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晨光文具2019年年度报告(英文版) 下载公告
公告日期:2020-06-03

Stock Code: 603899 Short Name: M&G Stationery

Shanghai M&G Stationery Inc.

Annual Report 2019

Important Notice

I. The Board of Directors, Supervisory Committee, directors, supervisors and seniormanagement of the Company warrant that the contents of this report are true,accurate and complete, without any misrepresentation, misleading statements ormaterial omissions, and severally and jointly bear the legal responsibilities thereof.

II. All directors of the Company attended the Board meeting.

III. BDO China Shu Lun Pan Certified Public Accounts LLP has issued the audit reportwith unqualified opinions to the Company.

IV. Chen Huwen, the chairman of the Company, Zhang Qing, the CFO of the Company

and Zhai Yu, the head of the accounting department (person in charge of accounting),warrant the truthfulness, accuracy and completeness of the financial report in thisannual report.

V. Profit distribution plan or plan to convert surplus reserves into share capital approvedby the Board of Directors during the Reporting PeriodThe Company will distribute cash dividend of RMB4.00 (tax inclusive) per 10 shares based onthe Company’s total share capital registered as at the registration date for the implementation ofdividend distribution, with the distributed profit totaling RMB368,000,000. The remainingdistributable profits in 2019 will be carried forward to the following year.

VI. Risks statement of the forward-looking statements"√ Applicable" "□ Not applicable"Forward-looking statements including future plans and development strategies involved in thisannual report do not constitute the Company’s substantive commitments to investors. Theinvestors are advised 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 partiesNo

VIII. Has the Company provided any external guarantees in violation of the decision-

making proceduresNo

IX. Warning on significant risksThe Company has illustrated various risks and corresponding measures that the Company mightface in the production and operation. Please refer to the “Potential Challenges and Risks” setout in the “Discussion and Analysis of Operation” under Section IV. Investors are advised to payattention to risk of investment.

X. Others"□ Applicable" "√ Not applicable"

本报告分别以中、英文编制,在对中外文文本的理解上发生歧义时,以中文文本为准。

This English version is converted from the Chinese version.In case of any discrepancy between the Chinese version and the English version,

the Chinese version shall prevail.

Contents

Chapter I Definition ...... 5

Chapter II Company Profile and Key Financial Indicators ...... 6

Chapter III Business Overview ...... 14

Chapter IV Discussion and Analysis of Operation ...... 21

Chapter V Major Events ...... 50

Chapter VI Changes in Ordinary Shares and Shareholders ...... 71

Chapter VII Preference Shares ...... 78

Chapter VIII Directors, Supervisors, Senior Management and Employees ...... 79

Chapter IX Corporate Governance ...... 87

Chapter X Corporate Bonds ...... 91

Chapter XI Financial Report ...... 92

Chapter XII References ...... 308

Chapter I Definition

I. DefinitionIn this report, unless the content requires otherwise, the following terms shall have thefollowing meanings:

Definition of common terms
The ReportAnnual Report 2019
Company, the Company, M&G StationeryShanghai M&G Stationery Inc.
M&G GroupM&G Holdings (Group) Co., Ltd.
M&G ColipuShanghai M&G Colipu Office Supplies Co., Ltd.
M&G Life (晨光生活馆)M&G Living Studio Enterprise Management Co., Ltd.(晨光生活馆企业管理有限公司)/Large retail store of the Company
M&G TechnologiesShanghai M&G Information Technology Co., Ltd.(上海晨光信息科技有限公司)
Jiekui InvestmentShanghai Jiekui Investment Management Firm (L.P.)
Keying InvestmentShanghai Keying Investment Management Office (L.P.)
Chenguang Venture Capital Center (晨光创投)Shanghai Chenguang Venture Capital Center (L.P.)
Chenguang Sanmei (晨光三美)Shanghai Chenguang Sanmei Property Investment Co., Ltd.
Jiumu Store (九木杂物社)Jiumu M&G Store Enterprise Management Co., Ltd.(九木杂物社企业管理有限公司)/Large retail store of the Company
M&G Office Supplies (晨光办公)Shanghai M&G Office Supplies Co., Ltd.
Office DepotOffice Depot Network Technology Co., Ltd.
Axus StationeryAxus Stationery (Shanghai) Company Ltd.
KAKey Account, usually referring to large cross-regional retailers with large operating space and dense customer flow, including RT-MART, Walmart, Carrefour, Hualian Supermarket.
Reporting periodYear 2019, from 1 January 2019 to 31 December 2019
Yuan, ten thousand Yuan, hundred million YuanRMB, RMB10,000, RMB100 million

Chapter II Company Profile and Key Financial IndicatorsI. 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 CompanySHANGHAI M&G STATIONERY INC.
Abbreviation of English name of the CompanyM&G
Legal representative of the CompanyChen Huwen

II. Contact Information

Board SecretarySecurities Affairs Representative
NameQuan QiangBai Kai
Office addressBuilding C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, ShanghaiBuilding C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, Shanghai
Telephone021-57475621021-57475621
Fax021-57475621021-57475621
E-mailir@mg-pen.comir@mg-pen.com

III. Introduction to General Information

Registered addressBuilding 3, No. 3469 Jinqian Road, Fengxian District, Shanghai
Postal code of registered address201406
Office addressBuilding C, Hanqiao Culture Science & Technology Park, No. 455 Yanzhan Road, Songjiang District, Shanghai
Postal code of office address201612
Website of the Companyhttp://www.mg-pen.com
E-mailir@mg-pen.com

IV. Information Disclosure and Place for Obtaining the Report

Media for the Company’s information disclosureShanghai Securities News, China Securities Journal, Securities Daily, Securities Times
CSRC's designated website for the Company’s Annual Report disclosurewww.sse.com.cn
The Company’s Annual Report may be obtained atBoard of Director’s Office

V. Stock Information

Stock Information
Share classExchanges on which the stocks are listedStock short nameStock codeStock short name before change
A shareShanghai Stock ExchangeM&G603899/

VI. Other Relevant Information

Auditor of the Company (domestic)NameBDO China Shu Lun Pan CPAs(Special general partnership)
Office address4F No. 61 Nanjing East Road, Shanghai
Name of the signing accountantGu Xuefeng, Wang Aijia

VII. Major Accounting Data and Financial Indicators for the Past Three Years

(1) Major accounting data

Unit: Yuan Currency: RMB

Major accounting data20192018Year-on-year change (%)2017
Revenue11,141,101,364.448,534,988,597.5530.536,357,102,964.25
Net profit attributable to shareholders of the listed companies1,060,083,625.03806,847,308.4131.39634,040,991.46
Net profit attributable to shareholders of the listed1,005,187,834.38749,412,457.0734.13544,514,731.94
companies, net of non-recurring gains and losses
Net cash flow generated from operating activities1,081,941,383.68827,940,565.5130.68717,497,928.03
End of 2019End of 2018Year-on-year change (%)End of 2017
Net assets attributable to shareholders of the listed companies4,201,500,384.993,410,808,445.4123.182,833,961,137.00
Total asset7,565,115,311.745,677,500,049.7133.254,388,278,915.63

(2) Key financial indicators

Key financial indicators20192018Year-on-year increase or decrease in the current period (%)2017
Basic earnings per share (Yuan/share)1.15230.877031.390.6892
Diluted earnings per share (Yuan/share)1.15230.877031.390.6892
Basic earnings per share, net of non-recurring gains and losses (Yuan/share)1.09260.814634.130.5919
Weighted average ROE (%)28.1726.16Increase of 2.01 percentage points24.45
Weighted average ROE, net of non-recurring gains and losses (%)26.7124.30Increase of 2.41 percentage points20.99

Explanation of major accounting data and financial indicators for the past three years by theend of the Reporting Period

"√ Applicable" "□ Not applicable"Revenue increased by 30.53% or RMB2,606,112,800 over the same period of last year,primarily due to: (1) the Company’s traditional core business grew a steadily 20% in 2019, as aleading company in the stationery and office supplies industry, we benefited from ourcompetitive advantages of distribution channel, brand recognition, design and R&D, and supplychains: (2) new business continued developing at a high speed in 2019, M&G Colipu and M&GLife grew by 51% compared with last year.

VIII. Difference in the Accounting Information under the PRC Accounting Standards forBusiness Enterprise (“PRC GAAP”) and Overseas Accounting Standards

(1) Difference in net profit and net asset attributable to shareholders of the listedcompany in financial reports disclosed under International Accounting Standardsand PRC GAAP"□ Applicable" "√ Not applicable"

(2) Differences in net profit and net assets attributable to shareholders of the listedcompany in financial reports disclosed under overseas accounting standards andPRC GAAP"□ Applicable" "√ Not applicable"

(3) Explanation on the differences between PRC GAAP and Overseas AccountingStandards:

"□ Applicable" "√ Not applicable"

IX. Key Financial Data for the Year of 2019 by Quarter

Unit: Yuan Currency: RMB

1st Quarter (Jan-Mar)(Apr-Jun)3rd Quarter (Jul-Sept)(Oct-Dec)
Revenue2,355,613,820.982,483,009,195.913,108,721,445.783,193,756,901.77
Net profit attributable to shareholders of the listed companies258,715,131.28212,549,376.55330,611,308.24258,207,808.96
Net profit attributable to shareholders of the232,639,806.85194,719,722.78333,199,496.91244,628,807.84
listed company after non-recurring profit or loss
Net cash flow generated from operating activities99,550,085.40147,529,761.88430,910,767.84403,950,768.56

Explanation on difference between information by quarter and information disclosed inperiodical reports"□ Applicable" "√ Not applicable"

X. Items and Amounts of Non-recurring Gains or Losses"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Items of Non-recurring Gains or LossesAmounts in 2019Notes (if applicable)Amounts in 2018Amounts in 2017
Gains or losses on disposal of non-current assets6,081,606.95
-69,195.83-621,092.66
Government grants included in profits and losses for the current period, excluding those closely related to the normal business and of fixed amount or fixed quantity granted on an on-going basis in accordance with certain standards and in compliance with the42,747,681.46Mainly including government grants received during the Reporting Period and government grants transferred from deferred income42,122,713.6635,057,419.77
State policies
Gains arising from investment costs for acquisition of subsidiaries, associates and joint ventures less than the fair values of attributable identifiable net assets of the invested entity at the time of acquisition33,642,175.40
Gains or losses on entrusted investment or asset management35,517,479.6538,184,246.05
Investment income arising from changes in fair values held-for-trading financial assets and held-for-trading financial liabilities, and investment gains on the disposal of held-for-trading financial assets, held-for-trading financial liabilities and available-for-sale financial assets, except the Company normal operations related to effective hedging business/-340,881.23
Investment income arising from changes in fair values held-for-trading financial assets, derivative financial assets, held-for-trading financial liabilities and derivative financial29,184,868.54Revenue generated from purchase of wealth management products/
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 hedging business
Reversal of provision for impairment of receivables which are individually tested for impairment1,803,027.63Mainly due to the provision reversal of bad debts on individual receivables of the Company7,460,100.24
Other net non-operating income and expenses, other than the above items-5,743,388.02Mainly the expense of public donations and the losses arising from the winding up of certain subsidiaries controlled by the subsidiaries of the Company-7,936,377.76-5,409,684.43
Effect of minority equity-4,764,697.27-2,192,444.11-13,897,494.77
Effect of income tax-14,413,308.64-10,007,324.27-4,548,528.85
Total54,895,790.6557,434,851.3489,526,259.52

XI. Items Measured at Fair Values"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemsOpening balanceClosing balanceChanges in the PeriodEffect on profit for the Period
Held-for-trading financial assets1,027,265,300.00661,878,587.24-365,386,712.764,613,287.24
Receivables1,894,232.0029,549,924.8327,655,692.83
financing
Derivative financial assets
Other debt investments (including other current assets)
Other non-current financial assets
Investments in other equity instruments3,600,000.003,909,179.93309,179.93
Held-for-trading financial liabilities
Derivative financial liabilities
Total1,032,759,532.00695,337,692.00-337,421,840.004,613,287.24

XII. Others"□ Applicable" "√ Not applicable"

Chapter III Business Overview

I. Description of the Company’s principal business, operation model and industry

condition during the Reporting Period

(1) Principal business and operation model

1. Principal business

As a comprehensive stationery supplier, the Company integrates the value of creativity into itsproducts and service advantages, advocates fashionable stationery lifestyle, and providessolutions for study and work. The traditional core businesses include designing, developing,manufacturing and selling writing instruments, student stationery, office supplies and otherproducts under brands; new businesses mainly comprise of one-stop direct officesupplies service platform—M&G Colipu and retail stores—M&G Life and Jiumu Store, and onlineplatform of M&G Technologies. During the Reporting Period, there were no significant changesin the Company's principal business and operation model.

(2) Main Operation Model

The Company has an independent and complete operation from design and development ofbrands and products, procurement of raw materials and accessories, product manufacturing,supply chain management and distribution network management, and warehouse and logistics.The Company is capable of performing independent operation of business in the market. ForR&D and new products development model, the Company has an “entire design system”covering the whole process starting from customer value proposal to product design, productmold development to brand image design, incorporating trend-, theme and experience-orienteddevelopment model to develop new products with a comprehensive categories approach basedon consumer insight. For manufacturing model, the Company uses the brand manufacturingmodel that combines sales-driven production, in-house and OEM outsourcing, develops anindependent system from raw material procurement to manufacturing and selling, and hasestablished its brands in the market. We have the advantages from participating the whole valuechain from design, research and developing, manufacturing and selling stationery. For salesmodel, based on features of stationery products and current situations of domestic stationeryconsumption, the Company has developed its sales model that heavily relies on regionaldistributors, complemented by direct sales to offices 2B customers, direct-sale store, KA sales,online sales, as well as international distribution. We are the one of pioneering companies inChina’s stationery business that engage in large-scale brand sales management and franchisemanagement.

In the direct office supplies service business,M&G Colipu is mainly responsible for providinggovernments, public institutions, Fortune Global 500 companies and other SMEs with cost-

effective one-stop service in procurement of office supplies. M&G Colipu has around 15 corecategories of office supplies, ranging from office appliances, office equipment, IT digital products,office furniture, personal protective equipment, food and beverage, and business gifts. M&GColipu ensures products are supplied by its factories directly, and provides customized value-added services.

M&G Technologies mainly comprises of onlines businesses in Tmall and JD. Tmall businessrefers to M&G Technologies’ Tmall flagship store where customers can place orders on the store.For the business on JD platform, the system issues purchase order monthly based on inventoryand shelf sales ratio, and M&G Technologies replies the purchase order in the system accordingto its actual inventory condition; after the order is confirmed, it will then be forwarded to ourwarehouse system, and warehouse will deliver goods to JD according to the confirmed purchaseorder.

M&G retail store businesses include two store formats: the M&G Life stores and Jiumu stores.M&G Life stores mainly target students aged 8-15, selling stationery products complemented bydaily necessity and entertainment products. M&G Life stores mostly locate in Xinhua Bookstoreand compound boutique bookstores, representing the Company’s exploration to move beyondthe then-dominant traditional channels nearby schools. Jiumu Stores mainly target the consumergroup of young female consumers aged 15-35 and their families, and sells a morecomprehensive products including stationery, cultural and recreative products, educational andentertainment products, and daily household and home products. Jiumu stores mostly locate inprime business districts in cities, it is an upgraded version based on experience learned fromM&G Life stores and is an ongoing exploration in new retail model in lifestyle products with adistinct cultural element. Jiumu Store started franchising in July 2018, franchisees payscontract deposit and decoration fee according to the contract, and store rent, store staff salary,utilities and other costs occurred in franchising stores are borne by franchisees.

For its traditional core businesses, the Company faces challenge with changing demands fromthe more individualized population born after 1990 and 2000. With the changing demographicsof China particularly with the decreasing birth rate, unit volume growth contribution to revenue isset to decline going forward, the sustained growth of the stationery industry will comes mostlyfrom consumption upgrade and product upgrade. Stationery consumption in China appears tobecome more brand conscious, innovative, individualized and premium. There is a clear growthin demand for better cultural and creative products, which promotes the industry moving frommerely stationery products towards stationery products with more cultural and creativity. M&GLife stores and Jiumu stores both serve as the Company’s bridgehead in upgrading its productsand channels of its traditional core businesses, and they play important role in promoting the

Company’s brands and upgrading products sales. M&G Colipu’s direct sales business to officessatisfactorily meets demands for purchasing office supplies from large corporations andinstitutions, which helps boosting the sales of writing instruments and office supplies in traditionalcore business of the Company.

3. Main driving forces in revenue growth

(1) Social transformation and consumption upgrade; (2) Greater investment from the state ineducation; (3) Favorable policy environment for development of culture industry; (4) Continuedgrowth in household income; (5) Second-child policy; (6) Fragmented industry with lowconcentration.

(2) Situations and features of industry where the Company operates, and industry statusof the Company

1. Situations of industry where the Company operates

According to Guidelines for the Industry Classification of Listed Companies (revised in 2012)issued by China Securities Regulatory Commission, and results of industry classification of listedcompanies released by China Securities Regulatory Commission, the Company is classified tomanufacturing industry in products for stationery, arts, sports and entertainment. The Companyis a member of China Stationery & Sporting Goods Association, and China Writing InstrumentAssociation.

In 2019, China’s stationery and office supplies amounted to RMB152.2 billion, representing agrowth of 6.7% from the previous year, industry profit reached RMB9.7 billion, representing agrowth of 9.8%. In 2019, there are 1,027 enterprises above designated size in China’s stationeryand office supplies industry, and the number of those who suffered loss in 2019 increasedcompared with previous year. (Source: China Stationery & Sporting Goods Association)

In 2019, member enterprises of China Writing Instrument Association recorded the revenue fromprincipal business of RMB16.4 billion, representing a decrease of 1% from the previous year,and profit is RMB0.9 billion, representing a growth of 15% compared with previous year.According to the comprehensive assessment made by China National Light Industry Council,the prosperity index of writing instrument industry was in normal range overall. In 2019, writinginstrument industry export amounted to USD2.8 billion, decreased 0.5% from previous year. Thepricing advantage of China’s low-end rollerball pens and pencils was lessened. The writinginstrument industry imports amounted to USD0.8 billion, decreased 2.2% from previous year.The import are mostly high-end pens. (Source: China Writing Instrument Association)

2. Features of the industry

(1) Periodicity

Writing instruments, student stationery and office supplies are slightly affected by economicfluctuations. With low unit price, writing instruments and student stationery are necessity goodswith relatively low income elasticity, and therefore are not much sensitive to economicfluctuations.

(2) Seasonality

There is a seasonality in demand for student stationery. Period before a new semester beginsevery year (summer and winter vacation) is what the stationery industry calls “schooling peak”season, during which sales for companies in the student stationery industry usually peak.

3. Development trend of the industry

With the changing demographics of China particularly with the decreasing birth rate, stationeryindustry revenue growth is less driven by unit volume growth, and more from consumptionupgrade and product upgrade. With the changes in the way of life and consumption habit ofconsumers, retail industry started a new round of redevelopment and innovation. Stationeryindustry faces challenges with uncertainty of external environment, diversification of retailchannels, and more individualized demands from the main customers group (post-90s and post-00s). As domestic stationery market becomes more mature, demand for mid- to high-endstationery products keeps increasing, breaking the past market structure dominated by low-endproducts, this provides opportunities for mid- to high-end stationery products with good qualityand good price. Furthermore, China’s population of 1.4 billion accounts for about 18% of globalpopulation, leading stationery companies in China have a big room for development in globalstationery market.Traditional nearby school stationery retail channels are still the major retail format in China, andthe other retail channels have higher growth rate, making channels of retail sales more diversified.New channels and forms of business are developed gradually, channel upgrade and competitionacross different channels become more pronounced. Domestic consumption for stationery inChina becomes more brand conscious, innovative, individualized and high-end. There is agrowing demand for exquisite cultural and creative products, promoting stationery productsmoving from those primarily focus on functionality towards those with more cultural and creativeelements that cater to customers. With continued development in the market, marketconcentration of stationery industry becomes greater, leaving more room for industryconsolidation. Leading companies in the stationery industry with good brand recognition are ina strong position where the strong ones may become stronger, and more market share aregained by leading companies.

The market of the direct office supplies service business has been growing very fast in China.According to industry research report from securities company, the scale of the market of broad

office supplies (including office furniture, equipment and other office supplies) in China reachedmore than RMB1 trillion. Regulation on the Implementation of the Government Procurement Lawof the People's Republic of China in 2015 explicitly requires that the state shall promote theutilization of information networks for carrying out digital government procurement. In the sameyear, General Office of the State Council issued the Notice of the General Office of the StateCouncil on Issuing the Work Plan for Integrating and Establishing a Uniform Public ResourcesTrading Platform, requiring that a public resources trading platform with unified regulations,openness and transparency, efficient service and standard supervision should be developedacross the country to achieve digital transaction of public resources in the whole process. Withsuch strong promotion and national policy supports, B2B office supplies procurement got thehistorical opportunities for rapid development.

4. Company position in the industry

The Company is a leading company of “own brand + domestic demand” in China’s stationeryindustry. The Company has a strong first-mover advantage and leading advantage with its wideand deep coverage of its distribution network in stationery industry. As at the end of the ReportingPeriod, the Company has a national distribution network covering over 85,000 retail stationeryshops across China, enabling the company to establish market leading position for its own brandproducts amidst fierce competitions of domestic market. The Company ranked first in “Top TenEnterprises in China’s Light Industry and Writing Instrument” for eight consecutive years.

II. Explanation on substantial changes in major assets of the Company during theReporting Period"√ Applicable" "□ Not applicable"Please refer to 2 (3) Analysis on Assets and Liabilities set out in Discussion and Analysis ofOperation under Section IV for more details.

III. Analysis on core competitiveness during the Reporting Period"√ Applicable" "□ Not applicable"

1. Brand advantage

As a leading company of “own brand + domestic demand” in China’s stationery industry, theCompany has established a leading position for its own brand products amidst fiercecompetitions of domestic market. The Company ranked first in “Top Ten Enterprises in China’sLight Industry and Writing Instrument” for eight consecutive years. M&G brand has sound brandrecognition among consumers, and served as the designated stationery brand for Boao Forumfor Asia for 12 consecutive years.

2. Channel advantage

The Company has a strong first-mover advantage and leading advantage with its wide and deepcoverage of its distribution network in stationery industry, and the efficient management of thedistribution system. As at the end of the Reporting Period, the Company has 35 tier-onedistributor partners across China, and tier-two and tier-three distributor partners in about 1,200cities, covering over 85,000 retail stationery shops across China.

3. Design and R&D advantage

The Company has the capability to respond timely to the market and strong R&D capacity fornew products.The Company will do market research for new product development to constantly spot and graspthe latest market trends. The Company launches about one thousand of new products each year,to meet different consumer needs. The continued development of new products helps theCompany to accumulate resources in product design. In 2019, “Enjoy Writing” gel pen developedby the Company won IF Design Award and Good Design Award (G-Mark), product design of theCompany received international recognition.

4. Technology advantage

The Company has learned core technologies of writing instrument including nib, ink and itsmatching, as well as inhouse mold development technology, and has participated in preparationof national industry standards. The Company undertook several research projects in the 13thFive-Year National R&D Program. The Company won a second-grade prize in 2019 ChinaInnovation Award for industry-university-research collaborations. During the Reporting Period,testing laboratory of the Company got CNAS accreditation certificate, which means that testresults of the Company’s laboratory are recognized by over 100 countries, testing capabilityreached world level.

5. Manufacturing advantage

The Company benefits from experience of large-scale manufacturing accumulated throughoutthe past years, independent mold development capability, stable supply chain, sound qualitycontrol system and introduction of various information management systems. The Company hasthe capability of large-scale manufacturing with high quality control standard. The good andstable product quality has won general recognition and favorable comments from consumers.China writing instrument industry base, China writing instrument center, national industry designcenter and China key laboratory of light industry and writing instrument engineering technologyall have physical presence in the Company.

6. Supply chain advantage

Using the idea of partnership to run business operation, the Company has been striving to builda high standard supply chain ecosystem. The Company keeps iterating and upgrading itsscientific management for supply chain, and has obtained new practice achievements ininformation collaboration across the value chain, inventory optimization, financial support forsupply chain, management informatization of quality and order, and optimization of supplierperformance to help business partners get stronger operation system, both loyalty and operationcapability of our business partners are improved simultaneously.

Chapter IV Discussion and Analysis of Operation

I. Discussion and Analysis of OperationIn 2019, with the background of increased uncertainties both at home and abroad, and morecomplication and changes in the market, the Company focused closely on development strategyand annual operation objective set by the Board of Directors. With the great efforts from themanagement and all employees, the Company maintained a healthy, stable and high-qualitydevelopment, achieved the annual operation target, operation performance continued to grow,and the Company’s comprehensive strength was further improved.The Board of Directors of the Company paid close attention to external industry development,actively implemented company strategies, continued to focus on “adjusting product structure andstimulating growth” as the theme for the year, continued to optimize retail channel, continued topush the four segments of its traditional core businesses, continued to grow direct office suppliesbusiness, accelerated growth of self-owned large retail stores, continued to expand online sales,and continued to improve internal management. Operation of the Company in 2019 issummarized and reported as follows:

1. Focus and Optimize Channels

During the Reporting Period, the Company focused on key retail stationery shops, built modelstores, continued to push optimization and upgrading of distribution network, and better channelmanagement: (1) improved single store quality with a focus on model stores; (2) facilitated theupgrading of franchising; (3) pushed the continued upgrading of distribution centers andoptimizing operations; (4) strengthened categories promotion and dedicated retail spaces for keyproducts; (5) actively carried out exploration for new business, and improved market shares inkey business districts. As at the end of the Reporting Period, the Company has 35 tier-onedistributor partners across China, and tier-two and tier-three distributor partners in about 1,200cities, covering over 85,000 retail stationery shops with “M&G” logo across China.

The Company made efforts to roll out M&G Alliance APP, so as to build a stronger connectionamong the Company headquarters, multi-tier distribution partners and retail stationery shops,and to improve digitization of business operations and information flow. Overall collaboration insales activities of the Company can will be improved as retail stationery shops adopt M&GAlliance APP. On the one hand, information from the Company can flow to retail stationery shopswithout geographical and time limitation, on the other hand, response time can be shortened andorder fulfillment rate improved. Headquarters can collect demand-side information as users’ pain

points and product feedback in a more timely and effective way, helping accuracy in new productdevelopment.

2. Push the Four Segments of Traditional Core Business

(1) Mass market stationery segment

Each category and product is reviewed with grid analysis tool to further identify high potentialproducts, collaborate and share resources across function departments including product,design, marketing and sales. Manage the number of SKUs to reduce quantity and increasequality, and develop a small number and high quality long-term products and hit products.

(2) Premium stationery segment

During the Reporting Period, the Company continued to expand the market for premiumstationery segment. Growth of product portfolio was driven by best-selling products, productstructure was upgraded, product mix became more balanced. Retail stationery shops suitablefor premium stationery segment was uplifted by model shops, and premium stationery productssales in single store were improved by creating dedicated zone for such products. Suitable saleschannel for premium stationery products were expanded across the country. With an integratedchain ranging from product development, business establishment, marketing, to brand promotion.Exclusive window for season-limited M&G products were well received by the market. Marketshare of the Company’s premium stationery products increased.

(3) Office stationery segment

During the Reporting Period, the Company continued development and promotion of officestationery, shifted focus from product breadth towards depth, formed overall solutions for officestationery products, put core products on shelves, developed potential customers, increasedstore count for office stationery stores. Drive sales growth and increase market shares in officesupplies market through seeking new customers continuously and improving sales in a singlestore with established customers.

(4) Arts and kids drawing segment

During the Reporting Period, the Company focused on key categories of arts and kids drawingsegment, continued to adjust product mix, emphasized on long-term products, and increasedcontribution from key products. The Company seized opportunities to build standard storeshelves in dedicated zones, improved the capability to develop best-selling categoriessignificantly with such popular products as marker pen, food-grade watercolor pen, wood-freeerasable color pencil, and water-soluble oil pastel; and prepared MG-KIDS and MG-ARTS mid-end product lines. During the Reporting Period, the Company acquired Axus Stationery, and

established strategic cooperation with CARIOCA, a stationery brand in Italy which enriched mid-to high-end arts products offering for children.

3. Continue to grow M&G Colipu

Unit: 0’000

M&G Colipu2019201820173-year average
Operating revenue365,806.17258,604.90125,515.91249,975.66
Net profit7,580.353,213.522,104.344,299.40

During the Reporting Period, M&G Colipu improved service quality and customer satisfaction,expanded product category, sought more customers, built national supply chain system, andenhanced service capability of regional warehouses across the country. M&G Colipu maintainedrapid growth, recorded revenue of RMB3,658,061,700, representing a year-on-year increase of

41.45%, and furthered increased its market shares and brand influence in direct sales of officesupplies. More details are presented as follows:

(1) Customer Development

As for government customers, the Company succeeded in shortlisting for e-commerce projectsof the People’s Government of Shanxi Province, the People’s Government of Liaoning Province,the People’s Government of Jilin Province, and Chongqing Municipal People’s Government; asfor central state-owned enterprises, the Company succeeded in shortlisting for procurementprojects of China Mobile, China Unicom, and China Post; as for customers of financial institutions,the Company succeeded in shortlisting for the project of SPD Bank and CGB; as for customersof companies listed on Global Fortune 500 and other enterprises, the Company won the biddingfor procurement projects of Xiaomi, Siemens, Dell, China Resources Land and GuangzhouMetro.During the Reporting Period, M&G Colipu launched convenient shopping service to expand themarket of SMEs through sound products with low price and low operation cost.

(2) Warehouse Distribution and Logistics

During the Reporting Period, M&G Colipu enhanced supervision on order, after-sale service,logistics and distribution, improved quality of basic delivery, took measures to address wrongdelivery and damaged goods, and improved product packaging. The Company enhanceddelivery capability for “end-to-end”, and implemented supervision and operation managementfor the entire order process, so delivery acceptance rate was increased. Optimizing availableareas and ranges of the four warehouses in East China, North China, South China and CentralChina, the Company kept workload of different warehouses in good balance to improve overalldelivery effectiveness, and set up delivery team in nine cities including Shanghai, Beijing,Guangzhou, Shenzhen and Tianjin, to improve customer experience.

4. Accelerate Growth of self-owned Large Retail Stores

Unit: 0’000

M&G Life (consolidated)2019201820173-year average
Revenue60,063.7030,592.1420,510.9637,055.60
Net profit-804.67-3,030.04-4,114.99-2,649.90
Of which, Jiumu Store201920182017Average in three years
Revenue46,043.5115,299.613,515.3521,619.49
Net profit-693.11-2,602.78-989.07-1,428.32

During the Reporting Period, M&G Life (including Jiumu Store) recorded a total operationrevenue of RMB600,637,000, increased 96.34% over the previous year. The Company activelyimproved product portfolio and service model, fully developed Jiumu Store and tried someremodeling for M&G Life stores, so as to better meet market demands from consumptionupgrading, and let people better enjoy writing and recording. As at the end of the ReportingPeriod, the Company has 380 large retail stores in China, of which 119 are M&G Life, and 261are Jiumu Stores (158 direct-sales stores and 103 franchising stores).For M&G Life stores, the Company kept optimizing operation management, focused on adjustingproduct mix and improving single store quality, continued to reduce loss and increase efficiency,losses from M&G Life was reduced significantly during the Reporting Period. For Jiumu Store,market expansion was accelerated, with new store opening in key cities, covering 55 cities inChina. The Company made continuous effort to improve and adjust product category, positionedcultural and creative products more accurately and increased brand awareness of Jiumu Store.WeChat mini program was launched, customer stickiness strengthened with membershipprograms. These efforts are meant to better satisfy consumer demand for cultural and creativeproducts from consumption upgrading, increase market shares of the Company in premiumstationery segment, and upgrade brand image of the Company. With increasing brand influenceof Jiumu Store, brands of M&G benefited better exposure to the public.

5. Continue to expand M&G Technologies

Unit: 0’000

M&G Technologies2019201820173-year average
Operating revenue29,668.2023,434.1518,530.7023,877.68
Net profit-120.59963.311,329.54724.09

During the Reporting Period, M&G Technologies followed the omni-channel strategy, andrecorded revenue of RMB296,682,000, representing growth of 26.60% over the previous year.M&G products ranked the first in online retail value for student writing instruments, learningauxiliary, painting materials and paper book in Taobao system. M&G Technologies facilitatedthe development and optimization of new products to penetrate the market and strengthen itsbrand position. The number and quality of online stores of the brand were increased to ensure

sustainable online development for M&G brand, while online products were improved andpromoted to explore online incremental categories.

6. Promote Design and R&D

As a national high- and new-tech enterprise, the Company has been striving to research anddevelop core technologies and production, and keep continuous innovation to provideconsumers with good products using industry-leading technologies. During the Reporting Period,the Company kept innovating in all its product segments, optimized product mix in differentcategories, better linked products with supply chain, made some breakthroughs in certain keycategories, further improved the product portfolio. Progress in R&D and manufacturing of fullfood-grade watercolor ink improved safety for arts and kids drawing segment. The successfuldevelopment of formulas for several new oil pastels improved applicability and costcompetitiveness of products. The needle nib with the smallest diameter was successfullydeveloped, and put into lot production smoothly to fill the gap in the category of writinginstruments. The Company developed Chinese lead-free material for nib manufacturing andprocessing to address safety problems in the supply of core materials, helping environmentalprotection in China. The third and fifth research projects on the 13th Five-Year National Key R&DProgram—New Environmentally Friendly Materials for Writing Instrument proceeded smoothlywith several sub-projects completed.In October 2019, the Company again obtained High- and New-tech Enterprise Certificate jointlyissued by Shanghai Municipal Science and Technology Commission, Shanghai Finance Bureauand Shanghai Municipal Tax Service, State Taxation Administration with another term of threeyears.

7. Continue to Improve Internal Management

Production center focused its efforts on improving efficiency, eliminating bad practice, andboosting morale. By implementing measures aimed at efficiency, quality, cost, delivery time,safety, morale and environment, operation capacity was improved.Various business team strengthened cross function coordination, for example, product anddesign team worked on improving pain points in consumer survey, product planning,technological R&D, product design, manufacturing, logistics, and customer complaints, so as toimprove product quality. Supply chain resources were further integrated to support developmentof hit products and high-value products.The Company’s lean production program of MPS (M&G Production System), which waslaunched in 2015, was upgraded to a comprehensive program of MBS (M&G Business System)in 2019. The Company continued to learn from advanced global management experience andto improve management capability. For human resources, the Company improved its position

and title system, promoted performance by performance management, continued building talenttraining system and accelerated reserve of qualified managers.

8. Continue Digitization

During the Reporting Period, the Company continued to empower businesses with data, buildin-house data middle platform, integrated various existing information systems with data,mobilizing resources to solve prioritized business pain points, and met the growing demand fromexternal businesses. For sales system, focus on rolling out M&G Alliance APP to push thedigitalization of channel; for production system, better data connection between qualityinspection and MES backoffice system; for financial system, updated group financial reportingsoftware and improved work efficiency.

II. Financial Performance during the Reporting PeriodIn 2019, the Company recorded revenue of RMB11,141,101,400, representing an increase of

30.53% as compared to the corresponding period of last year. The net profit attributable toshareholders of the listed company amounted to RMB1,060,083,600, representing an increaseof 31.39% as compared to the corresponding period of last year, while net profit attributable toshareholders of the listed company after deducting non-recurring profit and loss amounted toRMB1,005,187,800, representing an increase of 34.13% as compared to the correspondingperiod of last year. As at the end of 2019, total asset of the Company amounted toRMB7,565,115,300, representing an increase of 33.25% as compared to the correspondingperiod of last year. The net asset attributable to shareholders of the listed company amountedto RMB4,201,500,400, representing an increase of 23.18% as compared to the correspondingperiod of last year. The Company has maintained healthy and rapid growth, with sound operationof its asset.

(1) Analysis of principal operation

1. Analysis of change in certain items in income statement and cash flow statement

Unit: Yuan Currency: RMB

ItemAmount in the current periodAmount in the same period last yearChange in the proportion (%)
Revenue11,141,101,364.448,534,988,597.5530.53
Operation cost8,229,837,268.866,330,446,740.1630.00
Selling expenses980,166,101.18789,386,543.3724.17
Administrative expenses469,262,188.13379,618,754.1823.61
R&D expenses160,403,362.97114,388,916.7540.23
Financial expenses-8,397,277.65-7,959,449.65-5.50
Net cash flow generated from operating activities1,081,941,383.68827,940,565.5130.68
Net cash flow generated from investing activities-74,352,686.18-295,966,108.3574.88
Net cash flow from financing activities-364,300,101.66-225,100,000.0061.84

2. Analysis of revenue and cost

"√ Applicable" "□ Not applicable"During the Reporting Period, the Company recorded revenue of RMB11,141,100,000,representing an increase of 30.53% as compared to the corresponding period of last year. Theincrease is mainly attributable to:

(1) In 2019, the traditional core business achieved steady growth with a year-on-yearincrease of 20%. As a leading company in the stationery and office supplies industry, webenefited from our competitive advantages of distribution channel, brand recognition, design andR&D, and supply chains. Given that the stationery and office supplies industry in China are stillquite fragmented, there is still room for the Company to increase its market share.

(2) In 2019, new businesses continued rapid growth: M&G Colipu and M&G Life grew by51% compared with last year. Among this, M&G Colipu grew 41.45% from last year, mainly dueto the much larger scale of the market of direct office supplies service. According to industryresearch report from securities company, the scale of the market of broad office supplies(including office furniture, equipment and other office supplies) in China reached more thanRMB1 trillion. Regulation on the Implementation of the Government Procurement Law of thePeople's Republic of China in 2015 explicitly requires that the state shall promote the utilizationof information networks for carrying out digital government procurement. In the same year,General Office of the State Council issued the Notice of the General Office of the State Councilon Issuing the Work Plan for Integrating and Establishing a Uniform Public Resources TradingPlatform, requiring that a public resources trading platform with unified regulations, opennessand transparency, efficient service and standard supervision should be developed across thecountry to achieve transaction of public resources by digital in the whole process. With suchstrong promotion and national policy supports, B2B office supplies procurement got the historicalopportunities for rapid development.Revenue from the principal business amounted to RMB11,139,921,600, accounting for 99.99%of the operation revenue and representing an increase of 30.54% as compared to thecorresponding period of last year. Cost of the principal business amounted toRMB8,229,332,400, representing an increase of 30.00% as compared to the correspondingperiod of last year. The increase in cost is a main result of the growth in revenue.

With the development in business, direct sales of office supplies and large retail store businessof the Company gradually expanded. In order to better reflect product and business modules ofthe Company, the Company made segment disclosure for direct sales of office supplies,accordingly, principal business reporting format by industry and product was adjusted for theReporting Period.

(1). Result of principal business by industry, product and region

Unit: Yuan Currency: RMB

Result of principal business by industry
By industryRevenueOperation costGross margin (%)Change in revenue from last year (%)Change in cost from last year (%)Change in gross profit margin from last year (%)
Manufacturing and sales of stationery and office supplies7,085,012,384.594,856,789,638.8331.4521.6219.75Increase by 1.07 percentage points
Retail industry4,050,346,491.253,372,542,728.1916.7349.6948.27Increase by 0.80 percentage points
Service industry4,562,765.09///
Result of principal business by product
By productRevenueOperation costGross margin (%)Change in revenue from last year (%)Change in cost from last year (%)Change in gross profit margin from last year (%)
Writing instruments2,186,591,691.371,383,090,906.8736.7512.269.28Increase by 1.72 percentage points
Student stationery2,645,275,497.551,781,278,080.6732.6642.3544.14Decrease by 0.83
percentage points
Office stationery2,346,944,916.661,725,910,247.5626.4615.8614.76Increase by 0.70 percentage points
Other products298,485,107.73159,902,745.7846.43233.85238.49Decrease by 0.73 percentage points
Direct sales of office supplies3,658,061,662.533,179,150,386.1413.0941.4542.47Decrease by 0.62 percentage points
Management fee for franchising4,562,765.0968.41
Result of principal business by region
By GeographyRevenueOperation costGross margin (%)Change in revenue from last year (%)Change in cost from last year (%)Change in gross profit margin from last year (%)
China10,949,351,918.168,098,106,055.9226.0430.1529.53Increase by 0.35 percentage points
Other countries190,569,722.77131,226,311.1031.1457.7966.68Decrease by 3.67 percentage points

Explanation on result of principal business by industry, product and geography

1. Revenue from principal business of the Company includes revenue from manufacturing andselling stationery and office supplies, revenue from retail industry and revenue from serviceindustry.

2. Revenue from retail industry refers to revenue gained by M&G Colipu and M&G Life throughselling non-M&G products. During the Reporting Period, sales of the above categories grewcontinuously.

3. Writing instruments refers to products of writing utensil sold by the Company (excluding M&GColipu).

4. Student stationery refers to products of student stationery sold by the Company (excludingM&G Colipu). During the Reporting Period, revenue from student stationery increased by 40.53%as compared to the corresponding period of last year, mainly because of sales increase and theacquisition of Axus Stationery.

5. Office stationery refers to products of office supplies sold by the Company (excluding M&GColipu).

6. Other products refers to products sold by the Company (excluding M&G Colipu) apart fromwriting instruments, student stationery and office supplies. During the Reporting Period, revenuefrom other products increased by 233.85% as compared to the corresponding period of last year,mainly because large retail store expanded business quickly and sales increased.

7. Direct sales of office supplies refer to products in all categories sold by M&G Colipu. Duringthe Reporting Period, business of M&G Colipu developed rapidly.

8. Revenue from other countries increased by 57.79%, mainly because of the increase ofoverseas sales from Axus Stationery.

Unit: 0’000

Result of revenue by business
BusinessesRevenue in 2019Revenue in 2018Change in amountChange
Traditional core business665,068.98551,090.85113,978.1321%
Colipu Office Supplies business365,806.17258,604.90107,201.2741%
Retail large store business60,063.7030,592.1429,471.5696%
E-commerce business29,668.2023,434.156,234.0527%
Transactions offset-6,496.91-10,223.183,726.27
Total1,114,110.14853,498.86260,611.2831%

(2). Analysis of production and sales volume

"√ Applicable" "□ Not applicable"

Major productsUnitProductionSalesInventoryChange in production from last year (%)Change in sales from last year (%)Change in inventory from last year (%)
Writing instrumentsPiece2,301,956,3882,270,730,687580,672,7136.848.305.68
Student stationeryPiece5,494,359,5485,305,245,796644,449,96636.8533.0141.53
Office stationeryPiece1,423,262,6351,413,678,371138,580,6248.637.907.43
Other productsPiece12,576,0719,178,0225,410,802192.28197.66168.83
Direct sales of office suppliesPiece290,473,435288,518,32021,113,97212.8313.7310.20

Explanation on production and sales volumeProduction volume increased with sales. The growth in the production and sales volume ofstudent stationery is helped by the acquisition of Axus Stationery. The growth in the productionand sales volume of other products is mainly because large retail store expanded businessquickly and sales increased.

(3). Analysis of cost

Unit: RMB Yuan

By industry
By industryCost itemAmount in the current periodPercentage of total costs for the current period (%)Amount in the same period last yearPercentage of total costs for the same period last year (%)Percentage change in the amount for the current period as compared to the same period lastthe situation
year (%)
Manufacturing and sales of stationery and office suppliesCost of principal business4,856,789,638.8359.024,055,859,578.5864.0719.75
Retail industryCost of principal business3,372,542,728.1940.982,274,564,994.9535.9348.27
Service industry///////
By product
By productCost itemAmount in the current periodPercentage of total costs for the current period (%)Amount in the same period last yearPercentage 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 (%)the situation
Writing instrumentsCost of principal business1,383,090,906.8716.811,265,617,160.5019.999.28
Student stationeryCost of principal business1,781,278,080.6721.651,235,797,751.8019.5244.14
stationeryCost of principal business1,725,910,247.5620.971,503,891,848.0423.7614.76
Other productsCost of principal business159,902,745.781.9447,239,918.500.75238.49
Direct sales of office suppliesCost of principal business3,179,150,386.1438.632,231,387,838.7035.2542.47
Management fee for franchisingCost of principal business//////

Explanation on other situations of cost analysisCost increased simultaneously with sales. The growth in the costs of student stationery is mainlybecause of sales increase and the acquisition of Axus Stationery. The growth in the costs ofother products is mainly because large retail store expanded business quickly and salesincreased.

(4). Major customers and suppliers

"√ Applicable" "□ Not applicable"Sales of the top 5 customers amounted to RMB2,389,602,700, accounting for 21.45% of thetotal annual sales. Of the sales of the top 5 customers, sales of related parties amounted toRMB387,821,100, accounting for 3.48% of the total annual sales.

Unit: RMB Yuan

RankCustomer nameAmountRelated relationship
1First952,212,757.52No
2Second477,565,530.73No
3Third387,821,087.67Yes
4Fourth288,003,073.21No
5Fifth284,000,271.72No
Total2,389,602,720.85

Related relationship between the Company and top five customers in 2019: the third customeris Nanjing Zhaochen Stationery Sales Co., Ltd, a sales company controlled by Guo Weilong whois the younger brother of the spouse of Chen Huxiong, CEO of the Company. According to ArticleVIII and X set out in Guidelines for the Affiliated Transactions of Listed Companies, Guo Weilongis deemed as a related natural person of the Company, and the sales company controlled byhim is the related legal person of the Company.

Purchase amount of the top 5 suppliers amounted to RMB1,087,111,000, accounting for 13.52% ofthe total annual purchase amount. Of the purchase amount of the top 5 suppliers, purchase amountof related parties amounted to RMB0, accounting for 0% of the total annual purchase amount.

Unit: RMB Yuan

RankRank of supplierAmountRelated relationship
1First380,013,748.41No
2Second223,976,162.51No
3Third180,407,188.66No
4Fourth169,037,053.67No
5Fifth133,676,870.68No
Total1,087,111,023.93

There was no related relationship between the Company and the top 5 suppliers in 2019.Other explanationNo

3. Expense

"√ Applicable" "□ Not applicable"

Unit: RMB Yuan

Item in statementAmount in the current periodAmount in the last periodChange (%)Reason for change
Selling expenses980,166,101.18789,386,543.3724.17
Administrative expenses469,262,188.13379,618,754.1823.61
R&D expenses160,403,362.97114,388,916.7540.23Please see details below
Financial expenses-8,397,277.65-7,959,449.65-5.50

Explanation on the reason for change in R&D expenses:

R&D expenses increased by RMB46,014,400, representing an increase of 40.23% as comparedto the corresponding period of last year. Reason for change: investment in R&D in traditionalbusiness, investment in development of Colipu's new IT system, and increased R&D expensesfrom the acquisition of Axus Stationery.

4. R&D investment

(1). Table of R&D investment

"√ Applicable" "□ Not applicable"

Unit: RMB Yuan

Expensed R&D investment in the current period160,403,362.97
Capitalized R&D investment in the current period0.00
Total R&D investment160,403,362.97
Percentage of total R&D investment to operation revenue (%)1.44
Number of the Company’s R&D staff459
Percentage of the number of R&D staff to the Company’s total number8.12
of employees (%)
Percentage of capitalized R&D investment (%)0.00

(2). Explanation on the result

"√ Applicable" "□ Not applicable"The total R&D investment accounts for 4.08% of operation revenue of the parent company

5. Cash flow

"√ Applicable" "□ Not applicable"

Unit: RMB Yuan

ItemAmount in the current periodAmount in the same period last yearChange (%)Reason for change
Net cash flow generated from operating activities1,081,941,383.68827,940,565.5130.65Mainly because of growth in sales and profit and benefit from effective management of cash flow from operating activity.
Net cash flow generated from investing activities-74,352,686.18-295,966,108.3574.88Mainly because of the net redemption of bank financial product.
Net cash flow from financing activities-364,300,101.66-225,100,000.0061.84During the Reporting Period, growth achieved in distributed dividends and interest payments as compared to the same period last year, and

(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. Assets and liabilities

Unit: RMB Yuan

influence inchange ofborrowingsrepaid by AxusStationery tofinancialinstitutions.

Items

ItemsAmount as at the end of the current periodat the end of current period (%)Amount as at the end of last periodat the end of last period (%)Change in percentage for the current period over the last period (%)Explanation
Cash and equivalents1,935,600,694.3525.591,046,668,874.9718.4484.93Increase in cash and equivalents brought by the growth of income and net profit
Held-for-trading financial assets661,878,587.248.750.00According to requirements in New Standards of Financial Instruments, bank financial product is reclassified into financial assets held for trading
Bills receivable0.001,894,232.000.03-100.00According to requirements in New Standards of Financial Instruments, bills receivable are reclassified into receivable financing by nature
Receivables financing29,549,924.830.390.00According to requirements in New Standards of Financial Instruments, reclassification should be performed based on the nature of bills receivable and factoring of the accounts receivable
Prepayment85,371,444.731.1342,336,973.710.75101.65Payment settled in advance for goods because of the business development of the Company
Inventories1,378,108,759.8518.221,042,701,610.0018.3732.17
Other current assets29,280,925.290.391,046,977,400.3518.44-97.20According to New Standards of Financial Instruments, bank financial product is reclassified into financial assets held for trading
Available-for-sale financial assets0.003,600,000.000.06-100.00According to New Standards of Financial Instruments, available-for-sale financial assets are reclassified to investment in other equity instruments
Long-term receivables6,624,590.000.090.00Mainly from compensation for the Company made by original shareholders of Axus Stationery for audit adjustment and related losses during the period according to the agreement
Investments in other equity instruments3,909,179.930.050.00According to requirements in New Standards of Financial Instruments, the item is the investment for Shanghai M&G Culture and Creativity (上海晨光文化创意) held by the Company for non-transaction purpose
Fixed assets1,163,702,352.1215.38876,617,888.9915.4432.75Mainly due to the fixed assets in the acquisition of Axus Stationery during the Reporting Period
Construction in progress260,469,728.763.4424,506,469.590.43962.86Mainly due to investment in the construction project of new Qingcun production base during the Reporting Period
Intangible assets331,005,762.094.38187,987,875.673.3176.08Mainly due to intangible assets of land use rights in the acquisition of Axus Stationery during the Reporting Period
Goodwill30,175,537.190.40131,001.230.0022,934.54Consideration for the acquisition of Axus Stationery exceeded the assessed net assets during the Reporting Period
Deferred income tax assets36,623,535.590.4825,525,520.980.4543.48Mainly due to deferred income tax assets recorded through deductible temporary differences arising from increased asset impairment provisions and unrealized profits from internal transactions
Short-term borrowings182,979,528.812.420.00Mainly due to short-term borrowing of Axus Stationery from the bank and financial institutions
during the Reporting Period
Accounts payable1,861,072,467.8724.601,319,407,048.2123.2441.05Mainly due to accounts payable for purchasing goods at primary schooling peak season and the acquisition of Axus Stationery as at the end of the Reporting Period
Accounts received in advance206,762,293.942.73147,647,053.872.6040.04Mainly due to amounts received in advance from customers for primary schooling peak season during the Reporting Period
Other payables331,653,211.404.38240,665,881.174.2437.81Mainly due to the collection of risk margin and provision of due unpaid marketing fees during the Reporting Period
Deferred income tax liabilities36,576,744.550.48564,909.500.016,374.80Mainly due to the acquisition of Axus Stationery at a premium during the Reporting Period
Other comprehensive income526,359.550.010.00Mainly due to translation difference for Axus Stationery’s financial statement with foreign currency and changes in fair value of investment in other equity instruments during the Reporting Period
Minority equity259,424,856.613.4385,856,179.341.51202.16Mainly due to the new minority equity for the acquisition of Axus Stationery during the Reporting Period

Other explanationNo

2. Major restricted assets as at the end of the Reporting Period"√ Applicable" "□ Not applicable"

(1) On 29 March 2017, Axus Stationery and Shanghai Pudong Development Bank Co., Ltd.Songjiang Branch (hereinafter referred to as “SPD Bank”) entered into the Factoring Agreementunder the contract No. 98082013280133 to provide factoring service through the pledge ofaccounts receivable (USD). As of 31 December 2019, Axus Stationery's unpaid factoringborrowing was USD427,099.11 (equivalent to RMB2,979,528.81).

(2) On 29 October 2019, Axus Stationery and China Merchants Bank Co., Ltd. Shanghai Branchentered into the Facility Agreement (No. 121XY2019028027) with facility amount ofRMB180,000,000.00 for 12 months from 30 October 2019 to 29 October 2020. Pursuant to theagreement, Axus Stationery and China Merchants Bank entered into the Maximum MortgageContract (No.121XY2019028027) with the mortgage term from the effective date of the mortgagecontract to the termination of litigation for facility credit. The collaterals for mortgage include:

Name of collateralOwnership No.Original valueAccumulated depreciationNet value
No. 111 Xuezi South Road, Xianghuaqiao Street, Qingpu DistrictHFDQ Zi (2013) No. 01543747,061,453.5222,483,546.1124,577,907.41
No. 233 Xuezi South Road, Xianghuaqiao Street, Qingpu DistrictHFDQ Zi (2013) No. 01339632,156,238.7811,248,094.3120,908,144.47
No. 333 Xuezi South Road, Xianghuaqiao Street, Qingpu DistrictHFDQ Zi (2015) No. 01571860,230,210.9712,418,790.0347,811,420.94
Total139,447,903.2746,150,430.4593,297,472.82

3. Other explanation

"□ Applicable" "√ Not applicable"

(4) Analysis on industry operating information

"√ Applicable" "□ Not applicable"

Please refer to “Description of the Company’s Principle Business, Operation Model and IndustryCondition During the Reporting Period” set out in “Business Overview of the Company”of SectionIII.

(5) Analysis of investment

1. Overall analysis of external equity investment

"√ Applicable" "□ Not applicable"During the Reporting Period, total external investment of the Company amounted toRMB211,038,100, representing a decrease of 41.52% as compared to the total investment ofRMB360,875,700 in corresponding period of last year.

(1) Significant equity investment

"√ Applicable" "□ Not applicable"

1. In 2018, the Company increased capital by RMB322,000,000 for M&G Colipu in cash. Theamount pledged but not yet contributed is RMB322,000,000. For more details, please refer tothe Announcement on Increasing Capital for Controlled Subsidiary (announcement No.: 2018-034) disclosed by the Company on 9 November 2018. As at the end of the Reporting Period, theactual contribution of capital made by the Company amounted to RMB98,000,000, of whichpremium is RMB28,000,000, and amount promised but not yet settled is RMB252,000,000;

2. On 22 March 2019, the Company entered into the Equity Transfer Agreement of AxusStationery (Shanghai) Company Ltd. with Axus Stationery (Shanghai) Company Ltd. and itsshareholder Yilin Investment (Shanghai) Co., Ltd.(懿琳投资(上海)有限公司), Mr. Xu Peifeng andMr. Andre FrancisViegas, the actual controllers of Beilin Investment (Shanghai) Co.,Ltd.(倍林投资(上海)有限公司) and Highton Limited respectively, to acquire 56% equity of Axus Stationery(Shanghai) Company Ltd. at the consideration of RMB177,038,100. As at the end of theReporting Period, the actual contribution of capital made by the Company amounted toRMB170,006,000, and the amount promised but not yet settled is RMB7,032,100. For moredetails, please refer to the Announcement on the Acquisition of 56% of Equity of Axus Stationery(Shanghai) Company Ltd., Announcement on Update on the Acquisition of 56% of Equity of AxusStationery (Shanghai) Company Ltd., and Announcement on Update on the Acquisition of 56%of Equity of Axus Stationery (Shanghai) Company Ltd. disclosed by the Company on 26 March2019, 9 April 2019 and 30 July 2019 respectively under the announcement No.2019-009, 2019-011 and 2019-022 respectively. Acquisition was completed at the end of April 2019, and startedto be included into the consolidated statement of the Company.

(2) Significant non-equity investment

"□ Applicable" "√ Not applicable"

(3) Financial assets measured at fair value

"□ Applicable" "√ Not applicable"

(6) Sale of significant assets and equity interests

"□ Applicable" "√ Not applicable"

(7) Analysis of major controlled companies and shareholding companies"√ Applicable" "□ Not applicable"

Unit: 0’000 Currency: RMB

Company NameNature of the businessMajor products and servicesRegistered capitalTotal assetNet assetsNet profit
Shanghai M&G Zhenmei Stationery Co., Ltd.(上海晨光珍美文具有限公司)Wholesale and retailStationery and office supplies1,000.003,214.99-925.45-426.55
Shanghai M&G Colipu Office Supplies Co., Ltd.Wholesale and retailOffice supplies30,000.00167,576.1941,157.707,580.35
Shanghai M&G Stationery & Gift Co., Ltd.(上海晨光文具礼品有限公司)Wholesale and retailStationery and office supplies19,941.94100,954.2138,718.024,987.75
M&G Living Studio Enterprise Management Co., Ltd.(晨光生活馆企业管理有限公司)Wholesale and retailStationery and office supplies10,000.0037,086.02-2,341.24-804.67
Shanghai M&G Jiamei Stationery Co., Ltd.(上海晨光佳美文具有限公司)Manufacturing, wholesale and retailStationery and office supplies3,000.006,505.173,737.62127.68
Shanghai M&G Information Technology Co.,Wholesale and retailOffice supplies5,000.0012,699.556,761.94-120.59
Ltd.(上海晨光信息科技有限公司)
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)Design and so forthDesign, office supplies and so forth2,000.001,983.221,053.253.10
Shanghai M&G Office Supplies Co., Ltd.Wholesale and retailOffice supplies5,000.0020,682.639,635.452,636.01
Axus Stationery (Shanghai) Company Ltd.Production, sale and so forthStationery and office supplies8,100.0078,201.8925,273.66-993.49

Note: Acquisition of 56% equity of Axus Stationery by the Company during the ReportingPeriod was completed at the end of April 2019, and started to be included into the consolidatedstatement of the Company.

(8) Structured entities controlled by the Company

"□ Applicable" "√ Not applicable"

III. Discussion and analysis on future development of the Company

(1) Industry pattern and trend

"√ Applicable" "□ Not applicable"As the way of life and consumption habit of consumers change, retail industry started a newround of redevelopment and innovation. Stationery industry faces the challenge that uncertaintyof the external environment, decentralized diversification of consumption channel, individualdemands of the target consumption group (post-90s and post-00s) stimulate the demand for newproducts. As population structure changes in China and the birth rate declines, contributions ofgrowth in sales volume only to revenue weakens in stationery industry, so more revenue growthwill be contributed by consumption upgrading and product upgrading in the future. As domesticconsumption market becomes increasingly mature, demand for mid- to high-end pen productsin the Chinese market keeps increasing, helping enterprises to expand beyond the low-end penproducts market, and providing opportunities and challenges for mid- to high-end products withhigh quality and high price.

Traditional business circles around the schools are still the leading ones, while other businesscircles and form of sales increase rapidly, and sales terminal becomes diversified. New channelsand forms of business are developed gradually, with upgrading and competition in channelsbecoming increasingly obvious. Stationery consumption tends to be more brand-oriented,innovative, individualized and high-end in China, and there is a growing demand for exquisitecultural and creative products, promoting stationery upgrading and transforming to cultural andcreative life. With the constant development in the market, stationery industry becomes graduallycentralized in market with the M&A accelerating in upstream and downstream continuously, andintegration space in the industry further opened. Excellent brand stationery enterprises are in astrong position in the market, so the strong will get stronger, and market shares will be quicklyoccupied by leading enterprises.Market of direct sales to offices achieved prosperous development. According to industryresearch report made by the securities company, the scale of large market for office supplies(including office furniture, equipment and other office materials) in China reached more thanRMB1 trillion. Regulation on the Implementation of the Government Procurement Law of thePeople's Republic of China implemented in 2015 expressly requires that the state shall promotethe utilization of information networks for carrying out government procurement activities inelectronic manners. In the same year, General Office of the State Council issued the Notice ofthe General Office of the State Council on Issuing the Work Plan for Integrating and Establishinga Uniform Public Resources Trading Platform, requiring that a public resources trading platformwith unified regulations, openness and transparency, efficient service and standard supervisionshould be developed across the country to basically realize electronic transaction of publicresources in the whole process. Benefiting from the great promotion and support from nationalpolicies, B2B office supplies procurement got the historical opportunities for rapid development.The 1.4 billion population in China accounts for 18% of the total population in the world, andexcellent stationery enterprises in China have a vast space for greater development in globalmarket. During the Reporting Period, 98% revenue of the Company is contributed by domesticmarket, and the international market share is expected to increase.

(2) Development strategy of the Company

"√ Applicable" "□ Not applicable"To further the competitive advantage of the core traditional business by continued emphasis oninnovation of technology and products; to further develop new businesses of one-stop officesupplies service and direct retail; to actively expand international market; and to further integratehigh-quality resources in the industry chain. With continued efforts in those four areas, to reachthe goal of becoming the number one stationery brand(s) in China.

(3) Operation plan

"√ Applicable" "□ Not applicable"In 2020, the Company plans to reach revenue of RMB12,812,266,600, an increase of 15%,mainly through the following approaches:

1. Traditional core business

Businesses in domestic stationery industry are relatively decentralized. There are manymanufacturers with small average scale, so industrial concentration remains quite low.Thousands of stationery manufacturers in China are currently divided into different subdividedstationery categories. As there is no leading enterprise with relatively high market shares in mostof the subdivided stationery categories, the Company has much room for greater improvement.Making good use of the existing advantages in channel, brand, design and R&D and supplychain, the Company is expected to maintain fast and stable growth in traditional core business.

(1) Focus on and further develop channel

The Company will focus on key terminals, and build perfect stores to improve quality in a singlestore, facilitate the optimization and upgrading of franchising stores and delivery centers, andupgrade channel. Besides, the Company will also strengthen promotion for categories andspecial zones for products to increase on-sale rate of the must-have products, and activelyexplore new business models to create driving force for sale, increase proportion in businesscircles and expand market share, making breakthroughs in both the existing stock market andincrement market.

(2) Promote four product sectors comprehensively

① Consumer products

The Company will continue to improve stronger product strategy, and set up the assuranceprocess for quality of newly developed products to achieve target development with less quantitybut higher quality, and increase contribution of individual product. Focus will be placed onproduct management of key categories to develop long-term products and high-quality products.Promotion for category will be carried out collaboratively with offline distribution channel toincrease on-sale rate, while coordination will be made with online channel to increase onlinesales of consumer products.

② Exquisite cultural and creative products

The Company will optimize inventory of exquisite cultural and creative products, amelioratedevelopment and presentation plan for key categories based on terminal sale to developformations of exquisite cultural and creative products with strong function, and manage SKU toincrease the contribution of individual product. Besides, the Company will also optimizemarketing window and the timing of launching, and popularize key categories with breakthroughsthrough seizing market opportunities and collaborating research, production and sale. Brand ofexquisite cultural and creative products will be popularized and customer stickiness will beenhanced through summit of exquisite cultural and creative products.

③ Office supplies

The Company will enhance development and promotion of office supplies to put core productson sale, and expand M&G stores for office supplies and establish perfect stores for officesupplies on a continuous basis. Focus will be placed on key development and breakthrough of“mega customer”, “extensive category” and “large platform” to facilitate development of largeoffice terminal customers. Moreover, the Company will focus on the development of online officesupplies in all categories and multiple channels, and stimulate sales growth and increase marketshares in office supplies market through seeking new customers continuously and improvingsales in the single store of established customers.

④ Arts products for children

The Company will optimize product structure and promote long-term products and new products.The Company will also increase brand influence, optimize development of new products andenhance contributions from individual product, and facilitate rapid growth in e-commerce todevelop new e-commerce categories and establish new e-commerce stores. CARIOCA productswill be promoted through online and offline channel, and Marco products of Axus Stationery willbe further developed and popularized.

2. New business

(1) Keep expanding operation of M&G Colipu

Business in direct sales of office supplies continues to achieve booming development since M&GColipu follows requirement on well-informed, open and transparent government procurement,and meets requirements that enterprises desire to increase procurement efficiency and reduceprocurement cost for non-production office and administration supplies. Brand enterprisecontinues to enhance competitiveness through improving service quality, enriching productcategories, seeking more customers and developing national supply chain system, so M&GColipu is expected to maintain relatively rapid growth, and become one of the main competitorsin the market of direct sales of office supplies.M&G Colipu will redouble its efforts to develop sales teams in the south China, north China andcentral China so that it can expand local market and increase coverage of large projects.Furthermore, the Company will also further improve its capacity in supplying products to enhancecustomer stickiness, get shortlisted in more new comprehensive e-commerce projects fromstate-owned enterprises and win bidding for the Group's comprehensive promotion to expand itsexisting shares. Efforts will be made to construct central warehouse in the northeast China, andstart and facilitate construction and establishment of central warehouse in the northwest China.In addition, the Company will popularize Colipu's convenient shopping service(省心购) to expandthe market of small and micro businesses by providing sound products with low price and lowoperation cost.

(2) Combine direct sale with franchise to further explore the business model of large retail store

In terms of M&G Life, the Company will improve operation capacity of the stores and sales ofper employee, optimize human resource cost for stores, and increase orders from customersand quality of existing single store so as to improve new product launch strategy, accelerateiteration of products and increase efficiency of products. In terms of Jiumu Store, the Companywill speed up channel layout, enhance the development of operation team and exploreopportunity for new categories to strengthen development capacity for original products,integrate high-quality supply chain resources, improve supply chain management, and upgradechannel and product.

(3) Accelerate development of M&G Technologies

The Company will continue to focus on making breakthroughs in e-commerce channel, anddevelop best-selling products of new categories to accelerate development for online distributionchannel and improve key stores. Moreover, the Company will cultivate its capacity to developonline products, improve online product formations and promotion, and develop new scenes andcategories so as to continuously create incremental online categories, improve promotionefficiency for categories and enhance brand exposure. Attention will be paid to management ofmarket order to enhance control on distribution system.

(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 newchallenges in operation management system, internal control system and staff management.Although the Company has developed operation management system and internal controlsystem that accord with features of its business and technology in its development, and hiredand cultivated stable core management team, operation of the Company will be adverselyaffected if the aforesaid management system and management staff fail to promptly adapt to therapid expansion of the Company. Therefore, the Company will keep improving its managementsystem and internal control system, and adopt various measures to improve qualification ofmanagement staff.

2. Market risks

With social transformation and consumption upgrading, stationery market presents opportunitiesfor structure-based development. If the Company is unable to anticipate market trends in timeand adapt to market changes from aspects of product upgrading, quality management to salestrategy, the Company will encounter certain risks in market competition. Having been aware ofthe problem, the Company enhanced product R&D under the guidance of the market, optimizedproduct structure, and developed a sounder quality management and control system. Marketstrategies are formulated based on market survey, analysis of big data and managementdiscussion.

3. Risks from fiscal and taxation

According to Article 28 of Enterprise Income Tax Law of the People's Republic of China, theenterprise income tax on important high- and new-tech enterprises that are necessary to besupported by the state shall be levied at the reduced tax rate of 15%. The Company was re-recognized as a national high- and new-tech enterprise on 28 October 2019, and started toimplement 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 theCompany fails to pass the review after its qualification of high- and new-tech enterprise expires,operation performance of the Company will be adversely affected. As such, the Companyperforms strict control according to assessment standards for high- and new-tech enterprises toensure that it meets all indicators, and qualifies and passes the annual review and renewal forhigh- and new-tech enterprises.

4. Risks from COVID-19

Since the outbreak of novel coronavirus (hereinafter referred to as “COVID-19”) at the beginningof 2020, domestic economy growth and demand of foreign trade have slowed down significantly.Although demand of stationery industry is relatively rigid, it has been affected by macro-economyand delay in new semester, especially for primary and middle schools. The impact of COVID-19on the macro-economy is uncertain, adding uncertainties to the Company’s operation in 2020.The Company pays close attention to the development of COVID-19, and adopt active measuresto 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 specialreasons such as state secrets and business secrets and the reasons thereof"□ Applicable" "√ Not applicable"

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 is implemented after it was passed atthe 16th meeting of the third Board meeting and 2016 annual general meeting.

2. Principle in profit distribution of the Company: The Company implements the dividenddistribution policy which entitles the shareholders to the same rights and same dividends, underwhich shareholders are entitled to receive dividends and other kinds of distribution of interestsbased on the number of shares held by them. The Company adopts active profit distributionpolicy, which emphasizes investors’ reasonable investment returns while maintainingsustainability and stability. The Company is allowed to distribute profit in cash or shares, but itsprofit distribution shall not exceed the range of the accumulated distributable profits or affect theCompany’s ability to continue as a going concern.

3. Overall approaches to distribute profit of the Company: The Company distributes dividends incash or shares, or cash-and-shares, and if the Company satisfies the conditions for cashdividends, priority should be given to profit distribution by means of cash dividends.

4. Specific conditions and proportion for cash dividends: The Company primarily adopts cashdividend as its profit distribution policy. The Company may distribute cash dividend when itmakes 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 notexceed the range of the accumulated distributable profits. In general, if there are no materialinvestment plans or significant cash expenditure, the Company may distribute profit in cash fora single year not less than 20% of the distributable profit realized in the current year.In addition, as for the proportion of cash dividends to the total profit distribution, the Board ofDirectors shall take into full account of various factors such as features of the industries wherethe Company operates, the stage of development, its own business model, level of profitability,and whether there is significant capital expenditure arrangement, to distinguish the followingsituations and determine differentiated cash dividend proportion in accordance with theprocedures as required by the Articles of Association:

(1) If the Company is at a mature stage of development and has no significant capital expenditurearrangement, the proportion of cash dividends in the profit distribution shall be at least 80% whenthe profit distribution is made;

(2) If the Company is at a mature stage of development and has significant capital expenditurearrangement, the proportion of cash dividends in the profit distribution shall be at least 40% whenthe profit distribution is made;

(3) If the Company is at a growing stage of development and has no significant capitalexpenditure arrangement, the proportion of cash dividends in the profit distribution shall be atleast 30% when the profit distribution is made;

(4) If the Company is at a growing stage of development and has significant capital expenditurearrangement, the proportion of cash dividends in the profit distribution shall be at least 20% whenthe profit distribution is made.The aforesaid “significant investment plans” or “significant cash expenditure” refers to one of thefollowing:

(1) The proposed external investment, acquisition of assets or purchase of equipment by theCompany in the coming twelve months with accumulated expenses amounting to or exceeding50% of the latest audited net assets of the Company and exceeding RMB50,000,000;

(2) The proposed external investment, acquisition of assets or purchase of equipment by theCompany in the coming twelve months with accumulated expenses amounting to or exceeding30% of the latest audited total assets of the Company.Significant investment plans or significant cash expenditure that meets the above conditionsshall be reviewed and approved at the general meeting after being reviewed by the Boardmeeting.

5. During the Reporting Period, the formulation and implementation of the cash dividend policyhas complied with the Articles of Association and the resolutions of the general meetings. Thedividend distribution standards and proportions are clearly stated, and relevant decision makingprocedures and systems are complete. Independent directors have diligently served theirobligations, and played their roles. As minority shareholders have opportunities to fully expresstheir opinions and appeals, their legitimate interests have been fully protected.

(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 thereporting period)

Unit: Yuan Currency: RMB

distributionNumber of bonus shares per 10 shares (shares)Amount of dividends distributed per 10 shares (Yuan) (inclusive of tax)Number of shares transferred per 10 shares (shares)(inclusive of tax)
2019040368,000,000.001,060,083,625.0334.71
2018030276,000,000.00806,847,308.4134.21
201702.50230,000,000.00634,040,991.4636.28

(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 Companyduring the Reporting Period is positive but there is no proposal for cash dividend,the Company shall disclose the reasons, the usage and the utilization plan of theundistributed profits in detail"□ Applicable" "√ Not applicable"II. Performance of undertakings

(1) Undertakings by the Company’s beneficial controllers, shareholders, related parties,

acquirers, the Company and other related parties during or subsisted in theReporting Period

"√ Applicable" "□ Not applicable"

Background of undertakingsType of undertakings TypesUndertaking partyContents of the undertakingTime and term of the undertakingWhether there is deadline for performanceWhether strictly performed in a timely mannerIf not performed in time, describe the specific reasonsIf not performed in time, describe plans in next steps
Undertakings related to initial public offeringRestriction on sale of sharesM&G Group, Chen Huwen, Chen Huxiong, and Chen Xueling(1) Within 36 months from initial public offering and listing of the Company, the shares of the Company issued prior to the offering or listing shall neither be transferred or entrusted to other person for management, nor be 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 period upon the listing, the lockup period for shares of the Company held before the offering or listing shall be automatically extended by 6 months based on the 36 months of original undertaking period, in other words, the lockup period is 42 months from the date when shares of the Company are listed. If there are any ex-rights or ex-dividends events, such as the declaration of dividends, bonus issue, and capitalization from capital reserve to share capital, the above closing price refers to price after corresponding adjustment of price of shares of the Company; (3) 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 the Company's 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 the shareholding reduction should not be lower than the adjusted offering price of the Company's initial public offering shares at the time of the offering and the listing.36 monthsYesYes
Restriction on sale of sharesKeying Investment and 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 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 period upon the listing, the lockup period for shares of the Company held before the offering or listing shall be automatically extended by 6 months based on the 36 months of original undertaking period, in other words, the lockup period is 42 months from the date when shares of the Company are listed. If there are any ex-rights or ex-dividends events, such as the declaration of dividends, bonus issue, and capitalization from capital reserve to share capital, the above closing price refers to price after corresponding adjustment of price of shares of the Company; (3) After the aforesaid undertaking period expires, the proportion of shares unlocked every year shall not exceed 25% of the total shares of the Company held; (4) Within 24 months after the termination of lockup period, if any attempt is made to reduce the shares of the Company that it had held prior to the offering and listing by any means, the price of the shareholding reduction shall not be lower than the offering price of the Company's 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 the shareholding reduction should not be lower than the adjusted offering price of the Company's initial public offering shares at the time of the offering and the listing; (5) Notwithstanding any change in the position of some of the partners in the joint venture or their departure from the joint venture, the joint venture will strictly perform the above undertakings.36 monthsYesYes
OthersM&G Group(1) M&G Group advocates that shares of the Company should be held in the long term to ensure that M&G Group shares operation achievements of the Company on a continuous basis. Therefore, M&G Group has the intention to hold shares of the Company for a long term. (2) After the lockup period of the Company’s shares held by M&G Group expires, it is possible that M&G Group might reduce shareholding of the Company appropriately for the development requirement of M&G Group. In this situation, M&G Group is expected to reduce its shareholdings by no more than 5% of the total shares of the Company held by M&G Group within the first year after the lockup period expires with the price of the shareholding reduction not lower than the offering price of the Company's initial public offering. The shareholding reduction shall not exceed 10% of the total shares of the Company held by M&G Group within the second year after the lockup period expires with the price of the shareholding reduction not lowerNot applicableNoYes
(3) If M&G Group intends to reduce shareholding of the Company, it will announce its reduction plan 3 transaction days before reducing the shareholding. Furthermore, the reduction will be performed legally according to rules of Shanghai Stock Exchange in the form of block trade, auction transaction as well as other methods recognized by China Securities Regulatory Commission.
OthersKeying Investment and Jiekui Investment
(1) The joint venture, which is an employee-owned enterprise established by officials and important business professionals of the Company, advocates that shares of the Company should be held in the long term to ensure that operation achievements of the Company are shared on a continuous basis. Therefore, the joint venture has the intention to hold shares of the Company for a long term. (2) After the lockup period of the Company’s shares held by joint venture expires, it is possible that the joint venture might reduce shareholding of the Company appropriately for the development requirement of the joint venture. In this situation, the joint venture is expected to reduce its shareholdings by no more than 25% of the total shares of the Company held by the joint venture within the first year after the lockup period expires with the price of the shareholding reduction not lower than the offering price of the Company's initial public offering. The shareholding reduction shall not exceed 25% of the total shares of the Company held by joint venture within the second year after the lockup period expires with the price of the shareholding reduction not lower than the offering price of the Company's initial public offering. 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 Company reduces its holding of the aforesaid shares, the price of the shareholding reduction for the Company should not be lower than theadjusted offering price of the Company's initial public offering shares at the time of the offering and the listing; (3) If the joint venture intends to reduce shareholding of the Company, it will announce its reduction plan 3 transaction days before reducing the shareholding. Furthermore, the reduction will be performed legally according to rules of Shanghai Stock Exchange in the form of block trade, auction transaction as well as other methods recognized by China Securities Regulatory Commission.Not applicableNoYes
Address competition between counterpartsM&G Group, Keying Investment and Jiekui Investment(1) The enterprise and other enterprises (except the Company and enterprises controlled by it) controlled and (or) invested by it currently have not engaged in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with principal businesses of the Company and enterprises controlled by it. (2) After the initial public offering and listing of the Company, the enterprise and other enterprises (except the Company and enterprises controlled by it) controlled and (or) invested by it will not: ① engage in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in; ② support other enterprises other than the Company and enterprises controlled by it in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in; ③ interfere in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in. Apart from the aforesaid undertaking, the enterprise further guarantees that it will ① ensure its independence in assets, businesses, employees, finance and institution according to relevant rules of laws and regulations; ② adopt legal and effective measures to stop companies, enterprises and other economic organizations that the Company has control right from engaging directly or indirectly in the same or similar businesses with the Company; ③ not take advantage of its position as the controlling shareholder of the Company to carry out any other activities that may harm the rights of the Company and other shareholders.Not applicableNoYes
Address competition between counterpartsChen Huwen, Chen Huxiong, and Chen Xueling(1) I currently hold no position in other companies or economic organizations that have the same or similar business with the Company or enterprises controlled by it. (2) Other enterprises (except the Company and enterprises controlled by it) which are controlled by me independently and/ or in which I am one of the beneficial shareholders currently have not engaged in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with principal businesses of the Company and enterprises controlled by it. (3) After the initial public offering and listing of the Company, other enterprises (except the Company and enterprises controlled by it) which are controlled by me independently and/ or in which I am one of the beneficial shareholders will not: ① engage in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in; ② support other enterprises other than the Company and enterprises controlled by it in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in; ③ interfere in any form of business or activity that constitutes or may constitute a direct or indirect competition relationship with current or future principal businesses that the Company and enterprises controlled by it specialize in. Apart from the aforesaid undertaking, I further guarantee that I will: ① ensure its independence in assets, businesses, employees, finance and institution according to relevant rules of laws and regulations; ② adopt legal and effective measures to stop companies, enterprises and other economic organizations that I have control right from engaging directly or indirectly in the same or similar businesses with the Company; ③ not take advantage of the position as the beneficial controller of the Company to carry out any other activities that may harm the rights of the Company and other shareholders.Not applicableNoYes
OthersM&G(1) Our company will strictly perform various obligations and responsibilities set out in all public undertaking issues (hereinafter referred to as “Undertaking Issues”) in the initial public offering and listing. (2) If our company fails to perform various obligations and responsibilities set out in the undertaking issues, our company undertakes to take the following measures for restrictions: ① Compensate public investors for direct losses suffered by relying on relevant undertakings to implement transactions through self-owned capital with the amount of compensation being determined according to negotiation between our Company and investors, or the method or amount determined by the securities supervision and administration department and the judicial authority;Not applicableNoYes
③ Our Company shall not increase the salary or allowance of our directors, supervisors and senior management in any form until our Company has fully eliminated the adverse effect due to failure on related undertaking issues.
OthersM&G Group(1) M&G Group will strictly perform various obligations and responsibilities set out in all public undertaking issues (hereinafter referred to as “Undertaking Issues”) in the initial public offering and listing of M&G Stationery. (2) If M&G Group fails to perform various obligations and responsibilities set out in the aforesaid undertaking issues, M&G Group undertakes to take the following measures for restrictions: ① Compensate public investors for direct losses suffered by relying on relevant undertakings to implement transactions through self-owned capital with the amount of compensation being determined according to negotiation between M&G Group and investors, or the method or amount determined by the securities regulatory authorities and the judicial authority; ② The lockup period of M&G Stationery’s shares held by M&G Group will be automatically extended to the date when M&G Group fully eliminates the adverse effect due to failure on related undertaking issues.Not applicableNoYes
OthersChen Huwen, Chen Huxiong, and Chen Xueling(1) I will strictly perform various obligations and responsibilities set out in all public undertaking issues (hereinafter referred to as “Undertaking Issues”) in the initial public offering and listing of M&G Stationery. (2) If I fail to perform various obligations and responsibilities set out in the aforesaid undertaking issues, I undertake to take the following measures for restrictions: ① Compensate public investors for direct losses suffered by relying on relevant undertakings to implement transactions through self-owned capital with the amount of compensation being determined according to negotiation between investors and me, or the method or amount determined by the securities regulatory authorities and the judicial authority; ② The lockup period of M&G Stationery’s shares held by me directly or indirectly will be automatically extended to the date when I fully eliminate the adverse effect due to failure on related undertaking issues. ③ I shall not require M&G Stationery to increase my salary or allowance in any form, nor shall I accept the increase of salary or allowance by M&G Stationery in any form until I have fully eliminated the adverse effect due to failure on related undertaking issues.Not applicableNoYes
OthersKeying Investment and Jiekui Investment(1) The joint venture will strictly perform various obligations and responsibilities set out in all public undertaking issues (hereinafter referred to as “Undertaking Issues”) in the initial public offering and listing of M&G Stationery. (2) If the joint venture fails to perform various obligations and responsibilities set out in the aforesaid undertaking issues, the joint venture undertakes to take the following measures for restrictions: ① Compensate public investors for direct losses suffered by relying on relevant undertakings to implement transactions through self-owned capital with the amount of compensation being determined according to negotiation between the joint venture and investors, or the method or amount determined by the securities regulatory authorities and the judicial authority; ② The lockup period of M&G Stationery’s shares held by the joint venture will be automatically extended to the date when the joint venture fully eliminates the adverse effect due to failure on related undertaking issues.Not applicableNoYes

(2) Where the Company has profit forecasts on assets or projects, and the Reporting

Period was within the term of profit forecasts, the Company has to state whethersuch profit forecasts on assets or projects are fulfilled and the reasons therefor

"□ Fulfilled" "□ Unfulfilled" "√ Not applicable"

(3) Execution of the performance undertakings and its impact on the goodwill

impairment testing"□ Applicable" "√ Not applicable"

III. Occupation of funds and repayment of debts during the Reporting Period"□ Applicable" "√ Not applicable"IV. Explanation of the Company on the “non-standard opinions audit report” fromaccounting firm"□ Applicable" "√ Not applicable"

V. Analysis and explanation from the Company on the reasons and impact of the change

of accounting policies, accounting estimates or correction on significant accountingerrors

(1) Analysis and explanation from the Company on the reasons and impact of the change of

accounting policies or accounting estimates"√ Applicable" "□ Not applicable"

1. Implement Notice of Modification and Issuance of the Financial Statement Format for GeneralBusiness Enterprises in 2019(《关于修订印发2019年度一般企业财务报表格式的通知》) andNotice of Modification and Issuance of the Format of Consolidated Financial Statements (2019)(《关于修订印发合并财务报表格式(2019版)的通知》) released by the Ministry of Finance.The Ministry of Finance issued the Notice of Modification and Issuance of the FinancialStatement Format for General Business Enterprises in 2019 (Cai Kuai (2019) No. 6) and Noticeof Modification and Issuance of the Format of Consolidated Financial Statements (2019) (CaiKuai (2019) No.16) on 30 April 2019 and 19 September 2019 respectively to revise financialstatement format for general business enterprises. The main impact of the Company'simplementation of the above regulations is shown as follows:

Contents and reasons of changes in accounting policiesReview and approval procedureItem and amount in statement influenced
ConsolidationParent company
(1) The “bills receivable and accounts receivable” in the balance sheet is divided into “bills receivable” and “accounts receivable”; the “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”; the comparison data is adjusted accordingly.The 18th meeting of the fourth Board meetingThe “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”. Balance of “bills payable” at the end of last year is RMB0.00, and balance of “accounts payable” at the end of last year is RMB1,319,407,048.21.The “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”. Balance of “bills payable” at the end of last year is RMB0.00, and balance of
“accounts payable” at the end of last year is RMB240,475,062.99.
(2) The item of “Including: derecognition of income from financial assets at amortized cost” is added to the item of investment income in the income statement. The comparison data is not adjusted.The 18th meeting of the fourth Board meetingThe amount of “derecognition of income from financial assets at amortized cost” in the current period is RMB0.00.The amount of “derecognition of income from financial assets at amortized cost” in the current period is RMB0.00.

2. Implement the Accounting Standard for Business Enterprises No. 22—Recognition andMeasurement of Financial Instruments, the Accounting Standard for Business Enterprises No.23—Transfer of Financial Assets, the Accounting Standard for Business Enterprises No. 24—Hedge Accounting and the Accounting Standard for Business Enterprises No. 37—Presentationof Financial Instruments (revised in 2017) issued by the Ministry of FinanceThe Ministry of Finance revised the Accounting Standard for Business Enterprises No. 22—Recognition and Measurement of Financial Instruments, the Accounting Standard for BusinessEnterprises No. 23—Transfer of Financial Assets, the Accounting Standard for BusinessEnterprises No. 24—Hedge Accounting and the Accounting Standard for Business EnterprisesNo. 37—Presentation of Financial Instruments in 2017. It is stipulated in the revised standardsthat for financial instruments that have not been derecognized on the date of first implementation,if the previous recognition and measurement are inconsistent with the revised standards, theyshall be retrospectively adjusted. If the comparative figures in financial statements for the priorperiod are inconsistent with the revised standards, no adjustment is required. The Companyadjusted the retained earnings and other comprehensive income at the beginning of the yeardue to the cumulative impact of retrospective adjustment.Based on the adjusted balance at the end of last year according to Cai Kuai (2019) No. 6 andCai Kuai (2019) No. 16, the main impacts of implementing the above new financial instrumentstandards are as follows:

Contents and reasons of changes in accounting policiesReview and approval procedureItem and amount in statement influenced
ConsolidationParent company
(1) Non-tradableThe 18thAvailable-for-sale financial assets:Available-for-sale financial assets:
available-for-sale equity instrument investments are designated as “financial assets measured at fair value through other comprehensive income”.meeting of the fourth Board meetingOther equity instrument investments: increased by RMB3,600,000.000Other equity instrument investments: increased by RMB3,600,000.00
(2) Provision of expected credit loss was made for “financial assets at amortized cost” and “financial assets measured at fair value through other comprehensive income (debt instrument)”.The 18th meeting of the fourth Board meetingBills receivable: decreased by RMB0.00 Accounts receivable: decreased by RMB0.00 Other receivables: decreased by RMB0.00 Debt investment: decreased by RMB0.00 Other comprehensive income: increased by RMB0.00 Deferred income tax assets: increased by RMB0.00Bills receivable: decreased by RMB0.00 Accounts receivable: decreased by RMB0.00 Other receivables: decreased by RMB0.00 Debt investment: decreased by RMB0.00 Other comprehensive income: increased by RMB0.00 Deferred income tax assets: increased by RMB0.00
(3) Bank financial product is reclassified into financial assets held for trading and measured at fair valueThe 18th meeting of the fourth Board meetingOther current assets: decreased by RMB1,020,000,000.00 Deferred income tax liabilities: increased by RMB1,183,345.00 Financial assets held for trading: increased by RMB1,027,265,300.00Other current assets: decreased by RMB820,000,000.00 Deferred income tax liabilities: increased by RMB949,470.00 Financial assets held for trading: increased by RMB826,329,800.00

(2) Analysis and explanation from the Company on the reasons and impact of the

correction on significant accounting errors"□ Applicable" "√ Not applicable"

(3) Communication with the previous accounting firm

"□ Applicable" "√ Not applicable"

(4) Other explanation

"□ Applicable" "√ Not applicable"

VI. Appointment and dismissal of the accounting firm

Unit: 0’000 Currency: RMB

Current accounting firm
Name of domestic accounting firmBDO China Shu Lun Pan Certified Public Accounts LLP
Remuneration of domestic accounting firm130
Term of office of domestic accounting firm10
NameRemuneration
Internal control audit accounting firmBDO China Shu Lun Pan CPAs(Special general partnership)50

Explanation on appointment and dismissal of the accounting firm"√ Applicable" "□ Not applicable"During the Reporting Period, the BDO China Shu Lun Pan Certified Public Accounts LLP wasre-appointed as the audit institution.

Explanation on the change of accounting firm during the auditing period"□ Applicable" "√ Not applicable"VII. Risk of suspension of listing

(1) Causes of suspension of listing

"□ Applicable" "√ Not applicable"

(2) Measures to be taken by the Company

"□ Applicable" "√ Not applicable"

VIII. Situation and causes for termination of listing"□ Applicable" "√ Not applicable"

IX. Matters related to bankruptcy and reorganisation"□ Applicable" "√ Not applicable"

X. Material litigation and arbitration"□ The Company had material litigation and arbitration during the year""√ The Company did not have material litigation and arbitration during the year"

XI. Punishment and rectification to the listed Company, its directors, supervisors, seniormanagement, controlling shareholders, beneficial controllers and acquirers"□ Applicable" "√ Not applicable"

XII. Explanation on credibility status of the Company, its controlling shareholders andbeneficial controllers during the Reporting Period"√ Applicable" "□ Not applicable"During the Reporting Period, since the Company, its controlling shareholders and beneficialcontrollers maintained sound credibility, there had been no refusal to implement effectivejudgments of a court or default of any material overdue debt.

XIII. Equity incentive plan, employee shareholding plan or other employee incentivemeasures of the Company and their impacts

(1) Incentive matters disclosed in temporary announcements and without further

progress or change in subsequent implementation"□ Applicable" "√ Not applicable"

(2) Incentive matters which have not been disclosed in temporary announcements or

with further progressEquity incentive"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

Employee shareholding plan"□ Applicable" "√ Not applicable"

Other incentive measures"□ Applicable" "√ Not applicable"

XIV. Major related transactions

(3) Related transactions in relation to daily operation

1. Events disclosed in temporary announcements and without further progress orchange in subsequent implementation"□ Applicable" "√ Not applicable"

2. Events disclosed in temporary announcements and with further progress or changein subsequent implementation"√ Applicable" "□ Not applicable"The 15th meeting of the fourth Board meeting and 2018 annual general meeting of the Companyreviewed and passed Resolution for the Implementation of Daily Related Transactions in 2018and Expected Daily Related Transactions in 2019, and released Announcement for theImplementation of Daily Related Transactions in 2018 and Expected Daily Related Transactionsin 2019 (announcement No.: 2019-003) on 26 March 2019. In 2019, sales to the sales companycontrolled by Guo Weilong were estimated to be RMB380,000,000.00. It was estimated that feesfor the lease of self-owned houses (including office buildings, workshops, parking space,warehouses and dormitories) paid to M&G Group will amounted to RMB3,622,857.14; fees forthe lease of self-owned office buildings and parking space amounted to RMB3,848,991.90;utilities amounted to RMB6,000,000.00. M&G Colipu is expected to pay M&G GroupRMB14,834,912.14 for the lease of self-owned office building and parking space; M&GTechnologies is expected to pay M&G Group RMB1,675,847.14 for the lease of self-owned officebuilding and parking space; M&G Life is expected to pay M&G Group RMB11,428.57 for thelease of parking space.In 2019, the actual sales to the sales company controlled by Guo Weilong amounted toRMB387,821,087.67; actual fees for the lease of self-owned houses (including office buildings,workshops, parking space, warehouses and dormitories) paid to M&G Group amounted toRMB3,622,857.14; actual fees for the lease of self-owned office buildings and parking spacepaid to M&G Group amounted to RMB3,846,134.78; actual utilities paid to M&G Groupamounted to RMB5,283,878.50; M&G Colipu actually paid M&G Group RMB14,839,388.35 forthe lease of self-owned office building and parking space; M&G Technologies actually paid M&GGroup RMB1,677,275.74 for the lease of self-owned office building and parking space; M&G Lifeactually paid M&G Group RMB5,952.39 for the lease of self-owned parking space.

3. Events not disclosed in temporary announcements

"□ Applicable" "√ Not applicable"

(4) Related transactions as a result of acquisition and disposal of assets or equity

1. Events disclosed in temporary announcements and without further progress orchange in subsequent implementation"□ Applicable" "√ Not applicable"

2. Events disclosed in temporary announcements and with further progress or changein subsequent implementation"□ Applicable" "√ Not applicable"

3. Events not disclosed in temporary announcements

"□ Applicable" "√ Not applicable"

4. Disclosable performance achievements during the Reporting Period when involvedwith agreed-upon performance"□ Applicable" "√ Not applicable"

(5) Major related transactions in joint external investment

1. Events disclosed in temporary announcements and without further progress or

change in subsequent implementation"□ Applicable" "√ Not applicable"

2. Events disclosed in temporary announcements and with further progress or change

in subsequent implementation"□ Applicable" "√ Not applicable"

3. Events not disclosed in temporary announcements

"□ Applicable" "√ Not applicable"

(6) Creditor’s rights and debts with related parties

1. Events disclosed in temporary announcements and without further progress or

change in subsequent implementation"□ Applicable" "√ Not applicable"

2. Events disclosed in temporary announcements and with further progress or change

in subsequent implementation"□ Applicable" "√ Not applicable"

3. Events not disclosed in temporary announcements

"□ Applicable" "√ Not applicable"

(7) Others

"□ Applicable" "√ Not applicable"

XV. Material contracts and their performance

(1) Trusteeship, contracting and leasing matters

1. Trusteeship

"□ Applicable" "√ Not applicable"

2. Contracting

"□ Applicable" "√ Not applicable"

3. Leasing

"□ Applicable" "√ Not applicable"

(2) Guarantees

"□ Applicable" "√ Not applicable"

(3) Entrusting others to manage cash assets

1. Entrusted wealth management

(1) Overall condition of entrusted wealth management

"√ Applicable" "□ Not applicable"

Unit: 0’000 Currency: RMB

TypesSource of fundAmount incurredUndue balanceOverdue uncollected amount
Entrusted wealth management of banksRaised capital2,0000
Entrusted wealth management of banksSelf-owned capital104,00065,0000

Others"□ Applicable" "√ Not applicable"

(2) Individual entrusted wealth management

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

TrusteeType of entrusted wealth managementAmount of entrusted wealth managementBeginning date of entrusted wealth managementTermination date of entrusted wealth managementSource of fundSource of Usage of fundreturnrate of return(if any)Actual gains or lossActual recoveryWhether it has gone through a legal procedure or notWhether there is a future entrusted wealth management plan or notAmount of provision for the impairment (if any)
ABC Shanghai Fengxian Guangming BranchNon-principal guaranteed with floating returns10,0002019/7/4Self-owned capitalUnrecoveredYesYes
SPD Bank Fengxian BranchNon-principal guaranteed with floating returns20,0002019/7/42019/10/8Self-owned capital4.16%218.84RecoveredYesYes
SPD Bank Fengxian BranchNon-principal guaranteed with floating returns40,0002019/7/4Self-owned capitalUnrecoveredYesYes
China Merchants Bank Shanghai Wuzhong Road BranchPrincipal and income guaranteed20,0002019/7/92019/9/25Self-owned capital4.20%179.51RecoveredYesYes
Industrial and Commercial Bank of China Limited Gumei Road BranchFixed returns and non-principal guaranteed with floating returns12,0002019/6/20Self-owned capitalUnrecoveredYesYes
Industrial and Commercial Bank of China Limited Gumei Road BranchFixed returns and non-principal guaranteed with floating returns2,0002019/7/31Self-owned capitalUnrecoveredYesYes
Industrial and Commercial Bank of China Limited Gumei Road BranchFixed returns and non-principal guaranteed with floating returns1,0002019/8/30Self-owned capitalUnrecoveredYesYes
Industrial and Commercial Bank of China Limited Gumei Road BranchFixed returns and non-principal guaranteed with floating returns1,0002019/9/29Self-owned capitalUnrecoveredYesYes

Others"□ Applicable" "√ Not applicable"

(3) Provision for the impairment of entrusted wealth management

"□ Applicable" "√ Not applicable"

2. Entrusted loans

(1) Overall condition of entrusted loans

"□ Applicable" "√ Not applicable"Others"□ Applicable" "√ Not applicable"

(2) Individual entrusted loans

"□ Applicable" "√ Not applicable"Others"□ Applicable" "√ Not applicable"

(3) Provision for the impairment of entrusted loans

"□ Applicable" "√ Not applicable"

3. Others

"□ Applicable" "√ Not applicable"

(4) Other material contracts

"□ Applicable" "√ Not applicable"

XVI. Explanation on other material matters"□ Applicable" "√ Not applicable"

XVII. Active fulfillment of social responsibilities

(1) Poverty alleviation of the listed companies

"□ Applicable" "√ Not applicable"

(2) Overview of social responsibility

"√ Applicable" "□ Not applicable"For more details, please refer to 2019 Annual Report on Social Responsibilities disclosed bythe Company on the website of the Shanghai Stock Exchange on 14 April 2020.

(3) Environmental information

1. Explanation on environmental protection of the company and its major subsidiariesfalling into the category of key pollutant discharging units designated by theenvironmental protection authorities"□ Applicable" "√ Not applicable"

2. Explanation on environmental protection of companies other than key pollutantdischarging units"√ Applicable" "□ Not applicable"The Company does not belong to the key pollutant discharging units published by nationalenvironmental protection authorities. As the Company pays great attention to environmentalprotection, the greening rate of its sites is high. During the production process, the plastic rawgranular edges did not produce solid waste or environmental pollution after going throughsmashing, re-granulating and recycling process; paperboard edges for package was recycledand sold by classification to local recycle stations for recycled paper. The Company has notadmixed any harmful recycling waste in its production, so no volatile gas that is harmful to thehealth of human beings was produced. Besides, domestic wastewater was disposed inaccordance with sewage treatment regulations set by the local government.

3. Explanation on reasons for not disclosing the environmental information of

companies other than key pollutant discharging units"□ Applicable" "√ Not applicable"

4. Explanation on further progress or changes of environmental information disclosed

during the Reporting Period"□ Applicable" "√ Not applicable"

(4) Other explanation

"□ Applicable" "√ Not applicable"

XVIII. Convertible corporate bonds"□ Applicable" "√ Not applicable"

Chapter VI Changes in Ordinary Shares and Shareholders

I. Changes in share capital of ordinary shares

(1) Changes in ordinary shares

1. Changes in ordinary shares

During the Reporting Period, there is no change in the total number and structure of share capitalof ordinary shares of the Company.

2. Explanation on changes in ordinary shares

"□ Applicable" "√ Not applicable"

3. Impact of changes in ordinary shares on the earnings per share, net asset value pershare and other financial indicators in the last year and period (if any)"□ Applicable" "√ Not applicable"

4. Other contents that the Company deems necessary and the securities regulatoryauthorities require disclosing"□ Applicable" "√ Not applicable"

(2) Changes in restricted shares

"□ Applicable" "√ Not applicable"II. Issuance and listing of securities

(1) Issuance of securities as at the Reporting Period

"□ Applicable" "√ Not applicable"Explanation on issuance of securities as at the Reporting Period (please provide separateexplanation on the bonds with different interest rates during their duration):

"□ Applicable" "√ Not applicable"

(2) Changes in the total number of ordinary shares and shareholder structure of theCompany and changes in the structure of assets and liabilities of the Company"□ Applicable" "√ Not applicable"

(3) Existing internal employee shares

"□ Applicable" "√ Not applicable"III. Shareholder and beneficial controller

(1) Total number of shareholders

Total number of shareholders of ordinary shares as at the end of the Reporting Period15,196
Total number of shareholders of ordinary shares at the end of last month prior to the disclosure date of this annual report14,271
Total number of shareholders of preferred shares whose voting rights have been restored as at the end of the Reporting Period0
Total number of shareholders of preferred shares whose voting rights have been restored at the end of last month prior to the disclosure date of this annual report0

(2) Table of shareholdings of the top ten shareholders and the top ten shareholders ofshares in circulation (or shareholders not subject to selling restrictions) as at the endof the Reporting Period

Unit: share

Shareholdings of the top ten shareholders
(full name)Change during the Reporting PeriodNumber of shares held as at the end of the periodPercentage (%)Number of shares held subject to selling restrictionsPledged or frozenshareholder
statusNumber
M&G Holdings (Group) Co., Ltd.0536,000,00058.260No0Domestic nonstate-owned legal person
Hong Kong Securities Clearing Company Limited30,760,84933,489,5213.640No0Unknown
Shanghai Keying Investment Management Office (L.P.)-7,800,00023,400,0002.540No0Others
Shanghai Jiekui Investment Management Firm (L.P.)-7,700,00023,100,0002.510No0Others
Chen Huxiong-7,600,00022,800,0002.480No0Domestic natural person
Chen Huwen-7,600,00022,800,0002.480No0Domestic natural person
Chen Xueling-4,800,00014,400,0001.570No0Domestic natural person
Industrial and Commercial Bank of China Limited-Invesco Great Wall Emerging Mature and Hybrid Equity Investment Funds(中国工商银行股份有限公司-景顺长城新兴成长混合型证券投资基金)1,691,96611,999,8541.300No0Unknown
NSSF 406 portfolio6,608,7989,561,4011.040No0Unknown
Bank of China Limited-Invesco Great Wall Ding Yi Hybrid Security Investment Fund (LOF)(中国银行股份有限公司-景顺长城鼎益混合型证券投资基金)375,3969,260,0001.010No0Unknown
Shareholdings of the top ten shareholders of non-restricted circulating shares
Name of shareholderNumber of non-restricted circulating shares heldType and number of shares
TypeNumber
M&G Holdings (Group) Co., Ltd.536,000,000Ordinary RMB Shares536,000,000
Hong Kong Securities Clearing Company Limited33,489,521Ordinary RMB Shares33,489,521
Shanghai Keying Investment Management Office (L.P.)23,400,000Ordinary RMB Shares23,400,000
Shanghai Jiekui Investment Management Firm (L.P.)23,100,000Ordinary RMB Shares23,100,000
Chen Huxiong22,800,000Ordinary RMB Shares22,800,000
Chen Huwen22,800,000Ordinary RMB Shares22,800,000
Chen Xueling14,400,000Ordinary RMB Shares14,400,000
Industrial and Commercial Bank of China Limited-Invesco Great Wall Emerging Mature and Hybrid Equity Investment Funds(中国工商银行股份有限公司-景顺长城新兴成长混合型证券投资基金)11,999,854Ordinary RMB Shares11,999,854
NSSF 406 portfolio9,561,401Ordinary RMB Shares9,561,401
Bank of China Limited-Invesco Great Wall Ding Yi Hybrid Security Investment Fund (LOF)(中国银行股份有限公司-景顺长城鼎益混合型证券投资基金)9,260,000Ordinary RMB Shares9,260,000
Explanation on the related relationship or parties acting in concert among the above shareholdersThere is related relationship among the shareholders—M&G Group, Keying Investment, Jiekui Investment, Chen Huwen, Chen Huxiong, and Chen Xueling. Chen Huwen, Chen Huxiong, and Chen Xueling are parties acting in concert. Save as the above, the Company is not aware of any related relationship or parties acting in concert as set out in Measures for the Administration of the Takeover of Listed Companies among the aforesaid shareholders.
Explanation on the preference shareholders with voting rights restored and their shareholdingsNo

Shareholdings of the top ten shareholders subject to trading moratorium and the condition oftrading moratorium"□ Applicable" "√ Not applicable"

(3) Strategic investors or general legal persons becoming the top ten shareholders

because of placing of new shares"□ Applicable" "√ Not applicable"IV. Controlling shareholder and beneficial controllers

(1) Controlling shareholder

1 Legal person"√ Applicable" "□ Not applicable"

NameM&G Holdings (Group) Co., Ltd.
Person in charge of the Company or legal representativeChen Huxiong
Establishment date2007-05-10
Main operation businessesIndustrial investment, infrastructure investment,
management and relevant businesses, domestic trade (excluding projects with national special approval) (For the above items subject to licensing or permit, relevant approval must be obtained prior to operation)
Equity interests of other domestic and overseas listed companies controlled or invested during the Reporting PeriodNo
Other explanationsNo

2 Natural person"□ Applicable" "√ Not applicable"3 Special explanation on the Company not having controlling shareholders"□ Applicable" "√ Not applicable"

4 Index and date of changes in controlling shareholders during the Reporting Period"□ Applicable" "√ Not applicable"5 Diagram of the ownership and controlling relationship between the Company and its

controlling shareholders"√ Applicable" "□ Not applicable"

(2) Beneficial controllers

1 Legal person"□ Applicable" "√ Not applicable"2 Natural person"√ Applicable" "□ Not applicable"

NameChen Huwen
NationalityChina
Acquire right of residence in other countries or regions or notNo
Main job and titleChairman of the Board of Shanghai M&G Stationery Inc.
Shareholdings in other domestic or overseas listed companies over the past 10 yearsNo
NameChen Huxiong
NationalityChina
Acquire right of residence in other countries or regions or notYes
Main job and titleVice-chairman of the Board and CEO of Shanghai M&G Stationery Inc.
Shareholdings in other domestic or overseas listed companies over the past 10 yearsNo
NameChen Xueling
NationalityChina
Acquire right of residence in other countries or regions or notNo
Main job and titleChairman of the Board and vice president of Shanghai M&G Stationery Inc.
Shareholdings in other domestic or overseas listed companies over the past 10 yearsNo

3 Special explanation on the Company not having beneficial controllers"□ Applicable" "√ Not applicable"

4 Index and date of changes in beneficial controllers during the Reporting Period"□ Applicable" "√ Not applicable"

5 Diagram of the ownership and controlling relationship between the Company and itsbeneficial controllers"√ Applicable" "□ Not applicable"

6 Control of the Company by beneficial controllers by way of trust or other means ofasset management"□ Applicable" "√ Not applicable"

(3) Other explanation regarding the controlling shareholders and the beneficialcontrollers"□ Applicable" "√ Not applicable"

V. Other legal person shareholders with more than 10% shareholdings"□ Applicable" "√ Not applicable"VI. Explanation on limitation on reduction of shareholding"□ Applicable" "√ Not applicable"

Chapter VII Preference Shares

"□ Applicable" "√ Not applicable"

Chapter VIII Directors, Supervisors, Senior Management and EmployeesI. Shareholding change and remuneration

(1) Shareholding change and remuneration of directors, supervisors and senior management currently employed and retired during theReporting Period"√ Applicable" "□ Not applicable"

Unit: 0’000 shares

NamePosition (note)GenderAgeFromToNumber of shares held at the beginning of the yearNumber of shares held at the end of the yearChange in share of the yearReasons for changeTotal pre-tax remuneration from the Company during the Reporting Period (RMB 0’000)Whether to get remuneration from related parties of the Company
Chen HuwenChairmanMale502014-6-122020-5-103,0402,280-760Personal capital needs164.04No
Chen HuxiongVice Chairman and PresidentMale502014-6-122020-5-103,0402,280-760Personal capital needs164.04No
Chen XuelingDirector and Vice PresidentFemale532014-6-122020-5-101,9201,440-480Personal capital needs92.61No
Fu ChangDirector and Vice PresidentMale502018-3-232020-5-10000111.52No
Zhang JingzhongIndependent DirectorMale572017-5-112020-5-1000012.00No
Chen JingfengIndependent DirectorMale522017-5-112020-5-1000012.00No
Cheng BoIndependent DirectorMale452016-4-192020-5-1000012.00No
Zhu YipingChairman of the Board of SupervisorsFemale612014-6-122020-5-100000Yes
Xu JingjinEmployee SupervisorMale412014-6-122020-5-1000051.31No
Han LianhuaSupervisorFemale422014-6-122020-5-100000Yes
Yao HezhongChief EngineerMale642014-6-122020-5-1000068.16No
Zhang QingChief Financial OfficerMale452018-4-42020-5-10000146.70No
Quan QiangBoard SecretaryMale472017-3-312020-5-1000096.18No
Total/////8,0006,000-2,000/930.56/
NameMain working experience
Chen HuwenHas been involved in the stationery manufacturing industry since 1997 and is one of the founders of M&G Group. Once worked as General Manager of Shanghai Sino-Korean M&G Stationery Manufacturing Co., Ltd. Now works as Chairman of the Company.
Chen HuxiongHas been involved in the stationery manufacturing industry since 1995. Worked as General Manager of Shanghai Sino-Korean M&G Stationery Manufacturing Co., Ltd. from 2001 to 2004, and Chairman of Shanghai Sino-Korean M&G Stationery Manufacturing Co., Ltd. from 2004 to 2009. Now works as Vice Chairman and President of the Company, and is also Vice Chairman of China Writing Instrument Association, Deputy Director of Ballpoint Pen Professional Committee of China Writing Instrument Association, and Chairman of China Writing Instrument Industry Technology Innovation Alliance.
Chen XuelingHas been involved in the stationery manufacturing industry since 1997 and is one of the founders of M&G Group. Once worked as Deputy General Manager of the Company's Production Center, and now works as a director and Vice President of the Company.
Fu ChangJoined M&G Stationery in May 2006 and successively served as Deputy Director of Marketing Center and Director of Production Center. Now works as a director
and Vice President of the Company.
Zhang JingzhongWorked in the Research Office of the Politics and Law Committee under the Zhejiang Provincial Party Committee from August 1984 to September 1988; and has been the Director at Zhejiang T & C Law Firm from October 1988 to present. Has been Vice President of the All China Lawyers Association from April 2016 to present.
Chen JingfengOnce worked as Deputy General Manager and General Manager of Shanghai Dazhong Public Utilities (Group) Co., Ltd. and President of CMC Holdings, and is currently the Chairman of Zhongyun Capital.
Cheng BoProfessor of accounting, doctor of accounting, senior accountant, senior member of the Accounting Society of China, the third-level talent of the New Century 151 Talent Project in Zhejiang Province. Started to work in a college or university in 2008 and is currently a teacher of economics and accounting specialty at Zhejiang Agriculture and Forestry University. Has long been engaged in scientific research and teaching in auditing and internal control, corporate governance and financial management. Has chaired more than 20 projects such as the National Social Science Fund of China and the Humanities and Social Science Fund under the Ministry of Education, and published more than 100 academic papers in various authoritative accounting journals and 4 academic monographs.
Zhu YipingOnce worked as Deputy General Manager of Jiangsu Life Group Co., Ltd. and Deputy General Manager of Shanghai Yuhui Industrial Co., Ltd. Joined M&G Stationery in May 2003 and served successively as Chief Financial Officer of Shanghai Sino-Korean M&G Stationery Manufacturing Co., Ltd., Deputy Director of the Company's Financial Center, and Chief Financial Officer of M&G Group. Now works as the person in charge of internal control of M&G Group.
Xu JingjinOnce worked as Sales Manager of Beijing International Hotel, Marketing Director and Sales Manager of Jianguo Garden Hotel Beijing, Sales Manager of Noble Club, and Restaurant Manager of Thai Chili Catering Service Company. Joined M&G Stationery in 2007. Now works as Director of the Company's Public Affairs Department.
Han LianhuaOnce worked as Cashier of Shanghai Fengxian Qianqiao Grain Management Office, Chief Accountant of Shanghai Rongjian Chemical Plant, and Financial Director of Shanghai Office of Fengxian Modern Agricultural Park. Joined M&G Stationery in June 2006. Successively served as Financial Supervisor of Shanghai Sino-Korean M&G Stationery Manufacturing Co., Ltd., Shanghai M&G Zhenmei Stationery Co., Ltd., and Shanghai M&G Stationery & Gift Chain Management Co., Ltd., and Financial Manager of M&G Group. Now works as Chief Financial Officer of M&G Group.
Yao HezhongJoined M&G Stationery in 1999 and successively served as Deputy General Manager and Deputy President of the Company’s R & D Center. Now works as Chief Engineer of the Company.
Zhang QingOnce worked as Chief Financial & Operating Officer at Danone Premium Brands (Shanghai) Trading Co., Ltd. and Asia-Pacific Chief Financial Officer at Moen Shanghai Kitchen & Bath Products Co., Ltd. Now works as Chief Financial Officer of the Company.
Quan QiangOnce worked as Chief Financial Officer of Fenglin Wood Industry Group Co., Ltd. and Executive Director for Chinese Business of the Royal Bank of Scotland. Now works as Secretary of the Board of Directors of the Company.

Particulars on other information"□ Applicable" "√ Not applicable"

(2) Equity incentives granted to directors and senior management during the Reporting Period"□ Applicable" "√ Not applicable"II. Employment of directors, supervisors and senior management currently employed and retired during the Reporting Period

(1) Employment in shareholders’ companies

"√ Applicable" "□ Not applicable"

Name of person employedName of shareholder’s companyPosition held in shareholder’s companyFromTo
Chen HuwenM&G GroupPresident2007-05-10
Keying InvestmentGeneral Partner2011-02-18
Chen HuxiongM&G GroupChairman2007-05-10
Jiekui InvestmentGeneral Partner2011-02-18
Chen XuelingM&G GroupDirector2007-05-10
Zhu YipingM&G GroupChief Financial Officer2011-03-01
Han LianhuaM&G GroupFinancial Manager2011-03-01
Particulars on employment in shareholders’ companiesSave for the personnel disclosed above, none of other directors, supervisors and senior management of the Company were employed by the shareholders’ companies.

(2) Employment in other companies

"√ Applicable" "□ Not applicable"

Name of person employedName of other companiesPosition held in other companiesFromTo
Chen HuwenChenguang Venture Capital Center(晨光创投)General Partner12 May 2011
Chenguang Sanmei(晨光三美)General Manager26 May 2008
Chen HuxiongChenguang Venture Capital Center(晨光创投)Limited Partner12 May 2011
Chenguang Sanmei(晨光三美)Chairman26 May 2008
Chen XuelingChenguang Venture Capital Center (晨光创投)Limited Partner12 May 2011
Chenguang Sanmei(晨光三美)Director26 May 2008
Zhang JingzhongZhejiang T & C Law FirmDirectorOctober 1988
Zhejiang Jinggong Science & Technology Co., Ltd.Independent DirectorJanuary 2018
Kweichow Moutai Co., Ltd.Independent DirectorAugust 2016
Lily Group Co., Ltd.Independent DirectorSeptember 2018
Chen JingfengZhongyun CapitalChairmanOctober 2017
Cheng BoZhejiang Agriculture and Forestry UniversityFull-time TeacherJune 2014
Shanghai Serum Bio-technology Co., Ltd.Independent DirectorJanuary 2018
Hangzhou Silan Microelectronics Co., Ltd.Independent DirectorJune 2019
Particulars on employment in other companiesSave for the personnel disclosed above, none of other directors, supervisors and senior management of the Company were employed by other related companies.

III. Remuneration of directors, supervisors and senior management"√ Applicable" "□ Not applicable"

Decision-making procedures for the remuneration of directors, supervisors and senior managementAccording to the Articles of Association, the remuneration of directors and supervisors is determined by the general shareholders' meeting; and the remuneration of senior management is determined by the board of directors.
Determination basis for the remuneration of directors, supervisors and senior managementare subject to the operation performance appraisal on an annual basis and the pre-paid base salary on a monthly basis, and the annual remuneration is settled after the Company’s annual operation target is completed.
Actual payment of the remuneration of directors, supervisors and senior managementRMB9,305,600
Total remuneration actually received by all directors, supervisors and senior management at the end of the Reporting PeriodRMB9,305,600

IV. Changes in directors, supervisors and senior management of the Company"□ Applicable" "√ Not applicable"V. Particulars on punishments by securities regulatory authorities in the past three years"□ Applicable" "√ Not applicable"

VI. Employees of the parent company and major subsidiaries

(1) Employees

Number of employees in the parent company2,109
Number of employees in major subsidiaries3,543
Number of employees5,652
Number of retirees of whom the parent company and major subsidiaries are responsible for the expenses
Professional structure
CategoryNumber
Production personnel1,978
Sales personnel1,241
Technical personnel459
Finance personnel191
Administration personnel269
Management personnel1,040
Others474
Total5,652
Education background
CategoryNumber (person)
University (including college) and above2,827
High school, technical secondary school1,312
Others1,513
Total5,652

(2) Remuneration policy

"√ Applicable" "□ Not applicable"A competitive compensation strategy was implemented: The Company adopted differentappraisal methods for personnel in different positions and at different levels, and by establishingand improving competitive remunerations and benefits, performance appraisal systems andincentive systems, actively promoted equity incentives and employee shareholding plans,attracted all kinds of professional talents and formed a benign internal competition to stimulatethe potential of employees, enhance the enthusiasm and initiative of employees, build aprofessional team with stable development, and ensure the continuous improvement of theCompany’s performance.

(3) Training program

"√ Applicable" "□ Not applicable"The Company highlighted the construction of talent echelon and promoted the development oftalents in the organization. It carried out the cultivation of talent quality through the leadershiptraining program, potential talent development plan, rotation learning, personal developmentpath design, etc. The training of the manufacturing system focused on the ability enhancementof grassroots management personnel and the cultivation of reserve talents in core technicalpositions, and actively promoted the establishment and application of the apprentice base tocreate a first-class stationery manufacturing technician team in the industry.

(4) Labor outsourcing

"√ Applicable" "□ Not applicable"

Total working hours of labor outsourcing20,686,562 hours
Total remuneration paid for labor outsourcingRMB566,831,518

VII. Others"□ Applicable" "√ Not applicable"

Chapter IX Corporate GovernanceI. Particulars on corporate governance"√ Applicable" "□ Not applicable"

1. Shareholders and general shareholders’ meetings: The Company could hold generalshareholders’ meetings in accordance with the requirements of the Company Law, the Articlesof Association, and the Rules of Procedure of the General Shareholders’ Meeting. Proposals,procedures, and voting at the general shareholders’ meetings were strictly implemented inaccordance with the relevant provisions. When considering proposals related to related-partytransactions, related shareholders avoided voting to ensure fair and reasonable related-partytransactions. Resolutions adopted at general shareholders’ meetings met the requirements oflaws and regulations, and complied with the lawful rights and interests of all shareholders,especially small and medium-sized shareholders.

2. Directors and board of directors: All the Directors of the Company could, based on the Rulesof Procedure of the Meetings of the Board of Directors and other rules, attend the board meetingsearnestly and all independent directors strictly complied with the above rules and performed theirrespective functions and duties in good faith and with diligence. The board of directors set upfour special committees, namely the Audit Committee, the Strategic Committee, the NominationCommittee, and the Remuneration and Appraisal Committee, which could give full play to theirprofessional roles in the Company's operation management.

3. Supervisors and the board of supervisors: The Company’s board of supervisors strictlycomplied with the relevant provisions of the Company Law and the Articles of Association, metthe requirements of laws and rules in terms of number and composition of members, and could,according to the Rules of Procedure of the Board of Supervisors, etc., seriously perform theirown functions and duties, and supervise the compliance with laws and regulations of theCompany's finance personnel, directors and senior management in performing their functionsand duties.

4. Controlling shareholder and listed company: The Company and its controlling shareholderswere independent of each other in personnel, assets, finance, organization and operatingbusiness. The Company's board of directors, board of supervisors and internal institutions couldoperate independently. The Company's major decisions were made by the general shareholders'meeting in accordance with the law. The controlling shareholders exercised the rights ofshareholders in accordance with the law, and had no behaviors that directly or indirectlyinterfered with the Company's decisions and business activities by circumventing the Company'sgeneral shareholders' meeting.

Whether there are significant differences between corporate governance and the requirementsof the relevant regulations of the China Securities Regulatory Commission; if there aresignificant differences, the reasons should be explained"□ Applicable" "√ Not applicable"

II. Brief introduction to general shareholders’ meetings

Session numberConvening dateQuery index of the designated website on which the resolution is publishedDisclosure date when the resolution is published
2018 annual general shareholders’ meeting18 April 2019www.sse.com.cn19 April 2019
2019 1st extraordinary general shareholders’ meeting20 June 2019www.sse.com.cn21 June 2019

Particulars on general shareholders’ meetings"√ Applicable" "□ Not applicable"The proposals considered at 2018 annual general shareholders’ meeting and 2019 1stextraordinary general shareholders’ meeting were adopted.

III. Performance of functions and duties by directors

(1) Attendance of directors at board meetings and general shareholders’ meetings

NameIndependent directorAttendance at board meetingsAttendance at general shareholders’ meetings
Number of attendance requiredNumber of attendance in personNumber of attendance by communicationNumber of attendance by proxyNumber of absenceTwo consecutive absences in personNumber of attendance at general shareholders’ meetings
Chen HuwenNo55300No2
Chen HuxiongNo55500No1
Chen XuelingNo55300No1
Fu ChangNo55400No1
Zhang JingzhongYes55400No0
Chen JingfengYes55400No0
Cheng BoYes55300No1

Particulars on two consecutive absences in person from board meetings"□ Applicable" "√ Not applicable"

Number of board meetings held during the year5
Including: on site2
by communication3
on site and by communication2

(2) Independent directors' objections to the Company's related matters"□ Applicable" "√ Not applicable"

(3) Others

"□ Applicable" "√ Not applicable"

IV. If there is any objection to important opinions and suggestions put forward by the

special committees under the board of directors in performing its functions andduties during the Reporting Period, the specific situation should be disclosed"□ Applicable" "√ Not applicable"

V. Particulars on risks in the Company identified by the board of supervisors"□ Applicable" "√ Not applicable"

VI. Particulars on the situations that the Company and its controlling shareholderscannot guarantee independence and cannot maintain self-operation ability in theaspects of business, personnel, assets, organization and finance"□ Applicable" "√ Not applicable"

The corresponding solutions, work progress and follow-up work plan of the Company in caseof horizontal competition"□ Applicable" "√ Not applicable"

VII. Establishment and implementation of appraisal mechanism and the incentivemechanism for senior management during the Reporting Period"√ Applicable" "□ Not applicable"During the Reporting Period, the Company established a comprehensive appraisal mechanismfor senior management. Quarterly and annual appraisals were conducted based on thecompletion of KPI and daily routine work by the departments for which senior management wereresponsible. Through the appraisal, not only the Company's overall operation and maineconomic indicators were achieved, but also the development of the senior managementpersonnel was realized, so as to fully mobilize the work enthusiasm and operation potential ofthe senior management.

VIII. Whether to disclose the self-appraisal report on internal control"√ Applicable" "□ Not applicable"2019 Appraisal Report on Internal Control was considered and approved at the 20th meeting ofthe 4th board of directors of the Company. For the full text of the report, pleasesee 2019 Appraisal Report on Internal Control disclosed on the website of the Shanghai StockExchange (www.sse.com.cn) on 14 April 2020.

Particulars on major defects in the internal control during the Reporting Period"□ Applicable" "√ Not applicable"

IX. Particulars on the audit report on internal control"√ Applicable" "□ Not applicable"The Company engaged BDO China Shu Lun Pan Certified Public Accounts LLP to audit theimplementation of internal control in its 2019 financial statements and the Audit Report onInternal Control was issued. For the full text of the report, please see 2019 Audit Report onInternal Control disclosed on the website of the Shanghai Stock Exchange (www.sse.com.cn)on 14 April 2020.Whether to disclose the audit report on internal control: yes

X. Others"□ Applicable" "√ Not applicable"

Chapter X Corporate Bonds

"□ Applicable" "√ Not applicable"

Chapter XI Financial ReportI. Auditor’s report"√ Applicable" "□ Not applicable"

Xin Kuai Shi Bao Zi [2020] No. ZA10693

To the shareholders of Shanghai M&G Stationery Inc.:

I. Audits’ opinionWe have audited the accompanying financial statements of Shanghai M&G Stationery Inc.(hereinafter referred to as “M&G Stationery”), which comprise the consolidated and parentcompany’s balance sheets as at 31 December 2019, the consolidated and parent company’sincome statements, the consolidated and parent company’s cash flow statements, and theconsolidated and parent company’s statements of changes in shareholders’ equity for the yearof 2019, as well as notes to financial statements.In our opinion, the accompanying financial statements were prepared in accordance with theAccounting Standards for Business Enterprises in all material aspects and give a true and fairview of the consolidated and parent company’s financial position of M&G Stationery as at 31December 2019 and of its consolidated and parent company’s operating results and cash flowsfor the year of 2019.

II. Basis of auditors’ opinionWe have conducted our audit in accordance with the Chinese Auditing Standards for CertifiedPublic Accountants. The “Responsibilities of Certified Public Accountants for Auditing ofFinancial Statements” in the auditor’s report further illustrate our responsibilities under thosestandards. In accordance with the Code of Professional Ethics of Chinese Certified PublicAccountants, we are independent of M&G Stationery and have performed other responsibilitiesin respect of professional ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

III. Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significancein our audit of the financial statements for the current period. These matters were addressed inthe context of our audit of the financial statements as a whole and, in forming our opinion thereon,we do not provide a separate opinion on these matters. The followings are the key audit mattersthat we have determined to communicate in the auditor’s report.

Key audit mattersHow our audit addressed the key audit matter
(I) Recognition of the revenue
M&G Stationery mainly specializes in selling stationery and office supplies. (1) Timing of revenue recognition for regional sales and overseas sale (export agent): Shanghai: sales revenue is recognized after goods are delivered; regions other than Shanghai: sales revenue is recognized after goods are delivered and delivery documents are confirmed with signature from the logistic companies; (2) Timing of revenue recognition for KA sales: sales revenue is recognized after goods are delivered and delivery documents are confirmed with signature from the logistic companies; (3) Timing of revenue recognition for self-managing and export business: revenue is recognized when the goods pass the ship’s rail in the port of shipment under the term of FOB; (4) Timing of revenue recognition for direct sales of office supplies: sales revenue is recognized after goods are delivered and confirmed by customers; (5) Timing of revenue recognition for direct sales large flagship store: sales revenue is recognized after goods are delivered and confirmed by customers. In 2019, M&G Stationery’s revenue from principal business in sales recognition2. We inspected customer contracts, on a sample basis, to identify terms and conditions of transfer of risks and rewards related to the ownership of goods, and assessed the timing of revenue recognition with reference to the requirements of prevailing accounting standards; 3. We selected samples for revenue transactions recorded during the current year, with invoices, sales contracts, goods delivery notes or transport documents to assess whether the related revenue was recognized in accordance with M&G Stationery’s revenue recognition accounting policies; 4. We performed analytical procedures on revenue and cost, including analysis of revenue, cost, gross profit margin fluctuations in each month of the current period, and performed analysis on sales model to observe whether there is any abnormal transaction; 5. We took samples from revenue transactions that took place shortly before and after the balance sheet date, by checking delivery orders and other supportive documents to assess whether
Since revenue is one of the key performance indicators of M&G Stationery, there is possibly inherent risk of inappropriately recognizing revenue to reach specific purpose in revenue recognition made based on the sales group of distributor; there is possibly potential risk of material misstatement in revenue recognition made based on the sales group of end customer because it involves many transactions with small amount for each transaction, so we recognized revenue recognition as a key audit matter.6. We evaluated the accuracy and authenticity of the revenue amount by implementing the income letter verification procedure and checking goods return after the period.
(II) Anticipated credit loss of accounts receivable
As at 31 December 2019, balance of accounts receivable amounted to RMB1,059,038,000, and provision made for credit impairment loss of accounts receivable amounted to RMB32,943,200. M&G Stationery measured provision for loss of accounts receivable in accordance with amount of anticipated credit loss in the entire lifetime. The anticipated credit loss requires the management to take into consideration of forward-looking information apart from combining historical experience and current situations, involving lots of estimation and judgment, so we recognized anticipated credit loss of accounts receivable as a key audit matter.2. We evaluated rationality of the estimation on anticipated credit loss of accounts receivable, including judgment of forward-looking information; basis of estimation on anticipated credit loss made on a single item, and basis of estimation on anticipated credit loss made on portfolio, including rationality of the division for portfolio; 3. We reviewed credit risk assessment performed by the management on internal and external environment of M&G Stationery’s operation, integrity of different customers, repayment history, repayment capacity, and historical experience in credit loss;

IV. Other informationThe management of M&G Stationery (hereinafter referred to as the “management”) isresponsible for the other information which comprises all the information covered in M&GStationery 2019 Annual Report other than the financial statements and this auditor’s report.Our audit opinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.In conjunction with our audit to the financial statements, our responsibility is to read the otherinformation. During the process, we considered whether there is material inconsistency or thereis likely material misstatement between the other information and the financial statements or theinformation we obtained during the audit.As we have performed the work on the other information obtained before the date of our auditor’sreport, we shall report if we confirmed there was a material misstatement among the otherinformation. We have nothing needed to be reported on this case.

V. Responsibilities of the management and governing bodies for the financialstatementsThe management shall be responsible for the preparation of financial statements in accordancewith the Accounting Standards for Business Enterprises to enable them to be fairly reflected,and to design, implement and maintain the necessary internal controls so that there is no materialmisstatement due to fraud or error in the financial statements.In the preparation of the financial statements, the management is responsible for assessing M&GStationery’s continuous operating capacity, disclosing matters relating to continuous operations(if applicable), and applying the continuing operating assumptions unless the management plansto perform liquidation, cease operation or otherwise has no realistic choice.The governing bodies are responsible for overseeing the financial reporting process of M&GStationery.

VI. Responsibilities of CPA for the audit of the financial statementsOur objective is to obtain reasonable assurance of the financial statements as a whole whetherthere is a material misstatement due to fraud or error and to issue an auditor’s report containingaudit opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with China Standards on Auditing will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.As part of an audit in accordance with the auditing standards, we exercised professionaljudgment and maintained professional skepticism throughout the audit. We also performed thefollowing works:

(1) to identify and assess the risks of material misstatement of the financial statements, whetherdue to fraud or error; design and perform audit procedures responsive to those risks; and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

(2) to understand the internal control related to the audit to design the appropriate auditprocedures.

(3) to evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.

(4) to draw a conclusion on the appropriateness of the management’s use of the going concernbasis of accounting. and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the ability of M&GStationery to continue as a going concern. If we conclude that a material uncertainty exists, weare required to draw attention in our auditor’s report to the related disclosures in the financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditor’s report. However, futureevents or conditions may cause M&G Stationery to cease to continue as a going concern.

(5) to evaluate the overall presentation, structure and content (including disclosure) of thefinancial statements, and to assess whether the financial statements reflect the relatedtransactions and events fairly.

(6) to obtain sufficient and appropriate audit evidence of the financial information of the entity orbusiness activity of the M&G Stationery in order to express an opinion on the financial statements.We are responsible for directing, supervising and performing group audits. We take fullresponsibility for the audit opinion.We communicated with the governing bodies regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficienciesin internal control that we identify during the audit.We also provided a statement to management on compliance with ethical requirements relatedto independence, and communicated with governing bodies about all relationships and othermatters that may be reasonably considered to affect our independence, as well as relatedprecautions (if applicable).

From the matters we had discussed with the governing bodies, we confirmed which matters weremost important to the audit of the financial statements for the current period and thus constitutedthe key audit matters. We set out these matters in the auditor’s report. Unless the disclosure ofthese matters are forbidden by the laws and regulations, or, in rare cases, if it is reasonablyexpected that the negative impacts caused by discussing certain matters in the auditor’s reportwould be larger than the benefits for public interest, we shall not disclose the matters in theauditor’s report under such circumstances.

BDO China Shu Lun Pan CPAs Certified Public Accountant: Gu Xuefeng (Project Partner)(Special general partnership)

Certified Public Accountant: Wang Aijia

Shanghai, China 10 April 2020

II. Financial Statements

Combined Balance Sheet

31 December 2019Prepared by: SHANGHAI M&G STATIONERY INC.

Unit: Yuan Currency: RMB

ItemNotes31 December 201931 December 2018
Current assets:
Cash and equivalentsVII. 11,935,600,694.351,046,668,874.97
Transaction settlement funds
Lending funds
Held-for-trading financial assetsVII. 2661,878,587.24
Financial assets at fair value through current profit or loss
Derivative financial assets
Bills receivableVII. 41,894,232.00
Accounts receivableVII. 51,026,094,724.15808,772,112.91
Receivables financingVII. 629,549,924.83
PrepaymentVII. 785,371,444.7342,336,973.71
Premium receivable
Reinsurance premium receivable
Reserves for reinsurance contract receivable
Other receivablesVII. 8117,647,039.93110,280,059.38
Including: Interest receivable
Dividend receivable
Financial assets purchased under agreements to resell
InventoriesVII. 91,378,108,759.851,042,701,610.00
Held for sale assets
Non-current assets due within one year
Other current assetsVII. 1229,280,925.291,046,977,400.35
Total current assets5,263,532,100.374,099,631,263.32
Non-current assets:
Loans and advances to customers
Debt investment
Available-for-sale financial assets3,600,000.00
Other debt investment
Held-to-maturity investment
Long-term receivablesVII. 156,624,590.00
Long-term equity investmentsVII. 1635,582,783.4730,175,665.26
Investments in other equity instrumentsVII. 173,909,179.93
Other non-current financial assets
Investment real estate
Fixed assetsVII. 201,163,702,352.12876,617,888.99
Construction in progressVII. 21260,469,728.7624,506,469.59
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assetsVII. 25331,005,762.09187,987,875.67
Development expenses
GoodwillVII. 2730,175,537.19131,001.23
Long-term prepaid expensesVII. 28118,336,333.95118,024,364.67
Deferred income tax assetsVII. 2936,623,535.5925,525,520.98
Other non-current assetsVII. 30315,153,408.27311,300,000.00
Total non-current assets2,301,583,211.371,577,868,786.39
Total assets7,565,115,311.745,677,500,049.71
Current liabilities:
Short-term borrowingsVII. 31183,193,763.86
Borrowings from central bank
Placements from banks and other financial institutions
Held-for-trading financial liabilities
Financial liabilities at fair value through current profit or loss
Derivative financial liabilities
Bills payable
Accounts payableVII. 351,861,072,467.871,319,407,048.21
Accounts received in advanceVII. 36206,762,293.94147,647,053.87
Financial assets sold under repurchase agreements
Deposits from customers and other banks
Brokerage for trading securities
Brokerage for underwriting securities
Employee benefits payableVII. 37154,119,492.32120,786,076.52
Taxes payableVII. 38258,583,118.14279,377,546.18
Other payablesVII. 39331,438,976.35240,665,881.17
Including: Interest payable
Dividend payable
Fees and commissions payable
Reinsured accounts payable
Held-for-sale liabilities
Non-current liabilities due within one year
Other current liabilities
Total current liabilities2,995,170,112.482,107,883,605.95
Non-current liabilities:
Reserves for insurance contracts
Long-term borrowings
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payableVII. 466,620,000.005,109,800.00
Long-term employee benefits payable
Estimated liabilities
Deferred incomeVII. 4965,823,213.1167,277,109.51
Deferred income tax liabilitiesVII. 2936,576,744.55564,909.50
Other non-current liabilities
Total non-current liabilities109,019,957.6672,951,819.01
Total liabilities3,104,190,070.142,180,835,424.96
Owner’s equity (or shareholders’ equity):
Share capitalVII. 51920,000,000.00920,000,000.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserveVII. 53272,347,764.53272,347,764.53
Less: Treasury shares
Other comprehensive income526,359.55
Special reserve
Surplus reserveVII. 57440,260,399.59343,733,386.35
General risk provision
Undistributed profitVII. 582,568,365,861.321,874,727,294.53
Total equity attributable to the owners of the parent company4,201,500,384.993,410,808,445.41
Minority equity259,424,856.6185,856,179.34
Total owners’ equity (or shareholders’ equity)4,460,925,241.603,496,664,624.75
Total liabilities and owner's equity (or shareholders’ equity)7,565,115,311.745,677,500,049.71

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Parent Company’s Balance Sheet

31 December 2019Prepared by: SHANGHAI M&G STATIONERY INC.

Unit: Yuan Currency: RMB

ItemNotes31 December 201931 December 2018
Current assets:
Cash and equivalents1,358,805,872.56552,507,774.24
Held-for-trading financial assets509,467,061.37
Financial assets at fair value through current profit or loss
Derivative financial assets
Bills receivable
Accounts receivableXVII. 182,949,224.6593,324,765.86
Receivables financing
Prepayment9,630,209.459,002,289.37
Other receivablesXVII. 2285,036,794.54227,644,350.97
Including: Interest receivable192,500.00
Dividend receivable
Inventories448,245,658.48433,945,665.76
Held for sale assets
Non-current assets due within one year
Other current assets150,047,540.99820,679,150.20
Total current assets2,844,182,362.042,137,103,996.40
Non-current assets:
Debt investment
Available-for-sale financial assets3,600,000.00
Other debt investment
Held-to-maturity investment
Long-term receivables6,624,590.00
Long-term equity investmentsXVII. 31,089,168,192.56878,722,964.35
Investments in other equity instruments3,909,179.93
Other non-current financial assets
Investment real estate
Fixed assets749,415,024.84792,636,398.34
Construction in progress258,864,834.0023,686,726.44
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets182,268,368.82184,634,388.95
Development expenses
Goodwill
Long-term prepaid expenses10,106,589.0115,345,487.19
Deferred income tax assets5,469,359.665,277,303.99
Other non-current assets311,929,028.24311,300,000.00
Total non-current assets2,617,755,167.062,215,203,269.26
Total assets5,461,937,529.104,352,307,265.66
Current liabilities:
Short-term borrowings
Held-for-trading financial liabilities
Financial liabilities at fair value through current profit or loss
Derivative financial liabilities
Bills payable
Accounts payable225,831,712.59240,475,062.99
Accounts received in advance116,720,284.1980,736,039.60
Employee benefits payable87,609,891.6276,794,379.93
Taxes payable160,129,252.33187,418,365.45
Other payables513,035,659.9229,240,729.97
Including: Interest payable
Dividend payable
Held-for-sale liabilities
Non-current liabilities due within one year140,000,000.00
Other current liabilities
Total current liabilities1,103,326,800.65754,664,577.94
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payable258,620,000.00187,109,800.00
Long-term employee benefits payable
Estimated liabilities
Deferred income28,453,779.3729,979,024.38
Deferred income tax liabilities1,420,059.21
Other non-current liabilities
Total non-current liabilities288,493,838.58217,088,824.38
Total liabilities1,391,820,639.23971,753,402.32
Owner’s equity (or shareholders’ equity):
Share capital920,000,000.00920,000,000.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve274,008,599.09274,008,599.09
Less: Treasury shares
Other comprehensive income292,894.11
Special reserve
Surplus reserve439,931,539.68343,404,526.44
Undistributed profit2,435,883,856.991,843,140,737.81
Total owners’ equity (or shareholders’ equity)4,070,116,889.873,380,553,863.34
Total liabilities and owner's equity (or shareholders’ equity)5,461,937,529.104,352,307,265.66

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Consolidated Income Statement

January - December 2019

Unit: Yuan Currency: RMB

ItemNotes20192018
I. Total operating income11,141,101,364.448,534,988,597.55
Including: Operating incomeVII. 5911,141,101,364.448,534,988,597.55
Interest income
Premium received
Handling fee and commission income
II. Total operating costs9,873,266,701.557,640,602,184.07
Including: Operating costVII. 598,229,837,268.866,330,446,740.16
Interest expenses
Handling fee and commission expenses
Payment on surrenders
Net compensation expenses
Net provision drawn for insurance contract
Policy dividend expenses
Reinsurance expenses
Taxes and surchargesVII. 6041,995,058.0634,720,679.26
Selling expensesVII. 61980,166,101.18789,386,543.37
Administrative expensesVII. 62469,262,188.13379,618,754.18
R&D expensesVII. 63160,403,362.97114,388,916.75
Financial expensesVII. 64-8,397,277.65-7,959,449.65
Including: Interest expenses8,386,182.80
Interest income20,872,167.575,997,422.97
Add: Other gainsVII. 6526,504,881.468,716,713.66
Income from investment (“-” refers to loss)VII. 6623,994,985.3235,123,869.91
Including: Investment income from associates and joint ventures-576,595.97-393,609.74
Derecognition of income from financial assets at amortized cost
Exchange gains (“-” refers to loss)
Net gain on exposure hedging (“-” refers to loss)
Gain on change in fair value (“-” refers to loss)VII. 684,613,287.24
Losses on credit impairment (“-” refers to loss)VII. 69-28,006,009.88
Losses on assets impairment (“-” refers to loss)VII. 70-17,843,081.89-3,412,585.70
Gains from asset disposal (“-” refers to loss)VII. 716,081,606.95-69,195.83
III. Operating profits (“-” refers to loss)1,283,180,332.09934,745,215.52
Add: Non-operating profitsVII. 7229,358,655.0446,009,012.19
Less: Non-operating expensesVII. 7318,859,243.0620,539,389.95
IV. Total profits (“-” refers to total loss)1,293,679,744.07960,214,837.76
Less: Income tax expensesVII. 74217,602,900.41152,378,423.75
V. Net profits (“-” refers to net loss)1,076,076,843.66807,836,414.01
(I) Classified by operation continuity
1. Net profits from continuing activities (“-” refers to net loss)1,076,076,843.66807,836,414.01
2. Net profits from discontinuing activities (“-” refers to net loss)
(II) Classified by ownership
1. Net profits attributable to shareholders of the parent company (“-” refers to net loss)1,060,083,625.03806,847,308.41
2. Profit or loss attributable to minority shareholders (“-” refers to net loss)15,993,218.63989,105.60
VI. Net amount of other comprehensive income after tax709,796.69
(I) Net amount of other comprehensive income after tax attributable to owners of the parent company526,359.55
1. Other comprehensive income not to be reclassified into profit or loss309,179.93
(1) Change in re-measurement of defined benefit plans
(2) Other comprehensive income that may not be reclassified to profit or loss under equity method
(3) Change in fair value of investments in other equity instruments309,179.93
(4) Change in fair value of enterprise's own credit risk
2. Other comprehensive income to be reclassified into profit or loss217,179.62
(1) Other comprehensive income that may be reclassified to profit or loss under equity method-16,285.82
(2) Change in fair value of other debt investments
(3) Profit or loss from the change of fair value of available-for-sale financial assets
(4) Amount included in other comprehensive income on reclassification of financial assets
(5) Profit or loss from held-to-maturity investment reclassified as available-for-sale financial assets
(6) Credit impairment provisions of other debt investments
(7) Cash flow hedging reserve (Effective portion of cash flow hedging profit or loss)
(8) Exchange differences from translation of financial statements233,465.44
(9) Others
(II) Net amount of other comprehensive income after tax attributable to minority shareholders183,437.14
VII. Total comprehensive income1,076,786,640.35807,836,414.01
(I) Total comprehensive income attributable to owners of the parent company1,060,609,984.58806,847,308.41
(II) Total comprehensive income attributable to minority shareholders16,176,655.77989,105.60
VIII. Earnings per share:
(I) Basic earnings per share (Yuan/share)1.15230.8770
(II) Diluted earnings per share (Yuan/share)1.15230.8770

In case of business combination under common control, net profit realized by the combinedbefore the combination in the period was nil; net profit realized by the combined in the previousperiod was nil. RMB0.Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Income Statement of the Parent Company

January - December 2019

Unit: Yuan Currency: RMB

ItemNotes20192018
I. Operating incomeXVII. 43,933,991,943.143,402,622,358.54
Less: Operating costXVII. 42,183,782,074.372,034,456,319.11
Taxes and surcharges17,610,206.9615,169,890.00
Selling expenses186,518,505.25164,230,651.64
Administrative expenses338,338,989.17260,215,672.87
R&D expenses129,731,243.16114,388,916.75
Financial expenses-12,660,392.50-5,324,409.58
Including: Interest expenses948,654.26
Interest income12,582,570.872,721,099.71
Add: Other gains5,782,081.234,618,424.45
Income from investment (“-” refers to loss)XVII. 521,470,373.5532,190,116.49
Including: Investment income from associates and joint ventures-576,595.97-393,609.74
Derecognition of income from financial assets at amortized cost
Net gain on exposure hedging (“-” refers to loss)
Gain on change in fair value (“-” refers to loss)3,137,261.37
Losses on credit impairment (“-” refers to loss)-651,502.57
Losses on assets impairment (“-” refers to loss)-2,154,113.62-1,191,669.73
Gains from asset disposal (“-” refers to loss)190,467.53-332,568.10
II. Operating profits (“-” refers to loss)1,118,445,884.22854,769,620.86
Add: Non-operating profits17,311,132.8435,648,932.27
Less: Non-operating expenses2,001,519.2613,794,616.24
III. Total profits (“-” refers to total loss)1,133,755,497.80876,623,936.89
Less: Income tax expenses173,865,695.38131,832,461.42
IV. Net profits (“-” refers to net loss)959,889,802.42744,791,475.47
(I) Net profits from continuing activities (“-” refers to net loss)959,889,802.42744,791,475.47
(II) Net profits from discontinuing activities (“-” refers to net loss)
V. Net amount of other comprehensive income after tax292,894.11
(I) Other comprehensive income not to be reclassified into profit or loss309,179.93
1. Change in re-measurement of defined benefit plans
2. Other comprehensive income that may not be reclassified to profit or loss under equity method
3. Change in fair value of investments in other equity instruments309,179.93
4. Change in fair value of enterprise's own credit risk
(II) Other comprehensive income to be reclassified into profit or loss-16,285.82
1. Other comprehensive income that may be reclassified to profit or loss under equity method-16,285.82
2. Change in fair value of other debt investments
3. Profit or loss from the change of fair value of available-for-sale financial assets
4. Amount included in other comprehensive income on reclassification of financial assets
5. Profit or loss from held-to-maturity investment reclassified as available-for-sale financial assets
6. Credit impairment provisions of other debt investments
7. Cash flow hedging reserve (Effective portion of cash flow hedging profit or loss)
8. Exchange differences from translation of financial statements
9. Others
VI. Total comprehensive income960,182,696.53744,791,475.47
VII. Earnings per share:
(I) Basic earnings per share (Yuan/share)
(II) Diluted earnings per share (Yuan/share)

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Consolidated Cash Flow StatementJanuary - December 2019

Unit: Yuan Currency: RMB

ItemNotes20192018
I. Cash flow from operating activities:
Cash received from sales of goods or rendering of services12,659,206,706.739,713,854,726.05
Net increase in customer and interbank deposits
Net increase in borrowings from central bank
Net increase in placements from banks and other financial institutions
Cash received from premiums under original insurance contract
Net cash received from reinsurance business
Net increase in deposits of policy holders and investments
Cash received from interest, fees and commissions
Net increase in borrowings
Net increase in repurchase business capital
Net cash received from securities trading agency services
Tax rebates10,615,726.68
Other cash received from operating activitiesVII. 76278,708,570.57107,722,867.77
Sub-total of cash inflows from operating activities12,948,531,003.989,821,577,593.82
Cash paid for goods and services9,111,402,404.987,005,237,744.44
Net increase in customer loans and advances
Net increase in deposits with PBOC and interbank deposits
Cash paid for compensation payments under original insurance contract
Net increase in funds for lending
Cash paid for interests, handling charges and commissions
Cash paid for policy dividends
Cash paid to and on behalf of employees727,849,843.52578,387,066.44
Taxes and fees paid676,394,326.12467,902,661.41
Cash paid for other operating activitiesVII. 761,350,943,045.68942,109,556.02
Sub-total of cash outflows from operating activities11,866,589,620.308,993,637,028.31
Net cash flow generated from operating activities1,081,941,383.68827,940,565.51
II. Cash flow from investing activities:
Cash received from disposal of investments1,250,355,226.953,065,000,000.00
Cash received from returns on investments24,216,354.3535,517,479.65
Net cash received from disposal of fixed assets, intangible assets and other long-term assets5,463,204.22912,028.22
Net cash received from disposal of subsidiaries and other operating entities
Other cash received relating to investing activities
Sub-total of cash inflows from investing activities1,280,034,785.523,101,429,507.87
Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets377,738,579.26318,226,341.22
Cash paid for investment866,000,000.003,079,169,275.00
Net increase in pledged loans
Net cash paid for acquiring subsidiaries and other operating entities110,648,892.44
Other cash paid relating to investing activities
Sub-total of cash outflows from investing activities1,354,387,471.703,397,395,616.22
Net cash flow generated from investing activities-74,352,686.18-295,966,108.35
III. Cash flow generated from financing activities:
Proceeds received from financing activities42,000,000.004,900,000.00
Including: Proceeds received by subsidiaries from minority shareholders’ investment42,000,000.004,900,000.00
Cash received from borrowings346,892,780.31
Other cash received from financing-related activities
Sub-total of cash inflows from financing activities388,892,780.314,900,000.00
Cash repayments of borrowings458,363,649.10
Dividends paid, profit distributed or interest paid286,141,698.09230,000,000.00
Including: Dividend and profit paid by subsidiaries to minority shareholders
Other cash paid for financing-related activitiesVII. 768,687,534.78
Sub-total of cash outflows from financing activities753,192,881.97230,000,000.00
Net cash flow from financing activities-364,300,101.66-225,100,000.00
IV. Effects of exchange rate fluctuations on cash and cash equivalents-7,343,606.052,580,870.25
V. Net increase in cash and cash equivalents635,944,989.79309,455,327.41
Add: Cash and cash equivalents at the beginning of the period741,501,446.10432,046,118.69
VI. Cash and cash equivalents at the end of the period1,377,446,435.89741,501,446.10

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Cash Flow Statement of the Company

January - December 2019

Unit: Yuan Currency: RMB

ItemNotes20192018
I. Cash flow from operating activities:
Cash received from sales of goods or rendering of services4,481,220,462.213,889,934,554.26
Tax rebates
Other cash received from operating activities869,793,478.2365,606,561.94
Sub-total of cash inflows from operating activities5,351,013,940.443,955,541,116.20
Cash paid for goods and services2,424,224,396.022,227,188,178.82
Cash paid to and on behalf of employees366,624,770.76328,475,870.29
Taxes and fees paid445,473,384.86289,957,488.72
Cash paid for other operating activities894,987,272.24557,320,507.69
Sub-total of cash outflows from operating activities4,131,309,823.883,402,942,045.52
Net cash flow generated from operating activities1,219,704,116.56552,599,070.68
II. Cash flow from investing activities:
Cash received from disposal of investments1,020,000,000.002,610,000,000.00
Cash received from returns on investments22,046,969.5232,583,726.23
Net cash received from disposal of fixed assets, intangible assets and other long-term assets1,564,005.35611,830.73
Net cash received from disposal of subsidiaries and other operating entities
Other cash received relating to investing activities
Sub-total of cash inflows from investing activities1,043,610,974.872,643,195,556.96
Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets301,156,480.55246,840,159.56
Cash paid for investment954,000,000.002,589,269,275.00
Net cash paid for acquiring subsidiaries and other operating entities170,005,997.67
Other cash paid relating to investing activities
Sub-total of cash outflows from investing activities1,425,162,478.222,836,109,434.56
Net cash flow generated from investing activities-381,551,503.35-192,913,877.60
III. Cash flow generated from financing activities:
Proceeds received from financing activities
Cash received from borrowings
Other cash received from financing-related activities
Sub-total of cash inflows from financing activities
Cash repayments of borrowings
Dividends paid, profit distributed or interest paid276,948,654.26230,000,000.00
Other cash paid for financing-related activities
Sub-total of cash outflows from financing activities276,948,654.26230,000,000.00
Net cash flow from financing activities-276,948,654.26-230,000,000.00
IV. Effects of exchange rate fluctuations on cash and cash equivalents-2,444,756.422,580,870.25
V. Net increase in cash and cash equivalents558,759,202.53132,266,063.33
Add: Cash and cash equivalents at the beginning of the period247,580,827.87115,314,764.54
VI. Cash and cash equivalents at the end of the period806,340,030.40247,580,827.87

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge ofAccounting Department: Zhai Yu

Consolidated Statements of Changes in Owners’ Equity

January - December 2019

Unit: Yuan Currency: RMB

Item2019
Equity attributable to owners of the parent companyMinority equityTotal equity attributable to owners
Paid-up capital (or share capital)Other equity instrumentsCapital reserveLess: Treasury sharesOther comprehensive incomeSpecial reserveSurplus reserveGeneral risk provisionUndistributed profitOthersSub-total
Preference sharesPerpetual bondsOthers
I. Balance at the end of last year920,000,000.00272,347,764.53343,733,386.351,874,727,294.533,410,808,445.4185,856,179.343,496,664,624.75
Add: Changes in accounting policies538,033.005,543,922.006,081,955.006,081,955.00
Correction for previous errors
Enterprise merger under the same control
Others
II. Balance at the beginning of the year920,000,000.00272,347,764.53344,271,419.351,880,271,216.533,416,890,400.4185,856,179.343,502,746,579.75
III. Increase and decrease for the period (“-” for decrease)526,359.5595,988,980.24688,094,644.79784,609,984.58173,568,677.27958,178,661.85
(I) Total comprehensive income526,359.551,060,083,625.031,060,609,984.5816,176,655.771,076,786,640.35
(II) Owner’s contribution and capital reduction157,392,021.50157,392,021.50
1. Ordinary shares contributed by the owners42,000,000.0042,000,000.00
2. Capital contributions by other equity instrument holders
3. Amount of share-based payments credited to owners’ equity
4. Others115,392,021.50115,392,021.50
(III) Profit distribution95,988,980.24-371,988,980.24-276,000,000.00-276,000,000.00
1. Withdrawal of surplus reserve95,988,980.24-95,988,980.24
2. Withdrawal of general risk provision
3. Distribution to owners (or shareholders)-276,000,000.00-276,000,000.00-276,000,000.00
4. Others
(IV) Internal carry-forward of owners’ equity
1. Transfer of capital reserve to capital (or share capital)
2. Transfer of surplus reserve to capital (or share capital)
3. Surplus reserve to cover loss
4. Changes in defined benefit scheme carried forward to retained earnings
5. Carry-forward of other comprehensive income to retained earnings
6. Others
(V) Special reserve
1. Withdrawal for the period
2. Utilization for the period
(VI) Others
IV. Balance at the end of the period920,000,000.00272,347,764.53526,359.55440,260,399.592,568,365,861.324,201,500,384.99259,424,856.614,460,925,241.60
Item2018
Equity attributable to owners of the parent companyMinority equityTotal equity attributable to owners
Paid-up capital (or share capital)Other equity instrumentsCapital reserveLess: Treasury sharesOther comprehensive incomeSpecial reserveSurplus reserveGeneral risk provisionUndistributed profitOthersSub-total
Preference sharesPerpetual bondsOthers
I. Balance at the end of last year920,000,000.00272,347,764.53269,254,238.801,372,359,133.672,833,961,137.0079,967,073.742,913,928,210.74
Add: Changes in accounting policies
Correction for previous errors
Enterprise merger under the same control
Others
II. Balance at the beginning of the year920,000,000.00272,347,764.53269,254,238.801,372,359,133.672,833,961,137.0079,967,073.742,913,928,210.74
III. Increase and decrease for the period (“-” for decrease)74,479,147.55502,368,160.86576,847,308.415,889,105.60582,736,414.01
(I) Total comprehensive income806,847,308.41806,847,308.41989,105.60807,836,414.01
(II) Owner’s contribution and capital reduction4,900,000.004,900,000.00
1. Ordinary shares contributed by the owners4,900,000.004,900,000.00
2. Capital contributions by other equity instrument holders
3. Amount of share-based payments credited to owners’ equity
4. Others
(III) Profit distribution74,479,147.55-304,479,147.55-230,000,000.00-230,000,000.00
1. Withdrawal of surplus reserve74,479,147.55-74,479,147.55
2. Withdrawal of general risk provision
3. Distribution to owners (or shareholders)-230,000,000.00-230,000,000.00-230,000,000.00
4. Others
(IV) Internal carry-forward of owners’ equity
1. Transfer of capital reserve to capital (or share capital)
2. Transfer of surplus reserve to capital (or share capital)
3. Surplus reserve to cover loss
4. Changes in defined benefit scheme carried forward to retained earnings
5. Carry-forward of other comprehensive income to retained earnings
6. Others
(V) Special reserve
1. Withdrawal for the period
2. Utilization for the period
(VI) Others
IV. Balance at the end of the period920,000,000.00272,347,764.53343,733,386.351,874,727,294.533,410,808,445.4185,856,179.343,496,664,624.75

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge of Accounting Department: Zhai Yu

Statements of Changes in Equity of Owners of Parent Company

January - December 2019

Unit: Yuan Currency: RMB

Item2019
Paid-up capital (or share capital)Other equity instrumentsCapital reserveLess: Treasury sharesOther comprehensive incomeSpecial reserveSurplus reserveUndistributed profitTotal equity attributable to owners
Preference sharesPerpetual bondsOthers
I. Balance at the end of last year920,000,000.00274,008,599.09343,404,526.441,843,140,737.813,380,553,863.34
Add: Changes in accounting policies538,033.004,842,297.005,380,330.00
Correction for previous errors
Others
II. Balance at the beginning of the year920,000,000.00274,008,599.09343,942,559.441,847,983,034.813,385,934,193.34
III. Increase and decrease for the period (“-” for decrease)292,894.1195,988,980.24587,900,822.18684,182,696.53
(I) Total comprehensive income292,894.11959,889,802.42960,182,696.53
(II) Owner’s contribution and capital reduction
1. Ordinary shares contributed by the owners
2. Capital contributions by other equity instrument holders
3. Amount of share-based payments credited to owners’ equity
4. Others
(III) Profit distribution95,988,980.24-371,988,980.24-276,000,000.00
1. Withdrawal of surplus reserve95,988,980.24-95,988,980.24
2. Distribution to owners (or shareholders)-276,000,000.00-276,000,000.00
3. Others
(IV) Internal carry-forward of owners’ equity
1. Transfer of capital reserve to capital (or share capital)
2. Transfer of surplus reserve to capital (or share capital)
3. Surplus reserve to cover loss
4. Changes in defined benefit scheme carried forward to retained earnings
5. Carry-forward of other comprehensive income to retained earnings
6. Others
(V) Special reserve
1. Withdrawal for the period
2. Utilization for the period
(VI) Others
IV. Balance at the end of the period920,000,000.00274,008,599.09292,894.11439,931,539.682,435,883,856.994,070,116,889.87
Item2018
Paid-up capital (or share capital)Other equity instrumentsCapital reserveLess: Treasury sharesOther comprehensive incomeSpecial reserveSurplus reserveUndistributed profitTotal equity attributable to owners
Preference sharesPerpetual bondsOthers
I. Balance at the end of last year920,000,000.00274,008,599.09268,925,378.891,402,828,409.892,865,762,387.87
Add: Changes in accounting policies
Correction for previous errors
Others
II. Balance at the beginning of the year920,000,000.00274,008,599.09268,925,378.891,402,828,409.892,865,762,387.87
III. Increase and decrease for the period (“-” for decrease)74,479,147.55440,312,327.92514,791,475.47
(I) Total comprehensive income744,791,475.47744,791,475.47
(II) Owner’s contribution and capital reduction
1. Ordinary shares contributed by the owners
2. Capital contributions by other equity instrument holders
3. Amount of share-based payments credited to owners’ equity
4. Others
(III) Profit distribution74,479,147.55-304,479,147.55-230,000,000.00
1. Withdrawal of surplus reserve74,479,147.55-74,479,147.55
2. Distribution to owners (or shareholders)-230,000,000.00-230,000,000.00
3. Others
(IV) Internal carry-forward of owners’ equity
1. Transfer of capital reserve to capital (or share capital)
2. Transfer of surplus reserve to capital (or share capital)
3. Surplus reserve to cover loss
4. Changes in defined benefit scheme carried forward to retained earnings
5. Carry-forward of other comprehensive income to retained earnings
6. Others
(V) Special reserve
1. Withdrawal for the period
2. Utilization for the period
(VI) Others
IV. Balance at the end of the period920,000,000.00274,008,599.09343,404,526.441,843,140,737.813,380,553,863.34

Legal Representative: Chen Huwen Accountant in charge: Zhang Qing Person in charge of Accounting Department: Zhai Yu

III. General Information about the Company

1. Company profile

"√ Applicable" "□ Not applicable"Shanghai M&G Stationery Inc. (hereinafter referred to as “Company” or the “Company”) is alimited company that was approved by the Approval for the Initial Public Offering of ShanghaiM&G Stationery Inc. in [2015] No. 15 securities regulatory license of China Securities RegulatoryCommission in January 2015. The Company’s business license No.: 91310000677833266F. InJanuary 2015, the Company was listed on Shanghai Stock Exchange. The industry where theCompany operates is manufacturing industry in products for stationery, arts, sports andentertainment.As of 31 December 2019, the Company issued a total of 920,000,000 shares accumulatively,and its registered capital amounted to RMB920,000,000. The registered address of theCompany is Building 3, No. 3469 Jinqian Road, Fengxian District,Shanghai. The principaloperations of the Company include: stationery manufacturing and sales, digital products, securityequipment, instruments and apparatus, protective equipment in work, furniture, decorations,cosmetics, accessories, office supplies, craft gifts (except ivory and its products), rubber andplastic products, electronic products, household appliances, toys, molds, hardware and electricmaterial, communication equipment, computer software and auxiliary equipment, wholesale andretail of daily necessities, engagement in the import and export business of goods andtechnology, food sales, e-commerce, publication operation, printing for other prints, packagingand printing services, and consultation for business management. [For those businesses thatrequire permission, business activities are conducted after getting the approval from relevantdepartments].The parent company of the Company is M&G Holdings (Group) Co., Ltd., and the beneficialcontrollers are Chen Huwen, Chen Huxiong, and Chen Xueling.The financial statements were approved for submission by the Board of Directors on 10 April2020.

2. Scope of consolidated financial statements

"√ Applicable" "□ Not applicable"As of 31 December 2019, subsidiaries in the scope of the Company’s consolidated financialstatements are presented as follows:

Name of subsidiaries
Shanghai M&G Zhenmei Stationery Co., Ltd.(上海晨光珍美文具有限公司)
Shanghai M&G Colipu Office Supplies Co., Ltd.
Lianyungang Colipu Office Supplies Co., Ltd.(连云港市科力普办公用品有限公司)
Shenyang M&G Colipu Office Supplies Co., Ltd.(沈阳晨光科力普办公用品有限公司)
Shanghai M&G Stationery & Gift Co., Ltd.(上海晨光文具礼品有限公司)
Shanghai M&G Stationery Sales Co., Ltd.(上海晨光文具销售有限公司)
Guangzhou M&G Stationery&Gifts Sales Co., Ltd.(广州晨光文具礼品销售有限公司)
Yiwu Chenxing Stationery Co., Ltd.(义乌市晨兴文具用品有限公司)
Harbin M&G Sanmei Stationery Co., Ltd.(哈尔滨晨光三美文具有限公司)
Zhengzhou M&G Stationery&Gifts Co., Ltd.(郑州晨光文具礼品有限责任公司)
M&G Living Studio Enterprise Management Co., Ltd.(晨光生活馆企业管理有限公司)
M&G Living Studio Enterprise Management (Shanghai) Co., Ltd.(晨光生活馆企业管理(上海)有限公司)
Shanghai M&G Jiamei Stationery Co., Ltd.(上海晨光佳美文具有限公司)
Jiangsu M&G Living Studio Enterprise Management Co., Ltd.(江苏晨光生活馆企业管理有限公司)
Zhejiang New M&G Living Studio Enterprise Management Co., Ltd.(浙江新晨光生活馆企业管理有限公司)
Jiumu M&G Store Enterprise Management Co., Ltd.(九木杂物社企业管理有限公司)
Shanghai M&G Information Technology Co., Ltd.(上海晨光信息科技有限公司)
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)
Shanghai M&G Office Supplies Co., Ltd.
Office Depot Network Technology Co., Ltd.
Luoyang M&G Stationery Sales Co., Ltd.(洛阳晨光文具销售有限公司)
Hangzhou Sanmei M&G Stationery Co., Ltd.(杭州三美晨光文具有限公司)
Axus Stationery (Shanghai) Company Ltd.
Jiangsu Marco Pen Co., Ltd.(江苏马可笔业有限公司)
Changchun Macro Stationery Co., Ltd.(长春马可文教用品有限公司)
Yili Senlai Wood Co., Ltd.(伊犁森徕木业有限公司)
Axus Stationery (Hong Kong) Company Ltd.
International stationery company

Details of the scope of the consolidated financial statements for the current period and itschanges are set out in “VI Changes in the Consolidation Scope” and “VII Equity in Other Entities”of the notes.

IV. Preparation basis of financial statements

1. Preparation basis

Based on a going concern and actual transactions and events, the Company prepared financialstatements in accordance with the Accounting Standards for Business Enterprises-BasicStandards, as well as various specific account standards, application guidance for accounting

standards for business enterprises, interpretations of the accounting standards for businessenterprises and other relevant regulations (hereinafter collectively referred to as “CAS”) issuedby the Ministry of Finance, and the disclosure requirements in the Preparation Convention ofInformation Disclosure by Companies Offering Securities to the Public No.15—GeneralProvisions on Financial Report issued by China Securities Regulatory Commission.

2. Going concern

"√ Applicable" "□ Not applicable"The Company has the ability to continue as a going concern within the 12 months after the endof the Reporting Period and there are no material events that may affect its ability to continue asa going concern.

V. Significant accounting policies and accounting estimatesNotes to specific accounting policies and accounting estimates:

"√ Applicable" "□ Not applicable"The following disclosures cover the specific accounting policies and accounting estimatesformulated by the Company according to the characteristics of its production and operation. Formore details, please refer to “III (IX) Financial instrument”, “III (XIII) Fixed assets”, “III (XVI)Intangible assets”, “III (XVIII) Long-term prepaid expenses”, “III (XXII) Revenue” and “III (XXIII)Government grant”.

1. Statement of compliance of accounting standards for business enterprisesThe financial statements have been prepared by the Company in conformity with the ChinaAccounting Standards for Business Enterprises, and present truly and completely theCompany’s financial position, operating results, changes in shareholders' equity and cash flowand other related information.

2. Accounting period

The accounting period of the Company is from 1 January to 31 December of each calendar year.

3. Operating cycle

"√ Applicable" "□ Not applicable"The Company’s operating cycle is 12 months.

4. Reporting currency

The reporting currency of the Company is RMB.

5. Accounting treatments for enterprise merger under or not under joint control"√ Applicable" "□ Not applicable"Enterprise merger under joint control: the assets and liabilities acquired by the Company inenterprise merger shall be measured at the carrying amount of the assets and liabilities of theacquiree (including goodwill incurred in the acquisition of the acquiree by ultimate controllingparty) in the consolidated financial statements of the ultimate controlling party at the date ofmerger. The difference between the carrying amount of the net assets obtained and the carryingamount of the consideration paid for the merger (or total nominal value of the issued shares) isadjusted to capital premium in capital reserve. If the capital premium in capital reserve is notsufficient to offset the difference, the remaining balance is adjusted against retained earnings.Enterprise merger not under joint control: the assets paid and liabilities incurred or committed asa consideration of enterprise merger by the Company are measured at fair value on the date ofacquisition and the difference between the fair value and its carrying amount shall be includedin the current profit or loss. Where the cost of merger is higher than the fair value of theidentifiable net assets acquired from the acquiree in enterprise merger, the Company shallrecognize such difference as goodwill; where the cost of merger is less than the fair value of theidentifiable net assets acquired from the acquiree in enterprise merger, such difference shall beincluded in the current profit or loss.The direct expenses incurred in enterprise merger shall be included the current profit or loss;transaction costs associated with the issue of equity or debt securities for the enterprise mergershall be included in the initially recognized amounts of the equity or debt securities.

6. Preparation of consolidated financial statements

"√ Applicable" "□ Not applicable"

(1) Scope of consolidation

The consolidation scope of consolidated financial statements is determined on the basis ofcontrol, including the Company and all of its subsidiaries.

(2) Consolidation procedure

The consolidated financial statements are prepared by the Company based on the financialstatements of the Company and its subsidiaries and in accordance with the other relevantinformation. In preparation of the Company’s consolidated financial statements, the Companywill regard the enterprise group as a single accounting entity. The Group’s overall financialcondition, operating results and cash flow are reflected based on the relevant accountingstandards, measurement and presentation requirements and in accordance with the unifiedaccounting policy.

The subsidiaries that are within the scope of the consolidation shall have the same accountingpolicies and the accounting periods with those of the Company. In preparing the consolidatedfinancial statements, where the accounting policies and the accounting periods are inconsistentbetween the Company and its subsidiaries, the financial statements of subsidiaries are adjustedin accordance with the accounting policies and accounting period of the Company. Forsubsidiaries acquired from an enterprise merger not under joint control, the financial statementsof the subsidiaries are adjusted based on the fair value of the identifiable net assets on the dateof acquisition. For subsidiaries acquired from an enterprise merger under joint control, thefinancial statements of the subsidiaries are adjusted based on the carrying amount of their assets,liabilities (including goodwill incurred in the acquisition by ultimate controlling party) in thefinancial statements of the ultimate controlling party.The owners’ equity, the net profit or loss and the comprehensive income attributable to minorityshareholders of a subsidiary of the current period are presented separately under the owners’equity in the consolidated balance sheet, the net profit and the total comprehensive income inthe consolidated income statement respectively. Where losses attributable to the minorityshareholders of a subsidiary exceed the minority shareholders’ interest entitled in theshareholders’ equity of the subsidiary at the beginning of the period, the excess is allocatedagainst the minority equity.

① Addition of subsidiary or business

During the Reporting Period, if there is an addition of subsidiary or business due to businesscombination under common control, the amount at the beginning of the period in the consolidatedbalance sheet will be adjusted; the income, expenses and profit of the subsidiary or businesscombination from the beginning of the period to the end of the reporting period will be includedin the consolidated income statement; the cash flows of the subsidiary or business combinationfrom the beginning of the period to the end of the reporting period will be included in theconsolidated statement of cash flows, and relevant items in the comparative statements will alsobe adjusted as if the reporting entity after combination had been existing since the control of theultimate controlling party started.Where control over the investee under common control is obtained due to reasons such asincrease in investments, adjustment is made as if the parties involved in the combination hadbeen existing in the current condition since the control of the ultimate controlling party started.For equity investment held before the control over the acquiree is obtained, profit or loss, othercomprehensive income and other changes in net assets recognized from the later of theacquisition of the original equity interest and the date when the acquirer and the acquiree wereplaced under common control until the date of combination are offset against retained profit atthe beginning of the period of the comparative statements or profit or loss of the periodrespectively.

During the Reporting Period, if there is an addition of subsidiary or business due to businesscombination not under common control, the amount at the beginning of the period in theconsolidated balance sheet will not be adjusted; the income, expenses and profit of thesubsidiary or business from the date of purchase to the end of the reporting period will beincluded in the consolidated income statement; the cash flows of the subsidiary or business fromthe date of purchase to the end of the reporting period will be included in the consolidatedstatement of cash flows.Where control over the investee not under common control is obtained due to reasons such asincrease in investments, for the equity interest of the acquiree held before the date of purchase,the Company remeasures the equity interest at its fair value as at the date of purchase, and anydifference between the fair value and its book value will be accounted for as investment gains ofthe period. Where equity interest of the acquiree held before the date of purchase is related toother comprehensive income under equity accounting and other changes in owners’ equity otherthan net profit or loss, other comprehensive income and profit distribution, other comprehensiveincome and other changes in owners’ equity related thereto are transferred to investment gainsof the period to which the date of purchase belongs, except for other comprehensive incomearising from the changes in net liabilities or net assets due to the re-measurement of definedbeneficiary plans by the acquiree.

② Disposal of subsidiaries or business

A. General treatment for disposalDuring the reporting period, for the disposal of a subsidiary or business, the income, expensesand profit of the subsidiary or business from the beginning of the period to the date of disposalare included in the consolidated income statement; the cash flows of the subsidiary or businessfrom the beginning of the period to the date of disposal are included in the consolidatedstatement of cash flows.When control over the investee is lost due to the disposal of part of the equity investment orother reasons, the Company remeasures the remaining equity investment at fair value as at thedate on which control is lost. The difference between the sum of the consideration received fromequity disposal and the fair value of the remaining equity interest and the sum of the net assetsof the subsidiary proportionate to the original shareholding accumulated from the date ofpurchase or combination and goodwill is included in investment gains of the period during whichthe control is lost. Other comprehensive income related to the equity investment in the originalsubsidiary or other changes in owners’ equity other than net profit or loss, other comprehensiveincome and profit distribution are transferred to investment gains of the period during which thecontrol is lost, except for other comprehensive income arising from the changes in net liabilitiesor net assets due to the re-measurement of defined beneficiary plans by the investee.

Where loss of control is due to the decrease in the Company’s shareholding as a result of theincrease in capital contribution to the subsidiary by other investing parties, the accountingprinciple described above will be applied.B. Stepwise disposal of subsidiaryIn respect of stepwise disposal of equity investment in a subsidiary through multiple transactionsuntil control is lost, if the terms, conditions and economic effects of the transactions of equityinvestment in the subsidiary satisfy one or more of the following conditions, the transactions arenormally accounted for as a basket of transactions:

i. these transactions were entered into simultaneously or after considering the effects of eachother;ii. these transactions constituted a complete commercial result as a whole;iii. one transaction was conditional upon at least one of the other transaction;iv. one transaction was not economical on its own but was economical when considering togetherwith other transactions.Where the transactions of disposal of equity investment in a subsidiary until control is lostconstitute a basket of transactions, the Company accounts for the transactions as a transactionof disposal of a subsidiary until control is lost; however, the difference between the amountreceived each time for disposal before control is lost and the net assets of such subsidiarycorresponding to the disposal of investment is recognized as other comprehensive income in theconsolidated financial statements, and is transferred to profit or loss of the period during whichcontrol is lost upon loss of control.Where the transactions of disposal of equity investment in a subsidiary until control is lost do notconstitute a basket of transactions, before the loss of control, the transactions are accounted forusing the policies related to partial disposal of equity investment in a subsidiary where no controlis lost; when control is lost, they are accounted for using the general method for disposal ofsubsidiaries.

③ Purchase of minority interests in subsidiary

For the difference between the long-term equity investment newly acquired due to the purchaseof minority interests by the Company and the share of net assets of the subsidiary calculatedaccording to the new shareholding accumulated from the date of purchase (or date ofcombination), share premium of the capital reserve in the consolidated balance sheet will beadjusted; where share premium of the capital reserve is insufficient for the write-down, retainedprofit will be adjusted.

④ Partial disposal of equity investment in subsidiaries without losing controlFor the difference between the consideration received from partial disposal of long-term equityinvestment in a subsidiary without loss of control and the net assets of the subsidiarycorresponding to the disposal of long-term equity investment accumulated from the date ofpurchase or date of combination, share premium of the capital reserve in the consolidated

balance sheet will be adjusted; where share premium of the capital reserve is insufficient for thewrite-down, retained profit will be adjusted.

7. Classification of joint arrangements and accounting of associate"□ Applicable" "√ Not applicable"

8. Determination of cash and cash equivalents

In preparing the cash flow statement, the cash on hand and deposits that are available forpayment at any time of the Company are recognized as cash. The short-term (due within 3months of the date of purchase) and highly liquid investments that are readily convertible toknown amounts of cash and subject to an insignificant risk of change in value are recognized ascash equivalents.

9. Foreign currency transactions and translation of foreign currency financialstatements"√ Applicable" "□ Not applicable"

(1) Foreign currency transactions

Foreign currency transactions shall be translated into RMB at the spot exchange rate on the daywhen the transactions occur.Balance of monetary items in foreign currency as at the balance sheet date is translated at thespot rates prevailing at the balance sheet date, and any translation difference arising therefromis included in profit or loss of the period except for the translation difference arising fromdedicated borrowings in foreign currency related to the construction of assets qualified forcapitalisation which is accounted for under the principle of capitalisation of borrowing expenses.

(2) Translation of foreign currency financial statements

Asset and liability items in the balance sheet are translated at the spot rates prevailing at thebalance sheet date. Owners’ equity items other than “undistributed profit” are translated at thespot rates on the dates when they are incurred. Income and expense items in the incomestatement are translated at the spot rates prevailing at the transaction dates.On disposal of a foreign operation, the exchange differences in the financial statements in foreigncurrency relating to that foreign operation are transferred from owners’ equity to profit or loss ofthe period during which the disposal occurs.

10. Financial instruments

"√ Applicable" "□ Not applicable"Financial instruments include financial assets, financial liabilities and equity instruments.

(1) Classification of the financial instruments

Applicable accounting policies from 1 January 2019According to the business model of the Company’s management of financial assets and thecontractual cash flow characteristics of financial assets, financial assets are classified at theinitial recognition as: financial assets at amortized cost, financial assets (debt instruments) at fairvalue through profit or loss, and other financial assets at fair value through current profit or loss.If the business model aims at collecting contractual cash flows that are only the payment madebased on the principal and the interest of the outstanding principal amount, financial assets shallbe classified as financial assets at amortized cost; if the business model aims at both collectingcontractual cash flows and selling the financial assets, and contractual cash flows are only thepayment made based on the principal and the interest of the outstanding principal amount,financial assets shall be classified as financial assets at fair value through other comprehensiveincome. Save for the above, other financial assets shall be classified as financial assets at fairvalue through current profit or loss.For non-trading equity instrument investments, the Company determines at the initial recognitionwhether it is designated as financial asset (equity instruments) at fair value through othercomprehensive income.Financial liabilities at the initial recognition are classified into financial liabilities at fair valuethrough current profit or loss, and financial liabilities at amortized cost.Financial liabilities at the initial recognition can be designated as financial liabilities at fair valuethrough current profit or loss if one of the following conditions can be met:

① Such designation can eliminate or significantly reduce accounting mismatches.

② According to the enterprise risk management or investment strategy stated in the officialwritten document, management and evaluation of the financial liabilities portfolio or financialassets and financial liabilities portfolio are based on fair value which will be used as the basis forreporting to the key management personnel.

③ The financial liabilities include embedded derivatives that need to be split separately.

Applicable accounting policies before 1 January 2019The financial assets and financial liabilities are classified at the initial recognition as: financialassets or financial liabilities at fair value through current profit or loss, including financial assetsor liabilities for trading and financial assets or financial liabilities that are directly designated formeasurement at fair value through current profit or loss; held-to-maturity investments; accountsreceivable; available-for-sale financial assets and other financial liabilities.

(2) Recognition and measurement of financial instruments

Applicable accounting policies from 1 January 2019

① Financial assets at amortized cost

Financial assets at amortized cost include notes receivable and accounts receivable, otherreceivables, long-term receivables and debt investment, which are initially measured at fair value,and related transaction costs are included in the initial recognition amount. The accountsreceivable of major financing components and the accounts receivable of the Company’sdecision not to consider the financing component with the term less than one year are initiallymeasured at the contract transaction price.Interest calculated by the effective interest method during the period of holding is included in thecurrent profit or loss.Upon recovery or disposal, the difference between the acquisition price and the carrying amountof the financial asset shall be included in the current profit or loss.

② Financial assets at fair value through other comprehensive income (debt instruments)Financial assets (debt instruments) at fair value through other comprehensive income, includingreceivables financing and other debt investments, are initially measured at fair value, and relatedtransaction costs are included in the initial recognition amount. The financial assets aresubsequently measured at fair value. Changes in fair value are included in other comprehensiveincome, except for interest, impairment losses or gains and exchange gain or loss calculatedusing the effective interest method.When the recognition is terminated, the accumulated gain or loss previously included in othercomprehensive income is transferred from other comprehensive income and included in thecurrent profit or loss.

③ Financial assets (equity instruments) at fair value through other comprehensive incomeFinancial assets (equity instruments) at fair value through other comprehensive income,including other equity instruments, are initially measured at fair value, and related transactioncosts are included in the initial recognition amount. The financial assets are subsequentlymeasured at fair value, and changes in fair value are included in other comprehensive income.The dividends obtained are included in the current profit and loss.When the recognition is terminated, the accumulated gain or loss previously included in othercomprehensive income is transferred from other comprehensive income and included in retainedearnings.

④ Financial assets at fair value through the current profit or loss

Financial assets at fair value through the current profit or loss, including held-for-trading financialassets, derivative financial assets and other non-current financial assets, are initially measuredat fair value, and related transaction costs are included in the current profit or loss. The financialassets are subsequently measured at fair value, and changes in fair value are included in thecurrent profit or loss.

⑤ Financial liabilities at fair value through current profit or loss

Financial liabilities at fair value through current profit or loss, including held-for-trading financialliabilities, and derivative financial liabilities, are initially measured at fair value, and related

transaction costs are included in the current profit or loss. The financial liabilities aresubsequently measured at fair value, and changes in fair value are included in the current profitor loss.When the recognition is terminated, the difference between the carrying amount andconsideration paid is included in the current profit and loss.

⑥ Financial liabilities at amortized cost

Financial liabilities at amortized cost, including short-term borrowings, bills payable and accountspayable, other payables, long-term borrowings, bonds payable, long-term payables, are initiallymeasured at fair value, and related transaction costs are included in the initial recognition amount.Interest calculated by the effective interest method during the period of holding is included in thecurrent profit or loss.When the recognition is terminated, the difference between consideration paid and the carryingamount of the financial liabilities is included in the current profit and loss.

Applicable accounting policies before 1 January 2019

① Financial assets (financial liabilities) at fair value through current profit or lossWhen acquired, the financial assets (financial liabilities) shall be initially recognized at their fairvalue (except for cash dividends which are declared but not distributed or interests on bonds ofwhich the maturity interest is not collected), and related transaction costs are included in thecurrent profit or loss.The interest or cash dividend which was gained in the holding period is recognized as investmentincome. At the end of the period, the change in the fair value of the financial asset (financialliabilities) shall be included in the current profit or loss.When disposed, the difference between the fair value and the amount of initial recognition shallbe recognized as investment income; meanwhile, the gain or loss on changes in fair value isadjusted.

② Held-to-maturity investment

When acquired, the held-to-maturity investment is initially recognized at the sum of the fair value(except for interests on bonds of which the maturity interest is not collected) and relevanttransaction costs.Interest income is calculated according to the amortized cost and effective interest rate, andincluded in investment income during the holding period. The effective interest rate is determinedwhen acquired, and shall remain unchanged within the predicted term of existence or within ashorter applicable term.When disposed, the difference between the consideration obtained and the carrying amount ofthe investment shall be included in investment income.

③ Accounts receivable

The receivables that are formed in selling goods or rendering labor services to external parties,and the debts (excluding debt instruments that are quoted in an active market) of otherenterprises held by the Company, including accounts receivable and other receivables, areinitially recognized at the consideration of the contract or agreement to be received from thebuyers. Accounts receivable that are of a financing nature are initially recognized at their presentvalue.Upon recovery or disposal of accounts receivable, the difference between the considerationobtained and the carrying amount of accounts receivable is included in the current profit or loss.

④ Available-for-sale financial assets

When acquired, available-for-sale financial assets are initially recognized at the sum of the fairvalue (except for cash dividends which are declared but not distributed or interests on bonds ofwhich the maturity interest is not collected) and relevant transaction costs.The interests or cash dividends to be obtained during the holding period are recognized ininvestment income. At the end of the period, financial assets are measured at fair value, and itschange in fair value is included in other comprehensive income. However, the equity instrumentinvestment that is not quoted in an active market and whose fair value cannot be reliablymeasured, and derivative financial assets that are linked to the equity instrument and that mustbe settled through the delivery of the equity instrument, are measured at cost.When disposed, the difference between the consideration obtained and the carrying amount ofthe financial assets shall be included into the current profit or loss; meanwhile, the correspondingdisposal portion of accumulated change in fair value previously included into othercomprehensive income shall be transferred to the current profit or loss.

⑤ Other financial liabilities

Other financial liabilities are initially recognized based on the sum of its fair value and relevanttransaction costs, and subsequently measured at amortized cost.

(3) Recognition and measurement of transfer of financial assets

A financial asset shall be derecognized when the Company has transferred nearly all the risksand rewards related to the ownership of the financial asset to the transferee, and it shall not bederecognized if the Company has retained nearly all the risks and rewards related to theownerships of the financial asset.The substance-over-form principle shall be adopted while making a judgment on whether thetransfer of financial assets satisfies the above conditions for derecognition.The transfer of financial assets could be classified into entire transfer and partial transfer. If thetransfer of an entire financial asset satisfies the conditions for derecognition, the differencebetween the two amounts below shall be included in the current profit or loss:

① The carrying amount of the financial assets transferred;

② The consideration received as a result of the transfer, plus the accumulative amount of thechange in fair value previously included into the owners’ equity (in cases where the transferredfinancial assets are financial assets (debt instruments) at fair value through other comprehensiveincome, and available-for-sale financial assets).

If the partial transfer of financial assets satisfies the conditions for derecognition, the overallcarrying amount of the transferred financial assets shall be apportioned according to theirrespective relative fair value between the portion of derecognized part and the remaining part,and the difference between the two amounts below shall be included in the current profit or loss:

① The carrying amount of the derecognized portion;

② The sum of consideration of the derecognized portion, plus the corresponding derecognizedportion of accumulated change in fair value previously included in owners’ equity (in cases wherethe transferred financial assets are financial assets (debt instruments) at fair value through othercomprehensive income, and available-for-sale financial assets).If the transfer of financial assets does not meet the conditions for derecognition, the financialassets continue to be recognized and the consideration received is recognized as a financialliability.

(4) Conditions for derecognition of financial liabilities

When the current obligation under a financial liability is completely or partially discharged, thewhole or relevant portion of the liability is derecognized; if an agreement is entered into betweenthe Company and a creditor to replace the original financial liabilities with new financial liabilitieswith substantially different terms, the original financial liabilities will be derecognized and the newfinancial liabilities will be recognized.If the contract terms of the original financial liabilities are substantially amended in part or in full,the original financial liabilities will be derecognized in full or in part, and the financial liabilitieswhose terms have been amended will be recognized as a new financial liability.When financial liabilities are derecognized in full or in part, the difference between the carryingamount of the financial liabilities derecognized and the consideration paid (including transferrednon-cash assets or new financial liability) will be included in the current profit or loss.Where the Company repurchases part of its financial liabilities, the carrying amount of suchfinancial liabilities will be allocated according to the relative fair value between the continuouslyrecognized part and derecognized part on the repurchase date. The difference between thecarrying amount of the derecognized portion of financial liabilities and the consideration paid(including transferred non-cash assets or new financial liability) will be included in the currentprofit or loss.

(5) Method of determining the fair values of financial assets and liabilities

A financial instrument with an active market determines its fair value by quoted prices in an activemarket. Financial instruments that do not exist in an active market shall use valuation techniquesto determine their fair value. During the valuation process, the Company uses valuationtechniques appropriate to the prevailing circumstances with the support of sufficient data andother information available, selects inputs consistent with the characteristics of the assets orliabilities considered in the transactions of relevant assets or liabilities by market participants,and gives priority to relevant observable inputs. Unobservable inputs are used only when therelevant observable inputs are not accessible or the access to which is impracticable.

(6) Impairment test method and accounting treatment for impairment of financial assetsApplicable accounting policies from 1 January 2019The Company takes into consideration all reasonable and evidence-based information, includingforward-looking information, and estimates the anticipated credit loss on a single or combinationof financial assets measured at amortized cost and financial assets (debt instruments) at fairvalue through other comprehensive income. The measurement of anticipated credit lossdepends on whether the credit risk of the financial assets has increased significantly since theinitial recognition.If the credit risk of the financial instruments has increased significantly since the initial recognition,the Company will measure its loss provision based on the amount of anticipated credit loss forthe lifetime of the financial instruments; if the credit risk of the financial instruments has notsignificantly increased since the initial recognition, the Company will measure its loss provisionbased on the amount of anticipated credit loss for the financial instruments in the next 12 months.The increase or reversal of the loss provision resulting therefrom is included in the current profitand loss as an impairment loss or gain.Usually, after an overdue for more than 30 days, the Company believes that the credit risk of thefinancial instrument has increased significantly unless there is conclusive evidence that the creditrisk of the financial instrument has not increased significantly since the initial recognition.If the credit risk of financial instrument at the balance sheet date is low, the Company will believethat the credit risk of the financial instrument has not increased significantly since the initialrecognition.If there is any objective evidence indicating that some financial assets have incurred creditimpairment, the Company will make provision for impairment for the financial asset in a singlefinancial asset manner.For accounts receivable, whether it contains significant financing components or not, theCompany always measures its loss reserves in accordance with the amount of anticipated creditlosses for the entire lifetime.

For lease receivable and long-term receivables obtained by the Company through selling goodsand rendering services, the Company always measures its loss reserves in accordance with theamount of anticipated credit loss for the entire lifetime.

Applicable accounting policies before 1 January 2019The Company shall assess the carrying amount of financial assets other than those measuredat fair value with change included in the current profit or loss at the balance sheet date. If thereis objective evidence indicating that the financial asset is impaired, impairment provision shallbe made.

① Impairment provision for available-for-sale financial assets:

If the fair value of available-for-sale financial assets falls significantly, or judged by the Companythat descending trend is not temporary after taking into account various relevant factorscomprehensively at the end of the period, impairment will be recognized, and the cumulativeloss arising from decline in fair value that had been recognized directly in the shareholders’ equityshall be transferred from the shareholders’ equity and recognized as impairment loss.As for the available-for-sale debt instruments whose impairment losses have been recognized,if, within the accounting period thereafter, an increase in fair value is objectively related to asubsequent event that occurs after the original impairment losses were recognized, the originallyrecognized impairment losses shall be reversed and be recorded into the profits and losses ofthe current period.Impairment loss incurred during an investment period on an available-for-sale equity instrumentshall not be reversed through profit or loss.

② Impairment provision for held-to-maturity investment:

The measurement of the impairment loss for held-to-maturity investments shall be treated withreference to that for the accounts receivable.

11. Bills receivable

Determination and accounting treatment of the anticipated credit loss of notes receivable"√ Applicable" "□ Not applicable"Please refer to Note V (X) Financial instruments

12. Accounts receivable

Determination and accounting treatment of the anticipated credit loss of accountsreceivable"√ Applicable" "□ Not applicable"Please refer to Note V (X) Financial instruments

13. Receivables financing

"√ Applicable" "□ Not applicable"Please refer to Note V (X) Financial instruments

14. Other receivables

Determination and accounting treatment of the anticipated credit loss of other receivables"√ Applicable" "□ Not applicable"Please refer to Note V (X) Financial instruments

15. Inventories

"√ Applicable" "□ Not applicable"

(1) Classification of inventories

Inventories include raw materials, materials in transit, turnover materials, goods-in-stock,expendable biological assets, goods in production, goods in transit, commissioned processingmaterials and so forth.

(2) Determination of cost

Cost of inventories is determined using the weighted average method.

(3) Basis for the determination of net realizable value for different types of inventoriesNet realizable value of held-for-sale commodity stocks, such as finished goods, goods-in-stock,and held-for-sale raw materials, during the normal course of production and operation, shall bedetermined by their estimated selling price less the related selling expenses and taxes; the netrealizable value of material inventories, which need to be processed, during the normal courseof production and operation, shall be determined by the amount after deducting the estimatedcost of completion, estimated selling expenses and relevant taxes from the estimated sellingprice of finished goods; the net realizable value of inventories held for execution of salescontracts or labor contracts shall be calculated on the ground of the contracted price. If anenterprise holds more inventories than the quantity stipulated in the sales contract, the netrealizable value of the exceeding part shall be calculated on the ground of general selling price.Provision for decline in value of inventories is made on an item-by-item basis at the end of theperiod. For large quantity and low value items of inventories, provision for decline in value maybe made based on categories of inventories; for items of inventories relating to a product linethat is produced and marketed in the same geographical area with the same or similar end usesor purposes, which are impossible to be evaluated separately from other items in that productline, provision for decline in value of inventories may be determined on an aggregate basis.

Unless there is clear evidence indicating that abnormality in market price exists as of the balancesheet date, the net realizable value of inventories is determined based on the market price as ofthe balance sheet date.The net realizable value of inventories at the end of current period is determined based on themarket price of the balance sheet date.

(4) Inventory system

The perpetual inventory system is adopted.

(5) Amortization of low-value consumables and packaging materials

① Low-value consumables are amortized using the immediate write-off method;

② Packaging materials are amortized using the immediate write-off method.

16. Held for sale assets

"√ Applicable" "□ Not applicable"The Company classifies the non-current assets or disposal groups which meet the followingconditions as held-for-sale categories:

(1) According to the general practice for selling such kind of asset or disposal group in the similartransaction, it can be immediately sold in the prevailing circumstance;

(2) The sale of the asset or group is very likely to happen, which means that the Company hasmade a resolution for one selling plan and had acquired decided purchase commitment, and itis estimated that the sale will be completed within one year. Where the sale can be done onlyupon the approval of relevant authorities or regulatory authorities of the Company as requiredby relevant provisions, the approval has been obtained.

17. Debt investment

(1). Determination and accounting treatment of the anticipated credit loss of debtinvestments"□ Applicable" "√ Not applicable"

18. Other debt investment

(1). Determination and accounting treatment of the anticipated credit loss of other debtinvestments"□ Applicable" "√ Not applicable"

19. Long-term receivables

(1) Determination and accounting treatment of the anticipated credit loss of long-termreceivables"√ Applicable" "□ Not applicable"Please refer to Note V (X) Financial instruments

20. Long-term equity investments

"√ Applicable" "□ Not applicable"

(1) Joint control or significant influence criterion

Joint control is the contractually agreed sharing of control of an arrangement, and exists onlywhen decisions about the relevant activities of the arrangement require the unanimous consentof the parties sharing control. The Company together with the other joint venture parties canjointly control over the investee, and are entitled to the right of the net assets of the investee whois joint venture of the Company.Significant influence refers to the power to participate in making decisions on the financial andoperating policies of an enterprise, but not power to control or jointly control the formulation ofsuch policies with other parties. Where the investor can exercise significant influence over theinvestee, the investee is an associate of the Company.

(2) Determination of initial investment cost

① Long-term equity investments formed through business combination of entitiesFor business combinations involving entities under common control: where the Company payscash, transfers non-cash assets, bears debts or issues equity securities as consideration ofcombinations, the initial investment cost of long-term equity investments are the share withreference to the book value of the shareholders’ equity of the acquiree in the consolidatedfinancial statements of the ultimate controlling party on the date of combinations. In connectionwith imposing control over the investee under joint control as a result of additional investmentand other reasons, the initial investment cost of long-term equity investments shall bedetermined based on share of carrying amount in the consolidated financial statements of theultimate controlling party by net assets of acquiree after the merger on the date of merger. Thedifference between initial investment cost and the carrying amount of long term equity investmentbefore merger and the sum of carrying amount of newly paid consideration for additional sharesacquired on the date of merger is to adjust share premium. If the balance of share premium isinsufficient, any excess is adjusted to retained earnings.For business combinations involving entities not under common control: the cost of thecombinations ascertained on the date of acquisition shall be taken as the initial investment costof the long-term equity investments. In connection with imposing control over the investee not

under joint control as a result of additional investment and other reasons, the initial investmentcost when changing to the cost method shall be the sum of the carrying amount of the equityinvestment originally held and the newly increased initial investment cost.

② Long-term equity investments acquired by other means

The initial investment cost of a long-term equity investment obtained by the Company by cashpayment shall be the purchase cost paid actually.The initial investment cost of a long-term equity investment obtained by the Company by meansof issuance of equity securities shall be the fair value of the equity securities issued.If the non-monetary assets transaction is commercial in nature and the fair value of the assetsreceived or surrendered can be reliably measured, fair value shall be taken as the measurementbasis. If the assets received or surrendered can be reliably measured, for long-term equityinvestments received, the fair value of the assets surrendered and related taxes payable arerecognized as the initial investment cost of long-term equity investments received, unless thereis clear evidence indicating that the fair value of the assets received is more reliable. If neitherthe non-monetary assets transaction is commercial in nature, nor can the fair value of the assetsreceived and surrendered be reliably measured, for long-term equity investments received, thecarrying amount of the assets surrendered and related taxes payable are recognized as theinitial investment cost of long-term equity investments received.For the long-term equity investments acquired through debt restructuring, its carrying amount isdetermined based on the fair value of the creditor’s rights waived, the taxes that can be directlyattributable to the assets and other costs, and the balance between the fair value and carryingamount of the creditor’s rights waived is included in the current profit or loss.

(3) Subsequent measurement and recognition of profit or loss

① Long-term equity investment accounted for by cost method

Long-term equity investment in subsidiaries of the Company is accounted for by cost method,except for the actual consideration paid for the acquisition of investment or the declared but notyet distributed cash dividends or profits which are included in the consideration, investment gainsare recognized as the Company’s shares of cash dividends or profits declared by the investee.

② Long-term equity investment accounted for by equity method

Long-term equity investments of associates and joint ventures are accounted for by equitymethod. Where the initial investment cost of a long-term equity investment exceeds theinvestor’s interest in the fair value of the investee’s identifiable net assets at the date ofacquisition, no adjustment shall be made to the initial investment cost of long-term equityinvestments; where the initial investment cost is less than the investor’s interest in the fair valueof the investee’s identifiable net assets at the date of acquisition, the difference shall be includedin the current profit or loss.

The Company recognizes the investment income and other comprehensive income accordingto the shares of net profit or loss and other comprehensive income realized by the investee whichit shall be entitled or shared respectively, and simultaneously makes adjustment to the carryingamount of long-term equity investments; the carrying amount of long-term equity investmentsshall be reduced by attributable share of the profit or cash dividends for distribution declared bythe investee. In relation to other changes of owners’ equity except for net profit and loss, othercomprehensive income and profit distributions of the investee, the carrying amount of long-termequity investments shall be adjusted and included in the owners’ equity.When determining the amount of proportion of net profit or loss in the investee which it entitles,fair value of each identifiable assets of the investee at the time when the investment is obtainedshall be used as the basis, and adjustment shall be made to the net profit of the investeeaccording to the accounting policies and accounting period of the Company. During the periodof holding investments, when the investee prepares consolidated financial statements, theaccounting shall be based on the amounts attributable to the investee in the net profit, othercomprehensive income and other changes of the owners’ equity in the consolidated financialstatements.The unrealized profit or loss resulting from transactions between the Company and its associatesor joint ventures shall be offset in proportion to the investor’s equity interest of investee, basedon which investment income or loss shall be recognized. Any losses resulting from internaltransactions, which are attributable to impairment of assets, shall be fully recognized.Transactions of the assets casted and sold that are able to constitute an agreement between theCompany and associates and joint ventures shall be dealt with in accordance with Note “III (V)Accounting treatments for enterprise merger under and not under joint control” and Note III (VI)”Preparation of consolidated financial statements”.In recognition of share of losses in the investee, the Company treats it in the following order:

firstly, the Company will write off the carrying amount of long-term equity investments. Secondly,in the event the aforesaid carrying amount is insufficient for write-off, it shall continue torecognize investment loss and write off carrying amount of long-term receivables to the extentof the carrying amount of the long-term equity which substantively constitutes the net investmentin the investee. Finally, after the above treatment, for the additional obligations which shall bestill assumed by entities according to investment contract or agreement, the estimated liabilitiesshall be recognized based on the obligations which are expected to assume, and included in thecurrent investment loss.

③ Disposal of long-term equity investments

For disposal of long-term equity investment, the difference between the carrying amount and theconsideration actually received shall be included in the current profit or loss.For the long-term equity investment under the equity method, when such investment is disposed,part of amounts that shall be originally included in other comprehensive income shall be

accounted for in proportion by using the same basis as the investee used for direct disposal ofrelevant assets or liabilities. The owners’ equity which is recognized due to other changes ofowners’ equity except for net profit and loss, other comprehensive income and profit distributionsshall be transferred in proportion into the current profit or loss, excluding the othercomprehensive income derived from changes of net liabilities or net assets due to re-measurement on defined benefit plan by the investee.When the control or material influence over the investee is lost due to partial disposal of equityinvestment and other reasons, the remaining equities shall be accounted for in accordance withthe standards on recognition and measurement of financial instruments, and the differencebetween the fair value and the carrying amount at the date when control or material influence islost shall be included in the current profit or loss. For other comprehensive income recognizedin the original equity investment due to the equity method is adopted, it shall be treated with thesame accounting basis as the investee used for direct disposal of relevant assets or liabilitieswhen ceasing to use the equity method. All owners’ equities which are recognized due to otherchanges of owners’ equity except for net profit and loss, other comprehensive income and profitdistributions shall be transferred into the current profit or loss when ceasing to use the equitymethod.When the control over the investee is lost due to partial disposal of equity investment and otherreasons, the remaining equities after disposal shall be accounted for by equity method inpreparing individual financial statements provided that joint control or material influence over theinvestee can be imposed, and shall be adjusted as if such remaining equities has beenaccounted for by the equity method since they are obtained. Where the remaining equities afterdisposal cannot impose joint control or material influence over the investee, it shall be accountedfor according to relevant provisions of the standards on recognition and measurement of financialinstruments, and the difference between fair value and the carrying amount on the date whencontrol is lost shall be included in the current profit or loss.If the disposed equity interest is acquired in an enterprise merger as a result of making additionalinvestment or other reasons, the remaining equity interest after disposal will be accounted for bycost method or equity method when preparing the separate financial statements. Othercomprehensive income and other owners’ equity recognized when the equity interests held onthe date of acquisition is accounted for by equity method and shall be transferred on pro ratabasis; for the remaining equity interest after disposal accounted for by the recognition andmeasurement standard of financial instruments, other comprehensive income and other owners’equity shall be fully transferred.

21. Investment real estate

Not applicable

22. Fixed assets

(1) Conditions for recognition

"√ Applicable" "□ Not applicable"Fixed assets are tangible assets that are held for use in the production or supply of goods orservices, for rental to others, or for administrative purposes; and have a useful life of more thanone accounting year. Fixed assets are recognized when they meet the following conditions:

① It is probable that the economic benefits associated with the fixed assets will flow to theenterprise;

② The cost of fixed assets can be reliably measured.

(2) Method for depreciation

"√ Applicable" "□ Not applicable"

CategoryMethod for depreciationUseful lives of depreciation (year)Residual valueAnnual depreciation rate
Property and buildingsStraight-line method2054.75
Machinery and equipmentStraight-line method105-109.5-9
Transportation vehiclesStraight-line method4-100-1025-9
Other equipmentStraight-line method2-100-1047.5-9.5

Fixed assets are depreciated by categories using the straight-line method, and the depreciationrates are determined by categories based upon their estimated useful lives and their estimatedresidual value. Where the parts of a fixed asset have different useful lives or cause economicbenefits for the enterprise in different ways, different depreciation rates or depreciation methodsshall be applied, and each part shall be depreciated separately.For fixed assets leased under finance lease, if it can be reasonably determined that theownership of the leased asset can be acquired upon the expiry of the lease term, depreciationwill be prepared during the remaining useful life of the leased asset. If it cannot be reasonablydetermined that the ownership of the leased asset can be acquired upon the expiry of the leaseterm, depreciation will be prepared during the lease term or the remaining useful life of the leasedasset, whichever is shorter.Note: physical assets newly acquired through the increase of capital by M&G Holdings (Group)Co., Ltd. to the Company in 2010 are stated at valuation, and depreciated at the remaining usefullife.

(3) Recognition basis and measurement method of fixed assets under finance lease"√ Applicable" "□ Not applicable"Where any one of the following conditions is provided in the lease agreement between theCompany and the lesser, assets under finance lease will be recognized:

① the ownership of the leased asset is transferred to the Company upon the expiry of lease;

② the Company has the option to purchase the leased asset, and the purchase considerationentered into is expected to be far less than the fair value of the leased asset upon the exerciseof the option;

③ the lease term accounts for the majority of the useful life of the leased asset;

④ the present value of the minimum lease payment upon the commencement of the lease issubstantially the same as the fair value of the leased asset.On the commencement of the lease, the leased asset shall be stated at an amount equal to thefair value of the leased asset or the present value of the minimum lease payments (whichever islower), and the minimum lease payments shall be stated as the carrying amount of long-termpayables. The difference between the stated amount of the leased asset and the minimum leasepayments shall be accounted for as unrecognized finance charge.

23. Construction in progress

"√ Applicable" "□ Not applicable"Construction in progress is measured and recognized as fixed assets at all the expensesincurred to bring the fixed assets ready for their intended use. If the construction in progress offixed assets constructed are ready for their intended use but the final account of completedproject has not been issued, it should be transferred to fixed assets at an estimated costaccording to the construction budget, construction price or actual cost, and depreciation shouldbe provided according to the Company’s deprecation policy for fixed assets from the date whenthe assets are ready for their intended use. When the final account of completed project is issued,the estimated cost will be adjusted according to the actual cost, but the original depreciationcharge will not be adjusted.

24. Borrowing costs

"√ Applicable" "□ Not applicable"

(1) Criteria for recognition of capitalized borrowing costs

Borrowing costs refer to the borrowing interests, amortization of discounts or premiums, ancillarycosts and exchange differences arising from foreign currency borrowings.For borrowing costs incurred by the Company that are directly attributable to the acquisition,construction or production of assets qualified for capitalization, the costs will be capitalized and

included in the costs of the related assets. Other borrowing costs shall be recognized as expensein the period in which they incur and are included in the current profit or loss.Assets qualified for capitalization are assets (fixed assets, investment property, inventories, etc.)that necessarily take a substantial period of time for acquisition, construction or production to getready for their intended use or sale.Capitalization of borrowing costs begins when the following three conditions are fully satisfied:

① expenditures for the assets (including cash paid, transferred non-currency assets orexpenditure for holding debt liability for the acquisition, construction or production of assetsqualified for capitalization) have been incurred;

② borrowing costs have been incurred;

③ acquisition, construction or production that are necessary to enable the asset reach itsintended usable or saleable condition have commenced.

(2) Capitalization period of borrowing costs

The capitalization period shall refer to the period between the commencement and the cessationof capitalization of borrowing costs, excluding the period in which capitalization of borrowingcosts is temporarily suspended.Capitalization of borrowing costs shall be suspended during periods in which the qualifying assetunder acquisition and construction or production ready for the intended use or sale.If part of an asset being acquired, constructed or produced has been completed respectively andput into use individually, capitalization of its relevant borrowing costs should be suspended.If different parts of the assets acquired, constructed or produced are completed separately, butsuch asset will not be ready for the intended use or sale until all parts have been completed,then the borrowing costs will be capitalized until the completion of all parts of the said asset.

(3) Suspension of capitalization period

Capitalization of borrowing costs shall be suspended during periods in which the acquisition,construction or production of a qualifying asset is interrupted abnormally, when the interruptionis for a continuous period of more than 3 months; if the interruption is a necessary step for makingthe qualifying asset under acquisition and construction or production ready for the intended useor sale, the capitalization of the borrowing costs shall continue. The borrowing costs incurredduring such suspension period shall be recognized as the current profit or loss. When theacquisition and construction or production of the asset resumes, the capitalization of borrowingcosts commences.

(4) Calculation of capitalization rate and amount of borrowing costs

For specific borrowings for the acquisition, construction or production of assets qualified forcapitalization, the amount of borrowing costs for capitalization is determined through borrowing

costs of the specific borrowings actually incurred in the current period minus the interest incomeearned on the unused borrowing loans as a deposit in the bank or as investment income earnedfrom temporary investment.For general borrowings for the acquisition, construction or production of assets qualified forcapitalization, the to-be-capitalized amount of interests on the general borrowings shall becalculated and determined by multiplying the weighted average asset disbursement of the partof the accumulative asset disbursements minus the specifically borrowed loans by thecapitalization rate of the general borrowings used. The capitalization rate shall be calculated anddetermined according to the weighted average interest rate of the general borrowings.

25. Biological assets

"□ Applicable" "√ Not applicable"

26. Oil and gas assets

"□ Applicable" "√ Not applicable"

27. Right-of-use assets

"□ Applicable" "√ Not applicable"

28. Intangible assets

(1) Valuation method, useful life and impairment test

"√ Applicable" "□ Not applicable"

① Valuation method of intangible assets

A. Intangible assets are initially measured at cost upon acquisition by the Company;The costs of externally purchased intangible assets include the purchase price, relevant taxesand expenses paid, and other expenditures directly attributable to putting the asset into conditionfor its intended use. If the payment for the intangible assets is delayed beyond the normal creditconditions and it is of financing nature in effect, the cost of the intangible assets shall beascertained based on the present value of the purchase price.For the intangible assets obtained through debt restructuring for offsetting the debt of the debtor,its stated value is determined by the fair value of the creditor’s rights waived, the taxes that canbe directly attributable to putting the asset into condition for its intended use and other costs,and the balance between the fair value and carrying amount of the creditor’s rights waived isincluded in the current profit or loss.If the non-monetary assets transaction is commercial in nature and the fair value of the assetsreceived or surrendered can be reliably measured, fair value shall be taken as the measurementbasis. If the assets received or surrendered can be reliably measured, for intangible assets

received, the fair value of the assets surrendered and related taxes payable are recognized asthe initial investment cost of intangible assets received, unless there is clear evidence indicatingthat the fair value of the assets received is more reliable. If neither the non-monetary assetstransaction is commercial in nature, nor can the fair value of the assets received and surrenderedbe reliably measured, for intangible assets received, the carrying amount of the assetssurrendered and related taxes payable are recognized as the initial investment cost of intangibleassets received.B. Subsequent measurementThe useful life of intangible assets shall be analyze and judged upon acquisition.As for intangible assets with finite useful life, they are amortized using the straight-line methodover the term in which economic benefits are brought to the enterprise; if the term in whicheconomic benefits are brought to the enterprise by intangible assets cannot be estimated, theintangible assets shall be regarded as intangible assets with indefinite useful life, and shall notbe amortized.

② Estimated useful lives for the intangible assets with finite useful life

ItemEstimated useful livesBasis
Land use rights50Certificate of land use rights
Image identification rights12 months to 64 monthsLicense contract
Software3 to 10 yearsExpected years of benefit
Patent right10Patent right certificate
Others19 months to 120 monthsExpected years of benefit

Note: land use rights newly acquired through the increase of capital by M&G Holdings (Group)Co., Ltd. to the Company in 2010 are stated at valuation, and amortized at the remaininguseful life.

(2) Accounting policy regarding the expenditure on the internal research and

development"√ Applicable" "□ Not applicable"

① Specific criteria for the division of research phase and development phaseThe expenses for internal research and development projects of the Company are divided intoexpenses in the research phase and expenses in the development phase.Research phase: scheduled, innovative investigations and research activities to obtain andunderstand scientific or technological knowledge.Development phase: apply the research outcomes or other knowledge to a plan or design priorto a commercial production or use in order to produce new or essentially-improved materials,devices, products, etc.

② Specific criteria for capitalization at development phase

Expenses in the development phase are recognized as an intangible asset when all of thefollowing conditions are satisfied:

A. it is technically feasible to complete the intangible asset so that it will be available for use orsale;B. there is an intention to complete the intangible asset for use or sale;C. the intangible asset can produce economic benefits, including there is evidence that theproducts produced using the intangible asset has a market or the intangible asset itself has amarket; if the intangible asset is for internal use, there is evidence that there exists usage for theintangible asset;D. there is sufficient support in terms of technology, financial resources and other resources inorder to complete the development of the intangible asset, and there is capability to use or sellthe intangible asset;E. the expenses attributable to the development stage of the intangible asset can be measuredreliably.Expenses incurred during the development stage which do not meet the above conditions, areincluded in the current profit or loss. Expenses incurred during the research phase are includedin the current profit or loss.

29. Impairment of long-term assets

"√ Applicable" "□ Not applicable"Long-term assets, such as long-term equity investment, fixed assets, construction in progress,intangible assets with finite useful life, are tested for impairment if there is any indication that anasset may be impaired at the balance sheet date. If the result of the impairment test indicatesthat the recoverable amount of the asset is less than its carrying amount, the difference shall beused to make impairment provision and an impairment loss are recognized. The recoverableamount is the higher of the net amount of asset’s fair value less costs to sell and the presentvalue of the future cash flows expected to be derived from the asset. Provision for assetimpairment is determined and recognized on the individual asset basis. If it is not possible toestimate the recoverable amount of an individual asset, the recoverable amount of a group ofassets to which the asset belongs to is determined. An assets group is the smallest group ofassets that is able to generate cash inflow independently.Impairment test to goodwill, intangible assets with indefinite useful life and intangible assets notready to use shall be carried out at least at the end of each year.When the Company carries out impairment test to goodwill, the Company shall, as of thepurchasing day, allocate on a reasonable basis the carrying amount of the goodwill formed byenterprise merger to the relevant asset groups, or if there is a difficulty in allocation, the Companyshall allocate it to the portfolio of asset groups. When apportioning the carrying amount ofgoodwill, the Company shall carry out impairment test to goodwill after conducting apportionment

in accordance with relative benefit that the assets group or portfolio of asset groups can obtainfrom the synergistic effect of enterprise merger.For the purpose of impairment test to the relevant asset groups or portfolio of asset groupscontaining goodwill, if any evidence shows that the impairment of asset groups or portfolio ofasset groups related to goodwill exists, an impairment test will be made firstly on the assetgroups or portfolio of asset groups not containing goodwill, thus calculating the recoverableamount and comparing it with the relevant carrying amount so as to recognize the correspondingimpairment loss. Then the Company will make an impairment test to the asset groups or portfolioof asset groups containing goodwill, and compare the carrying amount of these asset groups orportfolio of asset groups (including the carrying amount of the goodwill apportioned thereto) withthe recoverable amount. Where the recoverable amount of the relevant assets or portfolio of theasset groups is lower than the carrying amount thereof, the impairment loss of the goodwill shallbe recognized.Once the above asset impairment loss is recognized, it will not be reversed in the subsequentaccounting periods.

30. Long-term prepaid expenses

"√ Applicable" "□ Not applicable"Long-term prepaid expenses are expenses which have occurred with amortization period over1 year and shall be borne by the current period and subsequent periods. Long-term prepaidexpenses of the Company include decoration fee and so forth.

(1) Amortization method

Long-term prepaid expenses are amortized averagely in the expected benefit period.

(2) Amortization period

ItemEstimated useful livesBasis
Decoration fee3 to 5 yearsExpected years of benefit
Others2Expected years of benefit

31. Employee remuneration

(1) Method of accounting treatment for short-term remuneration"√ Applicable" "□ Not applicable"During the accounting period when employees provide service, the Company will recognize theshort-term remuneration actually incurred as liabilities, and the liabilities will be included in thecurrent profit or loss or relevant costs of assets.The Company will pay social insurance and housing funds for the employees, and will makeprovision of trade union funds and employee education costs in accordance with therequirements. During the accounting period when employees provide service, the Company will

determine relevant amount of employee remuneration in accordance with the required provisionbasis and provision ratios.Non-currency employee benefits will be measured in accordance with their fair value if they canbe measured reliably.

(2) Method of accounting treatment for post-employment benefits"√ Applicable" "□ Not applicable"

① Defined contribution scheme

The Company will pay basic pension insurance and unemployment insurance in accordancewith the relevant provisions of the local government for the employees. During the accountingperiod when employees provide service, the Company will calculate the amount payable whichwill be recognized as liabilities in accordance with the local stipulated basis and proportions, andthe liabilities will be included in the current profit or loss or costs of related assets.In addition to basic pension insurance, the Company also established the enterprise annuitypayment system (supplementary pension insurance)/enterprise annuity scheme according torelevant policy of national enterprise annuity system. The Company makes payment to localsocial insurance agencies/annuity scheme based on a certain proportion of total employeeremuneration. Corresponding expense is included in the current profit or loss or costs of relatedassets.

② Defined benefit scheme

The welfare responsibilities generated from defined benefit scheme based on the formuladetermined by projected unit credit method will be vested to the service period of employees andincluded into the current profit or costs of related assets.The deficit or surplus generated from the present value of obligations of the defined benefitscheme minus the fair value of the assets of defined benefit scheme is recognized as netliabilities or net assets. When the defined benefit scheme has surplus, the Company will measurethe net assets of the defined benefit scheme at the lower of the surplus of defined benefit schemeand the upper limit of the assets.All obligations of the defined benefit plan, including the expected duty of payment within 12months after the end of annual reporting period during which employees provide service, shallbe discounted based on the bond market yield of sovereign bond matching the term ofobligations of the defined benefit plan and currency or corporate bonds of high quality in theactive market on the balance sheet date.The service cost incurred by defined benefit scheme and the net interest of the net liabilities andnet assets of the defined benefit scheme will be included in the current profit or loss or costs ofrelevant assets. The changes as a result of re-measurement of the net defined benefit liabilitiesor assets shall be recognized in other comprehensive income and shall not be reversed to profitor loss at subsequent accounting period. When the original defined benefit plan is terminated,

amount originally included in other comprehensive income shall be transferred to undistributedprofit in the scope of equity.When the defined benefit scheme is settled, the gain or loss is confirmed based on the differencebetween the present value of obligations and the settlement price of the defined benefit schemeas at the balance sheet date.

(3) Accounting method for termination benefits

"√ Applicable" "□ Not applicable"The Company will pay termination benefits when the Company can no longer withdraw the offerof termination plan or layoff proposal or when the Company recognizes costs for restructuringwhich involving the payment of termination benefits (whichever is earlier). The remunerationincurred by the termination benefits will be recognized as liabilities that will be included in thecurrent profit or loss.

(4) Accounting treatment of other long-term employees’ benefits"□ Applicable" "√ Not applicable"

32. Lease liabilities

"□ Applicable" "√ Not applicable"

33. Estimated liabilities

"√ Applicable" "□ Not applicable"

(1) Recognition criteria for estimated liabilities

The Company shall recognize the obligations related to contingencies involving litigation,guarantee provided to debt, loss-making contract, restructuring as estimated liabilities, when allof the following conditions are satisfied:

① the obligation is a present obligation of the group;

② it is probable that an outflow of economic benefits will be required to settle the obligation;

③ the amount of the obligation can be measured reliably.

(2) Method of measuring the various estimated liabilities

Estimated liabilities shall be initially measured at the best estimate of the expenses required tosettle the related present obligation.Factors pertaining to a contingency such as risk, uncertainties, and time value of money shall betaken into account as a whole in getting the best estimate. Where the effect of the time value ofmoney is material, the best estimate shall be determined by discounting the related future cashoutflow.The best estimate will be dealt with separately in the following circumstances:

The expenses required have a successive range (or band), in which the possibilities ofoccurrence of each result are the same, and the best estimate should be determined as themiddle value for the range, i.e. the average of the upper and lower limit.The expenses required does not have a successive range (or band), or although there is asuccessive range (or band), the possibilities of occurrence of each result are not the same, andif the contingency is related to individual item, the best estimate should be determined as themost likely amount; if the contingency is related to several items, the best estimate should becalculated and determined according to the possible results and the relevant possibilities.Where some or all of the expenses required to settle an estimated liability are expected to bereimbursed by a third party, the reimbursement is separately recognized as an asset when it isvirtually certain that the reimbursement will be received. The amount recognized for thereimbursement is limited to the carrying amount of the liability recognized.

34. Share-based payments

"√ Applicable" "□ Not applicable"Share-based payments are transactions that grant equity instruments or assume equity-instrument based liabilities for receiving services rendered by employees or other parties. TheCompany’s share-based payments included equity-settled share-based payments and cash-settled share-based payments.Equity-settled share-based paymentsEquity-settled share-based payments made in exchange for services rendered by employeesare measured at the fair value of equity instruments granted to employees. If the Companymakes the share-based payments by restricted shares, employees will subscribe shares, but theshares shall not be listed on the market or transferred before it fulfills the unlocking condition tobe unlocked. If the unlocking conditions stipulated in the equity incentive scheme cannot befulfilled eventually, the Company will repurchase those shares based on the predetermined price.Upon obtaining the payment for subscribing restricted shares made by the employees, theCompany will recognize the share capital and capital reserve (share capital premium) accordingto the payment it receives, while fully recognizing a liability for its repurchasing obligation as wellas its treasury shares. On each balance sheet date within the vesting period, the Company willmake the best estimation of the number of vested equity instruments based on the subsequentinformation such as [the updated changes in the number of executives] and [the achievement ofperformance standard]. Based on the above results, the services received in the current periodwill be included in the relevant cost or expense based on the fair value on the date of grant, andthe capital reserve will be increased accordingly. The recognized cost or expense and owners’interest will not be adjusted after the vesting date. However, equity instruments vestedimmediately after the date of grant will be included in the relevant cost or expense based on itsfair value on the date of grant, and the capital reserve will be increased accordingly.

For the share-based payments that are not vested eventually, no cost or expense will berecognized, unless the vesting condition is market condition or non-exercisable condition. Undersuch circumstances, no matter whether the market condition or non-exercisable condition canbe fulfilled, the share-based payments will be deemed as vested as long as all the non-marketconditions in the vesting condition are fulfilled.If the terms of the equity-settled share-based payments are amended, the Company shallrecognize the services received at least based on the situation before the amendment is made.In addition, any amendment resulting in the increase of the fair value of the equity instrumentgranted or changes that are beneficial to employees on the amendment date, will be recognizedas an increase in the service received.If the equity-settled share-based payments are canceled, they will be accounted for asaccelerated exercise on the date of cancellation, and the unrecognized amount will berecognized immediately. If employees and other parties are able to satisfy the non-vestingconditions, but the conditions are not fulfilled during the vesting period, the equity settled share-based payments will be deemed as canceled. However, if new equity instruments are vestedand they are verified at the vesting date of new equity instrument as alternatives vested tocanceled equity instruments, the treatment on the new equity instrument is in conformity with themodified treatment on disposal of equity instrument.

35. Preference shares, perpetual bonds and other financial instruments"□ Applicable" "√ Not applicable"

36. Revenue

"√ Applicable" "□ Not applicable"

(1) General principle of recognition of revenue from sales of goods

① All the significant risks and rewards of ownership of the goods have been transferred to thebuyer;

② The Company does not retain either continuing managerial involvement to the degree usuallyassociated with ownership or effective control over the goods sold;

③ The amount of revenue can be reliably measured;

④ It is probable that relevant economic benefits will flow to the Company;

⑤ The relevant amount of costs incurred or to be incurred can be measured reliably.

(2) Specific principles

① Timing of revenue recognition for regional sales and overseas sale (export agent): Shanghai:

sales revenue is recognized after goods are delivered; regions other than Shanghai: salesrevenue is recognized after goods are delivered and delivery documents are confirmed withsignature from the logistic companies;

② Timing of revenue recognition for KA sales: sales revenue is recognized after goods aredelivered and delivery documents are confirmed with signature from the logistic companies;

③ Timing of revenue recognition for self-managing and export business: revenue is recognizedwhen the goods pass the ship’s rail in the port of shipment under the term of FOB;

④ Timing of revenue recognition for direct sales of office supplies: sales revenue is recognizedafter goods are delivered and confirmed by customers;

⑤ Timing of revenue recognition for direct sales large flagship store: sales revenue isrecognized after goods are delivered and confirmed by customers.

37. Government grant

"√ Applicable" "□ Not applicable"

(1) Types

Government grants are transfer of monetary assets or non-monetary assets from thegovernment to the Company at no consideration, and are classified into government grantsrelated to assets and government grants related to income.Government grant related to assets refers to government grant obtained by the Company thatare used to purchase or construct or otherwise form long-term assets. Government grantsrelated to income refer to the government grants other than government grants related to assets.The standard for the Company to classify the government grant as assets related: If obtainedgrant is used to purchase, construct or otherwise form fixed assets, intangible assets and otherlong-term assets as expressly stipulated in government documents, then such grant is deemedas assets related.The standard for the Company to classify the government grant as income related: If thegovernment grant (excluding grant related to assets) is used to compensate relevant costs orlosses of the Company that are already incurred or to be incurred in subsequent periods, thensuch grant is deemed as income related.Where there is no express regulation on the grant object in government documents, then theCompany will classify a government grant as assets related or as income related depending onthe specific purpose that the grant is used for.

(2) Timing of recognition

Government grants are recognized when the grants are received actually or when the rights toget government grants are obtained and it is basically certain that the grants can be received.

(3) Accounting treatment

Government grants related to assets shall offset the carrying amount of relevant assets or berecognized as deferred income. If it is recognized as deferred income, it shall be included in thecurrent profit and loss in a reasonable and systematic way within the useful life of the relevant

assets (if it is related to the daily activities of the Company, it shall be included in other income;otherwise, it shall be included in the non-operating income);Government grants related to income that are used for compensation for the relevant costs orlosses of the Company in subsequent periods are recognized as deferred income and areincluded in the current profit or loss in the period in which the relevant costs, expenses or lossesare recognized (if it is related to the daily activities of the Company, it shall be included in otherincome; otherwise, it shall be included in the non-operating income) or offset the relevant costsor losses; government grants related to income that are used for compensation for the relevantcosts or losses that the Company has already incurred shall be directly included in the currentprofit or loss (if it is related to the daily activities of the Company, it shall be included in otherincome; otherwise, it shall be included in the non-operating income) or offset the relevant costsor losses.The Company's policy-based concessional loans are classified into the following two conditionsand are accounted for respectively:

① If the lending bank provides loans to the Company at a policy-based preferential interest rateafter the Ministry of Finance allocates the interest-grant funds to the lending bank, the actualborrowing amount received is recognized as the entry value of the borrowing and the relevantborrowing expenses are measured in accordance with the principal amount of the borrowing andpolicy-based preferential interest rate.

② When the government directly distributes the interest-grant funds to the Company, thecorresponding discount will offset the relevant borrowing costs.

38. Deferred income tax assets and liabilities

"√ Applicable" "□ Not applicable"Deferred tax assets are recognized to the extent that it is probable that future taxable profits willbe available against which deductible temporary differences can be offset. For deductible lossesand tax credits that can be reversed in the future period, deferred tax assets shall be recognizedto the extent that it is probable that taxable profit will be available in the future to offset thedeductible losses and tax credits.Save as the exceptions, deferred tax liabilities shall be recognized for the taxable temporarydifference.The exceptions for not recognizing deferred tax assets and liabilities include: the initialrecognition of the goodwill; other transactions or matters other than enterprise merger in whichneither profit nor taxable income (or deductible loss) will be affected when transactions occur.When the Group has a legal right to settle on a net basis and intends either to settle on a netbasis or to realize the assets and settle the liabilities simultaneously, current tax assets andcurrent tax liabilities are offset and presented on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, anddeferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxationauthority on either the same taxable entity or different taxable entities which intend either to settlecurrent tax assets and liabilities on a net basis or to realize the assets and liabilitiessimultaneously, in each future period in which significant amounts of deferred tax assets orliabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offsetand presented on a net basis.

39. Lease

(1) Accounting treatment method of operating lease

"√ Applicable" "□ Not applicable"

① The Company's rental expenses paid for leased assets shall be amortized at straight-linemethod over the whole lease period (including rent-free period) and will be included in the currentexpenses. Initial direct expenses related to lease transactions paid by the Company shall beincluded in current expenses.When the lessor of assets bears expenses related to the lease which shall be borne by theCompany, the Company shall deduct the part of expenses from the total rents and amortize therents after deduction over the lease term and include them in current expenses.

② The Company's rental expenses collected for leased assets shall be amortized at straight-line method over the whole lease period (including rent-free period) and recognized as therelevant rental income. Initial direct costs related to lease transactions and paid by the Companyare included in current expenses; in case of a large amount, such costs shall be capitalized andthen included in the current revenue by stages at the same base as the recognition of rentalincome over the whole lease term.When the Company bears expenses related to the lease which shall be borne by the lessee, theCompany shall deduct the part of expenses from the total rental income and amortize the rentsafter deduction over the lease term.

(2) Accounting treatment method of financing lease

"√ Applicable" "□ Not applicable"

① Assets acquired under financing leases: At the commencement of the lease term, assetsacquired under financing leases shall be recorded at the lower of their fair values and the presentvalues of the minimum lease payments, and the Company shall recognize the long-termpayables at amounts equal to the minimum lease payments,and shall record the differencesbetween book value of the leased assets and the long-term payables as unrecognized financingexpenses. The Company adopts the effective interest rate method for unrecognized financing

expenses, which shall be amortized over the lease terms and included in financial expenses.Initial direct expenses incurred to the Company shall be included in the value of the leased assets.

② Assets leased out under financing leases: On the lease beginning date, the Companyrecognizes the difference between the sum of financing lease receivable and the unguaranteedresidual value, and the present value thereof as unrealized financing income, and recognizesthem as rental income over the periods when the rents are received in the future. Initial directexpenses related to the rental transactions incurred to the Company shall be included in theinitial measurement of the financing lease receivables and the amount of income recognized inthe lease term will be reduced.

(3) Determination method and accounting treatment method of lease under new lease

standards"□ Applicable" "√ Not applicable"

40. Other significant accounting policies and accounting estimates"√ Applicable" "□ Not applicable"Discontinued operation is a component that satisfies one of the following conditions and isseparately identifiable, and has been disposed of by the Company or is classified by theCompany as held for sale:

(1) It represents a separate major line of business or geographical area of operations;

(2) It is part of a single coordinated plan to dispose of a separate major line of business orgeographical area of operations; or

(3) It is a subsidiary acquired exclusively with a view to resale.

41. Changes in significant accounting policies and accounting estimates

(1) Changes in significant accounting policies

"√ Applicable" "□ Not applicable"

Contents and reasons of changes in accounting policiesReview and approval procedureRemarks (name and amount of report items affected materially)
The Notice of the Ministry of Finance on Revising and Issuing the Format of Financial Statements of General Enterprises for 2019 and the Notice on Revising and Issuing theThe 18th meeting of the fourth Board meetingSee other descriptions l
Format of Consolidated Financial Statements (2019 Version) were implemented
The Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, the Accounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets, the Accounting Standards for Business Enterprises No. 24 - Hedging Accounting and the Accounting Standards for Business Enterprises No. 37 - Presentation of Financial Instruments (revised in 2017) were implementedThe 18th meeting of the fourth Board meetingSee other descriptions 2

Other explanation

1. The Ministry of Finance released the Notice of the Ministry of Finance on Revising and Issuingthe Format of Financial Statements of General Enterprises for 2019 (Cai Kuai (2019) No.6) andthe Notice on Revising and Issuing the Format of Consolidated Financial Statements (2019Version) ((Cai Kuai (2019) No.16)) on 30 April 2019 and 19 September 2019 respectively,revising the format of financial statements of general enterprises. The main impact of theCompany's implementation of the above regulations is shown as follows:

Contents and reasons of changes in accounting policiesReview and approval procedureItem and amount in statement influenced
ConsolidationParent company
(1) The “bills receivable and accounts receivable” in the balance sheet is divided into “bills receivable” and “accounts receivable”;The “bills receivable and accounts receivable” is divided into “bills receivable” and “accounts receivable”. Balance of “bills receivable” at the end ofThe “bills receivable and accounts receivable” is divided into “bills receivable” and “accounts receivable”. Balance of “bills receivable” at the
the “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”; the comparison data is adjusted accordingly.The “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”. Balance of “bills payable” at the end of last year is RMB0.00, and balance of “accounts payable” at the end of last year is RMB1,319,407,048.21.The “bills payable and accounts payable” is divided into “bills payable” and “accounts payable”. Balance of “bills payable” at the end of last year is RMB0.00, and balance of “accounts payable” at the end of last year is RMB240,475,062.99.
(2) The item of “Including: derecognition of income from financial assets at amortized cost” is added to the item of investment income in the income statement. The comparison data is not adjusted.The 18th meeting of the fourth Board meetingThe amount of “derecognition of income from financial assets at amortized cost” in the current period is RMB0.00.The amount of “derecognition of income from financial assets at amortized cost” in the current period is RMB0.00.

2. In 2017 the Ministry of Finance revised the Accounting Standards for Business EnterprisesNo. 22 - Recognition and Measurement of Financial Instruments, the Accounting Standards forBusiness Enterprises No. 23 - Transfer of Financial Assets, the Accounting Standards forBusiness Enterprises No. 24 - Hedging Accounting and the Accounting Standards for BusinessEnterprises No. 37 - Presentation of Financial Instruments. It is stipulated in the revisedstandards that for financial instruments that have not been derecognized on the date of firstimplementation, if the previous recognition and measurement are inconsistent with the revisedstandards, they shall be retrospectively adjusted. If the comparative figures in financial

statements for the prior period are inconsistent with the revised standards, no adjustment isrequired. The Company adjusted the retained earnings and other comprehensive income at thebeginning of the year due to the cumulative impact of retrospective adjustment. Based on theadjusted balance at the end of last year according to Cai Kuai (2019) No. 6 and Cai Kuai (2019)No. 16, the main impacts of implementing the above new financial instrument standards are asfollows:

Contents and reasons of changes in accounting policiesReview and approval procedureItem and amount in statement influenced
ConsolidationParent company
(1) Non-tradable available-for-sale equity instrument investments are designated as “financial assets measured at fair value through other comprehensive income”.The 18th meeting of the fourth Board meetingOther equity instrument investments: increased by RMB3,600,000.000Other equity instrument investments: increased by RMB3,600,000.00
(2) Provision of expected credit loss was made for “financial assets at amortized cost” and “financial assets measured at fair value through other comprehensive income (debt instrument)”.The 18th meeting of the fourth Board meetingBills receivable: decreased by RMB0.00 Accounts receivable: decreased by RMB0.00 Other receivables: decreased by RMB0.00 Debt investment: decreased by RMB0.00 Other comprehensive income: increased by RMB0.00 Deferred income tax assets: increased by RMB0.00Bills receivable: decreased by RMB0.00 Accounts receivable: decreased by RMB0.00 Other receivables: decreased by RMB0.00 Debt investment: decreased by RMB0.00 Other comprehensive income: increased by RMB0.00
Deferred income tax assets: increased by RMB0.00
(3) Bank financial product is reclassified into financial assets held for trading and measured at fair valueThe 18th meeting of the fourth Board meetingOther current assets: decreased by RMB1,020,000,000.00 Deferred income tax liabilities: increased by RMB1,183,345.00 Financial assets held for trading: increased by RMB1,027,265,300.00Retained earnings: increased by RMB5,380,330.00 Other current assets: decreased by RMB820,000,000.00 Deferred income tax liabilities: increased by RMB949,470.00 Financial assets held for trading: increased by RMB826,329,800.00

(2) Changes in significant accounting estimates

"□ Applicable" "√ Not applicable"

(3) Particulars on adjustment to relevant items of the financial statements for the yeardue to implementation of new standards for financial instruments, new standards forrevenues or new standards for lease from 2019"√ Applicable" "□ Not applicable"

Combined Balance Sheet

Unit: Yuan Currency: RMB

Item31 December 20181 January 2019Adjustment amount
Current assets:
Cash and equivalents1,046,668,874.971,046,668,874.97
Transaction settlement funds
Lending funds
Held-for-trading financial assetsNot applicable1,027,265,300.001,027,265,300.00
Financial assets at fair value through current profit or lossNot applicable
Derivative financial assets
Bills receivable1,894,232.00-1,894,232.00
Accounts receivable808,772,112.91808,772,112.91
Receivables financingNot applicable1,894,232.001,894,232.00
Prepayment42,336,973.7142,336,973.71
Premium receivable
Reinsurance premium receivable
Reserves for reinsurance contract receivable
Other receivables110,280,059.38110,280,059.38
Including: Interest receivable
Dividend receivable
Financial assets purchased under agreements to resell
Inventories1,042,701,610.001,042,701,610.00
Held for sale assets
Non-current assets due within one year
Other current assets1,046,977,400.3526,977,400.35-1,020,000,000.00
Total current assets4,099,631,263.324,106,896,563.327,265,300.00
Non-current assets:
Loans and advances to customers
Debt investmentNot applicable
Available-for-sale financial assets3,600,000.00Not applicable-3,600,000.00
Other debt investmentNot applicable
Held-to-maturity investmentNot applicable
Long-term receivables
Long-term equity investments30,175,665.2630,175,665.26
Investments in other equity instrumentsNot applicable3,600,000.003,600,000.00
Other non-current financial assetsNot applicable
Investment real estate
Fixed assets876,617,888.99876,617,888.99
Construction in progress24,506,469.5924,506,469.59
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets187,987,875.67187,987,875.67
Development expenses
Goodwill131,001.23131,001.23
Long-term prepaid expenses118,024,364.67118,024,364.67
Deferred income tax assets25,525,520.9825,525,520.98
Other non-current assets311,300,000.00311,300,000.00
Total non-current assets1,577,868,786.391,577,868,786.39
Total assets5,677,500,049.715,684,765,349.717,265,300.00
Current liabilities:
Short-term borrowings
Borrowings from central bank
Placements from banks and other financial institutions
Held-for-trading financial liabilitiesNot applicable
Financial liabilities at fair value through current profit or lossNot applicable
Derivative financial liabilities
Bills payable
Accounts payable1,319,407,048.211,319,407,048.21
Accounts received in advance147,647,053.87147,647,053.87
Financial assets sold under repurchase agreements
Deposits from customers and other banks
Brokerage for trading securities
Brokerage for underwriting securities
Employee benefits payable120,786,076.52120,786,076.52
Taxes payable279,377,546.18279,377,546.18
Other payables240,665,881.17240,665,881.17
Including: Interest payable
Dividend payable
Fees and commissions payable
Reinsured accounts payable
Held-for-sale liabilities
Non-current liabilities due within one year
Other current liabilities
Total current liabilities2,107,883,605.952,107,883,605.95
Non-current liabilities:
Reserves for insurance contracts
Long-term borrowings
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payable5,109,800.005,109,800.00
Long-term employee benefits payable
Estimated liabilities
Deferred income67,277,109.5167,277,109.51
Deferred income tax liabilities564,909.501,748,254.501,183,345.00
Other non-current liabilities
Total non-current liabilities72,951,819.0174,135,164.011,183,345.00
Total liabilities2,180,835,424.962,182,018,769.961,183,345.00
Owner’s equity (or shareholders’ equity):
Share capital920,000,000.00920,000,000.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve272,347,764.53272,347,764.53
Less: Treasury shares
Other comprehensive income
Special reserve
Surplus reserve343,733,386.35344,271,419.35538,033.00
General risk provision
Undistributed profit1,874,727,294.531,880,271,216.535,543,922.00
Total equity attributable to the owners of the parent company3,410,808,445.413,416,890,400.416,081,955.00
Minority equity85,856,179.3485,856,179.34
Total owners’ equity (or shareholders’ equity)3,496,664,624.753,502,746,579.756,081,955.00
Total liabilities and owner's equity (or shareholders’ equity)5,677,500,049.715,684,765,349.717,265,300.00

Description on adjustment to relevant items:

"√ Applicable" "□ Not applicable"See Note V (41). (4) Description on retrospective adjustment to previous comparative data dueto implementation of new standards for financial instruments and new standards for leases fordetails.

Parent Company’s Balance Sheet

Unit: Yuan Currency: RMB

Item31 December 20181 January 2019Adjustment amount
Current assets:
Cash and equivalents552,507,774.24552,507,774.24
Held-for-trading financial assetsNot applicable826,329,800.00826,329,800.00
Financial assets at fair value through current profit or lossNot applicable
Derivative financial assets
Bills receivable
Accounts receivable93,324,765.8693,324,765.86
Receivables financingNot applicable
Prepayment9,002,289.379,002,289.37
Other receivables227,644,350.97227,644,350.97
Including: Interest receivable
Dividend receivable
Inventories433,945,665.76433,945,665.76
Held for sale assets
Non-current assets due within one year
Other current assets820,679,150.20679,150.20-820,000,000.00
Total current assets2,137,103,996.402,143,433,796.406,329,800.00
Non-current assets:
Debt investmentNot applicable
Available-for-sale financial assets3,600,000.00Not applicable-3,600,000.00
Other debt investmentNot applicable
Held-to-maturity investmentNot applicable
Long-term receivables
Long-term equity investments878,722,964.35878,722,964.35
Investments in other equity instrumentsNot applicable3,600,000.003,600,000.00
Other non-current financial assetsNot applicable
Investment real estate
Fixed assets792,636,398.34792,636,398.34
Construction in progress23,686,726.4423,686,726.44
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets184,634,388.95184,634,388.95
Development expenses
Goodwill
Long-term prepaid expenses15,345,487.1915,345,487.19
Deferred income tax assets5,277,303.995,277,303.99
Other non-current assets311,300,000.00311,300,000.00
Total non-current assets2,215,203,269.262,215,203,269.26
Total assets4,352,307,265.664,358,637,065.666,329,800.00
Current liabilities:
Short-term borrowings
Held-for-trading financial liabilitiesNot applicable
Financial liabilities at fair value through current profit or lossNot applicable
Derivative financial liabilities
Bills payable
Accounts payable240,475,062.99240,475,062.99
Accounts received in advance80,736,039.6080,736,039.60
Employee benefits payable76,794,379.9376,794,379.93
Taxes payable187,418,365.45187,418,365.45
Other payables29,240,729.9729,240,729.97
Including: Interest payable
Dividend payable
Held-for-sale liabilities
Non-current liabilities due within one year140,000,000.00140,000,000.00
Other current liabilities
Total current liabilities754,664,577.94754,664,577.94
非流动负债:
Long-term borrowings
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payable187,109,800.00187,109,800.00
Long-term employee benefits payable
Estimated liabilities
Deferred income29,979,024.3829,979,024.38
Deferred income tax liabilities949,470.00949,470.00
Other non-current liabilities
Total non-current liabilities217,088,824.38218,038,294.38949,470.00
Total liabilities971,753,402.32972,702,872.32949,470.00
Owner’s equity (or shareholders’ equity):
Share capital920,000,000.00920,000,000.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve274,008,599.09274,008,599.09
Less: Treasury shares
Other comprehensive income
Special reserve
Surplus reserve343,404,526.44343,942,559.44538,033.00
Undistributed profit1,843,140,737.811,847,983,034.814,842,297.00
Total owners’ equity (or shareholders’ equity)3,380,553,863.343,385,934,193.345,380,330.00
Total liabilities and owner's equity (or shareholders’ equity)4,352,307,265.664,358,637,065.666,329,800.00

Description on adjustment to relevant items:

"√ Applicable" "□ Not applicable"See Note V (41). (4) Description on retrospective adjustment to previous comparative data dueto implementation of new standards for financial instruments and new standards for leases fordetails.

(4) Description on retrospective adjustment to previous comparative data due to

implementation of new standards for financial instruments and new standards forleases from 2019"√ Applicable" "□ Not applicable"Based on the balance at the end of the previous year adjusted according to Cai Kuai (2019) No.6and Cai Kuai (2019) No.16, various financial assets and financial liabilities were classified inaccordance with the provisions of the standards for recognition and measurement of financialinstruments before and after the revision and the measurement results were compared asfollows:

Consolidation

Old standards for financial instrumentsNew standards for financial instruments
Presentation itemMeasurement categoryCarrying valuePresentation itemMeasurement categoryCarrying value
Cash and equivalentsAmortized cost1,046,668,874.97Cash and equivalentsAmortized cost1,046,668,874.97
Financial assets at fair value through current profit or lossat fair value through profit or lossHeld-for-trading financial assetsat fair value through profit or loss
Derivative financial assetsat fair value through profit or lossDerivative financial assetsat fair value through profit or loss
Bills receivableAmortized cost1,894,232.00Bills receivableAmortized cost
Receivables financingat fair value through other comprehensive income1,894,232.00
Accounts receivableAmortized cost808,772,112.91Accounts receivableAmortized cost808,772,112.91
Receivables financingat fair value through other comprehensive income
Other receivablesAmortized cost110,280,059.38Other receivablesAmortized cost110,280,059.38
(Including other current assets)Amortized cost(Including other current assets)Amortized cost
(Including other current assets)at fair value through other comprehensive income (debt instruments)(Including other current assets)Amortized cost
(Including other current assets)at fair value through other comprehensive income
at fair value through other comprehensive income (equity instruments)Held-for-trading financial assetsat fair value through profit or loss
Other non-current financial assets
Investments in other equity instrumentsat fair value through other comprehensive income
at cost (equity instruments)3,600,000.00Held-for-trading financial assetsat fair value through profit or loss
Other non-current financial assets
Investments in other equity instrumentsat fair value through other comprehensive income3,600,000.00
Other current assetsAmortized cost1,020,000,000.00Held-for-trading financial assetsat fair value through profit or loss1,027,265,300.00
Long-term receivablesAmortized costLong-term receivablesAmortized cost
Financial liabilities at fair value through current profit or lossat fair value through profit or lossHeld-for-trading financial liabilitiesat fair value through profit or loss
Derivative financial liabilitiesat fair value through profit or lossDerivative financial liabilitiesat fair value through profit or loss

Parent company

Old standards for financial instrumentsNew standards for financial instruments
Presentation itemMeasurementCarrying valuePresentationMeasurementCarrying value
categoryitemcategory
Cash and equivalentsAmortized cost552,507,774.24Cash and equivalentsAmortized cost552,507,774.24
Financial assets at fair value through current profit or lossat fair value through profit or lossHeld-for-trading financial assetsat fair value through profit or loss
Derivative financial assetsat fair value through profit or lossDerivative financial assetsat fair value through profit or loss
Bills receivableAmortized costBills receivableAmortized cost
Receivables financingat fair value through other comprehensive income
Accounts receivableAmortized cost93,324,765.86Accounts receivableAmortized cost93,324,765.86
Receivables financingat fair value through other comprehensive income
Other receivablesAmortized cost227,644,350.97Other receivablesAmortized cost227,644,350.97
(Including other current assets)Amortized cost(Including other current assets)Amortized cost
(Including other current assets)at fair value through other comprehensive income (debt instruments)(Including other current assets)Amortized cost
(Including other current assets)at fair value through other comprehensive income
at fair value through otherHeld-for-trading financial assetsat fair value through profit or
comprehensive income (equity instruments)Other non-current financial assetsloss
Investments in other equity instrumentsat fair value through other comprehensive income
at cost (equity instruments)3,600,000.00Held-for-trading financial assetsat fair value through profit or loss
Other non-current financial assets
Investments in other equity instrumentsat fair value through other comprehensive income3,600,000.00
Other current assetsAmortized cost820,000,000.00Held-for-trading financial assetsat fair value through profit or loss826,329,800.00
Long-term receivablesAmortized costLong-term receivablesAmortized cost
Financial liabilities at fair value through current profit or lossat fair value through profit or lossHeld-for-trading financial liabilitiesat fair value through profit or loss
Derivative financial liabilitiesat fair value through profit or lossDerivative financial liabilitiesat fair value through profit or loss

42. Others

"√ Applicable" "□ Not applicable"Hedge accounting

(1) Classification of hedging

① Fair value hedge is a hedge of the exposure to changes in fair value of a recognized assetor liability or an unrecognized firm commitment (except for foreign exchange risk).

② Cash flow hedge is a hedge of the exposure to changes in cash flows. Such changes in cashflows mainly come from a specific type of risk related to a recognized asset or liability or an

expected transaction that is likely to occur, or the foreign exchange risk included in anunrecognized firm commitment.

② Hedge of net investment in an overseas operation is a hedge of the foreign exchangeexposure arising from net investment in an overseas operation. Net investment in an overseasoperation refers to an enterprise's equity proportion in the net assets in an overseas operation.

(2) Designation of hedging relationship and confirmation of hedging effectivenessApplicable accounting policies from 1 January 2019At the commencement of the hedging relationship, the Company shall specify the hedgingrelationship formally and prepare a formal written document on the hedging relationship, riskmanagement objectives and the strategies of hedging. This document shall at least specify thecontents and number of the hedging instruments, the nature and number of the hedged items,the nature of the hedged risk, the type of hedge and the evaluation of the Company on theeffectiveness of the hedging instruments. Hedging effectiveness refers to the extent that thechanges in the fair value or cash flow of a hedging instrument may offset the changes resultedfrom the hedging risks in the fair value or cash flow of a hedged item.The Company shall continuously evaluate the hedging effectiveness to determine whether thehedging meets the requirements on effectiveness for using hedging accounting within theaccounting period when the hedging relationship is specified. If the hedging fails to meet therequirements, the use of hedging relationship shall be terminated.The use of hedge accounting shall meet the following requirements for the hedging effectiveness:

① There is an economic relationship between the hedged item and the hedging instrument.

② In the value change caused by the economic relationship between the hedged item and thehedging instrument, the influence of credit risk is not dominant.

③ An appropriate hedging ratio is adopted, and this ratio will not form an imbalance in therelative weight of the hedged item and the hedging instrument, thereby generating accountingresults that are inconsistent with the hedge accounting objectives. If the hedging ratio is no longerappropriate, but the hedging risk management objectives have not changed, the number ofhedged items or hedging instruments shall be adjusted so that the hedging ratio meets therequirements on effectiveness again.

Applicable accounting policies before 1 January 2019At the commencement of the hedging relationship, the Company shall specify the hedgingrelationship formally and prepare a formal written document on the hedging relationship, riskmanagement objectives and the strategies of hedging. This document shall state the nature ofthe hedging instruments, the hedged items or transactions, and the hedged risk, and the methodof the Company for the evaluation on the effectiveness of the hedging instruments.

Hedging effectiveness refers to the extent that the changes in the fair value or cash flow of ahedging instrument may offset the changes resulted from the hedging risks in the fair value orcash flow of a hedged item. The Company shall continuously evaluate the hedging effectivenessto judge whether the hedging is highly effective within the accounting period when the hedgingrelationship is specified. If a hedging satisfies the following conditions simultaneously, theCompany shall recognize it as being highly efficient:

① At the commencement and in subsequent periods of a hedging, the hedging is expected tobe highly effective in offsetting the changes in the fair value or cash flows caused by the hedgedrisk during the period in which the hedging is specified; and

② The actual offset result of the hedging is within a range of 80% to 125%.

(3) Accounting treatment method of hedge

① Fair value hedge

Changes in the fair value of hedging derivatives are included in the current profit and loss.Changes in the fair value of a hedged item due to hedging risk are included in the current profitand loss, while adjusting the book value of the hedged item.For fair value hedges related to financial instruments measured at amortized cost, adjustmentsto the carrying value of the hedged item are amortized in the remaining period between theadjustment date and the maturity date and are included in the current profit and loss.Amortization carried out in accordance with the effective interest rate method can beginimmediately after the adjustment of the carrying value, and shall not be later than the adjustmentmade due to the changes in the fair values caused by the hedging risk after the hedged item isterminated.If the hedged item is derecognized, the un-amortized fair value is recognized as current profit orloss.If the hedged item is a unrecognized firm commitment, the accumulated changes in the fair valueof the firm commitment caused due to the hedged risk is recognized as an asset or liability, andthe related gains or losses are included in the current profit and loss. Changes in the fair valueof hedging instruments are also included in the current profit and loss.

② Cash flow hedge

The portion of the gains or losses from hedging instruments, which belongs to the effective hedge,shall be directly recognized as other comprehensive income, and the portion which belongs tothe ineffective hedge shall be included in the current profit and loss.If the hedged transaction affects the current profit or loss, for example, when the hedged financialincome or financial expense is confirmed or the expected sale occurs, the amount recognized inother comprehensive income will be transferred to the current profit and loss. If the hedged itemis the cost of a non-financial asset or liability, the amount originally recognized in othercomprehensive income is transferred out and included in the initial recognition amount of the

non-financial asset or liability (or the amount originally recognized in other comprehensiveincome is transferred out in the same period in which the non-financial asset or liability affectsthe profit and loss, and included in the current profit and loss).If the expected transaction or firm commitment is not expected to occur, the cumulative gains orlosses of hedging instruments previously included in shareholders’ equity are transferred out andincluded in the current profit and loss. If the hedging instrument expires, is sold, terminated orexercised (but has not been replaced or extended), or the designation of the hedging relationshipis revoked, the amount previously included in other comprehensive income will not be transferredout until the expected transaction or firm commitment affects the current profit and loss.

③ Hedge of net investment in an overseas operation

Hedge of net investment in an overseas operation, including hedge of monetary items as part ofnet investment, is handled similarly to cash flow hedge. The portion of the gains or losses fromhedging instruments, which is recognized as effective hedge, shall be recorded in othercomprehensive income, and the portion which is recognized as ineffective hedge shall beincluded in the current profit and loss. When disposing of overseas operations, any accumulatedgains or losses included in shareholders’ equity are transferred out and included in the currentprofit and loss.VI. Taxes

1. Major tax types and tax rates

Particulars on major tax types and tax rates"√ Applicable" "□ Not applicable"

Tax typeTaxing basisTax rate
Value added tax (“VAT”)The output tax is calculated on the basis of the income from sales of products and taxable income from rendering of services calculated according to the provisions of the tax law. The difference between the output tax and the input tax which is allowed to be deductible in the current period is the payable VAT.16%, 13% (Note), 10%, 9%, 6%, 5%
Urban maintenance and construction taxCalculated and paid according to the actually-paid VAT and consumption tax7%、1%
Enterprise income taxCalculated and paid according to the taxable income15%、20%、25%

Note: According to the Notice on Adjusting the VAT Rate of the Ministry of Finance and the StateAdministration of Taxation (Cai Shui [2019] No. 39), the original 16% and 10% VAT rates arerespectively adjusted to 13% and 9% for taxable sale behaviors and imported goods of thetaxpayers from 1 April 2019. The income from sales of products of the Company and itssubsidiaries is subject to VAT at the rate of 16% from January to March 2019 and at the rate of13% from 1 April 2019.

If there are taxpayers with different enterprise income tax rates, the disclosure will be made fordescription"√ Applicable" "□ Not applicable"

Name of taxpayerIncome tax rate (%)
Shanghai M&G Zhenmei Stationery Co., Ltd.(上海晨光珍美文具有限公司)25
Shanghai M&G Colipu Office Supplies Co., Ltd.25
Lianyungang Colipu Office Supplies Co., Ltd.(连云港市科力普办公用品有限公司)20
Shenyang M&G Colipu Office Supplies Co., Ltd.(沈阳晨光科力普办公用品有限公司)25
Shanghai M&G Stationery & Gift Co., Ltd.(上海晨光文具礼品有限公司)25
Shanghai M&G Stationery Sales Co., Ltd.(上海晨光文具销售有限公司)25
Guangzhou M&G Stationery&Gifts Sales Co., Ltd.(广州晨光文具礼品销售有限公司)25
Yiwu Chenxing Stationery Co., Ltd.(义乌市晨兴文具用品有限公司)25
Harbin M&G Sanmei Stationery Co., Ltd.(哈尔滨晨光三美文具有限公司)25
Zhengzhou M&G Stationery&Gifts Co., Ltd.(郑州晨光文具礼品有限责任公司)25
M&G Life Enterprise Management Co., Ltd.(晨光生活馆企业管理有限公司)25
M&G Life Enterprise Management (Shanghai) Co., Ltd.(晨光生活馆企业管理(上海)有限公司)25
Shanghai M&G Jiamei Stationery Co., Ltd.(上海晨光佳美文具有限公司)25
Jiangsu M&G Life Enterprise Management Co., Ltd.(江苏晨光生活馆企业管理有限公司)25
Zhejiang New M&G Life Enterprise Management Co., Ltd.(浙江新晨光生活馆企业管理有限公司)25
Jiumu M&G Store Enterprise Management Co., Ltd.(九木杂物社企业管理有限公司)25
Shanghai M&G Information Technology Co., Ltd.(上海晨光信息科技有限公司)25
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)25
Shanghai M&G Office Supplies Co., Ltd.25
Office Depot Network Technology Co., Ltd.25
Luoyang M&G Stationery Sales Co., Ltd.(洛阳晨光文具销售有限公司)20
Hangzhou Sanmei M&G Stationery Co., Ltd.(杭州三美晨光文具有限公司)25
Jiangsu Marco Pen Co., Ltd.(江苏马可笔业有限公司)25
Changchun Macro Stationery Co., Ltd.(长春马可文教用品有限公司)25
Yili Senlai Wood Co., Ltd.(伊犁森徕木业有限公司)25
Axus Stationery (Hong Kong) Company Ltd.16.5
International stationery company20

2. Tax preference

"√ Applicable" "□ Not applicable"On 28 October 2019, the Company obtained High- and New-tech Enterprise Certificate(certificate number GR201931001046, valid for 3 years) issued jointly by Shanghai MunicipalScience and Technology Commission, Shanghai Finance Bureau and Shanghai Municipal TaxService, State Taxation Administration.

On 2 November 2018, the subsidiary Axus Stationery (Shanghai) Company Ltd. (“AxusStationery”) obtained High- and New-tech Enterprise Certificate (certificate numberGR201831003575, valid for 3 years) issued jointly by Shanghai Municipal Science andTechnology Commission, Shanghai Finance Bureau and Shanghai Municipal Tax Service, StateTaxation Administration.

The Company and the subsidiary Axus Stationery paid the enterprise income tax at the rate of15% this year.

The subsidiaries Luoyang M&G Stationery Sales Co., Ltd. and Lianyungang Colipu OfficeSupplies Co., Ltd. paid the enterprise income tax according to the Enterprise Income Tax Lawof the People's Republic of China and the Notice of the Ministry of Finance and the StateAdministration of Taxation on the Implementation of Inclusive Tax Relief Policy for Small andMicro Enterprises (Cai Shui [2019] No. 13), namely, starting from 1 January 2019 to 31December 2021, for SMEs with annual taxable income not exceeding RMB 1 million, theenterprise income tax at 20% shall apply based on 25% of the taxable income; for SMEs withannual taxable income between RMB 1 million and RMB 3 million, the enterprise income tax at20% shall apply based on 50% of the taxable income.

3. Others

"□ Applicable" "√ Not applicable"

VII. Notes to the Items in Consolidated Financial Statements

1. Cash and equivalents

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Cash on hand503,222.44816,463.47
Cash at bank1,922,791,232.44736,640,850.12
Other cash and equivalents12,306,239.47309,211,561.38
Total1,935,600,694.351,046,668,874.97
Including: Total cash deposited outside China3,541,107.84

Other explanationDetails of the Cash and equivalents that are restricted for use due to mortgage, pledge orfreeze and which are deposited overseas and of which the remittance is restricted were asfollows:

ItemClosing balanceBalance at the end of the year
Letter of credit (“L/C”) deposit5,079,343.944,926,946.37
Performance bond230,000.00240,482.50
Structured deposit300,000,000.00
Fund of restricted use2,844,914.52
Time deposits over three months550,000,000.00
Total558,154,258.46305,167,428.87

2. Held-for-trading financial assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Financial assets at fair value through current profit or loss661,878,587.241,027,265,300.00
Including:
Debt instrument investment
Equity instrument investment
Derivative financial assets
Others661,878,587.241,027,265,300.00
Financial asset designated as at fair value through profit or loss
Including:
Total661,878,587.241,027,265,300.00

Other descriptions:

"√ Applicable" "□ Not applicable"Other bank wealth management products purchased for the Company.

3. Derivative financial assets

"□ Applicable" "√ Not applicable"

4. Bills receivable

(1). Notes receivable presented by category

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Bank acceptance bills0
Commercial acceptance bills0
Total0

(2). Notes receivable pledged by the Company at the end of the period"□ Applicable" "√ Not applicable"

(3). Notes receivable endorsed or discounted by the Company at the end of the period but

not due yet at the balance sheet date"□ Applicable" "√ Not applicable"

(4). Notes transferred by the Company into accounts receivable at the end of the period

due to the note issuer’s failure of performance"□ Applicable" "√ Not applicable"

(5). Disclosure by accruing method for bad debt provisions

"□ Applicable" "√ Not applicable"Bad debt provisions accrued separately:

"□ Applicable" "√ Not applicable"

Bad debt provisions accrued according to the combination:

"□ Applicable" "√ Not applicable"

If bad debt provisions are accrued according to the general model of expected credit losses,please refer to the disclosure on other receivables:

"□ Applicable" "√ Not applicable"

(6). Particulars on bad debt provisions

"□ Applicable" "√ Not applicable"

(7). Particulars on notes receivable actually written-off in the current period"□ Applicable" "√ Not applicable"

Other explanation"□ Applicable" "√ Not applicable"

5. Accounts receivable

(1). Disclosure by account age

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Account ageCarrying balance at the end of the period
Within 1 year
Including: Sub-item within 1 year
Sub-total within 1 year1,022,427,308.95
1 to 2 years30,982,477.00
2 to 3 years3,510,597.38
Above 3 years2,117,572.04
3 to 4 years
4 to 5 years
Above 5 years
Less: Bad debt provisions-32,943,231.22
Total1,026,094,724.15

(2). Disclosure by accruing method for bad debt provisions

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

CategoryClosing balanceOpening balance
Carrying balanceBad debt provisionsvalueCarrying balanceBad debt provisionsvalue
AmountPercentage (%)AmountAccruing percentage (%)AmountPercentage (%)AmountAccruing percentage (%)
Bad debt provisions accrued separately23,438,444.192.2113,612,009.1258.089,826,435.072,713,628.910.332,713,628.91100.00
Including:
Bad debt provisions accrued according to the combination1,035,599,511.1897.7919,331,222.101.871,016,268,289.08821,997,824.9499.6713,225,712.031.61808,772,112.91
Including:
Combination 1: Account age1,035,599,511.1897.7919,331,222.101.871,016,268,289.08821,997,824.9499.6713,225,712.031.61808,772,112.91
Total1,059,037,955.37/32,943,231.22/1,026,094,724.15824,711,453.85/15,939,340.94/808,772,112.91

Bad debt provisions accrued separately:

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

NameClosing balance
Carrying balanceBad debt provisionsAccruing percentage (%)Accruing reason
Xiangshan Haowenke Stationery & Sports Goods Co., Ltd.68,304.7368,304.73100.00Not expected to be recovered
Changxing Shengxing Stationery Co., Ltd.264,790.33264,790.33100.00Not expected to be recovered
Hangzhou Yunman Department Store Co., Ltd.227,671.00227,671.00100.00Not expected to be recovered
Zhejiang C&U Supermarket Co., Ltd.11,756.5411,756.54100.00Not expected to be recovered
Zebra Higo (Beijing) Commercial Chain Management Co., Ltd.1,539,651.031,539,651.03100.00Not expected to be recovered
Kiddy Children’s Products (Shanghai) Co., Ltd.8,636.168,636.16100.00Not expected to be recovered
Shanghai Kingwing General Aviation Co., Ltd.183,045.93183,045.93100.00Not expected to be recovered
Shanghai Eastone Automotive Technology Co., Ltd.17,033.0817,033.08100.00Not expected to be recovered
Shanghai Zhouji Restaurant Management Co., Ltd.22,978.7122,978.71100.00Not expected to be recovered
Shenzhen TFS Investment Development Co., Ltd.11,859.6411,859.64100.00Not expected to be recovered
Danone (China) Food & Beverage Co., Ltd.79,476.8079,476.80100.00Not expected to be recovered
Shanghai Chuangzhi Computer Technology Co., Ltd.4,082.474,082.47100.00Not expected to be recovered
Shanghai Yiguo E-commerce Co., Ltd.210,937.67210,937.67100.00Not expected to be recovered
Shanghai Lantern Network Technology Co., Ltd.585,865.00585,865.00100.00Not expected to be recovered
Ping An Bank Co., Ltd. Shanghai Branch51,623.7451,623.74100.00Not expected to be recovered
Huzhou Yuanhui Real Estate Development Co., Ltd.83,636.8483,636.84100.00Not expected to be recovered
Shanghai Renjian Investment Co., Ltd.64,389.1664,389.16100.00Not expected to be recovered
HNA Import and Export Co., Ltd.19,652,870.149,826,435.0750.00As the liquidity risk of the group company is high, whether it can be recovered is uncertain
Shanghai Donghao Oil Products Co., Ltd.126,732.39126,732.39100.00Not expected to be recovered
Ningbo Jiangdong Benyuan Stationery Co., Ltd.62,788.0562,788.05100.00Not expected to be recovered
Guangdong ONE PLUS ONE Commercial Chain Stores Co., Ltd.43,451.1643,451.16100.00Not expected to be recovered
Shenyang Yong Modern Trading Company36,202.4636,202.46100.00Not expected to be recovered
Changsha Kaifu Huida Stationery Supermarket21,799.0321,799.03100.00Not expected to be recovered
Dongguan Tangxia Yikang Stationery and Sports Goods Mall16,399.0716,399.07100.00Not expected to be recovered
Wuhan Bowen Stationery Business Department11,089.4111,089.41100.00Not expected to be recovered
Shaoxing Datong Commercial Trading Co., Ltd.10,838.9910,838.99100.00Not expected to be recovered
Beijing Guoyu Rongfeng Co., Ltd.9,036.169,036.16100.00Not expected to be recovered
Huai'an Famous Brand Culture and Education Office Supplies Co., Ltd.3,261.973,261.97100.00Not expected to be recovered
Shenzhen Luohu Jinhonghui Stationery Store3,093.393,093.39100.00Not expected to be recovered
Shanghai Golden Times Commercial Trading Co., Ltd.2,038.642,038.64100.00Not expected to be recovered
Hefei Yizheng Stationery Co., Ltd.1,795.121,795.12100.00Not expected to be recovered
Yunnan Timely Rain Commercial Trading Co., Ltd.1,038.511,038.51100.00Not expected to be recovered
Nanning Feida Zhishang Stationery Company270.87270.87100.00Not expected to be recovered
Total23,438,444.1913,612,009.1258.08/

Description on bad debt provisions accrued separately:

"□ Applicable" "√ Not applicable"No

Bad debt provisions accrued according to the combination:

"□ Applicable" "√ Not applicable"

If bad debt provisions are accrued according to the general model of expected credit losses,please refer to the disclosure on other receivables:

"□ Applicable" "√ Not applicable"

(3). Particulars on bad debt provisions

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

CategoryOpeningChange of the current periodClosing balance
balanceAccruedRecovered or reversedResold or written-offOther changes
Accrued separately2,713,628.9112,701,407.841,803,027.6313,612,009.12
Combination 1: Account age13,225,712.037,138,040.231,032,530.1619,331,222.10
Total15,939,340.9419,839,448.071,803,027.631,032,530.1632,943,231.22

Other descriptions:

Combination 1: The accruing of the account age change of the current period included anincrease of RMB4,861,462.60 for business combination. The actual amounts accrued separatelyand according to the combination were: RMB14,977,985.47.Significant bad debt provision amounts recovered or reversed in the current period:

"□ Applicable" "√ Not applicable"

(4). Particulars on accounts receivable actually written-off in the current period"□ Applicable" "√ Not applicable"

(5). Particulars on top 5 accounts receivable in terms of the balance at the end of the

period based on debtors"√ Applicable" "□ Not applicable"

Company nameClosing balance
Accounts receivablePercentage (%) of the total accounts receivableBad debt provisions
State Grid Materials Co., Ltd.231,601,047.0021.871,725,419.13
China Southern Power Grid Materials Co., Ltd.77,503,551.387.32393,433.13
China Post Group Company75,578,464.827.14600,085.53
China Petroleum & Chemical Corporation Material Assembly Department43,627,058.444.12326,105.44
China National Water Resources & Electric Power Materials & Equipment (Beijing)32,672,838.563.09164,099.08
Total460,982,960.2043.543,209,142.31

(6). Accounts receivable derecognizd due to the transfer of financial assets"□ Applicable" "√ Not applicable"

(7). Assets and liabilities formed due to the transfer and continuous involvement ofaccounts receivable"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

6. Receivables financing

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Bills receivable24,262,204.081,894,232.00
Factoring of accounts receivable5,287,720.75
Total29,549,924.831,894,232.00

Changes in receivables financing during the current period and changes in fair value:

"√ Applicable" "□ Not applicable"See the table below for details

ItemBalance at the beginning of the yearIncrease of the current periodDerecognition of the current periodOther changesClosing balanceAccumulated loss provisions recognized in other comprehensive income
Bills receivable1,894,232.0052,633,199.4430,265,227.3624,262,204.08
Factoring of accounts receivable105,362,252.36106,817,205.356,742,673.745,287,720.75
Total1,894,232.00157,995,451.80137,082,432.716,742,673.7429,549,924.83

Other descriptions: Other changes were caused by the increase in business combinations thisyear.

If bad debt provisions are accrued according to the general model of expected credit losses,please refer to the disclosure on other receivables:

"□ Applicable" "√ Not applicable"

Other descriptions:

"√ Applicable" "□ Not applicable"Notes receivable endorsed or discounted by the Company at the end of the period but not dueyet at the balance sheet date

Unit: Yuan Currency: RMB

ItemAmount derecognized at the end of the periodAmount not derecognized at the end of the period
Bank acceptance bills12,030,000.00

7. Prepayment

(1) Advance payment presented by account age

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Account ageClosing balanceOpening balance
AmountPercentage (%)AmountPercentage (%)
Within 1 year84,880,944.1399.4341,922,742.3799.02
1 to 2 years490,500.600.57392,024.180.93
2 to 3 years1,876.10
Above 3 years20,331.060.05
Total85,371,444.73100.0042,336,973.71100.00

Description on the reasons for failure to settle the advance payment with an account age overone year and a significant amount:

No

(2) Particulars on top 5 advance payments in terms of the balance at the end of the periodaccording to the concentration of parties to which the advance payments are made"√ Applicable" "□ Not applicable"

Parties to which the advance payments are madeClosing balancePercentage (%) in the total balance at the end of the period of advance payment
CNBM Technology Corporation Limited33,075,300.0038.74
M&G Holdings (Group) Co., Ltd.3,419,063.444.00
Suzhou Double Elephant Optical Materials Co., Ltd.2,215,051.322.59
A. O. Smith (China) Environmental Products Co., Ltd.1,994,936.632.34
Shijiazhuang Guoda Logistics Co., Ltd. Yuanshi Branch1,766,136.442.07
Total42,470,487.8349.74

Other explanation"□ Applicable" "√ Not applicable"

8. Other receivables

Presented by item"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Interest receivable
Dividend receivable
Other receivables117,647,039.93110,280,059.38
Total117,647,039.93110,280,059.38

Other descriptions:

"□ Applicable" "√ Not applicable"

Interest receivable

(1) Classification of interest receivable

"□ Applicable" "√ Not applicable"

(2) Important overdue interest

"□ Applicable" "√ Not applicable"

(3) Particulars on accruing of bad debt provisions

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

Dividend receivable

(1) Dividend receivable

"□ Applicable" "√ Not applicable"

(2) Important dividend receivable with the account age over one year"□ Applicable" "√ Not applicable"

(3) Particulars on accruing of bad debt provisions

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

Other receivables

(1) Disclosure by account age

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Account ageCarrying balance at the end of the period
Within 1 year
Including: Sub-item within 1 year
Sub-total within 1 year99,752,417.89
1 to 2 years25,715,031.11
2 to 3 years13,588,611.30
Above 3 years4,645,114.88
3 to 4 years
4 to 5 years
Above 5 years
Less: Bad debt provisions-26,054,135.25
Total117,647,039.93

(2) Particulars on classification by amount nature

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency:

RMB

Amount natureCarrying balance at the end of the periodCarrying balance at the beginning of the period
Personal loans and petty cash8,848,583.448,467,628.64
Amount paid for materials34,532,789.6313,688,452.79
Consolidated balance of related-parties current accounts - provisional input tax17,406,678.2120,205,179.36
Margin and deposit66,283,403.6350,835,514.15
Royalties collected on behalf39,000.00
Bank wealth management products with guaranteed principal and guaranteed income20,000,000.00
E-commerce platform amount781.00
Others16,629,720.2711,404,419.62
Total143,701,175.18124,640,975.56

(3) Particulars on accruing of bad debt provisions

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Bad debt provisionsPhase 1Phase 2Phase 3Total
Expected credit losses in the next 12 monthsExpected credit loss for the entire duration (no credit impairment occurred)Expected credit loss for the entire duration (credit impairment occurred)
Balance as at 1 January 201914,360,916.1814,360,916.18
Balance as at 1 January 2019 in the current period-651,031.11651,031.11
-- Transferred into Phase 2
-- Transferred into Phase 3-651,031.11651,031.11
-- Reversed into Phase 2
-- Reversed into Phase 1
Accrued in the current period9,819,847.253,208,177.1613,028,024.41
Reserved in the current period
Resold in the current period
Written-off in the current period705,861.682,359,820.283,065,681.96
Other changes1,730,876.621,730,876.62
Balance as at 31 December 201924,554,747.261,499,387.9926,054,135.25

Other descriptions:

Other changes included the increase of RMB1,719,516.14 for the Company’s businesscombination and the translation difference of RMB11,360.48 of foreign currency statements ofoverseas subsidiaries at the end of the year.

Particulars on the significant changes in the carrying balance of other receivables in whichchanges in loss provisions occurred in the current period:

"√ Applicable" "□ Not applicable"

Bad debt provisionsPhase 1Phase 2Phase 3Total
Expected credit losses in the next 12 monthsExpected credit loss for the entire duration (no credit impairment occurred)Expected credit loss for the entire duration (credit impairment occurred)
Balance as at 1 January 2019124,640,975.55124,640,975.55
Balance as at 1 January 2019 in the current period-797,789.51797,789.51
-- Transferred into Phase 2
-- Transferred into Phase 3-797,789.51797,789.51
-- Reversed into Phase 2
-- Reversed into Phase 1
Increase of the current period1,096,121,348.251,499,387.991,097,620,736.24
Direct reduction of the current period
Derecognition of the current period1,086,784,428.54797,789.511,087,582,218.05
Other changes9,021,681.439,021,681.43
Balance as at 31 December 2019142,201,787.191,499,387.99143,701,175.18

Other descriptions:

Other changes were caused by the increase for the Company’s business combinations.

The basis for adopting the amount of bad debt provisions accrued for the current period and theassessment on whether the credit risk of financial instruments increased significantly:

"□ Applicable" "√ Not applicable"

(4) Particulars on bad debt provisions

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

CategoryOpening balanceChange of the current periodClosing balance
AccruedRecovered or reversedResold or written-offOther changes
Bad debt provisions accrued separately3,208,177.161,708,789.171,499,387.99
Combination 1: Account age14,360,916.1811,550,723.871,356,892.7924,554,747.26
Total14,360,916.1814,758,901.033,065,681.9626,054,135.25

Other descriptions:

Combination 1: The accruing of the account age change of the current period included anincrease of RMB1,719,516.14 for business combination. The actual amounts accrued separatelyand according to the combination were RMB13,028,024.41. The amount affected by foreignexchange rate changes was RMB11,360.48.

Significant bad debt provision amounts reversed or recovered in the current period:

"□ Applicable" "√ Not applicable"

(5) Particulars on other receivables actually written-off in the current period"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemWritten-off amount
Other receivables actually written-off3,065,681.96

Significant writing-off of other receivables:

"□ Applicable" "√ Not applicable"Description on writing-off of other receivables:

"□ Applicable" "√ Not applicable"

(6) Particulars on top 5 other receivables in terms of the balance at the end of the periodbased on debtors"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Company nameAmount natureClosing balanceAccount agePercentage (%) in the total balance at the end of the period of other receivablesClosing balance
Provisional input taxConsolidated balance of related-parties current accounts - provisional input tax17,406,678.21Within 1 year12.11
Shanghai Xiqia Stationery FactoryAmount paid for materials12,713,462.64Within 1 year8.85635,673.13
Shanghai Linsong Real Estate Co., Ltd.Margin and deposit3,279,861.002-3 years2.281,967,916.60
State Grid Materials Co., Ltd.Margin and deposit2,400,000.00Within 1 year1.67120,000.00
Shenzhen Shuncheng Supply Chain Service Co., Ltd.Margin and deposit1,627,000.00Within 1 year1.1381,350.00
Total/37,427,001.8526.042,804,939.73

(7) Receivables involving government subsidies

"□ Applicable" "√ Not applicable"

(8) Other receivables derecognized due to the transfer of financial assets"□ Applicable" "√ Not applicable"

(9) Assets and liabilities formed due to the transfer and continuous involvement of otherreceivables"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

9. Inventories

(1) Classification of inventories

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Carrying balanceDevaluation provisionsCarrying valueCarrying balanceDevaluation provisionsCarrying value
Raw materials230,583,859.111,418,134.61229,165,724.50179,668,368.02179,668,368.02
Work-in-process55,336,578.5891,431.4655,245,147.1225,245,351.7725,245,351.77
Finished products1,070,802,359.9035,434,374.531,035,367,985.37835,427,474.2816,909,196.39818,518,277.89
Revolving materials17,933,897.041,035,002.5716,898,894.47402,083.23402,083.23
Expendable biological assets14,937,710.3914,937,710.39
Completed unsettled assets formed by construction contracts
Materials in transit4,258,709.424,258,709.42
Consigned processing materials14,249,868.7614,249,868.7616,215,146.4716,215,146.47
Shipped goods7,984,719.827,984,719.822,652,382.622,652,382.62
Total1,416,087,703.0237,978,943.171,378,108,759.851,059,610,806.3916,909,196.391,042,701,610.00

(2) Devaluation provisions of inventories

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease amount of the current periodDecrease amount of the current periodClosing balance
AccruedOthersReversed or resoldOthers
Raw materials739,072.04670,188.37-8,874.201,418,134.61
Work-in-process-580,268.16671,699.6291,431.46
Finished products16,909,196.3916,660,777.491,862,261.83-2,138.8235,434,374.53
Revolving materials892,499.29141,489.51-1,013.771,035,002.57
Expendable biological assets
Completed unsettled assets formed by construction contracts
Materials in transit
Consigned processing materials
Shipped goods
Total16,909,196.3917,712,080.663,345,639.33-12,026.7937,978,943.17

Other descriptions:

Increase amount of the current period - others were caused by the business combination, whiledecrease amount of the current period - others were caused by the translation difference offoreign currency statements of overseas subsidiaries at the end of the year.

(3) Description on the capitalization amount of the borrowing expenses included in thebalance of inventories at the end of the period"□ Applicable" "√ Not applicable"

(4) Particulars on completed but unsettled assets formed by construction contract at theend of the period"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

10. Held for sale assets

"□ Applicable" "√ Not applicable"

11. Non-current assets due within one year

"□ Applicable" "√ Not applicable"Important debt investment and other debt investment at the end of the period:

"□ Applicable" "√ Not applicable"Other explanationNo

12. Other current assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Bank wealth management products0
VAT input tax to be certified20,104,638.9812,930,815.35
Pre-paid enterprise income tax1,104,950.25154,827.95
Carbon quota35,824.00
VAT retention amount8,035,512.0613,891,757.05
Total29,280,925.2926,977,400.35

Other explanationNo

13. Debt investment

(1) Particulars on debt investment

"□ Applicable" "√ Not applicable"

(2) Important debt investment at the end of the period

"□ Applicable" "√ Not applicable"

(3) Particulars on accruing of impairment provisions

"□ Applicable" "√ Not applicable"

The basis for adopting the amount of impairment provisions accrued for the current period andthe assessment on whether the credit risk of financial instruments increased significantly:

"□ Applicable" "√ Not applicable"

Other explanation"□ Applicable" "√ Not applicable"

14. Other debt investment

(1) Particulars on other debt investments

"□ Applicable" "√ Not applicable"

(2) Important other debt investments at the end of the period

"□ Applicable" "√ Not applicable"

(3) Particulars on accruing of impairment provisions

"□ Applicable" "√ Not applicable"

The basis for adopting the amount of impairment provisions accrued for the current period andthe assessment on whether the credit risk of financial instruments increased significantly:

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

15. Long-term receivables

(1) Long-term receivables

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balanceDiscount rate range
Carrying balanceBad debt provisionsCarrying valueCarrying balanceBad debt provisionsCarrying value
Financing lease receivables
Including: Unrealized financing income
Installment sales of goods
Installment rendering of services
Others6,624,590.006,624,590.00
Total6,624,590.006,624,590.00/

Other descriptions:

On 29 July 2019, the Company and Axus Stationery’s original actual controllers (Mr. Xu Peifengand Mr. Andre Francis Viegas) and original shareholders (Yilin Investment (Shanghai) Co., Ltd.(“Yilin Investment”), Higton Limited and Beilin Investment (Shanghai) Co., Ltd. (“BeilinInvestment”) signed the Supplementary Agreement to the Equity Transfer Agreement (2).According to the Agreement, Yilin Investment, Higton Limited and Beilin Investment agreed toprovide company compensation for audit adjustments and losses during the period, and thecompensation would be implemented in two years from 1 July 2019, namely RMB3,312,295would be returned before 30 June 2020 and RMB3,312,295 before 30 June 2021; Mr. Xu Peifengagreed to assume personal guarantee of joint and several liability for the company for all theabove compensation obligations, and the guarantee period started from the effective date of theAgreement to the date when the creditor's right was fully performed; the scope of guaranteeincluded but was not limited to the creditor's right, damage compensation (if any), and thecompany's cost for realizing the creditor's right; Mr. Xu Peifeng's assets involved in theassumption of guarantee responsibility were including but not limited to his indirectly-held sharesof Axus Stationery.

(2) Particulars on accruing of bad debt provisions

"□ Applicable" "√ Not applicable"

The basis for adopting the amount of bad debt provisions accrued for the current period and theassessment on whether the credit risk of financial instruments increased significantly:

"□ Applicable" "√ Not applicable"

(3) Long receivables derecognizd due to the transfer of financial assets"□ Applicable" "√ Not applicable"

(4) Assets and liabilities formed due to the transfer and continuous involvement of long

receivables"□ Applicable" "√ Not applicable"

Other explanation"□ Applicable" "√ Not applicable"

16. Long-term equity investments

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Invested companyBalanceAdditional investmentWithdrawn investmentInvestment gains and losses recognized under the equity methodAdjustment to other comprehensive incomeOther equity changesDeclaration on distribution of cash dividends or profitsAccruing of impairment provisionsOthersBalanceBalance of impairment provisions at the end of the period
I. Joint venture
Sub-total
II. Associate
Ningbo Zhongchen Equity Investment Partnership (Limited Partnership)30,175,665.26-313,145.25-16,285.8229,846,234.19
Shanghai Pen-making Technology Services Co., Ltd.6,000,000.00-263,450.725,736,549.28
Sub-total30,175,665.266,000,000.00-576,595.97-16,285.8235,582,783.47
Total30,175,665.266,000,000.00-576,595.97-16,285.8235,582,783.47

Other explanationNo

17. Investments in other equity instruments

(1) Particulars on other equity instrument investments

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Shanghai M&G Culture and Creativity Co., Ltd.3,909,179.933,600,000.00
Total3,909,179.933,600,000.00

(2) Particulars on non-trading equity instrument investment

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemDividend income recognized in the current periodAccumulated gainsAccumulated lossesAmount transferred from other comprehensive income into retained earningsReason for designation as at fair value through other comprehensive incomeReason for transfer from other comprehensive income into retained earnings
Shanghai M&G Culture and Creativity Co., Ltd.309,179.93The Company held the investment for non-trading purposes

Other descriptions:

"□ Applicable" "√ Not applicable"

18. Other non-current financial assets

"□ Applicable" "√ Not applicable"Other descriptions:

"□ Applicable" "√ Not applicable"

19. Investment real estate

Measurement model of investment real estateNot applicable

20. Fixed assets

Presented by item"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Fixed assets1,163,702,352.12876,617,888.99
Disposal of fixed assets
Total1,163,702,352.12876,617,888.99

Other descriptions:

"□ Applicable" "√ Not applicable"

Fixed assets

(1) Particulars on fixed assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemProperty and buildingsMachinery and equipmentMeans of transportationOther equipmentTotal
I. Original carrying value:
1. Balance at the beginning of the period634,058,338.98508,257,905.7451,896,534.68247,138,600.171,441,351,379.57
2. Increase amount of the current period307,887,708.81228,594,626.617,103,818.0165,925,711.32609,511,864.75
(1) Acquisition1,124,312.142,243,162.752,718,213.628,683,132.1314,768,820.64
(2) Transfer-in from construction in progress344,573.6744,870,318.2043,644,778.6388,859,670.50
(3) Increase for business combination306,418,823.00181,481,145.664,385,604.3913,597,800.56505,883,373.61
3. Decrease amount of the current period-34,853.1410,671,810.891,609,309.018,464,792.3520,711,059.11
(1) Disposal or scraping344,908.4411,288,741.191,619,341.638,648,782.8821,901,774.14
(2) Translation difference of foreign-currency statements-379,761.58-616,930.30-10,032.62-183,990.53-1,190,715.03
4. Balance at the end of the period941,980,900.93726,180,721.4657,391,043.68304,599,519.142,030,152,185.21
II. Accumulative depreciation
1. Balance at the beginning of the period154,272,296.01195,023,643.7839,846,494.48175,591,056.31564,733,490.58
2. Increase amount of the current period100,482,179.17150,350,773.866,746,608.7159,581,720.59317,161,282.33
(1) Accruing44,858,253.6760,679,850.293,421,246.7151,540,231.67160,499,582.34
(2) Increase for business combination55,623,925.5089,670,923.573,325,362.008,041,488.92156,661,699.99
3. Decrease amount of the current period647,425.555,883,989.75877,379.098,270,294.1315,679,088.52
(1) Disposal or scraping660,455.036,242,258.00889,987.338,342,204.0616,134,904.42
(2) Translation difference of foreign-currency statements-13,029.48-358,268.25-12,608.24-71,909.93-455,815.90
4. Balance at the end of the period254,107,049.63339,490,427.8945,715,724.10226,902,482.77866,215,684.39
III. Impairment provisions(0.00)
1. Balance at the
beginning of the period
2. Increase amount of the current period234,148.70234,148.70
(1) Accruing
(2) Increase for business combination234,148.70234,148.70
3. Decrease amount of the current period
(1) Disposal or scraping
4. Balance at the end of the period234,148.70234,148.70
IV. Carrying value
1. Carrying value at the end of the period687,873,851.30386,456,144.8711,675,319.5877,697,036.371,163,702,352.12
2. Carrying value at the beginning of the period479,786,042.97313,234,261.9612,050,040.2071,547,543.86876,617,888.99

Other descriptions:

For the restricted situation of fixed assets, please refer to Note XIV. Commitments andContingencies.

(2) Particulars on temporary idle fixed assets

"□ Applicable" "√ Not applicable"

(3) Particulars on fixed assets leased in under financing leases

"□ Applicable" "√ Not applicable"

(4) Fixed assets leased out under operating leases

"□ Applicable" "√ Not applicable"

(5) Particulars on fixed assets of which the property ownership certificates have notbeen obtained"□ Applicable" "√ Not applicable"Other descriptions:

"□ Applicable" "√ Not applicable"

Disposal of fixed assets"□ Applicable" "√ Not applicable"

21. Construction in progress

Presented by item"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Construction in progress260,469,728.7624,506,469.59
Engineering materials
Total260,469,728.7624,506,469.59

Other descriptions:

"□ Applicable" "√ Not applicable"

Construction in progress

(1) Particulars on construction in progress

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Carrying balanceImpairment provisionsCarrying valueCarrying balanceImpairment provisionsCarrying value
Qingcun Production Base Construction Project158,942,138.30158,942,138.302,300,484.222,300,484.22
Internet E-Commerce Industrial Park Project82,259,438.9882,259,438.98
Fixed assets not yet installed and put into use8,824,754.048,824,754.0420,922,274.6320,922,274.63
Others10,443,397.4410,443,397.441,283,710.741,283,710.74
Total260,469,728.76260,469,728.7624,506,469.5924,506,469.59

Changes in important construction in progress projects in the current period"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemsBudgetBalanceIncrease amount of the current periodAmount of fixed assets transferred in the current periodOther decrease amounts in the current periodBalanceProportion of cumulative investment in the project to the budget (%)Progress of worksAccumulated amount of interest capitalizationIncluding: Amount of interest capitalization in the current periodInterest capitalization rate (%) in the current periodSource of fund
Qingcun Production Base Construction Project733,910,100.002,300,484.22156,792,972.06151,317.98158,942,138.3091.2291.22Self-raised funds, borrowings from financial institutions
Internet E-Commerce Industrial Park Project82,259,438.9882,259,438.98
Fixed assets not yet installed and put into use20,922,274.6373,095,059.9085,192,580.498,824,754.04
Others1,283,710.7415,396,762.863,515,772.032,721,304.1310,443,397.44
Total733,910,100.0024,506,469.59327,544,233.8088,859,670.502,721,304.13260,469,728.76////

The amount of other increases transferred into intangible assets was RMB2,461,673.93, and theamount transferred into long-term deferred expenses was RMB259,630.20.

(2) Particulars on impairment provisions accrued for construction in progress in thecurrent period"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

Engineering materials

(1) Particulars on engineering materials

"□ Applicable" "√ Not applicable"

22. Productive biological assets

(1) Productive biological assets using cost measurement model"□ Applicable" "√ Not applicable"

(2) Productive biological assets using fair value measurement model"□ Applicable" "√ Not applicable"

Other explanation"□ Applicable" "√ Not applicable"

23. Oil and gas assets

"□ Applicable" "√ Not applicable"

24. Right-of-use assets

"□ Applicable" "√ Not applicable"

25. Intangible assets

(1) Particulars on intangible assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemLand use rightsPatent rightUnpatented technologyImage identification rightsSoftwareOthersTotal
I. Original carrying value
1. Balance at the beginning of the period187,858,988.006,175,637.8514,754,928.9124,618,010.881,650,000.00235,057,565.64
2. Increase amount of the current period151,557,936.876,470,027.9493,989.008,633,605.8932,622.64166,788,182.34
(1) Acquisition741,339.433,590,815.984,332,155.41
(2) R&D
(3) Increase for business combination151,557,936.875,728,688.5193,989.002,581,115.9832,622.64159,994,353.00
(4) Transfer-in from construction in progress2,461,673.932,461,673.93
3. Decrease amount of the current period-600,414.2314,754,928.9114,154,514.68
(1) Disposal
(2) Translation difference of foreign--600,414.23-600,414.23
currency statements
(3) Invalid and derecognized use rights14,754,928.9114,754,928.91
4. Balance at the end of the period340,017,339.1012,645,665.7993,989.0033,251,616.771,682,622.64387,691,233.30
2. Cumulative amortization
1. Balance at the beginning of the period19,524,715.502,023,538.2014,335,071.5810,286,364.69900,000.0047,069,689.97
2. Increase amount of the current period15,562,298.971,278,556.24513,846.336,806,933.57182,622.4824,344,257.59
(1) Accruing6,253,494.221,047,818.95419,857.334,373,675.91150,000.0012,244,846.41
(2) Increase for business combination9,308,804.75230,737.2993,989.002,433,257.6632,622.4812,099,411.18
3. Decrease amount of the current period-26,452.5614,754,928.9114,728,476.35
(1) Disposal
(2) Invalid and derecognized use rights14,754,928.9114,754,928.91
(3) Translation difference of foreign-currency statements-26,452.56-26,452.56
4. Balance at the end of the period35,113,467.033,302,094.4493,989.0017,093,298.261,082,622.4856,685,471.21
III. Impairment provisions
1. Balance at the beginning of the period
2. Increase amount of the current period
(1) Accruing
(2) Increase for business combination
3. Decrease amount of the current period
(1) Disposal
4. Balance at the end of the period
IV. Carrying value
1. Carrying value at the end of the period304,903,872.079,343,571.3516,158,318.51600,000.16331,005,762.09
2. Carrying value at the beginning of the period168,334,272.504,152,099.65419,857.3314,331,646.19750,000.00187,987,875.67

The proportion of intangible assets formed by the Company's internal R&D at the end of thecurrent period in the balance of intangible assets was 0

(2) Particulars on use rights of land of which the property ownership certificates havenot been obtained"□ Applicable" "√ Not applicable"Other descriptions:

"□ Applicable" "√ Not applicable"

26. Development expenses

"□ Applicable" "√ Not applicable"

27. Goodwill

(1) Original carrying value of goodwill

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of invested company or event forming goodwillOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
Formed due to business combinationOthersDisposalOthers
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)131,001.23131,001.23
Axus Stationery (Shanghai) Company Ltd.30,175,537.1930,175,537.19
Total131,001.2330,175,537.1930,306,538.42

(2) Impairment provisions of goodwill

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of invested company or event forming goodwillOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
AccruedOthersDisposalOthers
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)131,001.23131,001.23
Total131,001.23131,001.23

(3) Information regarding the asset group or the combination of asset groups to which

goodwill belongs"√ Applicable" "□ Not applicable"

Name of asset groupCarrying value of goodwill attributable to shareholders of the parentCarrying value of goodwill attributable to minority shareholdersTotal carrying value of goodwillCarrying value of other assets in the asset group or the combination ofCarrying value of the asset group or the combination of asset groupsWhether the asset group has
companyasset groupsincluding goodwillchanged
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)131,001.23125,863.93256,865.161,347,489.931,604,355.09No
Axus Stationery (Shanghai) Company Ltd.30,175,537.1923,709,350.6553,884,887.84438,838,223.62492,723,111.46No

(4) Describe the goodwill impairment test process, key parameters (such as growth ratein the forecast period, growth rate in the stable period, profit margin, discount rate,forecast period, etc. when estimating the present value of the estimated future cashflow, if applicable) and the recognition method for impairment losses of goodwill"√ Applicable" "□ Not applicable"

Name of asset groupKey parameterPresent value of estimated future cash flowAmount of goodwill impairment provisions
Forecast periodExpected growth rateGrowth rate in the steady periodProfit marginDiscount rate (weighted average cost of capital WACC)
Axus Stationery (Shanghai) Company Ltd.2020-2024[Note]FlatCalculated according to predicted income, costs, expenses, etc.15.43%519,000,000.00

Note: According to the comprehensive analysis of the contracts and agreements signed byAxus Stationery, and development plans, operating trends over the years, market competitionand other factors, the main business income and related costs, expenses and profits in thenext five years starting from the evaluation base date were estimated.

(5) Effect of goodwill impairment test

"√ Applicable" "□ Not applicable"

The Company's acquisition of Axus Stationery was based on the performance promise that theagreed gross profit margin needs to be achieved in 2019 and the income from sales outsideChina needs to reach the corresponding amount, but because the Company failed to achievesuch goals, according to the relevant provisions of the Accounting Standards for BusinessEnterprises, should any new or further evidence arises within 12 months after the acquisitiondate and makes it necessary to adjust the contingent consideration on the acquisition date, itshall be recognized and the amount originally included into consolidated goodwill shall beadjusted; the Company determined the carrying value of goodwill according to the adjustedcorresponding consideration.For the current year, the Company hired Shanghai Lixin Appraisal Co., Ltd. to issue the AssetAppraisal Report on the Recoverable Amount of Relevant Asset Groups of Axus Stationery(Shanghai) Company Ltd. involved in the Goodwill Impairment Test Carried out by ShanghaiM&G Stationery Inc. for the Purpose of Financial Reporting with the report number of Xin Zi PingBao Zi [2020] No.40043 on 10 April 2020. According to the appraisal results, as of 31 December2019, the carrying value of the asst group or the combination of asset groups including goodwillof Axus Stationery acquired by the Company was RMB492,723,100, and the recoverableamount was RMB519,000,000; after the test, there was no impairment of the goodwill formed bythe Company's acquisition of Axus Stationery.

Other explanation"□ Applicable" "√ Not applicable"

28. Long-term prepaid expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease amount of the current periodAmortization amount of the current periodOther decrease amountsClosing balance
Decoration fee117,412,655.8158,969,490.9556,178,649.633,936,583.49116,266,913.64
Others611,708.8612,770,468.842,144,251.349,168,506.052,069,420.31
Total118,024,364.6771,739,959.7958,322,900.9713,105,089.54118,336,333.95

Other descriptions:

The increase amount of the current period included the original value of RMB12,538,099.65 oflong-term deferred expenses increased for business combinations.Other decrease amounts included the accumulated amortization amount of RMB12,279,319.47of long-term deferred expenses increased for business combinations.

29. Deferred income tax assets/Deferred income tax liabilities

(1) Unoffset deferred income tax assets

"√ Applicable" "□ Not applicable"

Unit: RMB Currency: RMB

ItemClosing balanceOpening balance
Deductible temporary differencesAssetsDeductible temporary differencesAssets
Impairment provisions of assets59,901,405.2914,183,474.2828,661,424.716,791,290.35
Unrealized profits from internal transactions105,422,678.5917,734,494.3582,691,090.0014,122,763.53
Deductible losses1,394,984.07348,746.02
Deferred income28,808,795.454,356,820.9430,437,478.084,611,467.10
Total195,527,863.4036,623,535.59141,789,992.7925,525,520.98

(2) Unoffset deferred income tax liabilities

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Taxable temporary differencesLiabilitiesTaxable temporary differencesLiabilities
Assets appreciation for business combination not under the common control190,554,505.0234,553,803.872,259,638.02564,909.50
Changes in fair value of other debt investments
Changes in fair value of other equity instrument investments
Changes in fair value of trading financial assets11,878,587.242,022,940.68
Total202,433,092.2636,576,744.552,259,638.02564,909.50

(3) Deferred income tax assets or liabilities presented on a net basis after offsetting"□ Applicable" "√ Not applicable"

(4) Details of unrecognized deferred income tax assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Deductible temporary differences80,145,537.4655,387,660.23
Deductible losses319,004,132.22222,133,153.97
Total399,149,669.68277,520,814.20

(5) The deductible losses of unrecognized deferred income tax assets will expire in thefollowing years"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

YearAmount at the end of the periodAmount at the beginning of the periodNote
202451,157,003.13
2023128,291,769.6658,495,645.77
202235,217,084.4552,048,124.68
202181,175,636.3686,639,439.53
202020,866,933.9215,739,983.66
20192,295,704.709,209,960.33
Total319,004,132.22222,133,153.97/

Other descriptions:

"□ Applicable" "√ Not applicable"

30. Other non-current assets

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Prepayments for real estate, engineering, equipment, etc.311,300,000.00
Total315,153,408.27311,300,000.00

Other descriptions:

No

31. Short-term borrowings

(1) Classification of short-term borrowings

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Pledged borrowings
Mortgaged borrowings182,979,528.81
Guaranteed borrowings
Credit borrowings
Interest payable214,235.05
Total183,193,763.86

Other descriptions:

For the relevant mortgage information, please refer to Note XIV. Commitments andContingencies.

(2) Particulars on overdue but yet unrepaid short-term borrowings"□ Applicable" "√ Not applicable"

Particulars of important overdue but yet unrepaid short-term borrowings:

"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

32. Held-for-trading financial liabilities

"□ Applicable" "√ Not applicable"

33. Derivative financial liabilities

"□ Applicable" "√ Not applicable"

34. Bills payable

(1) Presentation of notes payable

"□ Applicable" "√ Not applicable"

35. Accounts payable

(1) Presentation of accounts payable

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Within 1 year1,857,292,820.261,316,235,807.23
1 to 2 years2,179,464.371,992,272.43
2 to 3 years1,103,433.79731,795.95
Above 3 years496,749.45447,172.60
Total1,861,072,467.871,319,407,048.21

(2) Accounts payable with the account age over one year

"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

36. Accounts received in advance

(1) Presentation of advance received from customers

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Within 1 year205,407,801.97144,643,662.55
1 to 2 years824,974.392,713,712.64
2 to 3 years316,841.78179,943.98
Above 3 years212,675.80109,734.70
Total206,762,293.94147,647,053.87

(2) Significant advance received from customers with the account age over one year"□ Applicable" "√ Not applicable"

(3) Particulars of settled but uncompleted projects formed by construction contract at

the end of the period"□ Applicable" "√ Not applicable"Other explanation"□ Applicable" "√ Not applicable"

37. Employee benefits payable

(1) Presentation of employee benefits payable

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
I. Short-term benefits114,073,241.17684,508,436.90651,801,356.38146,780,321.69
II. Post-employment benefits - Defined contribution plans6,712,835.3577,590,743.5176,964,408.237,339,170.63
III. Dismissal benefits417,251.98417,251.98
IV. Other benefits due within one year
Total120,786,076.52762,516,432.39729,183,016.59154,119,492.32

(2) Presentation of short-term benefits

"√ Applicable" "□ Not applicable"

Unit: RMB Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
I. Salary, bonus, allowance and subsidy109,048,913.79599,982,363.54572,282,508.82136,748,768.51
II. Employee benefits1,248,410.481,248,017.15393.33
III. Social insurance2,599,960.2748,360,502.9747,133,344.023,827,119.22
Including: Medical insurance2,298,876.3140,569,713.8639,530,719.413,337,870.76
Work-related injury insurance66,036.093,242,652.283,163,283.70145,404.67
Maternity insurance235,047.874,548,136.834,439,340.91343,843.79
IV. Housing provident fund2,196,410.8919,535,462.4419,132,641.662,599,231.67
V. Labor union and employee education funds38,055.306,169,123.072,884,748.423,322,429.95
VI. Short-term compensated absences189,900.928,439,402.268,349,327.80279,975.38
VII. Short-term profit sharing plan
VIII. Other short-term benefits773,172.14770,768.512,403.63
Total114,073,241.17684,508,436.90651,801,356.38146,780,321.69

(3) Presentation of defined contribution plans

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
1. Basic pension6,589,734.6975,307,562.2874,741,520.097,155,776.88
2. Unemployment insurance123,100.662,283,181.232,222,888.14183,393.75
3. Enterprise annuity payment
Total6,712,835.3577,590,743.5176,964,408.237,339,170.63

Other descriptions:

"□ Applicable" "√ Not applicable"

38. Taxes payable

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Value added tax (“VAT”)104,412,244.02141,466,661.91
Consumption tax
Business tax
Enterprise income tax130,486,171.57120,221,282.24
Personnel income tax8,228,966.186,628,590.90
Urban maintenance and construction tax3,975,132.045,216,961.88
Property tax476,707.70
Education surcharge5,857,154.525,740,453.51
Land use tax1,492,046.98
Stamp duty3,439,030.61103,401.74
Others215,664.52194.00
Total258,583,118.14279,377,546.18

Other descriptions:

No

39. Other payables

Presented by item"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Interest payable
Dividend payable
Other payables331,438,976.35240,665,881.17
Total331,438,976.35240,665,881.17

Other descriptions:

"□ Applicable" "√ Not applicable"

Interest payable

(1) Presentation by category

"□ Applicable" "√ Not applicable"

Dividend payable

(1) Presentation by category

"□ Applicable" "√ Not applicable"

Other payables

(1) Other payables presented by amount nature

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Margin and deposit153,783,801.10120,859,921.25
Product license fee1,051,890.001,539,546.31
Estimated fees126,261,415.6578,855,783.50
Engineering and decoration fund28,482,632.6526,019,961.51
Others21,859,236.9513,390,668.60
Total331,438,976.35240,665,881.17

(2) Other payables with the account age over one year

"□ Applicable" "√ Not applicable"Other particulars:

"□ Applicable" "√ Not applicable"

40. Held-for-sale liabilities

"□ Applicable" "√ Not applicable"

41. Non-current liabilities due within one year

"□ Applicable" "√ Not applicable"

42. Other current liabilities

Particulars on other current liabilities"□ Applicable" "√ Not applicable"Changes in short-term bonds payable:

"□ Applicable" "√ Not applicable"Other descriptions:

"□ Applicable" "√ Not applicable"

43. Long-term borrowings

(1) Classification of long-term borrowings

"□ Applicable" "√ Not applicable"

Other particulars, including interest rate ranges:

"□ Applicable" "√ Not applicable"

44. Bonds payable

(1) Bonds payable

"□ Applicable" "√ Not applicable"

(2) Changes in bonds payable: (excluding other financial instruments such as preferredshares classified as financial liabilities and perpetual bonds)"□ Applicable" "√ Not applicable"

(3) Description on the conversion conditions and conversion time of convertiblecorporate bonds"□ Applicable" "√ Not applicable"

(4) Description on other financial instruments classified as financial liabilitiesBasic information on other financial instruments such as outstanding preferred shares andperpetual bonds at the end of the period"□ Applicable" "√ Not applicable"

Form of changes in financial instruments such as outstanding preferred shares and perpetualbonds at the end of the period"□ Applicable" "√ Not applicable"Description of the basis for other financial instruments classified as financial liabilities:

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

45. Lease liabilities

"□ Applicable" "√ Not applicable"

46. Long-term payables

Presented by item"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
Long-term payable
Special payables6,620,000.005,109,800.00
Total6,620,000.005,109,800.00

Other descriptions:

"□ Applicable" "√ Not applicable"

Long-term payable

(1) Long-term payables presented by amount nature

"□ Applicable" "√ Not applicable"

Special payables

(1) Special payables presented by amount nature

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balanceCause of formation
New environment-friendly pen-making material project belonging to key special projects for improvement and industrialization of key basic materials under the national key R&D plan5,109,800.008,710,200.007,200,000.006,620,000.00
Total5,109,800.008,710,200.007,200,000.006,620,000.00/

Other descriptions:

No

47. Long-term employee benefits payable

"□ Applicable" "√ Not applicable"

48. Estimated liabilities

"□ Applicable" "√ Not applicable"

49. Deferred income

Particulars on deferred income"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balanceCause of formation
Government grant30,215,315.265,543,095.624,291,731.8031,466,679.08
Reward on customer points2,904,973.75148,497.622,853,757.84199,713.53
Brand maintenance34,156,820.5034,156,820.50
Total67,277,109.515,691,593.247,145,489.6465,823,213.11/

Items involving government subsidies:

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Liability itemsOpening balanceSubsidy amount increased in the current periodAmount included in non-operating income of the current periodAmount included in other income of the current periodOther changesClosing balancePertinent to assets/income
Special Fund for Shanghai Modern Service Industry - Three-dimensional Warehouse10,080,267.27672,017.889,408,249.39Pertinent to assets
Shanghai's second batch special fund for encouraging enterprises to purchase international R&D equipment in 2014783,000.00174,000.00609,000.00Pertinent to assets
R&D and industrialization of key materials and preparation technologies in the pen-making industry966,610.33244,646.88721,963.45Pertinent to assets
Subsidies for the second batch of key technological2,783,993.79586,104.122,197,889.67Pertinent to assets
transformation projects in 2013
Subsidies for absorption and innovation projects in 2014620,217.5190,443.52529,773.99Pertinent to assets
Service industry guidance funds in 20142,123,531.21328,891.681,794,639.53Pertinent to assets
Key technological transformation projects of Shanghai in 20154,260,910.89561,878.283,699,032.61Pertinent to assets
Inbound Marketing - Internet + product development project687,029.12107,310.24579,718.88Pertinent to assets
Special fund for Shanghai informatization development1,340,000.00580,000.00325,087.601,594,912.40Pertinent to assets
Special funds for technology R&D projects266,167.65134,548.27131,619.38Pertinent to assets
Special funds for industrial transformation and upgrade development of Shanghai in 20161,100,000.00120,879.10979,120.90Pertinent to assets
High-value-added product creative development project197,296.6129,437.44167,859.17Pertinent to assets
Industrial foundation consolidation project in 20163,770,000.003,770,000.00Pertinent to assets
Special funds for development of SMEs in Shanghai in 2016236,290.8880,988.33155,302.55Pertinent to assets
Funds for improvement of capacities of Shanghai Engineering Research Center in 20171,000,000.001,000,000.00Pertinent to assets
Cultural and creative project in 2019700,000.00700,000.00Pertinent to assets
Subsidies for injection molding machine intelligent equipment570,000.00570,000.00Pertinent to assets
Zhangjiang Special Development Fund in 2017 - Achievement Transformation of “Green Design - Innovative R&D” by Marco Colorful Painting Pen C10851,542,320.00709,085.34529,461.951,362,696.61Pertinent to assets
Special fund plan for key technological renovation projects in Qingpu District in 201277,333.36473,666.66396,333.30Pertinent to assets
Construction Project of "Marco-Color- Source" Creative Experience Center362,370.95362,370.95Pertinent to assets
Special funds for central foreign economic and trade development49,079.76785,276.06736,196.30Pertinent to assets
Total30,215,315.263,754,690.954,291,731.801,788,404.6731,466,679.08

Other descriptions:

"√ Applicable" "□ Not applicable"Other changes were caused by the increase for business combinations.

50. Other non-current liabilities

"□ Applicable" "√ Not applicable"

51. Share capital

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Opening balanceIncrease or decrease (+ or -) due to this changeClosing balance
New sharesBonus sharesTransferred sharesOthersSub-total
Total shares920,000,000.00920,000,000.00

Other descriptions:

No

52. Other equity instruments

(1) Basic information on other financial instruments such as outstanding preferred

shares and perpetual bonds at the end of the period"□ Applicable" "√ Not applicable"

(2) Form of changes in financial instruments such as outstanding preferred shares and

perpetual bonds at the end of the period"□ Applicable" "√ Not applicable"Changes in other equity instruments of the current period, reasons for changes, and basis forrelevant accounting treatment:

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

53. Capital reserve

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
Capital premium (Share premium)272,347,764.53272,347,764.53
Other capital reserve
Total272,347,764.53272,347,764.53

Other descriptions, including descriptions on changes of the current period and reasons forchanges:

No

54. Treasury shares

"□ Applicable" "√ Not applicable"

55. Other comprehensive income

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemBalanceAmount accounted for in the current periodBalance
Amount incurred before income tax for the current periodLess: Included in other comprehensive income in the previous period and transferred to profit or loss in the current periodLess: Included in other comprehensive income in the previous period and transferred to retained earnings in the current periodLess: Income tax expensesAttributable to the parent company after the taxAttributable to minority shareholders after the tax
I. Other comprehensive income not to be reclassified into profit or loss309,179.93309,179.93309,179.93
Including: Change in re-measurement of defined benefit plans
Other comprehensive income that may not be reclassified to profit or loss under equity method
Changes in fair value of other equity instrument investments309,179.93309,179.93309,179.93
Change in fair value of enterprise's own credit risk
II. Other comprehensive income to be reclassified into profit or loss400,616.76217,179.62183,437.14217,179.62
Including: Other comprehensive income that may be reclassified to profit or loss under equity method-16,285.82-16,285.82-16,285.82
Changes in fair value of other debt investments
Amount included in other comprehensive income on reclassification of financial assets
Credit impairment provisions of other debt investments
Effective portion of cash flow hedging profit or loss
Exchange differences from translation of financial statements416,902.58233,465.44183,437.14233,465.44
Total other comprehensive income709,796.69526,359.55183,437.14526,359.55

Other descriptions, including the adjustment of the effective portion of cash flow hedging profitor loss transferred to the initial recognition amount of the hedged item:

No

56. Special reserve

"□ Applicable" "√ Not applicable"

57. Surplus reserve

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOpening balanceIncrease of the current periodDecrease of the current periodClosing balance
Statutory surplus reserve344,271,419.3595,988,980.24440,260,399.59
Arbitrary surplus reserve
Reserve fund
Enterprise development fund
Others
Total344,271,419.3595,988,980.24440,260,399.59

Descriptions on surplus reserve, including descriptions on changes of the current period andreasons for changes:

The statutory surplus reserve is accrued at 10% of the parent company’s net profits.

58. Undistributed profit

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemCurrent periodPrevious period
Pre-adjustment undistributed profits at the end of the previous period1,874,727,294.531,372,359,133.67
Total adjustment amount of undistributed profits at the beginning of the period (“+” refers to increase by adjustment and “-” refers to decrease by adjustment)5,543,922.00
Post-adjustment amount of undistributed profits at the beginning of the period1,880,271,216.531,372,359,133.67
Add: Net profit attributable to shareholders of the parent company in the current period1,060,083,625.03806,847,308.41
Less: Statutory surplus reserve accrued95,988,980.2474,479,147.55
Arbitrary surplus reserve accrued
Withdrawal of general risk provision
Dividends on common shares payable276,000,000.00230,000,000.00
Dividends on common shares converted to stock capital
Undistributed profit at the end of the period2,568,365,861.321,874,727,294.53

Details on adjustment of undistributed profits at the beginning of the period:

1. Due to the retrospective adjustment based on the Accounting Standards for BusinessEnterprises and their related new regulations, the affected undistributed profit at the beginningof the period was RMB5,543,922.00.

2. Due to changes in accounting policies, the affected undistributed profit at the beginning of theperiod was RMB0.

3. Due to correction of major accounting errors, the affected undistributed profit at the beginningof the period was RMB0.

4. Due to changes in the scope of the consolidated financial statements caused by the businesscombination under common control, the affected undistributed profit at the beginning of theperiod was RMB0.

5. Due to other adjustments, the affected undistributed profit at the beginning of the period wasRMB0.

59. Operating income and operating costs

(1) Operating income and operating costs

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
RevenueCostsRevenueCosts
Main operations11,139,921,640.938,229,332,367.028,533,924,778.696,330,424,573.53
Other operations1,179,723.51504,901.841,063,818.8622,166.63
Total11,141,101,364.448,229,837,268.868,534,988,597.556,330,446,740.16

Other descriptions:

Details on operating income:

ItemAmount in the current periodAmount in the last period
Income from main operations11,139,921,640.938,533,924,778.69
Including: Sales of goods11,128,504,198.108,530,618,597.18
Management fee for franchising4,562,765.092,709,394.05
Hardware and software6,854,677.74596,787.47
Income from other operations1,179,723.511,063,818.86
Including: Material income996,698.40
Rental income63,875.37955,179.69
Others119,149.74108,639.17
Total11,141,101,364.448,534,988,597.55

60. Taxes and surcharges

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Consumption tax
Business tax
Urban maintenance and construction tax11,196,254.0112,512,019.05
Education surcharge17,562,369.4918,171,704.35
Resource tax
Property tax1,348,318.75
Land use tax683,113.09754,343.70
Vehicle usage tax
Stamp duty11,052,982.623,211,910.43
Others152,020.1070,701.73
Total41,995,058.0634,720,679.26

Other descriptions:

No

61. Selling expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Total980,166,101.18789,386,543.37
Items with relatively large amount:
Salaries and benefits282,098,540.51264,361,912.83
Channel construction fee52,031,005.9546,590,825.26
Brand promotion fee49,109,586.7226,183,591.17
Transportation and handling charge86,718,004.3381,667,789.42
Business promotion fee77,878,656.7767,602,773.25
Rental fee149,176,463.15108,921,114.59
Others283,153,843.75194,058,536.85

Other descriptions:

No

62. Administrative expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Total469,262,188.13379,618,754.18
Items with relatively large amount:
Salaries and benefits226,532,654.57187,276,647.20
Depreciation and amortization57,040,455.3546,069,652.50
Rental fee34,022,959.8130,456,723.78
Office expense23,030,837.1411,263,997.46
Others128,635,281.26104,551,733.24

Other descriptions:

No

63. R&D expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Total160,403,362.97114,388,916.75
Items with relatively large amount:
Salaries and benefits74,850,775.5431,648,292.56
Inventory consumption56,560,157.0366,844,278.08
Others28,992,430.4015,896,346.11

Other descriptions:

No

64. Financial expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Interest expense8,386,182.80
Less: Interest income-20,872,167.57-5,997,422.97
Exchange gains and losses566,099.52-2,768,222.32
Others3,522,607.60806,195.64
Total-8,397,277.65-7,959,449.65

Other descriptions:

No

65. Other income

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Government grant26,355,003.298,716,713.66
Accrual and deduction of input tax
Handling charge on withholding personnel income tax149,878.17
Total26,504,881.468,716,713.66

Other descriptions:

Government subsidies included in other income

Subsidy projectsAmount in the current periodAmount in the last periodPertinent to assets/income
Special Fund for Shanghai Modern Service Industry - Three-dimensional Warehouse672,017.88672,017.88Pertinent to assets
Shanghai's second batch special fund for encouraging enterprises to purchase international R&D equipment in 2014174,000.00174,000.00Pertinent to assets
R&D and industrialization of key materials and preparation technologies in the pen-making industry244,646.88244,646.88Pertinent to assets
Subsidies for the second batch of key technological586,104.12586,104.12Pertinent to assets
transformation projects in 2013
Subsidies for absorption and innovation projects in 201490,443.5290,443.52Pertinent to assets
Service industry guidance funds in 2014328,891.68328,891.68Pertinent to assets
Key technological transformation projects of Shanghai in 2015561,878.28619,089.11Pertinent to assets
Inbound Marketing - Internet + product development project107,310.24107,310.24Pertinent to assets
Special fund for Shanghai informatization development325,087.60Pertinent to assets
Special funds for technology R&D projects134,548.27134,548.32Pertinent to assets
Special funds for industrial transformation and upgrade development of Shanghai in 2016120,879.10Pertinent to assets
High-value-added product creative development project29,437.44272,402.74Pertinent to assets
Special funds for development of SMEs in Shanghai in 201680,988.33228,817.89Pertinent to assets
Zhangjiang Special Development Fund709,085.34Pertinent to assets
in 2017 - Achievement Transformation of “Green Design - Innovative R&D” by Marco Colorful Painting Pen C1085
Special fund plan for key technological renovation projects in Qingpu District in 2012:77,333.36Pertinent to assets
Special funds for central foreign economic and trade development49,079.76Pertinent to assets
Zhangjiang Special Development Fund in 2017 - Achievement Transformation of “Green Design - Innovative R&D” by Marco Colorful Painting Pen C10851,217,680.00Pertinent to income
Zero Balance Special Account of Shanghai Qingpu District Finance Bureau - Enterprise Support Fund of Shanghai Municipal Administration for Market Regulation Qingpu District Branch10,100.00Pertinent to income
Construction Project of "Marco-Color-12,629.05Pertinent to income
Source" Creative Experience Center
Subsidies for coal-fired boilers36,864.00Pertinent to income
Government subsidies742,900.00Pertinent to income
Industry development guidance funds153,400.00Pertinent to income
Post stability subsidies428,526.10218,788.32Pertinent to income
Support funds for export credit insurance premium4,451.92202,358.65Pertinent to income
Disability benefit awards68,181.83Pertinent to income
IP related rewards489,463.00203,334.50Pertinent to income
Cultural festival bonuses4,000.00Pertinent to income
Special development funds for SMEs3,440,000.00Pertinent to income
Training fee subsidies1,795,663.80914,733.81Pertinent to income
Funds for investment promotion in Fengxian District69,226.00Pertinent to income
Rewards from Hangzhou Qiantang Smart City Industrial Construction Center210,000.00Pertinent to income
Support funds for physical industries1,780,000.00Pertinent to income
Appropriation of bonuses for recognition of enterprises5,000.00Pertinent to income
Unemployment insurance from Yiwu418,811.79Pertinent to income
Employment Management & Service Bureau
Government subsidies for automobile scrapping15,600.00Pertinent to income
Special funds for development of enterprises14,600,000.00Pertinent to income
Amount returned by financial department in 2018280,000.00Pertinent to income
Total26,355,003.298,716,713.66

66. Investment income

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Long-term equity investment income accounted for under the equity method-576,595.97-393,609.74
Investment income from disposal of long-term equity investment
Investment income from financial asset designated as at fair value through profit or loss during the holding period
Investment income from disposal of financial asset designated as at fair value through profit or loss
Investment income from held-to-maturity investments during the holding period
Investment income from disposal of held-to-maturity investments
Investment income from available-for-sale financial assets during the holding period
Investment income from disposal of available-for-sale financial assets
Investment income from held-for-trading financial assets during the holding period
Dividend income from other equity instrument investments during the holding period
Interest income from debt investment during the holding period
Interest income from other debt investments during the holding period
Investment income from disposal of held-for-trading financial assets24,571,581.29
Investment income from disposal of other equity instrument investments
Investment income from disposal of debt investment
Investment income from disposal of other debt investments
Income from bank wealth management products35,517,479.65
Total23,994,985.3235,123,869.91

Other descriptions:

No

67. Net gain on exposure hedging

"□ Applicable" "√ Not applicable"

68. Gain on change in fair value

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Sources of income from changes in fair valueAmount accounted for in the current periodAmount accounted for in the previous period
Held-for-trading financial assets4,613,287.24
Including: Income from changes in fair value of derivative financial instruments
Held-for-trading financial liabilities
Investment real estate measured at fair value
Total4,613,287.24

Other descriptions:

No

69. Credit impairment losses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Bad debt losses of accounts receivable14,977,985.47
Bad debt losses of other receivables13,028,024.41
Impairment losses of debt investment
Impairment losses of other debt investments
Bad debt losses of long-term receivables
Total28,006,009.88

Other descriptions:

No

70. Asset impairment losses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
1. Bad debt losses-4,070,164.66
2. Inventory devaluation losses17,712,080.667,482,750.36
3. Impairment losses of available-for-sale financial assets
4. Impairment losses of held-to-maturity investment
5. Impairment losses of long-term equity investment
6. Impairment losses on investment real estate
7. Impairment losses of fixed assets
8. Impairment losses of engineering materials
9. Impairment losses of construction in progress
10. Impairment losses of productive biological assets
11. Impairment losses of oil and gas assets
12. Impairment losses of intangible assets
13. Impairment losses of goodwill131,001.23
14. Others
Total17,843,081.893,412,585.70

Other descriptions:

No

71. Gains from asset disposal

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Gaines or losses from disposal of fixed assets6,081,606.95-69,195.83
Total6,081,606.95-69,195.83

Other descriptions:

No

72. Non-operating profits

Non-operating profits"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous periodAmount included in the current non-recurring gains and losses
Total gains from disposal of non-current assets
Including: Gains from disposal of fixed assets
Gains from disposal of intangible assets
Gains from restructuring of debts
Gains from exchange of non-currency assets
Acceptance of donations
Government grant16,242,800.0033,406,000.0016,242,800.00
Brand maintenance7,843,179.50
Liquidated damages and fine income922,677.942,814,531.50922,677.94
Others12,193,177.101,945,301.1912,193,177.10
Total29,358,655.0446,009,012.1929,358,655.04

Government subsidies included in current profit and loss"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Subsidy projectsAmount accounted for in the current periodAmount accounted for in the previous periodPertinent to assets/income
Financial support16,242,800.0033,406,000.00Pertinent to income
Total16,242,800.0033,406,000.00

Other descriptions:

"□ Applicable" "√ Not applicable"

73. Non-operating expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous periodAmount included in the current non-recurring gains and losses
Total losses from disposal of non-current assets3,153,550.207,769,418.993,153,550.20
Including: Losses from disposal of fixed assets
Losses from disposal of intangible assets
Losses from restructuring of debts
Losses from exchange of non-currency assets
Offering of donations4,456,387.805,211,500.004,456,387.80
Abnormal loss11,579.2711,579.27
Fine late payment19,532.73113,965.0619,532.73
Compensation expenses657,935.89831,477.90657,935.89
Inventory losses25,692.2413,243.4825,692.24
Others10,534,564.936,599,784.5210,534,564.93
Total18,859,243.0620,539,389.9518,859,243.06

Other descriptions:

No

74. Income tax expenses

(1) Table of income tax expenses

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Current income tax expenses229,869,239.88159,360,651.89
Deferred income tax expenses-12,266,339.47-6,982,228.14
Total217,602,900.41152,378,423.75

(2) Adjustment process of accounting profits and income tax expenses"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current period
Total profits1,293,679,744.07
Income tax expenses calculated at statutory/applicable tax rate194,051,961.61
Effect of applying different tax rates to subsidiaries18,551,460.39
Effect of adjusting income taxes of the previous periods-1,593,706.87
Effect of non-taxable income-28,090,838.02
Effect of non-deductible costs, expenses and losses26,010,897.30
Effect of deductible losses of deferred income tax assets not recognized in the previous period-18,128,238.44
Effect of deductible temporary differences or deductible losses of deferred income tax assets not recognized in the current period26,801,364.44
Income tax expenses217,602,900.41

Other descriptions:

"□ Applicable" "√ Not applicable"

75. Other comprehensive income

"□ Applicable" "√ Not applicable"

76. Items of the cash flow statement

(1) Other cash received from operating activities

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Recovery of current amount and advances212,985,779.5058,188,219.81
Special allowances and subsidies43,659,627.0941,020,341.28
Rental income
Interest income20,872,167.575,997,422.97
Non-operating profits1,190,996.412,516,883.71
Total278,708,570.57107,722,867.77

Descriptions on other cash received from operating activities:

No

(2) Cash paid for other operating activities

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Inter-company business453,378,164.39340,401,634.22
Sales expenses670,248,889.99452,856,547.19
Administration expenses191,012,799.95126,951,476.82
Financial expenses3,522,607.601,351,716.08
Non-operating expenses5,881,790.246,364,330.49
R&D expenses26,898,793.5114,183,851.22
Total1,350,943,045.68942,109,556.02

Descriptions on cash paid for other operating activities:

No

(3) Other cash received relating to investing activities

"□ Applicable" "√ Not applicable"

(4) Other cash paid relating to investing activities

"□ Applicable" "√ Not applicable"

(5) Other cash received from financing-related activities

"□ Applicable" "√ Not applicable"

(6) Other cash paid for financing-related activities

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemAmount accounted for in the current periodAmount accounted for in the previous period
Cash paid for financing lease8,687,534.78
Total8,687,534.78

Descriptions on other cash paid for financing-related activities:

No

77. Supplementary information for the cash flow statement

(1) Supplementary information for the cash flow statement

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Supplementary informationAmount in the current periodAmount in the last period
1. Reconciliation of net profit to cash flow from operating activities:
Net profit1,076,076,843.66807,836,414.01
Add: Impairment provisions of assets28,006,009.883,412,585.70
Depreciation of fixed assets, oil and gas assets, and productive biological assets17,843,081.89
Amortization of right-of-use assets160,499,582.34137,811,934.54
Amortization of intangible assets12,244,846.419,858,077.23
Amortization of long-term prepaid expenses58,322,900.9750,404,368.15
Losses from disposal of fixed assets, intangible assets and other long-term assets (“-” refers to gains)-6,081,606.9569,195.83
Losses from retirement of fixed assets (“-” refers to gains)3,153,550.207,769,418.99
Losses from changes in fair value (“-” refers to gains)-4,613,287.24
Financial expenses (“-” refers to income)15,729,788.85-2,580,870.25
Investment losses (“-” refers to gains)-23,994,985.32-35,123,869.91
Decrease in deferred income tax assets (“-” refers to increase)-11,098,014.61-6,866,481.94
Increase in deferred income tax liabilities (“-” refers to decrease)-1,168,324.86-115,746.20
Decrease in inventories (“-” refers to increase)-168,780,666.90-178,327,653.13
Decrease in operating receivables (“-” refers to increase)-393,772,873.21-667,687,434.76
Increase in operating payables (“-” refers to decrease)319,574,538.57701,480,627.25
Others
Net cash flow generated from operating activities1,081,941,383.68827,940,565.51
2. Major investing and financing activities not involving cash payment and receipts:
Debts converted to capital
Convertible company bonds due within one year
Fixed assets acquired under financing leases
3. Net changes in cash and cash equivalents:
Closing balance of cash1,377,446,435.89741,501,446.10
Less: Opening balance of cash741,501,446.10432,046,118.69
Add: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents635,944,989.79309,455,327.41

(2) Net cash amount paid for the acquisition of subsidiaries in the current period"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Amount
Cash or cash equivalents paid for the business combination of the current period in the current period170,005,997.67
Including: Axus Stationery (Shanghai) Company Ltd.170,005,997.67
Less: Cash and cash equivalents held by subsidiaries on the acquisition date59,357,105.23
Including: Axus Stationery (Shanghai) Company Ltd.59,357,105.23
Add: Cash or cash equivalents paid for the business combination of the prior periods in the current period
Net cash paid for acquiring subsidiaries110,648,892.44

Other descriptions:

No

(3) Net cash amount received from the disposal of subsidiaries in the current period"□ Applicable" "√ Not applicable"

(4) Composition of cash and cash equivalents

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing balanceOpening balance
I. Cash1,377,446,435.89741,501,446.10
Including: Cash on hand503,222.44816,463.47
Bank deposits readily available for payment1,372,791,232.44736,400,367.62
Other Cash and equivalents readily available for payment at any time4,151,981.014,284,615.01
Due from central bank available for payment
Due from placements with banks and other financial institutions
Call loan to banks and other financial institutions
II. Cash equivalents
Including: Bond investments due within three months
III. Closing balance of cash and cash equivalents1,377,446,435.89741,501,446.10
Including: Cash and cash equivalents of which the use is restricted for the parent company or subsidiaries within the group

Other descriptions:

"□ Applicable" "√ Not applicable"

78. Notes to items of the statement of changes in owners’ equity

Description on “other” item name and adjustment amount adjusted for balance at the end ofthe previous year:

"□ Applicable" "√ Not applicable"

79. Assets with restricted ownership or use rights

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemCarrying value at the end of the periodReason for restriction
Cash and equivalents558,154,258.46Letter of credit deposit and performance bond and fixed deposit over three months, etc.
Bills receivable
Inventories
Fixed assets93,297,472.82Mortgaged borrowings
Intangible assets
Receivables financing5,287,720.75Factoring of accounts receivable
Total656,739,452.03/

Other descriptions:

For details of accounts receivable factoring and fixed asset mortgage borrowing, please refer toNote XIV. Commitments and Contingencies.

80. Foreign currency monetary items

(1) Foreign currency monetary items

"√ Applicable" "□ Not applicable"

Unit: RMB Yuan

ItemForeign currency balance at the end of the periodTranslation foreign exchange rateBalance
Cash and equivalents--122,488,302.78
Including: USD17,048,608.256.9762118,934,500.87
EURO90.767.8155709.33
JPY1,121.000.064171.84
HKD22,127.120.895819,821.03
GBP1,175.009.150110,751.37
VND11,736,445,624.570.00033,522,448.34
Accounts receivable--24,143,538.52
Including: USD453,301.386.97623,162,321.09
VND69,900,471,814.680.000320,979,162.58
HKD2,293.920.89582,054.85
Prepayments--462,263.86
Including: VND1,540,216,961.200.0003462,263.86
Accounts payable--76,022,447.65
Including: USD375,614.186.97622,620,359.64
VND244,279,581,853.160.000373,315,400.18
HKD96,773.570.895886,687.83
Accounts received in advance--5,344,175.70
Including: USD746,196.836.97625,205,618.33
VND461,659,311.360.0003138,557.37
Other receivables--497,820.40
Including: VND1,620,977,408.450.0003486,502.42
HKD12,634.780.895811,317.98
Other payables--1,091,367.20
Including: VND3,502,005,373.200.00031,051,053.56
HKD45,003.950.895840,313.64
Long-term borrowings--
Including: USD
Short-term borrowings--2,979,528.81
Including: USD427,099.116.97622,979,528.81

Other descriptions:

No

(2) Descriptions on overseas operating entities, including: for important overseas

business entities, their main overseas business locations, bookkeeping currency andselection basis shall be disclosed; in case of any change in the bookkeeping currency,the reasons for such change shall be also disclosed"□ Applicable" "√ Not applicable"

81. Hedging

"□ Applicable" "√ Not applicable"

82. Government grant

(1) Basic information on government grant

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

TypeAmountPresentation itemAmount included in current profit and loss
Special Fund for Shanghai Modern Service Industry - Three-dimensional Warehouse13,131,632.13Deferred income672,017.88
Shanghai's second batch special fund for encouraging enterprises to purchase international R&D equipment in 20141,740,000.00Deferred income174,000.00
R&D and industrialization of key materials and preparation technologies in the pen-making industry2,446,471.05Deferred income244,646.88
Subsidies for the second batch of key technological transformation projects in 20135,328,614.61Deferred income586,104.12
Subsidies for absorption and innovation projects in 2014951,743.46Deferred income90,443.52
Service industry guidance3,450,000.00Deferred income328,891.68
funds in 2014
Key technological transformation projects of Shanghai in 20154,880,000.00Deferred income561,878.28
Inbound Marketing - Internet + product development project1,000,000.00Deferred income107,310.24
Special fund for Shanghai informatization development1,340,000.00Deferred income325,087.60
Special funds for technology R&D projects786,219.51Deferred income134,548.27
Special funds for industrial transformation and upgrade development of Shanghai in 20161,100,000.00Deferred income120,879.10
High-value-added product creative development project1,300,000.00Deferred income29,437.44
Industrial foundation consolidation project in 20163,770,000.00Deferred income
Special funds for development of SMEs in Shanghai in 2016465,108.77Deferred income80,988.33
Funds for improvement of capacities of Shanghai Engineering Research Center in 20171,000,000.00Deferred income
Cultural and creative project in 2019700,000.00Deferred income
Subsidies for injection molding machine intelligent equipment570,000.00Deferred income
Zhangjiang Special Development Fund in 2017 - Achievement Transformation of “Green4,600,000.00Deferred income709,085.34
Design - Innovative R&D” by Marco Colorful Painting Pen C1085
Special fund plan for key technological renovation projects in Qingpu District in 2012:1,160,000.00Deferred income77,333.36
Special funds for central foreign economic and trade development1,000,000.00Deferred income49,079.76
Construction Project of "Marco-Color-Source" Creative Experience Center2,500,000.00Deferred income
Financial support16,242,800.00Non-operating profits16,242,800.00
Special development funds for SMEsOther income
Support funds for export credit insurance premium4,451.92Other income4,451.92
Training fee subsidies1,795,663.80Other income1,795,663.80
Post stability subsidies428,526.10Other income428,526.10
Knowledge products and patent subsidies489,463.00Other income489,463.00
Funds for investment promotion in Fengxian DistrictOther income
Rewards from Hangzhou Qiantang Smart City Industrial Construction CenterOther income
Zhangjiang Special Development Fund in 2017 - Achievement Transformation of “Green Design - Innovative R&D” by Marco Colorful Painting Pen C10851,217,680.00Other income1,217,680.00
Zero Balance Special10,100.00Other income10,100.00
Account of Shanghai Qingpu District Finance Bureau - Enterprise Support Fund of Shanghai Municipal Administration for Market Regulation Qingpu District Branch
Construction Project of "Marco-Color-Source" Creative Experience Center12,629.05Other income12,629.05
Subsidies for coal-fired boilers36,864.00Other income36,864.00
Government subsidies742,900.00Other income742,900.00
Industry development guidance funds153,400.00Other income153,400.00
Disability benefit awards68,181.83Other income68,181.83
Cultural festival bonuses4,000.00Other income4,000.00
Support funds for physical industries1,780,000.00Other income1,780,000.00
Appropriation of bonuses for recognition of enterprises5,000.00Other income5,000.00
Unemployment insurance from Yiwu Employment Management & Service Bureau418,811.79Other income418,811.79
Government subsidies for automobile scrapping15,600.00Other income15,600.00
Special funds for development of enterprises14,600,000.00Other income14,600,000.00
Amount returned by financial department in 2018280,000.00Other income280,000.00

(2) Return of government grant

"□ Applicable" "√ Not applicable"Other descriptions:

No

83. Others

"□ Applicable" "√ Not applicable"

VIII. Change in consolidation scope

1. Business combinations not under common control

"√ Applicable" "□ Not applicable"

(1) Business combinations not under common control occurring during the current

period"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of acquireeEquity acquisition timeEquity acquisition cost(%)Equity acquisition typeDate of acquisitionBasis for determining the acquisition dateIncome of acquiree from the acquisition date to the end of the periodNet profit of acquiree from the acquisition date to the end of the period
Axus Stationery (Shanghai) Company Ltd.30 April 2019177,038,110.0056.00Acquisition2019-4-30Acquisition agreement364,743,402.42-9,934,923.15

Other descriptions:

No

(2) Business combination cost and goodwill

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Combination costXX Company
--Cash170,005,997.67
--Fair value of non-cash assets
--Fair value of the debts issued or assumed13,656,702.33
--Fair value of the equity securities issued
--Fair value of contingent consideration
--Acquisition-date fair value of the equity held before the acquisition date
--Others-6,624,590.00
Total combination cost177,038,110.00
Less: Fair value share of the identifiable net assets acquired146,862,572.81
Goodwill/Amount of the combination cost below fair value share of the identifiable net assets acquired30,175,537.19

Description on determination method for fair value of combination cost, contingent considerationand its change:

No

Main reason for the formation of large-amount goodwill:

No

Other descriptions:

According to the equity transfer agreement signed between the Company and the originalshareholder and ultimate controller of Axus Stationery, the consideration for 56% equity of AxusStationery was RMB177,038,110.00, of which RMB13,656,702.33 was not paid; the amount inarrear of Axus Stationery’s original shareholder was RMB6,624,590.00, of whichRMB170,005,997.67 has been paid in cash.

(3) Identifiable assets and liabilities of acquiree on the acquisition date"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Axus Stationery (Shanghai) Company Ltd.
Fair value on the acquisition dateCarrying value on the acquisition date
Assets:815,983,742.56617,929,441.79
Cash and equivalents63,033,979.8263,033,979.82
Receivables60,954,759.6860,954,759.68
Inventories186,767,547.77174,919,855.43
Fixed assets348,987,524.92271,750,108.32
Intangible assets147,781,660.1338,812,468.30
Construction in progress2,025,571.502,025,571.50
Long-term prepaid expenses258,780.18258,780.18
Other current assets6,078,498.056,078,498.05
Other non-current assets95,420.5195,420.51
Liabilities:553,729,148.25517,829,203.29
Borrowings293,443,925.46293,443,925.46
Payables216,213,376.08216,213,376.08
Deferred income tax liabilities35,899,944.96
Long-term payable6,383,497.086,383,497.08
Deferred income1,788,404.671,788,404.67
Net assets262,254,594.31100,100,238.50
Less: Minority equity115,392,021.5044,044,104.94
Net assets acquired146,862,572.8156,056,133.56

Determination method for fair value of identifiable assets and liabilities:

NoContingent liabilities of acquiree assumed in the business combination:

NoOther descriptions:

No

(4) Gains or losses arising from the re-measurement of the equity held before theacquisition date at fair valueWhether there is a transaction where a business combination is achieved stepwise throughmultiple transactions and the control is obtained within the Reporting Period"□ Applicable" "√ Not applicable"

(5) Descriptions on the situation that it is unable to reasonably determine thecombination consideration or the fair value of identifiable assets and liabilities of theacquiree at the combination date or the end of the combination period"□ Applicable" "√ Not applicable"

(6) Other explanation

"□ Applicable" "√ Not applicable"

2. Enterprise merger under the same control

"□ Applicable" "√ Not applicable"

3. Reverse acquisition

"□ Applicable" "√ Not applicable"

4. Disposal of subsidiaries

Whether there is a loss of control upon a single disposal of investment to subsidiaries"□ Applicable" "√ Not applicable"Other descriptions:

"□ Applicable" "√ Not applicable"

Whether there is a loss of control in the current period upon a stepwise disposal of investment to subsidiaries through multiple transactions"□ Applicable" "√ Not applicable"

5. Changes in scope of consolidated financial statements for other reasonsDescriptions on changes in the scope of consolidated financial statements for other reasons (e.g, establishing subsidiaries, clearing subsidiaries,etc.) and their related circumstances:

"√ Applicable" "□ Not applicable"

(1) This year the Company deregisters two subsidiaries M&G Life Jiangxi Enterprise Management Co., Ltd. and Beijing Asia Business OnlineInformation Technology Co., Ltd.

(2) This year the subsidiary Shenyang M&G Colipu Office Supplies Co., Ltd. was incorporated into the scope of consolidated financial statementsthrough establishment. The registered capital is RMB500,000, and the investment ratio is 100%.

6. Others

"□ Applicable" "√ Not applicable"

IX. Equity in Other Entities

1. Equity in subsidiaries

(1) Composition of the corporate group

"√ Applicable" "□ Not applicable"

NameMain place of businessRegistered addressNature of the businessShareholding ratio (%)way
DirectIndirect
Shanghai M&G Colipu Office Supplies Co., Ltd.ShanghaiShanghaiRetail, wholesale, etc.70.00Establishment
Shanghai M&G Stationery & Gift Co., Ltd.(上海晨光文具礼品有限公司)ShanghaiShanghaiProduction, sale and so forth100.00Establishment
Shanghai M&G Stationery Sales Co., Ltd.(上海晨光文具销售有限公司)ShanghaiShanghaiRetail, wholesale, etc.100.00Establishment
Guangzhou M&G Stationery&Gifts Sales Co., Ltd.(广州晨光文具礼品销售有限公司)GuangzhouGuangzhouRetail, wholesale, etc.100.00Establishment
Yiwu Chenxing Stationery Co., Ltd.(义乌市晨兴文具用品有限公司)YiwuYiwuRetail, wholesale, etc.100.00Establishment
M&G Life Enterprise Management Co., Ltd.(晨光生活馆企业管理有限公司)ShanghaiShanghaiRetail, wholesale, etc.60.00Establishment
M&G Life Enterprise Management (Shanghai) Co., Ltd. (晨光生活馆企业管理(上海)有限公司)ShanghaiShanghaiRetail, wholesale, etc.100.00Establishment
Shanghai M&G Jiamei Stationery Co., Ltd.(上海晨光佳美文具有限公司)ShanghaiShanghaiProduction, sale and so forth100.00Establishment
Shanghai M&G Information Technology Co., Ltd.(上海晨光信息科技有限公司)ShanghaiShanghaiE-commerce business, etc.55.00Establishment
Jiangsu M&G Life Enterprise Management Co., Ltd.(江苏晨光生活馆企业管理有限公司)NanjingNanjingRetail, wholesale, etc.70.00Establishment
Zhejiang New M&G Life Enterprise Management Co., Ltd.(浙江新晨光生活馆企业管理有限公司)HangzhouHangzhouRetail, wholesale, etc.100.00Establishment
Jiumu M&G Store Enterprise Management Co., Ltd.(九木杂物社企业管理有限公司)ShanghaiShanghaiRetail, wholesale, etc.100.00Establishment
Shanghai M&G Zhenmei Stationery Co., Ltd.(上海晨光珍美文具有限公司)ShanghaiShanghaiRetail, wholesale, etc.100.00Acquired by business combination under common control
Harbin M&G Sanmei Stationery Co., Ltd.(哈尔滨晨光三美文具有限公司)HarbinHarbinRetail, wholesale, etc.100.00Acquired by business combination under common control
Zhengzhou M&G Stationery&Gifts Co., Ltd.(郑州晨光文具礼品有限责任公司)ZhengzhouZhengzhouRetail, wholesale, etc.100.00Acquired by business combination under common control
Shenzhen Erya Creative and Cultural Development Co., Ltd.(深圳尔雅文化创意发展有限公司)ShenzhenShenzhenDesign and so forth51.00Acquired by business combination under common control
Shanghai M&G Office Supplies Co., Ltd.ShanghaiShanghaiRetail, wholesale, etc.100.00Establishment
Office Depot Network Technology Co., Ltd.BeijingBeijingRetail, wholesale, etc.100.00Acquired by business combination under common control
Lianyungang Colipu Office Supplies Co., Ltd.(连云港市科力普办公用品有限公司)LianyungangLianyungangRetail, wholesale, etc.100.00Establishment
Shenyang M&G Colipu Office Supplies Co., Ltd.(沈阳晨光科力普办公用品有限公司)ShenyangShenyangRetail, wholesale, etc.100.00Establishment
Hangzhou Sanmei M&G Stationery Co., Ltd.(杭州三美晨光文具有限公司)HangzhouHangzhouRetail, wholesale, etc.100.00Establishment
Luoyang M&G Stationery Sales Co., Ltd.(洛阳晨光文具销售有限公司)LuoyangLuoyangRetail, wholesale, etc.100.00Establishment
Axus Stationery (Shanghai) Company Ltd.ShanghaiShanghaiProduction, sale and so forth56.00Acquired by business combination not under common control
Jiangsu Marco Pen Co., Ltd.(江苏马可笔业有限公司)JiangsuJiangsuProduction, sale and so forth100.00Acquired by business combination not under common control
Changchun Macro Stationery Co., Ltd. (长春马可文教用品有限公司)JilinJilinProduction, sale and so forth100.00Acquired by business combination not under common control
Yili Senlai Wood Co., Ltd.(伊犁森徕木业有限公司)XinjiangXinjiangProduction, sale and so forth100.00Acquired by business combination not under common control
Axus Stationery (Hong Kong) Company Ltd.Hong KongHong KongRetail, wholesale, etc.100.00Acquired by business combination not under common control
International stationery companyVietnamVietnamProduction, sale and so forth100.00Acquired by business combination not under common control

Descriptions on the situation that the shareholding ratio in the subsidiary is different from theshare of the voting rights:

No

Basis for holding half or less of the voting rights of the investee but still controlling the investeeand holding more than half of the voting rights but not controlling the investee:

No

Basis for controlling important structured entities included in the scope of consolidated financialstatements:

No

Basis for determining whether the Company is an agent or a principal:

No

Other descriptions:

No

(2) Important non-wholly owned subsidiaries

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of subsidiariesratioProfits and losses attributable to minority shareholders in the current periodDividends declared and distributed to minority shareholders in the current periodMinority equity balance at the end of the period
Shanghai M&G Colipu Office Supplies Co., Ltd.30.00%22,741,063.01123,473,104.09

Descriptions on the situation that the shareholding ratio of minority shareholders in the subsidiaryis different from that of the voting rights:

"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

(3) Major financial information of important non-wholly owned subsidiaries"√ Applicable" "□ Not applicable"

Unit: 0’000 Currency: RMB

Name of subsidiariesClosing balanceOpening balance
Current assetsNon-current assetsTotal assetsCurrent liabilitiesNon-current liabilitiesTotal liabilitiesCurrent assetsNon-current assetsTotal assetsCurrent liabilitiesNon-current liabilitiesTotal liabilities
Shanghai M&G Colipu Office Supplies Co., Ltd.163,996.713,579.48167,576.19122,907.023,511.47126,418.49112,789.593,253.11116,042.7093,003.833,461.5396,465.36
Name of subsidiariesAmount accounted for in the current periodAmount accounted for in the previous period
Operating revenueNet profitTotal comprehensive incomeCash flow from operating activitiesOperating revenueNet profitTotal comprehensive incomeCash flow from operating activities
Shanghai M&G Colipu Office Supplies Co., Ltd.365,806.177,580.3514,880.10258,604.903,213.5214,280.02

Other descriptions:

No

(4) Significant restrictions on the use of corporate group assets and the liquidation of

corporate group debts"□ Applicable" "√ Not applicable"

(5) Financial support or other support provided to structured entities included in the

scope of consolidated financial statements"□ Applicable" "√ Not applicable"

Other descriptions:

"□ Applicable" "√ Not applicable"

2. Transactions which result in a change in the share of owners’ equity in the subsidiarybut the Company still controls the subsidiary"□ Applicable" "√ Not applicable"

3. Equity in joint ventures or associates

"√ Applicable" "□ Not applicable"

(1) Important joint ventures or associates

"□ Applicable" "√ Not applicable"

(2) Major financial information of important joint ventures

"□ Applicable" "√ Not applicable"

(3) Major financial information of important associates

"□ Applicable" "√ Not applicable"

(4) Summary financial information of unimportant joint ventures and associates"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Balance at the end of the period/Amount accounted for in the current periodBalance at the beginning of the period/Amount accounted for in the previous period
Joint ventures:
Total carrying value of investments
Total of the following items calculated according to the shareholding ratio
--Net profits
--Other comprehensive income
--Total comprehensive income
Associates:
Total carrying value of investments35,582,783.4730,175,665.26
Total of the following items calculated according to the shareholding ratio
--Net profits-576,595.97-393,609.74
--Other comprehensive income-16,285.82
--Total comprehensive income-592,881.79-393,609.74

Other explanationNo

(5) Descriptions on significant limitation of the ability of a joint venture or associate totransfer funds to the Company"□ Applicable" "√ Not applicable"

(6) Excess losses incurred by a joint venture or associate

"□ Applicable" "√ Not applicable"

(7) Unrecognized commitments related to joint venture investment"□ Applicable" "√ Not applicable"

(8) Contingent liabilities related to joint venture or associate investment"□ Applicable" "√ Not applicable"

4. Important joint operations

"□ Applicable" "√ Not applicable"

5. Equity in structured entities not included in the consolidated financial statementsDescriptions on structured entities not included in the consolidated financial statements:

"□ Applicable" "√ Not applicable"

6. Others

"□ Applicable" "√ Not applicable"

X. Risks associated with financial instruments"√ Applicable" "□ Not applicable"The Company faces various financial risks in its business operations: credit risk, market risk andliquidity risk. The Company's Board of Directors is fully responsible for the determination of riskmanagement objectives and policies and bears the ultimate responsibility for risk managementobjectives and policies. The Company's overall objective of risk management is to develop a riskmanagement policy that minimizes risks without unduly affecting the Company'scompetitiveness and resilience.(I) Credit riskCredit risk is the risk that a party to a financial instrument fails to perform its obligations, causingfinancial losses to the other party. The Company mainly faces customer credit risk caused bycredit sales. Before signing a new contract, the Company assesses the credit risk of newcustomers. The Company has set a credit limit for each customer, which is the maximum amountthat does not require additional approval. The Company ensures that the overall credit risk ofthe Company is within a controllable range through the annual monitoring of existing customercredit ratings and the monthly review of aging analysis of accounts receivable.(II) Market riskMarket risk of financial instruments is the risk that the fair value or future cash flows of financialinstruments will fluctuate due to changes in market prices, including exchange rate risk and otherprice risks.Exchange rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate due to changes in foreign exchange rates. The Company matches foreign currencyincome with foreign currency expenditure as far as possible to reduce exchange rate risk. Inaddition, the Company may also sign forward foreign exchange contracts or currency swapcontracts to avoid exchange rate risk. During the current period and the previous period, theCompany did not sign any forward foreign exchange contracts or currency swap contracts.Foreign exchange risk faced by the Company mainly comes from financial assets and liabilitiesdenominated in USD, and the amounts of foreign currency financial assets and liabilitiesconverted into RMB are shown below:

ItemClosing balanceOpening balance
USDOther foreign currenciesTotalUSDOther foreign currenciesTotal
Cash and equivalents118,934,500.873,553,801.91122,488,302.7851,086,558.1579,156.0351,165,714.18
Accounts receivable3,162,321.0920,981,217.4324,143,538.524,107,704.544,107,704.54
Prepayment462,263.86462,263.864,002,319.294,002,319.29
Other497,820.40497,820.40
receivables
Total foreign currency financial assets122,096,821.9625,495,103.60147,591,925.5655,194,262.694,081,475.3259,275,738.01
Short-term borrowings427,099.11427,099.11
Accounts payable2,620,359.6473,402,088.0176,022,447.654,242,195.194,242,195.19
Accounts received in advance5,205,618.33138,557.375,344,175.707,912,504.087,912,504.08
Other payables1,091,367.201,091,367.20
Total foreign currency financial liabilities8,253,077.0874,632,012.5882,885,089.6612,154,699.2712,154,699.27

(III) Liquidity riskLiquidity risk is the risk of a shortage of funds of the Company when the Company is performingits obligation to settle in the form of delivery of cash or other financial assets. The Company'spolicy is to ensure that there is sufficient cash to pay off the debts due. Liquidity risk is centrallycontrolled by the Company's Finance Department. Finance Department ensures that theCompany has sufficient funds to repay debts under all reasonable forecasts by monitoring cashbalances, marketable securities at any time, and rolling forecasts of the cash flows in the coming12 months.Financial liabilities of the Company are presented as unrealized contractual cash flows on thematurity date as follows:

ItemClosing balance
Within 1 month1-3 months3 months - 1 year1-5 yearsAbove 5 yearsTotal
Short-term borrowings214,235.052,979,528.81180,000,000.00183,193,763.86

XI. Disclosure of fair value

1. Closing fair value of assets and liabilities measured at fair value"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemClosing fair value
Level-1 fair value measurementLevel-2 fair value measurementLevel-3 fair value measurementTotal
I. Continuous fair value measurement
(I) Held-for-trading financial assets
1. Financial assets at fair value through profit or loss
(1) Debt instrument investment
(2) Equity instrument investment
(3) Derivative financial assets
(4) Others661,878,587.24661,878,587.24
2. Financial assets designated as at fair value through profit or loss
(1) Debt instrument investment
(2) Equity instrument investment
(II) Other debt investments
(III) Other equity instrument investments3,909,179.933,909,179.93
(IV) Investment real estate
1. Land use rights used for rent
2. Rental buildings
3. Land use rights held and ready to be transferred after appreciation
(V) Biological assets
1. Consumable biological assets
2. Productive biological assets
Receivables financing29,549,924.8329,549,924.83
Total assets continuously measured at fair value661,878,587.2433,459,104.76695,337,692.00
(VI) Held-for-trading financial liabilities
1. Financial liabilities at fair value through profit or loss
Including: Trading bonds issued
Derivative financial liabilities
Others
2. Financial liabilities designated as at fair value through profit or loss
Total liabilities continuously measured at fair value
II. Non-continuous fair value measurement
(I) Assets held for sale
Total assets not continuously measured at fair value
Total liabilities not continuously measured at fair value

Other descriptions:

The level to which the fair value measurement result belongs is determined by the lowest levelto which the input value that is important to the fair value measurement as a whole belongs.

2. Basis for determining market prices of items continuously and not continuouslymeasured at the first-level fair value"√ Applicable" "□ Not applicable"The input value of the first level is the unadjusted quotation of the same asset or liability that canbe obtained on the measurement date in the active market.

3. Qualitative and quantitative information on valuation techniques and important

parameters adopted by items continuously and not continuously measured at thesecond-level fair value"√ Applicable" "□ Not applicable"The input value of the second level is the directly or indirectly observable input value of relatedassets or liabilities except the input value of the first level.

4. Qualitative and quantitative information on valuation techniques and important

parameters adopted by items continuously and not continuously measured at thethird-level fair value"√ Applicable" "□ Not applicable"The input value of the third level is the unobservable input value of the related asset or liability.

5. Information on adjustment between the beginning carrying value and the closing

carrying value of items continuously measured at the third-level fair value andsensitivity analysis on unobservable parameters"□ Applicable" "√ Not applicable"

6. For items continuously measured at fair value, in case of any conversion between

various levels during the period, reasons for the conversion and policies to determinethe conversion time should be provided"□ Applicable" "√ Not applicable"

7. Changes in valuation techniques and reasons for changes during the period"□ Applicable" "√ Not applicable"

8. Particulars on fair value of financial assets and liabilities which are not measured atfair value"□ Applicable" "√ Not applicable"

9. Others

"□ Applicable" "√ Not applicable"

XII. Related Parties and Related-Party Transactions

1. Particulars on the parent company of the Company

"√ Applicable" "□ Not applicable"

Unit: 0’000 Currency: RMB

Name of the parent companyRegistered addressNature of the businessRegistered capitalThe parent company's shareholding ratio in the Company (%)The parent company's voting right ratio in the Company (%)
M&G Holdings (Group) Co., Ltd.ShanghaiIndustrial Investment30,00058.2658.26

Descriptions on the parent company of the CompanyNoThe ultimate controlling party of the Company is Chen Huwen, Chen Huxiong and Chen XuelingOther descriptions:

No

2. Particulars on subsidiaries of the Company

Particulars on subsidiaries of the Company are shown in the relevant notes"√ Applicable" "□ Not applicable"For particulars on subsidiaries of the Company, see Note VII. “Equity in Other Entities” for details.

3. Particulars on joint ventures and associates of the CompanyFor important joint ventures and associates of the Company, see the Notes for details"√ Applicable" "□ Not applicable"

For important joint ventures and associates of the Company, see the Note VII. “Equity in OtherEntities” for details.

Particulars on other joint ventures and associates which have related-party transactions with theCompany in the current period or had related-party transactions with the Company in theprevious period and form balances are as follows"√ Applicable" "□ Not applicable"

Name of joint venture and associateRelationship with the Company
Ningbo Zhongchen Equity Investment Partnership (Limited Partnership)Associates
Shanghai Pen-making Technology Services Co., Ltd.Associates

Other explanation"□ Applicable" "√ Not applicable"

4. Particulars on other related parties

"√ Applicable" "□ Not applicable"

Name of other related partiesRelationship between other related parties and the Company
Shanghai Jiekui Investment Management Firm (L.P.)Share-participation shareholders
Shanghai Keying Investment Management Office (L.P.)Share-participation shareholders
Guo WeilongOthers
Wuxi Creative M&G Trading Co., Ltd.Others
Nanjing Zhaochen Stationery Sales Co., Ltd.Others
Nanjing Youchen Stationery Sales Co., Ltd.Others
Nanjing Chenri Stationery Sales Co., Ltd.Others

Other explanationNo

5. Particulars on related-party transactions

(1) Related-party transactions for the purchase and sales of goods and the renderingand receipt of servicesTable of information on the purchase of goods/the receipt of services"□ Applicable" "√ Not applicable"

Table of information on the sale of goods/the rendering of services"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Related partyRelated-party transaction contentAmount accounted for in the current periodAmount accounted for in the previous period
Sales entities controlled by Guo WeilongSale of goods387,821,087.67332,427,736.80
M&G Holdings (Group) Co., Ltd.Sale of goods26,730.34
M&G Holdings (Group) Co., Ltd.Fixed assets5,882.90

Particulars on related-party transactions for the purchase and sales of goods and the renderingand receipt of services"□ Applicable" "√ Not applicable"

(2) Particulars on related-party entrusted management/contracting and entrustingmanagement/outsourcingTable of information on the Company's entrusted management/contracting:

"□ Applicable" "√ Not applicable"Particulars on related-party entrusting/contracting"□ Applicable" "√ Not applicable"

Table of information on the Company's entrusting management/outsourcing"□ Applicable" "√ Not applicable"Particulars on related-party management/outsourcing"□ Applicable" "√ Not applicable"

(3) Particulars on related-party leases

The Company as the lessor:

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of lesseeTypes of leased assetsRental income recognized in the current periodRental income recognized in the previous period
Shanghai Jiekui Investment Management Firm (L.P.)Self-owned office building
Shanghai Keying Investment Management Office (L.P.)Self-owned office building

The Company as the lessee:

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Name of lessorTypes of leased assetsRental fee recognized in the current periodRental fee recognized in the previous period
M&G Holdings (Group) Co., Ltd.Self-owned houses (including office buildings, workshops, parking spaces, warehouses, dormitory buildings, etc.)3,622,857.142,818,095.24
M&G Holdings (Group) Co., Ltd.Self-owned office buildings and parking spaces19,032,828.26
M&G Holdings (Group) Co., Ltd.Utilities5,283,878.505,602,223.96

Descriptions on related-party leases"□ Applicable" "√ Not applicable"

(4) Particulars on related-party guarantees

The Company as a guarantor"□ Applicable" "√ Not applicable"The Company as a guaranteed party"□ Applicable" "√ Not applicable"Descriptions on related-party guarantees"□ Applicable" "√ Not applicable"

(5) Related-party fund lending

"□ Applicable" "√ Not applicable"

(6) Related-party asset transfer and debt restructuring

"□ Applicable" "√ Not applicable"

(7) Compensation of key management personnel

"□ Applicable" "√ Not applicable"

(8) Other related-party transactions

"□ Applicable" "√ Not applicable"

6. Receivables from and payables to related parties

(1) Receivables

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemsRelated partyClosing balanceOpening balance
Carrying balanceBad debt provisionsCarrying balanceBad debt provisions
Accounts receivableM&G Holdings (Group) Co., Ltd.25,003.50156.21
PrepaymentsM&G Holdings (Group) Co., Ltd.3,419,063.443,906,164.44
Other receivablesSales entities controlled by Guo Weilong12.930.65

(2) Payables

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemsRelated partyCarrying balance at the end of the periodCarrying balance at the beginning of the period
Accounts payableSales entities controlled by Guo Weilong9,576.58
Other payablesSales entities controlled by Guo Weilong
M&G Holdings (Group) Co., Ltd.6,234,878.32521,547.01
Advance receiptsSales entities controlled by Guo Weilong38,198,477.8112,367,997.96

7. Related-party commitments

"□ Applicable" "√ Not applicable"

8. Others

"□ Applicable" "√ Not applicable"

XIII. Share-based payments

1. Overall situation of share-based payment

"□ Applicable" "√ Not applicable"

2. Particulars on equity-settled share-based payment

"□ Applicable" "√ Not applicable"

3. Particulars on cash-settled share-based payment

"□ Applicable" "√ Not applicable"

4. Particulars on modification and termination of share-based payment"□ Applicable" "√ Not applicable"

5. Others

"□ Applicable" "√ Not applicable"

XIV. Commitments and Contingencies

1. Important commitments

"√ Applicable" "□ Not applicable"Important external commitments, nature, and amount existing on the balance sheet date

(1) Mortgage, pledge and guarantee matters in which Shanghai Pudong Development Bank Co.,Ltd. Songjiang Sub-branch (“SPD Songjiang Sub-branch”) is involved

① On 24 March 2016, the subsidiary Jiangsu Marco Pen Co., Ltd. and SPD Songjiang Sub-branch signed the Cap Guarantee Contract numbered ZB9808201600000004, pursuant to which,SPD Songjiang Sub-branch provides a guarantee with a maximum amount not exceeding theequivalent of USD12,000,000.00 to the debts incurred by Jiangsu Marco Pen Co., Ltd. inhandling various financing businesses during the period from 24 March 2016 to 23 March 2022;

② On 24 March 2016, Xu Peifeng and Yang Min, as the ultimate controllers of Axus Stationery,and SPD Songjiang Sub-branch signed the Cap Guarantee Contract numberedZB9808201600000005, pursuant to which, SPD Songjiang Sub-branch provides a guaranteewith a maximum amount not exceeding the equivalent of USD12,000,000.00 to the debtsincurred by Axus Stationery in handling various financing businesses during the period from 24March 2016 to 23 March 2022;

③ On 29 March 2017,Axus Stationery and SPD Songjiang Sub-branch signed the FactoringAgreement numbered 98082013280133, which stipulated that Axus Stationery transfers thereceivables to SPD Songjiang Sub-branch through the way as agreed in the Agreement, andSPD Songjiang Sub-branch agrees to assign related accounts receivable and provide relatedfactoring services in accordance with the conditions and methods stipulated in the Agreement.As of 31 December 2019, the outstanding factoring borrowing from Axus Stationery wasUSD427,099.11, equivalent to RMB2,979,528.81.

(2) Mortgage matters in which China Merchants Bank Co., Ltd. Shanghai Branch is involvedOn 29 October 2019, the subsidiary Axus Stationery and China Merchants Bank Co., Ltd.Shanghai Branch (“CMB Shanghai Branch”) signed the Credit Agreement numbered121XY2019028027; the credit line is RMB180,000,000.00, and the credit period is 12 months,from 30 October 2019 to 29 October 2020; the types of credit business under the credit lineinclude but are not limited to loans\order loans, trade financing, bill discounting, commercial billacceptance, commercial acceptance bill confirmation\discount, international\domestic letter ofguarantee, customs duty payment guarantee, corporate account overdraft, derivative transactionand gold leasing. CMB Shanghai Branch has the right to adjust the floating ratio and/or basicpoint of current asset loans regularly or irregularly in accordance with changes in relevantnational policies, changes in domestic credit market prices or changes in Axus Stationery’s owncredit policies. As of 31 December 2019, the outstanding loan of Axus Stationery wasRMB180,000,000.00.At the same time, Axus Stationery and the bank signed the Maximum Mortgage Contractnumbered 121XY2019028027 based on the above credit agreement, the mortgage period isfrom the effective date of the mortgage contract to the expiration of the period of the creditor'srights claims under the Credit Agreement; the collaterals used for mortgage include:

Name of collateralOwnership No.Original valueAccumulated depreciationNet value
No. 111 XueziHFDQ Zi (2013)47,061,453.5222,483,546.1124,577,907.41
South Road, Xianghuaqiao Street, Qingpu DistrictNo. 015437
No. 233 Xuezi South Road, Xianghuaqiao Street, Qingpu DistrictHFDQ Zi (2013) No. 01339632,156,238.7811,248,094.3120,908,144.47
No. 333 Xuezi South Road, Xianghuaqiao Street, Qingpu DistrictHFDQ Zi (2015) No. 01571860,230,210.9712,418,790.0347,811,420.94
Total139,447,903.2746,150,430.4593,297,472.82

2. Contingencies

(1) Important contingencies on the balance sheet date

"□ Applicable" "√ Not applicable"

(2) If the Company has no important contingent issues that need to be disclosed, it

should also be explained:

"√ Applicable" "□ Not applicable"There were no important contingent issues that need to be disclosed during the ReportingPeriod

3. Others

"□ Applicable" "√ Not applicable"

XV. Post-balance sheet date events

1. Important non-adjustment matters

"□ Applicable" "√ Not applicable"

2. Profit distribution

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Profits or dividends proposed to be distributed368,000,000
Profits or dividends reviewed and approved to be declared for distribution

According to the Profit Distribution Plan for 2019 reviewed and approved by the 20th meeting ofthe 4th session of Board of Directors of the Company on 10 April 2020, based on the total sockcapital registered on the registration date for the implementation of the equity distribution, theCompany intends to distribute the dividend in cash at RMB4 every 10 shares (tax inclusive) andthe total profit distributed this time is RMB368,000,000.00. The remaining distributable profits in2019 will be carried forward to the following year.

3. Sales return

"□ Applicable" "√ Not applicable"

4. Explanations on other post-balance-sheet-date events

"√ Applicable" "□ Not applicable"According to the 2020 Restricted Stock Incentive Plan of Shanghai M&G Stationery Inc. (Draft)considered and approved at the 20th meeting of the fourth Board of Directors of the Companyon 10 April 2020, the form of incentives to be adopted is restricted stock. The source of the stockis RMB A-share common stock issued by the Company to the incentive target. Incentive targetincludes directors, senior management personnel and key management, technical, and businesspersonnel who serve in the company (including holding subsidiaries, the same below) when theCompany announces this incentive plan. It does not include independent directors, supervisors,shareholders or actual controllers who hold more than 5% of shares individually or in total, andtheir spouses, parents and children. The validity period of this incentive plan is from the datewhen the registration of the first grant of restricted stocks is completed to the date when all therestricted stocks granted to the incentive objects are exempt from restricted sales or therepurchase is canceled, and the maximum period is 48 months.

XVI. Other Important Issues

1. Correction of previous-period accounting errors

(1) Retrospective restatement method

"□ Applicable" "√ Not applicable"

(2) Future application method

"□ Applicable" "√ Not applicable"

2. Debt restructuring

"□ Applicable" "√ Not applicable"

3. Asset replacement

(1) Non-monetary asset exchange

"□ Applicable" "√ Not applicable"

(2) Other asset replacement

"□ Applicable" "√ Not applicable"

4. Annuity plan

"□ Applicable" "√ Not applicable"

5. Discontinued operations

"□ Applicable" "√ Not applicable"

6. Segment information

(1) Basis for determining reporting segments and accounting policies"√ Applicable" "□ Not applicable"According to the Company's internal organizational structure, management requirements andinternal reporting system, two reporting segments are identified, namely: office direct-sellingbusiness and traditional core business. The Company's reporting segments provide differentservices. Since each segment requires different technical or marketing strategies, themanagement of the Company separately manages the operating activities of each reportingsegment and regularly evaluates the operating results of these reporting segments to determinethe allocation of resources to them and the evaluation of their performance.The transfer price between segments is determined on the basis of the actual transaction price,and the expenses indirectly attributable to each segment are grouped according to the actualshare of each segment. Assets are allocated according to the operation of the segment and thelocation of the asset. Segment liabilities include liabilities that can be attributed to the segmentformed by the segment's operating activities. If the expenses associated with liabilities sharedby multiple operating segments are allocated to these operating segments, the jointly assumedliabilities are also allocated to these operating segments.

(2) Financial information of reporting segments

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

ItemOffice direct-selling businessTraditional core businessInter-segment eliminationTotal
I. Revenue from foreign transactions3,635,092,992.227,570,977,486.2064,969,113.9811,141,101,364.44
II. Revenue from inter-segment transactions22,968,670.3142,000,443.6764,969,113.98
III. Income from investments in associates and joint ventures-576,595.97-576,595.97
IV. Credit impairment losses-18,750,413.26-9,255,596.62-28,006,009.88
V. Asset impairment losses-66,174.84-17,776,907.05-17,843,081.89
VI. Depreciation and amortization charges9,128,652.71221,938,677.01231,067,329.72
VII. Total profits (total losses)100,778,132.681,192,792,039.85-109,571.541,293,679,744.07
VIII. Income tax expenses24,974,589.33192,600,918.20-27,392.88217,602,900.41
IX. Net profits (net losses)75,803,543.351,000,191,121.65-82,178.661,076,076,843.66
X. Total assets1,675,761,928.195,904,802,289.5515,448,906.007,565,115,311.74
XI. Total Liabilities1,264,184,914.551,855,536,240.2515,531,084.663,104,190,070.14

(3) If the Company does not have a reporting segment, or if it cannot disclose the totalassets and total liabilities of each reporting segment, the reason should be explained"□ Applicable" "√ Not applicable"

(4) Other explanation

"□ Applicable" "√ Not applicable"

7. Other important transactions and matters that have an impact on investors’ decisions"□ Applicable" "√ Not applicable"

8. Others

"□ Applicable" "√ Not applicable"

XVII. Notes on the main items of the parent company's financial statements

1. Accounts receivable

(1) Disclosure by account age

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

Account ageCarrying balance at the end of the period
Within 1 year
Including: Sub-item within 1 year
Sub-total within 1 year83,650,659.61
1 to 2 years61,547.48
2 to 3 years16,481.17
Above 3 years34,618.97
3 to 4 years
4 to 5 years
Above 5 years
Less: Bad debt provisions-814,082.58
Total82,949,224.65

(2) Disclosure by accruing method for bad debt provisions

"√ Applicable" "□ Not applicable"

Unit: Yuan Currency: RMB

CategoryClosing balanceOpening balance
Carrying balanceBad debt provisionsvalueCarrying balanceBad debt provisionsvalue
AmountPercentage (%)AmountAccruing percentage (%)AmountPercentage (%)AmountAccruing percentage (%)
Bad debt provisions accrued separately
Including:
Bad debt provisions accrued according to the combination83,763,307.23100.00814,082.580.9782,949,224.6594,543,811.55100.001,219,045.691.2993,324,765.86
Including:
Combination 1: Account age16,281,651.6719.44814,082.585.0015,467,569.0921,821,635.3423.081,219,045.695.5920,602,589.65
Combination II: Consolidated balance of related-parties current accounts - provisional input tax
Combination III: Related parties in the scope of the consolidated financial statements67,481,655.5680.5667,481,655.5672,722,176.2176.9272,722,176.21
Total