS2020 with the credit line of RMB250,000,000.00 for 12 months from 24 September 2020 to 23 September 2021.The specific types of line business inc
235、lude,but are not limited to,working capital loans,bank notes,and letters of credit.On 24 September 2020,Axus Stationery and Industrial Bank Co.,Ltd.Shanghai Zhangyang Branch entered into the Maximum Mortgage Contract numbered Zhang Yang DYAS2020.This contract is a sub-contract of the Line Credit Con
236、tract.The maximum principal limit of the mortgage under this contract is RMB200,000,000.00,and the mortgage limit is valid from 24 September 2020 to 23 September 2021.The mortgage term runs from the effective date of the mortgage contract to the termination of litigation for facility credit.The coll
237、aterals 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 47,061,453.52 24,976,111.47 22,085,342.05 No.233 Xuezi South Road,Xianghuaqiao Street,Qingpu District HFDQ
238、 Zi(2013)No.013396 32,156,238.78 12,856,455.39 19,299,783.39 No.333 Xuezi South Road,Xianghuaqiao Street,Qingpu District HFDQ Zi(2015)No.015718 60,230,210.97 15,309,106.79 44,921,104.18 Total 139,447,903.27 53,141,673.65 86,306,229.62 Under the framework of the above-mentioned Line Credit Contract a
239、nd Maximum Mortgage Contract,on 24 September 2020,Axus Stationery and Industrial Bank Co.,Ltd.Shanghai Zhangyang Branch signed the Working Capital Loans Contract numbered Zhang Yang LDAS2020,with the contractual loan amount of RMB180,000,000.00,the loan period of 12 months from 25 September 2020 to
240、24 September 2021,and the loan interest rate of one-year term LPR.As of 31 December 2020,the outstanding loan of Axus Stationery was RMB180,000,000.00.3.3.Other descriptions Applicable Not applicable 4)Analysis on industry operating information Applicable Not applicable Please refer to“I.Description
241、 of the Companys principal business,operation model and industry condition during the Reporting Period”set out in“Business Overview”of Chapter III.Annual Report 2020 32/244 5)Analysis of investment 1 1、Overall analysis of external equity investment Applicable Not applicable During the Reporting Peri
242、od,the Company made foreign investments.(1)(1)Significant equity investment Applicable Not applicable 1.The Company has established a wholly-owned subsidiary,Shanghai Chenxun Enterprise Management Co.,Ltd.,with a registered capital of RMB70 million;the Company has completed the relevant industrial a
243、nd commercial registration procedures,and has not yet paid the capital;2.the Company has established a subsidiary Shanghai Qizhihaowan Cultural and Creative Co.,Ltd.,with an investment of RMB57 million;the Company has promised but has not contributed RMB57.0 million,with the shareholding ratio of 57
244、%.(2)(2)Significant non-equity investment Applicable Not applicable (3)(3)Financial assets measured at fair value Applicable Not applicable 6)Sale of significant assets and equity interests Applicable Not applicable 7)Analysis of major controlled companies and shareholding companies Applicable Not a
245、pplicable Unit:0000 Currency:RMB Company Name Nature of the business Major products and services Registered capital Total asset 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 3,426.47-603.38 322.06 Shanghai M&G
246、 Colipu Office Supplies Co.,Ltd.Wholesale and retail Office supplies 66,000.00 243,746.53 56,879.45 14,382.86 Shanghai M&G Stationery&Gift Co.,Ltd.（上海晨光文具禮品有限公司）Wholesale and retail Stationery and office supplies 19,941.94 121,266.40 46,755.47 8,037.45 M&G Life Enterprise Management Co.,Ltd.（晨光生活館企業
247、管理有限公司）Wholesale and retail Stationery and office supplies 10,000.00 43,751.23-7,469.18-5,022.93 Shanghai M&G Jiamei Manufacturing,Stationery and 3,000.00 4,800.12 3,842.31 104.69 Annual Report 2020 33/244 Stationery Co.,Ltd.（上海晨光佳美文具有限公司）wholesale and retail office supplies Shanghai M&G Information
248、 Technology Co.,Ltd.（上海晨光信息科技有限公司）Wholesale and retail Office supplies 5,000.00 22,748.86 5,598.78-1,195.77 Shenzhen Erya Creative and Cultural Development Co.,Ltd.（深圳爾雅文化創意發展有限公司）Design and so forth Design,office supplies and so forth 2,000.00 2,795.57 1,216.19 30.47 Shanghai M&G Office Supplies Co
249、.,Ltd.Wholesale and retail Office supplies 5,000.00 41,251.68 13,052.09 3,416.63 Axus Stationery(Shanghai)Company Ltd.Production,sale and so forth Stationery and office supplies 8,100.00 68,842.62 17,313.85-7,884.61 8)Structured entities controlled by the Company Applicable Not applicable III.Discus
250、sion and analysis on future development of the Company 1)Industry pattern and trend Applicable Not applicable With the changes in the way of life and consumption habit of consumers,Chinas retail industry entered a new stage of redevelopment and innovation.Stationery industry faces challenges with un
251、certainty of external environment,diversification of retail channels,and more individualized demands from main customers group(now being the post-90s and post-00s).With the changing demographics of China in particular the decreasing birth rate,stationery industry revenue growth comes less from by un
252、it volume growth,and more from consumption upgrade and product upgrade.Domestic market demand for mid-to high-end stationery products keeps increasing,reshaping market structure dominated by low-end products.This provides opportunities for mid-to high-end stationery products with better quality and
253、higher price.Chinas population of 1.4 billion accounts for about 18%of global population,while leading stationery companies in China can continue to mostly rely on the huge domestic market,they also have room for international expansion in international markets,which could reinforce each other under
254、 favorable conditions.Traditional retail stationery shops nearby school are still the dominant channel for Chinas stationery industry,and shares of other retail formats are increasing faster.Sales terminals and channels of the industry are becoming more diversified,upgrading and competition in chann
255、els becomes more obvious.Domestic consumption for stationery in China becomes more brand conscious,innovative,individualized and more premium.There is a growing demand for premium cultural and creative products,stationery products are moving from those primarily focus on functionality towards those
256、with more cultural and creative elements catering to customers.There are around thousands of stationery manufacturers in Chinas domestic stationery industry and the industry is quite decentralized.There are a few leading Annual Report 2020 34/244 companies for most sub-category stationery products,w
257、ith continued development in the stationery industry,there could be higher industry consolidation,and leading companies could gain larger market shares.The market of the direct office supplies service has been growing fast in China.According to industry research report,the scale of the market of bro
258、ad 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 explicitly requires that the state shall promote the utilization of i
259、nformation networks for carrying out digital government procurement.In 2019,the Notice on Promoting Fair Competition and Optimizing the Business Environment in Government Procurement clearly proposed to accelerate the promotion of electronic government procurement.With strong national policy support
260、s,B2B office supplies procurement in China got a unique opportunity for rapid development.At present days,driven by favorable policies and leading large and medium-sized enterprises,various digital procurement service providers are entering the market,accelerating development of e-procurement with p
261、ublic purchasing.The continuous integration and development of public procurement and high technology have also promoted the development of public procurement towards more professional,intelligent market-oriented and international.During the pandemic,offline consumption was hindered,and consumption
262、towards online accelerated.According to the National Bureau of Statistics,online retail sales across the country recorded RMB12 trillion in 2020,a year-on-year increase of 11%.Leading consumer products companies seized opportunities of online consumption and achieved sustained growth through online
263、and offline integration.Chinas digital economy accounts for 36%of the total economy(source:China Academy of Information and Communications Technology).Data has become a new factor of production.Industrial digitization is becoming the main pillar of the digital economy.Traditional industries have gai
264、ned growth momentum in the digital age.With smart technology and products upgrade,promotion of national education informatization and the development of the online education market,smart stationery products have developed rapidly in the past few years.Technology-empowered smart pens and smart books
265、are widely adopted in online education,providing an increasingly better user experience.2)Development strategy of the Company Applicable Not applicable To consolidate competitive advantages of traditional core businesses by adhering to the mission of make study and work more joyful and effective,bei
266、ng consumer centric,and emphasizing on innovation of technology and products;to further develop new business including direct office supplies service and own-operated retail stores;to actively expand international market;and to promote digitalization,organization development and talents,mergers and
267、acquisitions with synergy.With continued efforts in those four areas,to realize the vision of becoming a world-class M&G.Annual Report 2020 35/244 The Companys mission is to make study and work more joyful and effective,and the Companys vision is to become a world-class M&G.3)Operation plan Applicab
268、le Not applicable In 2021,the Company plans to reach revenue of RMB16,200,000,000,an increase of 23%,mainly through the following:1.Traditional core business To make good use of the advantages in channel,brand,design and R&D and supply chain,to maintain fast and stable growth in traditional core bus
269、iness,improve the quality of development,continue product mix upgrade,and improve quality of online business.(1)Promote four segments comprehensively Mass market stationery segment The Company will focus on development of long life cycle products and best-selling products,increase share of long life
270、 cycle products,increase new products with longer life cycle with new functions,new technologies and at higher prices.Continue to improve design capabilities and quality.Using MBS method to continuously optimize new product development process and reduce lead time of product development.The Company
271、will take advantage of online channels to enhance the sales of mass market products.Premium stationery segment The Company will continue to optimize the existing product offering of premium stationery segment,improve product mix,increase contribution of single products,create a series of best-sellin
272、g products,and increase the proportion of premium stationery segment in traditional channels;and develop tailored premium stationery products for Jiumu Stores,direct channels,E-commerce and APPs to better meet demand of higher income consumers.The Company will also focus more on best-selling product
273、s by better coordinating marketing,design,supply chain and channel actions,improve the launch pace and distribution of IP products.Office stationery segment The Company will strengthen the development and promotion of office products,focus on the development of high-end innovative products in terms
274、of solving pain points of end users,optimize quality control process;promote channel transformation with direct supply from the headquarters focusing on the development of key customers;expand M&G stores for office supplies and develop model stores for office supplies on a continuous basis;focus on
275、development of online office supplies in all categories and multiple channels to drive the overall growth of the office supplies.Arts and kids drawing segment The Company will focus on product design and quality upgrade and development of high-value best-selling products;create best-selling products
276、 and drive channels through categories;develop e-commerce product lines with integrated thinking,carry out cultivation of categories to form M&Gs integrated online product matrix+channel promotion matrix+supply support plan of arts products for children,and build loyalty of childrens arts category a
277、t new channels;exert more efforts in the exploration of new categories;expand category width and improve the store product structure.（2)Focus on and further develop traditional channels,and promote channel transformation Annual Report 2020 36/244 The Company will focus on key terminals,and build mod
278、el stores to improve single store quality,facilitate the optimization and upgrading of franchise stores and delivery centers,and upgrade channel.Besides,the Company will also strengthen promotion for categories and dedicated zones for products to increase on shelf ratio of the must-have products,inc
279、rease presence in major business districts and expand market share,promote direct supply both at headquarters and partners level to create incremental sales.The Company will better utilize data to upgrade traditional distribution network,including using M&G Alliance APP to shorten the feedback betwe
280、en retail terminal and the Company,to form a closed-loop order and increase the number of APP monthly active users.(3)Improve online business quality M&G Technologies will join in hands with product segments to launch online products and build a standard process for online product development,explor
281、e opportunities in key categories,improve product efficiency,improve online product offering;use platform data to guide the development of premium products;coordinate brand and the segments to build the content output capacity of product promotion.To build promotion matrix of celebrity,live broadcas
282、t and video,to promote new channel business including Douyin live broadcast and Xiaohongshu;enhance online operations capabilities by combining Tmall digital category captain project and promote a more refined membership operations.(4)Continue digitalization In line with corporate strategy,the Compa
283、ny plans to build foundation for M&Gs data governance,initiate quick-win projects for members and channels,and improve products and core business processes of the supply chain.The Company will establish a unified data standard to improve M&Gs data analysis;upgrade the existing dealer information sys
284、tem to improve the ability to select the right stores and deliver the right goods;use member operations as a key handle to grow online business.(5)Axus Stationery to reduce loss Stabilize overseas markets and continue to develop MARCOs own brand and online business,build brand image of MARCOs profes
285、sional art pencils,increase sources of revenue and cut costs,increase efficiency,improve quality improvement and new product launch,aiming for an turnaround.2.New business development(1)Continue to develop retail large store business For Jiumu Stores,continue to exert efforts in member operations,cl
286、osed-loop online business,continuous optimization of products,and optimization of store operating standards to achieve high-quality growth of offline channels and higher growth of online business.As M&Gs bridgehead in upgrading its products and channels,Jiumu stores will work closely with the Compan
287、y to increase the sales ratio of premium products.M&G Life will improve operation capacity of the stores and sales of per employee,and optimize human resource cost for stores.(2)Continue to grow M&G Colipu Business in direct sales of office supplies continues to achieve booming development since M&G
288、 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 administration supplies.Renowned companies in the industry continue to
289、enhance competitiveness through improving service quality,enriching product categories,seeking more customers and developing nationwide supply chain system.M&G Colipu is expected to maintain relatively rapid growth,and become one of the main competitors in its market.M&G Colipu will continue to win
290、new large national customers,while maintaining good services for contracted projects,to increase Annual Report 2020 37/244 prefecture-level city coverage,strengthen sales and service capabilities,and improve supply chain systems,to enhance service efficiency,better meet market needs,and improve orga
291、nizational capabilities.4)Potential risks Applicable Not applicable 1.Risks in operation management With the 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 h
292、as developed operation management system and internal control system that accord with features of its business and technology in its development,and has recruited and cultivated stable core management team,operation of the Company will be adversely affected if the aforesaid management system and man
293、agement staff fail to promptly adapt to the rapid expansion of the Company.Therefore,the Company will keep improving 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 upg
294、rading,stationery market presents opportunities for structure-based development.If the Company is unable to anticipate 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 competitio
295、n.Having been aware of the problem,the Company enhanced product R&D under the guidance of the market,optimized product 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.3.Risk
296、s from fiscal and taxation According to Article 28 of Enterprise Income Tax Law of the Peoples 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-reco
297、gnized as a national high-and new-tech enterprise on 28 October 2019,and started to implement 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 re
298、view after its qualification of high-and new-tech enterprise expires,operation performance 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 an
299、d passes the annual review and renewal for high-and new-tech enterprises.4.Risks from COVID-19 Since the outbreak of 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
300、been affected by macro-economy and delay in new semester,especially for primary and middle schools.The impact of COVID-19 on the macro-economy is uncertain,adding uncertainties to the Annual Report 2020 38/244 Companys operation in 2021.The Company pays close attention to the development of COVID-19
301、,and adopts active measures to reduce risks and uncertainties brought by 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 appl
302、icable Annual Report 2020 39/244 Chapter V Major Events I.Proposal for 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
303、 is implemented after it was passed at the 20th meeting of the fourth Board meeting and 2019 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 wh
304、ich shareholders are entitled to receive dividends and other kinds of distribution 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
305、Company is allowed to distribute profit in cash or shares,but its profit 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 div
306、idends in cash or shares,or cash-and-shares,and if the Company satisfies 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 distr
307、ibution policy.The Company may distribute cash dividend when it makes a 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 d
308、istributable profits.In general,if there are no material investment plans 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 t
309、otal profit distribution,the Board of Directors shall take into full account 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 dis
310、tinguish the following situations and determine differentiated cash dividend 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 div
311、idends in the profit distribution shall be at least 80%when the profit distribution 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 distr
312、ibution is made;Annual Report 2020 40/244 (3)If the Company is at a growing 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 grow
313、ing stage of development and has significant capital expenditure arrangement,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
314、:(1)The proposed external investment,acquisition of assets or purchase of 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,acquis
315、ition of assets or purchase of equipment by the Company in the coming twelve 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
316、and approved at the general meeting after being reviewed by the Board meeting.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
317、 proportions are clearly stated,and relevant decision making procedures 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 ha
318、ve been fully protected.Annual Report 2020 41/244 2)Plan or proposal for dividend distribution of 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
319、shares per 10 shares(shares)Amount of dividends distributed per 10 shares(Yuan)(inclusive of tax)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 statem
320、ents for the distribution year Percentage of the net profit attributable to the ordinary shareholders of the listed company in the consolidated financial statements(%)2020 0 5 0 463,713,800.00 1,255,426,655.27 36.94 2019 0 4 0 368,000,000.00 1,060,083,625.03 34.71 2018 0 3 0 276,000,000.00 806,847,3
321、08.41 34.21 3)The inclusion of shares repurchased through cash offer in 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 d
322、isclose the reasons,the usage and the utilization plan of the undistributed 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 subsiste
323、d in the Reporting Period Applicable Not applicable Annual Report 2020 42/244 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
324、 in a timely manner If not performed in time,describe the specific reasons 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,Chen Xueling Undertaking for restriction on sale of shares
325、and voluntary lockup undertaking by the controlling shareholderM&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 tr
326、ansferred or entrusted to other person for management,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 closi
327、ng price is lower than the issue price as at the end 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 pe
328、riod is 42 months from the date when shares of the 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
329、price of shares of the Company;(3)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 listing by any means,the price of the shareholding reduction shall not be lower than the offering price of t
330、he 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 capitalization from capital reserve to share capital before the reduction of the aforesaid shares,the price of
331、 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.36 months Yes Yes Restriction on sale of shares Keying Investment Undertaking for restriction on sale of shares and voluntary lo
332、ckup undertaking by Keying Investment and Jiekui Investment,shareholders holding more than 5%of the equity 36 months Yes Yes Annual Report 2020 43/244 ,Jiekui Investment(1)Within 36 months from initial public offering and listing of the Company,the shares of the Company issued prior to the offering
333、or listing shall neither be transferred or entrusted to other person for management,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 end of the six-month
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