Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR THE SECURITIES ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended August 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Date of event requiring this shell company report
Commission file number: 001-38077
Bright Scholar Education Holdings Limited
(Exact name of registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation)
No.1, Country Garden Road
Beijiao Town, Shunde District, Foshan, Guangdong 528300
The People’s Republic of China
(Address of principal executive offices)
Ms. Dongmei Li, Chief Financial Officer
No.1, Country Garden Road
Beijiao Town, Shunde District, Foshan, Guangdoug 528300
The People’s Republic of China
Telephone: +86-757-6683-2007
Facimile: +86-757-2360-2220
E-mail: lidongmei@brightscholar.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
Title of each class
American depositary shares, each representing one Class A
ordinary share, par value US$0.00001 per share
Class A ordinary shares, par value US$0.00001 per share*
*Not for trading, but only in connection with the listing on the
New York Stock Exchange of American depositary shares
Trading Symbol
BEDU
Name of each exchange on which registered
The New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report:
Class A ordinary shares, par value US$0.00001 each
Class B ordinary shares, par value US$0.00001 each
25,695,274
93,690,000
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer. ☐
Accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the
Exchange Act. ☒
† Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒
International Financial Reporting Standards as issued by the
International Accounting Standards Board ☐
Other ☐
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
Table of Contents
INTRODUCTION
MARKET AND INDUSTRY DATA
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.
PART II
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
PART III
ITEM 17.
ITEM 18.
ITEM 19.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
INFORMATION ON THE COMPANY
UNRESOLVED STAFF COMMENTS
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
FINANCIAL INFORMATION
THE OFFER AND LISTING
ADDITIONAL INFORMATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
AUDIT COMMITTEE FINANCIAL EXPERT
CODE OF ETHICS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
CORPORATE GOVERNANCE
MINE SAFETY DISCLOSURE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
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INTRODUCTION
Except where the context otherwise requires and for purposes of this annual report on Form 20-F only:
● “ADSs” refers to American depositary shares, each of which represents one Class A ordinary share;
● “Advanced Placement” or “AP” refers to a program in the United States and Canada created by the U.S.
College Board which offers college-level curricula and examinations to high school students;
● “A-Level” or “A Levels” refers to the General Certificate of Education (Advanced Level) Examination, a
subject-based qualification conferred as part of the General Certificate of Education, as well as a school
leaving qualification offered by the educational bodies in the United Kingdom and the educational
authorities of British Crown dependencies to students completing secondary or pre-university education;
● “BGY Education Investment” refers to BGY Education Investment Management Co., Ltd., our affiliated
entity that controls and holds our schools in China, through certain contractual arrangements;
● “Bright Scholar Holdings” refers to Bright Scholar Education Holdings Limited;
● “CAGR” refers to compound annual growth rate;
● “China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report
only, Taiwan and the special administrative regions of Hong Kong and Macau;
● “Country Garden” refers to Country Garden Holdings Company Limited, a company listed on The Stock
Exchange of Hong Kong Limited (stock code: 2007), a related party, and its subsidiaries;
● “Diploma Program” refers to the International Baccalaureate Diploma Program, a two-year educational
program administered by the International Baccalaureate headquartered in Geneva, Switzerland, providing
an internationally accepted qualification for entry into higher education, which is generally recognized in all
major English-speaking countries;
● “fiscal year” refers to the period from September 1 of the previous calendar year to August 31 of the
concerned calendar year;
● “IB” or “IB Organization” refers to International Baccalaureate, an international educational foundation
headquartered in Geneva, Switzerland, which offers four educational programs: the IB Diploma Program
and the IB Career-related Program for students aged 16 to 19, the IB Middle Years Program for students
aged 11 to 16, and the IB Primary Years Program for children aged three to 12, generally recognized in all
major English-speaking countries;
● “IGCSE” refers to the International General Certificate of Secondary Education, an English language
curriculum developed by the University of Cambridge International Examinations and offered to students to
prepare them for the International Baccalaureate, A Level and BTEC Level 3 which is recommended for
higher-tier students;
● “learning centers” refer to entities providing after-school education training services, including English
proficiency training and extracurricular programs;
● “ordinary shares” or “shares” refers to our Class A and Class B ordinary shares of par value US$0.00001 per
share;
● “RMB” or “Renminbi” refers to the legal currency of China;
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● “school” refers to each of our international schools, bilingual schools, overseas schools and kindergartens,
unless otherwise specified;
● “school year” refers to the annual period of instruction at each school respectively, which customarily runs
from September of the previous calendar year to July of the concerned calendar year;
● “SEC” refers to the Securities and Exchange Commission of the United States;
● “top local high schools” refers to a group of public high schools that are designated as top local high schools
during each high school application period by the local educational authorities in cities in which our
bilingual schools are located. Such schools are granted early admission privilege by which they enjoy first
priority to admit student applicants with excellent academic performances based on their score rankings in
Zhongkao, the high school entrance examinations administered in China;
● “US$,” “U.S. dollars,” “$” and “dollars” refers to the legal currency of the United States of America;
● “we,” “us,” “our,” and “our company” refers to Bright Scholar Education Holdings Limited, its subsidiaries
and its affiliated entities; and
● “Zhuhai Bright Scholar” refers to Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd., our
wholly-owned subsidiary in China.
Names of certain companies provided in this annual report are translated or transliterated from their original
Chinese legal names.
Discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed
therein are due to rounding.
This annual report on Form 20-F includes our audited consolidated financial statements for the 2018, 2019 and
2020 fiscal years.
This annual report on Form 20-F contains information from an industry report commissioned by us and prepared
by Frost & Sullivan, an independent research firm, to provide information regarding our industry and our market position
in China. We refer to this report as the Frost & Sullivan report.
This annual report contains translations of certain Renminbi amounts into U.S. dollars at specified rates. Unless
otherwise stated, the translation of Renminbi into U.S. dollars has been made at RMB6.8474 to US$1.00, the noon buying
rate in effect on August 31, 2020 as set forth in the H.10 Statistical Release of the Federal Reserve Board. We make no
representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or
Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes
controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign
exchange and through restrictions on foreign trade. On December 18, 2020, the noon buying rate was RMB6.5395 to
US$1.00.
We listed our ADSs on the New York Stock Exchange under the symbol “BEDU” on May 18, 2017 and
completed an initial public offering of 17,250,000 ADSs on June 7, 2017. We issued an additional 10,000,000 ADSs on
March 2, 2018. In July 2019, we issued senior notes in the aggregate principal amount of US$300.0 million, with interests
of 7.45% per annum and maturing on July 31, 2022, and listed such senior notes on the Stock Exchange of Hong Kong
Limited.
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MARKET AND INDUSTRY DATA
Market data and certain industry forecasts used in this annual report were obtained from internal surveys, market
research, publicly available information and industry publications. Industry publications generally state that the
information contained therein has been obtained from sources believed to be reliable, but that the accuracy and
completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts and market research,
while believed to be reliable, have not been independently verified, and we make no representation as to the accuracy of
such information.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
We have derived our selected consolidated statement of comprehensive income data for the 2018, 2019 and 2020
fiscal years, and our selected consolidated balance sheet data as of August 31, 2019 and 2020, from our audited
consolidated financial statements included in this annual report. Our selected combined statement of comprehensive
income data for the fiscal years of 2016 and 2017 and our selected combined and consolidated balance sheet data as of
August 31, 2016, 2017 and 2018 have been derived from our audited combined and consolidated financial statements not
included in this annual report. Our financial statements have been prepared in accordance with U.S. GAAP.
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You should read the following information in conjunction with our audited combined and consolidated financial
statements and related notes and “Item 5. Operating and Financial Review and Prospects” in this annual report. Our
historical operating results presented below are not necessarily indicative of the results to be expected for any future fiscal
period.
2016
RMB
2017
RMB
Year Ended August 31,
2018
RMB
2019
RMB
RMB
(in thousands, except for share and per share data)
2020
US$
Summary Combined and Consolidated Income
(Loss) Data:
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Other operating income
Impairment loss on operating lease right-of-use
assets
Impairment loss on goodwill
Operating income
Interest income/(expense), net
Investment income
Other expenses
Income before income taxes and share of equity
in income of unconsolidated affiliates
Income tax expense
Share of equity in income of unconsolidated
affiliates
Net income
Net income attributable to non-controlling
interests
Net (loss)/income attributable to ordinary
shareholders
Net (loss)/earnings per share attributable to
ordinary shareholders
Basic
Diluted
Weighted average shares used in calculating net
loss/earnings per ordinary share:
Basic
Diluted
1,040,329
(736,205)
304,124
(290,098)
4,283
1,328,367
(860,330)
468,037
(261,972)
8,874
1,718,871
(1,090,595)
628,276
(368,141)
12,027
2,563,005
(1,586,014)
976,991
(691,900)
15,435
3,366,503
(2,144,786)
1,221,717
(871,154)
38,661
—
—
18,309
2,148
805
(457)
20,805
(17,889)
—
2,916
—
—
214,939
4,901
13,718
(779)
232,779
(40,970)
—
191,809
—
—
272,162
27,297
21,669
(4,803)
316,325
(67,382)
(40)
248,903
—
—
300,526
24,254
17,414
(8,617)
333,577
(80,580)
(239)
252,758
(12,772)
(68,723)
307,729
(159,352)
106,675
(11,291)
243,761
(78,992)
(595)
164,174
491,647
(313,226)
178,421
(127,224)
5,646
(1,866)
(10,036)
44,941
(23,272)
15,579
(1,649)
35,599
(11,536)
(87)
23,976
39,290
19,759
1,934
11,659
3,169
463
(36,374)
172,050
246,969
241,099
161,005
23,513
(0.38)
(0.38)
1.64
1.64
2.02
2.02
1.97
1.97
1.34
1.34
0.20
0.20
96,983,360
96,983,360
104,839,041
104,839,041
122,088,201
122,186,796
122,322,894
122,430,457
120,158,001
120,158,001
120,158,001
120,158,001
2016
RMB
2017
RMB
2018
RMB
2019
RMB
2020
RMB
US$
(in thousands)
As of August 31,
Summary Combined and
Consolidated Balance Sheet
Data
Cash and cash equivalents
Restricted Cash
Total assets
Total equity
Current liabilities
Total liabilities
356,018
6,433
1,239,232
161,561
1,011,849
1,077,671
1,883,000
13,662
2,686,632
1,419,458
1,202,074
1,267,174
3,153,852
10,229
4,666,481
3,011,599
1,625,344
1,654,882
3,246,995
18,019
7,787,637
3,083,268
2,512,290
4,704,369
3,377,684
1,046,253
10,823,309
3,124,381
3,695,043
7,698,928
493,280
152,795
1,580,643
456,287
539,626
1,124,356
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
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D. Risk Factors
An investment in our ADSs involves risks. You should carefully consider the risks described below, as well as the
other information included or incorporated by reference in this annual report, before making an investment decision. Our
business, financial condition or results of operations could be materially adversely affected by any of these risks. The
market or trading price of our ADSs could decline due to any of these risks, and you may lose all or part of your
investment. In addition, the risks discussed below also include forward-looking statements and our actual results may
differ substantially from those discussed in these forward-looking statements. You should also review the section of this
annual report captioned “Item 5. Operating and Financial Review and Prospects—G. Safe Harbor on Forward-Looking
Statements.” Please note that additional risks not presently known to us, that we currently deem immaterial or that we
have not anticipated may also impair our business and operations.
Risk Factor Summary
Risks Related to Our Business
● our ability to execute our growth strategies or continue to grow as rapidly as we have in the past;
● our ability to remain profitable or increase profitability in the future;
● PRC laws and regulations imposing significant limitations on our ability to engage in the private for-profit
education business;
● Uncertainties in our contractual arrangements resulting from changes in and interpretations of PRC laws and
regulations;
● limitations on our ability to maintain the operation of our kindergartens and to expand our kindergarten
network;
● our learning centers being able to secure required educational permits and business license;
● acquisition related risks as a result of our acquisition strategy;
● our ability to manage our business expansion and integrate businesses we acquire;
● unknown or contingent liabilities related to the acquired businesses;
● our ability to secure additional capital for our future expansion;
● our ability to ramp up existing schools and successfully launch new schools;
● concentration of our business in Guangdong province, China;
● our ability to enroll and retain a sufficient number of students;
● accidents, injuries or other harm that may occur at our schools, learning centers or the events we organize;
and
● our ability to charge tuition or other fees at sufficient levels.
Risks Related to Our Corporate Structure
● ownership structure and contractual arrangements being challenged by extensive regulation over private
education service business in China;
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● uncertainties in the interpretation and implementation of the newly enacted PRC Foreign Investment Law
and how it may impact the viability of our current corporate structure, corporate governance and business
operations;
● contractual arrangements with BGY Education Investment and its shareholders being ineffective in
providing control as direct ovwership;
● failure by our affiliated entities and their shareholders to perform their obligations under the contractual
arrangements;
● potential conflict of interest between us and our largest shareholders; and
● additional taxes owed by us or our affiliated entities due to the PRC tax authorities’ scrutiny over our
contractual arrangement.
Risks Related to Doing Business in China
● overall economy in China or the education services market affected by PRC economic, political and social
conditions, as well as changes in any government policies, laws and regulations;
● uncertainties with respect to the PRC legal system;
● any increase in applicable enterprise income tax rates or the discontinuation of any preferential tax
treatments currently available to us;
● unfavorable tax consequences to us as a result of us being classified as a PRC “resident enterprise;”
● are significant uncertainties under the PRC enterprise income tax law relating to the withholding tax
liabilities of our PRC subsidiaries;
● uncertainties with respect to indirect transfers of the equity interests in PRC resident enterprises by their
non-PRC holding companies; and
● restrictions on currency exchange.
Risks Related to Our Ordinary Shares and ADSs
● exemptions from requirements applicable to other public companies due to our status as an emerging growth
company;
● volatile ADS trading price;
● decline in our ADS price due to substantial future sales or perceived potential sales of our ADSs;
● decline in our ADS price due to techniques employed by short sellers;
● limitation on your ability to influence corporate amtters due to our dual-class share structure with different
voting rights; and
● decline in our ADS price due to inaccurate, unfavorable or little research about us.
Risks Related to Our Business
We may not be able to execute our growth strategies or continue to grow as rapidly as we have in the past several years.
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We have grown rapidly in the past few years, expanding our school network from 29 schools as of September 1,
2013 to 102 schools as of the date of this annual report. We intend to enroll students, recruit teachers and educational staff,
increase the utilization rates of our existing and new schools and invest in overseas and complementary businesses.
However, we may not be able to continue to grow as rapidly as we did in the past due to uncertainties involved in the
process, for example:
● we may not be able to attract and retain a sufficient number of students for our existing and new schools;
● we may be unable to successfully integrate complementary or acquired businesses with our current service
offerings and achieve anticipated synergies;
● we may not be able to hire and retain principals, teachers, educational staff and other employees for our
existing and new schools;
● we may require more time than expected to obtain the accreditation for the education programs, particularly
the international education programs, at our schools;
● we may be unable to continue to refine our curricula and optimize our students’ academic performance;
● our business partner, Country Garden, a related party, may be unable to develop new residential
communities at locations with a robust demand for private education or sell residential units to a sufficient
number of buyers seeking convenient access to private education;
● the development of new schools may be delayed or affected as a result of many factors, such as delays in
obtaining government approvals or licenses, shortages of key construction supplies and skilled labor,
construction accidents, or natural catastrophes, some of which are beyond our control;
● we may be unable to successfully build our brand name and launch schools independent of Country Garden;
and
● we may be unable to successfully execute new growth strategies.
These risks may increase significantly when we expand into new cities or countries. Managing the growth of a
geographically diverse business also involves significant risks and challenges. We may find it difficult to manage financial
resources, implement uniform education standards and operational policies and maintain our operational, management and
technology systems across our network. If we are unable to manage our expanding operations or successfully achieve
future growth, our business, prospects, results of operations and financial condition may be materially and adversely
affected.
We may not remain profitable or increase profitability in the future.
We may not be successful in maintaining or increasing overall profitability. In particular, certain of our schools,
especially those at the ramp-up stage and with comparatively low utilization rates, are currently operating at a loss and we
may not be able to improve the profitability of these schools. As we plan to expand our school network, new schools we
launch may negatively impact our profitability.
Our ability to maintain profitability and positive cash flow will depend in large part on our ability to control our
costs and expenses which we expect to increase as we further develop and expand our school network, as well as our
ability to attract and retain educational talents to promote our business success. We may incur significant losses in the
future for a number of reasons, including the other risks described in this annual report. We may also further encounter
unforeseen expenses, difficulties, complications, delays and other unknown events. If we fail to increase revenue at the
rate we anticipate or if our expenses increase at a faster rate than the increase in our revenue, we may not be able to
remain profitable or increase profitability.
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We may be subject to significant limitations on our ability to engage in the private for-profit education business and
may otherwise be materially and adversely affected by changes in PRC laws and regulations.
The Standing Committee of the National People’s Congress amended the Law on the Promotion of Private
Education on November 7, 2016, which became effective on September 1, 2017 and were further amended on
December 29, 2018 (the “Amended Law”). Pursuant to the Amended Law, sponsors of private schools may choose to
establish schools in China either as non-profit or for-profit schools. Sponsors of for-profit private schools are entitled to
retain the profits from their schools and the operating surplus may be allocated to the sponsors pursuant to the PRC
company law and other relevant laws and regulations. On the other hand, sponsors of non-profit private schools are not
entitled to any distribution of profits from their schools and all revenue must be used for the operation of the schools. As a
holding company, our ability to generate profits, pay dividends and other cash distributions to our shareholders under the
existing and the Amended Law is affected by many factors, including but not limited to the characterizations of our
schools as for-profit or non-profit schools, the profitability of our schools and other affiliated entities, and our ability to
receive dividends and other distributions from our PRC subsidiary, Zhuhai Bright Scholar, which in turn depends on the
service fees paid to Zhuhai Bright Scholar from our schools and other affiliated entities. If our schools elect to be non-
profit private education entities, our contractual arrangements with such schools may be subject to more stringent scrutiny.
Furthermore, pursuant to the Amended Law, sponsors are not permitted to establish for-profit schools if such schools
provide compulsory education services, which cover grades one to nine. Nevertheless, during the reporting period,
compulsory education services accounted for a significant portion of our student base as well as revenue. For further
details, see “Item 4. Information on the Company—B. Business Overview— Regulations—Regulations on Private
Education in the PRC—The Law for Promoting Private Education and the Implementation Rules for the Law for
Promoting Private Education.”
As of the date of this annual report, it remains uncertain as to how the Amended Law will be interpreted and
implemented as well as the impact the Amended Law may have on our business operations. For example, under the
Amended Law, schools that offer compulsory education services in China must register as non-profit schools while high
schools can elect to register as either for-profit or non-profit schools. However, it is unclear what options are available for
schools that offer both compulsory and high school education in some provinces where our schools operate. In addition,
the local government authorities may impose additional limits on the tuition and fees our schools in China can charge
when implementing the Amended Law. Any of the abovementioned uncertainties with regard to the Amended Law may
have a material adverse effect on our business, financial condition and results of operations.
As of the date of this annual report, we have 94 schools in China, among which 11 are for-profit schools, 13 are
non-profit private schools, and the remaining ones have not elected to register as either for-profit or non-profit schools.
The election to register as for-profit or non-profit schools depends on the legislative status of the implementing regulations
by competent government authorities in the various provinces where we operate. In the provinces where the
implementation regulations have specified deadlines and provided grace periods for sponsors to elect to register private
schools as for-profit or non-profit schools, we are still within such grace periods. For example, for our schools located in
Hunan province, we shall be submitting our applications in batches aiming to complete the required election by August
2022. For our schools located in Jiangsu province, we do not have to make such elections until December 2022. For our
schools located in Hebei and Shandong provinces, we do not have to make such elections until September 2022. The date
of election can be postponed to a later date in some of the provinces we operate, if so approved by the local authorities.
However, for provinces that have not promulgated implementing regulations that include deadlines or procedures for
making the election, it is unclear when or how we must make the election. To the extent that we have to register certain of
our schools in China as non-profit schools pursuant to the implementing regulations, our ability to generate revenue from
these schools in the form of service fees could be adversely affected.
Our corporate structure is built upon a series of contractual arrangements which are subject to uncertainties resulting
from changes in and interpretations of PRC laws and regulations.
Zhuhai Bright Scholar has entered into an exclusive management services and business cooperation agreement
with each of our affiliated entities in China, including our schools controlled and held by BGY Education Investment,
pursuant to which we provide service to our schools in China in exchange for the payment of service fees. As a holding
company, our ability to generate profits and pay dividends and other cash distributions to our shareholders depends on our
ability to receive dividends and other distributions from our PRC subsidiary, Zhuhai
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Bright Scholar, which in turn depends on the service fees paid to Zhuhai Bright Scholar from our schools and other
affiliated entities in China.
As advised by JunHe LLP, our PRC legal counsel, our right to receive the service fees from our schools and other
affiliated entities in China does not contravene any PRC laws and regulations and that payment of service fees under our
contractual arrangements should not be regarded as the distribution of returns, dividends or profits to the sponsors of our
schools under the PRC laws and regulations. However, if the relevant PRC government authorities take a different view,
or if the Amended Law were to be implemented and interpreted in a manner that results in our current business practices
being in violation, our business, financial condition and results of operations may be materially and adversely affected.
For example, the relevant PRC government authorities may seek to confiscate any or all of the service fees that have been
paid by our schools to Zhuhai Bright Scholar, including retrospectively, to the extent that such service fees are tantamount
to returns, dividends or profits taken by the sponsors of these schools. The relevant PRC government authorities may also
seek to prevent students from attending our schools or, in a more extreme situation, revoke the operating permits of these
schools. We may also have to reorganize our operations to meet the requirements regarding the compulsory education
services and comply with the Amended Law. In addition, if our schools in China are to elect to be non-profit private
education entities, our contractual arrangements with such schools may be subject to more stringent scrutiny. The
occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of
operations.
On August 10, 2018, the Ministry of Justice, or the MOJ, released the Implementation Rules of the Law on the
Promotion of Private Education (Revised Draft) (Draft for Review), or the MOJ Draft, to seek public comments. As of the
date of this annual report, the MOJ Draft has not entered into force, with uncertainties with respect to its contents and its
retroactive effect. As advised by our PRC legal counsel, if the MOJ Draft is legislated in the same form as published,
pursuant to the Legislation Law of the PRC, it shall not have retroactive effect in principle, and except for the situations
disclosed in this annual report, the implementation of the MOJ Draft will not require our existing corporate structure and
contractual arrangements to be restructured. The MOJ Draft has stipulated, among others, (1) that foreign-invested
enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor,
participate in or actually control private schools that provide compulsory education, (2) that group-based education
organizations shall not control non-profit private schools through mergers and acquisitions, franchise agreements and
contractual arrangements, and (3) that related party transactions entered into by private schools shall be open, fair and just
and shall not harm national interests, school interests, or student or teacher interests. However, there is uncertainty as to
whether the MOJ Draft will be legislated in the same form as published for consultation and how they will be interpreted
and implemented when and if legislated at all. In particular, as advised by our PRC legal counsel, if the Implementation
Rules of the Law on the Promotion of Private Education is promulgated and implemented in accordance with the MOJ
Draft with retroactive effect, the validity of our contractual arrangements may be challenged and our corporate structure
may need to be restructured to comply with the new regulations, which may be time-consuming and expensive and impose
additional restrictions on our business expansion.
On August 17, 2020, the PRC Ministry of Education, or MOE, and other four ministries and commissions
promulgated the Opinions on Further Standardization of Education Fee, which further strengthen the regulation of private
education fees. The Opinions on Further Standardization of Education Fee stipulate that private schools must publicize the
itemized fees and standards at a prominent location in the school and indicate the itemized fees and standards in the
admissions brochure and admission notice. If fees that should be publicized are not publicized, or the content of the
publicity is not in compliance with the relevant policies, students are entitled to refuse the payment of the fees. In addition,
the Opinions on Further Standardization of Education Fee emphasizes that sponsors of non-profit schools shall not tranfer
proceeds generated from operating such schools by way of related party transactions that fail to meet the requirements of
being open, fair or just, and other service fees charged to our students must be charged based on a reasonable basis and
voluntary and non-profit principles. If the regulatory authority deems otherwise, our operations may be adversely affected.
On September 7, 2020, the MOE published the Draft Preschool Education Law for public comments. The Draft
Preschool Education Law, among other things, tightens restrictions over kindergartens in pursuing profits and prohibits
social capital from controlling state-run kindergartens and non-profit kindergartens through mergers and acquistitions,
entrusted operation, franchising, through variable interest entities or via contractual control.
Our schools in China that are involved in related party transactions may also be subject to strict supervision by
relevant government authorities, and we may need to establish corresponding information disclosure systems and
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incur greater compliance costs, and our contractual arrangements, which may be deemed as related-party transactions,
may be subject to scrutiny against the stipulated benchmarks by relevant government authorities.
If our existing group structure or contractual arrangements are deemed to violate any rules, laws or regulations,
we may be required to terminate or amend our contractual arrangement, our license to operate private schools may be
revoked, cancelled or not be renewed and we may be subject to penalties as determined by the relevant authorities. We
may also be restricted from further expanding our schools or school network. For example, we may not be able to acquire
non-profit private schools. If any of the foregoing occurs, our business, financial condition and results of operations would
be materially and adversely affected.
Our ability to maintain the operation of our kindergartens and to expand our kindergarten network may be limited due
to our listing status as well as the PRC laws and regulations, which may in turn affect our results of operations.
On November 7, 2018, the Central Committee of the Communist Party of China and the State Council
promulgated the Opinions on Regulating the Development and Deepening of the Reform of the Pre-School Education (the
“Opinions”), which limits the ability by kindergartens to obtain financing through equity financing. It is unclear whether
the Opinions will be applied retrospectively. In addition, we have not been notified of or been subject to any material fines
or other penalties under any PRC laws or regulations due to any alleged violation of the Opinions. However, we cannot
assure you that the Opinions will not be applied retrospectively, and that we will not be subject to adverse impact under
the Opinions or any laws or regulations promulgated pursuant to the Opinions in the future. Moreover, the Opinions
restrict public companies from acquiring for-profit kindergartens with funds raised in the capital markets. Even though the
Opinions do not clearly provide whether companies listed in capital markets outside the PRC fall under such restriction,
we may be subject to this restriction, which would limit our ability to carry out further expansion plans with regard to our
kindergarten business.
In addition, on January 22, 2019, the General Office of the State Council issued the Circular on Initiating the
Rectification of Kindergartens Affiliated to Residential Communities in Urban Areas (the “Circular on Initiating the
Rectification”), which requires existing community-affiliated kindergartens to be handed over to local education
authorities and shall be held by local education authorities as public kindergartens or turn into inclusive kindergartens
operated by authorized social entities. It also provides that community-affiliated kindergartens shall be not-for-profit.
Some of our kindergartens are community-affiliated facilities, and the enforcement of the Circular on Initiating the
Rectification may require us to convert them into low-profit or not-for-profit kindergartens, which may affect our
profitability and results of operations. As of the date of this annual report, we are in the process of clarifying with local
education authorities for four of our kindergartens, which we were notified to hand over to, or to operate on behalf of the
local education authorities. As the implementation rules for determining community-affiliated kindergartens have not been
promulgated and the attitudes of local education authorities towards the enforcement of such circular may vary in different
regions, it remains uncertain whether and when our community-affiliated kindergartens will be required to make such
conversion and to what extent such circular will impact on our business operations in general. See “Item 4. Information on
the Company—B. Business Overview—Regulations—Regulations on Private Education in the PRC—Opinions on
Regulating the Development and Deepening of the Reform of Pre-school Education.”
A number of our learning centers do not possess the required educational permits and business licenses and are
currently unable to obtain them, which may subject us to fines and other penalties, including the suspension of
operations in noncompliant learning centers and confiscation of profits derived from noncompliant operations.
According to the Amended Law, which became effective on September 1, 2017, private schools for after-school
tutoring can be established as for-profit private schools at the election of the school sponsors. The Amended Law also
deleted the provision which stipulates that measures for administration of profit-making privately-run training institutions
registered with the administrative department for industry and commerce shall be separately formulated by the State
Council. According to The Rules for the Implementation of Supervision and Management of For-profit Private Schools,
jointly issued by the Ministry of Education, the Ministry of Human Resources and Social Security and the State
Administration for Industry and Commerce, which came into force on December 30, 2016, for-profit private tutoring
institutions shall be in compliance with the regulations applicable to private schools. On February 13, 2018, the General
Offices of the Ministry of Education and three other ministries in China jointly issued the Notice to Launch Special
Campaign towards After-school Tutoring Institutions on Practically Reducing Burdens for Primary and Middle School
Students, which requires after-school tutoring institutions with satisfactory
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conditions to obtain school operation licenses and other permits. Further, on August 22, 2018, the State Council issued the
Opinion on Supervising After-School Tutoring Institutions (the “Opinions 80”), which provides detailed guidance for
these after-school tutoring institutions. Therefore, we expect that the Amended Law, accompanied with its relevant
implementation rules and regulations as well as other administrative actions, will bring significant changes to our
compliance environment and a certain number of our entities, through which we operate our existing learning centers, may
be required to obtain new licenses and permits or update their existing ones.
As of the date of this annual report, eight out of 22 of our learning centers in China currently in operation do not
possess the operating permits , while nine out of 22 of our learning centers do not possess business licenses required by
the regulatory changes discussed above. Although the implementing rules for the Amended Law or the relevant local
regulations have not been published to the public, we are in the process of preparing filings and applying for permits for
these learning centers in accordance with the Opinions 80 and relevant PRC laws and regulations but do not expect to
complete all such filings and obtain all such permits in the near term. If we fail to obtain such required permits and
licenses, we may be subject to fines or confiscation of profits derived from noncompliant operations and we may be
unable to continue the operations at our noncompliant learning centers, which could materially and adversely affect our
business and results of operations.
We have in the past acquired several businesses and intend to remain acquisitive while continue our organic growth,
which may expose us to acquisition related risks.
We are at all times pursuing a number of acquisition opportunities and these processes are, at any time, in various
stages of completion. For example, we have completed several acquisitions in the United Kingdom and will continue to
seek opportunities in overseas markets as well as in complementary education services. Our targets may cover a wide
range of education, including independent schools, boarding schools, art institutes, pre-university education service
providers, language training centers and other education-related service providers. Our acquisition strategy exposes us to
significant acquisition related risks. If we successfully complete several of these ongoing opportunities, the overall scope
of our operations could grow substantially in the near to mid-term and would have a material impact on our business,
results of operations and financial condition. While there is no certainty as to whether any of the opportunities that we are
currently pursuing, or any future opportunity, will be completed, some of these opportunities may be completed in the
near- or mid-term, if current challenges to the processes can be overcome. Our acquisition related risks include:
● failure to obtain sufficient financing on satisfactory commercial terms in a timely manner;
● failure to successfully manage the increased leverage, interest expense, gearing and risks of default;
● depletion of our resources and cash flows available for existing operations;
● significant reduction in our cash flow and liquidity for financing the acquisitions;
● unanticipated challenges in operating in jurisdictions in which we do not currently operate in or do not
operate at a significant scale, such as failure to get accustomed to the political, cultural and legal
environment of these new jurisdictions;
● unforeseen challenges in operating new types of schools or programs and the failure to obtain relevant
licenses for these new businesses;
● failure to manage and integrate the acquired businesses into our current operations effectively and may
require financial resources that would otherwise be available for the ongoing development or expansion of
our existing operations;
● failure to adjust our current business model to manage and operate at a more sizable scale and to realize the
expected benefits from economies of scale;
● divert our management’s attention from existing businesses as they commit significant resources and efforts
to the acquisition process;
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● incurrence of significant costs in pursuing each acquisition, even if transactions cannot be successfully
pursued, such as legal and managerial costs in conducting due diligence on the targeted businesses, resulting
in a deprivation of the value of the targeted businesses;
● unforeseen contingent risks and latent liabilities of the targeted businesses that are not revealed to us in the
due diligence process;
● financial risks related to the acquisition processes due to the inaccuracy of our assumptions with respect to
the cost of and schedule for completing the acquisitions;
● potential loss of key personnel and students of the acquired business and failure to develop new
relationships with students, teachers and other third parties in the overseas market;
● failure to recover the cost of the acquisitions through the materialization of the expected value from the
targeted businesses or to achieve synergistic effect;
● regulatory risks related to the acquisition processes and to the operation of the newly acquired businesses,
such as trade barriers and other restrictive or protective measures of our targeted overseas markets due to
our lack of experience in dealing with the relevant authorities;
● liabilities related to the acquisitions against the sellers if we are unable to fulfil our obligations to them
pursuant to the relevant sell and purchase agreements resulting in unanticipated financial costs;
● unanticipated increase in financing cost for the acquisitions due to fluctuation in foreign currencies and
other foreign exchange restrictions or currency controls; and
● failure to protect our minority interests in certain non-wholly owned schools or to increase our
shareholdings by acquiring more equity interests and our interests may not be aligned with those of
controlling shareholders’.
We may not be able to effectively manage our business expansion and successfully integrate businesses we acquire.
In recent years, we have expanded rapidly through acquisitions in China and overseas. We plan to continue
expanding our operations in China as we address the growth in our student base and the market demand of our quality
education services and complementary education services. As part of our global expansion plan, we have also been
actively exploring merger and acquisition opportunities abroad to expand our global school network, targeting quality K-
12 private education providers and reputable schools in our targeted overseas countries and jurisdictions where students of
our domestic school network would normally be interested in pursuing or continuing their education. For further details,
see “Item 4. Information on the Company—B. Business Overview—Our Expansions and Investments.”
Our rapid expansion has resulted, and will continue to result, in substantial demands on our management,
personnel, operational, technological and other resources. The sustainable post-acquisition organic growth is largely
dependent on our ability to integrate operations, system infrastructure, existing partnerships and management philosophies
of acquired schools and businesses. The integration of acquired schools is complicated and time-consuming and requires
significant resource commitment, standardized integration process, and adequate planning and implementation. There can
be no assurance that the acquisitions will be as successful as intended, or at all. The main challenges involved in
integrating acquired schools and business include the following:
● implementing integration process and management systems to ensure management philosophies, group-wide
strategies and evaluation benchmarks can be effectively carried out at each acquired school and business;
● demonstrating to students of our acquired schools that the acquisitions will not result in adverse changes in
the service quality and business focus;
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● retaining local existing managerial and operational teams and qualified education professionals of our
acquired schools and businesses;
● integrating and streamlining different system infrastructure and data management systems;
● integrating financial reporting systems, the failure of which could cause a delay in, or impact the reliability
of, our financial statements;
● maintaining adequate internal control over financial reporting and preventing failed or delayed integration of
these acquired businesses into our internal control over financial reporting;
● preserving strategic, marketing or other important relationships of the acquired schools;
● obtaining requisite pre-acquisition and post-acquisition regulatory approvals in countries and jurisdictions in
which our target schools and businesses are located in a timely manner or at all; and
● competing with multinational education companies.
Therefore, we cannot assure you that we will be able to integrate the acquired schools and businesses with our
existing operations in accordance with the expected timetables, and we may incur significant financial resources to
streamline the operation of the acquired schools and businesses under our internal control requirements, and our pricing
and profitability targets may not prove accurate or feasible resulting in adverse impact to our financial performance. Any
difficulties or delays encountered in connection with the integration of our and the acquired businesses’ operations could
divert substantial management attention to the transition of the acquired schools and businesses before achieving full
integration and may result in delay or deferral by our management of important strategic decisions for our existing
businesses, which may adversely affect our business growth. In addition, the businesses and schools we acquire may be
loss making or have existing liabilities or other risks that we may not be able to effectively manage or may not be aware of
at the time we acquire them, which may impact our ability to realize the expected benefits from the acquisition or our
financial performance.
In addition, we plan to acquire additional overseas schools to expand our global network. We have announced a
number of international acquisitions and may undertake future acquisitions or other corporate transactions in the future.
We cannot assure you that we will be able to effectively and efficiently identify new overseas school projects, manage
acquired overseas schools and our overseas operations, or integrate the acquired overseas schools with our existing
operations. In addition, political and economic instabilities, tariffs, trade barriers and other restrictive actions taken by the
governments of our targeted markets, fluctuations in foreign exchange rates, our insufficient experience and knowledge of
the local markets as well as the relevant local laws and regulations may all affect our ability to operate our overseas
schools and manage our overseas operations, which in turn may have a material and adverse effect on our business,
financial position and results of operations.
We may be subject to unknown or contingent liabilities related to the acquired businesses, which may adversely affect
our financial performance.
The businesses and schools we acquired or plan to acquire may be operating at a loss or have existing liabilities
or other risks that we may not be able to effectively manage or may not be aware of at the time that we acquire them.
Although we always conduct a review of assets prior to each acquisition that we believe is consistent with industry
practice, such reviews are inherently incomplete as it is generally not feasible to review in depth every individual asset
involved in each acquisition. Ordinarily, we will focus our due diligence efforts on higher valued businesses or assets and
will only conduct a sample due diligence on the remainder. Nonetheless, even an in-depth review of all assets and records
may not necessarily reveal an exhaustive list of existing and potential problems, nor will it permit us to become
sufficiently familiar with the assets to assess fully their deficiencies and capabilities. As we may have no recourse, or only
limited recourse, against the sellers for these unknown liabilities and risks, this may in turn affect our ability to realize the
expected benefits from the acquisition or our financial performance. Furthermore, even though the sellers may be required
to indemnify us with respect to breaches of the representations and warranties pursuant to the respective sell and purchase
agreements, such indemnification is limited and subject to various materiality thresholds and an aggregate cap on losses.
As a result, there is no guarantee that we will be able to recover any amounts with respect to losses due to breaches by the
sellers of their representations and
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warranties. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated
with the acquired business may exceed our expectations, along with other unanticipated adverse effects, all of which may
adversely affect our business, results of operations and financial condition.
We may need additional capital for our future expansion and our leverage profile may change significantly.
To the extent our existing sources of capital are not sufficient to satisfy our existing and future needs, we may
have to seek external financing sources. Our ability to obtain additional capital from external sources in the future is
subject to a variety of uncertainties, including our future financial condition, results of operations and cash flows,
regulatory considerations, general market conditions for capital raising activities and economic, political and other
conditions in jurisdictions where we operate. In particular, future debt financing, if it can be obtained, could include terms
that may restrict our financial flexibility or restrict our ability to manage our business freely, which may adversely affect
our business and results of operations. In addition, we have completed several overseas acquisitions in the past, such as
the acquisitions of Bournemouth Collegiate School (“BCS”), St. Michael’s School, Bosworth Independent School (“BIC”)
and CATS Colleges Holdings Limited (“CATS”), and may in the future enter into agreements in relation to future overseas
acquisitions, some of which may be funded through debt financing by us. In the event that the amount of debt drawn to
fund such acquisitions is significant, this could result in a significant change to our leverage profile and financing costs,
which could impact our financial position and results of operations in the future. Additional debt financing may also
increase our interest expense, leverage and gearing, as well as potentially require us to dedicate a substantial portion of our
cash flow from operations to debt servicing. If we fail to repay our debt in a timely manner, we may face risks of default
which may also cause our other debt to be accelerated.
If we fail to ramp up our existing schools or successfully launch new schools, our business growth and prospects could
be materially and adversely affected.
As of the date of this annual report, we have a network of 94 schools in China and eight overseas schools in the
United Kingdom and the United States, 34 of which, including three international schools, four bilingual schools and 27
kindergartens, are in the ramp-up period which typically follows within the first five fiscal years upon the launch of a new
school. Certain of our schools currently in the ramp-up period are operating at a loss. We have dedicated significant
resources to expanding our international school business in China. As of the date of this annual report, we have five
international schools in China that have been in operation for more than five years. Five international schools were
profitable for the 2018 fiscal year, and all were profitable for the 2019 and 2020 fiscal years. We cannot assure you that we
will be able to continue to attract a sufficient number of students to enroll in these schools, recruit additional qualified
teachers and educational staff to meet the demands of the increased student enrollment or otherwise expand our operations
at schools in a manner that ensures a consistently high quality of education service. For example, our five newly added
kindergartens and two newly acquired overseas schools in the 2020 fiscal year contributed an increase of 1,361 out of a
total increase of 5,087 in student enrollment in the 2020 fiscal year.
As a growth strategy, we seek to continue to expand our school network in the future. We plan to launch schools
in collaboration with school development partners, including Country Garden, and on our own. We or our partners may
encounter difficulty in procuring the land and obtaining the permits for construction. As the offering of international
education programs requires us to meet the relevant accreditation standards and attract and retain teachers qualified to
deliver internationally-accredited courses, we cannot assure you that we will be able to apply our experience from the
operation of our existing international schools to new schools or that we will be able to obtain the requisite accreditations
or recruit a sufficient number of qualified teachers. If we fail to attract students to our existing schools or start new schools
with the requisite accreditations and teachers, our business growth and prospects could be materially and adversely
affected.
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A significant portion of our schools are located in Guangdong province, China, and any significant downturn of the
regional economy or adverse changes in the local regulatory regime may materially and adversely affect our business,
financial condition and results of operations.
As of the date of this annual report, 49 of our 102 schools are located in Guangdong province, China. Our
schools in Guangdong province in aggregate generated 53.8% and 41.7% of our total revenues in the 2019 and 2020 fiscal
years, respectively. Our flagship school, Guangdong Country Garden School, alone generated approximately 16.4% and
13.8% of our total revenues in the 2019 and 2020 fiscal years, respectively. We have historically benefited from the rapid
economic development of this region. The concentration of our business in Guangdong province, however, exposes us to
geographical concentration risks related to this region or the schools located in this region. Any material adverse social,
economic or political development or any natural disaster or epidemic affecting this region could negatively affect the
disposable income of the families of our current and prospective students and their demand for private education. The
occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of
operations.
If we fail to enroll and retain a sufficient number of students, our business could be materially and adversely affected.
Our ability to continue to enroll and retain students for our schools is critical to the continued success and growth
of our business. The success of our efforts to enroll and retain students will depend on several factors, including our ability
to:
● enhance existing education programs and services to respond to market changes and student demands;
● develop new programs and services that appeal to our students and their parents;
● maintain and enhance our reputation as a leading school operator offering quality education;
● expand our school network and geographic reach;
● effectively market our schools and programs to a broader base of prospective students;
● manage our growth while maintaining the consistency of our teaching quality;
● develop and license additional high quality education content; and
● respond to increasing competition in the market.
In addition, local and provincial government authorities may impose restrictions on the number of students we
can enroll. Our business, financial condition and results of operation could be materially and adversely affected if we
cannot maintain or increase our student base as we expand our school network.
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Accidents, injuries or other harm may occur at our schools, learning centers or the events we organize, which could
negatively affect our reputation and our ability to attract and retain students.
There are inherent risks of accidents or injuries in our business. We could be held liable if any student, employee
or other person is injured in any accident or incident at any of our schools, learning centers or the events we organize.
Though we believe we have taken appropriate measures to limit these risks, in the event of personal injuries, food
poisoning, fires or other accidents or incidents suffered by students or other people, we could nonetheless face claims
alleging that we were negligent, that we provided inadequate supervision or that we were otherwise liable for the injuries.
In addition, if any of our students, teachers or instructors commits acts of violence or otherwise behaves inappropriately,
we could face claims alleging our failure to provide adequate security measures or precautions to prevent such actions.
Similar events and allegations may also arise with respect to events we organize, including off-campus gatherings and
overseas camp programs. Parents of our students may perceive our facilities or programs to be unsafe, which may
discourage them from sending their children to our schools, learning centers or programs. We have historically
encountered isolated student-related accidents on our school premises and compensated the injured students. Although we
maintain liability insurance, the insurance coverage may not be adequate to fully protect us from claims of all kinds and
we cannot guarantee that we will be able to obtain sufficient liability insurance in the future on commercially reasonable
terms or at all. A liability claim against us or any of our employees could adversely affect our reputation and ability to
attract and retain students. Even if unsuccessful, such a claim could create unfavorable publicity, cause us to incur
substantial expenses and divert the time and attention of our management.
We may be unable to charge tuition or other fees at sufficient levels to be profitable or raise tuition as planned.
Our results of operations are affected in large part by the pricing of our education services. We charge tuition
based on each student’s grade level and the programs in which the student is enrolled. Subject to the applicable regulatory
requirements, we generally determine tuition based on the demand for our education services, the cost of our services, and
the tuition and the fees charged by our competitors. Although we have been able to increase the tuition we charge our
students in the past, we cannot guarantee that we will be able to maintain or increase our tuition in the future without
adversely affecting the demand for our education services.
The tuition we charge for some of our education programs is subject to regulatory restrictions. The regulatory
authorities in China, at both the provincial and local levels, have broad powers to regulate the private education industry in
China, including the tuition, room and board fees and other fees charged by schools. We have occasionally encountered
difficulty in persuading the local regulatory authorities to approve our tuition increase proposals in the past. In light of the
significant increase in tuition and other education related fees in China in recent years, regulatory authorities may impose
stricter price controls on education charges generally in the future. For example, in accordance with the relevant local
regulations, if we increase the tuition at our schools in Guangdong province in a certain school year, such increase will
generally not affect the existing students until they complete their current section of education at the same schools. If the
tuition we charge were required to be reduced or were not allowed to increase in line with increases in our costs, or if there
are any changes in the regulations which may otherwise negatively affect or restrict our ability to adjust our tuition, our
business, financial condition and results of operations may be materially and adversely affected. For example, the local
government authorities in implementing the Amended Law may impose additional limits on the tuition and fees our
schools charge, restrict proposed increase in fees as charged by any of our kindergartens if deemed community-affiliated
kindergartens, or prevent us from raising the tuition and fees to our desired levels or at all. For our complementary
education services, we have more discretion in determining the tuition, but we cannot guarantee that the current regulatory
regime will not change in a manner that may restrict our ability to increase tuition for our complementary education
services.
In addition, the Amended Law for Promoting Private Education sets out certain restrictions as to the use of
profits earned by not-for-profit schools. We plan to submit applications and designate certain of our kindergartens as for-
profit schools, but there is no guarantee that our for-profit school designation applications will be approved. As a result,
we may not be able to maintain our current tuition fee rates and may not be able to raise any of such fees for our
kindergartens at our desired rates, times and places or at all in the future under the framework of the Amended Law for
Promoting Private Education.
Furthermore, the tuition we are able to charge is subject to a number of other factors, such as the perception of
our brand, the academic results achieved by our students, our ability to hire qualified teachers, and general local
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economic conditions. Any significant deterioration in these factors could have a material adverse effect on our ability to
charge tuition at levels sufficient for us to remain profitable.
We may not be able to renew school operation agreements or maintain favorable fee rates at our existing schools or
enter into school operation agreements for new schools on commercially reasonable terms.
Since our inception, we have launched substantially all of our schools in China by collaborating with Country
Garden. Our schools have enabled Country Garden to meet the local zoning requirements of associated residential
properties and have helped market its residential units to prospective home buyers seeking convenient access to private
education.
As of August 31, 2020, substantially all of our schools in China, other than those that did not operate on Country
Garden properties, had entered into a three-year school operation agreement with Country Garden. We are in the process
of arranging the execution of such school operation agreements with Country Garden for our schools in China established
after August 31, 2020.Under these agreements, Country Garden provides the premises and facilities for our schools, while
we are responsible for school operation and management. We may also offer preferential placement and favorable tuition
rates to Country Garden homeowners and employees or under some other extraordinary circumstances. In the 2020 fiscal
year, the aggregate amount of tuition discounts was equal to 7.1% of total revenues from our schools in China. If a higher
proportion of our students are from families of Country Garden homeowners in the future, the aggregate amount of tuition
discounts may increase as a percentage of our revenue. We only recognize the tuition that we actually receive as revenue.
However, we cannot assure you that we will be able to renegotiate the contract terms that are commercially acceptable to
us with Country Garden when the existing agreements expire. As a result, we may be required by Country Garden to pay
fees such as rent to use Country Garden’s school premises and facilities or relocate the affected operations to new
locations outside of Country Garden’s school premises and facilities or residential communities, which would require us to
pay higher fees for or even purchase the school facilities, and may significantly increase our marketing expenses to attract
students from families residing outside Country Garden’s residential communities. Our profitability may decrease if we
are unable to pass on the increased costs and expenses to our students by raising tuition without compromising our ability
to retain students.
As Country Garden is responsible for ensuring the proper land use type, obtaining the requisite government
certifications on construction, environmental assessments, fire control and title certificates and providing utilities
including water, heating and power, if Country Garden fails to procure the land use type designated for education-related
purposes, obtain such certifications or maintain uninterrupted utility supplies, our operations could be disrupted. If our use
of any such properties is challenged by third parties or government authorities, we may be forced to relocate the affected
operations and incur significant expenses. We cannot assure you that we will be able to find suitable replacement sites in a
timely manner, on terms acceptable to us, or at all. Any protraction for the relocation may also materially interrupt our
business operations and result in a loss of student enrollment.
We plan to launch new schools in China in collaboration with school development partners, including Country
Garden, and on our own. We cannot assure you that we will obtain leases for school premises or enter into school
operation agreements on commercially reasonable terms, or at all. Country Garden has an internal policy that designates
us as a preferred school operator partner, under which we are entitled to a right of first refusal on school development
projects in connection with its new residential properties. We cannot assure you that Country Garden will faithfully
implement this policy or will not amend it, and we do not have any standing to require Country Garden to do otherwise.
For new schools we launch in the future, we may not offer tuition discounts to Country Garden homeowners but may be
required to pay fees, such as rent, for Country Garden’s school premises and facilities. This may increase our revenues but
also cost of revenue at the same time at a different level, which may affect our profit margins.
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We have certain property defects relating to our lease of the land occupied by Guangdong Country Garden School,
which may adversely affect our operations.
Guangdong Country Garden School is located on a parcel of land of approximately 172,240 square meters, leased
pursuant to a 70-year lease agreement, effective since 1994, signed between Guangdong Country Garden School and the
local village cooperative. This long-term lease agreement has been registered on the rural collective asset management
platform in accordance with the local administrative rules. However, PRC law requires that land parcels be classified
according to their specific use type. Although the parcel on which Guangdong Country Garden School is located and
which was classified for agricultural use has been converted by the relevant government authorities from agricultural use
into a piece of land for construction purpose and upon which the construction and operation of a school can be carried out,
we are still unable to obtain the relevant land planning approval, construction planning approval, construction approval,
inspection for completion of construction, fire control assessment and title certificates because such formalities for
conversion cannot be rectified retrospectively. As a result, we may be subject to fines and may be required to vacate if the
facilities are found to fall below the statutory standard for construction. Further, the relevant local authorities could
prevent us from continuing to use the land for failing to fulfill the aforesaid formalities and we could be required to give
up our school facilities. As of the date of this annual report, we are not aware of any government investigations related to
our school facilities. However, if our school facilities are found to fall below the relevant statutory standards, we could be
required to relocate Guangdong Country Garden School. Guangdong Country Garden School is our flagship school and
alone generated 16.4% and 13.8% of our total revenues in the 2019 and 2020 fiscal years, respectively. We cannot assure
you that suitable alternative locations are readily available on commercially reasonable terms or at all, and if we are
unable to relocate our operations in a timely manner, our operations will be severely interrupted, which may materially
and adversely affect our business, result of operations and financial condition.
If regulatory authorities challenge our curriculum or textbook practices, our business, results of operations and
financial condition may be materially and adversely affected.
Under current PRC laws, all schools are required to offer sufficient government-mandated coursework to students
eligible for compulsory education and may supplement their compulsory education with elective coursework. Private
schools may offer education programs outside government-mandated curriculum so long as the local education authorities
have approved such programs. We offer internationally-accredited courses to our students, primarily in our international
schools. We may be deemed to offer insufficient government-mandated coursework to students enrolled in our
international programs from grades one through nine. Additionally, we have not obtained the required government
approval for providing non-government-mandated coursework in certain schools. Current PRC laws are not clear as to
which government examination and approval process is required for such education programs. We make annual filings for
our schools to the local education authorities when required, but it is uncertain whether we have satisfied the relevant
government approval requirement in relation to government-mandated coursework and non-government mandated
programs.
In addition, under current PRC laws, textbooks, including those for non-government-mandated coursework, must
be examined and approved by the local education authorities. Fifteen of our schools use foreign textbooks without
obtaining the required government approval. There is no clear or implemented guideline under the current PRC laws for
obtaining such government approval.
On December 29, 2016, the State Council issued the Several Opinions of the State Council on Encouraging the
Operation of Education by Social Forces and Promoting the Healthy Development of Private Education, or the State
Council Opinions. The State Council Opinions emphasize enhancing the leadership of the Chinese Communist Party, or
the CCP, over private schools and, in particular, furthering the theoretical system of Socialism with Chinese
Characteristics by introducing such system into textbooks and teaching programs.
Furthermore, on June 23, 2019, the Central Committee of the Communist Party of China and the State Council
promulgated the Opinions on Deepening the Reform of Educational Teaching and Thoroughly Enhancing the Quality of
Compulsory Education (the “Opinion on Deepening the Reform”), which lays out more stringent requirements for
textbooks that are permitted to be used in compulsory education.
On December 16, 2019, the MOE issued the Administrative Measures on Primary and Secondary School
Textbooks, which details the regulations on the authoring, vetting, publication and schools’ selection of primary and
secondary school textbooks.
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It is not entirely clear under current PRC laws what penalties we may be subject to for non-compliant curriculum
and textbook practice. The local education authorities have the right to prevent us from offering the non-government-
mandated coursework or using the textbooks that have not been approved or permitted. As of the date of this annual
report, we are not aware of any government investigation of our curriculum or textbook practices. We cannot guarantee,
however, that more stringent rules regulating curriculum and textbook will not be promulgated following the
implementation of the Opinion on Deepening the Reform and the Administrative Measures on Primary and Secondary
School Textbooks. Neither can we assure you that enhancing the leadership of the CCP over private schools according to
the State Council Opinions will not lead to more stringent administrative orders on or any penalty against our current
practice. We may be ordered by the government to rectify our current practices, which may include ceasing to provide
courses that are not government-mandated, if a subsequent government investigation concludes that our practices are not
fully compliant with the laws. If regulatory authorities challenge our curriculum or textbook practices, our business,
results of operations and financial condition may be materially and adversely affected.
Our business and future growth are affected by the residential communities developed by Country Garden.
We have launched, and expect to continue to launch, schools in collaboration with many of the residential
properties developed and to be developed by Country Garden, and our business and future growth are, to a considerable
extent, affected by Country Garden’s ability to successfully develop and sell residential units in its existing and new
property projects. We have experienced slow ramp-up in certain of our schools launched in collaboration with Country
Garden. If any of the residential properties developed by Country Garden on which we operate or plan to operate our
schools are underpopulated or otherwise unable to develop into substantial communities, the demand for private education
in such areas may be lower than anticipated and we may be unable to enroll a sufficient number of students for our
schools, which may adversely affect our business and results of operations. We cannot guarantee that we will be able to
develop our schools independent of Country Garden’s residential property projects. Seeking partnership with other
property developers or procuring properties for construction of school facilities may be time-consuming and capital-
intensive and may in turn affect our business growth. In addition, we cannot guarantee that we will be able to cost-
effectively attract prospective students to our schools launched in cooperation with other property developers or on our
own in a cost-effective manner.
The real estate market in China is sensitive to changes in government policies affecting the real estate and
financial markets and related sectors. In recent years, the PRC government has implemented various administrative
measures to curb what it has perceived as unsustainable growth in the real estate market, particularly when the real estate
market in China experienced rapid and significant increases in home sales as well as prices. As Country Garden develops
residential communities in prime areas in second- or third-tier cities or suburban areas in first-tier cities, any local
economic downturn or changes in the real estate market policies may adversely affect Country Garden’s business
development or alter its business strategies, which may in turn adversely affect our business relationship with Country
Garden and our business and future growth.
If we fail to help our students achieve their academic goals, student and parent satisfaction with our education services
may decline.
The success of our business depends on our ability to deliver quality school experiences and help our students
achieve their academic goals. Our schools may not be able to meet the expectations of our students and their parents in
terms of students’ academic performance. A student may not be able to attain the level of academic improvement that he
or she seeks and his or her performance may otherwise not progress or decline due to reasons beyond our control. We may
not be able to provide education that is satisfactory to all of our students and their parents, and student and parent
satisfaction with our services may decline. In addition, we cannot guarantee that our students will be admitted to higher
levels of education institutions of their choice. Any of the foregoing could result in a student’s withdrawal from our
schools, and dissatisfied students or their parents may attempt to persuade other students or prospective students not to
attend our schools. If our ability to retain students decreases significantly or if we otherwise fail to continue to enroll and
retain new students, our business, financial condition and results of operations may be materially and adversely affected.
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If fewer Chinese students aspire to study abroad, especially in the United States, Australia and the United Kingdom,
demand for our international schools may decline.
One of the principal drivers of the growth of our international schools has been the increasing number of Chinese
students who aspire to study abroad, especially in the United States, Australia and the United Kingdom. As such, any
adverse changes in immigration policy or political sentiments toward foreigners and immigrants , global or regional
pandemics such as the outbreak of a new strain of coronavirus, COVID-19, terrorist attacks, geopolitical uncertainties
such as the United Kingdom exiting the European Union and the associated effects, and any international conflicts
involving these countries, in particular, economic, political or military tensions, or the emergence of a trade war or news
or rumors of the escalation of a potential trade war between China and the United States or a more stringent visa policy
towards Chinese students studying in science and technology fields, such as aeronautical engineering, robotics and
biomedicine, in the United States, could increase the difficulty for Chinese students to study overseas, or lower the appeal
of Chinese students in studying in such countries. Any significant change in admission standards adopted by overseas
education institutions could also affect the demand for overseas education by Chinese students.
In addition, any fluctuation in the currency exchange rate could have a negative impact on the translation of
Renminbi into other currencies, including U.S. dollars, Australian dollars and British pounds, which may increase the
costs of living and tuition for Chinese students studying abroad. The attractiveness of pursuing an education at
international schools in China may decrease accordingly, which could adversely affect our business and profitability.
Furthermore, Chinese students may also become less likely to study abroad due to other reasons, such as
improving domestic education or employment opportunities associated with continued economic development in China or
a changing attitude to the merits of education abroad. These factors could cause declines in the demand for our
international schools, which may adversely affect our business and profitability.
Our business is subject to the risks of international operations.
We have entered into the overseas markets, such as United Kingdom and the United States, through acquisition
of established overseas schools, and we may expand our operations in additional markets and regions in the future. We
may have to adapt our business models to the local markets due to various legal requirements and market conditions. Our
international operations and expansion efforts have resulted and may continue to result in increased costs and expenses
and are subject to a variety of risks, including increased competition, uncertain enforcement of our intellectual property
rights, changes and evolutions in overseas market conditions, and the complexity of compliance with the local laws and
regulations.
In addition, compliance with applicable Chinese and foreign laws and regulations, such as education laws, anti-
corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy requirements, labor
laws, restrictions on foreign investment, and anti-competition regulations, increases the costs and risk exposure of doing
business in foreign jurisdictions. Although we have implemented policies and procedures to comply with these laws and
regulations, a violation by us or our employees, contractors or agents could nevertheless occur. In some cases, compliance
with the laws and regulations of one country could violate the laws and regulations of another country. Violations of these
laws and regulations could materially and adversely affect our brand, international growth efforts and business.
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We may be unable to recruit, train and retain a sufficient number of qualified and experienced teachers and principals.
Our teachers are critical to maintaining the quality of our education and services and our brand and reputation.
Our principals are also instrumental to the successful operation of our schools. Our ability to continue to attract teachers
and principals with the necessary experience and qualifications is therefore a critical contributing factor to the success of
our operations. There are a limited number of teachers and principals in China with the necessary experience, expertise
and qualifications that meet our requirements. Further, the Measures for Punishment for Violation of Professional Ethics
of Primary and Secondary School Teachers, promulgated by the PRC Ministry of Education, or MOE, on January 11,
2014 and amended on November 8, 2018, prohibits teachers of primary and secondary schools from providing paid
tutoring in schools or in out-of-school learning centers. Some provinces and cities where our schools are located have
adopted more stringent stipulations which prohibit public school teachers from teaching on a part-time basis at private
schools or learning centers. Public school teachers may join private schools only after ending their employment with
public schools. Therefore, to recruit qualified and experienced teachers and principals, including those with public school
experience, we must provide candidates with competitive compensation packages and offer attractive career development
opportunities, especially when former public school teachers and principals may have to undergo major career changes. In
addition, we strive to provide an immersive bilingual learning environment, particularly at our international schools,
which requires a sizable pool of foreign teachers. As the market for qualified foreign teachers is extremely competitive
and the attrition rate for foreign teacher is generally higher than that for Chinese teachers, we cannot guarantee that we can
increase the number of our foreign teachers to meet the growing demand as our student enrollment increases. In addition,
as government process for obtaining the work and residence permits for foreign teachers may be time-consuming, we may
fail to apply for such permits for our foreign teachers before they join us. If we are unable to attract and retain qualified
teachers and principals, we may experience a decrease in the quality of our education programs and services in one or
more of our schools or incur an increase in hiring and labor costs, which may materially and adversely affect our business
and results of our operations.
If we lose the accreditations, permits or licenses required to provide our education or complementary education
services or operate our schools or if we fail to obtain the accreditations, permits or licenses for our new schools or
complementary education services, our business could be materially and adversely affected.
In order to provide our education programs or operate our schools, we apply for and maintain various
accreditations from curriculum providers and permits from examination boards, such as the IB Organization. To obtain or
maintain our accreditations and permits, we must meet standards related to, among other things, performance, governance,
institutional integrity, education quality, staff, administrative capability, resources and financial stability, on an ongoing
basis. If any of our schools fails to meet these standards, it could fail to obtain or lose its existing accreditations or permits,
or be unable to expand its offerings of internationally-accredited curricula that are popular among students and their
parents, which could materially and adversely affect our business, results of operations and financial condition.
In addition, we must apply periodically to the local education bureaus and civil affairs bureaus to obtain or renew
the permits or licenses to operate our schools and ancillary services, including room and board services and school bus
services. While we believe that we will be able to obtain or renew such permits or licenses, we cannot assure you that such
permits and licenses will be obtained or renewed in a timely manner, or at all or that new conditions will not be imposed.
For example, we are in the process of obtaining certain licenses or permits for five of our existing schools and renewing
certain licenses or permits for four of our existing schools, as of the date of this annual report. Any failure to obtain or
renew the required permits or licenses to operate our schools could give rise to administrative penalties including
rectification or suspension of operations in noncompliant schools or confiscation of profits derived from noncompliant
operations, which could materially and adversely affect our business, results of operations and financial condition.
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Competition in the private education market could reduce enrollment at our schools, increase our cost of recruiting
and retaining students and teachers and put downward pressure on our tuition and profitability.
We may face competition from other existing or new schools that target the children of affluent local families in
the locations in which we operate. Some of our existing and potential competitors may be able to devote greater resources
than we can to the development and construction of private schools and respond more quickly to changes in demands of
students and their parents, admissions standards, market needs or new technologies. Moreover, our competitors may
increase capacity in any of the local markets to an extent that leads to an over-supply of placement positions at private
schools and downward pressure on tuition prices. Our existing or potential competitors may also strategically price their
tuition lower than ours to attract students and parents. The Amended Law may attract more private school operators to
offer non-compulsory education and further increase competition in this market.
Our complementary businesses, including English proficiency training and extracurricular programs, may also
face competition from other providers of comparable services that may have stronger financial resources, technology,
service performance or brand recognition.
If we are unable to differentiate our services from those of our competitors and successfully market our services
to students and their parents, we could face competitive pressures that reduce our student enrollment. If our student
enrollment falls, we may be required to reduce our tuition or increase spending in order to attract and retain students,
which could materially and adversely affect our business, prospects, results of operations and financial condition.
Our business and financial performance may suffer if we fail to successfully develop and launch new education
services.
The future success of our business depends partly on our ability to develop new education services. The planned
timing or launch of new education services is subject to risks and uncertainties. Actual timing may differ materially from
any originally proposed timeframes. Unexpected operational, technical or other issues could delay or prevent the launch of
one or more of our new education services or programs. In addition, significant investment of human capital, financial
resources and management time and attention may be required to successfully launch features of our new education
programs. For further details, see “Item 4. Information on the Company—B. Business Overview—Our Expansions and
Investments.” However, we cannot assure you that our students will choose us over third party service providers or that we
will be able to successfully integrate such services with our schools and other complementary businesses without
expending significant financial resources on marketing and operational optimization. If we fail to manage the expansion of
our portfolio of education services cost-effectively, our business could be negatively affected.
We cannot assure you that any of our new services will achieve market acceptance or generate incremental
revenue or that our operation of such new services or programs will comply with our business scope or applicable
licensing requirements. If our efforts to develop, market and sell our new education services and programs to the market
are not successful, our business, financial position and results of operations could be materially and adversely affected.
Any deterioration in our relationships with providers of overseas education services may adversely affect our business.
We have business collaborations with various overseas schools and institutions to provide education resources for
our international schools. We derive direct benefits from these relationships such as the ability to offer more diverse
programs and classes, including summer and winter camps, and the ability to charge a premium for the programs we offer
with other overseas education service providers. We also derive indirect benefits from these relationships, including
enhancement of our brand and reputation and exposure to international education methods and experiences.
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If our relationships with any of these overseas education service providers deteriorate or are otherwise damaged
or terminated, or if the benefits we derive from these relationships diminishes, whether as a result of our own actions,
actions of our partners, actions of any third party, including our competitors, or of regulatory authorities or other entities
beyond our control, our business, prospects, financial condition and results of operations could be adversely affected.
Any damage to the reputation of any of our schools may adversely affect our overall business, prospects, results of
operations and financial condition.
Our reputation could be adversely affected under many circumstances, including the following:
● accidents, epidemics or other events adversely affect our students;
● we fail to properly manage accidents or other events that injure our students;
● our staff behave or are perceived to behave inappropriately or illegally;
● our staff fail to appropriately supervise students under their care;
● we fail to conduct proper background checks on our staff;
● our third party business partners may commit misconduct or other improper activities that cause negative
publicity concerning us or penalties from relevant authorities;
● we lose a license, permit, accreditation or other authorization to operate an education program, a school or a
complementary education service;
● we do not maintain consistent education quality or fail to enable our students to achieve strong academic
results;
● our school facilities do not meet the standards expected by parents and students for private education; and
● school operators of lower quality that abuse our brand name or those with brand names similar to ours
conduct fraudulent activities and create confusion among students and their parents.
The likelihood that any of the foregoing may occur increases as we expand our school network. These events
could influence the perception of our schools not only by our students and their parents, but also by other constituencies in
the education sector and the general public. Moreover, an event that directly damages the reputation of one of our schools
could adversely affect the reputation and operations of our other schools. If our reputation deteriorates, our overall
business, prospects, results of operations and financial condition could be adversely affected.
Our business is subject to seasonal fluctuations, which may cause our results of operations to fluctuate from quarter to
quarter, and in turn result in volatility in and adversely affect the price of our ADSs.
Our business is subject to seasonal fluctuations as our costs and expenses vary significantly during the fiscal year
and do not necessarily correspond with the timing of recognition of our revenues. Our students enrolled in our schools that
offer K-12 education services and their parents typically pay the tuition and other fees prior to the commencement of a
semester, and we recognize revenues from the delivery of education services on a straight-line basis over the semester. For
schools offering K-12 education services, we typically incur higher upfront operating expenses in the first fiscal quarter at
the start of each school year, and also typically recognize more revenue in the second half of fiscal years due to higher
revenues from complementary education services during the summer and, to a lesser extent, students who transfer into our
schools for the second semester. As a result of the combination of the foregoing, we have historically incurred net loss or
significantly lower net income in the second and fourth fiscal quarters, primarily due to our schools being closed due to
the winter and summer holidays, when no revenue from
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our school operations is recognized. We expect to continue to experience seasonal fluctuations in our results of operations.
These fluctuations could result in volatility in and adversely affect the price of our ADSs.
Our business could be disrupted if we lose the services of members of our senior management team, key principals and
teaching staff.
Our success depends in part on the continued application of skills, efforts and motivation of our officers and
senior management team. We may in the future experience changes in our senior management for reasons beyond our
control. In addition, key personnel could leave us to join our competitors. Losing the services of key members of senior
management or experienced personnel may be disruptive to and cause uncertainty for our business. We depend upon the
services of our senior management team, including our executive vice chairman, Mr. Junli He, who collectively has
significant experience with our company and within the education industry. If one or more members of our senior
management team are unable or unwilling to continue in their present positions for health, family or other reasons, we
may not be able to replace them easily or at all. If we cannot attract and retain qualified senior management members, key
principals and teaching staff in a timely manner, our business, results of operations and financial condition could be
materially and adversely affected.
Failure to adequately protect our intellectual property could materially and adversely affect our business.
We have historically relied upon the brand name of “Country Garden” to market our schools. As we expand our
schools beyond the network of Country Garden’s residential communities, we have created and begun to promote our own
brands, including “Bright Scholar.” Since our inception, we have also created other intellectual property, including
education materials developed by our teaching staff. Unauthorized use of any of our intellectual property may adversely
affect our business and reputation. We rely on a combination of copyright, trademark and trade secrets laws to protect our
intellectual property rights. Nevertheless, third parties may obtain and use our intellectual property without due
authorization. The practice of intellectual property rights enforcement by the PRC regulatory authorities is in its early
stage of development and is subject to significant uncertainty. We may also need to resort to litigation and other legal
proceedings to enforce our intellectual property rights. Any such action, litigation or other legal proceedings could result
in substantial costs and diversion of our management’s attention and resources and could disrupt our business. In addition,
we cannot assure you that we will be able to enforce our intellectual property rights effectively or otherwise prevent others
from the unauthorized use of our intellectual property. Failure to adequately protect our intellectual property could
materially and adversely affect our business, financial condition and results of operations.
We operate schools and complementary education services under several brands, which may have a dilutive effect on
brand recognition among our students and their parents.
We operate substantially all of our schools in China under the brand “Country Garden,” our English proficiency
training under “élan,” overseas study counseling business under “Can-Achieve” and overseas career counseling business
under “Dream Big Career.” We intend to otherwise promote a unified brand “Bright Scholar” as our corporate image,
which represents the entire spectrum of education services we offer in China. We also acquired several overseas schools,
such as BCS, BIC, St Michael’s School and CATS, which are operated under their current brands, and we intend to
promote a unified brand for overseas operation in the near future. Maintaining multiple brands may have a dilutive effect
on brand recognition among our students and their parents and increase our overall marketing expenses as we need to
allocate resources among different brands. We may seek to transition our individual brands to “Bright Scholar” in the
future if the market responds favorably to our new corporate image. We cannot assure you, however, that our prospective
students will embrace our new brand given its limited market exposure and recognition. We may incur significant
financial resources for, and divert considerable management attention to, the integration of our existing brands with our
new corporate image, which may adversely affect our business, results of operation and financial condition.
We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant
damages.
We cannot assure you that education materials and content used in our schools and programs do not or will not
infringe on intellectual property rights of third parties. As of the date of this annual report, we are not aware of any claims
for intellectual property infringement with regard to the abovementioned education materials and content. However, we
cannot guarantee that third parties will not claim that we have infringed on their proprietary rights in
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the future. We may also use education materials designed in conjunction with our overseas associates and we cannot
guarantee that disputes will not arise over the intellectual property rights associated with these materials.
Although we plan to defend ourselves vigorously in any such litigation or legal proceedings, we cannot assure
you that we will prevail in these matters. Participation in such litigation and legal proceedings may also cause us to incur
substantial expenses and divert the time and attention of our management. We may be required to pay damages or incur
settlement expenses. In addition, in case we are required to pay any royalties or enter into any licensing agreements with
the owners of intellectual property rights, we may find that the terms are not commercially acceptable and we may lose the
ability to use the related materials or content, which in turn could adversely affect our education programs. Any similar
claim against us, even without any merit, could also damage our reputation and brand image. Any such event could have a
material adverse effect on our business, financial condition and results of operations.
Unauthorized disclosure of personal data that we collect and retain, whether due to a system failure or otherwise, could
damage our business.
We maintain records that include personal data, such as academic and medical records, address and family
information. Our online services may store and process certain personal and other sensitive data provided by students or
their parents. There are numerous laws regarding privacy and the storing, sharing, use, disclosure and protection of
personally identifiable information and data. Specifically, personally identifiable and other confidential information is
increasingly subject to legislation and regulations in PRC and numerous foreign jurisdictions. PRC government authorities
have enacted a series of laws and regulations relating to the protection of privacy and personal information, under which
internet service providers and other network operators are required to clearly indicate the purposes, methods and scope of
any information collection and usage, to obtain appropriate user consent and to establish user information protection
systems with appropriate remedial measures. However, this regulatory framework for privacy issues in China and
worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. We cannot assure you that our
existing privacy and personal protection system and technical measures will be considered sufficient under applicable
laws and regulations. We could be adversely affected if legislation or regulations in China are expanded to require changes
in business practices or privacy policies, or if the PRC governmental authorities interpret or implement their legislation or
regulations in ways that negatively affect our business, financial condition and results of operations. In addition to laws,
regulations and other applicable rules regarding privacy and privacy advocacy, industry groups or other private parties
may propose new and different privacy standards. Because the interpretation and application of privacy and data
protection laws and privacy standards are still uncertain, it is possible that these laws or privacy standards may be
interpreted and applied in a manner that is inconsistent with our practices. Any inability to adequately address privacy
concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacy
standards, could result in additional cost and liability for us, damage our reputation, inhibit the use of our services and
harm our business.
If we were found to be in breach of any privacy and data protection laws, we could incur significant expenses in
connection with rectifying any security breaches, settling any resulting claims and providing enhanced protection to
prevent additional breaches. In addition, any failure to protect personal information may adversely impact our ability to
attract and retain students, harm our reputation and materially adversely affect our business, prospects and results of
operations.
Failures or interruptions in our centralized data management system may adversely affect our operations.
We have established a centralized data management system, the Oracle ERP system, which collects and analyzes
group-wide financial, procurement and student admission information and data. We are in the process of gradually
refining the features and functionalities of such enterprise resource planning system (“ERP system”) to enhance its
efficiency. We are also expanding the application of such ERP system into entities we newly acquired in order to
streamline our data and information management system. However, we cannot assure you that such ERP system will not
encounter technical failures and interruptions, leading to our management’s failure to timely access accurate key operating
data, which may adversely affect our operation. We may encounter compatibility issues when incorporating newly
acquired schools into our ERP system, which may compromise the overall accuracy and value of the operating
information generated from such ERP system and adversely affect the implementation of our growth strategies as we
expand our business and integrate new businesses.
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We may fail to maintain the proper functioning of or improve our technology infrastructure.
Our online teaching facilities and internal systems rely on software that is highly technical and complex, and
depend on the ability of such software to store, retrieve, process and manage immense amounts of data. Our systems are
vulnerable to disruptions from design errors, execution errors, employee misconduct, external fraud, security breaches,
capacity constraints, software flaws, computer viruses, cyberattacks, power outages and similar events. We cannot assure
you that our information technology systems will always operate without interruptions. Some errors may only be
discovered after the code has been released for external or internal use. Any errors, bugs or defects discovered in the
software on which we rely could cause failures in our systems’ performance and cause us to experience disruptions in
operations, slower response time and delays in information processing, thereby compromising our ability to support our
online teaching activities. If any of the above were to occur, our business, financial condition and results of operations
may be adversely affected. In addition, some of our subsidiaries and affiliates have historically been targeted in
cyberattacks. Although we have stepped up the protection of our information systems, we cannot assure you that we will
not become a target in cyberattacks again.
We must also continue to upgrade and improve our information technology systems, software, mobile application
and big data analytics in order to support our business growth and optimize our operating efficiency. Adopting new
technologies and maintaining and upgrading our technology infrastructure require significant investment of time and
resources, including adding new hardware, updating software and recruiting and training new engineering personnel.
However, we cannot assure you that we will be successful in implementing these upgrades and improvement plans. New
technologies may not be fully integrated with our existing systems on a timely basis, or at all, and our systems may
experience slower response time and interruptions during upgrades, which could impair the experience of our students and
business partners, delay the reporting of accurate operating and financial information, and result in material and adverse
effects on our business, financial condition, results of operations and prospects.
In addition, the reliability and availability of our platform depends on telecommunications carriers and other
third-party providers for communications and storage capacity, including bandwidth and server storage, among other
things. If we are unable to enter into and renew agreements with these providers on acceptable terms, if any of our existing
agreements with such providers are terminated as a result of our breach or otherwise, or if these service providers
themselves experience service disruptions or cessations, the proper functioning of our platform could be adversely
affected.
We have limited insurance coverage with respect to our business and operations.
We are exposed to various risks associated with our business and operations, and we have limited insurance
coverage. See “Item 4. Information on the Company—B. Business Overview—Insurance” for more information. We are
exposed to risks including, among other things, accidents or injuries in our schools, loss of key management and
personnel, business interruption, natural disasters, terrorist attacks and social instability or any other events beyond our
control. The insurance industry in China is still at an early stage of development, and as a result insurance companies in
China offer limited business related insurance products. We do not have any business disruption insurance, product
liability insurance or key-man life insurance. Any business disruption, legal proceeding or natural disaster or other events
beyond our control could result in substantial costs and diversion of our resources, which may materially and adversely
affect our business, financial condition and results of operations.
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We face risks related to natural disasters, health epidemics or terrorist attacks in China.
Our business could be materially and adversely affected by natural disasters, such as earthquakes, floods,
landslides, tornados and tsunamis, outbreaks of health epidemics such as avian influenza and severe acute respiratory
syndrome, or SARS, COVID-19 virus, and Influenza A virus, such as H5N1 subtype and H5N2 subtype flu viruses, as
well as terrorist attacks, other acts of violence or war or social instability in the regions in which we operate or those
generally affecting China. If any of these occur, our schools and facilities may be required to temporarily or permanently
close and our business operations may be suspended or terminated. Our students, teachers and staff may also be negatively
affected by such event. In addition, any of these could adversely affect the PRC economy and demographics of the
affected region, which could cause significant declines in the number of our students in that region and could have a
material adverse effect on our business, financial condition and results of operations.
An outbreak of COVID-19 was first reported in Wuhan, Hubei Province, the PRC in late 2019 and continues to
spread within the PRC and globally. The new strain of coronavirus is considered highly contagious and may pose a serious
public health threat. On January 30, 2020, the World Health Organization reportedly declared this COVID-19 outbreak a
health emergency of international concern. In March 2020, the World Health Organization declared the COVID-19 a
pandemic. Since the COVID-19 outbreak, the PRC government has imposed various strict measures with the aim to
contain the virus including, but not limited to, travel restrictions, mandatory quarantine requirements, and postponed
resumption of business operations. Our K-12 schools in China were mostly closed down from February to May, and we
provided online education services to our students. After a closedown of approximately three to four months as required
by local education regulatory authority, and following the directives of local governments, most of our K-12 schools in
China had resumed operation by June 2020. Accelerated by the COVID-19 pandemic, we are also increasingly embracing
the online-merge-offline, or OMO model, by launching our virtual online international school “3i Global Academy” and
moving our complementary education services online. Our overseas operations were most negatively affected amid the
COVID-19 pandemic. As a large number of students opted to return to their home countries during the pandemic, we
partially refunded the accommodation fees to these students, which has adversely affected our business, financial
performance and results of operations. We consolidated our offline teaching sites to accommodate certain boarding
students in the UK, while the majority of the rest quickly shifted to online courses. As a resource conserving measure, we
permanently ceased the operation of the four language training institutions in the United States. We also took this
opportunity to reduce our cost structure, upgrade our IT and management systems, realign our sales and marketing
strategies and improve our education outcome. We believe these measures will help put us in a more competitive position
than our peers when students return to schools after the COVID-19 pandemic. We are closely monitoring the development
of the COVID-19 pandemic and continuously evaluating any further potential impact on our business, results of
operations and financial condition, which we believe will depend on the duration and degree of the pandemic. If the
outbreak persists or escalates, we may be subject to further negative impact on our business operations and financial
condition.
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Our business, financial performance and results of operations could be adversely affected by deterioration of the
relation between China and the United States.
Recent international trade disputes, including those between China and the United States, and the uncertainties
created by such disputes may disrupt the transnational flow of goods and significantly undermine the stability of the
global and Chinese economy, thereby harming our business. International trade disputes could result in tariffs and other
protectionist measures that could adversely affect our business. Any escalation in existing trade tensions or the advent of a
trade war, or news and rumors of the escalation of a potential trade war, could affect consumer confidence and have a
material adverse effect on our business, results of operations and, ultimately, the trading price of our ADSs.
Political tensions between the United States and China have escalated due to, among other things, the COVID-19
outbreak, the PRC National People’s Congress’ passage of Hong Kong national security legislation, sanctions imposed by
the U.S. Department of Treasury on certainofficials of the Hong Kong Special Administrative Region and the central
government of the PRC, and the executive orders issued by U.S. President in August 2020 that prohibit certain
transactions with ByteDance Ltd., Tencent Holdings Ltd. and the respective subsidiaries of such companies. Rising
political tensions could reduce levels of trades, investments, technological exchanges and other economic activities
between the two major economies, which would have a material adverse effect on global economic conditions and the
stability of global financial markets. Any of these factors could have a material adverse effect on our business, prospects,
financial condition and results of operations. Furthermore, there have been media reports on deliberations within the U.S.
government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. If
any such deliberations were to materialize, the resulting legislation may have a material and adverse impact on the stock
performance of China-based issuers listed in the United States. It is currently unclear whether the proposed or additional
legislations would be enacted that would have the effect of potentially limiting or restricting China-based companies from
accessing U.S. capital markets.
If we grant additional employees share options or other equity incentives in the future, our net income could be
adversely affected.
We granted share options to purchase a total of 3,557,138 Class A ordinary shares to certain school principals and
management team members pursuant to our 2017 Share Incentive Plan (the “2017 Plan”) from 2017 to 2020. We may
grant additional share options under the 2017 Plan in the future. We are required to account for share-based compensation
in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation
—Stock Compensation, which generally requires a company to recognize, as an expense, the fair value of share options
and other equity incentives to employees based on the fair value of equity awards on the date of the grant, with the
compensation expense recognized over the period in which the recipient is required to provide service in exchange for the
equity award. If we grant options or other equity incentives in the future, we could incur significant compensation charges
and our results of operations could be adversely affected.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely
report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be
materially and adversely affected.
In the 2020 fiscal year, we and our independent registered public accounting firm identified one significant
deficiency, together with other control deficiencies not identified as significant. The significant deficiency identified
relates to insufficient review over underlying data supporting journal entries and account reconciliations due to the lack of
segregation of duties in certain acquired overseas business. We implemented certain management compensating control,
including financial analytical review, reconciliation of certain accounts and sample check the accuracy of the underlying
information used in schedules. In recent years, we have expanded rapidly through acquisitions in China and overseas. For
the fiscal year 2020, we have excluded the businesses acquired during the year from our assessment of the effectiveness of
internal control over financial reporting as of August 31, 2020.We have implemented and are continuing to implement a
number of measures to address our significant deficiency and other control deficiencies not identified as significant. See
“Item 15. Controls and Procedures—Internal Control over Financial Reporting.” We cannot assure you, however, that
these measures will fully address the significant deficiency, together with other control deficiencies identified, in our
internal control over financial reporting or that we will conclude that they have been fully remedied. Our failure to correct
these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies
in our financial statements and could also impair our ability to comply with applicable financial reporting requirements
and related regulatory
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filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the
trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial
reporting significantly hinders our ability to prevent fraud.
Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our
internal control over financial reporting, such firm might have identified material weaknesses and additional deficiencies.
As a public company in the United States, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-
Oxley Act of 2002 requires that we include a report from management on the effectiveness of our internal control over
financial reporting in our annual report on Form 20-F beginning with our annual report for the 2018 fiscal year. Our
management has concluded that our internal control over financial reporting was effective as of August 31, 2020. See
“Item 15. Controls and Procedures.” If we fail to maintain effective internal control over financial reporting in the future,
our management and our independent registered public accounting firm may conclude that our internal control over
financial reporting is not effective. This could adversely impact the market price of our ADSs due to a loss of investor
confidence in the reliability of our reporting processes. We will need to incur additional costs and use management and
other resources in order to comply with Section 404. In addition, once we cease to be an “emerging growth company” as
such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the
effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over
financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial
reporting is effective, our independent registered public accounting firm, after conducting its own independent testing,
may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are
documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal
control over financial reporting, and we may not be able to conclude on an ongoing basis that we have effective internal
control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve
and maintain an effective internal control environment, we could suffer material misstatements in our financial statements
and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial
information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in
the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to
increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on
which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial
statements from prior periods.
Risks Related to Our Corporate Structure
Our private education service business is subject to extensive regulation in China. If the PRC government finds that
the contractual arrangement that establishes our corporate structure for operating our business does not comply with
applicable PRC laws and regulations, we could be subject to severe penalties.
Our private education service business is subject to extensive regulations in China. The PRC government
regulates various aspects of our business and operations, such as curriculum content, education materials, standards of
school operations, student recruitment activities, tuition and other fees. The laws and regulations applicable to the private
education sector are subject to frequent change, and new laws and regulations may be adopted, some of which may have a
negative effect on our business, either retrospectively or prospectively.
Foreign ownership in education services is subject to significant regulations in China. The PRC government
regulates the provision of education services through strict licensing requirements. In particular, PRC laws and regulations
currently prohibit foreign ownership of companies and institutions providing compulsory education services at primary
and middle school levels, and restrict foreign investment in education services businesses at the high school and
kindergarten level. We are a company incorporated in the Cayman Islands. Our PRC subsidiary, Zhuhai Bright Scholar, is
a foreign-owned enterprise and is currently ineligible to apply for and hold licenses to operate, or otherwise own equity
interests in, our schools. Due to these restrictions, we conduct our private education business in China primarily through
contractual arrangements among (1) Zhuhai Bright Scholar, (2) our affiliated entities, including BGY Education
Investment and the schools controlled and held by it, and (3) the ultimate shareholders of BGY Education Investment,
including Ms. Meirong Yang. We hold the required licenses and permits necessary to conduct our private education
business in China through the schools controlled and held by
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BGY Education Investment. We have been and expect to continue to be dependent on our affiliated entities to operate our
private education business. See “Item 4. Information on the Company—C. Organizational Structure” for more
information.
If our ownership structure and contractual arrangements are found to violate any PRC laws or regulations,
including the Opinions on Deepening the Reform of Educational Teaching and Thoroughly Enhancing the Quality of
Compulsory Education and any legislations to be enacted (such as the Preschool Education Law), or if we are found to be
required but failed to obtain any of the permits or approvals for our private education business, the relevant PRC
regulatory authorities, including the MOE, which regulates the education industry, the PRC Ministry of Commerce, or
MOFCOM, which regulates foreign investments, the Civil Affairs Bureau, which regulates the registration of schools, and
SAIC, which regulates the registration of for-profit schools, would have broad discretion in imposing fines or punishments
upon us for such violations, including:
● revoking the business and operating licenses of our group and/or our affiliated entities;
● discontinuing or restricting any related-party transactions between our group and our affiliated entities;
● imposing fines and penalties, or imposing additional requirements for our operations with which we, or our
affiliated entities may not be able to comply;
● requiring us to restructure the ownership and control structure or our current schools;
● restricting or prohibiting our use of the proceeds of our equity offerings to finance our business and
operations in China, particularly the expansion of our business through strategic acquisitions; or
● restricting the use of financing sources by us or our affiliated entities or otherwise restricting our or their
ability to conduct business.
As of August 31, 2020, similar ownership structure and contractual arrangements have been used by many
China-based companies listed overseas, including a number of education companies listed in the United States. To our
knowledge, none of the fines or punishments listed above has been imposed on any of these public companies, including
companies in the education industry. However, we cannot assure you that such fines or punishments will not be imposed
on us or any other companies in the future. If any of the above fines or punishments is imposed on us, our business,
financial condition and results of operations could be materially and adversely affected. If any of these penalties results in
our inability to direct the activities of BGY Education Investment and our schools and subsidiaries that most significantly
impact their economic performance, and/or our failure to receive the economic benefits from BGY Education Investment
and our schools and subsidiaries, we may not be able to consolidate BGY Education Investment and our schools and
subsidiaries in our financial statements in accordance with U.S. GAAP. However, we do not believe that such actions
would result in the liquidation or dissolution of our company, our wholly-owned subsidiaries in China or BGY Education
Investment or our schools or subsidiaries.
Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment
Law and how it may impact the viability of our current corporate structure, corporate governance and business
operations.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law (“Foreign Investment
Law”), which came into effect on January 1, 2020 and replaced the Law on Chinese-Foreign Equity Joint Ventures, the
Law on Chinese-Foreign Contractual Joint Ventures, and the Wholly Foreign-invested Enterprise Law. , together with
their implementation rules and ancillary regulations. On December 26, 2019, the State Council issued the Implementation
Rules of the Foreign Investment Law to clarify and elaborate relevant provisions of the Foreign Investment Law, and the
Supreme People's Court of the PRC promulgated a judicial interpretation to address several issues concerning the
application of the Foreign Investment Law. The above Implementation Rules and the judicial interpretation became
effective as of January 1, 2020.
The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment
regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal
requirements for both foreign and domestic investments. However, since it is relatively new,
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uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment
Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals,
enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign
investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of
indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all
provision which includes investments made by foreign investors through means stipulated in laws or administrative
regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws,
administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a
form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be
deemed to be in violation of the market access requirements for foreign investment under PRC Laws. Furthermore, if
future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken
by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we
can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any
of these or similar regulatory compliance challenges could materially and adversely affect our business, results of
operations or financial position.
We rely on contractual arrangements with BGY Education Investment and its shareholders for our operations in
China, which may not be as effective in providing control as direct ownership.
We have relied and expect to continue to rely on the contractual arrangements with BGY Education Investment
and its shareholders, including Ms. Meirong Yang, one of our largest shareholders, to operate our private education
business. For a description of these contractual arrangements, see “Item 4. Information on the Company—C.
Organizational Structure.” The revenue contribution of our affiliated entities accounted for 63.3% of our total revenues in
the 2020 fiscal year. However, these contractual arrangements may not be as effective as direct equity ownership in
providing us with control over BGY Education Investment and our schools. Any failure by our affiliated entities,
including BGY Education Investment and our schools controlled and held by BGY Education Investment, and the
shareholders of BGY Education Investment, to perform their obligations under the contractual arrangements would have a
material adverse effect on the financial position and performance of our company. For example, the contractual
arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China.
Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in
accordance with arbitral procedures as contractually stipulated. The commercial arbitration system in China is not as
developed as some other jurisdictions, such as the United States. As a result, uncertainties in the commercial arbitration
system or legal system in China could limit our ability to enforce these contractual arrangements. In addition, if the legal
structure and the contractual arrangements were found to violate any existing or future PRC laws and regulations, we may
be subject to fines or other legal or administrative sanctions.
If the imposition of government actions causes us to lose our right to direct the activities of our affiliated entities
or our right to receive substantially all the economic benefits and residual returns from our affiliated entities and we are
not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to
consolidate the financial results of our affiliated entities.
Any failure by our affiliated entities and their shareholders to perform their obligations under the Contractual
Arrangement may have a material adverse effect on our business.
Our affiliated entities and their shareholders may fail to take certain actions required for our business, or to
procure that newly established or acquired schools enter into the contractual arrangements in a timely manner, or to follow
our instructions despite their contractual obligations to do so. If they fail to perform their obligations under their respective
agreements with us, we may have to rely on legal remedies under PRC law, including seeking specific performance or
injunctive relief, which may not be effective.
Our largest shareholders may have potential conflict of interest with us and not act in the best interests of our
company.
Ms. Meirong Yang is the controlling shareholder and a director of BGY Education Investment. She and
Ms. Huiyan Yang are also the largest shareholders of our company. We cannot assure you that Ms. Meirong Yang and
Ms. Huiyan Yang will always act in the best interests of our company. In addition, Ms. Meirong Yang owes duties of
loyalty and diligence to BGY Education Investment as its director pursuant to PRC law. However, she does not owe a
fiduciary duty to our company as she is not an officer or director of our company. We provide no
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incentives to encourage Ms. Meirong Yang to act in our best interest in her capacity as the shareholder of our affiliated
entities. We rely on Ms. Meirong Yang to comply with the terms and conditions of the contractual arrangements. Although
Ms. Meirong Yang is obligated to honor her contractual obligations with respect to our affiliated entities, she may
nonetheless breach or cause our affiliated entities to breach or refuse to renew the existing contractual arrangements which
allow us to effectively exercise control over our affiliated entities and to receive economic benefits from them. If
Ms. Meirong Yang does not honor her contractual obligations with respect to our affiliated entities, we may exercise our
exclusive option to purchase, or cause our designee to purchase, all or part of the equity interest in BGY Education
Investment to the extent permitted by PRC law. If we cannot resolve any disputes between us and the shareholders of
BGY Education Investment, we would have to rely on arbitration or legal proceedings, which could result in disruption of
our business and substantial uncertainty as to the outcome of any such legal proceedings.
Contractual arrangements between our affiliated entities and us may be subject to scrutiny by the PRC tax authorities
and a finding that we or our affiliated entities owe additional taxes could materially reduce our net income and the
value of your investment.
Under PRC laws and regulations, transactions between related parties should be conducted on an arm’s-length
basis and may be subject to audit or challenge by the PRC tax authorities. We could face material adverse tax
consequences if the PRC tax authorities determine that the contractual arrangements among our subsidiary in China, our
affiliated entities and the shareholders of BGY Education Investment are not conducted on an arm’s-length basis and
adjust the income of our affiliated entities through the transfer pricing adjustment. A transfer pricing adjustment could,
among other things, result in, for PRC tax purposes, increased tax liabilities of our affiliated entities. In addition, the PRC
tax authorities may require us to disgorge our prior tax benefits, and require us to pay additional taxes for prior tax years
and impose late payment fees and other penalties on our affiliated entities for underpayment of prior taxes. To date,
similar contractual arrangements have been used by many public companies, including companies listed in the United
States, and, to our knowledge, the PRC tax authorities have not imposed any material penalties on those companies.
However, we cannot assure you that such penalties will not be imposed on any other companies or us in the future. Our
net income may be reduced if the tax liabilities of our affiliated entities materially increase or if they are found to be
subject to additional tax obligations, late payment fees or other penalties.
If any of our affiliated entities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to
use and enjoy assets held by such entity, which could materially and adversely affect our business, financial condition
and results of operations.
We currently conduct our operations in China through contractual arrangements with our affiliated entities and
the shareholders of BGY Education Investment. As part of these arrangements, substantially all of our education-related
assets that are critical to the operation of our business are held by our affiliated entities. If any of these entities goes
bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to
continue some or all of our business activities, which could materially and adversely affect our business, financial
condition and results of operations. If any of our affiliated entities undergoes a voluntary or involuntary liquidation
proceeding, its equity owner or unrelated third-party creditors may claim rights relating to some or all of these assets,
which would hinder our ability to operate our business and could materially and adversely affect our business, our ability
to generate revenue and the market price of our ADSs.
If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill
their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and
adversely affected.
Under PRC law, legal documents for corporate transactions, including agreements and contracts that our business
relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose
designation is registered and filed with the relevant PRC industry and commerce authorities.
In order to maintain the physical security of our chops, we generally have them stored in secured locations
accessible only to authorized employees. Although we monitor such authorized employees, the procedures may not be
sufficient to prevent all instances of abuse or negligence. There is a risk that our employees could abuse their authority, for
example, by entering into a contract not approved by us or seeking to gain control of one of our subsidiaries or affiliated
entities. If any employee obtains, misuses or misappropriates our chops and seals or other controlling intangible assets for
whatever reason, we could experience disruption to our normal business operations.
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We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert
management from our operations.
PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us
from using the proceeds of our public offerings and other financing activities to make loans or additional capital
contributions to our PRC subsidiaries and affiliated entities, which could harm our liquidity and our ability to fund
and expand our business.
In utilizing the proceeds of our initial public offerings and other financing activities as an offshore holding
company of our PRC subsidiaries and affiliated entities, we may (1) make loans to our PRC subsidiaries and affiliated
entities, (2) make additional capital contributions to our PRC subsidiaries, (3) establish new PRC subsidiaries and make
capital contributions to these new PRC subsidiaries, and (4) acquire offshore entities with business operations in China in
an offshore transaction. For details on our use of offering proceeds, see “Item 14—Use of Proceeds.”
However, most of these uses are subject to PRC regulations and approvals. For example:
● loans by us to our wholly-owned subsidiaries in China, which are foreign-invested enterprises, cannot
exceed statutory limits, which is the difference between the total investment amount and the registered
capital of our wholly-owned subsidiaries, and must be registered with the State Administration of Foreign
Exchange of the PRC, or SAFE, or its local counterparts;
● loans by us to our affiliated entities, which are domestic PRC entities, over a certain threshold must be
approved by the relevant government authorities and must also be registered with SAFE or its local
counterparts; and
● capital contributions to our wholly-owned subsidiaries in China must be filed with MOFCOM or its local
counterparts and must also be registered with the local bank authorized by SAFE.
As a result of the requirements and limitations outlined above, the amount of funds that we can directly
contribute to our operations in China through Zhuhai Bright Scholar, a foreign-invested enterprise indirectly held by us, is
limited.
In addition, on March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach
regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (“Circular 19”), which came into
effect from June 1, 2015. The notice requires that the capital of a foreign-invested company settled in Renminbi converted
from foreign currencies shall be used only for purposes within the business scope as approved by the applicable
government authorities and may not be used for equity investments in China unless such activity is set forth in the
business scope or is otherwise permissible under PRC laws or regulations. Furthermore, SAFE strengthened its oversight
of the flow and use of such capital of a foreign-invested company settled in Renminbi converted from foreign currencies.
The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay
Renminbi loans if the proceeds of such loans have not otherwise been used. On October 23, 2019, the SAFE issued the
Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment,
which, among other things, expanded the use of foreign exchange capital in domestic equity investment. Non-investment
foreign-funded enterprises are allowed to lawfully make domestic equity investments by using their capital on the premise
without violation of prevailing special administrative measures for access of foreign investments (negative list) and the
authenticity and compliance with the regulations of domestic investment projects. If our affiliated entity requires financial
support from us or our wholly owned subsidiary in the future, and we find it necessary to use foreign currency-
denominated capital to provide such financial support, our ability to fund our variable interest entity’s operations will be
subject to statutory limits and restrictions, including those described above.
On February 13, 2015, SAFE promulgated the Circular of the State Administration of Foreign Exchange on
Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies (“Circular
13”), which was implemented on June 1, 2015. Pursuant to Circular 13, the registration of existing equity is required in
lieu of annual foreign exchange inspection of direct investment. Circular 13 also grants the authority to
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banks to examine and process foreign exchange registration with respect to both domestic and overseas direct investments.
We expect that PRC laws and regulations may continue to limit our use of proceeds from our initial public
offerings and other financing activities or from other financing sources. We cannot assure you that we will be able to
obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital
contributions by us to our entities in China. If we fail to receive such registrations or approvals, our ability to use the
proceeds of our initial public offerings and other financing activities and to capitalize our PRC operations may be
hindered, which could adversely affect our liquidity and our ability to fund and expand our business.
Risks Related to Doing Business in China
PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations,
could adversely affect the overall economy in China or the education services market, which could harm our business.
The majority of our operations are conducted in China, and a significant portion of our revenues are derived from
China. Accordingly, our business, prospects, financial condition and results of operations are subject, to a significant
extent, to economic, political and legal developments in China.
The PRC economy differs from the economies of most developed countries in many respects. Although the PRC
economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the
PRC government continues to play a significant role in regulating the industry. The PRC government continues to exercise
significant control over China’s economic growth through allocating resources, controlling the incurrence and payment of
foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular
industries or companies. Uncertainties or changes in any of these policies, laws and regulations, especially those affecting
the private education industry in China, could adversely affect the economy in China or the market for education services,
which could harm our business. For example, under the former Law on the Promotion of Private Education, as amended
on June 29, 2013 and on December 29, 2018, and its implementation rules, a private school should elect to be either a
school that does not require “reasonable returns” or a school that requires “reasonable returns.” A private school must
consider factors such as the school’s tuition, ratio of the funds used for education-related activities to the course fees
collected, admission standards and educational quality when determining the percentage of the school’s net income that
would be distributed to the investors as reasonable returns. However, the current PRC laws and regulations provide no
clear guideline for determining “reasonable returns.” In addition, the current PRC laws and regulations do not set forth
any different requirements for the management and operation of private schools that elect to require reasonable returns as
compared to those that do not.
On September 1, 2017, the Amended Law came into effect, under which the concept “reasonable returns” is no
longer applicable and a private school should elect to be either a for-profit school or a non-profit school. Sponsors of for-
profit schools may obtain operating profits, while sponsors of non-profit schools may not. As the implementation rules for
the Amended Law are not yet available as of the date of the annual report, it remains uncertain how the relevant
government authorities will implement the new laws and how long the grace period will be.
While the PRC economy has experienced significant growth in the past two to three decades, growth has been
uneven, both geographically and among various sectors of the economy. Demand for our education services depends, in
large part, on economic conditions in China and especially the regions where we operate, including Guangdong province.
Any significant slowdown in China’s economic growth may adversely affect the disposable income of the families of
prospective students and cause prospective students to delay or cancel their plans to enroll in our schools, which in turn
could reduce our revenues. In addition, any sudden changes to China’s political system or the occurrence of social unrest
could also have a material adverse effect on our business, prospects, financial condition and results of operations.
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Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court
decisions in a civil law system may be cited as reference but have limited precedential value. Since 1979, newly
introduced PRC laws and regulations have significantly enhanced the protections of interests related to foreign
investments in China. However, since these laws and regulations are relatively new and the PRC legal system continues to
evolve rapidly, the interpretations of such laws and regulations may not always be consistent, and enforcement of these
laws and regulations involves significant uncertainties, any of which could limit the available legal protections.
In addition, the PRC administrative and judicial authorities have significant discretion in interpreting,
implementing or enforcing statutory rules and contractual terms, and it may be more difficult to predict the outcome of
administrative and judicial proceedings and the level of legal protection we may enjoy in the PRC than under some more
developed legal systems. These uncertainties may affect our decisions on the policies and actions to be taken to comply
with PRC laws and regulations, and may affect our ability to enforce our contractual or tort rights. In addition, the
regulatory uncertainties may be exploited through unmerited legal actions or threats in an attempt to extract payments or
benefits from us. Such uncertainties may therefore increase our operating expenses and costs, and materially and
adversely affect our business and results of operations.
Any increase in applicable enterprise income tax rates or the discontinuation of any preferential tax treatments
currently available to us may result in significantly higher tax burden or the disgorgement of any benefits we enjoyed
in the past, which could in turn materially and adversely affect our business, financial condition and results of
operations.
Under the former Law on the Promotion of Private Education, as amended on June 29, 2013 and on
December 29, 2018, and its implementing rules as promulgated on March 5, 2004, private schools, whether requiring
reasonable returns or not, may enjoy preferential tax treatment. The implementing rules provide that private schools not
requiring reasonable returns are eligible to enjoy the same preferential tax treatment as public schools and that the relevant
authorities under the State Council may introduce preferential tax treatments and related policies applicable to private
schools requiring reasonable returns. To date, however, no separate policies, regulations or rules have been introduced by
the authorities in this regard.
Preferential tax treatments granted to us by local government authorities are subject to review and may be
adjusted or revoked at any time in the future. For example, three of our affiliate entities in Sichuan enjoy preferential
enterprise income tax treatments. The discontinuation of any preferential tax treatments currently available to us will
cause our effective tax rate to increase, which will increase our income tax expenses and in turn decrease our net income.
In addition, we may not be granted preferential tax treatment by the local governments of additional regions into which we
may expand. The Amended Law, which became effective on September 1, 2017, no longer uses the term “reasonable
return.” Instead, under the Amended Law, sponsors of private schools may elect to register their schools as either non-
profit or for-profit, with the exception that private schools in compulsory education must be registered as non-profit
private schools. Pursuant to such Amended Law, non-profit private schools will be entitled to the same tax benefits as
public schools, but taxation policies for for-profit private schools are still unclear. However, it is unclear how the
Amended Law and its potential implementation rules would impact the tax treatment applicable to our schools and
whether our schools would enjoy any preferential tax treatment in the future. Any negative development could have a
material adverse effect on our business, financial condition and results of operations.
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Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in
unfavorable tax consequences to us and our non -PRC shareholders.
The PRC enterprise income tax law and its implementing rules provide that enterprises established outside of
China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax
laws. The implementing rules define the term “de facto management bodies” as a management body which substantially
manages, or has control over the business, personnel, finance and assets of an enterprise. On April 22, 2009, the State
Administration of Taxation issued Circular 82, which provides that a foreign enterprise controlled by a PRC company or a
group of PRC companies will be classified as a “resident enterprise” with its “de facto management body” located within
China if all of the following requirements are satisfied: (1) the senior management and core management departments in
charge of its daily operations function are mainly in China; (2) its financial and human resources decisions are subject to
determination or approval by persons or bodies in China; (3) its major assets, accounting books, company seals, and
minutes and files of its board and shareholders’ meetings are located or kept in China; and (4) at least half of the
enterprise’s directors with voting right or senior management reside in China. The State Administration of Taxation issued
a bulletin on August 3, 2011 to provide more guidance on the implementation of Circular 82. The bulletin clarifies certain
matters relating to resident status determination, post-determination administration and competent tax authorities.
Although both the circular and the bulletin only apply to offshore enterprises controlled by PRC enterprises and not those
by PRC individuals, the determination criteria set forth in the circular and administration clarification made in the bulletin
may reflect the general position of the State Administration of Taxation on how the “de facto management body” test
should be applied in determining the tax resident status of offshore enterprises and the administration measures should be
implemented, regardless of whether they are controlled by PRC enterprises or PRC individuals.
In addition, the State Administration of Taxation issued a bulletin on January 29, 2014 to provide more guidance
on the implementation of Circular 82. This bulletin further provides that, among other things, an entity that is classified as
a “resident enterprise” in accordance with the circular shall file the application for classifying its status of resident
enterprise with the local tax authorities where its main domestic investors are registered.
As the tax resident status of an enterprise is subject to the determination by the PRC tax authorities, if we are
deemed as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a
uniform tax rate of 25.0%, although dividends distributed to us from our existing PRC subsidiaries and any other PRC
subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our
PRC “resident recipient” status. This could have a material adverse effect on our overall effective tax rate, our income tax
expenses and our net income. Furthermore, dividends, if any, paid to our shareholders and ADS holders may be decreased
as a result of the decrease in distributable profits. In addition, if we were to be considered a PRC “resident enterprise,”
dividends we pay with respect to our ADSs or ordinary shares and the gains realized from the transfer of our ADSs or
ordinary shares may be considered income derived from sources within China and be subject to PRC withholding tax,
which could have a material adverse effect on the value of your investment in us and the price of our ADSs.
There are significant uncertainties under the PRC enterprise income tax law relating to the withholding tax liabilities
of our PRC subsidiaries, and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualify to
enjoy certain treaty benefits.
Under the PRC enterprise income tax and its implementation rules, the profits of a foreign-invested enterprise
generated through operations, which are distributed to its immediate holding company outside China, will be subject to a
withholding tax rate of 10.0%. Pursuant to a special arrangement between Hong Kong and China, such rate may be
reduced to 5.0% if a Hong Kong resident enterprise owns more than 25.0% of the equity interest in the PRC company.
Our current PRC subsidiaries are wholly owned by our Hong Kong subsidiary. Moreover, under the Notice of the State
Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated
on February 20, 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These
conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends, and (2) the corporate
shareholder to receive dividends from the PRC subsidiaries must have continuously met the direct ownership thresholds
during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation
promulgated the Notice on Issues Relating to “Beneficial Owner” in Tax Treaties, or Circular 9, which defines the
“beneficial owner” as a party who holds ownership of and control over the income of the entity, or the rights or assets
from which such income are derived, and sets forth certain detailed factors in determining the “beneficial owner” status.
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Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central
government and governments of other countries or regions is subject to inspection or approval of the relevant tax
authorities. As a result, we cannot assure you that we will be entitled to any preferential withholding tax rate under tax
treaties for dividends received from our PRC subsidiaries.
We face uncertainties with respect to indirect transfers of the equity interests in PRC resident enterprises by their non-
PRC holding companies.
The State Administration of Taxation issued Bulletin on Several Issues concerning the Enterprise Income Tax on
the Indirect Transfers of Properties by Non-Resident Enterprises, or Bulletin 7, on February 3, 2015. Under Bulletin 7, an
“indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may
be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable
commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, “PRC
taxable assets” include assets attributed to an establishment in China, immoveable properties in China, and equity
investments in PRC resident enterprises. In respect of an indirect offshore transfer of assets of a PRC establishment, the
relevant gain is to be regarded as effectively connected with the PRC establishment and therefore included in its enterprise
income tax filing, and would consequently be subject to PRC enterprise income tax at a rate of 25.0%. Where the
underlying transfer relates to the immoveable properties in China or to equity investments in a PRC resident enterprise,
which is not effectively connected to a PRC establishment of a non-resident enterprise, a PRC enterprise income tax at
10.0% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements,
and the party who is obligated to make the transfer payments has the withholding obligation. There is uncertainty as to the
implementation details of Bulletin 7. If Bulletin 7 was determined by the tax authorities to be applicable to some of our
transactions involving PRC taxable assets, our offshore subsidiaries conducting the relevant transactions might be required
to spend valuable resources to comply with Bulletin 7 or to establish that the relevant transactions should not be taxed
under Bulletin 7.
On October 17, 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Source-
based Withholding of Enterprise Income Tax on Non-resident Enterprises, or Bulletin 37, which became effective on
December 1, 2017. According to Bulletin 37, non-resident enterprises who voluntarily declare their enterprise income tax
shall at the same time confirm when they would make payments for the declared amount of tax. If the withholding agent
fails to or is unable to withhold the income tax in accordance with the law, the non-resident enterprise will be deemed to
have cleared its tax payment on time if it voluntarily declares and pays the tax before or within the time limit the tax
authority orders it to do so. If the taxable income before withholding on a source-basis falls within the form of dividends
or any equity investment gains, the date of triggering obligations to settle such tax payments is the date of actual payment
of the dividends or other equity investment gains. In addition, on December 1, 2017, Bulletin 37 repealed the Notice of the
State Administration of Taxation on Strengthening the Administration over Enterprise Income Tax on Income of Non-
resident Enterprises from Equity Transfer and Notice of the State Administration of Taxation on Issuing the Interim
Measures for the Administration of Source-based Withholding of the Enterprise Income Tax of Non-resident Enterprises
issued by the State Administration of Taxation on December 10, 2009 and January 1, 2009, respectively.
As a result, we and our non-PRC shareholders may have the risk of being taxed for the disposition of our
ordinary shares or ADS and may be required to spend valuable resources to comply with Bulletin 7 and Bulletin 37 or to
establish that we or our non-PRC shareholders should not be taxed as an indirect transfer, which may have a material
adverse effect on our financial condition and results of operations or the investment by non-PRC investors in us.
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Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.
A majority of our revenue is denominated in Renminbi. As a result, restrictions on currency exchange may limit
our ability to use revenue generated in Renminbi to fund any business activities we may have outside China in the future
or to make dividend payments to our shareholders and ADS holders in U.S. dollars. Under current PRC laws and
regulations, Renminbi is freely convertible for current account items, such as trade and service-related foreign exchange
transactions and dividend distributions. However, Renminbi is not freely convertible for direct investment or loans or
investments in securities outside China, unless such use is approved by SAFE. For example, foreign exchange transactions
under our subsidiary’s capital account, including principal payments in respect of foreign currency-denominated
obligations, remain subject to significant foreign exchange controls and the approval requirement of SAFE. These
limitations could affect our ability to obtain foreign exchange for capital expenditures.
Our PRC subsidiaries are permitted to declare dividends to our offshore subsidiary holding their equity interest,
convert the dividends into a foreign currency and remit to its shareholder outside China. In addition, in the event that any
of our PRC subsidiaries liquidates, proceeds from the liquidation may be converted into foreign currency and distributed
outside China to our overseas subsidiary holding its equity interest. Furthermore, in the event that BGY Education
Investment liquidates, our PRC subsidiary, Zhuhai Bright Scholar, may, pursuant to the power of attorneys respectively
executed by Ms. Meirong Yang and Mr. Wenjie Yang, require BGY Education Investment to pay and remit the proceeds
from such liquidation to Zhuhai Bright Scholar. Zhuhai Bright Scholar then may distribute such proceeds to us after
converting them into foreign currency and remit them outside China in the form of dividends or other distributions. Once
remitted outside China, dividends, distributions or other proceeds from liquidation paid to us will not be subject to
restrictions under PRC regulations on its further transfer or use.
Other than the above distributions by and through our PRC subsidiaries which are permitted to be made without
the necessity to obtain further approvals, any conversion of the Renminbi-denominated revenue generated by our affiliated
entities for direct investment, loan or investment in securities outside China will be subject to the limitations discussed
above. To the extent we need to convert and use any Renminbi-denominated revenue generated by our affiliated entities
not paid to our PRC subsidiaries and revenue generated by our PRC subsidiaries not declared and paid as dividends, the
limitations discussed above will restrict the convertibility of, and our ability to directly receive and use such revenue. As a
result, our business and financial condition may be adversely affected. In addition, we cannot assure you that the PRC
regulatory authorities will not impose more stringent restrictions on the convertibility of Renminbi in the future, especially
with respect to foreign exchange transactions.
Our subsidiaries and affiliated entities in China are subject to restrictions on making dividends and other payments to
us.
We are a holding company and rely principally on dividends paid by our subsidiaries in China for our cash needs,
including paying dividends and other cash distributions to our shareholders to the extent we choose to do so, servicing any
debt we may incur and paying our operating expenses. The income for our PRC subsidiaries, especially Zhuhai Bright
Scholar, in turn depends on the service fees paid by our affiliated entities. Current PRC regulations permit our subsidiaries
in China to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese
accounting standards and regulations. Under the applicable requirements of PRC law, our PRC subsidiaries may only
distribute dividends after they have made allowances to fund certain statutory reserves. These reserves are not
distributable as cash dividends. In addition, at the end of each fiscal year, each of our schools that are private schools in
China is required to allocate a certain amount to its development fund for the construction or maintenance of the school
properties or purchase or upgrade of school facilities. In particular, our schools that require reasonable returns must
allocate no less than 25.0% of their annual net income, and our schools that do not require reasonable returns must
allocate no less than 25.0% of their annual increase in the net assets of the school for such purposes. Furthermore, if our
subsidiaries or our affiliated entities in China incur debt on their own behalf in the future, the instruments governing the
debt may restrict their ability to pay dividends or make other payments to us. Any such restrictions may materially affect
such entities’ ability to make dividends or make payments, in service fees or otherwise, to us, which may materially and
adversely affect our business, financial condition and results of operations.
Fluctuations in the value of the Renminbi may have a material adverse effect on your investment.
The change in value of the Renminbi against the U.S. dollar and other currencies is affected by, various factors,
such as changes in China’s political and economic conditions. On July 21, 2005, the PRC government
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changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under such policy, the Renminbi
was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Later on, the
People’s Bank of China has decided to further implement the reform of the RMB exchange regime and to enhance the
flexibility of RMB exchange rates. Such changes in policy have resulted in a significant appreciation of the Renminbi
against the U.S. dollar since 2005. There remains significant international pressure on the PRC government to adopt a
more flexible currency policy, which could result in a further and more significant adjustment of the Renminbi against the
U.S. dollar.
Any significant appreciation or revaluation of the Renminbi may have a material adverse effect on the value of,
and any dividends payable on, our ADSs in foreign currency terms. More specifically, if we decide to convert our
Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our initial public offering
into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the
Renminbi amount we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of
the Renminbi to the U.S. dollar could materially and adversely affect the price of our ADSs in U.S. dollars without giving
effect to any underlying change in our business or results of operations.
Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated
review and approval process which could make it more difficult for us to pursue growth through acquisitions in China.
The M&A Rules established additional procedures and requirements that could make merger and acquisition
activities in China by foreign investors more time-consuming and complex. For example, MOFCOM must be notified in
the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic
companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic
companies, are subject to approval by MOFCOM. In addition, the Implementing Rules Concerning Security Review on
Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by MOFCOM in August 2011, require
that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national
security review by MOFCOM. In addition, any activities attempting to circumvent such review process, including
structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited.
There is significant uncertainty regarding the interpretation and implementation of these regulations relating to
merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and
the required notification, review or approval process may materially delay or affect our ability to complete merger and
acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and
adversely affected.
In addition, if MOFCOM determines that we should have obtained its approval for our entry into contractual
arrangements with our affiliated entities and the shareholders of BGY Education Investment, we may be required to file
for remedial approvals. We cannot assure you that we would be able to obtain such approval from MOFCOM. We may
also be subject to administrative fines or penalties by MOFCOM that may require us to limit our business operations in
China, delay or restrict the conversion and remittance of our funds in foreign currencies into China or take other actions
that could have material adverse effect on our business, financial condition and results of operations.
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A failure by the beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange
regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities
and subject us to liability under PRC law.
SAFE has promulgated regulations, including the Notice on Relevant Issues Relating to Foreign Exchange
Control on Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles,
or Circular 37, effective on July 4, 2014, and its appendices, that require PRC residents, including PRC institutions and
individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an
offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or
equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose
vehicle.” The term “control” under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-
making rights acquired by the PRC residents in the offshore special purpose vehicles by such means as acquisition, trust,
proxy, voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the
registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease
of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the
event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,
the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore
parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be
restricted in its ability to contribute additional capital into its PRC subsidiaries. Further, failure to comply with the various
SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.
These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any
offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. However, in
practice, different local SAFE branches may have different views and procedures on the application and implementation
of SAFE regulations, and there remains uncertainty with respect to its implementation. As of the date of this annual report,
all PRC residents known to us that currently hold direct or indirect interests in our company either have completed the
necessary registrations or are in the process of updating their necessary registration, with SAFE as required by Circular
37. However, we cannot assure you that these individuals or any other direct or indirect shareholders or beneficial owners
of our company who are PRC residents will be able to successfully complete the registration or update the registration of
their direct and indirect equity interest as required in the future. If they fail to make or update the registration, our PRC
subsidiaries could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities
and our foreign exchange activities, including restricting our PRC subsidiaries’ ability to distribute dividends to, or obtain
loans denominated in foreign currencies from, our company, or prevent us from contributing additional capital into our
PRC subsidiaries. As a result, our business operations and our ability to make distributions to you could be materially and
adversely affected.
We face regulatory uncertainties in China that could restrict our ability to grant share incentive awards to our
employees or consultants who are PRC citizens.
Pursuant to the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals
Participating in a Stock Incentive Plan of an Overseas Publicly-Listed Company issued by SAFE on February 15, 2012, or
Circular 7, a qualified PRC agent (which could be the PRC subsidiary of the overseas-listed company) is required to file,
on behalf of “domestic individuals” (both PRC residents and non-PRC residents who reside in China for a continuous
period of not less than one year, excluding the foreign diplomatic personnel and representatives of international
organizations) who are granted shares or share options by the overseas-listed company according to its share incentive
plan, an application with SAFE to conduct SAFE registration with respect to such share incentive plan, and obtain
approval for an annual allowance with respect to the purchase of foreign exchange in connection with the share purchase
or share option exercise. Such PRC individuals’ foreign exchange income received from the sale of shares and dividends
distributed by the overseas listed company and any other income shall be fully remitted into a collective foreign currency
account in China, which is opened and managed by the PRC domestic agent before distribution to such individuals. In
addition, such domestic individuals must also retain an overseas entrusted institution to handle matters in connection with
their exercise of share options and their purchase and sale of shares. The PRC domestic agent also needs to update
registration with SAFE within three months after the overseas-listed company materially changes its share incentive plan
or make any new share incentive plans.
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We have granted shares options under the 2017 Plan in the past and may continue to grant additional share
options in the future. When we do, from time to time, we need to apply for or update our registration with SAFE or its
local branches on behalf of our employees or consultants who receive options or other equity-based incentive grants under
our share incentive plan or material changes in our share incentive plan. However, we may not always be able to make
applications or update our registration on behalf of our employees or consultants who hold any type of share incentive
awards in compliance with Circular 7, nor can we ensure you that such applications or update of registration will be
successful. If we or the participants of our share incentive plan who are PRC citizens fail to comply with Circular 7, we
and/or such participants of our share incentive plan may be subject to fines and legal sanctions, there may be additional
restrictions on the ability of such participants to exercise their share options or remit proceeds gained from sale of their
shares into China, and we may be prevented from further granting share incentive awards under our share incentive plan
to our employees or consultants who are PRC citizens.
Labor contract laws in China may adversely affect our results of operations.
The current PRC labor contract law imposes greater liabilities on employers and significantly affects the cost of
an employer’s decision to reduce its workforce. Further, it requires certain terminations be based on the mandatory
retirement age. In the event we decide to significantly change or decrease our workforce, the Labor Contract Law could
adversely affect our ability to enact such changes in a manner that is most advantageous to our business or in a timely and
cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.
Increases in labor costs and employee benefits in China may adversely affect our business and our profitability.
The PRC economy has been experiencing significant growth, leading to inflation and increased labor costs.
China’s overall economy and the average wage in China are expected to continue to grow. In addition, we are required by
PRC laws and regulations to pay various statutory employee benefits, including pensions, housing fund, medical
insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government
agencies for the benefit of our employees. It is subject to the determination of the relevant government agencies whether
an employer has made adequate payments of the requisite statutory employee benefits, and employers that fail to make
adequate payments may be subject to late payment fees, fines and/or other penalties. Future increases in China’s inflation
and material increases in labor costs and employee benefits may materially and adversely affect our profitability and
results of operations unless we are able pass on these costs to our students by increasing tuition.
Recent litigation and negative publicity surrounding China-based companies listed in the United States may negatively
impact the trading price of our ADSs.
We believe that recent litigation and negative publicity surrounding companies with operations in China that are
listed in the United States have negatively impacted stock prices of these companies. Certain politicians in the United
States have publicly warned investors to shun China-based companies listed in the United States. The SEC and the Public
Company Accounting Oversight Board (United States), or the PCAOB, also issued a joint statement on April 21, 2020,
reiterating the disclosure, financial reporting and other risks involved in the investments in companies that are based in
emerging markets, and the limited remedies thereof. Furthermore, various equity-based research organizations have
recently published reports on China-based companies after examining their corporate governance practices, related party
transactions, sales practices and financial statements, and these reports have led to special investigations and listing
suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market
price of our ADSs to fall, divert management resources and energy, cause us to incur expenses in defending ourselves
against rumors, and increase the premiums we pay for director and officer insurance.
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The audit report included in this annual report is prepared by an auditor who is not inspected by the PCAOB, and as
such, our investors are deprived of the benefits of such inspection. Various proceedings and legislative and regulatory
developments related to China-based accounting firms, including our independent registered public accounting firm,
and other developments due to political tensions between the U.S. and China may have an adverse impact on our
listing and trading in the U.S., including adverse impact on the trading prices of our ADSs and possible delisting.
Our independent registered public accounting firm issues audit report included in this annual report filed with the
Securities and Exchange Commission, or SEC. As auditors of companies that are traded publicly in the United States and
a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is required by the
laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the
United States and professional standards. Because our auditors are located in China, a jurisdiction where the PCAOB is
currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently
inspected by the PCAOB.
In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement
Cooperation with the CSRC and the PRC Ministry of Finance, which established a cooperative framework between the
parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB, the
CSRC or the PRC Ministry of Finance in the United States and the PRC. The PCAOB continued to discuss with the
CSRC and the PRC Ministry of Finance on joint inspections in the PRC of PCAOB-registered audit firms that provide
auditing services to Chinese companies that trade on U.S. stock exchanges. On December 7, 2018, the SEC and the
PCAOB issued a joint statement highlighting the continued challenges faced by the U.S. regulators in their oversight of
financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC and
the PCAOB issued another joint statement reiterating the greater risks of insufficient disclosures from companies in many
emerging markets, including China, compared to those from U.S. domestic companies. In discussing the specific issues
related to these risks, the statement again highlighted the PCAOB’s inability to inspect audit work and practices of
accounting firms in China with respect to U.S. reporting companies. On June 4, 2020, the U.S. President issued a
memorandum ordering the President’s Working Group on Financial Markets, or the PWG, to submit a report to the
President within 60 days of the memorandum that includes recommendations for actions that can be taken by the
executive branch and by the SEC or the PCAOB on Chinese companies listed on U.S. stock exchanges and their audit
firms. On August 6, 2020, the PWG released the report. In particular, with respect to jurisdictions that do not grant the
PCAOB sufficient access to fulfill its statutory mandate, or NCJs, the PWG recommended that enhanced listing standards
be applied to companies from NCJs for seeking initial listing and remaining listed on U.S. stock exchanges. Under the
enhanced listing standards, if the PCAOB does not have access to work papers of the principal audit firm located in a NCJ
for the audit of a U.S.-listed company as a result of governmental restrictions, the U.S.-listed company may satisfy this
standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB
determines that it has sufficient access to the firm’s audit work papers and practices to inspect the co-audit. The report
recommended a transition period until January 1, 2022 before the new listing standards apply to companies already listed
on U.S. stock exchanges. Under the PWG recommendations, if we fail to meet the enhanced listing standards before
January 1, 2022, we could face de-listing from the NYSE, deregistration from the SEC and/or other risks, which may
materially and adversely affect, or effectively terminate, our ADS trading in the United States. There were recent media
reports about the SEC’s proposed rulemaking in this regard. It is uncertain whether the PWG recommendations will be
adopted, in whole or in part, and the impact of any new rule on us cannot be estimated at this time.
Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’
audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve
future audit quality. This lack of the PCAOB inspections in China prevents the PCAOB from regularly evaluating audits
and quality control procedures of our independent registered public accounting firm. As a result, we and our investors are
deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in
China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB
inspections, which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures
and reported financial information and the quality of our financial statements.
As part of a continued regulatory focus in the United States on access to audit and other information currently
protected by national law, in particular China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both
houses of the U.S. Congress, which if passed, would require the SEC to maintain a list of issuers for which the
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PCAOB is not able to inspect or investigate auditor reports issued by foreign public accounting firms. The proposed
Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act
prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. stock
exchanges of issuers included on the SEC’s list for three consecutive years. On May 20, 2020, the U.S. Senate passed S.
945, the Holding Foreign Companies Accountable Act, or the HFCAA. The HFCAA was approved by the U.S. House of
Representatives on December 2, 2020 and signed into law by the U.S. President on December 18, 2020. In essence, the
HFCAA requires the SEC to prohibit foreign companies from listing securities on U.S. securities exchanges or traded
“over-the-counter” if a company retains a foreign accounting firm that cannot be inspected by the PCAOB for three
consecutive years, beginning in 2021. The enactment of the HFCAA or any other similar legislations or efforts to increase
U.S. regulatory access to audit information in China could cause investor uncertainty for affected SEC registrants,
including us, the market price of our ADSs could be materially adversely affected, and we could be delisted if we are
unable to meet the PCAOB inspection requirement in time.
If the settlement reached between the SEC and the big four PRC-based accounting firms, including the Chinese
affiliate of our independent registered public accounting firm, concerning the manner in which the SEC may seek
access to audit working papers from audits in China of US-listed companies, is not or cannot be performed in a
manner acceptable to authorities in China and the US, we may be unable to timely file future financial statements in
compliance with the requirements of the Exchange Act.
In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also
under the Sarbanes-Oxley Act of 2002 against the mainland Chinese affiliates of the “big four” accounting firms
(including the mainland Chinese affiliate of our independent registered public accounting firm). A first instance trial of the
proceedings in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The
administrative law judge proposed penalties on the Chinese accounting firms including a temporary suspension of their
right to practice before the SEC, although that proposed penalty did not take effect pending review by the Commissioners
of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the Chinese accounting firms
reached a settlement with the SEC whereby the proceedings were stayed. Under the settlement, the SEC accepted that
future requests by the SEC for the production of documents would normally be made to the CSRC. The Chinese
accounting firms would receive requests matching those under Section 106 of the Sarbanes-Oxley Act of 2002, and would
be required to abide by a detailed set of procedures with respect to such requests, which in substance would require them
to facilitate production via the CSRC. The CSRC for its part initiated a procedure whereby, under its supervision and
subject to its approval, requested classes of documents held by the accounting firms could be sanitized of problematic and
sensitive content so as to render them capable of being made available by the CSRC to US regulators.
Under the terms of the settlement, the underlying proceeding against the four PRC-based accounting firms was
deemed dismissed with prejudice at the end of four years starting from the settlement date, which was on February 6,
2019. Despite the final ending of the proceedings, the presumption is that all parties will continue to apply the same
procedures: i.e., the SEC will continue to make its requests for the production of documents to the CSRC, and the CSRC
will normally process those requests applying the sanitization procedure. We cannot predict whether, in cases where the
CSRC does not authorize production of requested documents to the SEC, the SEC will further challenge the four PRC-
based accounting firms’ compliance with U.S. law. If additional challenges are imposed on the Chinese affiliates of the
“big four” accounting firms, we may be unable to timely file future financial statements in compliance with the
requirements of the Exchange Act.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed
companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect
of their operations in the PRC, which could result in financial statements being determined to not be in compliance with
the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future
proceedings against these accounting firms may cause investor uncertainty regarding China-based, United States-listed
companies and the market price of our ADSs may be adversely affected.
If the Chinese affiliate of our independent registered public accounting firm were denied, even temporarily, the
ability to practice before the SEC, and we were unable to timely find another registered public accounting firm to audit
and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance
with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of our ordinary
shares from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate
the trading of our ADSs in the United States.
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Risks Related to Our Ordinary Shares and ADSs
We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain
reduced reporting requirements.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain
exemptions from requirements applicable to other public companies that are not emerging growth companies including,
most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-
Oxley Act of 2002 for so long as we are an emerging growth company until the fifth anniversary from the date of our
initial listing. As we have elected not to comply with such auditor attestation requirements, our investors may not have
access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised
financial accounting standards until such date that a private company is otherwise required to comply with such new or
revised accounting standards. However, we have elected to “opt out” of this provision and, as a result, we will comply
with new or revised accounting standards as required when they are adopted for public companies. This decision to opt
out of the extended transition period under the JOBS Act is irrevocable.
After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote
substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes- Oxley
Act of 2002 and the other rules and regulations of the SEC, which may adversely affect our financial condition and results
of operations.
The trading price of our ADSs may be volatile, which could result in substantial losses to investors.
The trading prices of our ADSs may be volatile and could fluctuate widely due to factors beyond our control.
This may happen because of broad market and industry factors, akin to the performance and fluctuation of the market
prices of other companies with business operations located mainly in China that have listed their securities in the United
States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets.
The securities of some of these companies have experienced significant volatility, including price declines in connection
with their initial public offerings. The trading performances of these Chinese companies’ securities after their offerings
may affect the perception and attitudes of investors toward Chinese companies listed in the United States in general and
consequently may impact the trading performance of our ADSs, regardless of our actual operating performance.
In addition to market and industry factors, the prices and trading volume for our ADSs may be highly volatile
due to a number of factors, including the following:
● regulatory developments affecting us or our industry, and customers of our education services;
● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our
expected results;
● changes in the market condition, market potential and competition in education services;
● announcements by us or our competitors of new education services, expansions, investments, acquisitions,
strategic partnerships or joint ventures;
● fluctuations in global and Chinese economies;
● changes in financial estimates by securities analysts;
● adverse publicity about us;
● additions or departures of our key personnel and senior management;
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● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional
equity securities; and
● potential litigation or regulatory investigations.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will
trade.
In the past, shareholders of public companies have often brought securities class action suits against those
companies following periods of instability in the market price of their securities. If we were involved in a class action suit,
it could divert a significant amount of our management’s attention and other resources from our business and operations
and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class
action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In
addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a
material adverse effect on our financial condition and results of operations.
Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our
ADSs to decline.
Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur,
could adversely affect the market price of our ADSs. All of our outstanding ADSs are freely transferable without
restriction or additional registration under the Securities Act. If any existing shareholder or shareholders sell a substantial
amount of ADSs, the prevailing market price for our ADSs could be adversely affected. Such sales also might make it
more difficult for us to sell in the future at a time and price that we deem appropriate.
Techniques employed by short sellers may drive down the market price of our ADSs.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party
with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit
from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the
replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short
seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of,
negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum
and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of
shares in the market.
Public companies listed in the United States that have a substantial majority of their operations in China have been
the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective
internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate
corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of
these companies are now conducting internal and external investigations into the allegations and, in the interim, are
subject to shareholder lawsuits and/or SEC enforcement actions.
We may be the subject of unfavorable allegations made by short sellers in the future. Any such allegations may be
followed by periods of instability in the market price of our common shares and ADSs and negative publicity. If and when
we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could
have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would
strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed
against the relevant short seller by principles of freedom of speech, applicable federal or state law or issues of commercial
confidentiality. Such a situation could be costly and timeconsuming and could distract our management from growing our
business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our
business operations and shareholders’ equity, and the value of any investment in our ADSs could be greatly reduced or
rendered worthless.
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Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and
could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares
and ADSs may view as beneficial.
As of December 15, 2020, Ms. Meirong Yang and Ms. Huiyan Yang together beneficially own approximately
92.5% of the aggregate voting power of our company, and Mr. Junli He beneficially own approximately 6.5% of the
aggregate voting power of our company. See “Item 6. Directors, Senior Management And Employees—E. Share
Ownership.” As a result of the dual-class share structure and the concentration of ownership, Ms. Meirong Yang, Ms.
Huiyan Yang, and Mr. Junli He have considerable influence over matters such as decisions regarding mergers,
consolidations, sale of all or substantially all of our assets, election of directors and other significant corporate actions.
They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership
may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other
shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the
price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage
others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A
ordinary shares and ADSs may view as beneficial.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our
business, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry
analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or
if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or unfavorable research about
our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our
company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could
cause the market price or trading volume for our ADSs to decline.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs
for return on your investment.
We declared a cash dividend of US$0.10 and US$0.12 per ordinary share on September 18, 2019 and July 23,
2020, respectively. We do not currently expect to pay additional cash dividends in the foreseeable future. Therefore, you
should not rely on an investment in our ADSs as a source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends, subject to applicable laws.
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if
any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and
surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual
restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our
ADSs will likely depend entirely upon any future price appreciation of our ADSs. We cannot guarantee that our ADSs will
appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your
investment in our ADSs and you may even lose your entire investment in our ADSs.
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Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business
to pay our substantial debt.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness,
including the senior notes, depends on our future performance, which is subject to economic, financial, competitive and
other factors beyond our control. Our business may not continue to generate cash flow from operations in the future
sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we
may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity
capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the
capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage
in these activities on desirable terms, which could result in a default on our debt obligations.
We may not have the ability to raise the funds necessary to repurchase the senior notes upon a change of control
triggering event (as defined in the relevant note documents), and our future debt may contain limitations on our ability
to repurchase the senior notes.
We will have to make an offer, and the holder of the outstanding senior notes will have the right to accept such
offer, to repurchase their senior notes upon the occurrence of a change of control triggering event (as defined in the
relevant note documents) at a repurchase price equal to 101% of the principal amount of the senior notes to be
repurchased, plus accrued and unpaid interest. However, we may not have enough available cash or be able to obtain
financing at the time we are required to make repurchases of notes surrendered therefor. In addition, our ability to
repurchase the senior notes may be limited by law, by regulatory authority or by agreements governing our future
indebtedness. Our failure to repurchase senior notes at a time when the repurchase is required by the relevant note
documents would constitute a default under such documents. A default under the relevant note documents or the
fundamental change itself could also lead to a default under agreements governing any future indebtedness. If the
repayment of any future indebtedness were to be accelerated after any applicable notice or grace periods, we may not have
sufficient funds to repay the indebtedness and repurchase the senior notes.
We may be classified as a passive foreign investment company for United States federal income tax purposes, which
could result in adverse United States federal income tax consequences to United States investors in the ADSs or
ordinary shares.
We will be classified as a “passive foreign investment company,” or PFIC, if, in the case of any particular
taxable year, either (1) 75.0% or more of our gross income for such year consists of certain types of passive income, or
(2) 50.0% or more of the average quarterly value of our assets during such year produce or are held for the production of
passive income. Although the law in this regard is unclear, we treat our affiliated entities as being owned by us for United
States federal income tax purposes, not only because we exercise effective control over the operation of such entities but
also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of
operation in our financial statements. Assuming that we are the owner of our affiliated entities for United States federal
income tax purposes, and based upon our historical and current income and assets, we do not believe that we were
classified as a PFIC for the taxable year ended August 31, 2020.
The determination of whether we are or will become a PFIC will depend upon the composition of our income
(which may differ from our historical results and current projections) and assets and the value of our assets from time to
time, including, in particular, the value of our goodwill and other unbooked intangibles (which may depend upon the
market value of our ADSs or ordinary shares from time-to-time and may be volatile). In estimating the value of our
goodwill and other unbooked intangibles, we have taken into account our anticipated market capitalization, which may
fluctuate. Among other matters, if our market capitalization declines or does not increase, we may be classified as a PFIC
for the current on future taxable years. It is also possible that the IRS may challenge our classification or valuation of our
goodwill and other unbooked intangibles, which may result in our company being, or becoming classified as, a PFIC for
the current or future taxable years.
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The determination of whether we are or will be a PFIC may also depend, in part, on how, and how quickly, we
use our liquid assets. Under circumstances where we retain significant amounts of liquid assets, or if our affiliated entities
were not treated as owned by us for United States federal income tax purposes, our risk of being classified as a PFIC may
substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual
determination made annually after the close of each taxable year, we cannot assure you that we will not be a PFIC for the
current taxable year or any future taxable year.
If we are classified as a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information
—E. Taxation—United States Federal Income Tax Considerations”) may incur significantly increased United States
federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of
distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an ‘‘excess distribution’’
under the United States federal income tax rules, and such holders may be subject to burdensome reporting requirements.
Further, if we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we
generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or
ordinary shares. For more information, see “Item 10. Additional Information—E. Taxation—United States Federal Income
Tax Considerations.”
Our memorandum and articles of association contains anti-takeover provisions that could have a material adverse
effect on the rights of holders of our Class A ordinary shares and ADSs.
Our memorandum and articles of association contain provisions to limit the ability of others to acquire control of
our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving
our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third
parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of
directors has the authority subject to any resolution of the shareholders to the contrary, to issue preferred shares in one or
more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special
rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than the rights associated with our Class A
ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay
or prevent a change in control of our company or make removal of management more difficult. If our board of directors
decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our
Class A ordinary shares and ADSs may be materially and adversely affected.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be
limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are
governed by our memorandum and articles of association, the Cayman Islands Company Law (2018 Revision as
amended) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors,
actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a
large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the
decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of
our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established
as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman
Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have
more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman
Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
The Cayman Islands courts are also unlikely (1) to recognize or enforce against us judgments of courts of the
United States based on certain civil liability provisions of U.S. securities laws, or (2) to impose liabilities against us, in
original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are
penal in nature.
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There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the
courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court
of competent jurisdiction without retrial on the merits.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in
the face of actions taken by management, members of the board of directors or large shareholders than they would as
public shareholders of a company incorporated in the United States.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and substantially all of our assets are located outside of the United States. The
majority of our current operations are conducted in the United Kingdom and China, which is an emerging market. In
addition, a majority of our current directors and officers are nationals and residents of countries other than the United
States. Most of the assets of these persons are located outside the United States. The SEC, U.S. Department of Justice, or
the DOJ, and other authorities often have substantial difficulties in bringing and enforcing actions against non-U.S.
companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China.
Additionally, our public shareholders may have limited rights and few practical remedies in emerging markets where we
operate, as shareholder claims that are common in the United States, including class action securities law and fraud
claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets,
including China. For example, in China, there are significant legal and other obstacles for the SEC, the DOJ and other
U.S. authorities to obtaining information needed for shareholder investigations or litigation. Although the competent
authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another
country or region to implement cross-border supervision and administration, the regulatory cooperation with the securities
regulatory authorities in the United States has not been efficient in the absence of a mutual and practical cooperation
mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no foreign
securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the
PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no
organization or individual may provide the documents and materials relating to securities business activities to foreign
securities regulators. As a result, it may be difficult or impossible for you to bring an action against us or against these
individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal
securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands
and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt
from certain provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the
securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on
Form 8-K with the SEC;
● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect
of a security registered under the Exchange Act;
● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading
activities and liability for insiders who profit from trades made in a short period of time; and
● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In
addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and
regulations of the New York Stock Exchange. Press releases relating to financial results and material events will also be
furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be
less extensive and less timely compared to that required to be filed with the SEC by U.S.
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domestic issuers. As a result, you may not be afforded the same protections or information, which would be made
available to you, were you investing in a U.S. domestic issuer.
As a “controlled company” under the rules of the NYSE, we are exempt from certain corporate governance
requirements that could adversely affect our public shareholders.
Under the rules of the NYSE, a company of which more than 50% of the voting power for the election of
directors is held by an individual, group or another company is a controlled company and may elect not to comply with
certain corporate governance requirements, including the requirement that a majority of our directors be independent, as
defined in the NYSE rules, and the requirement that our compensation and nominating and corporate governance
committees consist entirely of independent directors. In April 2017, Ms. Huiyan Yang and Ms. Meirong Yang entered into
an acting-in-concert agreement by which Ms. Huiyan Yang agrees with Ms. Meirong Yang when voting and deciding on
material matters in relation to the management of our company. Ms. Huiyan Yang and Ms. Meirong Yang are also joint
settlors and members of the two-person investment committee of Yeung Family Trust V, which holds approximately 1.8%
of the outstanding Class A ordinary shares and approximately 93.5%of the outstanding Class B ordinary shares as of
December 15, 2020. As a result, Ms. Huiyan Yang and Ms. Meirong Yang collectively are the beneficial owners of a
majority of the voting power of our issued and outstanding share capital as of December 15, 2020. Therefore, we qualify
as a “controlled company” under the rules of the NYSE. We have elected to rely on certain exemptions under the NYSE
rules available to controlled companies, including the exemption from having a majority of our directors be independent,
and may continue to elect to do so as long as we remain a controlled company. As a result, you may not have the same
protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements.
As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in
relation to corporate governance matters that differ significantly from New York Stock Exchange corporate
governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we
complied fully with from New York Stock Exchange corporate governance listing standards.
As a Cayman Islands company listed on the New York Stock Exchange, we are subject to New York Stock
Exchange corporate governance listing standards. However, the New York Stock Exchange rules permit a foreign private
issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in
the Cayman Islands, which is our home country, may differ significantly from New York Stock Exchange corporate
governance listing standards. Shareholders of Cayman Islands exempted companies like us have no general rights under
Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our
directors have discretion under our articles of association to determine whether or not, and under what conditions, our
corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders.
This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder
motion or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly
from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to
follow home country practice with respect to corporate governance matters, our shareholders may be afforded less
protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to
exercise your right to vote your Class A ordinary shares.
As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying
Class A ordinary shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you
must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote
the underlying Class A ordinary shares in accordance with these instructions. You will not be able to directly exercise your
right to vote with respect to the underlying shares unless you withdraw the shares. Under our memorandum and articles of
association, the minimum notice period required for convening a general meeting is ten days. When a general meeting is
convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to
vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming
vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting
materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its
agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting
instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the
shares underlying your ADSs are not voted as you requested.
The depositary for our ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your
ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your
interests.
Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to
vote our Class A ordinary shares underlying your ADSs at shareholders’ meetings unless:
● we have failed to timely provide the depositary with notice of meeting and related voting materials;
● we have instructed the depositary that we do not wish a discretionary proxy to be given;
● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the
meeting; or
● a matter to be voted on at the meeting would have a material adverse impact on shareholders.
The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent our
Class A ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This
may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares
are not subject to this discretionary proxy.
You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value
for them, if it is illegal or impractical to make them available to you.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian
receives on ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You
will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the
depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders
of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that
require registration under the Securities Act but that are not properly registered or distributed under an applicable
exemption from registration. The depositary may also determine that it is not feasible to distribute certain property
through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases,
the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws
any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to
take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This
means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or
impractical for us to make them available to you. These restrictions may cause a material decline in the value of our
ADSs.
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You may experience dilution of your holdings due to inability to participate in rights offerings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the
deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights
and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to
all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required
to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to
establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration
statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared
effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution
of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any
time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may
close its books from time to time for a number of reasons, including in connection with corporate events such as a right
offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified
period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary
may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the
depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of
law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the company
We are an exempted company with limited liability incorporated in the Cayman Islands. We conduct our business
primarily through our subsidiaries and affiliated entities in China, the United Kingdom, the United States and Canada. As
of the date of this annual report, we have a network of 94 schools in China that cover K-12 education and a number of
learning centers for after-school programs through certain contractual arrangements with BGY Education Investment,
which in turn controls and holds these schools and learning centers. As of the date of this annual report, we operate eight
overseas schools and six language training institutions, which we may also refer to as international language schools,
through Bright Scholar (UK) Holdings Limited, a wholly owned subsidiary of ours. We trace our history back to the
founding of Guangdong Country Garden School, our first private school, in 1994. Over the past two decades, we have
launched and acquired a number of schools, complementary education services and education technology services in
China, the United Kingdom, the United States and Canada.
Beginning in 2016, we underwent a series of restructurings. In particular:
● Incorporation of the listing entity. In December 2016, Ms. Meirong Yang incorporated Bright Scholar
Holdings in the Cayman Islands.
● Acquisition of Impetus. In January 2016, we acquired Impetus Investment Ltd., or Impetus, a Cayman
Islands company from Mr. Junli He and other selling shareholders.
● Incorporation of PRC subsidiary. In January 2017, Time Education China Holdings Limited incorporated
Zhuhai Bright Scholar, as our wholly-owned subsidiary in China.
● Contractual arrangements. In January 2017, we, through our PRC subsidiary, Zhuhai Bright Scholar,
entered into a series of contractual arrangements with (1) our affiliated entities, including BGY Education
Investment and the schools it owns and operates, and (2) Ms. Meirong Yang and Mr. Wenjie Yang, the
shareholders of BGY Education Investment, to obtain effective control of our affiliated entities.
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Foreign ownership in education services is subject to significant regulations in China. The PRC government
regulates the provision of education services through strict licensing requirements. In particular, PRC laws and regulations
prohibit foreign ownership of companies and institutions from providing compulsory education services at primary and
middle school levels, and restrict foreign investment in education services at the kindergarten and high school level. We
are a company incorporated in the Cayman Islands. Our PRC subsidiary, Zhuhai Bright Scholar, is a wholly foreign-
owned enterprise and currently ineligible to apply for and hold licenses to operate, or otherwise own equity interests in our
domestic schools.
Due to these restrictions, we, through our PRC subsidiary, Zhuhai Bright Scholar, have entered into a series of
contractual arrangements with (1) our affiliated entities, including BGY Education Investment and the schools it owns and
operates, and (2) the shareholders of BGY Education Investment, i.e., Ms. Meirong Yang and Mr. Wenjie Yang, which
enable us to:
● exercise effective control over our affiliated entities;
● receive substantially all of the economic benefits of our affiliated entities in consideration for the services
provided by us; and
● have an exclusive option to purchase all of the equity interests in our affiliated entities when and to the
extent permitted under PRC law.
Ms. Meirong Yang is one of our founders and a relative of Ms. Huiyan Yang, our chairperson. Mr. Wenjie Yang is
Ms. Meirong Yang’s business partner. We do not have any equity interest in our affiliated entities. However, as a result of
these contractual arrangements, we control our affiliated entities through our PRC subsidiary, Zhuhai Bright Scholar. We
have consolidated the results of our affiliated entities in our consolidated financial statements included elsewhere in this
annual report in accordance with U.S. GAAP. The contractual arrangements were executed and became effective on
January 25, 2017. As of the date of this annual report, we are in the process of arranging the execution of Rights and
Obligations Assumption Letters for our domestic schools newly launched and acquired in 2020 fiscal year. For a detailed
description of the risks associated with our corporate structure, see “Item 3. Key Information—D. Risk Factors—Risks
Related to Our Corporate Structure” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in
China.”
We have been advised by our PRC legal counsel that the contractual arrangements among Zhuhai Bright Scholar,
our affiliated entities, and Ms. Meirong Yang and Mr. Wenjie Yang as the shareholders of BGY Education Investment are
valid, binding and enforceable under PRC laws and regulations, and are not in violation of PRC laws or regulations
currently in effect. If our affiliated entities, Ms. Meirong Yang and Mr. Wenjie Yang fail to perform their obligations under
the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us the
effective control over our affiliated entities. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Corporate Structure—We rely on contractual arrangements with BGY Education Investment and its shareholders for our
operations in China, which may not be as effective in providing control as director ownership.”
We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the
interpretation and application of current and future PRC laws and regulations. Accordingly, the PRC regulatory authorities
may in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised
by our PRC legal counsel that if the PRC government finds that the contractual arrangements that establish the structure
for operating our education services business in China do not comply with relevant PRC government restrictions on
foreign investment in the education services industry, we could be subject to severe penalties, including being prohibited
from continuing operations. For a detailed description of the risks associated with our corporate structure, see “Item 3.
Key Information—D. Risk Factors—Risks Related to Our Corporate Structure” and “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China.”
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If we are unable to maintain effective control over our affiliated entities, we will not be able to continue to
consolidate the financial results of our affiliated entities into our financial results. The revenue contribution of our
affiliated entities accounted for 94.4% of our total revenues in the 2018 fiscal year, 82.0% of our total revenues in the
2019 fiscal year, and 63.3% of our total revenues in the 2020 fiscal year. Further, as a holding company, our ability to
generate profits, pay dividend and other cash distributions to our shareholders depends principally on our ability to receive
dividends and other distributions from our PRC subsidiary, Zhuhai Bright Scholar, which in turn depends on the service
fees paid to Zhuhai Bright Scholar from our schools and other affiliated entities. We, through our PRC subsidiary, Zhuhai
Bright Scholar, have entered into an exclusive management services and business cooperation agreement with each of our
affiliated entities, pursuant to which we provide service to our schools in exchange for the payment of service fees. The
services fees we are entitled to collect under the agreement are calculated as the balance of general income less any costs,
taxes and other reserved fees stipulated by laws and regulations. In practice, we evaluate on a case-by-case basis the
performance and future plans of individual schools before determining the amount we collect from each school. We do not
have unfettered access to the revenues from our PRC subsidiaries or affiliated entities due to the significant PRC legal
restrictions on the payment of dividends by PRC companies, foreign exchange control restrictions, and the restrictions on
foreign investment, among others. For example, under the applicable requirements of PRC law, our PRC subsidiaries may
only distribute dividends after they have made allowances to fund certain statutory reserves and each private school in
China is required to allocate a certain amount to its development fund prior to payments of dividend. In particular, our
schools that require reasonable returns must allocate no less than 25.0% of their annual net income, and our schools that
do not require reasonable returns must allocate no less than 25.0% of their annual increase in their net assets for such
purposes. See “—D. Risk Factors—Risks Related to Doing Business in China—Our subsidiaries and affiliated entities in
China are subject to restrictions on making dividends and other payments to us.”
We listed our ADSs on the New York Stock Exchange under the symbol “BEDU” on May 18, 2017 and
completed an initial public offering of 17,250,000 ADSs on June 7, 2017, raising approximately US$174.7 million in net
proceeds after deducting underwriting commissions and the offering expenses payable by us. On March 2, 2018, we
completed a follow-on public offering of 10,000,000 ADSs, raising approximately US$181.4 million in net proceeds after
deducting underwriting commissions and the offering expenses payable by us.
In April 2018, our board approved a share repurchase program (the “2018 Share Repurchase Program”) to
repurchase up to US$100.0 million worth of our outstanding ADSs within 12 months. The 2018 Share Repurchase
Program has expired on April 30, 2019 and as of such date, we had repurchased 6,679,183 of our outstanding ADSs for an
aggregate purchase price of approximately US$77 million, pursuant to the 2018 Share Repurchase Program. In
September 2019, our board approved a share repurchase program (the "2019 Share Repurchase Program") to repurchase
up to US$30.0 million worth of our outstanding ADSs within 12 months. The 2019 Share Repurchase Program expired on
November 19, 2020 and as of such date we had repurchased 1,200,000 of our outstanding ADSs for an aggregate purchase
price of approximately US$9.4 million pursuant to the program. In November 2020, our board approved a share
repurchase program (the “2020 Share Repurchase Program”) to repurchase up to US$50.0 million worth of our
outstanding ADSs within 12 months.
In July 2019, we issued senior notes in the aggregate principal amount of US$300.0 million, with interests of
7.45% per annum and maturing on July 31, 2022 at an issue price of 100.0% in reliance on Regulation S under the
Securities Act. We listed such senior notes on the Stock Exchange of Hong Kong Limited by way of debt issues to
professional investors (as defined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited and in the Securities and Futures Ordinance (Cap. 571) of Hong Kong) only.
Our principal executive office is located at No.1, Country Garden Road, Beijiao Town, Shunde District, Foshan,
Guangdong, zip code 528300, China. Our principal phone number is (86) 757-6683-2507. Our registered office in the
Cayman Islands is located at the offices of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive,
PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Investors should submit any inquiries to the address and
telephone number of our principal executive offices. Our website is www.brightscholar.com. The information contained
on our website is not a part of this annual report. Our agent for service of process in the United States is Law Debenture
Corporate Services Inc., located at 801 2nd Avenue, Suite 403, New York, New York 10017.
For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and
Prospects—B. Liquidity and Capital Resources—Capital Expenditures.”
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B. Business Overview
We are a global premier education service provider operating K-12 schools and complementary education
services in China and overseas, and we were the largest operator of international and bilingual K-12 schools in China in
terms of student enrollment as of August 31, 2020, according to the Frost & Sullivan report. We are dedicated to providing
quality international education to Chinese students and equipping them with the critical academic foundation and skillsets
necessary to succeed in the pursuit of higher education overseas. We also complement our international offerings with
Chinese government-mandated curriculum for students who wish to maintain the option of pursuing higher education in
China. We established one of the first private schools in China in 1994 and have since expanded our network to operate 94
schools as of the date of this annual report covering the breadth of K-12 academic needs of our students across twelve
provinces in China. As part of our global expansion plan, we have been actively exploring mergers and acquisition
opportunities abroad to expand our global school network, targeting quality K-12 private education providers and
reputable schools in our targeted overseas countries and jurisdictions where students of our domestic school network
would normally be interested in pursuing or continuing their education. As of the date of this annual report, we have eight
overseas school located in the United Kingdom and the United States. During the 2020 school year, we had an average of
51,825 students enrolled at our schools, representing an increase of 145.8 % from an average of 21,084 students enrolled
during the 2015 school year. Bright Scholar Holdings, our ultimate Cayman Islands holding company, does not have any
substantive operations other than indirectly controlling BGY Education Investment, our affiliated entity which controls
and holds our domestic schools, through certain contractual arrangements, and indirectly holding Bright Scholar (UK)
Holdings Limited, through which we operate our overseas schools.
Our business includes domestic K-12 schools, overseas schools, education technology, complementary education
services and education technology services. Our schools for domestic K-12 education services consist of international
schools, bilingual schools and kindergartens. We offer a broad range of internationally-accredited curricula at our
international schools. We tailor the delivery of coursework to optimize learning outcomes for our students and prepare
them for higher education overseas. According to the Frost & Sullivan report, we are among a select group of private
school operators in China accredited to administer all major globally-recognized education programs, including Diploma
Program, Advanced Placement and IGCSE/A-Level. We are also one of the first school operators in China accredited to
administer the full set of IB curricula, including its Primary Years Program, Middle Years Program, and Diploma Program.
Our bilingual schools place a specific emphasis on developing our students’ English language proficiency and non-
academic skillsets, offering elective classes in sports, arts and community service programs. Leveraging our experience
and insights into learning needs at different stages, our kindergartens seek to lay the necessary foundation for our students’
future studies. In addition, as a global premier education provider, we have built our global presence primarily through
acquiring established overseas schools and language training institutions in countries such as the United Kingdom, the
United States and Canada. We also offer a range of complementary education services, primarily including camp
programs, after-school programs, through our network of learning centers in China, as well as international education
consulting services.
Our schools have effectively enhanced our students’ academic performance. Approximately 93.6% of the 2020
graduating class enrolled in our Diploma Program, Advance Placement or A-level curricula in our domestic K-12 schools
that applied for overseas universities were admitted into global top 50 institutions, as ranked by either the QS World
University Rankings or U.S. News, including University of Cambridge, University of Oxford, The University of Chicago,
New York University, University of Toronto, The University of Sydney. Students in our 2020 graduating class have
received more than 1,100 offers in total from global top 50 institutions by the same ranking as of August 31, 2020.
Approximately 52.8% of our graduating students from our bilingual schools were admitted into top local high schools in
the 2020 fiscal year. Approximately 55.0% and 62.1% of the 2020 graduating class from our two largest bilingual schools,
Huanan Country Garden School and Phoenix City Bilingual School, respectively, were admitted into the top local high
schools.
The effectiveness of our education, along with our state-of-the-art facilities, student- and parent-centric support
services and our brand recognition, allow us to command premium pricing. The average tuition of our domestic K-12
schools for the 2020 school year was significantly higher than that of overall K-12 private schools in China, according to
the Frost & Sullivan Report.
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We collaborate closely with Country Garden, a related party of ours and a leading developer of residential
properties in China, which has allowed us to operate a highly scalable business model and launch greenfield schools with
significantly lower upfront capital expenditures. Substantially all of our existing domestic K-12 schools were developed in
cooperation with Country Garden’s residential property projects, allowing Country Garden to meet local government
requirements and the market needs for education facilities and services in its residential communities. The demand for
convenient access to quality education from Country Garden’s homeowners, who are relatively affluent families, provides
a large pool of students for our domestic K-12 schools, and at the same time drives sales of residential units in the vicinity
of our schools. We believe we will continue to benefit from this synergistic relationship as we expand our school network
in China.
We have experienced substantial growth in recent years. Our revenue increased from RMB1,718.9 million in the
2018 fiscal year to RMB2,563.0 million in the 2019 fiscal year, and further to RMB3,366.5 million (US$ 491.6 million) in
the 2020 fiscal year, representing a CAGR of 39.9%. We focus on providing quality education to our students and, since
the beginning of the 2016 fiscal year, we have implemented various initiatives to improve operating efficiency and
profitability. See “—Centralized Management.” We had net income of RMB248.9 million , RMB252.8 million and
RMB164.2 million (US$ 24.0 million) in the 2018 , 2019 and 2020 fiscal years, respectively. We use adjusted net income,
which excludes share-based compensation expense, amortization of intangible assets, tax effect of amortization of
intangible assets, impairment loss on operating lease right-of-use assets and impairment loss on goodwill, in evaluating
our ongoing results of operations. Our adjusted net income was RMB283.0 million, RMB322.6 million and RMB267.7
million (US$ 39.1 million) for the 2018 , 2019 and 2020 fiscal years, respectively. See “Item 5. Operating and Financial
Review and Prospectus—A. Operating Results-Results of Operations—Non-GAAP measures” for details.
Our Domestic K-12 Schools
We offer education programs that cover K-12 education and integrate internationally-accredited curricula,
government-mandated curricula and extracurricular activities that aim to develop well-rounded individuals through a
network of 94 schools in 12 provinces in China as of the date of this annual report. We divide our schools in China
broadly into international schools, bilingual schools and kindergartens.
● International schools. As of the date of this annual report, we have eight international schools in China,
which focus on internationally-accredited curricula and offer extracurricular activities and programs that aim
to develop well-rounded individuals.
● Bilingual schools. As of the date of this annual report, we have 15 bilingual schools in China, which provide
government-mandated curricula. Our bilingual schools place an emphasis on developing students’ English
proficiency and well-rounded individuals.
● Kindergartens. As of the date of this annual report, we have 71 kindergartens in China, including 11
kindergartens that deliver international curricula.
During the 2020 school year, we had an average of 48,613 students enrolled and employed an average of 5,496
teachers and instructors at our domestic K-12 schools. We have grown rapidly during the past three years, supported by
strong demand for quality education in China and favorable policies promulgated by the PRC government and the
nationwide expansion of Country Garden’s residential communities. The following table sets forth the average number of
students enrolled at our domestic K-12 schools for the period indicated.
Domestic K-12 schools
International schools
Bilingual schools
Kindergartens
Total
2018 school
year
2019 school
year
2020 school
year
7,366
15,620
13,693
36,679
9,350
18,132
16,742
44,224
10,584
20,189
17,840
48,613
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An important element of our schools in China is to provide an immersive bilingual learning environment, with
our English teachers and English-speaking staff. To help students master the English language, we design our English
courses according to the specific linguistic needs of the students at each grade level, building their English language skills
from kindergarten to high school.
Our domestic K-12 schools are also committed to developing well-rounded students. As a private school
operator, we have more flexibility in offering courses based on students’ learning needs and in response to popular student
and parent demand. We offer a broad range of courses, and students at our international schools may choose an
individualized combination of courses. Some of the courses we offer, such as calligraphy, dance, debate and music,
emphasize creativity, critical thinking and a deeper appreciation of traditional Chinese and international culture. Our
domestic K-12 schools also offer students the opportunity to participate in a variety of after-school programs and club
events, including sports and life skills development programs, such as first aid and disaster drills, to supplement classroom
learning. This provides our students with opportunities to fully explore and pursue their individual interests and potential.
Our coverage of K-12 education allows us to instill our educational philosophy from the starting point of a
student’s academic career. For our schools that cover the full spectrum of K-12 education, we believe we are able to
minimize the need for our students to adapt for teaching methodologies and learning environments they may encounter
when moving to the next level of education.
Most of our international and bilingual schools have boarding facilities, which allows students to focus on their
studies and experience living independently before attending universities and allows us to recruit students from beyond
Country Garden’s residential communities. While a majority of our domestic K-12 schools are located within or in the
vicinity of the residential communities developed by Country Garden, students from families that have not purchased
property from Country Garden are increasingly attracted by our reputation for quality education. Approximately 62.4 % of
our students enrolled in the bilingual and international schools established by us in the 2020 fiscal year came from
families who do not own Country Garden properties. All of our domestic K-12 schools also feature a comprehensive suite
of sports and education facilities and on-campus catering facilities.
Our international schools
As of the date of this annual report, we have eight international schools in six provinces across China, including
Guangdong, Jiangsu, Hunan, Guizhou, Hubei and Gansu. Our international schools offer a broad range of internationally-
accredited education programs to accommodate the individual needs of our large student base seeking to pursue higher
education overseas. Driven by the increasing appreciation for the quality of higher education overseas and our
commitment to providing quality education, our international programs have proven to be an attractive option to an
increasing number of Chinese students and their parents, allowing us to charge a premium in tuition compared to other
international schools targeting Chinese students.
Our schools are among the first private schools in China to receive international accreditations for our programs.
According to the Frost & Sullivan report, we are also among a select group of private school operators in China accredited
to administer all major globally-recognized education programs. The following table sets forth certain information about
the major international programs we offer.
Accreditation Institution
IB Organization
Program
Primary Years Program
Middle Years Program
Diploma Program
Cambridge International Examinations
IGCSE
A-Level
U.S. College Board
Advanced Placement
NCC Education
International Foundation Year
57
Applicable
Grades
1-5
6-10
11-12
9-10
11-12
9-12
11-12
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Programs administered by the IB Organization are generally recognized in all major English-speaking countries.
IGCSE, A-Level and International Foundation Year are recognized primarily in the United Kingdom. Advanced
Placement is recognized primarily in the United States and Canada. In addition, we offer joint diploma programs,
including Sino-Canadian dual diploma, Sino-U.S. dual diploma and Sino-Australian dual diploma programs. Our students
may switch from one program to another if they meet the applicable requirements.
We integrate classes under our international programs with government-mandated coursework to students from
the first through ninth grades. In the event that our students under international programs elect to attend universities in
China at any stage of their studies, they may switch to government-mandated curricula offered in some of our
international schools.
The number of students enrolled at our international schools have increased rapidly in the last three school years,
from an average of 7,366 for the 2018 school year to 10,584 in the 2020 school year. Students in the 2020 graduating class
at our international schools were accepted to top colleges and universities in countries and regions such as the United
States, the United Kingdom, Australia, New Zealand, Canada, Switzerland, France, Singapore, Hong Kong, Japan, Italy
and the Netherlands. Approximately 93.6% of the 2020 graduating class enrolled in our Diploma Program, Advance
Placement and A-Level curricula in our domestic K-12 schools who applied for overseas universities were admitted into
global top 50 institutions, ranked by either the QS World University Rankings or U.S. News, including University of
Oxford, University of Cambridge, The University of Chicago, New York University, University of Toronto, and The
University of Sydney. As of August 31, 2020, students in our 2020 graduating class have received more than 1,100 offers
in total from global top 50 institutions by the same rankings.
The following table sets forth certain information about each of our international schools.
Average Average
number
number
of students of students
enrolled
during
the 2020
school
year
enrolled
during
the 2019
school
year
Establishment Grades
Capacity
as of
September 1,
2020
1994
1-12
3,987
4,297
3,940
2013
1-12
1,542
1,571
2,950
2014
1-12
745
944
2,100
2015
1-12
898
1,057
3,000
2015
1-9
468
503
798
2016
1-12
1,356
1,910
2,472
2016
7-12
354
302
1,200
2020
1-9
—
9,350
—
10,584
1,350
17,810
Location
Jurong, Jiangsu province
Changsha, Hunan province
Shunde, Guangdong province
Huizhou, Guangdong province
Name
Guangdong Country
Garden School
Jurong Country Garden
School
Ningxiang Country
Garden School
Country Garden Silver
Beach School
Huaxi Country Garden
International School
Lanzhou Country
Garden International
School
Wuhan Sannew
American Middle
School
Fettes College
Experimental School of
Zengcheng, Guangzhou Guangzhou, Guangdong province
Total
Guiyang, Guizhou province
Lanzhou, Gansu province
Wuhan, Hubei province
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Guangdong Country Garden School ((cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0))
Founded in 1994, Guangdong Country Garden School is our first international school that offers all three IB-
accredited programs. It is also one of the few schools in China authorized to teach IGCSE and A-Level, Advance
Placement, and International Foundation Year courses. Guangdong Country Garden School has become our flagship
school due to its comprehensive set of internationally-accredited curricula, effective education services and long operating
history. It is well known throughout China as the recipient of a number of recognitions such as being a First-Class School
in Guangdong province and being part of the Advanced Group in National Private Education. It hosts a teacher training
academy which serves as the hub for teacher training within our school network. We send veteran teachers at our
Guangdong Country Garden School to our new schools to share teaching experiences with, and provide demonstration
classes to the resident teachers at those schools and also allow such resident teachers to visit Guangdong Country Garden
School for on-site training sessions. Guangdong Country Garden School is instrumental in establishing our brand
recognition throughout China and setting the benchmark for our other international schools.
Our students in this school are regular winners of national and international competitions. During the 2020
school year, three students won a gold award in the UK Chemistry Olympiad 2020, one student won a gold award in the
British Physics Olympiad 2019 Year 10 Physics Challenge, and five students won a gold award in the Canadian Chemistry
Contest. Additionally, eleven students were award winners in the National Economics Challenge China Preliminary 2020,
and five were award winners in the American Computer Science League. Among our 2020 graduating class enrolled in
our Diploma Program, A-level or AP curricula at this school who applied for overseas universities, approximately 97.5 %
of them were admitted into top 50 institutions, as ranked by either the QS World University Rankings or the U.S. News.
Jurong Country Garden School ((cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0))
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Founded in 2013, Jurong Country Garden School, our first international school outside Guangdong province,
obtained authorization from the IB Organization to offer all three IB-accredited programs within three years of its
establishment. The school is also authorized to offer IGCSE and A-Level courses and International Foundation Year
courses. Among our 2020 graduating classes enrolled in our Diploma Program, A-Level or AP curricula at this school,
who applied for overseas universities, approximately 92.9 % of them were admitted into top 50 institutions, as ranked by
either the QS World University Rankings or the U.S. News.
Other international schools
Since 2014, we have established five international schools and acquired one international school, namely
Ningxiang Country Garden School, Country Garden Silver Beach School, Huaxi Country Garden International School,
Lanzhou Country Garden International School , Fettes College Experimental School of Zengcheng, Guangzhou and
Wuhan Sannew American Middle School. We have replicated, and intend to continue to replicate, the success of
Guangdong Country Garden School by leveraging the collective expertise and experiences accumulated by the teachers
and management at Guangdong Country Garden School over the years. We believe the ample demand for international
education, our education service quality, know-how and brand position us well to continue to ramp up the operation of
each of these schools.
Our bilingual schools
As of the date of this annual report, we have 15 bilingual schools in five provinces in China. Our bilingual
schools teach government-mandated curricula with an emphasis on English proficiency development. We supplement our
academic offerings with activities for the well-balanced development of our students, such as arts-related and life skills
building classes or club events, which are not generally available in public schools. The students enrolled at our bilingual
schools have increased rapidly in the last three school years, from an average of 15,620 for the 2018 school year to an
average of 20,189 in the 2020 school year.
Graduates from our bilingual schools generally take Zhongkao, the high school entrance examinations
administered in China, and may pursue high school education in public or private schools. A number of our bilingual
schools, including Phoenix City Bilingual School and Country Garden Huacheng School, also offer international courses
to a small number of students in response to the local demands for further education at overseas universities. We generally
allow our students to transfer from one program to another if they meet the relevant requirements.
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The following table sets forth certain information about each of our bilingual schools.
Average Average
Location
Establishment
Grades
number
number
of students of students
enrolled
during
the 2020
school
year
enrolled
during
the 2019
school
year
Capacity
as of
September 1,
2020
Guangzhou (Panyu),
Guangdong province
Guangzhou (Zengcheng),
Guangdong province
Shunde, Guangdong
province
2002
2003
2003
Changsha, Hunan province
2007
Jiangmen, Guangdong
province
Heshan, Guangdong
province
Wuhan, Hubei province
Guangzhou (Zengcheng),
Guangdong province
Shunde, Guangdong
province
Chuzhou, Anhui province
Jiangmen, Guangdong
province
Chuzhou, Anhui province
Shaoguan, Guangdong
province
Jiangmen, Guangdong
province
Baoding, Hebei province
2009
2010
2011
2013
2015
2015
2015
2017
2017
2017
2017
1-9
1-9
1-9
1-9
1-9
1-9
1-6
1-9
1-9
1-9
1-9
1-9
1-9
1-6
1-9
2,986
3,008
2,848
4,306
4,477
4,438
1,208
1,281
1,116
1,813
1,853
1,728
922
944
1,008
1,246
1,336
1,296
722
861
840
1,311
1,520
1,512
1,226
1,611
2,160
501
587
768
646
834
1,944
240
388
2,392
454
673
1,296
363
581
1,080
188
18,132
235
20,189
1,296
25,722
Name
Huanan Country Garden
School
Phoenix City Bilingual
School
Country Garden Huacheng
School
Country Garden Venice
Bilingual School
Wuyi Country Garden
Bilingual School
Heshan Country Garden
School
Wuhan Country Garden
School
Zengcheng Country Garden
School
Country Garden
Experimental School*
Laian Country Garden
Foreign Language School
Taishan Country Garden
School
Chuzhou Country Garden
Foreign Language School
Shaoguan Country Garden
Foreign Language School
Kaiping Country Garden
School
Shenghua Country Garden
Bilingual School
Total
* Country Garden Experimental School was previously known as Country Garden Panpuwan School.
Approximately 52.8 % of graduating students from our bilingual schools have been accepted into top high
schools in their respective regions in the 2020 school year. Approximately 55.0% and 62.1 % of the 2020 graduating class
from our two largest bilingual schools, Huanan Country Garden School and Phoenix City Bilingual School, were admitted
into the top local high schools, respectively.
Our kindergartens
As of the date of this annual report, we have 71 kindergartens in twelve provinces across China. A significant
portion of our kindergartens are built adjacent to our primary, middle and high schools to share certain education resources
and facilities and provide potential student sources to our schools. Our kindergartens are generally smaller in size
compared with our international and bilingual schools. In the 2020 school year, our kindergartens had an average of
17,840 students.
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Our kindergartens provide an active and healthy learning environment to help students develop their potential
and personality, appreciate diverse cultures and lay the foundation to drive future success. In our kindergartens, we
integrate elements of traditional Chinese culture with international cultural awareness through language classes and
cultural activities. We have seven kindergartens that offer Primary Years Programs, four of which have received IB
accreditations. Under the Primary Years Programs, we provide a foreign homeroom teacher to stay with our students
throughout each school day and implement a holistic approach to English education including the adoption of English
teaching materials. We believe that administering Primary Years Programs at our kindergartens helps our students move
up seamlessly to other IB-accredited programs offered in the primary through high schools within our school network.
Our Overseas Schools
As of the date of this annual report, we have an overseas school network of eight schools, including seven
schools in the United Kingdom and one in the United States, with an average of 3,212 enrolled students for the 2020
school year. As a global premier education provider, we have built our global presence primarily through overseas
acquisition of schools and education services in countries such as the United Kingdom, the United States and Canada.
In December 2018, we acquired BCS, an established independent school located in the United Kingdom. BCS
offers day and boarding education from two to 18 years of age, and has a strong global inclusive philosophy based on a
traditional UK education.
In July 2019, we acquired CATS, which operates five overseas schools and ten language training institutions
across the United Kingdom, the United States and Canada. In addition, we granted a third party the right to use the brands
“CATS” and “Cambridge School of Visual & Performing Arts” for the operation of two campuses in Shanghai, China.
In September 2019, we acquired St. Michael’s School and BIC located in the United Kingdom. St. Michael’s
School offers day and boarding education from three to 18 years of age, comprising predominantly day students and
boarders from more than 15 countries. BIC provides independent boarding education to pupils from the United Kingdom
and other countries from 13 to 19 years of age.
The following table sets forth certain information about each of our overseas schools.
Average
number
of students
enrolled
during
the 2019
school
year
Average
number
of students
enrolled
during
the 2020
school
year
598
236
398
464
441
377
—
—
2,514
634
227
373
410
466
368
423
311
3,212
Capacity
as of
September 1,
2020
730
400
525
500
700
525
480
562
4,422
Name*
Bournemouth Collegiate School
CATS London
CATS Cambridge
CATS Canterbury
CATS Academy Boston
Cambridge School of Visual &
Performing Arts
St. Michael’s School
Bosworth Independent School
Total
Location
Acquisition Time
the United Kingdom December 2018
the United Kingdom
the United Kingdom
the United Kingdom
the United States
July 2019
July 2019
July 2019
July 2019
the United Kingdom
the United Kingdom September 2019
the United Kingdom September 2019
July 2019
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Bournemouth Collegiate School (BCS)
BCS is an established independent school located in Bournemouth, Dorset, England. It offers day and boarding
education from age 2-18 on two campuses. It has a strong global inclusive philosophy based on a traditional UK
education. The school has an average of 634 students enrolled for the 2020 school year, including local students and
international boarders from 26 countries.
CATS Colleges
CATS Colleges is an international school network focused primarily on the provision of quality education
services to international students with a globally integrated platform of campuses located across the United Kingdom, the
United States and Canada. As of August 31, 2020, it comprised five schools in Cambridge, London, Canterbury and
Boston as well as six language training institutions in the United Kingdom and Canada. It has a diverse mix of over 1,800
students from around 90 nationalities in the 2020 school year.
In July 2020, we decided to permanently cease the operation of the four language training institutions in the
United States as a resource conserving measure in response to the challenges posed by the COVID-19 pandemic.
St. Michael's School
St. Michael’s School is an established independent school in the United Kingdom. Located in Llanelli, Wales. It
offers day and boarding education from age three to 18. Established in 1923, the school has an inclusive philosophy for all
its students based on a traditional UK education, and was named Welsh Independent Secondary School of the Year 2019 in
The Sunday Times Parent Power rankings and regularly ranking in the United Kingdom’s top 30 Independent Schools for
A level results. The school has an average of 423 students enrolled for the 2020 school year, comprised predominantly of
day students as well as boarding students from more than 15 countries.
Bosworth Independent College (BIC)
BIC is a leading independent boarding college in the United Kingdom. Located in Northampton, England, it
provides independent boarding education to pupils from the United Kingdom and abroad from 13 to 19 years of age.
Established in 1977, it was ranked in the UK's Top 100 Coeducational Boarding Schools by A Level results in 2018. The
school has an average of 311 students enrolled for the 2020 school year, including boarding students from 20 countries.
Our Complementary Education Services
We provide complementary education services to students from our schools and others. These complementary
education services further enhance students’ overall learning experience and generate synergies with our school
operations.
Camp programs
We have organized summer and winter camp programs in certain countries, including the United Kingdom, the
United States and Australia. We also offer summer school programs, which are more rigorous and allow our participants
to study for specific courses or prepare for standardized tests. These summer and winter camp programs are primarily
offered to students enrolled at our domestic K-12 schools, but are also open to other students.
As of the date of this annual report, we have developed business collaborations with a number of overseas
universities and high schools as the local hosts of our camps or summer school programs. We work together with our
partners to design programs and activities to improve the participants’ English communication skills, expand their
knowledge and develop a familiarity with college environments and international cultures.
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Our overseas camp programs typically take place on university campuses and include various activities, such as
classes and excursions. For high school students, we offer tours to different universities during our programs. These visits
allow participants to become familiar with the overseas campuses, talk with admissions officers and spend time with our
alumni currently studying at each university. Some of our camp programs include a homestay, which allows the
participants to get an inside look at Western family dynamics and form supportive friendships in an immersive English-
speaking environment. We send our teachers to escort the students during their tours. By participating in the summer and
winter camps, we believe our students not only broaden their horizons and improve their English proficiency, but also
clarify their academic goals and enhance their motivation to pursue overseas studies after graduating from our schools.
In addition to overseas camps, we have launched our domestic camp programs by opening our first campground,
Lake Forest Camp, in Huizhou, Guangdong province at the beginning of 2019. Taking full advantage of its outdoor
adventure facilities, we provide different kinds of activities on the land and in the water, which encourage personal
growth, team cooperation and leadership. Lake Forest Camp targets students from both our own schools and schools
outside our network. In June 2019, we acquired a 25% equity interest in Start Camp Education (“Start Camp”). Start
Camp provides one-stop solution in camp layout and program design for education department of local governments,
education groups and real estate developers. In September 2020, we entered into an agreement to acquire 60% equity
interests in Jiangxi Leti Camp Education Technology Co., Ltd. ("Leti Camp"), which specializes in providing summer
and winter camp activities for teenagers and owns a comprehensive product offering in Hands-on Inquiry Based Learning
(HIBL) and camp business. We plan to launch our new camp programs in Ma'anshan, Anhui Province and Longli,
Guizhou Province in May 2021. We have postponed the launch of our camp program in Shanghai due to the impact of the
COVID-19 pandemic. In the future, we plan to launch more domestic summer and winter camp programs, which will
target students enrolled in our schools as well as students outside our network and feature STEAM activities, i.e., activities
related to science, technology, engineering, art and math.
Our overseas camp programs were adversely affected by the COVID-19 pandemic due to the global travel freeze
resulted therefrom. In response, we developed domestic travel study programs, which are complementary to our students'
classroom education and allow students to study and explore humanities, history, technology, nature, etc., depending on
the theme of each program. In the 2020 fiscal year, approximately 14,600 students participated in our domestic and
overseas camp programs as well as domestic travel study programs.
After-school programs
English proficiency training
We offer English proficiency development courses to children aged from five to 15 through a network of 21
learning centers located in Beijing, Shanghai and Guangdong province under the brand of “élan.” Our goal is to help
children improve their general English proficiency. To this end, we have adopted a holistic language learning approach,
which immerses children in an English-speaking environment and requires them to think, learn and communicate with the
mindset of native speakers. Our learning centers are staffed only by native English speakers as instructors and are
equipped with libraries containing age-appropriate English-language books and audio materials suited to English learners
of different proficiency levels. In the 2020 school year, we had an average of 109 instructors in our learning centers. In the
2020 fiscal year, we had an average student enrollment of 3,859 for English proficiency training.
Extracurricular programs
We offer a wide range of extracurricular programs primarily to children through one learning center located in
Shunde, Guangdong province. Our programs encompass popular subjects, such as art, soccer, mathematics and
programmable robotics. Our programs supplement in-classroom learning and promote the well-balanced development of
children. Our programs also help children tap into their interests and potential that benefit their study or career goals. We
work with our partners on these programs.
We have also strategically invested in the acquisition of equity interest in Hangzhou Impression Arts Training
Co., Ltd. (“Hangzhou Impression”), a Zhejiang-based art training institution, to supplement the extracurricular programs
we offer. See “—Our Expansions and Investments.”
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Overseas Study Consulting Services
We offer overseas study education consulting services to better serve our students in and outside of our network
of schools. As of the date of this annual report, we have strategically invested in the acquisitions of equity interests in
several providers of education consulting services, including Can-achieve (Beijing) Education Consulting Co., Ltd. (“Can-
achieve ") and FGE Holdings Limited and its subsidiaries (“FGE”). See “—Our Expansions and Investments.” Through
these strategic acquisitions, we are able to provide a comprehensive range of services covering K-12 education as well as
consulting services from application to overseas universities, which we believe will drive our future growth.
Education Technology Services
We offer education technology services to students. Our new education technology business comprises online
career counselling, online Academic Olympiad training and an online international school, the 3i Global Academy. We
have strategically invested in the acquisitions of equity interests in services provider for online career counselling and
online Academic Olympiad training, such as Chengdu Yinzhe Education and Technology Co., Ltd. (“Chengdu Yinzhe”)
and Shanghai Huodai Business Information Consulting Co., Ltd. (“Linstitute”). The launch of our 3i Global Academy in
June represents a major milestone in utilizing technology in an online-merge-offline model to provide students around the
globe with access to high quality education.
Schools under development
We intend to expand our global school network with a particular emphasis on developing international schools in
selective areas in China as well as overseas schools in global select markets. When determining a new school location, we
generally consider factors such as potential demand for quality private education, demographic background of prospective
students and their families, household income level, level of local government support, availability of suitable sites and
existing market competition.
We generally favor new domestic schools located within the residential communities developed by Country
Garden to achieve cost savings and synergies in land procurement, facilities construction, marketing and student
acquisition. Based on its residential property development plans, Country Garden has plans to develop several hundred
sites in the next few years, presenting us with a large number of potential opportunities for expanding our domestic school
network. We may also enter into agreements with third-party partners to expand our domestic school network. Under such
agreements, we are primarily responsible for the day-to-day operation of the schools, and our partner is primarily
responsible for land procurement and facilities construction. After we terminated our cooperation relationship with a third-
party partner and ceased operations of Huaian Country Garden Tianshan Bilingual School and Tianshan Kindergarten in
August 2018, we have not entered into such agreements with any third-party partners.
The following flowchart sets forth the major steps involved in launching a school with a partner.
As a majority of our existing domestic K-12 schools were established within or in the vicinity of Country
Garden’s residential communities, the sales of Country Garden’s residential units have had an impact on the number of
students enrolled at our schools. The number of residents typically increases within the first two to three years after the
completion of Country Garden’s residential property development, and correspondingly, a school usually takes up to
several years to ramp up its utilization rate and build its reputation.
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We have added five kindergartens to our school network and acquired two overseas schools in the 2020
fiscal year, and expect to launch a total of 19 kindergartens in the 2021 fiscal year.
Centralized Management
We have established a centralized management system for our domestic school network, through which we
manage and oversee certain aspects of our schools across our network, including school administration, supply
procurement and sharing and development of teaching resources, to support and facilitate management of our schools as
well as to ensure consistency in the quality of our education. For our overseas operations, we are in the process of
establishing a center of excellence to centralize certain functions of management such as finance and IT, and will further
progress into other areas including human resources, procurement, marketing and admissions.
Sharing and development of teaching resources
In order to maintain and improve our teaching quality, some of our schools share their teaching resources with
each other and jointly hold teacher development workshops. For example, our flagship school, Guangdong Country
Garden School, established a teacher training academy, which serves as the hub for teacher training within our school
network. We send veteran teachers from Guangdong Country Garden School to our new schools to share teaching
experiences with, and provide demonstration classes to, the resident teachers at these schools and also allow such resident
teachers to visit Guangdong Country Garden School for training sessions. We also operate a centralized teaching staff
recruitment program through which we hire and deploy teachers and educational staff within our school network based on
each school’s needs and teacher preferences. We intend to continue to leverage the availability of our teaching resources at
different schools within our network to ensure consistency in teaching quality.
Education material and equipment procurement
We make procurement decisions regarding teaching materials and equipment and other education supplies for our
schools in the same geographical areas to improve our operating efficiency, maximize economies of scale and enhance our
overall bargaining power with suppliers. Such procurement choices include those for catering, textbooks, school uniforms,
classroom furniture, computers, kitchen equipment, tableware and office appliances.
School administration
To improve our operating efficiency, we have centralized our finance, marketing, human resources, legal and
information technology functions. We have adopted a series of policies and procedures relating to general corporate
governance matters, which are aimed at strengthening the management and government of our company and our schools.
For example, in the 2018 fiscal year, we implemented an ERP system where we centralize the collection and analysis of
budgeting, procurement and financial information and data, which enhanced the efficiency of our data management
processes, adding value to the overall operation of our business.
School marketing
While each of our schools conducts its own on-site promotional events to attract local students, we also organize
group-wide marketing events to promote our brand and corporate image as one of China’s leading private school
operators. For details, see “—Marketing” below.
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Our Expansions and Investments
In January 2016, we acquired élan, an English proficiency training business. In March 2018, we acquired a 75%
equity interest in Wuhan Qiaosheng Education Investment Co., Ltd. and its subsidiaries (“Xinqiao”), which manages five
kindergartens with a total capacity of 1,800 students in Hubei province. In March 2018, we acquired an additional 49%
equity interest in Can-achieve to supplement our test preparation and college counseling business to improve our students’
university admission results. As of the date of this annual report, we hold a total of 70% equity interest in Can-achieve. In
June 2018, we acquired a 75% equity interest in FGE, which is primarily engaged in providing overseas study consulting
services. In December 2018, we acquired a 75% equity interest in Chengdu Yinzhe, which is primarily engaged in offering
online career and education mentoring services to overseas Chinese students under the brand of “DreambigCareer.” In
December 2018, we acquired BCS in the United Kingdom, which offers day and boarding education from ages two to 18.
In March 2019, we acquired an 85% equity interest in Heze Qiqiaoban Education Technology Limited (“Qiqiaoban”), a
company that manages a chain of eight kindergartens in Shandong province. In March 2019, we purchased a 70% equity
interest in Hangzhou Impression, a Zhejiang-based art training institution. In May 2019, we acquired an 80% equity
interest in Wuhan Sannew Education Development Co., Ltd. (“Sannew Education”), which operates a private boarding
school in Wuhan. In June 2019, we acquired a 25% equity interest in Start Camp, which provides one-stop solution in
camp layout and program design for education department of local governments, education groups and real estate
developers in China. In July 2019, we acquired CATS, which operates five overseas schools and ten language training
institutions across the United Kingdom, the United States and Canada. In September 2019, we acquired St. Michael’s
School and BIC located in the United Kingdom. In July 2020, we acquired a 51% equity interest in Shanghai Huodai
Business Information Consulting Co., Ltd. ("Linstitute"), which offers high-quality and outcomes-focused online training
services including Academic Olympiad and other world-wide recognized international courses. In September 2020, we
entered into an agreement to acquire a 60% equity interest in Leti Camp, which specializes in providing summer and
winter camp activities for teenagers and owns a comprehensive product offering in Hands-on Inquiry Based Learning
(HIBL) and camp business. We plan to continue to make strategic investments into and acquisitions of overseas schools
and complementary businesses to better serve our students and drive our future growth.
In September 2018, we also entered into a partnership agreement with third-parties to establish an investment
fund under which we agreed to invest a total of RMB999.8 million in promoting the establishment and operations of K-12
education centers, bilingual schools and international schools. However, due to uncertainties in government regulations,
we have decided not to pursue the plan any further and have withdrawn substantially all of our investment in the fund.
Our Students
Student admission
Our students enrolled in our domestic K-12 schools are primarily Chinese nationals from relatively affluent
families and aspire to pursue the next level of education overseas or gain a competitive advantage from bilingual
education. Since a majority of our domestic K-12 schools were launched within or in the vicinity of the residential
communities developed by Country Garden, our recruitment efforts were initially targeted at students from families who
were Country Garden’s homeowners. As we have gradually forged a reputation for providing quality education through a
proven track record of success over the years, we frequently attract prospective students from outside of Country Garden
properties, largely through word-of-mouth referrals and marketing efforts. Approximately 62.4% of our students enrolled
in our bilingual and international schools in the 2020 fiscal year came from families who do not own Country Garden
properties. We believe that our schools are attractive to prospective students and their parents due to our reputation and the
quality and breadth of our education programs.
We implement selective screening procedures for student admissions. We generally require middle school and
high school applicants to take entry tests to assess their English proficiency and academic performance. We conduct
admissions interviews with kindergarten and primary school applicants. As a result of the large number of students
wishing to enroll in our schools, we are selective in accepting our students.
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Our overseas schools recruit students from around the world, with a student body comprising over 90 different
nationalities for the 2020 school year. The CATS Colleges recruit entirely international students, while the rest accept both
international and domestic students. The majority of the students in our overseas schools are from 14 to 18 years old.
Student performance
Approximately 93.6% of the 2020 graduating class of our domestic K-12 schools who were enrolled in our
Diploma Program, Advance Placement or A-Level curricula and applied for overseas universities were admitted into the
global top 50 institutions, ranked by either the QS World University Rankings or U.S. News, including University of
Oxford, University of Cambridge, The University of Chicago, New York University, University of Toronto, and The
University of Sydney. Students in our 2020 graduating class have received more than 1,100 offers in total from global top
50 institutions by the same ranking as of August 31, 2020. Our 2020 graduating students of our domestic K-12 schools
were admitted by 261 top institutions, which are located in over 12 countries or regions, including the United States, the
United Kingdom, Australia, New Zealand, Canada, Switzerland, France, Singapore, Hong Kong, Japan, Italy and the
Netherlands, of which over 55% are U.S.-based institutions. Approximately 52.8% of our graduating students from our
bilingual schools were admitted into top local high schools in the 2020 fiscal year. Approximately 55.0% and 62.1% of the
2020 graduating class from our Huanan Country Garden School and Phoenix City Bilingual School were admitted into the
top local high schools. For our overseas schools, approximately 67% of the students across the CATS schools progressed
to Russel Group universities, and approximately 94%, 89% and 74% of the students in CATS Cambridge, CATS
Canterbury and CATS London achieved three A*-C A-level results, respectively, and the results were equally strong for
BIC, BCS and St Michael’s School, reaching 95%, 99% and 72%, respectively.
As all of our programs place particular emphasis on developing students’ English skills, our students are regular
winners of regional and provincial rounds at national English skill competitions, such as the China Youth English
Competence Contest and the China Central Television Star of Outlook Talent Competition. In addition to academic
accomplishments, we also seek to promote the well-balanced development of our students through a wide range of
extracurricular activities to tap into their interests and potential.
Student and parent support services
We generally have small class sizes across our domestic school network in order to provide each student with
close and frequent teacher interactions and individual attention and support. Our teachers assist students through academic
difficulties with personalized remedial measures, including additional practice materials and instructive sessions. We also
provide counseling to help our students with university applications.
As a testament to the positive student experience we provide at our schools, we have historically maintained
relatively high student retention rates in our schools in China. After our students complete their studies at our schools, we
encourage them to advance their education within our school network if they meet the requisite academic requirements.
For example, in our domestic K-12 schools offering both primary and middle school education, 55.7% of the 2020
primary school graduating class continued their next level of studies at the same school. Our average net annual student
retention rate for all students in our domestic K-12 schools, which measures the percentage of students enrolled at the
beginning of a school year who move on to the next grade level, was over 90.0% for each of the 2018, 2019 and 2020
school years.
We also maintain regular communication with the parents of our students and provide them with complementary
seminars and training on education programs, university applications and parenting.
Our Teachers
Teacher qualifications
We have assembled a team of teachers with extensive experience in education. Our schools are staffed with
different levels of teachers and educational staff. Certain senior teachers have managerial responsibilities in addition to
their responsibilities as instructors. Educational staff include teaching assistants, librarians and medical staff. In the 2020
fiscal year, we had an average of 6,358 teachers and instructors globally.
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We seek to employ teachers that have a passion for teaching, mastery of their subject areas, strong
communication skills and proficiency in employing innovative and effective teaching methods. Our teachers for schools in
China who are Chinese nationals have an average of approximately nine years of experience in teaching. Across our
domestic school network, we also had an average of 302 foreign teachers, representing 5.5% of the teacher pool of our
domestic K-12 schools in the 2020 school year. Foreign teachers of our international schools represented 8.8% of our
teacher pool in international schools during the same period. We believe that foreign teachers are essential to providing an
immersive bilingual environment and better preparing our students for the pursuit of the next level of education overseas.
We had 652 teachers, or 11.9% of our total teacher pool in our schools in China and 44.7% of our teacher pool in
international schools, licensed with IB training certificates as of August 31, 2020. To stay current with the constant
changes in the IB syllabus, we require all of our teachers to take regular IB training classes. We typically outsource
instructors for our extracurricular programs.
Teacher recruitment
Our teachers are critical to maintaining the quality of our programs and services and in promoting our brand and
reputation. We place particular importance on recruiting teachers who are appropriately qualified and experienced. For our
overseas schools, we also expect teachers to have a wealth of international experience across the world of academia. We
implement a centralized recruitment program that seeks to hire teachers and educational staff and deploy them across our
domestic school network based on each school’s needs and teacher preferences. We screen candidates for strong academic
credentials, dedication and knowledge in the relevant teaching subjects, and commitment to serving students’ needs. We
require our teachers for schools in China to possess the appropriate qualifications required by PRC regulatory authorities,
including the foreign expert certificate in the case of foreign teachers. We believe that teacher candidates are attracted to
our schools because of our reputation, commitment to quality education, financial strength and competitive compensation
package. To enhance our retention rate, we also allow our teachers to laterally transfer within our school network. We
maintained teacher retention rates of above 87.0% for our domestic K-12 schools in each of the 2018, 2019 and 2020
school years. “Teacher retention rate” is calculated as 100.0% minus the quotient of the number of both our Chinese and
foreign teachers that leave employment during a school year by the number of teachers at the beginning of that school
year (not including teachers hired during that school year).
In May 2018, we entered into a strategic partnership agreement with Beijing Normal University (“BNU”)
pursuant to which we jointly established Huiyan International Education College, which aims to provide international
education training for prospective and existing teachers, and which will form part of the Faculty of Education of BNU.
Huiyan International Education College will primarily collaborate with overseas universities to introduce renowned
education institution brands and resources into China, offering degree programs at different levels and establishing a
platform for recruiting global teaching talents. It will also conduct training programs to provide career development
growth opportunities for teachers. Through this partnership, we will jointly own the intellectual property of research in
international education with BNU. By offering internship opportunities across our domestic school networks to
prospective students of Huiyan International Education College, we will also obtain a stable and valuable source of future
teachers for our schools. In 2019, we entered into strategic cooperation agreements with a number of well-known
universities in China, such as Jinan University, Changchun Normal University, Shaanxi Normal University, Guizhou
University, South China Normal University and Guangdong University of Foreign Studies. Under these agreements, we
may provide internship and job opportunities to their students, design and conduct joint training programs for our teachers
and conduct joint research projects.
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Teacher training
We are committed to investing in our teachers and principals. Newly-hired teachers for our schools in China
undergo a training program on teaching skills as well as our school culture. We also provide ongoing professional
development for our teachers and principals, in the form of online, on-campus or one-on-one training and support
sessions. Our flagship school, Guangdong Country Garden School, established a teacher training academy which
organizes centralized teacher training activities. We also send veteran teachers to our new schools to share teaching
experiences with, and provide demonstration classes to, the resident teachers at those schools and also allow such resident
teachers to visit Guangdong Country Garden School for on-site training sessions. From time to time, we organize seminars
on professional training in cooperation with prestigious institutions, such as the Institute of Education of University
College London. We also invite veteran teachers to participate in school administration by offering them management
training with the possibility of promotion to principal positions. The opportunity for ongoing professional training and
career advancement is not always available at private schools in China and is a key differentiator in our ability to attract,
develop and retain talented teachers.
Teachers in our overseas schools are continuously assessed under Continues Development, a program that
measure the effectiveness and quality of their teaching and provide them with the right learning environment that enables
them to adapt teaching methods and use innovative tools to delivery academic excellence.
Our Tuition
We charge our students tuition, boarding and textbook fees generally prior to the beginning of each semester.
Tuition and fees being paid in arrears is subject to special approval. As a result, approximately 96.0% of our revenue from
schools in China for the first semester of the 2020 school year was received in or before September 2019 and
approximately 4.0% was received after September 2019. For the second semester of the 2020 school year, approximately
81.0% of our revenue from schools in China was received in or before March 2020 and approximately 19.0% was
received after March 2020. We also accept monthly payment of fees at certain kindergartens we operate. We offer a partial
refund if a student withdraws in the predetermined period. We may also offer tuition discounts to certain of Country
Garden’s homeowners, our employees and employees of Country Garden. Tuition refund or discounts did not materially
and adversely affect our business, results of operations or financial position. We have limited discretion in determining the
types and amounts of fees we charge under the current PRC regulatory regime. For example, in accordance with the
relevant local regulations, if we increase the tuition at our schools in Guangdong province in a certain school year, such
increase will generally not affect the existing students until they complete their current section of education at the same
schools. In determining the amount of tuition we charge, we consider factors including the demand for our education
programs, the cost of our operations, the geographic markets where our schools are located, the tuition charged by our
competitors, our pricing strategy to gain market share and general economic conditions in China. For example, the
average tuition and fees per student at Guangdong Country Garden School was RMB108,398 in the 2020 school year,
compared to RMB69,387 and RMB70,899 at Country Garden Silver Beach School and Jurong Country Garden School,
respectively, in the same period. Our tuition and fees charged for internationally-accredited programs are typically higher
than that for government-mandated curricula, which reflects the additional educational and operational resources
associated with administering the former. For the 2020 school year, we charged average tuition and fees of RMB82,469
for international schools, RMB35,782 for bilingual schools, RMB20,910 for kindergartens and RMB207,643 for overseas
schools. Our average tuition for our kindergartens decreased from RMB30,424 in the 2019 fiscal year to RMB20,910 in
the 2020 fiscal year primarily due to temporary shutdown of kindergartens caused by the COVID-19 pandemic.
Our Business Partners
We collaborate with a number of universities overseas, which enables our partner institutions to appreciate our
strong academic programs and the English language proficiency of students from our schools in China and facilitates the
early admissions process by encouraging early contact between our students and these institutions. In particular, we have
formed strategic relationships with each of University of St. Andrews and Newcastle College in the area of international
college admission tests such as the AP tests and the SAT, and our cooperations with East Sussex College on IELTS
courses.
Over the years, our international schools have individually obtained authorization from the Cambridge
International Examinations to administer education programs such as IGCSE and A-Level and the related
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examinations. In May 2016, we became a Cambridge Associate, which allows us to review and self-approve the eligibility
of all of our schools to administer such programs and the related examinations. Our status as a Cambridge Associate also
allows us to deepen our cooperation with Cambridge International Examinations on teacher training, curriculum
development and international exchange programs. On May 17, 2017, we cooperated with Columbia University and co-
established the “Bright Scholar — Columbia Scholarship” program. On May 26, 2017, we co-established the “Bright
Scholar — University of California — Berkley Scholarship.” In June 2018, we signed a collaboration agreement with
Fettes College, a boarding and day school in Scotland, to jointly establish a school in China that features the campus
design, curricular, management system and school traditions of Fettes College. In November 2018, in collaboration with
BNU, we opened Huiyan International Education College aiming to strengthen BNU’s international collaborations with
other educational institutions in the area of education training for teachers. In addition, we granted a third party the right to
use the brands “CATS” and “Cambridge School of Visual & Performing Arts” for the operation of two campuses in
Shanghai, China.
Research and Curriculum Development
We believe we have devoted significant resources to our research and curriculum development efforts which are
reflected in our course materials and effective teaching methods. We encourage our teachers to develop, update and
improve our curricula and course materials based upon our students’ needs and the latest official government curricula or
course outlines issued by the relevant international programs. As our students’ academic ability levels vary, our curricula
are designed with the flexibility to address a particular student’s strengths and weaknesses. Our teachers in charge of
designing the curricula also work with other teachers to prepare or update such course curricula, and revise the curricula
based on feedback from the classroom. To ensure our education quality can be upheld across our schools, we have
dedicated a team of senior teaching staff to designing curricula for the programs implemented in our schools and to keep
our teaching materials updated with reference to the latest educational trends. Our overseas schools are continuously
developing curriculum and academic extension activities to prepare students for admission to top universities. For
example, preparation for students applying to Oxbridge has included preparation for admissions tests, workshops with a
drama specialist to prepare students for interview, and mock interviews with academics from the University of Cambridge.
Additionally, our overseas schools develop curricula in specific subject areas, which focus on the skills needed for
interested students' success at university.
In August 2019, we entered into an agreement with National Center for School Curriculum and Textbook
Development (“NCCT”) and National Institute for Curriculum and Textbook Research (“NICTR”), to jointly establish a
research base for fundamental education curriculum reform. Through this agreement, NCCT and NICTR will assist us in
the development of a forward-looking and systematic five-year curriculum plan and annual curriculum reform guidance.
In addition, they will also assist in the optimization of our current curriculum to advocate our core values in education.
Marketing
We historically market our schools in China primarily to students from families that purchased residential units
developed by Country Garden. We distribute marketing brochures and offer site tours of our school to prospective home
buyers visiting the sales centers for residential properties developed by Country Garden. Our relationship with Country
Garden is synergistic because our schools enable Country Garden to meet the requisite local governmental requirements or
market needs for schools in its residential communities and we may offer preferential student placements and tuition
discounts as an incentive to prospective home buyers. We believe that the availability of and convenient access to quality
education is a significant factor that drives home buying decisions.
As we have gradually forged a reputation for quality education through a proven track record of success over
the years, we began to attract students from families other than Country Garden’s homeowners. We have also
implemented a variety of marketing methods to enhance the brand recognition of our schools. By doing so, we intend to
continue creating and implementing a standard corporate identity across all our schools. We take measures to increase
word-of-mouth referrals which have been instrumental to attracting new students and building our brand. We have also
strengthened our marketing strategy to drive student recruitment, and built up our marketing teams at both headquarters
and regional levels to assist students recruitment, while allocating more marketing and promotional budgets for schools in
the ramp-up stage.
● Referrals. Word-of-mouth referrals by former and current students and their families have been a significant
source of our student enrollment. Recommendations made by our alumni who matriculated
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into reputable overseas education institutions or excelled in Zhongkao or Gaokao provide convincing
testimonials to prospective students. We actively work with our alumni and current students to encourage
them to recommend our programs to prospective students.
● Promotional events. From time to time, we organize promotional and recruiting events to provide real-time,
on-site opportunities for our prospective students to learn more about our services and programs, as well as
to meet our teachers and staff. We also organize event-driven marketing campaigns such as seminars for our
international schools so that prospective students interested in studying abroad can meet with teachers and
recruiting personnel from overseas institutions and learn more about our international programs. For
example, in November 2019, during the celebration of the 25th anniversary of Bright Scholar, we held three
education forums, which attracted more than 1,600 guests to attend. We also joined SPBCN to hold an
online English spelling contest with more than 3,300 registered contestants.
● Media advertising. From time to time, we may publish articles on popular local newspapers to promote our
brand awareness and advocate for our education philosophy. We have also placed advertisements on
searching engines and internet portals in China.
Our overseas schools depend on advertisements on related websites such as university targeted websites, generic
campaigns on platforms such as Facebook and Instagram, and educational agencies to market themselves and recruit
students. We have also assembled a team of specialists to offer support, training and guidance to the educational agencies
and assist them in student recruitment.
Competition
The education service market in China is rapidly evolving, highly fragmented and competitive. We compete with
a number of private K-12 school operators, including, among others, Maple Leaf schools, Nord Anglia schools, Hailiang
schools, and Wisdom schools. We believe we can compete effectively because we have a track record of delivering quality
education primarily to local Chinese students, while certain other market players primarily serve students from expatriate
families. We may also compete with local private international and bilingual schools in each region we have a presence.
Similarly, our overseas schools compete against large operators such as Nord Anglia and Alpha Plus in the UK, as well as
standalone private schools in each region. We believe we are well-positioned to replicate our success and compete
effectively based on the following factors:
● scalable business model;
● operating knowledge;
● reputation and brand recognition;
● teaching quality;
● ability to recruit and retain students;
● ability to recruit and retain principals and teaching staff;
● relationship with local education authorities, international program accreditors and overseas colleges and
universities; and
● relationship with other key stakeholders, such as real estate developers.
Properties and Facilities
A significant portion of our properties are located in China. We currently occupy a total combined gross floor
area of approximately 1.6 million square meters of facilities developed by Country Garden, substantially all of which is
leased. By utilizing the properties developed by Country Garden we avoid significant capital expenditures
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in connection with land procurement and facilities construction. We may also provide preferential student placements and
tuition discounts to homeowners of the Country Garden properties. We are in the process of entering into school operation
agreements to document our arrangements with Country Garden for the newly established schools. In recognition of our
synergistic relationship, Country Garden adopted an internal policy that designates us as a preferred school operator
partner, under which we are entitled to the right of first refusal on school development projects in connection with its new
residential properties.
We also lease a total site area of approximately 172,240 square meters of land from a third party for Guangdong
Country Garden School. This lease expires in 2063, and we pay annual rental charges, which are adjusted for annual
changes in the cost of living index. The lessor may terminate the lease only for our material breach of contract. See
“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have certain property
defects relating to our lease of the land occupied by Guangdong Country Garden School, which may adversely affect our
operations.”
As of the date of this annual report, we also own 58 properties and lease 52 facilities in the United Kingdom, the
United States and Canada for school campuses and office use.
Intellectual Property
We have obtained a license to use certain trademarks, including “Country Garden” from Country Garden free of
charge for a term expiring in 2028 and 2030. We have applied for or registered trademarks relating to our logos and
names, including “Bright Scholar” and “Bo Shi Le” in China. As of the date of this annual report, we have registered 65
trademarks including “élan,” with the PRC Trademark Office and major domain names used for our operation with the
China Internet Network Information Center, including www.brightscholar.com, brightscholar.net, fettesgz.com,
fetteschina.com, www.bgyedu.cn, (cid:0)(cid:0)(cid:0).cn and (cid:0)(cid:0)(cid:0).com. As of the date of this annual report, we have registered a total of
71 trademarks and 71 domain names with relevant authorities in jurisdictions where we operate internationally. From time
to time, we are required to obtain licenses with respect to course materials owned by third parties for our education
services, in particular for our international program which requires foreign-language education materials. We own
copyrights to the course content we developed in-house.
Our trademarks and other intellectual property rights distinguish our services and products from those of our
competitors and contribute to our ability to compete in our target markets. To protect our intellectual properties, we rely
on a combination of trademark, copyright and trade secret laws. We have confidentiality clauses in our employment
agreements with our employees to protect our intellectual property rights, and also monitor any infringement or
misappropriation of our intellectual property rights.
Insurance
We maintain various insurance policies to safeguard against risks and unexpected events. We maintain insurance
to cover students and teachers’ medical expenses for injuries they might sustain at our schools. We also maintain
insurance to cover our liability should any injuries occur at our schools. In addition, we maintain property insurance for
our vehicles. We do not maintain business interruption insurance, product liability insurance or key-man life insurance.
See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have limited
insurance coverage with respect to our business and operations.” We consider our insurance coverage to be in line with
that of other private K-12 education providers of a similar scale in China.
Legal Proceedings
From time to time, we are subject to legal proceedings, investigations and claims during the ordinary course of
our business. We are not currently a party to any legal proceeding or investigation which, in the opinion of our
management, is likely to have a material adverse effect on our business, financial condition or results of operations.
Regulations
We operate our business in China under a legal regime consisting of the National People’s Congress, which is the
country’s highest legislative body, the State Council, which is the highest authority of the executive branch of the PRC
central government, and several ministries and agencies under its authority, including the MOE, the Ministry of Industry
and Information Technology, the State Administration for Market Regulation, the Ministry of
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Civil Affairs and their respective local offices. The section summarizes the principal PRC regulations related to our
business.
PRC Laws and Regulations Relating to Foreign Investment in Education
Special Administrative Measures for Access of Foreign Investment (2020 Version)
Pursuant to the Foreign Investment Industries Guidance Catalog (Amended in 2015), or the Foreign Investment
Catalog, which was amended and promulgated by National Development and Reform Commission, or the NDRC, and the
MOFCOM on March 10, 2015 and became effective on April 10, 2015, kindergarten education, high school education and
higher education are restricted industries for foreign investors, and foreign investments are only allowed to invest in
kindergarten education, high school education and higher education in cooperative ways and the domestic party shall play
a dominant role in the cooperation. In addition, according to the Foreign Investment Catalog, foreign investors are
prohibited from investing in compulsory education, i.e., primary school to middle school.
Sino-foreign cooperation in operating schools is specifically governed by the Regulation on Operating Sino-
foreign Schools of the PRC, which was promulgated by the State Council on March 1, 2003 and became effective on
September 1, 2003 and amended on July 18, 2013, the Law for Promoting Private Education of the PRC, and the
Implementing Rules for the Regulations on Operating Sino-foreign Schools or the Implementing Rules, which were issued
by the MOE on June 2, 2004 and became effective on July 1, 2004.
On June 18, 2012, the MOE issued the Implementation Opinions of the MOE on Encouraging and Guiding the
Entry of Private Capital in the Fields of Education and Promoting the Healthy Development of Private Education to
encourage private investment and foreign investment in the field of education. According to these opinions, the proportion
of foreign capital in a PRC-foreign education institute shall be less than 50%.
The Foreign Investment Industries Guidance Catalog (2017 Revision), or the 2017 Catalog, which was
promulgated on June 28, 2017 and took effect on July 28, 2017 replacing the abovementioned Foreign Investment
Industries Guidance Catalog (2015 Revision), contains the same types of industry categories.
The Special Administrative Measures for Access of Foreign Investment (Foreign Investment Access Negative
List) set forth in the 2017 Catalog was replaced by the Special Administrative Measures for Access of Foreign Investment
(Negative List) (2018 Version), or the 2018 Negative List, promulgated on June 28, 2018 with effect on July 28, 2018,
which imposes the same restriction and prohibition on foreign investors in the education sector besides one additional ban
on religious education institutes. On June 30, 2019, the MOFCOM and the NDRC jointly released the Catalog of
Industries Encouraging Foreign Investment (2019 Version), or the 2019 Encouraged Catalog, which became effective on
July 30, 2019 and replaced the previous list of the industries in which foreign investment is encouraged to invest under the
2017 Catalog, and the Special Administrative Measures for Access of Foreign Investment (Negative List) (2019 Version),
or the 2019 Negative List, which became effective on July 30, 2019 and replaced the 2018 Negative List. On June 23,
2020, the MOFCOM and the NDRC jointly released the Special Administrative Measures for Access of Foreign
Investment (Negative List) (2020 Version), or the 2020 Negative List, which superseded the 2019 Negative List on July
23, 2020. The 2020 Negative List remains unchanged with respect to the education industry.
As of the date of this annual report, our kindergartens and high schools fall within restricted industries for foreign
investors, and our international schools and bilingual schools which cover compulsory education fall within prohibited
industries for foreign investors.
Regulations on Private Education in the PRC
Education Law of the PRC
On March 18, 1995, the National People’s Congress of the PRC, or the NPC, enacted the Education Law of the
PRC, or the Education Law, which was amended on August 27, 2009. The Education Law sets forth provisions relating to
the fundamental education systems of the PRC, including a school education system comprising kindergarten education,
primary education, secondary education and higher education, a system of nine-year compulsory education, a national
education examination system, and a system of education certificates. The
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Education Law stipulates that the government formulates plans for the development of education, establishes and operates
schools and other education institution. Furthermore, it provides that in principle, enterprises, social organizations and
individuals are encouraged to establish and operate schools and other types of education institutions in accordance with
PRC laws and regulations. Meanwhile, no organization or individual may establish or operate a school or any other
education institution for profit-making purposes. On December 27, 2015, the Education Law was amended, which became
effective on June 1, 2016. The amended Education Law repudiates a specific paragraph of the old law, which prohibits any
organization or individual from establishing or operating a school or any other education institution for profit-making
purposes. Nevertheless, schools and other education institutions sponsored wholly or partially by government financial
funds and donated assets remain prohibited from being established as for-profit organizations.
The Law for Promoting Private Education and the Implementation Rules for the Law for Promoting Private Education
The Law for Promoting Private Education of the PRC became effective on September 1, 2003 and was amended
on June 29, 2013 and on December 29, 2018, and the Implementation Rules for the Law for Promoting Private Education
of the PRC became effective on April 1, 2004. Under these regulations, “private schools” are defined as schools
established by social organizations or individuals using non-government funds. Private schools providing academic
qualifications education, kindergarten education, education for self-study examination and other education shall be subject
to approval by the education authorities at or above the county level, while private schools engaging in occupational
qualification training and occupational skill training shall be subject to approvals from the authorities in charge of labor
and social welfare at or above the county level. A duly approved private school will be granted a Permit for Operating a
Private School, and shall be registered with the Ministry of Civil Affairs of the PRC, or the MCA, or its local counterparts
as a privately run non-enterprise institution. Each of our schools has obtained the Permit for Operating a Private School
and has been registered with the relevant local counterpart of the MCA.
Under the above regulations, the operations of a private school are highly regulated. For example, the types and
amounts of fees charged by a private school providing academic qualifications education shall be approved by relevant
government authorities and publicly disclosed, and a private school that provides non-academic qualifications education
shall file its pricing information with the relevant government authorities and publicly discloses such information.
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According to PRC laws and regulations, entities and individuals who establish private schools are commonly
referred to as “sponsors” rather than “owners” or “shareholders.” The economic substance of “sponsorship” with respect
to private schools is substantially similar to that of shareholder’s ownership with respect to companies in terms of legal,
regulatory and tax matters. For example, the name of the sponsor shall be entered into the private schools’ articles of
association and Permit for Operating a Private School, similar to that of shareholders where their names shall be entered
into the company’s articles of associations and corporate records filed with relevant authority. From the perspective of
control, the sponsor of a private school also has the right to exercise ultimate control over the school by means such as
adopting the private school’s constitutional documents, electing the school’s decision-making bodies, including the
school’s board of directors and principals. The sponsor can also profit from the private schools by receiving “reasonable
returns,” as explained in detail below, or disposing its sponsorship interests in the schools for economic gains. However,
the rights of sponsors vis-à-vis private schools also differ from the rights of shareholders vis-à-vis companies. For
example, under the PRC laws, a company’s ultimate decision-making body is its shareholders meeting, while for private
schools, it is the board of directors, though the members of which are substantially appointed by the sponsor. The
sponsorship interest also differs from the ownership interests with regard to the right to the distribution of residual
properties upon liquidation of a private school, mainly because private education is treated as a public welfare undertaking
under the current regulations. While private education is treated as a public welfare undertaking under the current
regulations, sponsors of a private school may choose to require “reasonable returns” from the annual net balance of the
school after deduction of costs for school operations, donations received, government subsidies (if any), the reserved
development fund and other expenses as required by the regulations. Private schools whose sponsor does not require
reasonable returns shall be entitled to the same preferential tax treatment as public schools, while the preferential tax
treatment policies applicable to private schools whose sponsor require reasonable returns shall be formulated by the
finance authority, taxation authority and other authorities under the State Council. To date, however, no regulations have
been promulgated by such authorities in this regard.
The Decision of the Standing Committee of the National People’s Congress on Amending the Law for Promoting
Private Education of the PRC, or the Amendment, has been promulgated by Order No. 55 of the President of the PRC on
November 7, 2016 and has come into force on September 1, 2017.
Under the Amendment, the term “reasonable return” is no longer used and sponsors of private school may choose
to establish non-profit or for-profit private schools at their own discretion, while before the Amendment, all private
schools shall not be established for for-profit purposes. Nonetheless, school sponsors are not allowed to establish for-profit
private schools that are engaged in compulsory education. In other words, the schools engaged in compulsory education
should retain their non-profit status after the Amendment comes into force.
For the registration status of our schools, see “Item 3. Key Information—D. Risk Factors—We may be subject to
significant limitations on our ability to engage in the private for-profit education business and may otherwise be materially
and adversely affected by changes in PRC laws and regulations.”
The Amendment further establishes a new classification system for private schools to be classified by whether
they are established and operated for profit-making purposes.
According to the Amendment, the key features of the aforesaid new classification system for private schools
include the following:
● sponsors of for-profit private schools are entitled to retain the profits and proceeds from the schools and the
operation surplus may be allocated to the sponsors pursuant to the PRC Company Law and other relevant
laws and regulations;
● sponsors of non-profit private schools are not entitled to the distribution of profits or proceed from the non-
profit schools and all operation surplus of non-profit schools shall be used for the operation of the schools;
● for-profit private schools are entitled to set their own tuition and other miscellaneous fees without the need
to seek prior approvals from or report to the relevant government authorities. The collection of fees by non-
profit private schools, on the other hand, shall be regulated by the provincial, autonomous regional or
municipal governments;
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● private schools (for-profit and non-profit) may enjoy preferential tax treatments. Non-profit private schools
will be entitled to the same tax benefits as public schools. Taxation policies for for-profit private schools
after the Amendment taking effect are still unclear as more specific provisions are yet to be introduced;
● where there is construction or expansion of a non-profit private school, the school may acquire the required
land use rights in the form of allocation by the government as a preferential treatment. Where there is
construction or expansion of a for-profit private school, the school may acquire the required land use rights
by purchasing them from the government;
● the remaining assets of non-profit private schools after liquidation shall continue to be used for the operation
of non-profit schools. The remaining assets of for-profit private schools shall be distributed to the sponsors
in accordance with the PRC Company Law; and
● people’s governments at or above the county level may support private schools by subscribing to their
services, provision of student loans and scholarships, and leases or transfers of unused state assets. The
governments may further take such measures as government subsidies, bonus funds and incentives for
donation in support of non-profit private schools.
On December 29, 2016, the State Council issued the Several Opinions of the State Council on Encouraging the
Operation of Education by Social Forces and Promoting the Healthy Development of Private Education, or the State
Council Opinions, which requires to ease the access to the operation of private schools and encourages social forces to
enter the education industry. The State Council Opinions also provides that each level of the people’s governments shall
increase their support to the private schools in terms of financial investment, financial support, autonomy policies,
preferential tax treatments, land policies, fee policies, autonomy operation, protecting the rights of teachers and students
etc. Further, the State Council Opinions require each level of the people’s governments to improve its local policies on
government support to for-profit and non-profit private schools by ways of preferential tax treatments etc. In addition,
under the State Council Opinions, private schools shall strengthen its construction of the Chinese Communist Party, or the
CCP, and further the theoretical system of Socialism with Chinese Characteristics by introducing such system into
textbooks and teaching programs. The construction of the CCP’s organizations by the private schools as well as the CCP’s
leadership to private schools shall constitute an important part of such schools annual inspection.
On December 30, 2016, the MOE, MCA, SAIC, the Ministry of Human Resources and Social Welfare and the
State Commission Office of Public Sectors Reform jointly issued the Implementation Rules on the Classification
Registration of Private Schools to reflect the new classification system for private schools as set out in the Amendment.
Generally, if a private school established before promulgation of the Amendment chooses to register as a non-profit
school, it shall amend its articles of association, continue its operation and complete the new registration process. If such
private school chooses to register as a for-profit school, it shall conduct financial liquidation process, have the property
rights of its assets such as lands, school buildings and net balance being authenticated by relevant government authorities,
pay up relevant taxes, apply for a new Permit for Operating a Private School, re-register as for-profit schools and continue
its operation. Specific provisions regarding the above registrations are yet to be introduced by people’s governments at the
provincial level.
On December 30, 2016, the MOE, SAIC and the Ministry of Human Resources and Social Welfare jointly issued
the Implementation Rules on the Supervision and Administration of For-profit Private Schools, pursuant to which the
establishment, division, merger and other material changes of a for-profit private school shall first be approved by the
education authorities or the authorities in charge of labor and social welfare, and then be registered with the competent
branch of SAIC.
On September 1, 2017, SAIC and MOE jointly issued the Notice of Relevant Work on the Registration and
Management of the Name of For-Profit Private Schools, which specifies the requirements on the names of for-profit
private schools.
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On December 29, 2018, the Decision of the Standing Committee of the National People’s Congress on Amending
the Seven Laws of the Labor Law of the People’s Republic of China was promulgated by Order No.24 of the President of
the PRC and took effect on the same date, which made two minor adjustments to Article 26 and Article 64 of the Law for
Promoting Private Education of the PRC. These minor adjustments do not materially affect our business and operations.
For a detailed discussion on how the Amendment and the above regulations will affect our schools, see “Item 3.
Key Information—D. Risk Factors—Risks Related to Our Business—We may be subject to significant limitations on our
ability to engage in the private education business or make payments to our subsidiaries and may otherwise be materially
and adversely affected by changes in PRC laws and regulations.”
Besides the Amendment and the above regulations, the other details of the operation requirement of non-profit
schools and for-profit schools will further be provided in implementation regulations that are yet to be introduced:
● the amendment to the Implementation Rules for the Law for Promoting Private Education of the PRC;
● the local regulations relating to legal person registration of for-profit and non-profit private schools; and
● the specific measures to be formulated and promulgated by the competent authorities responsible for the
administration of private schools in the province(s) in which our schools are located, including but not
limited to the specific measures for registration of pre-existing private schools, the specific requirements for
authenticating various parties’ property rights and payment of taxes and fees of for-profit private schools,
taxation policies for for-profit private schools, measures for the collection of non-profit private schools’
fees.
As of the date of this annual report, certain local governments, such as Jiangsu province and Hebei province,
have promulgated their local regulations relating to legal person registration and administration for private schools and
certain local governments, such as Guangdong province, Jiangsu province, Hubei province, Hebei province, Gansu
province, and Anhui province, have promulgated general guidance to encourage the development of private schools.
Among these local regulations and guidance, some local governments, such as Hubei province, Hebei province, and
Anhui province, require the existing private schools to register either as for-profit or non-profit schools within a specific
time period.
Regulations on compulsory education
According to the Law for Compulsory Education of the PRC, which was promulgated by the NPC on April 12,
1986 and was amended by the tenth Standing Committee of the NPC on June 29, 2006 and by the twelfth Standing
Committee of the NPC on April 24, 2015, and by the thirteenth Standing Committee of the NPC on December 29, 2018, a
nine-year system of compulsory education, including six years of primary school and three years of middle school, was
adopted.
Further, the MOE issued the Reform Guideline on the Curriculum System of Compulsory Education (Trial) on
June 8, 2001, which became effective on the same day, pursuant to which schools providing compulsory education shall
follow a “state-local-school” three-tier curriculum system. In other words, schools must follow the state curriculum
standard for state courses, while the local education authorities have the power to determine the curriculum standard for
other courses, and schools may also develop curriculum that are suitable for their specific needs provided that the state
curriculum shall be completely maintained.
On June 23, 2019, the Central Committee of the Communist Party of China and the State Council promulgated
the Opinions on Deepening the Reform of Educational Teaching and Thoroughly Enhancing the Quality of Compulsory
Education, which lays out more stringent requirements for textbooks that are permitted to be used in compulsory
education.
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On December 16, 2019, the MOE issued the Administrative Measures on Primary and Secondary School
Textbooks, which details the regulations on the authoring, vetting, publication and schools' selection of primary and
secondary school textbooks.
On May 6, 2020, the General Office of the MOE issued the Notice on Negative List of Excessive and Advanced
Training in Six Subjects of Compulsory Education (Trial). According to the Notice, extracurricular training institutions are
prohibited from providing for students in primary schools and middle schools excessive and advanced training relating to
six subjects, namely, Chinese, Math, English, Physics, Chemistry and Biology. For example, the difficulties of education
contents provided by extracurricular training institutions shall not exceed the difficulties of contents in textbooks used in
corresponding compulsory education classes, and the extracurricular education targeting students in primary schools shall
not include contents expected to be taught in middle schools, and the extracurricular education targeting students in
middle schools shall not include contents expected to be taught in high schools.
Regulations on the operation of high schools
The MOE has promulgated several regulations on the operation of high schools, which mainly concern the choice
of textbooks, the curriculum system and the graduation exam system.
According to the Circular of the Central Office of the MOE on the Selection of the Trial Textbooks for the
Curriculum of High Schools promulgated on April 26, 2005 and the Interim Measures for the Management of the
Selection of the Primary and Middle School Textbooks promulgated and came into effect on September 30, 2014, the
textbooks used by the primary and middle schools can only be selected from the catalog issued by the MOE; and the
provincial education authority is in charge of textbook selection within its relevant administrative jurisdiction and has the
power to approve the curriculum system applied in the primary and middle schools within the province.
Further, the MOE issued the Notice on Developing Trial Curriculum System in High Schools, the Guidance on
Strengthening Instruction on Developing Trial Curriculum System in High Schools, the Notice on Propelling 2006 Trial
Curriculum System in High Schools and the Notice on Propelling 2007 Trial Curriculum System in High Schools from
2003 through 2007, pursuant to which the MOE developed a new curriculum system in high schools nationwide, and the
implementation of such curriculum system is carried on mainly by the provincial education authorities while the MOE
mainly provides guidance to its local counterparts. Under the guidelines of the MOE and subject to approval by the
respective provincial education authorities, the high schools may adopt their own unique curriculum system.
Since we offer internationally-accredited courses to our students, primarily in our international schools, we may
be deemed to offer insufficient government-mandated coursework to students enrolled in our international programs from
grades one through nine. Additionally, we did not obtain the required government approval for providing non-
government-mandated coursework and the use of foreign textbooks in certain schools. For a detailed description of the
risk associated with these matters, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If
regulatory authorities challenge our curriculum or textbook practices, our business, results of operations and financial
condition may be materially and adversely affected.”
Regulations on After-School Tutoring
The State Council issued an Opinion on Supervising After-School Tutoring Institutions (“Circular 80”) on
August 22, 2018, which provides various guidance on regulating after-school tutoring institutions that target primary and
secondary school students. Circular 80 requires that after-school tutoring institutions obtain school operating permits and
other legally required licenses and permits, and instructs relevant governmental authorities to strengthen their supervisions
and regulations on after-school tutoring institutions. Circular 80 also standardizes the approval and registration processes
of after-school tutoring institutions. For a detailed description of the risks associated with these matters, see “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Business—A number of our learning centers do not possess the
required educational permits and business licenses and are currently unable to obtain them, which may subject us to fines
and other penalties, including the suspension of operations in noncompliant learning centers and confiscation of profits
derived from noncompliant operations.”
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Measures for Punishment for Violation of Professional Ethics of Primary and Secondary School Teachers
The Measures for Punishment for Violation of Professional Ethics of Primary and Secondary School Teachers as
promulgated by MOE on January 11, 2014 and amended on November 8, 2018 prohibits teachers of primary and
secondary schools from providing paid tutoring in schools or in out-of-school learning centers. Some provinces and cities
where our schools are located have adopted more stringent regulations which prohibit public school teachers from
teaching, on a part-time basis, at private schools or learning centers. For a detailed description of the risk associated with
these matters, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We may be unable to
recruit, train and retain a sufficient number of qualified and experienced teachers and principals.”
Opinions on Regulating the Development and Deepening of the Reform of Pre-school Education
On November 7, 2018, the Central Committee of the Communist Party of China and the State Council
promulgated the Opinions on Regulating the Development and Deepening of the Reform of the Pre-School Education (the
“Opinions”), which provides, among others, that (1) private kindergartens forming part or all of the assets of a listing
vehicle are prohibited from listing on stock markets; (2) non-governmental capital is prohibited from controlling state-
owned or collectively-owned kindergartens and non-profit kindergartens by ways of mergers and acquisitions, entrusted
management, franchising, variable interest entities arrangements, or other forms of control agreements; (3) for-profit
kindergartens which participate in acquisitions, franchising or chain operation shall file with education departments of the
county level or above and make available to the public agreements entered into with relevant interested enterprises;
(4) listed companies are prohibited from investing in for-profit kindergartens through financing through stock markets,
and should not purchase assets of for-profit kindergartens by cash, issuance of shares or other similar means; and
(5) provincial legislative bodies should promulgate implementing measures by June 2019 with regard to the election of
private kindergartens to be registered as non-profit or for-profit schools and specify time-frame requirements for such
registration. For a detailed description of the associated risks, see “Item 3. Key Information—Risks Factors—Risks
Related to Our Business—We may be subject to significant limitations on our ability to engage in the private education
business or make payments to our subsidiaries and may otherwise be materially and adversely affected by changes in PRC
laws and regulations.” On September 7, 2020, the MOE published the Draft Preschool Education Law for public
comments. The Draft Preschool Education Law is expected to tighten restrictions over kindergartens in pursuing profits
and specify legal liabilities for the violation of such restrictions.
PRC Laws and Regulations Relating to Trademark and Domain Name
Trademark
Pursuant to the Trademark Law of the PRC, or the Trademark Law, which was revised on April 23, 2019 and
with effect from November 1, 2019, registered trademarks refer to trademarks that have been approved and registered by
the Trademark Office of the National Intellectual Property Administration, which include commodity trademarks, service
trademarks, collective marks and certification marks. The trademark registrant shall enjoy an exclusive right to use the
trademark, which shall be protected by law.
Domain name
Pursuant to the Measures for the Administration of Internet Domain Names of China, which was promulgated by
the Ministry of Industry and Information Technology of the PRC on August 24, 2017 and with effect from November 1,
2017, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer
on the internet and corresponds to the Internet protocol (IP) address of that computer and the principle of “first come, first
serve” is followed for the domain name registration service. Domain name applicants shall provide true, accurate and
complete identification of the domain name holder as requested by the domain name registration service provider.
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PRC Laws and Regulations Relating to Foreign Exchange
The principal regulation governing foreign currency exchange in China is the Foreign Exchange Administration
Rules of the PRC. These were promulgated by the State Council of the PRC on January 29, 1996 and with effect from
April 1, 1996 and were amended on January 14, 1997 and August 5, 2008. Under these rules, Renminbi is generally freely
convertible for payments of current account items, such as trade and service-related foreign exchange transactions and
dividend payments, but not freely convertible for capital account items, such as direct investment, loan or investment in
securities outside China, unless the prior approval of the SAFE or its local counterparts is obtained.
Under the Foreign Exchange Administration Rules, foreign-invested enterprises in the PRC may, without the
approval of SAFE, make a payment from their foreign exchange accounts at designated foreign exchange banks for
paying dividends with certain evidencing documents (such as board resolutions, tax certificates), or for trade and services-
related foreign exchange transactions by providing commercial documents evidencing such transactions. They are also
allowed to retain foreign currency (subject to a cap approval by SAFE) to satisfy foreign exchange liabilities. In addition,
foreign exchange transactions involving overseas direct investment or investment and trading in securities, derivative
products abroad are subject to registration with SAFE or its local counterparts and approval form or filling with the
relevant PRC government authorities (if necessary).
According to the Circular on the Management of Offshore Investment and Financing and Round Trip Investment
By Domestic Residents through Special Purpose Vehicles, or Circular 37, which was promulgated on July 14, 2014 and
with effect from the same day, before a domestic resident contributes its legally owned onshore or offshore assets and
equity into a Special Purpose Vehicle, or SPV, the domestic resident shall be required to register with the local branch of
SAFE for foreign exchange registration of overseas investments before contributing the domestic and overseas lawful
assets or interests to a SPV, and to update such registration in the event of any change of basic information of the
registered SPV or major change in the SPV’s capital, including increases and decreases of capital, share transfers, share
swaps, mergers or divisions. The SPV is defined as an “offshore enterprise directly established or indirectly controlled by
the domestic resident (including domestic institution and individual resident) with their legally owned assets and equity of
the domestic enterprise, or legally owned offshore assets or equity, for the purpose of investment and financing”; “Round
Trip Investments” refer to “the direct investment activities carried out by a domestic resident directly or indirectly via an
SPV, that is, establishing a foreign-invested enterprise or project within the PRC through a new entity, merger or
acquisition and other ways, while obtaining ownership, control, operation and management and other rights and interests”.
In addition, according to the procedural guidelines as attached to the Circular 37, the principle of review has been changed
to “the domestic individual resident is only required to register the SPV directly established or controlled (first level)”.
Pursuant to Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the
Direct Investment-related Foreign Exchange Administration Policies, or Circular 13, which was promulgated on
February 13, 2015 and implemented June 1, 2015, the initial foreign exchange registration for establishing or taking
control of a SPV by domestic residents can be conducted with a qualified bank, instead of the local foreign exchange
bureau, and the Circular 13 also simplifies some procedures relating to foreign exchange for direct investments.
On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach regarding the
Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or Circular 19, which came into effect from
June 1, 2015. According to Circular 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the
Discretional Foreign Exchange Settlement. The Discretional Foreign Exchange Settlement refers to the foreign exchange
capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution
has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the
banks) can be settled at the banks based on the actual operational needs of the foreign-invested enterprise. The proportion
of Discretional Foreign Exchange Settlement of the foreign exchange capital of a foreign-invested enterprise is
temporarily determined to be 100%. The Renminbi converted from the foreign exchange capital will be kept in a
designated account and if a foreign-invested enterprise needs to make further payment from such account, it still needs to
provide supporting documents and go through the review process with the banks.
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SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange
Settlement of Capital Accounts, or Circular 16, on June 9, 2016, which became effective simultaneously. Pursuant to
Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign currency to Renminbi on a
self-discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange under capital
account items (including but not limited to foreign currency capital and foreign debts) on self-discretionary basis which
applies to all enterprises registered in the PRC. Circular 16 reiterates the principle that Renminbi converted from foreign
currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope
or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-
affiliated entities.
On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange
Administration and Optimizing Authenticity and Compliance Verification, or Circular 3, which took effect on the same
day. Circular 3 sets out various measures to tighten authenticity and compliance verification of cross-border transactions
and cross-border capital flow, which include without limitation requiring banks to verify board resolutions, tax filing form,
and audited financial statements before wiring foreign invested enterprises' foreign exchange distribution above
US$50,000, and strengthening genuineness and compliance verification of foreign direct investments.
As of the date of this annual report, all PRC residents known to us that currently have direct or indirect interests
in our company have completed the necessary registrations, as required by Circular 37. For a detailed description of the
risk associated with the non-completion of such process, see “Item 3. Key Information—D. Risk Factors—Risks Related
to Doing Business in China—A failure by the beneficial owners of our shares who are PRC residents to comply with
certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-
border investment activities and subject us to liability under PRC law.”
Regulations on loans to and direct investment in the PRC entities by offshore holding companies
According to the Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign
Debt promulgated by SAFE on September 24, 1997 and the Interim Provisions on the Management of Foreign Debts
promulgated by SAFE, the NDRC and the MOF and effective from March 1, 2003, loans by foreign companies to their
subsidiaries in China, which accordingly are foreign-invested enterprises, are considered foreign debt, and such loans
must be registered with the local branches of the SAFE. Under the provisions, the total amount of accumulated medium-
term and long-term foreign debt and the balance of short-term debt borrowed by a foreign-invested enterprise is limited to
the difference between the total investment and the registered capital of the foreign-invested enterprise.
According to the Provisional Regulations for the Proportion of Registered Capital to Total Amount of Investment
of Joint Ventures Using Chinese and Foreign Investment issued by SAIC on February 17, 1987 and Decision on
Amending the Provisions on the Merger or Acquisition of Domestic Enterprises by Foreign Investors issued by
MOFCOM on August 8, 2006, if the registered capital of a foreign-invested enterprise is less than US$2.1 million, its total
investment amount may not exceed 1.4 times the registered capital; if the registered capital of a foreign-invested
enterprise is more than US$2.1 million but less than US$5 million, its total investment amount may not exceed two times
the registered capital; if the registered capital of a foreign-invested enterprise is more than US$5 million but less than
US$12 million, its total investment amount may not exceed 2.5 times the registered capital; and if the registered capital of
a foreign-invested enterprise is more than US$12 million, its total investment amount may not exceed three times the
registered capital.
According to the Measures for the Administration of Foreign Debt Registration issued by SAFE on April 28,
2013, the statutory limit on the amount of loans from an overseas shareholder to a foreign-invested enterprise is the
difference between the total investment amount and the registered capital of the foreign-invested enterprise.
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According to applicable PRC regulations on foreign-invested enterprises, including but not limited to the Interim
Measures for the Administration of the Establishment and Alteration of Archival Filing of Foreign Funded Enterprises,
effective on October 8, 2016 and revised on July 30, 2017 and June 29, 2018, capital contributions from a foreign holding
company to its PRC subsidiaries, which are considered foreign-invested enterprises, may only be made when approval or
filing by MOFCOM or its local counterpart has been obtained. In such approval and filing process of capital contributions,
MOFCOM or its local counterpart examines the business scope of each foreign invested enterprise under review to ensure
it complies with the Foreign Investment Access Special Management Measures. See “—PRC Laws and Regulations
Relating to Foreign Investment in Education— Special Administrative Measures for Access of Foreign Investment (2020
Version).” The capital contribution of the foreign-invested enterprises falling in the scope of “restricted foreign investment
industries” and “prohibited foreign investment industries” shall obtain approval from MOFCOM or its local counterpart,
while the capital contribution of the foreign-invested enterprises falling outside such scopes may file with MOFCOM or
its local counterpart.
On January 12, 2017, the People’s Bank of China promulgated Notice of the People’s Bank of China on Issues
Concerning Macro Prudential Management of Full Scale Cross-border Financing, or PBOC Circular 9. According to
PBOC Circular 9, the People’s Bank of China establishes a cross-border financing regulation system and the legal entities
and financial institutions established in PRC excluding government financing vehicles and real estate enterprise, may
carry out cross-border financing of foreign currency in accordance with relevant regulations. PBOC Circular 9 provides
that, among other things, the outstanding amount of the foreign currency for the entities in cross-border financing, shall be
limited to the upper limit of the risk-weighted balance of such entity.
The enterprise shall, after signing the cross-border financing contract, but not later than three business days
before the withdrawal of the borrowing funds, file with the local branches of SAFE for the cross-border financing through
SAFE’s capital project information system. PBOC Circular 9 also provides that during the one-year period starting from
January 11, 2017, foreign-invested enterprises may choose one method to carry out cross-border financing in foreign
currency either according to PBOC Circular 9 or according to the Interim Provisions on the Management of Foreign
Debts. After the end of such one-year period, the method of foreign-invested enterprises to carry out cross-border
financing in foreign currency will be determined by the People’s Bank of China and SAFE.
On September 14, 2015, the National Development and Reform Commission promulgated Notice on Promoting
the Administrative Reform of the Filing and Registration System for Enterprises’ Issuance of Foreign Debts, or NDRC
Circular 2044. According to NDRC Circular 2044, an enterprise that plans to issue foreign debts shall apply to the
National Development and Reform Commission in advance for filing, registration, and report issuance information to the
National Development and Reform Commission within 10 business days after the completion of such issuance. The
National Development and Reform Commission shall determine whether to accept the application within five
business days from the date of receipt of the application, and issue the Certificate on the Filing and Registration of Foreign
Debts Issued by Enterprises within seven business days from the date of accepting the application.
Zhuhai Bright Scholar, a foreign-invested enterprise indirectly held by us, currently has a total investment
amount of RMB14.0 million (approximately US$2.0 million) and an initially subscribed registered capital RMB10.0
million (approximately US$1.5 million). We may provide shareholder loans of up to the U.S. dollar equivalent of RMB4.0
million (approximately US$0.6 million) to Zhuhai Bright Scholar, which is the difference between its total investment
amount and registered capital. According to the Measures for the Reporting of Foreign Investment Information issued by
MOFCOM and SAIC on December 30, 2019 , which supersedes the Interim Measures for the Administration of the
Establishment and Alteration of Archival Filing of Foreign Invested Enterprises , the increase of total investment amount
and registered capital of a foreign-invested enterprise must be reported to commerce departments through the enterprise
registration system and the National Enterprise Credit Information Publicity System, and market regulatory departments
shall forward such investment information reported by foreign investors or foreign-invested enterprises to commerce
departments in a timely manner.
According to applicable PRC regulations on foreign-invested enterprises, capital contributions from a foreign
holding company to its PRC subsidiaries, which are considered foreign-invested enterprises, may only be made when
approval by or registration with the MOFCOM or its local counterpart is obtained.
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Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors (Revised in 2009)
Under the Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors (Revised in
2009), or the M&A Rules, a foreign investor is required to obtain necessary approvals when (1) a foreign investor acquires
equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes
for new equity in a domestic enterprise via an increase of registered capital thereby converting it into a foreign-invested
enterprise; or (2) a foreign investor establishes a foreign-invested enterprise which purchases and operates the assets of a
domestic enterprise, or which purchases the assets of a domestic enterprise and injects those assets to establish a foreign-
invested enterprise. According to Article 11 of the M&A Rules, where a domestic company or enterprise, or a domestic
natural person, through an overseas company established or controlled by it/him/her, acquires a domestic company which
is related to or connected with it/him/her, approval from the MOFCOM is required.
For a detailed description of the risk associated with the M&A Rules, see “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—Certain PRC regulations, including the M&A Rules and national
security regulations, may require a complicated review and approval process which could make it more difficult for us to
pursue growth through acquisitions in China.”
C. Organizational Structure
The following diagram illustrates our corporate structure, including our principal subsidiaries and affiliated
entities, as of the date of this annual report.
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(1) Ultimately owned by Ms. Meirong Yang and Ms. Huiyan Yang. See “Item 6. Directors, Senior Management and
Employees—E. Share Ownership.” Ms. Meirong Yang and Ms. Huiyan Yang have also entered into an acting-in-
concert arrangement, pursuant to which they consult with each other before voting and deciding on material matters
in relation to the management of our company. Under such arrangement, if no consensus could be reached through
consultation, the decision made by Ms. Meirong Yang prevails. Furthermore, Ms. Huiyan Yang and Ms. Meirong
Yang are joint settlors and members of the two-person investment committee of Yeung Family Trust V, which
controls Excellence Education Investment Limited and Ultimate Wise Group Limited.
(2) Wholly owned by Ms. Huiyan Yang. See “Item 6. Directors, Senior Management and Employees—E. Share
Ownership” for information.
(3) For the beneficial ownership of Ms. Meirong Yang, Ms. Huiyan Yang and Mr. Junli He, see “Item 6. Directors, Senior
Management and Employees—E. Share Ownership.”
(4) Under PRC law, entities and individuals who establish private schools are referred to as “sponsors” rather than
“owners” or “shareholders.” The rights of sponsors vis-à-vis schools are similar to the rights of shareholders vis-à-vis
companies with regard to legal, regulatory and tax matters, but differ with regard to the right of a sponsor to receive
returns on investment and the right to the distribution of residual properties upon termination and liquidation. Each of
our schools we currently operate is sponsored by BGY Education Investment or a school sponsored by it as registered
pursuant to applicable PRC laws and regulations. For more information regarding school sponsorship and the
difference between sponsorship and ownership under relevant laws and regulations, see “Item 4. Information on the
Company—B. Business Overview— Regulations—Regulations on Private Education in the PRC.”
For a list of our significant subsidiaries, affiliated entity and schools/subsidiaries held by our affiliated entity, see
Exhibit 8.1 to this annual report.
Our Contractual Arrangements
Foreign ownership in education services is subject to significant regulations in China. The PRC government
regulates the provision of education services through strict licensing requirements. In particular, PRC laws and regulations
currently prohibit foreign ownership of companies and institutions providing compulsory education services at primary
and middle school levels, and restrict foreign investment in education services at the kindergarten and high school level.
We are a company incorporated in the Cayman Islands. Our PRC subsidiary, Zhuhai Bright Scholar, is a wholly foreign-
owned enterprise and currently ineligible to apply for and hold licenses to operate, or otherwise own equity interests in our
schools.
Due to these restrictions, we, through our PRC subsidiary, Zhuhai Bright Scholar, have entered into a series of
contractual arrangements with (1) our affiliated entities in China, including BGY Education Investment and the schools it
owns and operates, and (2) the shareholders of BGY Education Investment, i.e., Ms. Meirong Yang and Mr. Wenjie Yang,
which enable us to:
● exercise effective control over our affiliated entities;
● receive substantially all of the economic benefits of our affiliated entities in consideration for the services
provided by us; and
● have an exclusive option to purchase all of the equity interests in our affiliated entities when and to the
extent permitted under PRC law.
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The following is a summary of the material provisions of these contractual arrangements with our affiliated
entities and the shareholders of BGY Education Investment. We may not amend or terminate these agreements unless
authorized by a majority vote of our board of directors.
Call Option Agreement. Pursuant to the call option agreement between Zhuhai Bright Scholar, Ms. Meirong
Yang and Mr. Wenjie Yang, and BGY Education Investment, entered into in January 2017, Ms. Meirong Yang and
Mr. Wenjie Yang unconditionally and irrevocably granted Zhuhai Bright Scholar or its designee an exclusive option to
purchase, to the extent permitted under PRC laws and regulations, all or part of the equity interest in BGY Education
Investment at nil consideration or the lowest consideration permitted by PRC laws and regulations under the
circumstances where Zhuhai Bright Scholar or its designee is permitted under PRC laws and regulations to own all or part
of the equity interests of BGY Education Investment or where we otherwise deem it necessary or appropriate to exercise
the option. Zhuhai Bright Scholar has the sole discretion to decide when to exercise the option, and whether to exercise
the option in part or in full. Without Zhuhai Bright Scholar’s written consent, Ms. Meirong Yang and Mr. Wenjie Yang
may not sell, transfer, pledge or otherwise dispose of or create any encumbrance on any of BGY Education Investment’s
assets or equity interests. Without obtaining Zhuhai Bright Scholar’s written consent, Ms. Meirong Yang and Mr. Wenjie
Yang may not enter into any material contracts, incur any indebtedness, or alter the business scope of BGY Education
Investment. The key factor for us to decide whether to exercise the option is whether the current regulatory restrictions on
foreign investment in the education services business will be removed in the future, the likelihood of which we are not in a
position to know or comment on.
Power of Attorney. In January 2017, Ms. Meirong Yang and Mr. Wenjie Yang each executed irrevocable powers
of attorney, appointing Zhuhai Bright Scholar, or any person designated by Zhuhai Bright Scholar, as his/her attorney-in-
fact to (1) call and attend shareholders meeting of BGY Education Investment and execute relevant shareholders
resolutions, (2) exercise on his/her behalf all his/her rights as a shareholder of BGY Education Investment, including those
rights under PRC laws and regulations and the articles of association of BGY Education Investment, such as voting,
appointing, replacing or removing directors, (3) submit all documents as required by government authorities on behalf of
BGY Education Investment, (4) assign Ms. Meirong Yang’s and Mr. Wenjie Yang’s shareholding rights to Zhuhai Bright
Scholar, including the rights to receive dividends, dispose of equity interest and enjoy the rights and interests during and
after liquidation, (5) review the resolutions, books and accounts of BGY Education Investment, and (6) exercise any other
rights and benefits associated with shareholding that Ms. Meirong Yang or Mr. Wenjie Yang receive from BGY Education
Investment.
Exclusive Management Services and Business Cooperation Agreement. Pursuant to the exclusive management
services and business cooperation agreement among Zhuhai Bright Scholar, each of our affiliated entities, Ms. Meirong
Yang and Mr. Wenjie Yang, as the shareholders of BGY Education Investment, entered into in January 2017, Zhuhai
Bright Scholar has the exclusive right to provide comprehensive technical and business support services to our affiliated
entities. Such services include conducting market research, offering strategic business advice and providing information
technology services, advice on mergers and acquisitions, human resources management services, intellectual property
licensing services, support for teaching activities and other services that the parties may mutually agree. Without the prior
consent of Zhuhai Bright Scholar, none of our affiliated entities may accept such services from any third party. Zhuhai
Bright Scholar owns the exclusive intellectual property rights created as a result of the performance of this agreement. Our
affiliated entities agree to pay Zhuhai Bright Scholar service fees in an amount solely decided by Zhuhai Bright Scholar,
but not to exceed the paying school’s total revenues deducted by costs, taxes, mandatory reserve fund and other expenses.
At the sole discretion of Zhuhai Bright Scholar, the calculation of the service fees should be determined based on the
complexity of the services provided, the time and resources committed by Zhuhai Bright Scholar, the commercial value of
the services, the market reference price and the operating condition of the paying school. As part of the exclusive
management services and business cooperation agreement, Ms. Meirong Yang, Mr. Wenjie Yang and our affiliated entities
agree that they will not take any action, such as incurring indebtedness, disposing of material assets, materially changing
the scope or nature of the business of our affiliated entities, or disposing of their equity interests in our affiliated entities,
without the written consent of Zhuhai Bright Scholar. The exclusive management services and business cooperation
agreement may not be terminated by Ms. Meirong Yang, Mr. Wenjie Yang or any of our affiliated entities without the
written consent of Zhuhai Bright Scholar.
Unless terminated, the agreement shall remain in full force and effect during the term of operations of Zhuhai
Bright Scholar and our affiliated entities.
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Equity Pledge Agreement. Pursuant to the equity pledge agreement among Zhuhai Bright Scholar, Ms. Meirong
Yang, Mr. Wenjie Yang, BGY Education Investment entered into in January 2017, Ms. Meirong Yang and Mr. Wenjie
Yang unconditionally and irrevocably pledged all of their respective equity interests in BGY Education Investment to
Zhuhai Bright Scholar to guarantee performance of the obligations of our affiliated entities under the call option
agreements, power of attorneys and exclusive management services and business cooperation agreements, each as
described above. Ms. Meirong Yang and Mr. Wenjie Yang each agreed that without prior written consent of Zhuhai Bright
Scholar, they shall not transfer or dispose of the pledged equity interests or create or allow any encumbrance on the
pledged equity interests. Unless terminated, the equity pledge agreement remains in full force and effect until all of the
obligations of Ms. Meirong Yang, Mr. Wenjie Yang and our affiliated entities under the agreements described above have
been duly performed and related payments are duly paid. The pledge of equity interests in BGY Education Investment has
been duly registered with the local branch of SAIC and is effective upon such registration.
D. Property, plants and equipment
See “—B. Business Overview—Properties and Facilities.”
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in
conjunction with our consolidated financial statements and their related notes included in this annual report. This report
contains forward-looking statements. See “—G. Safe Harbor on Forward-Looking Statements.” In evaluating our
business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk
Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial
risks and uncertainties.
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A. Operating Results
Overview
Our business includes domestic K-12 schools, overseas schools and complementary education services. We
operate three types of educational facilities for domestic K-12 schools, including international schools, bilingual schools
and kindergartens. We offer a broad range of internationally-accredited curricula at our international schools. We tailor the
delivery of coursework to optimize learning outcomes for our students and prepare them for higher education overseas.
We also have an overseas school network of eight schools in the United Kingdom and the United States as of the date of
this annual report. In the 2020 school year, an average of 51,825 students were enrolled in our schools. We have
experienced significant growth in our business. In the 2020 fiscal year, our revenue increased to RMB3,366.5 million
(US$491.6 million) from RMB1,718.9 million in the 2018 fiscal year, representing an increase of 95.9%. We focus on
providing quality education to our students and, since the beginning of the 2016 fiscal year, we have implemented various
initiatives to improve operating efficiency and profitability. For example, in the 2018 fiscal year, we implemented an ERP
system where we centralize the collection and analysis of budgeting, procurement and financial information and data,
which enhanced the efficiency of our data management processes, adding value to the overall operation of our business.
See “Item 4. Information on the Company—B. Business Overview—Centralized Management” for details. We had net
income of RMB248.9 million and RMB252.8 million and RMB164.2 million (US$24.0 million) in the 2018, 2019 and
2020 fiscal years, respectively. We use adjusted net income, which excludes share-based compensation, amortization of
intangible assets, tax effect of amortization of intangible assets, impairment loss on operating lease right-of-use assets and
impairment loss on goodwill, in evaluating our ongoing results of operation. Our adjusted net income was RMB283.0
million, RMB322.6 million and RMB267.7 million (US$39.1 million) for the 2018, 2019 and 2020 fiscal years,
respectively. Our share-based compensation was RMB29.1 million, RMB51.7 million and RMB(10.6) million (US$(1.6)
million) in the 2018, 2019 and 2020 fiscal years, respectively. Our amortization of intangible assets was RMB6.6 million,
RMB23.3 million and RMB41.4 million (US$6.1 million) for the 2018, 2019 and 2020 fiscal years, respectively. Our tax
effect of amortization of intangible assets was RMB1.5 million, RMB5.1 million and RMB8.8 million (US$1.3 million)
for the 2018, 2019 and 2020 fiscal years, respectively. Our impairment loss on operating lease right-of-use assets was nil,
nil and RMB12.8 million (US$1.9 million) for the 2018, 2019 and 2020 fiscal years, respectively. Our impairment loss on
goodwill was nil, nil and RMB68.7 million (US$10.0 million) for the 2018, 2019 and 2020 fiscal years, respectively. See
“—Results of Operations—Non-GAAP measures” for details.
Major Factors Affecting Our Results of Operations
We believe that our results of operations are affected by general factors affecting the private K-12 education
industry in China and overseas and company-specific factors, including the following:
Demand for international and bilingual private K-12 education in China and overseas
We have benefited from the increasing demand for international and bilingual private K-12 education in China.
Such demand is primarily driven by the increasing number of Chinese students who seek quality education and aspire to
study abroad, which is in turn driven by an increasing number of affluent families in China, the rising recognition of the
quality of higher education overseas, the emphasis placed by Chinese parents on the importance of enrollment in globally-
recognized universities to improve their children’s career prospects, and various economic and political factors. Demand
for private K-12 education in each respective overseas market is affected by, among many other factors, the general
economic conditions and political trend, local policies and regulations on private education, and the quality of local public
education. Material changes to these factors will affect our operation results.
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Our student enrollment and mix
Our revenue primarily consists of tuition and fees from students enrolled at our schools. The level of students
enrolled at our schools directly affects our revenue and profitability. The following table sets forth the average number of
students enrolled at our schools for the school years indicated.
2018 school year
2019 school year
Number % of total Number % of total Number % of total
2020 school year
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Total
7,366
15,620
13,693
—
36,679
20.1 %
9,350
42.6 % 18,132
37.3 % 16,742
2,514
100.0 % 46,738
—
20.0 % 10,584
38.8 % 20,189
35.8 % 17,840
3,212
100.0 % 51,825
5.4 %
20.4 %
39.0 %
34.4 %
6.2 %
100.0 %
(1) For the purpose of calculating average number of students enrolled at our schools, we do not take into account
students at our language training institutions.
Our total student enrollment increased from an average of 36,679 students for the 2018 school year, to an average
of 46,738 students for the 2019 school year and further to an average of 51,825 students for the 2020 school year. Student
enrollment is generally dependent on, among other things, the reputation of our schools, which is primarily driven by our
education quality and our students’ academic results, the ramp-up stage of our schools, the expansion of our school
network as well as the population density in Country Garden’s residential properties, which have served as a major source
of students for our schools. An increase in the student contribution of our international schools also enhances our ability to
increase revenue, because our international schools generally charge tuition and fees substantially higher than our
bilingual schools and kindergartens do.
Student enrollment is also affected by the number and capacity of our schools. The following table sets forth the
number and capacity of schools as of the dates indicated.
2018
As of September 1,
2019
2020
Number
Student
of schools capacity of schools capacity of schools capacity
Number
Number
Student
Student
Domestic K-12 Schools
International schools
Bilingual schools (1)
Kindergartens (1)
Overseas Schools (2)
Total
6
15
44
—
65
15,260
23,210
19,009
—
57,479
7
15
58
6
86
16,460
23,210
23,127
3,357
66,154
8
15
71
8
102
17,810
25,722
27,357
4,422
75,311
We expanded our school network from 65 schools as of September 1, 2018 to 102 schools as of the date of this
annual report, with our total student capacity increasing from 57,479 students as of September 1, 2018 to 75,311 students
as of September 1, 2020. In August 2018, we ceased operations of Huaian Country Garden Tianshan Bilingual School and
Tianshan Kindergarten because we terminated our cooperation relationship with a third-party partner. In December 2018,
we acquired and commenced operation of BCS, being the first overseas school within our network. In July 2019, we
acquired five overseas schools under the brand “CATS.” In September 2019, we acquired St Michael’s School and BIC
located in the UK. In June 2020, we ceased our operation of Haiyang Country Garden Kindergarten out of operation
efficiency concerns. As utilization rates are generally higher for schools that have been in operation for a longer period of
time, the unutilized capacity at our recently-opened schools, which are still at the ramp-up stage, allows us to readily
increase student enrollment without incurring significant additional investment. The utilization rate, defined as the average
of monthly student enrollment at a school for a period divided by the school capacity as of the start of such period, at our
schools in China that were in their sixth fiscal year or above since their launch as of September 1, 2020 remained at high
levels of 84.7%,87.6% and 83.1% on average for the 2018, 2019 and 2020 school years, respectively. The average
utilization rate for schools that were within the first five fiscal years since their launch as of September 1, 2020 increased
from 35.8% for the 2018 school year to 42.8% for the 2020 school year. In particular, the average utilization rate for our
schools that opened on or
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after September 1, 2016 was 15.0% in their first year of operation, 32.0% in their second year of operation and 40.2% in
their third year of operation, demonstrating our ability to effectively ramp up individual new schools.
Our revenue generated from complementary education services was driven by the number of students enrolled in
our complementary education services.
Our tuition and fees
Our results of operations are affected by the level of the tuition and fees we charge our students. We charge
tuition and fees based on the type of school that the student is enrolled at, the location of the school and, in certain cases,
the student’s grade level. We generally seek to gradually increase our tuition and fee level without compromising our
student enrollment. The tuition and fees we charge are subject to approval by the competent government pricing
authorities. The government pricing authorities, at both the provincial and local levels, have broad powers to regulate the
private education industry in China including the tuition, room and board fees and other fees charged by schools. The
following table sets forth the average tuition and fees of our schools for the school years indicated.
Domestic K-12 School
International schools
Bilingual schools
Kindergartens
Average
Overseas Schools (1)
2018 school
year
RMB
2019 school
year
RMB
2020 school
year
RMB US$
80,048
34,187
30,736
42,108
—
83,555
35,872
30,424
43,891
239,486
82,469
35,782
20,910
40,489
207,643
12,044
5,226
3,054
5,913
30,324
(1) For the purpose of calculating average tuition and fees of our schools, we do not take into account students at our
language training institutions.
For the 2018, 2019 and 2020 school years, our average tuition and fees across all of our domestic schools were
RMB42,108, RMB43,891 and RMB40,489 respectively. Our tuition and fees charged for international schools are higher
than that for our bilingual schools and kindergartens, which reflects the additional education and operating resources we
provide and the premium that parents are willing to pay for international education. For the 2020 school year, we charged
average tuition and fees of RMB82,469 per student for international schools, RMB35,782 per student for bilingual schools
and RMB20,910 per student for kindergartens. Our tuition and fees charged for overseas schools take into consideration of
market rates and consumption levels of the relevant countries and areas where our schools are located. For the 2019 and
2020 school years, our average tuition and fees per student for overseas schools were RMB239,486 and RMB207,643,
respectively. The decline was largely attributable to the impact of the COVID-19 pandemic.
The tuition and fees we charge are also affected by the ramp-up stage of our schools. For our new schools in the
initial ramp-up period, which are typically located at or in the vicinity of recently-completed properties of Country
Garden, a related party, we may strategically price our tuition and fees to encourage student enrollment. For example, we
charged an average tuition and fees of RMB80,048 per student for our international schools for the 2018 school year,
which represented a slight decrease from the average tuition and fees of RMB80,478 per student for the 2017 school year
due to such pricing strategies for our promotional efforts for schools in the ramp-up stage. We have greater leverage over
the pricing of tuition and fees for our more established schools, such as Guangdong Country Garden School and Phoenix
City Bilingual School.
In addition, the acquisition of schools may impact the tuition and fees we charge. For example, we charge an
average tuition and fees of RMB30,424 per student for our kindergartens for the 2019 school year, which represents a
slight decrease from the average tuition and fees of RMB30,736 per student for the 2018 school year, primarily due to the
lower average fees charged at the newly added kindergartens in the 2019 fiscal year. We intend to maintain the tuition and
fees in acquired schools for a smooth transition.
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We have more discretion in determining the tuition levels for our complementary education services. We
generally raise the tuition for our complementary education services based on factors including the demand for our
services, the costs of offering our services, and the tuition and fees charged by our competitors.
Our ability to control our costs and expenses and improve our operating efficiency
Staff costs and administrative expenses have a direct impact on our profitability. The number of our staff,
particularly our teachers, generally increases as our student base expands, while other expenses, particularly those in
relation to administrative functions, are relatively fixed. Our ability to drive the productivity of our staff and enhance our
operating efficiency affects our profitability. The ratio of the number of our students to the number of our teachers in our
schools affects our margins, with higher student-to-teacher ratios generally representing higher operating efficiency and
higher margins. Our student-to-teacher ratio for our schools in China in the 2020 school years was 8.9, which was
generally lower than that seen amongst our industry peers for the same periods, according to the Frost & Sullivan report,
and represents potential for us to increase this ratio in the future. Our operating margin was 15.8%, 11.7% and 9.1% in the
2018, 2019 and 2020 fiscal years, respectively. Our adjusted operating income margin, which excludes share-based
compensation expenses, amortization of intangible assets, impairment loss on operating lease right-of-use assets and
impairment loss on goodwill, was 17.9%, 14.6% and 12.5% in the 2018, 2019 and 2020 fiscal years, respectively. See “—
Results of Operations—Non-GAAP measures.” The decline in our operating margin and adjusted operating income
margin was primarily due to increased costs relating to campus and office space leasing largely as a result of our
expansion overseas and launch of schools with school development partners other than Country Garden, and partially
offset by the decrease in the compensation and benefits incurred from additional staff members as a percentage of revenue.
The average number of our staff was 7,891, 10,366 and 11,499 in the 2018, 2019 and 2020 fiscal years, respectively, and
our total staff costs as a percentage of revenue were 55.0%, 52.0% and 48.4% during the same periods, respectively.
We focus on providing quality education to our students and, since the beginning of the 2017 fiscal year, we have
implemented various initiatives to improve operating efficiency and profitability through management centralization of
certain operational aspects, those schools in our network with longer operating history have seen significant improvement
in operating margin over time. Schools in our domestic network that were in their sixth fiscal year or above since their
launch as of September 1, 2020 had, as a group, significantly improved their adjusted operating margin, calculated as the
total adjusted operating income or loss of the concerned schools, which excludes share-based compensation expenses,
amortization of intangible assets, impairment loss on operating lease right-of-use assets and impairment loss on goodwill,
divided by total revenues of such schools, from 25.0% in the 2018 fiscal year to 28.7% in the 2020 fiscal year. See “—
Results of Operations—Non-GAAP measures.”
Our newly-established schools have been able to grow rapidly during the ramp-up period following their
establishment, as their brand value grows, student enrollment increases and capacity utilization improves. This has
resulted in greater operating leverage and increasing profitability at these schools as well. Schools in our domestic
network that were within the first five fiscal years of its launch as of September 1, 2020 had, as a group, significantly
narrowed their adjusted operating margin, calculated as the total adjusted operating income or loss of the concerned
schools, which excludes share-based compensation expenses, amortization of intangible assets, impairment loss on
operating lease right-of-use assets and impairment loss on goodwill, divided by the total revenues of such schools, from an
adjusted operating margin of negative 9.5% in the 2018 fiscal year to negative 4.8% in the 2020 fiscal year. See “—
Results of Operations—Non-GAAP measures.” In addition, three out of the eight international schools we operate are
within the first five fiscal years of their launch. The relatively higher fixed and variable costs and expenses for our
international schools and the number of international schools at the ramp-up stage have affected the gross margin of our
international schools segment historically. In the 2020 fiscal year, gross margin for our international schools segment was
42.5%, compared to 41.6% and 27.0% for bilingual schools and kindergartens, respectively.
A majority of our schools in operation are located within or in the vicinity of Country Garden’s residential
communities. We did not pay fees for the facilities occupied by a majority of our existing schools. Going forward, for new
schools launched in collaboration with Country Garden, we may pay fees to Country Garden for operating schools on their
land and facilities, which may affect our profitability as we further expand our school network.
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Our ability to expand our school network cost-efficiently
We operate a highly scalable model by leveraging our strong strategic relationship with Country Garden. A
majority of our existing schools are located within or in the vicinity of Country Garden’s residential communities. Country
Garden is generally responsible for land procurement and facilities construction, and we are responsible for the school
operation. Our ability to maintain the collaboration with Country Garden or with other third parties in a similar manner
will determine the speed and efficiency with which we expand our school network. In the case where we pursue a strategy
to procure and build our schools independent of Country Garden and other third parties, our ability to efficiently procure
land, construct school facilities and ramp up the school operation will impact our ability to expand our school network.
Strategic acquisitions and investments
In recent years, we have expanded rapidly through acquisitions and strategic investments in China and overseas.
For details, see “Item 4. Information on the Company—B. Business Overview—Our Expansions and Investments.” We
plan to continue to make strategic investments into and acquisitions of schools and complementary businesses to better
serve our students, expand our global school network and drive our future growth. Our overall financial condition and
profitability could be affected by the different levels of profitability of our acquisition targets.
Seasonality
Our business in China is subject to seasonal fluctuations as our costs and expenses vary significantly and do not
necessarily correspond with our recognition of revenues. Our students enrolled in our schools offering K-12 education
services and their parents typically pay the tuition and fees prior to the commencement of a semester, and we recognize
revenues from the delivery of education services on a straight-line basis over the semester. For schools offering K-12
education services, we typically incur higher upfront operating expenses in the first fiscal quarter at the start of each
school year. We also typically recognize more revenue in the second half of fiscal years due to higher revenues from
complementary education services during the summer and, to a lesser extent, students who transfer into our schools for the
second semester. As a result of the combination of the forgoing, we have historically incurred net loss or significantly
lower net income in the second and fourth fiscal quarters, primarily due to our schools being closed due to the winter and
summer holidays, when no revenue from our school operations is recognized.
Our overseas operations are subject to seasonal fluctuations similar to our domestic operations, with minimal
school term revenue recognized typically in July and August.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of financial
statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. We continually evaluate these judgments and estimates based on our own
experience, knowledge and assessment of current business and other conditions.
Our expectations regarding the future are based on available information and assumptions that we believe to be
reasonable, which together form our basis for making judgments about matters that are not readily apparent from other
sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could
differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their
application.
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions
about matters that are highly uncertain at the time such estimate is made and if different accounting estimates that
reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could
materially impact the combined and consolidated financial statements. We believe that the following accounting policies
involve a higher degree of judgment and complexity in their application and require us to make significant accounting
estimates.
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Consolidation of Variable Interest Entity
PRC laws and regulations currently prohibit foreign ownership of companies and institutions providing
compulsory education services at primary and middle school levels, and restrict foreign investment in education services
at the kindergarten and high school level. In addition, the PRC government regulates the provision of education services
through strict licensing requirements.
Accordingly, we, through our WFOE, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd.
("Zhuhai Bright Scholar"), have entered into the following contractual arrangements with BGY Education Investment,
BGY Education Investment's schools and subsidiaries and Guangdong Country Garden Education Investment
Management Co., Ltd. ("BGY Education Investment")'s shareholders that enable the Company to (1) have power to direct
the activities that most significantly affects the economic performance of the VIE, and (2) receive the economic benefits
of the VIE that could be significant to the VIE.
We believe we have the power to control BGY Education Investment. Specifically, we believe that the terms of
the exclusive call option agreement are currently exercisable and legally enforceable under PRC laws and regulations. We
also believe that the minimum amount of consideration permitted by the applicable PRC law to exercise the option does
not represent a financial barrier or disincentive for us to exercise our rights under the exclusive call option agreement. To
exercise our rights under the exclusive call option agreement does not require the consent of BGY Education Investment.
Therefore, we believe this gives us the power to direct the activities that most significantly impact the economic
performance of our affiliated entities. We believe that our ability to exercise effective control, together with the exclusive
management services and business cooperation agreement and the equity pledge agreement, give us the rights to receive
substantially all of the economic benefits from our affiliated entities in consideration for the services provided by our
subsidiaries in China. Accordingly, as the primary beneficiary of the affiliated entities and in accordance with U.S. GAAP,
we consolidate their financial results and assets and liabilities in our consolidated financial statements.
As advised by our PRC legal counsel, our corporate structure in China complies with all existing PRC laws and
regulations. However, our PRC legal counsel has also advised us that as there are substantial uncertainties regarding the
interpretation and application of PRC laws and regulations, and we cannot assure you that the PRC government would
agree that our corporate structure or any of the above contractual arrangements comply with current or future PRC laws or
regulations. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the
relevant government authorities may have broad discretion in interpreting these laws and regulations.
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable net assets
acquired in a business combination. Goodwill is not amortized but is tested for impairment on an annual basis, or more
frequently if events or changes in circumstances indicate that it might be impaired. We have the option to first assess
qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In
the qualitative assessment, we consider primary factors such as industry and market considerations, overall financial
performance of the reporting unit, and other specific information related to the operations. We will perform the
quantitative impairment test if we bypass the qualitative assessment, or based on the qualitative assessment, if it is more
likely than not that the fair value of each reporting unit is less than the carrying amount.
On September 1, 2019, we early adopted ASU No. 2017-04, Simplifying the Test for Goodwill Impairment,
which simplifies the accounting for goodwill impairment by eliminating Step two from the goodwill impairment test.
Under the new guidance, if the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired and no
further testing is required. If the fair value of a reporting unit is less than the carrying value, an impairment charge is
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit.
For the year ended August 31, 2020, we have determined that the underperformance of the Wuhan Sannew
reporting unit since the acquisition date, market conditions and other factors including the uncertainty in the Sino-US
relationship and adverse impacts from COVID-19, it was more likely than not that there were indications of impairment.
The Group utilized the discounted cash flow model to and concluded the carrying amount of Wuhan
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Sannew reporting unit exceeded its fair value. Accordingly, the Group recorded RMB 68,723 as impairment loss on
goodwill on the consolidated statement of operations for the year ended August 31, 2020. The impairment is recorded in
international schools reportable segment.
In performing the quantitative impairment test, we estimate the fair value of the reporting unit based on income
approach. Under the income-based approach, we determine fair value using a discounted cash flow model that requires
significant judgment with respect to revenue growth rate and gross margin, based upon annual budgets and longer-range
strategic plans, and the selection of an appropriate discount rate. These budgets and plans are used for internal purposes
and are also the basis for communication with outside parties about future business trends.
Fair value estimates employed in our annual impairment review of goodwill and indefinite-lived intangible assets
were determined using models involving several assumptions. Changes in our assumptions could materially impact our
fair value estimates. Assumptions critical to our fair value estimates were: (i) discount rates used in determining the fair
value of the reporting units and intangible assets; (ii) projected revenue growth rate and gross margin used in the reporting
unit and intangible asset models. These and other assumptions are impacted by economic conditions and expectations of
management and may change in the future based on period specific facts and circumstances. While we believe the
assumptions we used to estimate future cash flows are reasonable, there can be no assurance that the expected future cash
flows will be realized. As a result, impairment loss that possibly would have been recognized in earlier periods may not be
recognized until later periods if actual results deviate unfavorably from earlier estimates. The use of different assumptions
would increase or decrease discounted cash flows or earnings projections and, therefore, could change impairment
determinations.
Leases
Before September 1, 2019, we adopted ASC Topic 840 (“ASC 840”), Leases, and each lease is classified at the
inception date as either a capital lease or an operating lease. On September 1, 2019, we adopted the New Leasing Standard
(“ASC 842”), using the modified retrospective transition method.
We determine if an arrangement is a lease or contains a lease at lease inception. Leases that transfer substantially
all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an
acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as
operating leases. As of August 31, 2020, we have no significant finance leases. Operating leases are required to be
recorded in the balance sheets as right-of-use assets and lease liabilities, initially measured at the present value of the lease
payments. We have elected the package of practical expedients, which allows us not to reassess (1) whether any expired or
existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as
of the adoption date and (3) initial direct costs for any expired or existing leases as of the adoption date. We account for
the lease and non-lease components separately. Lastly, we also have elected to utilize the short-term lease recognition
exemption and, for those leases that qualified, we did not recognize operating lease right-of-use (“ROU”) assets or
operating lease liabilities.
As the rate implicit in the lease is not readily determinable, we estimate our incremental borrowing rate based on
the information available at the commencement date in determining the present value of lease payments. The incremental
borrowing rate is estimated in a portfolio approach to approximate the interest rate on a collateralized basis with similar
terms and payments in a similar economic environment. Lease terms may include options to extend or terminate the lease
when it is reasonably certain that we will exercise that option. Lease expenses are recorded on a straight-line basis over
the lease term.
We evaluate the carrying value of ROU assets, including the operating lease obligation of the asset group if there
are indicators of impairment and reviews the recoverability of the related asset group. If the carrying value of the asset
group determined to not be recoverable and is in excess of the estimated fair value, we record an impairment loss in the
consolidated statement of operations. As a result of the adverse impacts of the COVID-19 pandemic on the economic
environment and the Group's business strategy, the Group determined to close certain language training centers in the US
resulting in four idled operating leases. The Group determine the fair value of the ROU assets based on the discounted
value of estimated future cash flows including cash flows related to subleases, if any. For the year ended August 31, 2020,
the Group recorded impairment loss of RMB 12,772 related to the ROU assets within the overseas schools reportable
segment.
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During the 2020 fiscal year, we received RMB2.7 million (US$0.4 million) of COVID-19 related rent
concessions. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in April 2020,
we elected to treat COVID-19-related rent concessions as variable rent. Rent concessions were recognized as an offset to
our rent expense within selling, general and administrative expenses and cost of revenue on our consolidated statement of
operations.
Revenue recognition
As of September 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”) and
all subsequent ASUs that modified ASC 606, using the modified retrospective method for all contracts not completed as
of September 1, 2018. Results for reporting periods beginning on September 1, 2018 are presented under Topic 606, while
prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior
periods.
Revenue is recognized when control of promised goods or services is transferred to our customers in an amount
of consideration to which we expect to be entitled to in exchange for those goods or services. We follow the five steps
approach for revenue recognition under Topic 606: (1) identify the contract(s) with a customer, (2) identify the
performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance obligation. The
primary sources of our revenues are as follows:
Income from educational programs and services
The educational programs and services consist of tuition, boarding and meal service from international schools,
bilingual schools and kindergartens in the PRC and overseas schools in the UK, the US and Canada. Each contract of
educational programs and services is accounted for as a single performance obligation which is satisfied proportionately
over the service period. The program and service fee is generally collected in advance prior to the beginning of each
semester, or prior to the beginning of the education programs, and is initially recorded as contract liabilities. Refunds are
provided to students if they decide within the predetermined period that they no longer want to take the course or enroll in
the program. After the predetermined period as agreed in the contract, if a student withdraws from the program, the
program fee is no longer available for refund. We determine the transaction price to be earned based on the tuition fee and
the estimated refund liability. The refund liability is determined based on historical refund ratio on a portfolio basis using
the expected value method. Historically, we have not had material refunds in this respect.
During the year ended August 31, 2020, in response to the COVID-19 pandemic, we temporarily stopped
providing offline tuition, boarding and meal services to students, instead it offered online tuition services to students
during the school temporary closure period, except for kindergartens. The amount of considerations relating to boarding
and meal services to all students and tuition service to the kindergarten students during the period, which were not
provided, has been recorded as refund liability.
Complementary training course and program fees
We offer various types of after-school tutoring services and art training services, which primarily consist of after-
school group class courses, personalized tutoring courses and art training courses. The tutoring services and art training
services are accounted for as a single performance obligation. Tutoring services and art training service fees is recognized
proportionately as the tutoring sessions and art training courses are delivered. The course fees are generally collected in
advance and are initially recorded as contract liability. Tuition refunds are provided to students if they decide within the
trial period that they no longer want to take the course. For certain courses, we also offer refunds for any unutilized classes
for students who withdraw from the course. We determine the transaction price to be earned based on the tutoring services
and art training service fees and the estimated refund liability. The refund liability is determined based on historical refund
ratio on a portfolio basis using the expected value method.
Commission income
We earn commission revenue by providing referral services to overseas education universities and institutions.
Students’ referral service is accounted for as a single performance obligation. Commission income is
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recognized at the point in time when the referred students enrolled at the overseas education universities or institutions’
program, with the tuition fees are paid and upon we are entitled to the commission income.
Consulting service fees
We offer study abroad consulting and career consulting services to students/candidates who intend to study
abroad and to successfully obtain target job offer respectively. Study-abroad consulting services and career consulting
services are accounted for as a single performance obligation respectively. We charge each student/candidate an up-front
prepaid fee based on the scope of consulting services requested by the student/candidate. Portion of the prepaid services
fee are refundable if the student/candidate does not successfully gain admission or obtain target job offer. We determine
the transaction price to be earned based on service fees and the estimated refund liability. The refund liability is
determined based on historical refund ratio on a portfolio basis using the expected value method. We have not experienced
significant refunds in the past or in the current year. We recognize revenue over the consulting service period.
Camp service income
We offer camp services for students during school vacations. Camp service is accounted for as a single
performance obligation. Camp service fees are generally collected upfront and are initially recorded as contract liability.
Portion of the prepaid service fees are refundable if the student requests for refund prior to the camp starts. We determine
the transaction price to be earned – based on services and the estimated refund liability. The refund liability is determined
based on historical refund ratio on a portfolio basis using the expected value method. We have not experienced significant
refunds in current year. We recognize revenue over the camping period.
Practical expedients and exemptions
We have applied the new revenue standard requirements to a portfolio of contracts (or performance obligations)
with similar characteristics for transactions where it is expected that the effects on the financial statements of applying the
revenue recognition guidance to the portfolio would not differ materially from applying this guidance to the individual
contracts (or performance obligations) within that portfolio. Therefore, we elect the portfolio approach in applying the
new revenue guidance.
We have elected to record the incremental costs of obtaining a contract as an expense when incurred if the
amortization period of the asset that the entity otherwise would have recognized is one year or less.
Purchase price allocation relating to business combination
We record acquisitions using the purchase method of accounting in accordance with ASC 805, Business
Combinations. The identifiable tangible and intangible assets acquired and any non-controlling interests in the acquiree
are required to be recognized and measured at fair value as of the acquisition date. The excess of the purchase price over
the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the
purchase method of accounting requires management to make significant estimates and assumptions in the determination
of the fair value of assets acquired and liabilities assumed, in order to properly allocate purchase price consideration.
These assumptions and estimates include a market participant’s use of the asset and the appropriate discount rates for a
market participant. Our estimates are based on historical experience, information obtained from the management of the
acquired companies and with the assistance of independent third-party appraisal firms.
Critical estimates in valuing certain of the intangible assets include, but are not limited to, discount rates and
expected future cash flows from and the economic lives of customer relationships, trademarks and brand names and other
intangible assets. These estimates are inherently uncertain and unanticipated events and circumstances may occur which
could affect the accuracy or validity of estimates used in purchase accounting. The purchase price allocation recorded in a
business combination may change during the measurement period, which is a period not to exceed one year from the date
of acquisition, as additional information about conditions existing at the acquisition date becomes available.
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Recent Accounting Pronouncements
For a summary of recent accounting pronouncements, see Note 2 to our consolidated financial statements
pursuant to Item 17 of Part III of this annual report.
Key Components of Results of Operations
Revenue
We derive our revenue from six operating segments, including international schools, bilingual schools,
kindergartens, overseas schools, education technology and complementary education services. Our revenue increased
during the 2018 and 2019 primarily due to increases in the average tuition and fees and the increased number of student
enrollment, which is the result of the expansion of our school network and increasing utilization of existing schools. Our
revenue further increased to RMB3,366.5 million (US$491.6 million) in the 2020 fiscal year in spite of the impact from
the COVID-19 pandemic primarily as a result of revenue contribution from acquired overseas schools as well as increase
in the number of students in our domestic K-12 schools.
The following tables compare revenue generated from our schools and complementary education services and as
a percentage of total revenues for the periods indicated.
Domestic K-12 Schools
International schools
Tuition revenue (1)
Others (2)
Bilingual schools
Tuition revenue (1)
Others (2)
Kindergartens
Tuition revenue (1)
Others (2)
Overseas schools (6)
Tuition revenue (1)
Others (3)
Education technology (7)
Complementary education services
Tuition revenue (4)
Others (5)
Total
Year Ended August 31,
2018
RMB
2019
RMB
2020
RMB
US$
(in thousands)
589,599
513,493
76,106
534,008
396,069
137,939
399,249
344,828
54,421
—
—
—
—
196,015
85,098
110,917
1,718,871
745,015
652,307
92,708
650,433
486,703
163,730
495,024
426,838
68,186
181,793
123,897
57,896
69,980
420,760
123,895
296,865
2,563,005
872,857
789,510
83,347
722,396
583,544
138,852
373,028
318,445
54,583
835,927
518,660
317,267
103,327
458,968
126,258
332,710
3,366,503
127,473
115,301
12,172
105,499
85,221
20,278
54,477
46,506
7,971
122,080
75,746
46,334
15,090
67,028
18,439
48,589
491,647
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Domestic K-12 School
International schools
Tuition revenue (1)
Others (2)
Bilingual schools
Tuition revenue (1)
Others (2)
Kindergartens
Tuition revenue (1)
Others (2)
Overseas schools (6)
Tuition revenue (1)
Others (3)
Education technology (7)
Complementary education services
Tuition revenue (4)
Others (5)
Total
2018
%
Year Ended August 31,
2019
%
2020
%
34.3 %
29.9 %
4.4 %
31.1 %
23.1 %
8.0 %
23.2 %
20.0 %
3.2 %
—
—
—
—
11.4 %
5.0 %
6.4 %
100.0 %
29.1 %
25.5 %
3.6 %
25.4 %
19.0 %
6.4 %
19.3 %
16.7 %
2.6 %
7.1 %
4.8 %
2.3 %
2.7 %
16.4 %
4.8 %
11.6 %
100.0 %
25.9 %
23.5 %
2.4 %
21.5 %
17.3 %
4.2 %
11.1 %
9.5 %
1.6 %
24.8 %
15.4 %
9.4 %
3.1 %
13.6 %
3.8 %
9.8 %
100.0 %
(1) Includes tuition from K-12 education programs and income from sales of education materials.
(2) Includes meal income, boarding income and others.
(3) Includes revenue from meal income, boarding income, language training services and others.
(4) Includes revenue from English proficiency training and art training services.
(5) Includes income from camps and other extracurricular programs and other educational services, net of sales tax.
(6) We acquired two overseas schools in the 2020 fiscal year, including St. Michael’s School and BIC.
(7) Includes income from career counseling business and other educational services, net of sales tax.
We generally charge our students tuition and other fees prior to the beginning of each semester. We also accept
monthly payment for fees at certain kindergartens. We offer a partial refund if a student withdraws during a semester and
tuition discounts to certain of Country Garden’s homeowners, our employees and Country Garden’s employees.
Cost of revenue
Our cost of revenue primarily consists of staff costs, comprising primarily salaries and other benefits for teachers
and educational staff, and other costs, comprising primarily expenses relating to room and board services, educational
activities and utilities and maintenance of school facilities.
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The following tables set forth the components of our cost of revenue by amount and as a percentage of total
business segment revenue for the periods indicated.
Domestic K-12 Schools
International schools
Staff costs
Others (1)
Bilingual schools
Staff costs
Others (1)
Kindergartens
Staff costs
Others (1)
Overseas schools (2)
Staff costs
Others
Education Technology
Staff costs
Others (1)
Complementary education services
Staff costs
Others (1)
Total
Domestic K-12 Schools
International schools
Staff costs
Others (1)
Bilingual schools
Staff costs
Others (1)
Kindergartens
Staff costs
Others (1)
Overseas schools (2)
Staff costs
Others
Education Technology
Staff costs
Others (1)
Complementary education services
Staff costs
Others (1)
Total
Year Ended August 31,
2018
RMB
2019
RMB
2020
RMB
US$
(in thousands)
373,391
286,004
87,387
346,868
242,572
104,296
223,397
164,893
58,504
—
—
—
—
—
—
146,939
60,180
86,759
1,090,595
456,003
340,592
115,411
400,043
279,596
120,447
279,315
196,911
82,404
145,625
58,242
87,383
18,103
—
18,103
286,925
104,235
182,690
1,586,014
502,186
386,874
115,312
421,894
308,522
113,372
272,261
170,227
102,034
588,839
204,150
384,689
38,517
5,474
33,043
321,089
100,301
220,788
73,339
56,499
16,840
61,614
45,057
16,557
39,761
24,860
14,901
85,994
29,814
56,180
5,625
799
4,826
46,893
14,648
32,245
2,144,786 313,226
2018
%
Year Ended August 31,
2019
%
2020
%
63.3 %
48.5 %
14.8 %
65.0 %
45.5 %
19.5 %
56.0 %
41.3 %
14.7 %
—
—
—
—
—
—
75.0 %
30.7 %
44.3 %
63.4 %
61.2 %
45.7 %
15.5 %
61.5 %
43.0 %
18.5 %
56.4 %
39.8 %
16.6 %
80.1 %
32.0 %
48.1 %
25.9 %
—
25.9 %
68.2 %
24.8 %
43.4 %
61.9 %
57.5 %
44.3 %
13.2 %
58.4 %
42.7 %
15.7 %
73.0 %
45.6 %
27.4 %
70.4 %
24.4 %
46.0 %
37.3 %
5.3 %
32.0 %
70.0 %
21.9 %
48.1 %
63.7 %
(1) Includes primarily expenses relating to room and board services, depreciation and amortization and others.
(2) We acquired two overseas schools in the 2020 fiscal year, including St. Michael’s School and BIC.
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Selling, general and administrative expenses
Our selling, general and administrative expenses primarily consisted of salaries and other benefits for our
administrative, management and marketing personnel, maintenance costs of our office facilities and teaching equipment,
and share-based compensation expenses. Our selling, general and administrative expenses were RMB368.1 million,
RMB691.9 million and RMB871.2 million (US$127.2 million) in the 2018, 2019 and 2020 fiscal years, respectively,
accounting 21.4%, 27.0% and 25.9% of our revenue for the same periods, respectively. Excluding the share-based
compensation in the 2020 fiscal year, our selling, general and administrative expenses would have been RMB881.8
million, accounting for 26.2% of our revenue in the same fiscal year. See “A Operating Results—Results of Operations—
Non-GAAP measures” for details.
Results of Operations
Reportable Segment
Prior to fiscal year 2020, our chief operating decision maker ("CODM") had previously been identified as the
Chief Executive Officer. Due to the reorganization of the business units and change in internal reporting, the CODM has
been defined as the management committee.
In the fiscal year 2018, we have identified four reportable segments, including International Schools, Bilingual
Schools, Kindergartens and Complementary Education Services. During the year ended August 31, 2019, we have
acquired the overseas businesses and our CODM reviewed results in five reportable segments, including International
Schools, Bilingual Schools, Kindergartens, Overseas Schools and Complementary Education Services. During the year
ended August 31, 2020, we have changed our internal management structure and has expanded into service offerings in
utilizing technology to deliver online study programs; therefore we have identified six reportable segments, including
International Schools, Bilingual Schools, Kindergartens, Overseas Schools, Complementary Education Services and
Education Technology. Given the change in the composition of our reportable segments, prior year segment information
was recast to conform to the current year's presentation.
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The following tables set forth a summary of our consolidated results of operations by amount and as a percentage
of total revenues for the periods indicated. This information should be read together with our consolidated financial
statements and related notes included elsewhere in this annual report. The results of operations in any period are not
necessarily indicative of the results that may be expected for any future period.
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Other operating income
Impairment loss on operating lease right-of-use assets
Impairment loss on goodwill
Operating income
Interest income/(expenses), net
Investment income
Other expenses
Income before income taxes and share of equity in
income of unconsolidated affiliates
Income tax expenses
Share of equity in income of unconsolidated affiliates
Net income
Net income attributable to non-controlling interests
Net income attributable to ordinary shareholders
Adjusted net income (1)
Net earnings per share attributable to ordinary
shareholders
Basic
Diluted
Weighted average shares used in calculating net
earnings per ordinary share
Basic
Diluted
2018
RMB
Year Ended August 31,
2019
RMB
RMB
2020
US$
(in thousands, except for share and per share data)
1,718,871
(1,090,595)
628,276
(368,141)
12,027
—
—
272,162
27,297
21,669
(4,803)
316,325
(67,382)
(40)
248,903
1,934
246,969
283,036
2,563,005
(1,586,014)
976,991
(691,900)
15,435
—
—
300,526
24,254
17,414
(8,617)
333,577
(80,580)
(239)
252,758
11,659
241,099
322,583
3,366,503
(2,144,786)
1,221,717
(871,154)
38,661
(12,772)
(68,723)
307,729
(159,352)
106,675
(11,291)
243,761
(78,992)
(595)
164,174
3,169
161,005
267,663
491,647
(313,226)
178,421
(127,224)
5,646
(1,866)
(10,036)
44,941
(23,272)
15,579
(1,649)
35,599
(11,536)
(87)
23,976
463
23,513
39,090
2.02
2.02
1.97
1.97
1.34
1.34
0.20
0.20
122,088,201
122,186,796
122,322,894
122,430,457
120,158,001
120,158,001
120,158,001
120,158,001
(1) Represents net income before share-based compensation expenses, amortization of intangible assets, tax effect of
amortization of intangible assets, impairment loss on operating lease right-of-use assets and impairment loss on
goodwill. See “—Non-GAAP measures” for details.
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Table of Contents
Non-GAAP measures
In evaluating our business, we consider and use certain non-GAAP measures, including primarily adjusted
EBITDA, adjusted net income/(loss), adjusted gross profit/(loss), adjusted SG&A, adjusted operating income/(loss),
adjusted earnings/(loss) per share attributable to ordinary shareholders basic and diluted as supplemental measures to
review and assess our operating performance. The presentation of these non-GAAP financial measures is not intended to
be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S.
GAAP. We define adjusted gross profit/(loss) as gross profit/(loss) excluding amortization of intangible assets and
adjusted gross margin as adjusted gross profit/(loss) divided by revenue. We define adjusted EBITDA as net income/(loss)
excluding interest income/(expense), net; income tax (expense)/benefit; depreciation and amortization; share-based
compensation expense; impairment loss on operating lease right-of-use assets; impairment loss on goodwill, and adjusted
EBITDA margin as adjusted EBITDA divided by revenue. We define adjusted net income/(loss) as net income/(loss)
excluding share-based compensation expense; amortization of intangible assets; tax effect of amortization of intangible
assets; impairment loss on operating lease right-of-use assets; impairment loss on goodwill, and adjusted net margin as
adjusted net income/(loss) divided by revenue. We define adjusted SG&A as selling, general and administration expense
excluding share-based compensation expense. We define adjusted operating income/(loss) as net operating income/(loss)
excluding share-based compensation expense; amortization of intangible assets; impairment loss on operating lease right-
of-use assets; impairment loss on goodwill and adjusted operating margin as adjusted operating income/(loss) divided by
revenue. Additionally, we define adjusted earnings/(loss) per share attributable to ordinary shareholders, basic and diluted,
as adjusted net income/(loss) attributable to ordinary shareholders (net income/(loss) to ordinary shareholders excluding
share-based compensation expense; amortization of intangible assets; tax effect of amortization of intangible assets;
impairment loss on operating lease right-of-use assets and impairment loss on goodwill) divided by the weighted average
number of basic and diluted ordinary shares or American depositary shares (each an “ADS”), each representing one Class
A ordinary share of the Company, on an as-converted basis.
We incur amortization expense of intangible assets related to various acquisitions that have been made in recent
years. These intangible assets are valued at the time of acquisition and are then amortized over a period of several years
after the acquisition. We believe that exclusion of these expenses allows greater comparability of operating results that are
consistent over time for the Company’s newly-acquired and long-held business as the related intangibles does not have
significant connection to the growth of the business. Therefore, we provide exclusion of amortization of intangible assets
to redefine adjusted operating income/(loss), adjusted net income/(loss), and adjusted earnings/(loss) per share attributable
to ordinary shareholders, basic and diluted.
We present the non-GAAP financial measures because they are used by our management to evaluate our
operating performance and formulate business plans. Such non-GAAP measures include adjusted EBITDA, adjusted net
income/(loss), adjusted gross profit/(loss), adjusted SG&A, adjusted operating income/(loss), adjusted earnings/(loss) per
share attributable to ordinary shareholders basic and diluted. Non-GAAP financial measures enable our management to
assess our operating results without considering the impact of non-cash charges, including depreciation and amortization
and share-based compensation expense, and without considering the impact of non-operating items such as interest
income/(expense), net; income tax (expense)/benefit; share-based compensation expense; amortization of intangible
assets; tax effect of amortization of intangible assets; impairment loss on operating lease right-of-use assets and
impairment loss on goodwill. We also believe that the use of these non-GAAP measures facilitates investors’ assessment
of our operating performance.
The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with
U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using
these non-GAAP financial measures is that they do not reflect all items of income and expense that affect our operations.
Interest income/(expense), net; income tax (expense)/benefit; depreciation and amortization; and share-based
compensation expense, have been and may continue to be incurred in our business and are not reflected in the presentation
of these non-GAAP measures, including adjusted EBITDA or adjusted net income/(loss). Further, these non-GAAP
measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore
their comparability may be limited.
We reconcile the non-GAAP financial measures to the nearest U.S. GAAP performance measures, which should
be considered when evaluating our performance. We encourage you to review our financial information in its entirety and
not rely on a single financial measure.
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The following tables reconcile our adjusted EBITDA, adjusted net income/(loss), adjusted gross profit/(loss),
adjusted SG&A, adjusted operating income/(loss), adjusted net earnings per share attributable to ordinary shareholders
basic and diluted for the periods indicated to their respective most directly comparable financial measures calculated and
presented in accordance with U.S. GAAP:
Reconciliation of gross profit to adjusted gross profit
Gross profit
Add: amortization of intangible assets
Adjusted gross profit
Reconciliation of operating income to adjusted operating income
Operating income
Add: share-based compensation expense
Add: amortization of intangible assets
Add: Impairment loss on operating lease right-of-use assets
Add: Impairment loss on goodwill
Adjusted operating income
Reconciliation of net income to adjusted net income
Net income
Add: share-based compensation expense
Add: amortization of intangible assets
Add: Tax effect of amortization of intangible assets
Add: Impairment loss on operating lease right-of-use assets
Add: Impairment loss on goodwill
Adjusted net income
Reconciliation of net income attributable to ordinary shareholders to adjusted
net income attributable to ordinary shareholders
Net income attributable to ordinary shareholders
Add: Share-based compensation expense
Add: Amortization of intangible assets
Add: Tax effect of amortization of intangible assets
Add: Impairment loss on operating lease right-of-use assets
Add: Impairment loss on goodwill
Adjusted net income attributable to ordinary shareholders
Reconciliation of net income to EBITDA and adjusted EBITDA
Net income
Less: interest income/(expense), net
Add: income tax expense
Add: depreciation and amortization
Add: share-based compensation expense
Add: foreign exchange loss (included in other expenses)
Add: Impairment loss on operating lease right-of-use assets
Add: Impairment loss on goodwill
Adjusted EBITDA
Reconciliation of selling, general and administrative expenses to adjusted
SG&A
Selling, general and administrative expenses
Less: share-based compensation expense
Adjusted SG&A
Weighted average shares used in calculating earnings per ordinary share
Basic
Diluted
Adjusted net earnings per share attributable to ordinary shareholders
Basic
Diluted
103
2018
RMB
Year Ended August 31,
2019
RMB
RMB
2020
US$
(in thousands, except for share amounts and
per share data)
628,276
6,621
634,897
976,991
23,284
1,000,275
1,221,717
41,447
1,263,164
178,421
6,053
184,474
272,162
29,061
6,621
—
—
307,844
248,903
29,061
6,621
(1,549)
—
—
283,036
246,969
29,061
6,621
(1,549)
—
—
281,102
248,903
27,297
67,382
85,879
29,061
4,868
—
—
408,796
300,526
51,664
23,284
—
—
375,474
252,758
51,664
23,284
(5,123)
—
—
322,583
241,099
51,664
23,284
(5,123)
—
—
310,924
252,758
24,254
80,580
130,819
51,664
—
—
—
491,567
307,729
(10,631)
41,447
12,772
68,723
420,040
164,174
(10,631)
41,447
(8,822)
12,772
68,723
267,663
161,005
(10,631)
41,447
(8,822)
12,772
68,723
264,494
164,174
(159,352)
78,992
197,425
(10,631)
—
12,772
68,723
670,807
44,941
(1,553)
6,053
1,866
10,036
61,343
23,976
(1,553)
6,053
(1,288)
1,866
10,036
39,090
23,513
(1,553)
6,053
(1,288)
1,866
10,036
38,627
23,976
(23,272)
11,536
28,832
(1,553)
—
1,866
10,036
97,965
368,141
29,061
339,080
691,900
51,664
640,236
871,154
(10,631)
881,785
127,224
(1,553)
128,777
122,088,201
122,186,796
122,322,894
122,430,457
120,158,001
120,158,001
120,158,001
120,158,001
2.30
2.30
2.54
2.54
2.20
2.20
0.32
0.32
Table of Contents
Segment information
The following tables set forth the net revenue, cost of revenue and gross profit of our six segments of business by
amount and as a percentage of total segment revenue for the periods indicated:
Revenue
Domestic K-12 School
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Cost of revenue
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Gross profit
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Year Ended August 31,
2018
RMB
2019
RMB
2020
RMB
US$
(in thousands)
1,718,871
2,563,005
3,366,503
491,647
589,599
534,008
399,249
—
—
196,015
(1,090,595)
745,015
650,433
495,024
181,793
69,980
420,760
(1,586,014)
872,857
722,396
373,028
835,927
103,327
458,968
(2,144,786)
127,473
105,499
54,477
122,079
15,090
67,028
(313,226)
(373,391)
(346,868)
(223,397)
—
—
(146,939)
628,276
216,208
187,140
175,852
—
—
49,076
(456,003)
(400,043)
(279,315)
(145,625)
(18,103)
(286,925)
976,991
289,012
250,390
215,709
36,168
51,877
133,835
(502,186)
(421,894)
(272,261)
(588,839)
(38,517)
(321,089)
1,221,717
(73,340)
(61,614)
(39,761)
(85,995)
(5,625)
(46,892)
178,421
370,671
300,502
100,767
247,088
64,810
137,879
54,133
43,886
14,716
36,085
9,465
20,136
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Revenue
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Cost of revenue
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Gross profit
Domestic K-12 Schools
International schools
Bilingual schools
Kindergartens
Overseas Schools (1)
Education Technology
Complementary Education Services
Year Ended August 31,
2020
2019
2018
(as a percentage of segment revenue)
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
—
—
100.0 %
(63.4)%
(63.3)%
(65.0)%
(56.0)%
—
—
(75.0)%
36.6 %
36.7 %
35.0 %
44.0 %
—
—
25.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
(61.9)%
(61.2)%
(61.5)%
(56.4)%
(80.1)%
(25.9)%
(68.2)%
38.1 %
38.8 %
38.5 %
43.6 %
19.9 %
74.1 %
31.8 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
(63.7)%
(57.5)%
(58.4)%
(73.0)%
(70.4)%
(37.3)%
(70.0)%
36.3 %
42.5 %
41.6 %
27.0 %
29.6 %
62.7 %
30.0 %
(1) We acquired two overseas schools in the 2020 fiscal year, including St. Michael’s School and BIC.
Year ended August 31, 2019 compared to year ended August 31, 2020
Revenue. Our revenue increased by 31.3% from RMB2,563.0 million in the 2019 fiscal year to RMB3,366.5
million (US$491.6 million) in the 2020 fiscal year, primarily due to (1) an increase in the total number of students enrolled
at our domestic K-12 schools to 48,613 in the 2020 fiscal year from 44,224 in the 2019 fiscal year and (2) revenue
contribution from acquired overseas schools.
· Domestic K-12 schools.
International schools. Our revenue from international schools increased by 17.2% from RMB745.0 million
in the 2019 fiscal year to RMB872.9 million (US$127.5 million) in the 2020 fiscal year, primarily due to an
increase in the total number of students enrolled at our international schools to 10,584 in the 2020 fiscal year
from 9,350 in the 2019 fiscal year.
Bilingual schools. Our revenue from bilingual schools increased by 11.1% from RMB650.4 million in the
2019 fiscal year to RMB722.4 million (US$105.5 million) in the 2020 fiscal year, primarily due to an
increase in the total number of students enrolled at our bilingual schools to 20,189 in the 2020 fiscal year
from 18,132 in the 2019 fiscal year.
Kindergartens. Our revenue from kindergartens decreased by 24.6% from RMB495.0 million in the 2019
fiscal year to RMB373.0 million (US$54.5 million) in the 2020 fiscal year, primarily due to temporary
shutdowns of our kindergartens during the COVID-19 pandemic. The average tuition and fees decreased
from RMB30,424 in the 2019 fiscal year to RMB20,910 in the 2020 fiscal year, primarily due to the
temporary shutdowns during the COVID-19 pandemic.
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● Overseas schools. Our revenue from overseas schools increased by 359.9% from RMB181.8 million in the
2019 fiscal year to RMB835.9 million (US$122.1 million) in the 2020 fiscal year, primarily due to revenue
contribution from acquired overseas schools. We acquired CATS in July 2019 and St. Michael’s School and
BIC in September 2019. For the 2019 and 2020 fiscal years, overseas schools had an average number of
students of 2,514 and 3,212 and an average tuition and fees of RMB239,486 and RMB207,643, respectively.
● Education technology. Our revenue from education technology services increased by 47.7% from RMB70.0
million in the 2019 fiscal year to RMB103.3 million (US$15.1 million) in the 2020 fiscal year, primarily due
to revenue contribution from our acquired education technology services in the 2019 and 2020 fiscal years.
● Complementary education services. Our revenue from complementary education services increased by 9.1%
from RMB420.8 million in the 2019 fiscal year to RMB459.0 million (US$67.0 million) in the 2020 fiscal
year, primarily due to (1) our swift response to the COVID-19 pandemic by launching new products and
services that are less affected by the pandemic in the summer of 2020 and (2) revenue contribution from our
acquired complementary education services.
Cost of revenue. Our cost of revenue increased by 35.2% from RMB1,586.0 million in the 2019 fiscal year to
RMB2,144.8 million (US$313.2 million) in the 2020 fiscal year, primarily due to an increase in the number of teachers
and educational staff needed to support the expansion of our school network and the incremental cost from overseas
schools. We added five kindergartens to our school network and acquired two overseas schools in the 2020 fiscal year. The
average number of our teachers and instructors increased by 13.5% from 5,602 in the 2019 fiscal year to 6,358 in the 2020
fiscal year.
· Domestic K-12 schools.
International schools. Our cost of revenue incurred by international schools increased by 10.1% from
RMB456.0 million in the 2019 fiscal year to RMB502.2 million (US$73.3 million) in the 2020 fiscal year,
primarily due to (1) the cost from Sannew Education, which we acquired in May 2019, and (2) an increase in
the number of teachers and educational staff needed to support the ramp-up of schools.
Bilingual schools. Our cost of revenue incurred by bilingual schools increased by 5.5% from RMB400.0
million in the 2019 fiscal year to RMB421.9 million (US$61.6 million) in the 2020 fiscal year, primarily due
to an increase in the number of teachers and educational staff needed to support the ramp-up of schools.
Kindergartens. Our cost of revenue incurred by kindergartens decreased by 2.5% from RMB279.3 million in
the 2019 fiscal year to RMB272.3 million (US$39.8 million) in the 2020 fiscal year, primarily due to
temporary shutdowns of our kindergartens during the COVID-19 pandemic, partially offset by an increase in
the number of teachers and educational staff needed to support the ramp-up of kindergartens. We added five
kindergartens to our school network during the 2020 fiscal year.
● Overseas schools. Our costs of revenue incurred by our overseas schools increased by 304.4% from
RMB145.6 million in the 2019 fiscal year to RMB588.8 million (US$86.0 million) in the 2020 fiscal year,
primarily due to increased expenses from acquired overseas schools. We acquired CATS in July 2019 and
St. Michael’s School and BIC in September 2019.
● Education technology. Our cost of revenue from education technology services increased by 112.8% from
RMB18.1 million in the 2019 fiscal year to RMB38.5 million (US$5.6 million) in the 2020 fiscal year,
primarily due to increased expenses from our acquired education technology services in the 2019 and 2020
fiscal years.
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● Complementary education services. Our cost of revenue incurred by complementary education services
increased from RMB287.0 million in the 2019 fiscal year to RMB321.1 million (US$46.9 million) in the
2020 fiscal year, primarily due to the growth of our complementary education services in the 2020 fiscal
year.
Gross profit. As a result of the foregoing, our gross profit increased by 25.0% from RMB977.0 million in the
2019 fiscal year to RMB1,221.7 million (US$178.4 million) in the 2020 fiscal year. Our gross margin decreased slightly
from 38.1% in the 2019 fiscal year to 36.3% in the 2020 fiscal year, primarily due to the impact from the COVID-19
pandemic. Since the beginning of the 2016 fiscal year, we have implemented various initiatives to improve operating
efficiency and profitability, including budget control, improvement of teacher productivity and allocation of experienced
teachers from mature schools to newer schools across our school network.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased by
25.9% from RMB691.9 million in the 2019 fiscal year to RMB871.2 million (US$127.2 million) in the 2020 fiscal year.
Our selling, general and administrative expenses as a percentage of our revenue decreased from 27.0% in the 2019 fiscal
year to 25.9% in the 2020 fiscal year. The increase in selling, general and administrative expenses was primarily due to the
increase in the compensation and benefits incurred from additional general and administrative staff members, as well as
the incremental selling, general and administrative expenses incurred from the acquired businesses.
Operating income. As a result of the foregoing, we experienced an operating gain of RMB300.5 million in the
2019 fiscal year, and an operating gain of RMB307.7 million (US$44.9 million) in the 2020 fiscal year.
Interest income/expense, net. We recorded a net interest expense of RMB159.4 million (US$23.3 million) in the
2020 fiscal year as compared to a net interest income of RMB24.3 million in the 2019 fiscal year, primarily due to the
increased interest expense as a result of senior note issuance.
Income tax expense. Our income tax expense was RMB79.0 million (US$11.5 million) in the 2020 fiscal year.
Our effective tax rate increased from 24.2% in the 2019 fiscal year to 32.4% in the 2020 fiscal year, primarily due to the
increase of undeductible expenses and impairment loss on operating lease right-of-use assets and goodwill.
Income for the year. As a result of the foregoing, we experienced a net gain of RMB252.8 million for the 2019
fiscal year and a net gain of RMB164.2 million (US$24.0 million) for the 2020 fiscal year.
Adjusted net income. We recorded an adjusted net income of RMB267.7 million (US$39.1 million) for the 2020
fiscal year, compared to an adjusted net income of RMB322.6 million for the 2019 fiscal year. See “—Non-GAAP
measures.”
Year ended August 31, 2018 compared to year ended August 31, 2019
Revenue. Our revenue increased by 49.1% from RMB1,718.9 million in the 2018 fiscal year to RMB2,563.0
million in the 2019 fiscal year, primarily due to a 27.4% increase in the average total number of students from 36,679, to
46,738, a 4.2% increase in the average tuition and fees for all of our domestic K-12 schools from RMB42,108 to
RMB43,891, in part driven by the contribution of the newly-acquired overseas schools during the same periods. Our
revenue from complementary education services also increased significantly from RMB196.1 million in the 2018 fiscal
year to RMB420.8 million in the 2019 fiscal year, primarily due to revenue contribution from our acquired complementary
education services, including Can-achieve, FGE and Hangzhou Impression.
● Domestic K-12 schools.
International schools. Our revenue from international schools increased by 26.4% from RMB589.6 million
in the 2018 fiscal year to RMB745.0 million in the 2019 fiscal year, primarily due to a 26.9% increase in the
average number of students from 7,366 to 9,350 and a 4.4% increase in the average tuition and fees from
RMB80,048 to RMB83,555 during the same period. Revenue contribution from Sannew Education was
RMB15.5 million for the 2019 fiscal year.
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Bilingual schools. Our revenue from bilingual schools increased by 21.8% from RMB534.0 million in the
2018 fiscal year to RMB650.4 million in the 2019 fiscal year, primarily due to a 16.1% increase in the
average number of students from 15,620 to 18,132 and a 4.9% increase in the average tuition and fees from
RMB34,187 to RMB35,872 during the same period.
Kindergartens. Our revenue from kindergartens increased by 24.0% from RMB399.2 million in the 2018
fiscal year to RMB495.0 million in the 2019 fiscal year, primarily due to a 22.3% increase in the average
number of students from 13,693 to 16,742. Revenue contribution from Xinqiao and Qiqiaoban kindergartens
was RMB52.9 million for the 2019 fiscal year. The average tuition and fees decreased from RMB30,736 in
the 2018 fiscal year to RMB30,424 in the 2019 fiscal year, primarily due to the lower average tuition and
fees at our newly-added kindergartens.
● Overseas schools. We recorded revenue from overseas schools of RMB181.8 million in the 2019 fiscal year,
accounted for 7.1% of the total revenues. For the 2019 fiscal year, overseas schools had an average number
of students of 2,514 and an average tuition and fees of RMB239,486.
● Education technology. Our revenue from education technology services was RMB70.0 million in the 2019
fiscal year, contributed primarily by our acquired education technology service, Chengdu Yinzhe.
● Complementary education services. Our revenue from complementary education services increased by
114.7% from RMB196.1 million in the 2018 fiscal year to RMB420.8 million the 2019 fiscal year, primarily
due to the revenue contribution from acquired businesses including Can-achieve, FGE and Hangzhou
Impression of RMB215.0 million .
Cost of revenue. Our cost of revenue increased by 45.4% from RMB1,090.6 million in the 2018 fiscal year to
RMB 1,586.0 million in the 2019 fiscal year, primarily due to an increase in staff costs from RMB753.7 million to
RMB979.6 million during the same period as a result of an increase in the number of teachers and educational staff
needed to support the expansion of our school network and the ramp-up of recently-opened or acquired schools. We
opened three kindergartens in the 2019 fiscal year. We also added eight kindergartens to our school network and acquired
one international school and six overseas schools in the 2019 fiscal year. The average number of our teachers and
instructors increased by 30.4% from 4,297 in the 2018 fiscal year to 5,602 in the 2019 fiscal year.
● Domestic K-12 schools.
International schools. Our cost of revenue incurred by international schools increased by 22.1% from
RMB373.4 million in the 2018 fiscal year to RMB456.0 million in the 2019 fiscal year, primarily due to a
19.1% increase in staff costs from RMB286.0 million to RMB340.6 million as a result of an increase in the
number of teachers and educational staff needed to support the expansion of our school network and the
ramp-up of schools. We acquired one international schools during the 2019 fiscal year.
Bilingual schools. Our cost of revenue incurred by bilingual schools increased by 15.3% from RMB346.9
million in the 2018 fiscal year to RMB400.0 million in the 2019 fiscal year, primarily due to a 15.3%
increase in staff costs from RMB242.6 million to RMB279.6 million as a result of an increase in the number
of teachers and educational staff to support the expansion of our school network.
Kindergartens. Our cost of revenue incurred by kindergartens increased by 25.0% from RMB223.4 million
in the 2018 fiscal year to RMB279.3 million in the 2019 fiscal year, primarily due to a 19.4% increase in
staff costs from RMB164.9 million to RMB196.9 million as a result of an increase in the number of teachers
and educational staff to support the expansion of our school network and the ramp-up of recently-opened
schools. We added 11 kindergartens to our school network during the 2019 fiscal year.
● Overseas schools. Our costs of revenue incurred by our overseas schools was RMB145.6 million in the
2019 fiscal year. We acquired six overseas schools during the 2019 fiscal year
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● Education technology. Our cost of revenue from education technology services was RMB18.1 million in the
2019 fiscal year, primarily incurred by our acquired education technology services, Chengdu Yinzhe.
● Complementary education services. Our cost of revenue incurred by complementary education services
increased significantly from RMB146.9 million in the 2018 fiscal year to RMB287.0 million in the 2019
fiscal year, primarily due to the increased expenses from our acquired complementary education services,
including Can-achieve, FGE and Hangzhou Impression.
Gross profit. As a result of the foregoing, our gross profit increased by 55.5% from RMB628.3 million in the
2018 fiscal year to RMB977.0 million in the 2019 fiscal year. Our gross margin increased from 36.6% in the 2018 fiscal
year to 38.1% in the 2019 fiscal year, primarily due to our improved operating efficiency and the increased average tuition
and fees. Since the beginning of the 2016 fiscal year, we have implemented various initiatives to improve operating
efficiency and profitability, including budget control, improvement of teacher productivity and allocation of experienced
teachers from mature schools to newer schools across our school network.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased by
87.9% from RMB368.1 million in the 2018 fiscal year to RMB691.9 million in the 2019 fiscal year. Our selling, general
and administrative expenses as a percentage of our revenue increased from 21.4% in the 2018 fiscal year to 27.0% in the
2019 fiscal year. The increase in selling, general and administrative expenses was primarily due to the increase in the
compensation and benefits incurred from additional general and administrative staff members, equity incentive award-
related expenses to retain talents, the increase in marketing expenses for brand promotion, the costs associated with
acquisitions and other professional services to support the business growth as a listed company as well as the incremental
selling, general and administrative expenses incurred from the acquired businesses.
Operating income. As a result of the foregoing, we experienced an operating gain of RMB272.2 million in the
2018 fiscal year, and an operating gain of RMB300.5 million in the 2019 fiscal year.
Interest income, net. Our net interest income decreased by 11.1% from RMB27.3 million in the 2018 fiscal year
to RMB24.3 million in the 2019 fiscal year, primarily due to the increased interest expense as a result of senior note
issuance.
Income tax expense. Our income tax expense was RMB80.6 million in the 2019 fiscal year, and our effective tax
rate was 24.2%, lower than the statutory rate of 25.0%, primarily due to the utilization of net operating losses carry-
forwards. Our effective tax rate increased from 21.3% in the 2018 fiscal year to 24.2% in the 2019 fiscal year, primarily
due to (1) the increase in the number of schools that began to generate net profits in the 2019 fiscal year, and (2) the
increase of undeductible expenses.
Income for the year. As a result of the foregoing, we experienced a net gain of RMB248.9 million for the 2018
fiscal year and a net gain of RMB252.8 million for the 2019 fiscal year.
Adjusted net income. We recorded an adjusted net income of RMB322.6 million for the 2019 fiscal year,
compared to an adjusted net income of RMB283.0 million for the 2018 fiscal year. See “—Non-GAAP measures.”
B. Liquidity and Capital Resources
Historically, we have financed our operations primarily through cash generated from our operating activities and
proceeds from our financing activities. As of August 31, 2018, 2019 and 2020, we had RMB3,164.1 million, RMB3,265.0
million and RMB4,423.9 million (US$646.1 million), respectively, in cash and cash equivalents and restricted cash.
Approximately 67.4% of our cash and cash equivalents and restricted cash as of August 31, 2020 were held in China. Our
cash primarily consists of cash on hand and interest-bearing financial instruments which are unrestricted as to withdrawal
or use. We intend to finance our future working capital requirements and capital expenditures primarily from cash
generated from operating activities, and to a lesser extent, from debt and equity financing activities.
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Although we combine the results of our affiliated entities and their respective subsidiaries, we do not have direct
access to the cash and cash equivalents or future earnings of our affiliated entities or their respective subsidiaries.
However, a portion of the cash balances of our affiliated entities and their respective subsidiaries will be paid to us
pursuant to our contractual arrangements with our affiliated entities and their respective subsidiaries. For restrictions and
limitations on liquidity and capital resources as a result of our corporate structure, see “—Holding Company Structure.”
We have not encountered any difficulties in meeting our cash obligations to date. When considering our liquidity
position and our future capital resources and needs, we take into account price controls set by local governments that may
affect the tuition and fees we are able to charge to students in our schools, annual enrollment numbers approved for our
schools, the economic benefits we have received from our subsidiaries and affiliated entities attributable to the provision
of services to these entities and the economic benefits we may receive from our subsidiaries and affiliated entities directly
through payments under our exclusive management services and business cooperation agreement. We believe that our
current cash and cash equivalents and anticipated cash flow from operations, will be sufficient to meet our anticipated
cash needs for longer than the next twelve months.
The following table sets forth a condensed summary of our cash flows for the periods indicated.
Net cash generated from operating activities
Net cash (used in)/generated from investing activities
Net cash generated from financing activities
Net increase in cash and cash equivalents, and restricted cash
Cash and cash equivalents, and restricted cash at beginning of the
year
Effect of exchange rate change
Cash and cash equivalents, and restricted cash at end of the year
Operating activities
2018
RMB
Year Ended August 31,
2019
RMB
2020
RMB
US$
(in thousands)
554,216
(472,460)
1,092,604
1,174,360
864,988
(2,256,009)
1,479,533
88,512
491,227
72,567
675,703
1,239,497
71,739
10,598
98,680
181,017
1,896,662
93,059
3,164,081
3,164,081
12,421
3,265,014
3,265,014
(80,574)
4,423,937
476,825
(11,767)
646,075
We generate cash from operating activities primarily from tuition and fees for our schools and fees for our
complementary education services, all of which are typically paid in advance before the respective services are rendered.
Tuition and fees for schools and fees for our complementary education services are initially recorded under deferred
revenue. We recognize such amounts received as revenue proportionately over the relevant period in which the students
attend the applicable programs.
For the 2020 fiscal year, we had net cash generated from operating activities of RMB491.2 million (US$71.7
million). This amount represents our net income of RMB164.2 million (US$24.0 million), adjusted primarily for (1)
depreciation of RMB153.9 million (US$22.5 million), (2) noncash lease expenses of RMB142.5 million (US$20.8
million), (3) impairment loss on goodwill of RMB68.7 million (US$10.0 million), (4) amortization of intangible assets of
RMB41.4 million (US$6.1 million), and (4) changes in working capital. Adjustment for changes in working capital
primarily consisted of (1) an increase of RMB109.5 million (US$16.0 million) in lease liabilities and (2) an increase of
RMB25.2 million (US$3.7 million) in contract liabilities.
For the 2019 fiscal year, we had net cash generated from operating activities of RMB865.0 million. This amount
represents our net income of RMB252.8 million, adjusted primarily for (1) contract liability of RMB293.3 million due to
increased enrollment of students and increase in our average tuitions, (2) depreciation of RMB106.1 million relating
primarily to our school facilities capitalized renovation construction, (3) accrued expenses and other current liabilities of
RMB104.5 million, and (4) share-based compensation of RMB51.7 million.
For the 2018 fiscal year, we had net cash generated from operating activities of RMB554.2 million. This amount
represents our net income of RMB248.9 million, adjusted primarily for (1) deferred revenue of RMB190.6 million due to
increased enrollment of students and increase in our average tuitions, (2) depreciation of RMB78.3 million relating
primarily to our school facilities capitalized renovation construction, (3) accrued expenses and other current liabilities of
RMB50.9 million, and (4) share-based compensation of RMB29.1 million.
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Investing activities
For the 2020 fiscal year, we had net cash generated from investing activities of RMB72.6 million (US$10.6
million), primarily attributable to proceeds from redemption of short-term investments upon maturity of RMB2,390.0
million (US$349.0 million), partially offset by (1) purchase of short-term investments of RMB2,156.6 million (US$314.9
million), (2) additions of property and equipment and intangible assets of RMB 149.8 million (US$21.9 million). For
details on our acquisitions, see “Item 4. Information on the Company—B. Business Overview—Our Expansions and
Investments.”
For the 2019 fiscal year, we had net cash used in investing activities of RMB2,256.0 million, primarily
attributable to (1) acquisition of subsidiaries of RMB1,721.1 million, (2) purchase of short-term investments of
RMB688.4 million, (3) payment for acquisition deposits of RMB338.6 million, and (4) additions of property and
equipment of RMB155.2 million, partially offset by proceeds from redemption of short-term investments upon maturity of
RMB669.1 million.
For the 2018 fiscal year, we had net cash used in investing activities of RMB472.5 million, primarily attributable
to (1) purchase of short-term investments of RMB1,897.0 million, (2) purchase of long-term investments of RMB190.9
million, (3) acquisition of subsidiaries of RMB179.6 million, and (4) additions of property and equipment of RMB117.6
million, partially offset by proceeds from redemption of short-term investments upon maturity of RMB1,922.6 million.
Financing activities
For the 2020 fiscal year, we had net cash generated from financing activities of RMB675.7 million (US$98.7
million), representing proceeds from bank loan of RMB1,016.2 million (US$148.4 million), partially offset by (1)
dividend payment to shareholders of RMB184.2 million (US$26.9 million), (2) repurchase of ordinary shares of RMB56.1
million (US$8.2 million) and (3) repayment of bank loans of RMB50.0 million (US$7.3 million).
For the 2019 fiscal year, we had net cash generated from financing activities of RMB1,479.5 million,
representing (1) proceeds from the issuance of senior notes in July 2019 of RMB2,069.2 million, and (2) proceeds from
bank borrowings of RMB50.0 million, partially offset by repurchase of ordinary shares of RMB417.1 million.
For the 2018 fiscal year, we had net cash from generated financing activities of RMB1,092.6 million, primarily
due to (1) net proceeds from our follow-on offering (net of offering cost paid RMB6.0 million) of RMB1,151.7 million,
and (2) proceeds from bank borrowings of RMB49.8 million, partially offset by repurchase of ordinary shares of
RMB108.9 million.
For the translations of our net proceeds from our initial public offering and follow-on offering as well as proceeds
from issuance of senior notes, we used the foreign exchange rates on the dates of closing of the initial public offering,
follow-on offering and issuance of senior notes, respectively.
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Capital Expenditures
We incurred capital expenditures of RMB117.6 million, RMB155.2 million and RMB149.8 million (US$21.9
million) in the 2018, 2019 and 2020 fiscal years, respectively, primarily in connection with the construction, maintenance
and renovation of school facilities and purchase of educational equipment. We intend to fund our future capital
expenditures with our existing cash balance, proceeds from our offering and other financing alternatives. We will continue
to incur capital expenditures to support the growth of our business.
Holding Company Structure
We are a holding company with no material operations of our own. We conduct our operations primarily through
our subsidiaries and affiliated entities in China, the United Kingdom, the United States and Canada. As a result, our ability
to pay dividends depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or any newly formed
subsidiaries incur any debt in the future, the instruments governing their debt may restrict their ability to pay dividends to
us. Our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and affiliated entities
is required to set aside at least 10.0% of its after-tax profits each year, if any, to fund a statutory surplus reserve until such
reserve reaches 50.0% of its registered capital. In addition, each of our PRC subsidiaries may allocate a portion of its
after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its
discretion. Each of our affiliated entities may allocate a portion of its after-tax profits based on PRC accounting standards
to a discretionary surplus fund at its discretion. Although the statutory surplus reserves can be used to increase the
registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds
are not distributable as cash dividends except in the event of liquidation. Furthermore, at the end of each fiscal year, each
of our schools that are private school in China is required to allocate a certain amount to its development fund for the
construction or maintenance of the school properties or purchase or upgrade of school facilities. In particular, our schools
that require reasonable returns must allocate no less than 25.0% of their annual net income, and our schools that do not
require reasonable returns must allocate no less than 25.0% of their annual increase in the net assets of the school for such
purposes. For the 2018, 2019 and 2020 fiscal years, our PRC subsidiaries and affiliated entities made apportions of nil, nil
and RMB0.6 million (US$0.1 million) to the statutory surplus reserve fund, and our schools made no apportions to the
development fund. Our PRC subsidiaries have not historically paid any dividends to our offshore entities until they
generate accumulated profits and meet the requirements for statutory reserve funds.
The following table sets forth the respective revenue contributions of (1) our affiliated entities and (2) our
subsidiaries for the periods indicated as a percentage of total revenues:
2018
% of
total
revenues
RMB
As of August 31,
2019
% of
total
revenues
RMB
(in thousands, except percentages)
RMB
2020
US$
% of
total
revenues
Our affiliated entities
Our subsidiaries
Total revenues
1,621,872
94.4 % 2,102,396
96,999
1,718,871
5.6 %
460,609
100.0 % 2,563,005
82.0 % 2,130,124 311,085
18.0 % 1,236,379
100.0 % 3,366,503
180,562
491,647
63.3 %
36.7 %
100.0 %
The following table sets forth the respective asset contributions of (1) our affiliated entities and (2) our
subsidiaries as of the date indicated as a percentage of total assets:
2018
As of August 31,
2019
RMB
% of total
assets
RMB
% of total
assets
RMB
(in thousands, except percentages)
2020
US$
% of total
assets
Our affiliated entities
Our subsidiaries
Total assets
1,690,615
2,975,866
4,666,481
36.2 % 2,405,769
63.8 % 5,381,868
100.0 % 7,787,637
4,151,628
30.9 %
6,671,681
69.1 %
100.0 % 10,823,309
606,307
974,336
1,580,643
38.4 %
61.6 %
100.0 %
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C. Research and Development, Patents and Licenses, etc.
See “Item 4. Information on the Company—B. Business Overview—Research and Curriculum Development.”
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands,
commitments or events for the 2020 fiscal year that are reasonably likely to have a material adverse effect on our net
revenue, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not
necessarily indicative of future operating results or financial condition.
E. Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of
any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and
classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not
have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or
market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and
development services with us.
We do not currently have any outstanding off-balance sheet arrangements or commitments. We have no plans to
enter into transactions involving, or otherwise form relationships with, unconsolidated entities or financial partnerships
established for the purpose of facilitating off-balance sheet arrangements or commitments.
F. Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations as of August 31, 2020.
Payment Due by Period
Total
Less than
one year
RMB
US$
RMB
One to
three
years
RMB
Three to
five years
RMB
More than
five years
RMB
(in thousands)
Operating lease payment
Senior notes
Short-term loans
Long-term borrowing
2,799,128 408,787 211,907
2,348,497
924,475
420,186
342,977
135,011
61,364
152,274
924,475
11,638
385,714 344,372 1,857,135
—
—
21,809
—
—
351,518
2,196,223
—
35,221
We lease certain school and office premises under non-cancellable operating leases that expire at various dates.
We incurred rental expenses under operating leases of RMB28.1 million, RMB107.9 million and RMB272.0 million
(US$39.7 million) in the 2018, 2019 and 2020 fiscal years, respectively.
We also have certain capital commitments that primarily related to commitments for construction of schools and
investment in an equity method investment. Total capital commitments contracted but not yet reflected in the consolidated
financial statement was RMB246.5 million (US$36.0 million) as of August 31, 2020. All of these capital commitments
will be fulfilled in the future according to the construction progress and the investment payment schedule.
In July 2019, we issued senior notes in the aggregate principal amount of US$300.0 million, with interests of
7.45% per annum and maturing on July 31, 2022.
From time to time, we take out loans with commercial banks to provide for our working capital for daily
operation.
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G. Safe Harbor on Forward-Looking Statements
This annual report contains forward-looking statements that reflect our current expectations and projections of
future events. You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,”
“anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “potential,” “continue” or other similar
expressions. We have based these forward-looking statements largely on our current expectations and projections of future
events that we believe may affect our financial condition, results of operations, business strategy and financial needs.
These forward-looking statements include, but are not limited to, statements about:
● our goals and strategies;
● growth of the private education market in China;
● our expectations regarding demand for our services;
● our future business development, results of operations and financial condition;
● trends and competition in the private education industry in China;
● relevant government policies and regulations governing our corporate structure, business and industry;
● our use of proceeds from the offering;
● general economic and business condition in China and elsewhere; and
● assumptions underlying or related to any of the foregoing.
You should read this annual report and the documents that we refer to in this annual report and have filed as
exhibits to the registration statement, of which this annual report is a part, completely and with the understanding that our
actual future results may be materially different from and worse than what we expect. Moreover, new risk factors and
uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and
uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We
qualify all of our forward-looking statements by these cautionary statements.
This annual report also contains certain data and information that we obtained from various government and
private publications, including the Frost & Sullivan report. Statistical data in these publications also include projections
based on a number of assumptions. The private education industry in China may not grow at the rate projected by market
data, or at all. Failure of this market to grow at the projected rate may have a material adverse effect on our business and
the market price of our ADSs. In addition, due to the rapidly evolving nature of the private education industry, projections
or estimates about our business and financial prospects involve significant risks and uncertainties. Furthermore, if any one
or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the
projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this annual report relate only to events or information as of the date on
which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or
revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after
the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual
report and the documents that we refer to in this annual report and have filed as exhibits to the registration statement, of
which this annual report is a part, completely and with the understanding that our actual future results may be materially
different from what we expect.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Executive Officers
The following table sets forth information regarding our executive officers and directors as of the date of this
annual report.
Directors and Executive Officers
Huiyan Yang
Junli He
Shuting Zhou
Peter Andrew Schloss
Jun Zhao
Ronald J. Packard
Wanmei Li
Zi Chen
Dongmei Li
Jinsheng Cheng
Age
39
46
36
60
58
57
46
38
52
57
Position/Title
Chairperson of the Board of Director
Director and Executive Vice Chairman
Director
Director
Director
Director
Co-Chief Executive Officer
Co-Chief Executive Officer
Chief Financial Officer
Vice President
Huiyan Yang is a co-founder of certain of our schools and has served as a director and the chairperson of Bright
Scholar Holdings since our inception. Ms. Yang joined Country Garden Holdings Company Limited, a related party,
which is a HKSE-listed Chinese residential property developer, in 2005, as the manager of its procurement department.
Ms. Yang has served as a director of Country Garden since December 2006, its vice chairperson since March 2012, and its
co-chairperson since December 2018. Ms. Yang graduated from Ohio State University with a bachelor degree in
marketing and logistics. Ms. Yang received her middle school education from Guangdong Country Garden School. She
received the “China Charity Award Special Contribution Award” in 2008.
Junli He has served as the executive vice chairman of Bright Scholar Holdings since February 2019 and as a
director of our company since October 2015. Prior to January 2019, Mr. He was the chief executive officer of our
company since October 2015. Before joining us, Mr. He was a managing director of TStone Fund from June 2012 to
June 2015. He had served as the chief financial officer, chief executive officer and a director of Noah Education
Holdings Ltd., a former NYSE-listed private education services provider in China, from July 2009 to December 2011.
Mr. He was a portfolio manager at Morgan Stanley Global Wealth Management from June 2008 to June 2009 and had
served as a vice president at Bear Stearns from June 2006 to May 2008. Mr. He obtained a bachelor in chemistry science
from Peking University and an MBA with Honors from the University of Chicago, Booth School of Business. Mr. He is
also a CFA charter holder.
Shuting Zhou became a director of Bright Scholar Holdings in May 2017. Ms. Zhou has served as the general
manager of new business department finance branch at Country Garden Holdings Company Limited since
November 2019. Ms. Zhou has been a deputy financial controller of Guangdong Country Garden Property Management
Co., Ltd., a subsidiary of Country Garden Holdings Company Limited, since May 2016. Ms. Zhou held various
managerial positions at Guangdong Country Garden Property Management Co., Ltd. from February 2009 to April 2016.
From March 2007 to January 2009, Ms. Zhou served as an accounting manager at Gaoyao Biyi Property Development
Co., Ltd. and Shaoguan Country Garden Property Development Co., Ltd., both of which are subsidiaries of Country
Garden Holdings Company Limited. Ms. Zhou obtained a bachelor degree in financial management from Guangdong
University of Finance & Economics.
Peter Andrew Schloss became a director of Bright Scholar Holdings in May 2017. Mr. Schloss has served as the
managing partner and chief executive officer of CastleHill Partners since November 2015. Mr. Schloss is also a director
and the audit committee chairman of YY, Inc., an interactive social platform listed on the NASDAQ Stock Market, since
2012. Mr. Schloss was a director and the audit committee chairman of Giant Interactive Group Inc., a China-based online
game developer and operator, from 2007 to 2015, and a partner at Phoenix Media Fund L.P., a private equity fund
established by Phoenix Television Group, from 2012 to May 2016. From 2009 to 2012, Mr. Schloss served as the founder
and chief executive officer of Allied Pacific Sports Network Limited, a leading over-the-top provider of live and on-
demand sports in Asia. Prior to joining Allied Pacific Sports Network Limited, Mr. Schloss worked at TOM Online Inc.,
serving as the chief financial officer from 2003 to 2005, as an executive director from 2004 to 2007 and as the chief legal
officer from 2005 to 2007. Mr. Schloss obtained a bachelor degree in political science and a juris doctor degree from
Tulane University.
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Jun Zhao became a director of Bright Scholar Holdings in May 2017. Mr. Zhao has served as the chairman of
Beijing Fellow Partners Investment Management Ltd. since October 2014 and an independent director of China
Merchants Bank Co., Ltd., a company listed on Shanghai Stock Exchange and The Stock Exchange of Hong Kong
Limited, since January 2015. Mr. Zhao served as a managing partner at DT Capital Partners from July 2005 to
September 2014. From May 2000 to July 2005, he served as a managing director of ChinaVest, Ltd. Mr. Zhao obtained a
bachelor degree in shipbuilding engineering from Harbin Engineering University, a master degree in ocean engineering
from Shanghai Jiao Tong University, a doctor degree in civil engineering from University of Houston and a MBA from
Yale University.
Ronald J. Packard became a director of Bright Scholar Holdings in May 2018. Mr. Packard is the CEO and
Founder of Pansophic Learning, a global technology based education company. He was previously the long-time CEO and
founder of K12 Inc. Prior to K12 Inc., Mr. Packard was the Vice President of Knowledge Universe and CEO of
Knowledge Schools, one of the nation’s largest early childhood education companies. Mr. Packard also previously worked
for McKinsey & Company and for Goldman Sachs and earned the Chartered Financial Analyst (CFA) designation in
1992. Mr. Packard holds a B.A. degree from the University of California at Berkeley and an M.B.A. from the University
of Chicago, both with honors.
Wanmei Li has served as the co-chief executive officer of Bright Scholar Holdings since May 2020. Ms. Li joined
the Company in January 2018 as a vice president and general manager of business development center. She is also a
special assistant to co-chairs of Country Garden Holdings Co., Ltd. Prior to that, she was the general manager of
Guangzhou Country Garden Business Management Co., Ltd. from 2013 to 2017, and executive deputy general manager of
Country Garden Marketing Center from 2005 to 2012. From 1998 to 2004, Ms. Li was the general manager of Country
Garden Hong Kong Exhibition Sales Center. Ms. Li holds a bachelor’s degree in international economics and trade from
Guangdong University of Finance and Economics.
Zi Chen has served as the co-chief executive officer of Bright Scholar Holdings since May 2020. Mr. Chen joined
the Company in June 2018 as general manager of Elan. Prior to that, he was an assistant to the general manager in the new
business department of the Country Garden Group from November 2016 to June 2018. Prior to that, Mr. Chen was the
director of strategy in China Resources SZITIC Trust Co., Ltd from April 2012 to March 2016. He was a consultant in
strategy for Roland Berger from April 2011 to April 2012, and Cambridge Group for November 2010 to April 2011. Prior
to that, he was an assistant vice president in HSBC Broking Services (U.S.) from January 2007 to January 2010. Mr. Chen
holds a bachelor’s degree in information management and system from Fudan University and a master’s degree in
management science and engineering from Stanford University.
Dongmei Li has served as the chief financial officer of Bright Scholar Holdings since February 2017. Prior to
joining us, Ms. Li served as financial controller, vice president of finance and chief financial officer of Noah Education
Holdings Ltd. from December 2007. Previously, Ms. Li served as the financial controller and the head of investor relations
of China GrenTech, a NASDAQ-listed company, from April 2007 to November 2007. From February 1999 to
March 2007, Ms. Li served as a senior finance manager at Conair Corp., a Fortune 500 company. Ms. Li obtained a
bachelor degree in business administration and tourism management from the Beijing Second Foreign Language Institute,
and a master degree in business administration from the Arizona State University, Thunderbird School of Global
Management. She is a certified master financial manager from the American Academy of Financial Management and is
also a member of the Institute of Management Accountants.
Jinsheng Cheng has served as a vice president of Bright Scholar Holdings since November 2015 and the
principal of Guangdong Country Garden School since January 2017. Mr. Cheng joined Guangdong Country Garden
School since its establishment in 1994. He served as the principal of Guangdong Country Garden School from July 2003
to May 2005 and the principal of Phoenix City Bilingual School from May 2005 to January 2017. Mr. Cheng has served as
the vice president of BGY Education Investment, our affiliated entity, since September 2016 and he has over 30 years’
education experience. Mr. Cheng obtained a bachelor degree in science from Anhui Normal University and completed
master course in Beijing Normal University.
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B. Compensation
Compensation of Directors and Executive Officers
For the fiscal year ended August 31, 2020, we paid an aggregate of approximately RMB20.8 million (US$3.0
million) in cash to our officers and directors. Other than the statutory benefits that we are required by the PRC law to
contribute for each employee, including pension insurance, we have not set aside or accrued any amount to provide
pension, retirement or other similar benefits to our executive officers and directors.
Share Incentive Plan
In February 2017, our board of directors approved the 2017 Share Incentive Plan (the “2017 Plan”) to attract and
retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the
success of our business. Under the 2017 Plan, the maximum aggregate number of shares which may be issued pursuant to
all awards under the 2017 Plan shall be 5,263,158 ordinary shares, which constitutes 5.0% of the total outstanding shares
of our company on an as-converted basis as of the date of adoption of the 2017 Plan, after giving effect to a ten-for-one
share split effected on April 26, 2017. In December 2017, we granted share options to purchase a total of 845,000 Class A
ordinary shares to certain school principals and management team members at an exercise price of US$8.74 per share with
vesting period varying from three to five years. In September 2018, we granted options to purchase 167,138 Class A
ordinary shares to certain members of the senior management team of Can-achieve pursuant to the 2017 Plan at an
exercise price of US$8.74 per share with vesting periods ending on December 31, 2018, 2019 and 2020. In January 2019,
we granted options to purchase 2,545,000 Class A ordinary shares to a certain member of our senior management team
pursuant to the 2017 plan at an exercise price of US$8.74 per share.
In the 2018 fiscal year, our share-based payment expenses were RMB29.1 million in connection with the share
options granted to employees. In the 2019 fiscal year, our share-based payment expenses were RMB51.7 million in
connection with the share options granted to employees. In the 2020 fiscal year, we recorded share-based payment
expenses of negative RMB10.6 million (negative US$1.6 million) primarily due to the reverse of share-based payment
expenses in previous years in connection with the cancellation of share options due to certain employees’ failure to meet
the performance conditions under their share options.
The following table summarizes, as of December 15, 2020, the outstanding options we have granted to our
directors, officers and other individuals under the 2017 Plan:
Name
Dongmei Li
Jinsheng Cheng
Senior management members of Can-achieve
Other individuals as a group
Exercise Price
Options
(US$/Share)
Date of
Grant
Date of
Expiration
* US$
* US$
93,503 US$
525,607 US$
8.74 December 15, 2017 December 14, 2027
8.74 December 15, 2017 December 14, 2027
December 14, 2027
8.74
8.74 December 15, 2017 December 14, 2027
September 1, 2018
*
Less than 1% of our total outstanding shares on an as-converted basis or voting power assuming full exercise of the
options.
The following table sets forth the number of options that have been granted, exercised, and forfeited or cancelled
as of December 15, 2020.
Granted
Exercised
Forfeited/Cancelled
Outstanding
Options
3,557,138
14,457
2,724,648
818,033
The following paragraphs describe the principal terms of the 2017 Plan.
Types of awards. The 2017 Plan permits the awards of options, restricted shares or restricted share units.
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Plan administration. Our board of directors or a committee of one or more members of the board of directors
will administer the 2017 Plan. The committee or the full board of directors, as applicable, will determine the participants
to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each
award grant.
Award agreement. Awards granted under the 2017 Plan are evidenced by an award agreement that sets forth
terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in
the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify,
suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company, and other
individuals, as determined by the plan administrator. However, we may grant options that are intended to qualify as
incentive share options only to our employees and employees of our parent companies and subsidiaries.
Vesting schedule. In general, the plan administrator determines the vesting schedule, which is specified in the
relevant award agreement.
Exercise of options. The plan administrator determines the exercise price for each award, which is stated in the
award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator
determines at the time of its grant. However, the maximum exercisable term is 10 years from the date of a grant.
Transfer restrictions. Awards may not be transferred in any manner by the recipient except under limited
circumstances, including by will or the laws of descent and distribution, unless otherwise provided by the plan
administrator.
Termination and amendment of the 2017 Plan. Unless terminated earlier, the 2017 Plan has a term of 10 years.
Our board of directors has the authority to amend or terminate the plan. However, no such action may adversely affect in
any material way any awards previously granted without the prior written consent of the recipient.
C. Board Practices
Board of Directors
Our board of directors consists of six directors. A director is not required to hold any shares in our company. A
director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially
interested provided (1) such director, if his interest in such contract or arrangement is material, has declared the nature of
his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically or by way of a
general notice and (2) if such contract or arrangement is a transaction with a related party, such transaction has been
approved by the audit committee. A director may exercise all the powers of the company to borrow money, mortgage its
business, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as
security for any obligation of the company or of any third party. None of our directors has a service contract with us that
provides for benefits upon termination of service.
Committees of the Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nominating and
corporate governance committee and adopted a charter for each of the three committees. Each committee’s members and
functions are described below.
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Audit Committee. Our audit committee consists of Mr. Peter Andrew Schloss, Mr. Jun Zhao and Mr. Ronald J.
Packard, and is chaired by Mr. Schloss. Mr. Schloss, Mr. Zhao and Mr. Packard satisfy the “independence” requirements
of Section 303A of the Corporate Governance Rules of the New York Stock Exchange and meet the independence
standards under Rule 10A-3 under the Exchange Act. We have determined that Mr. Schloss qualifies as an “audit
committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits
of the financial statements of our company. The audit committee is responsible for, among other things:
● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing
services permitted to be performed by the independent registered public accounting firm;
● reviewing with the independent registered public accounting firm any audit problems or difficulties and
management’s response;
● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K
under the Securities Act;
● discussing the annual audited financial statements with management and the independent registered public
accounting firm;
● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in
light of material control deficiencies;
● reviewing and reassessing annually the adequacy of our audit committee charter;
● meeting separately and periodically with management and the independent registered public accounting
firm; and
● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and
effectiveness of our procedures to ensure proper compliance.
Compensation Committee. Our compensation committee consists of Mr. Jun Zhao, Mr. Peter Andrew Schloss
and Ms. Huiyan Yang, and is chaired by Mr. Zhao. Mr. Zhao and Mr. Schloss satisfy the “independence” requirements of
Section 303A of the Corporate Governance Rules of the New York Stock Exchange. The compensation committee assists
the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our
directors and executive officers. Our chief executive officer may not be present at any committee meeting during which
their compensation is deliberated upon. The compensation committee is responsible for, among other things:
● reviewing and approving, or recommending to the board for its approval, the compensation for our chief
executive officer and other executive officers;
● reviewing and recommending to the board for determination with respect to the compensation of our non-
employee directors;
● reviewing periodically and approving any incentive compensation or equity plans, programs or similar
arrangements; and
● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all
factors relevant to that person’s independence from management.
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Nominating and Corporate Governance Committee. Our nominating and corporate governance committee
consists of Mr. Jun Zhao, Mr. Peter Andrew Schloss and Ms. Huiyan Yang, and is chaired by Mr. Zhao. Messrs Zhao and
Schloss satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York
Stock Exchange. The nominating and corporate governance committee assists the board in selecting individuals qualified
to become our directors and in determining the composition of the board and its committees. The nominating and
corporate governance committee is responsible for, among other things:
● recommending nominees to the board for election or re-election to the board, or for appointment to fill any
vacancy on the board;
● reviewing annually with the board the current composition of the board with regards to characteristics such
as independence, age, skills, experience and availability of service to us;
● selecting and recommending to the board the names of directors to serve as members of the audit committee
and the compensation committee, as well as of the nominating and corporate governance committee itself;
● developing and reviewing the corporate governance principles adopted by the board and advising the board
with respect to significant developments in the law and practice of corporate governance and our
compliance with such laws and practices; and
● evaluating the performance and effectiveness of the board as a whole.
Duties of Directors
Under Cayman Islands law, our directors owe to us fiduciary duties, including a duty of loyalty, a duty to act
honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors also have a duty to
exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in
comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our
memorandum and articles of association, as amended and restated from time to time. Our company may have the right to
seek damages if a duty owed by our directors is breached.
Terms of Directors and Officers
Pursuant to the amended and restated memorandum and articles of association, our officers are elected by and
serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time as they
resign or are removed from office by ordinary resolution of our shareholders. A director will be removed from office
automatically if, among other things, the director (1) becomes bankrupt or has a receiving order made against him or her
or suspends payment or compounds with his or her creditors; or (2) dies or becomes of unsound mind.
Employment Agreements
We have entered into employment agreements with our executive officers. Each of our executive officers is
employed for a specified time period, which will be automatically extended for successive one-year terms unless either
party gives the other party a prior written notice to terminate employment. We may terminate the employment for cause, at
any time, without advance notice or remuneration, for certain acts of the executive officer, including conviction or
pleading of guilty to a felony, fraud, misappropriation or embezzlement; negligent or dishonest act to our detriment;
misconduct or failure to perform his or her duty; disability; or death. An executive officer may terminate his or her
employment at any time with a one-month prior written notice if there is a material and substantial reduction in such
executive officer’s existing authority and responsibilities or at any time if the termination is approved by our board of
directors.
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Each executive officer has agreed to hold, both during and after the employment agreement expires, in strict
confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential
information. Each executive officer has also agreed to assign to us all his or her all inventions, improvements, designs,
original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask
works and trade secrets.
D. Employees
We had 7,891 employees in 2018 fiscal year, 10,366 in 2019 fiscal year and 11,499 in 2020 fiscal year. The
majority of our employees are full-time and have signed employment agreements for one year, renewable with
substantially same terms on mutual agreements. In addition to teachers, we also have supporting staff such as security
guards, chefs, electricians and chauffeurs, and educational and administrative staff including teaching assistants,
librarians, medical staff, and employees in sales and marketing, finance and general administration. In the 2018
fiscal year, we began to classify certain nursery staff as teachers, and we retrospectively made the reclassification for the
2016 and 2017 fiscal years. The following table sets forth the average numbers of our employees, categorized by function
for the period indicated.
Teachers and instructors
Managerial staff
Educational and administrative staff
Supporting staff
Total
2018 fiscal 2019 fiscal 2020 fiscal
year
5,602
660
1,629
2,475
10,366
year
4,297
469
1,012
2,113
7,891
year
6,358
1,062
1,403
2,676
11,499
As required by PRC laws and regulations, we participate in various employee social security plans for our
employees that are administered by local PRC governments, including housing, pension, medical insurance and
unemployment insurance. We compensate our employees with basic salaries and performance-based bonuses. None of our
employees is represented by any collective bargaining arrangements. We believe we have maintained good relationship
with our employees.
E. Share Ownership
The following table sets forth information concerning the beneficial ownership of our ordinary shares as of
December 15, 2020 by:
● each of our directors and executive officers; and
● each person known to us to beneficially own more than 5.0% of our ordinary shares.
The calculations in the table below are based on the fact that there are 119,385,274 ordinary shares outstanding,
including 25,695,274 Class A ordinary shares and 93,690,000 Class B ordinary shares outstanding as of December 15,
2020.
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Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the
number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares
that the person has the right to acquire within 60 days, including through the exercise of any option, warrant, or other right
or the conversion of any other security. These shares, however, are not included in the computation of the percentage
ownership of any other person.
Directors and Executive Officers: **
Ms. Huiyan Yang (1)
Mr. Junli He (2)
Ms. Shuting Zhou
Mr. Peter Andrew Schloss
Mr. Ronald J. Packard
Ms. Wanmei Li
Mr. Zi Chen
Mr. Jun Zhao
Ms. Dongmei Li
Mr. Jinsheng Cheng
Directors and executive officers as a group
Principal Shareholders:
Excellence Education Investment Limited (3)
Ultimate Wise Group Limited (4)
Mr. Junli He (5)
Sure Brilliant Global Limited (6)
Serenity Capital LLC (7)
Hillhouse Capital Advisors , Ltd. (8)
Indus Capital Partners, LLC (9)
Ordinary Shares Beneficially Owned
Class A
ordinary
shares
Class B
ordinary
shares
Total ordinary
shares on an
as-converted
basis
% of
aggregate
ordinary
% of
aggregate
voting
shares*** power†***
5,451,559
1,209,934
—
—
*
—
—
—
*
*
6,864,416
87,590,000
6,100,000
—
—
—
—
—
—
—
—
93,690,000
93,041,559
7,309,934
—
—
*
—
—
—
*
*
100,554,416
—
451,559
1,209,934
5,000,000
2,195,075
3,985,797
4,696,558
72,590,000
15,000,000
6,100,000
—
—
—
—
72,590,000
15,451,559
7,309,934
5,000,000
2,195,075
3,985,797
4,696,558
77.93 %
6.12 %
—
—
*
—
—
—
*
*
84.10 %
60.80 %
12.94 %
6.12 %
4.19 %
1.84 %
3.34 %
3.93 %
92.51 %
6.49 %
—
—
*
—
—
—
*
*
99.00 %
76.43 %
15.82 %
6.49 %
0.26 %
0.12 %
0.21 %
0.25 %
†
For each person and group included in this column, percentage of voting power is calculated by dividing the voting
power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary
shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per share and each holder of our
Class B ordinary shares is entitled to 20 votes per share on all matters submitted to them for a vote. Our Class A
ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of our
shareholders, except as may otherwise be required by law. Our Class B ordinary shares are convertible at any time by
the holder thereof into Class A ordinary shares on a one-for-one basis.
*
Less than 1% of our total outstanding share on an as-converted basis or voting power.
** The business address of our directors and executive officers is No. 1, Country Garden Road, Beijiao Town, Shunde
District, Foshan, Guangdong 528300, China.
*** The calculation of percentage of aggregate ordinary shares and aggregate voting power does not take into account the
235,022 Class A ordinary shares issued to The Bank of New York Mellon and reserved for further issuance to
beneficiaries under the 2017 Plan. We have, however, included the 14,457 Class A ordinary shares already issued
upon exercise of options under the 2017 Plan as of December 15, 2020. We have also included Class A ordinary
shares that may be issued for options exercisable within 60 days from the date of this annual report, provided that
these shares are not included in the computation of the percentage ownership or voting power of any other person.
The calculation of percentage of aggregate ordinary shares and aggregate voting power also does not take into
account the 630,268 Class A ordinary shares we repurchased but not cancelled as of December 15, 2020.
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(1) Represents 5,000,000 Class A ordinary shares directly held by Sure Brilliant Global Limited (“Sure Brilliant) wholly
owned by Ms. Huiyan Yang, and 451,559 Class A ordinary shares and 15,000,000 Class B ordinary shares directly
held by Ultimate Wise Group Limited (“Ultimate Wise”) and 72,590,000 Class B Ordinary Shares directly held by
Excellence Education Investment Limited (“Excellence Education”), both of which are wholly owned subsidiaries of
Noble Pride Global Limited (“Noble Pride”). The sole shareholder of Noble Pride is TMF Trust (HK) Limited (“TMF
Trust”), which acts as the trustee for Yeung Family Trust V, in which Ms. Huiyan Yang is a joint settlor and a member
of the two-person investment committee. Sure Brilliant, Noble Pride, Ultimate Wise and Excellence Education are all
British Virgin Islands companies. TMF Trust is incorporated and existing under the laws of Hong Kong, with its
principal business address at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong. Yeung
Family Trust V is an irrevocable discretionary trust established under the laws of Jersey. Ms. Huiyan Yang and
Ms. Meirong Yang, a relative of hers, are the joint settlors and the members of the two-person investment committee
of Yeung Family Trust V. The investment committee retains the sole right to vote the ordinary shares beneficially
owned by Yeung Family Trust V in our company. Ms. Meirong Yang has two votes and Ms. Huiyan Yang has one
vote on the investment committee. In addition, according to an acting-in-concert agreement entered into in
February 2017, Ms. Huiyan Yang agreed to consult and agree with Ms. Meirong Yang when voting and deciding on
material matters in relation to the management of our company. See the Schedule 13D and Schedule 13D/A jointly
filed by Ms. Huiyan Yang, Sure Brilliant, Ultimate Wise, Excellence Education, Noble Pride, TMF Trust and Yeung
Family Trust V on December 31, 2018 and February 19, 2019, respectively, for further details.
(2) Includes 199,934 Class A ordinary shares in the form of ADSs, 4,000,000 Class B ordinary shares and 1,010,000
Class A ordinary shares directly held by Mr. He and 2,100,000 Class B ordinary shares held in an irrevocable
discretionary trust established by Mr. He.
(3) Represents 72,590,000 Class B ordinary shares directly held by Excellence Education, a British Virgin Islands
company with its registered office located at Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town,
Tortola, British Virgin Islands. See also footnote (1) above.
(4) Represents 451,559 Class A ordinary shares in the form of ADSs and 15,000,000 Class B ordinary shares directly
held by Ultimate Wise, a British Virgin Islands company with its registered office located at Trident Chambers,
P.O. Box 146, Road Town, Tortola, British Virgin Islands. See also footnote (1) above.
(5) In his capacity as an individual principal shareholder. See also footnote (2) above.
(6) Represent 5,000,000 Class A ordinary shares in the form of ADSs directly held by Sure Brilliant which is wholly-
owned by Ms. Huiyan Yang. Sure Brilliant is a British Virgin Islands company with its registered address located at
Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, British Virgin Islands. See also footnote
(1) above.
(7) Represents 2,195,075 Class A ordinary shares in the form of ADSs beneficially owned by Serenity Capital LLC as
reported in Form 13F-HR filed by Serenity Capital LLC on November 16, 2020. Serenity Capital LLC is a company
incorporated in Delaware, United States with its business address at Suite 200, 530 Lytton Avenue, Palo Alto,
California 94301.
(8) Represents 3,985,797 Class A ordinary shares in the form of ADSs beneficially owned by Hillhouse Capital
Advisors, Ltd. as reported in Form 13F-HR filed by Hillhouse Capital Advisors, Ltd. on November 16, 2020.
Hillhouse Capital Advisors, Ltd. is a company incorporated in the Cayman Islands with its business address at C/O
DMS House, 20 Genesis Close PO Box 2587, George Town, Grand Cayman, E9 KY1-1103.
(9) Represents 4,696,558 Class A ordinary shares in the form of ADSs beneficially owned by Indus Capital Partners,
LLC as reported in Form 13F-HR filed by Indus Capital Partners, LLC on November 13, 2020. Indus Capital
Partners, LLC is a company incorporated in Delaware, United States with its business address at 888 Seventh
Avenue, 26th Floor, New York, New York 10019.
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On February 8, 2017, Ms. Meirong Yang and Ms. Huiyan Yang, who together beneficially own approximately
92.5% of the aggregate voting power of our company, entered into an acting-in-concert agreement. According to the
acting-in-concert agreement, Ms. Huiyan Yang and Ms. Meirong Yang must consult with each other before voting and
deciding on material matters in relation to the management of our company, including matters subject to approvals by
board or shareholders’ meetings, such as appointment of directors and officers and adoption of key group-level policies. If
no consensus could be reached through consultation, the decision made by Ms. Meirong Yang prevails. Ms. Huiyan Yang
and Ms. Meirong Yang retrospectively confirmed in the acting-in-concert agreement that they have been acting-in-concert
since 2008. The acting-in-concert agreement will continue until (1) such agreement is terminated by the parties thereto or
(2) the disposal of all of either party’s interests in our company and affiliated entities and termination of either party’s
employment or directorship with our company and affiliated entities. In 2018, Ms. Huiyan Yang and Ms. Meirong Yang
further set up Yeung Family Trust V, an irrevocable discretionary trust established under the laws of Jersey with TMF
Trust, a company incorporated and existing under the laws of Hong Kong, acting as its trustee. Ms. Huiyan Yang and
Ms. Meirong Yang are the joint settlors and the members of the two-person investment committee of Yeung Family Trust
V. The investment committee retains the sole right to vote the ordinary shares beneficially owned by Yeung Family Trust
V in our company. Ms. Meirong Yang has two votes and Ms. Huiyan Yang has one vote on the investment committee.
Yeung Family Trust V was established for succession planning purposes.
To our knowledge, as of August 31, 2020, the record holders of our Class A ordinary shares in the United States
include Mr. Junli He and The Bank of New York Mellon, the depositary of our ADS program. The number of beneficial
owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary
shares in the United States.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
B. Related Party Transactions
Contractual Arrangements with Our Affiliated Entities and Their Shareholders
We entered into a series of contractual arrangements with our affiliated entities, including our schools, and
Ms. Meirong Yang, and Mr. Wenjie Yang, the shareholders of our affiliated entities, in January 2017. Such contractual
arrangements enable us to (1) has the power to direct the activities that most significantly affects the economic
performance of the affiliated entities; (2) bear the obligation to absorb losses of our affiliated entities that could potentially
be significant to the affiliated entities or to receive benefits from the affiliated entities that could potentially be significant
to the affiliated entities; and (3) have an exclusive option to purchase all of the equity interests in our affiliated entities
when and to the extent permitted under PRC law. Therefore, we control our affiliated entities, including our schools. For a
description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—
Our Contractual Arrangements.”
All of our newly launched and acquired schools have executed Rights and Obligations Assumption Letters to
enjoy the rights and perform the obligations under the contractual arrangements.
School Operation Agreements with Country Garden
As of August 31, 2020, substantially all of our schools in China, other than those that do not operate on Country
Garden properties, had entered into an operation agreement with Country Garden. Under these agreements, Country
Garden provides the premises and facilities for us to operate these schools, while we are responsible for the operation and
management of these schools. We may also provide preferential student placements and tuition discounts to Country
Garden’s homeowners and employees. We are in the process of arranging the execution of such school operation
agreements with Country Garden for our domestic K-12 schools established after August 31, 2020.
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Trademark Licensing Agreements with Country Garden
As of August 31, 2020, all of our schools in China had entered into a trademark licensing agreement with
Country Garden, pursuant to which Country Garden agreed to grant BGY Education Investment, its subsidiaries and
schools controlled and held by it the right to use certain trademarks, including “Country Garden,” free of charge for a term
expiring in 2028 or 2030.
Transactions with Certain Related Parties
Purchase of services and materials
We purchase services and materials, which include mechanics and electrics engineering services, construction
services, shuttle bus services and furniture, from other entities controlled by Ms. Huiyan Yang, our chairperson, including
Country Garden. In the 2018, 2019 and 2020 fiscal years, we entered into various agreements with certain entities
controlled by Ms. Huiyan Yang or her affiliates, including primarily the following:
● Country Garden Intelligent Services Group Co., Ltd.
● Guangdong Phoenix Holiday International Travel Service Co., Ltd.
● Guangdong Shunde Chuang Xi Bang Sheng Furniture Co., Ltd.
● Foshan Shunde Country Garden Property Development Co., Ltd.
● Zengcheng Crystal Water Plant Co., Ltd.
● Guangdong Shunde Phoenix Optimal Commercial Co., Ltd.
● Guangzhou Country Garden Shuttle Bus Services Limited
● Huidong Country Garden Real Estate Development Co., Ltd.
● Zhaoqing Contemporary Zhumei Furnishing Co., Ltd.
● Dongguan Country Garden Real Estate Development Co., Ltd.
For the 2018, 2019 and 2020 fiscal years, we entered into transactions of an aggregate of approximately
RMB16.8 million, RMB19.4 million and RMB11.2 million (US$1.6 million), respectively, to purchase materials,
construction services and other services from such related parties.
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Advances and loans from and to related parties
The following table presents amounts owed from and to our related parties as of August 31, 2019 and 2020:
Amounts due from related parties
Foshan Shunde Country Garden Property Development Co., Ltd. (1)
Shaoguan Shunhong Real Estate Development Co., Ltd.(5)
Changsha Ningxiang Country Garden Property Development Co., Ltd. (2)
Kaiping Country Garden Property Development Co., Ltd. (3)
Can-Achieve Global Edutour Co., Ltd. (4)
Others (1)
Total
2019
RMB
As of August 31,
2020
RMB
(in thousands)
US$
3,576
—
474
1,590
3,144
1,868
10,652
—
10,000
1,172
1,607
3,915
1,827
18,521
—
1,460
171
235
572
267
2,705
(1) The amounts mainly represent the advance payment for purchasing services and materials or construction services
provided by the entities controlled by Ms. Ms. Huiyan Yang.
(2) The amounts mainly represent the receivables of the enrolment tuition discount provided to the owners of properties
which were subsidized by real estate entities controlled by Ms. Huiyan Yang.
(3) The amounts mainly represent the receivables of providing consulting services on pre-opening schools to Kaiping
Country Garden Property Development Co., Ltd.
(4) The amounts mainly represents the receivables from the entity in which consists of expense was paid on behalf of the
entity controlled by a non-controlling interest holder.
(5) The amounts mainly represents the receivables from the entity in which consists of expense was paid on behalf of the
entity controlled by Ms. Huiyan Yang.
Amounts due to related parties
Laian Country Garden Property Development Co., Ltd.(1)
Changsha Ningxiang Country Garden Property Development Co., Ltd. (1)
Chuzhou Country Garden Property Development Co., Ltd. (1)
Wuhan Country Garden Property Management Co., Ltd. (1)
Guangdong Teng An Mechanics and Electrics Engineering Co., Ltd. (2)
Guangdong Giant Leap Construction Co., Ltd. (2)
Baoding Baigou New Town Honghua Eaton Commerce Co., Ltd. (3)
Shanghai Hanlue Information Technology Center Limited Partnership (6)
Huaihua Zhiyi Network Technology Limited Partnership (4)
Huaihua Yimeng Network Technology Limited Partnership (4)
Huidong Country Garden Real Estate Development Co., Ltd. (5)
Others
Total
126
2019
RMB
As of August 31,
2020
RMB
(in thousand)
US$
11,550
8,732
30,769
3,154
6,515
10,166
3,000
—
18,335
9,167
3,110
5,540
110,038
11,550
—
30,769
3,154
4,076
10,166
6,000
11,573
—
—
3,515
5,760
86,563
1,687
—
4,494
461
595
1,485
876
1,690
—
—
513
841
12,642
Table of Contents
Amounts due to related parties are non-interest bearing, unsecured, and due on demand.
Other non-current liability due to related parties
Huaihua Zhiyi Network Technology Limited Partnership (4)
Huaihua Yimeng Network Technology Limited Partnership (4)
Shanghai Hanlue Information Technology Center Limited Partnership (6)
Total
2019
RMB
As of August 31,
2020
RMB
(in thousand)
US$
14,490
7,246
—
21,736
14,490
7,246
5,107
26,843
2,116
1,058
746
3,920
Other non-current liabilities due to related parties are non-interest bearing and unsecured.
(1) The amounts mainly represent financing funds for maintaining daily operation of schools held by subsidiaries and the
VIEs from other entities controlled by Ms. Huiyan Yang.
(2) The amounts mainly represent construction services provided by other entities controlled by Ms. Huiyan Yang.
(3) The amounts represent the financing funds for maintaining daily operation from Baoding BaiGou, the non-controlling
interest shareholder.
(4) The amounts represent the acquisition payables to Huaihua Zhiyi Network Technology Limited Partnership and
Huaihua Yimeng Network Technology Limited Partnership for the acquisition of Chengdu Yinzhe Group in
fiscal year 2019.
(5) The amount mainly represents the advance payment from Huidong Country Garden Real Estate Development
Co., Ltd., the entities controlled by Ms. Huiyan Yang, as the enrolment tuition discount to the owners of properties.
We utilize facilities and equipment provided by other real-estate subsidiaries controlled by Ms. Huiyan Yang. In
return, we give enrolment priorities to the owners of properties with these affiliated companies when providing its
educational services.
(6) The amounts represent the acquisition payables to Shanghai Hanlue Information Technology Center Limited
Partnership for the acquisition of Linstitute in the fiscal year 2020.
Employment Agreements
See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Employment Agreements.”
Share Incentive Plan
See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.”
C. Interests of Experts and Counsels
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
B. Legal Proceedings
See “Item 4. Information on the Company—B. Business Overview—Legal Proceedings.”
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C. Dividend Policy
On September 18, 2019, we declared a cash dividend of US$0.10 per ordinary share, and on July 23, 2020, we
declared a cash dividend of US$0.12 per ordinary share. We currently have no further plan to declare or pay any dividends
in the near future on our shares or ADSs. We currently intend to retain most, if not all, of our available funds and any
future earnings to operate and expand our business.
Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Under
Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of its profits, realized or unrealized,
or from any reserve set aside from profits which its directors determine is no longer required or out of the share premium
account or any other fund or account that can be authorized for this purpose in accordance with the Companies Act (2020
Revision) of the Cayman Islands, provided that in no circumstances may a dividend be paid if this would result in the
company being unable to pay its debts due in the ordinary course of business. Even if our board of directors decides to pay
dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem
relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our Class A ordinary
shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends
on our Class A ordinary shares, if any, will be paid in U.S. dollars.
We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our Hong
Kong and PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. PRC
regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—Our subsidiaries and affiliated entities in China are subject to
restrictions on making dividends and other payments to us.”
B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the
date of our audited consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our ADSs are listed on the New York Stock Exchange under the symbol “BEDU.” Each ADS represents one
Class A ordinary share (or right to receive one Class A ordinary share) of our ordinary shares.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs have been listed for trading on the New York Stock Exchange under the symbol “BEDU” since
May 18, 2017.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We incorporate by reference into this annual report our amended and restated memorandum of association and
our amended and restated articles of association filed as Exhibit 3.2 to our F-1 registration statement (File No. 333-
217359), as amended, initially filed with the SEC on April 18, 2017.
C. Material Contracts
Material contracts other than in the ordinary course of business are described in Item 4 and Item 7 or elsewhere in
this annual report.
D. Exchange Controls
See “Item 4. Information on the Company—B. Business Overview—Regulations—PRC Laws and Regulations
Relating to Foreign Exchange.”
E. Taxation
The following discussion of material Cayman Islands, PRC and United States federal income tax consequences
of an investment in our ADSs or Class A ordinary shares is based upon laws and relevant interpretations thereof in effect
as of the date of this annual report, all of which are subject to change. This discussion does not deal with all possible tax
consequences relating to an investment in our ADSs or Class A ordinary shares, such as the tax consequences under state,
local and other tax laws.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or
appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be
material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on
instruments executed in, or after execution brought within the jurisdiction of, the Cayman Islands.
The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but
otherwise is not party to any double tax treaties.
There are no exchange control regulations or currency restrictions in the Cayman Islands.
Pursuant to Section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, we have obtained an
undertaking from the Governor-in-Cabinet that:
● no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains
or appreciation shall apply to us or our operations; and
● the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares,
debentures or other obligations.
The undertaking for us is for a period of 20 years from January 10, 2017.
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People’s Republic of China Taxation
Bright Scholar Holdings is a holding company incorporated in the Cayman Islands and its income depends
primarily on dividends from our PRC subsidiaries. The PRC enterprise income tax law and its implementation
rules provide that an income tax rate of 10.0% will be applicable to dividends payable by Chinese companies to non-PRC-
resident enterprise shareholders unless otherwise exempted or reduced according to treaties or arrangements between the
PRC central government and governments of other countries or regions. Under the Double Tax Avoidance Arrangement,
dividends paid by a foreign-invested enterprise in the PRC to its direct holding company, which is considered a Hong
Kong tax resident and is determined by the PRC tax authority to have satisfied relevant requirements under the Double
Tax Avoidance Arrangement between China and Hong Kong and other applicable PRC laws, will be subject to
withholding tax at the rate of 5.0%. Entitlement to a lower tax rate on dividends according to tax treaties or arrangements
between the PRC central government and governments of other countries or regions is subject to inspection or approval of
the relevant tax authorities. Furthermore, the State Administration of Taxation promulgated Circular 9 to clarify the
definition of beneficial owner under PRC tax treaties and tax arrangements. According to Circular 9, a beneficial owner
refers to a party who holds ownership of and control over the income of the entity, or the rights or assets from which such
income is derived. The test to determine whether a resident of the other contracting party to the double taxation treaty or
arrangement is a beneficial owner shall focus on several factors including, among others, (1) whether the applicant is
under the obligation to pay 50% or more of the income received to any resident of any third country or region within
12 months upon receipt of the income; and (2) whether the business activities carried out by the applicant constitutes
substantive business activities, which include substantive manufacturing, distribution, management and other activities.
See “Item 3. Key Information—D. Risk Factors—Risk Related to Doing Business in China—There are significant
uncertainties under the PRC enterprise income tax law relating to the withholding tax liabilities of our PRC subsidiaries,
and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualify to enjoy certain treaty
benefits.”
Under the PRC enterprise income tax law, enterprises established under the laws of jurisdictions outside China
with their “de facto management body” located within China may be considered to be PRC tax resident enterprises for tax
purposes and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The
implementation rules of the PRC enterprise income tax law define the term “de facto management body” as a management
body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. The
State Administration of Taxation issued the Notice Regarding the Determination of Chinese-Controlled Offshore
Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82,
on April 22, 2009. Circular 82 provides certain specific criteria for determining whether the “de facto management body”
of a Chinese-controlled offshore incorporated enterprise is located in China, which include all of the following conditions:
(1) the senior management and core management departments in charge of daily operations are located mainly within
China, (2) financial and human resources decision are subject to determination or approval by persons or bodies in China,
(3) major assets, accounting books, company seals and minutes and files of board and shareholders’ meeting are located or
kept within China, and (4) at least half of the enterprise’s directors with voting rights or senior management reside within
China. The State Administration of Taxation issued a bulletin on August 3, 2011 to provide more guidance on the
implementation of Circular 82. The bulletin clarifies certain matters relating to resident status determination, post-
determination administration and competent tax authorities. Although both the circular and the bulletin only apply to
offshore enterprises controlled by PRC enterprises and not those by PRC individuals, the determination criteria set forth in
the circular and administration clarification made in the bulletin may reflect the general position of the State
Administration of Taxation on how the “de facto management body” test should be applied in determining the tax resident
status of offshore enterprises and the administration measures should be implemented, regardless of whether they are
controlled by PRC enterprises or PRC individuals. See “Item 3. Key Information—D. Risk Factors—Risk Related to
Doing Business in China—Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,”
which could result in unfavorable tax consequences to us and our non-PRC shareholders.”
United States Federal Income Tax Considerations
The following discussion is a summary of United States federal income tax considerations relating to the
ownership and disposition of our ADSs or Class A ordinary shares by a U.S. Holder, as defined below, who holds our
ADSs or Class A ordinary shares as “capital assets” (generally, property held for investment) under the United States
Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon existing United States federal
income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been
sought from the Internal Revenue Service, or the IRS, with respect to any United States federal
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income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary
position. This discussion does not address all aspects of United States federal income taxation that may be important to
particular investors in light of their individual circumstances, including investors subject to special tax rules (such as, for
example, financial institutions, insurance companies, regulated investment companies, real estate investment trusts,
broker-dealers, traders in securities that elect mark-to-market treatment, partnerships or other pass-through entities and
their partners or investors, tax-exempt organizations (including private foundations)), investors who are not U.S. Holders,
investors subject to special accounting rules under Section 451(b) of the Code, investors that own (directly, indirectly, or
constructively) 10% or more of our stock by vote or by value, investors that hold their ADSs or ordinary shares as part of
a straddle, hedge, conversion, constructive sale or other integrated transaction, or investors that have a functional currency
other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below.
In addition, this discussion does not address any state, local, alternative minimum tax, or non-United States tax
considerations, or the Medicare contribution tax on net investment income. Each potential investor is urged to consult its
tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations of
an investment in our ADSs or ordinary shares.
General
For purposes of this discussion or arrangement, a “U.S. Holder” is a beneficial owner of our ADSs or Class A
ordinary shares that is, for United States federal income tax purposes, (1) an individual who is a citizen or resident of the
United States, (2) a corporation (or other entity treated as a corporation for United States federal income tax purposes)
created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (3) an estate
the income of which is includible in gross income for United States federal income tax purposes regardless of its source,
or (4) a trust (a) the administration of which is subject to the primary supervision of a United States court and which has
one or more United States persons who have the authority to control all substantial decisions of the trust or (b) that has
otherwise elected to be treated as a United States person under the Code.
If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax
purposes) is a beneficial owner of our ADSs or Class A ordinary shares, the tax treatment of a partner in the partnership
will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership
holding our ADSs or Class A ordinary shares are urged to consult their tax advisors regarding an investment in our ADSs
or Class A ordinary shares.
For United States federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial
owner of the underlying shares represented by the ADSs. Accordingly, deposits or withdrawals of Class A ordinary shares
for ADSs will generally not be subject to United States federal income tax.
Passive foreign investment company considerations
A non-United States corporation, such as our company, will be classified as a “passive foreign investment
company,” or PFIC, for United States federal income tax purposes, if, in the case of any particular taxable year, either
(1) 75% or more of its gross income for such year consists of certain types of “passive” income or (2) 50% or more of its
average quarterly assets during such year produce or are held for the production of passive income. For this purpose, cash
is categorized as a passive asset and the company’s unbooked intangibles associated with active business activities may
generally be classified as active assets. Passive income generally includes, among other things, dividends, interest, rents,
royalties, and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the
assets and earning our proportionate share of the income of any other non-U.S. corporation in which we own, directly or
indirectly, more than 25% (by value) of the stock.
Although the law in this regard is unclear, we treat our affiliated entities as being owned by us for United States
federal income tax purposes, not only because we exercise effective control over the operation of such entities but also
because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating
results in our consolidated financial statements. Assuming that we are the owner of our affiliated entities for United States
federal income tax purposes, based upon our historical and current income and assets, we do not believe that we were
classified as a PFIC for the taxable year ending August 31, 2020.
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While we do not expect to become a PFIC in the current or future taxable years, the determination of whether we
are or will become a PFIC will depend upon the composition of our income (which may differ from our historical results
and current projections) and assets and the value of our assets from time to time, including, in particular the value of our
goodwill and other unbooked intangibles (which may depend upon the market value of our ADSs or Class A ordinary
shares from time-to-time and may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we
have taken into account our market capitalization, which may fluctuate. If our market capitalization declines or does not
increase, we may be classified as a PFIC for the current or future taxable years. It is also possible that the IRS may
challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our
company being, or becoming classified as, a PFIC for the current or one or more future taxable years.
The determination of whether we are or will be a PFIC may also depend, in part, on how, and how quickly, we
use our liquid assets, including cash. Under circumstances where we retain significant amounts of liquid assets including
cash, or if our affiliated entities were not treated as owned by us for United States federal income tax purposes, our risk of
being classified as a PFIC may substantially increase. Because there are uncertainties in the application of the relevant
rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no
assurance that we will not be a PFIC for the current taxable year or any future taxable year. If we are classified as a PFIC
for any year during which a U.S. holder holds our ADSs or Class A ordinary shares, we generally would continue to be
treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or Class A ordinary shares.
The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Ordinary Shares” is written
on the basis that we will not be classified as a PFIC for United States federal income tax purposes. The United States
federal income tax rules that apply if we are classified as a PFIC for the current taxable year or any subsequent
taxable year are discussed below under “Passive Foreign Investment Company Rules.”
Dividends
Subject to the PFIC rules described below, any cash distributions (including the amount of any PRC tax withheld)
paid on our ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as determined under
United States federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend
income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the
depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of
United States federal income tax principles, any distribution will generally be treated as a “dividend” for United States
federal income tax purposes. Under current law, a non-corporate recipient of dividend income will generally be subject to
tax on dividend income from a “qualified foreign corporation” at the lower applicable net capital gains rate rather than the
marginal tax rates generally applicable to ordinary income provided that certain holding period and other requirements are
met.
A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in
which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation
(1) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of
the United States determines is satisfactory for purposes of this provision and which includes an exchange of information
program, or (2) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is readily tradable
on an established securities market in the United States. Our ADSs are listed on the New York Stock Exchange.
Accordingly, we believe that the ADSs are readily tradable on an established securities market in the United States and
that we will be a qualified foreign corporation with respect to dividends paid on the ADSs. Since we do not expect that our
Class A ordinary shares will be listed on established securities markets, it is unclear whether dividends that we pay on our
Class A ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate. There
can be no assurance that our ADSs will continue to be considered readily tradable on an established securities market in
later years. In the event we are deemed to be a PRC resident enterprise under the EIT Law, we may be eligible for the
benefits of the Agreement Between the Government of the United States of America and the Government of the People’s
Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on
Income (the “United States-PRC income tax treaty”) (which the Secretary of the Treasury of the United States has
determined is satisfactory for this purpose), in which case we would be treated as a qualified foreign corporation with
respect to dividends paid on our Class A ordinary shares or ADSs. U.S. Holders are urged to consult their tax advisors
regarding the availability of the reduced tax rate on dividends in their particular circumstances. Dividends received
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on our ADSs or Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporate
shareholders of a domestic corporation.
For United States foreign tax credit purposes, dividends paid on our ADSs or Class A ordinary shares will
generally be treated as income from foreign sources and will generally constitute passive category income. In the event
that we are deemed to be a PRC resident enterprise under the EIT Law, a U.S. Holder may be subject to PRC withholding
taxes on dividends paid, if any, on our ADSs or Class A ordinary shares. A U.S. Holder may be eligible, subject to a
number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on
dividends received on our ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit
for foreign tax withheld may instead claim a deduction for United States federal income tax purposes in respect of such
withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The
rules governing the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors regarding the
availability of the foreign tax credit under their particular circumstances.
Sale or other disposition of ADSs or ordinary shares
Subject to the PFIC rules discussed below, a U.S. Holder will generally recognize capital gain or loss, if any,
upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the
amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary shares. Any
capital gain or loss will be long-term gain or loss if the ADSs or Class A ordinary shares have been held for more than
one year and will generally be United States source gain or loss for United States foreign tax credit purposes. Long-term
capital gains of non-corporate tax payers are currently eligible for reduced rates of taxation. In the event that we are
treated as a PRC resident enterprise under the EIT Law, and gain from the disposition of the ADSs or Class A ordinary
shares is subject to tax in the PRC, such gain may be treated as PRC source gain for foreign tax credit purposes under the
United States-PRC income tax treaty. The deductibility of a capital loss may be subject to limitations. U.S. Holders are
urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs
or Class A ordinary shares, including the availability of the foreign tax credit under their particular circumstances.
Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A
ordinary shares, unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will,
except as discussed below, be subject to special tax rules that have a penalizing effect, regardless of whether we remain a
PFIC, on (1) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during
a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the three preceding
taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or Class A ordinary shares), and (2) any gain
realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or Class A ordinary
shares. Under the PFIC rules:
● the excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for the
ADSs or Class A ordinary shares;
● the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period
prior to the first taxable year in which we are classified as a PFIC, or a pre-PFIC year, will be taxable as
ordinary income; and
● the amount allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will
be subject to tax at the highest tax rate in effect applicable to the individuals or corporations, as appropriate,
for that year, and will be increased by an additional tax equal to interest on the resulting tax deemed deferred
with respect to each such other taxable year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and
any of our non-United States subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate
amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. Each U.S. Holder is
advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
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As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-
market election with respect to our ADSs, provided that the ADSs are “regularly traded” (as specially defined) on the New
York Stock Exchange. No assurances may be given regarding whether our ADSs will continue to qualify as being
regularly traded in this regard. If a mark-to-market election is made, the U.S. Holder will generally (1) include as ordinary
income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the
taxable year over the adjusted tax basis of such ADSs and (2) deduct as an ordinary loss the excess, if any, of the adjusted
tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but only to the extent of
the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax
basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S.
Holder makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or
other disposition of the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the
extent of the net amount previously included in income as a result of the mark-to-market election. Because our ordinary
shares are not listed on a stock exchange, U.S. Holders will not be able to make a mark-to-market election with respect to
our ordinary shares.
If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such
corporation ceases to be classified as a PFIC, the U.S. Holder will not be required to take into account the mark-to-market
gain or loss described above during any period that such corporation is not classified as a PFIC.
Because a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. Holder
who makes a mark-to-market election with respect to our ADSs may continue to be subject to the general PFIC rules with
respect to such U.S. Holder’s indirect interest in any of our non-United States subsidiaries that is classified as a PFIC.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections,
which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
As discussed above under “Dividends,” dividends that we pay on our ADSs or Class A ordinary shares will not
be eligible for the reduced tax rate that applies to qualified dividend income if we are classified as a PFIC for the
taxable year in which the dividend is paid or the preceding taxable year. In addition, if a U.S. Holder owns our ADSs or
Class A ordinary shares during any taxable year that we are a PFIC, the holder must file an annual information return with
the IRS. Each U.S. Holder is urged to consult its tax advisor concerning the United States federal income tax
consequences of purchasing, holding, and disposing ADSs or Class A ordinary shares if we are or become a PFIC,
including the possibility of making a mark-to-market election and the unavailability of the qualified electing fund election.
Information reporting and backup withholding
Certain U.S. Holders are required to report information to the IRS relating to an interest in “specified foreign
financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of
all specified foreign financial assets exceeds $50,000 (or a higher dollar amount prescribed by the IRS), subject to certain
exceptions (including an exception for shares held in custodial accounts maintained with a United States financial
institution). These rules also impose penalties if a U.S. Holder is required to submit such information to the IRS and fails
to do so.
In addition, U.S. Holders may be subject to information reporting to the IRS and backup withholding with
respect to dividends on and proceeds from the sale or other disposition of our ADSs or ordinary shares. Information
reporting will apply to payments of dividends on, and to proceeds from the sale or other disposition of, ordinary shares or
ADSs by a paying agent within the United States to a U.S. Holder, other than U.S. Holders that are exempt from
information reporting and properly certify their exemption. A paying agent within the United States will be required to
withhold at the applicable statutory rate, currently 24%, in respect of any payments of dividends on, and the proceeds
from the disposition of, ordinary shares or ADSs within the United States to a U.S. Holder (other than U.S. Holders that
are exempt from backup withholding and properly certify their exemption) if the holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with applicable backup withholding requirements. U.S. Holders who
are required to establish their exempt status generally must provide a properly completed IRS Form W-9.
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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a
U.S. Holder’s U.S. federal income tax liability. A U.S. Holder generally may obtain a refund of any amounts withheld
under the backup withholding rules by filing the appropriate claim for refund with the IRS in a timely manner and
furnishing any required information. Each U.S. Holder is advised to consult with its tax advisor regarding the application
of the United States information reporting rules to their particular circumstances.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on display
We have previously filed with the SEC our registration statement on Form F-1 (File Number 333-217359), as
amended and our registration statement on Form F-1 (File Number 333-223193), as amended.
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the
Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file
annually a Form 20-F within four months after the end of each fiscal year. Copies of reports and other information, when
so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information
regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains
a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding
registrants that make electronic filings with the SEC using its EDGAR system.
As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and
content of quarterly reports and proxy statements, and our executive officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as
frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We will furnish The Bank of New York Mellon, the depositary of our ADSs, with our annual reports, which will
include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S.
GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available
to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and,
upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’
meeting received by the depositary from us.
I. Subsidiary Information
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency risk
Our revenues, expenses and assets and liabilities are primarily denominated in Renminbi. Renminbi is not freely
convertible into foreign currencies for capital account transactions. The value of the Renminbi against the U.S. dollar and
other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange
policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of
the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following
three years. Between July 2008 and June 2010, this appreciation subsided and the exchange rate between the Renminbi
and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar,
at times significantly and unpredictably. On March 17, 2014, the PRC government announced a policy to further expand
the maximum daily floating range of Renminbi trading prices against the U.S. dollar in the inter-bank spot foreign
exchange market to 2.0%. On August 10, 2015, the PRC government announced that it had changed the calculation
method for Renminbi’s daily central parity exchange rate against the U.S. dollar, which resulted in an approximately 2.0%
depreciation of Renminbi on that day. We expect Renminbi to fluctuate more significantly in value against the U.S. dollar
or other foreign currencies in the future, depending on the market supply and demand with reference to a basket of major
foreign currencies. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.
To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency
exchange risk. To the extent that we need to convert U.S. dollars we received from the offering into Renminbi for our
operations or capital expenditures, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on
the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S.
dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes,
appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to
us.
In addition, very limited hedging options are available in China to reduce our exposure to exchange rate
fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign
currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and
effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In
addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to
convert Renminbi into foreign currency.
Concentration of credit risk
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of
cash and cash equivalents and restricted cash. As of August 31, 2020, substantially all of our cash and cash equivalents
and term deposits were deposited with financial institutions with high-credit ratings and quality.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
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D. American Depositary Shares
Fees and Expenses
Our ADS holders are required to pay the following service fees to the depositary bank, the Bank of New York
Mellon, and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other
governmental charges payable on the deposited securities represented by any of your ADSs):
Persons depositing or withdrawing shares or ADS
holders must pay :
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
US$0.05 (or less) per ADS
A fee equivalent to the fee that would be payable if
securities distributed to you had been shares and the shares
had been deposited for issuance of ADSs
US$0.05 (or less) per ADS per calendar year
Registration or transfer fees
Expenses of the depositary
Taxes and other governmental charges the depositary or the
custodian has to pay on any ADSs or shares underlying
ADSs, such as stock transfer taxes, stamp duty or
withholding taxes
Any charges incurred by the depositary or its agents for
servicing the deposited securities
For :
Issuance of ADSs, including issuances resulting from a
distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal,
including if the deposit agreement terminates
Any cash distribution to ADS holders
Distribution of securities distributed to holders of deposited
securities (including rights) that are distributed by the
depositary to ADS holders
Depositary services
Transfer and registration of shares on our share register to
or from the name of the depositary or its agent when you
deposit or withdraw shares
Cable, telex and facsimile transmissions (when expressly
provided in the deposit agreement) converting foreign
currency to U.S. dollars
As necessary
As necessary
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or
surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for
making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of
distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from
cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for
them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion
of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may
generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally
arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by
the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit
agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by
or affiliated with the depositary and that may earn or share fees, spreads or commissions.
The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for
its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including,
without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things,
the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the
rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary
makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement
will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined
will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The
methodology used to determine exchange rates used in currency conversions is available upon request.
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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information” for a description of the rights of securities holders, which remain
unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File
Number 333-217359) in relation to our initial public offering of 17,250,000 ADSs representing 17,250,000 Class A
ordinary shares, at an initial offering price of US$10.50 per ADS, and the F-1 Registration Statement (File Number 333-
223193) in relation to our follow-on public offering of 10,000,000 ADSs representing 10,000,000 Class A ordinary shares
at US$19.00 per ADS. Our initial public offering closed in June 2017, and our follow-on offering closed in March 2018.
Morgan Stanley & Co. International plc and Deutsche Bank Securities Inc. were the representatives of the underwriters for
our initial public offering, and Deutsche Bank Securities Inc. and Goldman Sachs (Asian) LLC were the representatives of
the underwriters for our follow-on public offering.
The F-1 registration statement for our initial public offering was declared effective by the SEC on May 17, 2017.
For the period from the effective date of the F-1 registration statement to August 31, 2017, the total expenses incurred for
our company’s account in connection with our initial public offering was approximately US$0.6 million. We received net
proceeds of approximately US$174.7 million from our initial public offering. None of the transaction expenses included
payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity
securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any
of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
The F-1 registration statement for our follow-on public offering was declared effective by the SEC on
February 27, 2018. For the period from the effective date of the F-1 registration statement to August 31, 2018, the total
expenses incurred for our company’s account in connection with our follow-on public offering was approximately US$1.0
million. We received net proceeds of approximately US$181.4 million from our follow-on offering. None of the
transaction expenses included payments to directors or officers of our company or their associates, persons owning more
than 10% or more of our equity securities or our affiliates. None of the net proceeds from the follow-on offering were
paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our
equity securities or our affiliates.
For the period from May 17, 2017, the date that the F-1 registration statement in connection with our initial
public offering was declared effective by the SEC, to the date of this annual report, we have used (1) approximately
US$50.0 million as the registered capital of Guangdong Bright Scholar Education Technology Co., Ltd.,
(2) approximately US$77.4 million for the repurchase of our ADSs, and (3) approximately US$228.7 million for overseas
acquisitions, of the net proceeds received from our public offerings.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and
chief financial officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is
defined in Rules 13a-15(e) of the Exchange Act, as of August 31, 2020. Based on that evaluation, our chief executive
officer and chief financial officer concluded that our disclosure controls and procedures as of August 31, 2020 were
effective.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or because the degree of compliance with policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our chief executive officer and
chief financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as
of August 31, 2020. We have excluded the businesses acquired in the 2020 fiscal year from our assessment of the
effectiveness of internal control over financial reporting as of August 31, 2020, which are listed in Note 3 of our
consolidated financial statements. The businesses that we acquired represented 2.6% of our total assets as of August 31,
2020, and 3.3% of our revenues and 4.78% of our net income for the 2020 fiscal year, which mainly relate to the
acquisition completed in September 2019. The assessment was based on criteria established in the framework Internal
Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our management will include the business acquired in the 2020 fiscal year in the assessment of the
effectiveness of internal control over financial reporting at the conclusion of the 2021 fiscal year. Based on this
assessment, management concluded that our internal control over financial reporting was effective as of August 31, 2020.
Attestation Report of the Registered Public Accounting Firm
This annual report on Form 20 F does not include an attestation report of our registered public accounting firm
due to rules of the SEC where domestic and foreign registrants that are “emerging growth companies” which we are, are
not required to provide the auditor attestation report.
Changes in Internal Control over Financial Reporting
We have implemented remediation measures to address the significant deficiency related to lack of
comprehensive documentation on assessment on transition and implementation of new accounting
standards/pronouncements as of and for the year ended August 31, 2019 by enhancing the implementation a set of internal
control policies that include detailed procedures and guidance on assessment on transition and implementation of new
Accounting Standards Updates, which will enable us to complete and document a comprehensive assessment of the
impact arise from the adoption of new accounting standards/pronouncements to our consolidated financial statements. Our
historical significant deficiency of lack of comprehensive documentation on assessment on transition and implementation
of new accounting standards/pronouncements has been remediated during the year ended August 31, 2020.
As permitted by the SEC, companies are allowed to exclude acquired businesses from management’s assessment
of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed. In the
2020 fiscal year, we identified a significant deficiency within our internal control over financial reporting (excluding the
newly acquired business in the 2020 fiscal year). The significant deficiency identified relates to insufficient review over
underlying data supporting journal entries and account reconciliations due to the lack of segregation of duties in certain
acquired overseas business. We implemented certain management compensating control, including financial analytical
review, reconciliation of certain accounts and sample check the accuracy of the underlying information used in schedules.
Having identified such significant deficiency, we are in the process of enhancing the implementation of a set of
internal control policies that include recruiting more qualified financial and accounting professionals, establishing an
ongoing program to provide sufficient and appropriate training for financial reporting and accounting personnel, engaging
external consultants to evaluate the acquired overseas business’s internal controls over financial reporting procedures to
ensure compliance with U.S. securities laws and regulations, establishing an UK based share service center to unify
business operation processes cross oversea schools, including finance, human resources, IT, marketing etc., and enhancing
and revising design of information technology applications and procedures.
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However, we cannot assure you that we will not identify material weaknesses or significant deficiencies in the
future. In addition, the process of designing and implementing an effective financial reporting system is a continuous
effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and
to employ significant resources to maintain a financial reporting system that satisfies our reporting obligations. See “Item
3. Key Information—D. Risk Factors—Risks Related to Our Business—If we fail to implement and maintain an effective
system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and
investor confidence and the market price of our ADSs may be materially and adversely affected.” As a result, we may be
subject to a number of risks, including increased risks that we have or may not file our financial statements and related
reports with the SEC on a timely basis and that there are errors in our reported financial statements and material
misstatements in our reports and other documents filed with the SEC.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Peter Andrew Schloss, an independent director (under the
standards set forth in Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3
under the Exchange Act) and the chairman of our audit committee, is our audit committee financial expert.
ITEM 16B. CODE OF ETHICS
Our board of directors has adopted our code of conduct and ethics, a code that applies to members of the board of
directors including its chairman and other senior officers, including the chief executive officer, the chief financial officer
and the chief operations officer. This code is publicly available on our website at http://ir.brightscholar.com/.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain
professional services rendered by Deloitte Touche Tohmatsu Certified Public Accountants LLP (“Deloitte”), our
independent registered public accounting firm, its member firms of Deloitte Touche Tohmatsu Limited, and their
respective affiliates (“Deloitte Entities”), for the periods indicated. We did not pay any other fees to the Deloitte Entities
during the periods indicated below.
Audit fees (1)
Audit-related fee (2)
All other fees (3)
2019
Fiscal Year
2020
Fiscal Year
(in thousands)
RMB 6,726 RMB 11,411 US$ 1,667
—
RMB 2,242
—
RMB 1,038
—
—
(1) Audit fees represent the aggregate fees billed for each of the fiscal years listed for professional services rendered by
our principal accountant for the audit of our annual consolidated financial statements, review of quarterly financial
information, and audit services that are normally provided by the principal accountant in connection with regulatory
filings or engagements for those fiscal years.
(2) Audit-related fees represent the aggregate fees billed in each of the fiscal years listed for assurance and related
services by our principal accountant that are reasonably related to the performance of the audit or review of our
financial statements and are not reported under Audit Fees.
(3) All other fees represent the aggregate fees billed in each of the fiscal years listed for products and services provided
by our principal accountant, other than the services reported in (1) and (2).
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
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ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
In April 2018, our board of directors announced a share repurchase program pursuant to which we would
repurchase up to US$100 million worth of our ADSs. The 2018 share repurchase program expired on April 30, 2019 and
as of such date we had repurchased 6,679,183 of our outstanding ADSs for an aggregate purchase price of approximately
US$77 million pursuant to the program.
In September 2019, our board of directors announced a new share repurchase program pursuant to which we
would repurchase up to US$30 million worth of our ADSs. The 2019 Share Repurchase Program expired on November
29, 2020 and as of such date we had repurchased 1.2 million of our outstanding ADSs for an aggregate purchase price of
approximately US$9.4 million pursuant to the program.
The table below is a summary of the shares repurchased by us during the 2020 fiscal year and up to December
15, 2020. All ADSs were repurchased in the open market pursuant to the applicable share repurchase programs.
Total Number
of ADSs
Purchased as
Part of
Publicly
Announced
Purchased Paid per ADS(US$) Programs
Total Number
of
ADSs
Average Price
September 2019
October 2019
November 2019
December 2019
January 2020
February 2020
March 2020
April 2020
May 2020
June 2020
July 2020
August 2020
September 2020
October 2020
November 2020
December 2020
—
—
14,373
55,981
153,153
157,072
189,153
100,150
104,368
116,164
116,815
89,083
56,619
47,069
—
—
—
—
9.29
9.23
9.08
8.93
7.21
6.59
6.84
7.82
8.05
7.60
6.98
6.57
—
—
Approximate
Dollar
Value of ADSs
that
May Yet Be
Purchased
Under
the
—
—
14,373
55,981
153,153
157,072
189,153
100,150
104,368
116,164
116,815
89,083
56,619
47,069
—
—
Programs(US$)
—
—
29,866,540
29,349,941
27,959,477
26,557,368
25,194,218
24,534,280
23,820,673
22,912,283
21,972,404
21,294,968
20,899,990
20,590,596
—
—
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on the New York Stock Exchange, we are subject to New York Stock
Exchange corporate governance listing standards. However, the New York Stock Exchange rules permit a foreign private
issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in
the Cayman Islands, which is our home country, may differ significantly from New York Stock Exchange corporate
governance listing standards. Shareholders of Cayman Islands exempted companies like us have no general rights under
Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our
directors have discretion under our articles of association to determine whether or not, and under what conditions, our
corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders.
This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder
motion or to solicit proxies from other shareholders in connection with a proxy contest.
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Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly
from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to
follow home country practice with respect to corporate governance matters, our shareholders may be afforded less
protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. See “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Ordinary Shares and ADSs—As a company incorporated in the
Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that
differ significantly from New York Stock Exchange corporate governance listing standards; these practices may afford
less protection to shareholders than they would enjoy if we complied fully with New York Stock Exchange corporate
governance listing standards.”
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our consolidated financial statements are included at the end of this annual report.
ITEM 19. EXHIBITS
Exhibit
No.
1.1
2.1
2.2
2.3
2.4
2.5*
3.1
4.1
Description of Exhibit
Amended and Restated Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2
of our Registration Statement on Form F-1 (file No. 333-217359) filed with the Securities and Exchange
Commission on April 18, 2017)
Registrant’s specimen American depositary receipt (included in Exhibit 2.3)
Registrant’s specimen certificate for ordinary shares (incorporated by reference to Exhibit 4.2 of our
Registration Statement on Form F-1 (file No. 333-217359) filed with the Securities and Exchange
Commission on May 5, 2017)
Form of deposit agreement by and among the Registrant, the depositary and holders of the American
Depositary Receipts (incorporated by reference to Exhibit 4.3 of our Registration Statement on Form F-1
(file No. 333-217359) filed with the Securities and Exchange Commission on May 5, 2017)
Indenture, dated as of July 31, 2019, among Bright Scholar Education Holdings Limited, its Subsidiary
Guarantors and The Bank of New York Mellon, London Branch, as the Trustee (incorporated by reference
to Exhibit 2.4 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission
on December 23, 2019)
Description of Securities
English translation of acting-in-concert agreement between Ms. Meirong Yang and Ms. Huiyan Yang
dated February 8, 2017 (incorporated by reference to Exhibit 4.4 of our Registration Statement on Form F-
1 (file No. 333-217359) filed with the Securities and Exchange Commission on April 18, 2017)
Form of employment agreement between the Registrant and the executive officers of the Registrant
(incorporated by reference to Exhibit 10.1 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
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Exhibit
No.
Description of Exhibit
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Form of indemnification agreement by and between the Registrant and its directors and executive officers
(incorporated by reference to Exhibit 10.2 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
English translation of exclusive management service and business cooperation agreement among Zhuhai
Bright Scholar, our affiliated entities, and Ms. Meirong Yang and Mr. Wenjie Yang, dated January 25,
2017 (incorporated by reference to Exhibit 10.3 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
English translation of exclusive call option agreement among Zhuhai Bright Scholar, Ms. Meirong Yang
and Mr. Wenjie Yang, and BGY Education Investment dated January 25, 2017 (incorporated by reference
to Exhibit 10.4 of our Registration Statement on Form F-1 (file No. 333-217359) filed with the Securities
and Exchange Commission on April 18, 2017)
English translation of power of attorney granted by BGY Education Investment dated January 25, 2017
(incorporated by reference to Exhibit 10.5 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
English translation of power of attorney granted by Ms. Meirong Yang dated January 25, 2017
(incorporated by reference to Exhibit 10.6 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
English translation of power of attorney granted by Mr. Wenjie Yang dated January 25, 2017.
(incorporated by reference to Exhibit 10.7 of our Registration Statement on Form F-1 (file No. 333-
217359) filed with the Securities and Exchange Commission on April 18, 2017)
English translation of equity pledge agreement among Zhuhai Bright Scholar, Ms. Meirong Yang and
Mr. Wenjie Yang, and BGY Education Investment dated January 25, 2017 (incorporated by reference to
Exhibit 10.8 of our Registration Statement on Form F-1 (file No. 333-217359) filed with the Securities
and Exchange Commission on April 18, 2017)
2017 Share Incentive Plan (incorporated by reference to Exhibit 10.9 of our Registration Statement on
Form F-1 (file No. 333-217359) filed with the Securities and Exchange Commission on April 18, 2017)
English Translation of Rights and Obligations Assumption Letter executed by Baoding Baigou New City
Bright Scholar Shenghua Education Consulting Co., Ltd. dated June 14, 2017 (incorporated by reference
to Exhibit 4.10 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission
on December 7, 2017)
English Translation of Rights and Obligations Assumption Letter executed by Chuzhou Country Garden
Kindergarten dated August 30, 2017 (incorporated by reference to Exhibit 4.12 of our Form 20-F (file
No. 001-38077) filed with the Securities and Exchange Commission on December 7, 2017)
English Translation of Rights and Obligations Assumption Letter executed by Chuzhou Country Garden
Foreign Language School dated October 13, 2017 (incorporated by reference to Exhibit 4.13 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 7,
2017)
English Translation of Rights and Obligations Assumption Letter executed by Kaiping Country Garden
Jade Bay Kindergarten dated July 5, 2017 (incorporated by reference to Exhibit 4.14 of our
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Exhibit
No.
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 7,
2017)
Description of Exhibit
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
English Translation of Rights and Obligations Assumption Letter executed by Shaoguan Country Garden
English Foreign Language School dated September 3, 2017 (incorporated by reference to Exhibit 4.15 of
our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 7,
2017)
English Translation of Rights and Obligations Assumption Letter executed by Shenghua Country Garden
Bilingual School dated October 10, 2017 (incorporated by reference to Exhibit 4.16 of our Form 20-F
(file No. 001-38077) filed with the Securities and Exchange Commission on December 7, 2017)
English Translation of Rights and Obligations Assumption Letter executed by Kaiping Country Garden
School dated September 25, 2017 (incorporated by reference to Exhibit 4.17 of our Form 20-F (file
No. 001-38077) filed with the Securities and Exchange Commission on December 7, 2017)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan East Lake High-tech
Development Zone Xinqiao-Jinxiu Longcheng Kindergarten dated October 22, 2018 (incorporated by
reference to Exhibit 4.17 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange
Commission on December 14, 2018)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan East Lake High-tech
Development Zone Xinqiao Kindergarten dated October 22, 2018 (incorporated by reference to
Exhibit 4.18 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission
on December 14, 2018)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Dongxihu District
Dongqiao Kindergarten dated October 22, 2018 (incorporated by reference to Exhibit 4.19 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 14,
2018)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Hongshan District
Xinqiao Aijia Kindergarten dated October 22, 2018 (incorporated by reference to Exhibit 4.20 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 14,
2018)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Qingshan District
Xinqiao Bilingual Kindergarten dated October 22, 2018 (incorporated by reference to Exhibit 4.21 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 14,
2018)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Qiaosheng
Education Investment Co., Ltd. dated October 23, 2018 (incorporated by reference to Exhibit 4.22 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 14,
2018)
English Translation of Rights and Obligations Assumption Letter executed by Foshan Shunde Beijiao
Country Garden Guilanshan Kindergarten Co., Ltd. dated November 3, 2018 (incorporated by reference to
Exhibit 4.23 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission
on December 14, 2018)
English Translation of Rights and Obligations Assumption Letter executed by Chengdu Yinzhe Education
and Technology Co., Ltd. dated December 13, 2018 (incorporated by reference to
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Exhibit
No.
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
Exhibit 4.24 of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission
on December 14, 2018)
Description of Exhibit
English Translation of Rights and Obligations Assumption Letter executed by Chengdu Laizhe Education
and Technology Co., Ltd. dated December 13, 2018 (incorporated by reference to Exhibit 4.25 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 14,
2018)
Business and Asset Sale and Purchase Agreement in relation to the sale and purchase of the Business and
Asset of Bournemouth Collegiate School dated October 1, 2018 (incorporated by reference to Exhibit 4.26
of our Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on
December 14, 2018)
English Translation of Rights and Obligations Assumption Letter executed by Hubei Sannew Education
Development Limited dated December 15, 2019 (incorporated by reference to Exhibit 4.27 of our Form
20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by Sannew American Middle
School dated December 20, 2019 (incorporated by reference to Exhibit 4.28 of our Form 20-F (file No.
001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Mierdun Education
Technology Limited dated December 10, 2019 (incorporated by reference to Exhibit 4.29 of our Form 20-
F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by Heze Qiqiaoban Education
Technology Limited dated December 10, 2019 (incorporated by reference to Exhibit 4.30 of our Form 20-
F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by Heze Development Zone
Electric Kindergarten dated December 9, 2019 (incorporated by reference to Exhibit 4.31 of our Form 20-
F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by HeZe Qiqiaoban Juancheng
Kindergarten dated December 10, 2019 (incorporated by reference to Exhibit 4.32 of our Form 20-F (file
No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
English Translation of Rights and Obligations Assumption Letter executed by Beijing Huanxue
International Travel Limited dated December 12, 2019 (incorporated by reference to Exhibit 4.33 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23,
2019)
English Translation of Rights and Obligations Assumption Letter executed by Guangzhou Huihua
Education Consulting Co., Ltd. dated December 12, 2019 (incorporated by reference to Exhibit 4.34 of our
Form 20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23,
2019)
Purchase Agreement in relation to the issuance and sales of US$300,000,000 7.45% Senior Notes due
2022 to the Initial Purchaser dated July 24, 2019 (incorporated by reference to Exhibit 4.35 of our Form
20-F (file No. 001-38077) filed with the Securities and Exchange Commission on December 23, 2019)
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Exhibit
No.
4.36
4.37*
4.38*
4.39*
4.40*
4.41*
4.42*
4.43*
4.44*
4.45*
4.46*
4.47*
4.48*
4.49*
4.50*
4.51*
4.52*
Sale and Purchase Agreement relating to CATS Colleges Holdings Limited dated July 5, 2019
(incorporated by reference to Exhibit 4.36 of our Form 20-F (file No. 001-38077) filed with the Securities
and Exchange Commission on December 23, 2019)
Description of Exhibit
English translation of exclusive management service and business cooperation agreement among Zhuhai
Bright Scholar, our affiliated entities, Beijing Haidian Bright Scholar Training School and Beijing Elib
Technology Co., Ltd., dated November 26, 2019
English Translation of Rights and Obligations Assumption Letter executed by Baoding Baigou New City
Shenghua Country Garden Kindergarten Co., Ltd. dated August 31, 2019
English Translation of Rights and Obligations Assumption Letter executed by Heze Economic
Development Zone Qiqiaoban -OTC Kindergarten dated September 30, 2020
English Translation of Rights and Obligations Assumption Letter executed by Cao xian Qiqiaoban
Kindergarten dated December 15, 2020
English Translation of Rights and Obligations Assumption Letter executed by Guangyuan Lizhou Kasijia
Kindergarten dated August 31, 2019
English Translation of Rights and Obligations Assumption Letter executed by Beijing Huanxue Tianxia
International Travel Limited dated January 31, 2020
English Translation of Rights and Obligations Assumption Letter executed by Chengdu Zhiyimeng
Software Technology Co., Ltd. dated July 25, 2019
English Translation of Rights and Obligations Assumption Letter executed by Guangzhou Xingzhu
Information Technology Co., Ltd. dated August 31, 2019
English Translation of Rights and Obligations Assumption Letter executed by Dongguan Humen Bright
Scholar Country Garden Kindergarten dated December 2, 2020
English Translation of Rights and Obligations Assumption Letter executed by Foshan Shunde Ronggui
Street Country Garden Kindergarten dated June 16, 2020
English Translation of Rights and Obligations Assumption Letter executed by Dongguan Dongcheng
Bright Scholar Kindergarten Co., Ltd. dated March 31, 2020
English Translation of Rights and Obligations Assumption Letter executed by Huizhou Huiyang Lelebao
Shenhui City Kindergarten Co., Ltd. dated December 10, 2020
English Translation of Rights and Obligations Assumption Letter executed by Chengdu Pidu Bright
Scholar Kindergarten Co., Ltd. dated December 3, 2020
English Translation of Rights and Obligations Assumption Letter executed by Tianjin Beichen Lelebao
Kindergarten dated August 30, 2020
English Translation of Rights and Obligations Assumption Letter executed by Guangzhou Zengcheng
Fettes College Kindergarten Co., Ltd. dated June 15, 2020
English Translation of Rights and Obligations Assumption Letter executed by Guigang Gangbei Country
Garden Lelebao Kindergarten dated October 21, 2020
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Exhibit
No.
4.53*
4.54*
4.55*
4.56*
4.57*
4.58*
4.59*
4.60*
4.61*
4.62*
4.63*
4.64*
4.65*
4.66*
4.67*
4.68*
8.1*
11.1
English Translation of Rights and Obligations Assumption Letter executed by Jinan Zhangqiu Phoenix
City Lelebao Kindergarten dated December 14, 2020
Description of Exhibit
English Translation of Rights and Obligations Assumption Letter executed by Heze Mudan District
Cultural City Kindergarten dated December 17, 2020
English Translation of Rights and Obligations Assumption Letter executed by Fettes College
Experimental School of Zengcheng, Guangzhou dated June 15, 2020
English Translation of Rights and Obligations Assumption Letter executed by Shanghai Huodai
Commercial Information Consulting Co., Ltd. dated July 20, 2020
English Translation of Rights and Obligations Assumption Letter executed by Shanghai Youxun
Education Technology Co., Ltd. dated May 26, 2020
English Translation of Rights and Obligations Assumption Letter executed by Shanghai Hanlin Education
Technology Co., Ltd. dated July 20, 2020
English Translation of Rights and Obligations Assumption Letter executed by Guangdong Lebeimeng
Education Consulting Co., Ltd. dated November 29, 2019
English Translation of Rights and Obligations Assumption Letter executed by Guangdong Lelebao
Education Technology Co., Ltd. dated November 30, 2019
English Translation of Rights and Obligations Assumption Letter executed by Jinan Boshixing Education
Consulting Co., Ltd. dated January 27, 2020
English Translation of Rights and Obligations Assumption Letter executed by Jining Boshiwei Education
Consulting Limited dated October 29, 2019
English Translation of Rights and Obligations Assumption Letter executed by Taishan Lebeimeng
Education Consulting Co., Ltd. dated December 26, 2019
English Translation of Rights and Obligations Assumption Letter executed by Weifang Boshixin
Education Consulting Co., Ltd. dated March 29, 2020
English Translation of Rights and Obligations Assumption Letter executed by Foshan Shunde Beijiao
Town Country Garden Ivy League Education Training Centre Co., Ltd. dated December 7, 2020
English Translation of Rights and Obligations Assumption Letter executed by Guangdong Bright Scholar
Ivy League Education Science Research Institute Co., Ltd. dated December 7, 2020
English Translation of Rights and Obligations Assumption Letter executed by Shanghai Bolai Training
Center Co., Ltd. dated December 7, 2020
English Translation of Rights and Obligations Assumption Letter executed by Wuhan Qiaokou Mierdun
Training School Limited dated November 20, 2019
List of subsidiaries and affiliated entities of the Registrant
Code of business conduct and ethics (incorporated by reference to Exhibit 99.1 of our Registration
Statement on Form F-1 (file No. 333-217359) filed with the Securities and Exchange Commission on
April 18, 2017)
147
Table of Contents
Exhibit
No.
12.1*
12.2*
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Description of Exhibit
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**
CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**
CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*
15.2*
15.3*
Consent of Frost & Sullivan
Consent of JunHe LLP
Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed with this annual report on Form 20-F
** Furnished with this annual report on Form 20-F
Portions of the exhibit have been omitted
†
148
Table of Contents
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Date: December 23, 2020
BRIGHT SCHOLAR EDUCATION HOLDINGS
LIMITED
By:
Name: Dongmei Li
Title: Chief Financial Officer
/s/ Dongmei Li
149
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of August 31, 2019 and 2020
Consolidated Statements of Operations for the years ended August 31, 2018, 2019 and 2020
Consolidated Statements of Comprehensive Income for the years ended August 31, 2018, 2019 and 2020
Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2018, 2019 and 2020
Consolidated Statements of Cash Flows for the years ended August 31, 2018, 2019 and 2020
Notes to Consolidated Financial Statements
Schedule 1-Condensed Financial Statement of Bright Scholar Education Holdings Limited
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-53
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Bright Scholar Education Holdings Limited
Opinion of the Financial Statements
We have audited the accompanying consolidated balance sheets of Bright Scholar Education Limited and its
subsidiaries (the "Company") as of August 31, 2019 and 2020, the related consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended August 31,
2020, and the related notes and the schedule (collectively referred to as the "financial statements"). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2019
and 2020, and the results of their operations and their cash flows for each of the three years in the period ended August 31,
2020, in conformity with accounting principles generally accepted in the United States of America.
Convenience Translation
Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 2(g). Such United States dollar
amounts are presented solely for the convenience of the readers.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases
on September 1, 2019 due to the adoption of ASU2016-02, Leases (Topic 842), and related ASUs using a modified
retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP
Guangzhou, China
December 23, 2020
We have served as the Company's auditor since 2016.
F-2
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except shares and par value data)
Note
As of August 31,
2019
RMB
As of August 31,
2020
RMB
USD
Note 2(g)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowance of RMB 7,772 and RMB 15,433 as of August 31, 2019
and 2020, respectively
Amounts due from related parties
Other receivables, deposits and other assets
Inventories
Total current assets
Restricted cash – non current
Property and equipment, net
Land use rights, net
Intangible assets, net
Goodwill, net
Long-term investments
Prepayments for construction contract
Deferred tax assets, net
Deposits for acquisition
Other non-current assets
Operating lease right-of-use assets –non current
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Accounts payable (including accounts payable of the consolidated VIEs without recourse to
Bright Scholar Education Holdings Limited of RMB 32,842 and RMB 28,691 as of
August 31, 2019 and 2020, respectively)
Amounts due to related parties (including amounts due to related parties of the consolidated
VIEs without recourse to Bright Scholar Education Holdings Limited of RMB 76,117 and
RMB 52,567 as of August 31, 2019 and 2020, respectively)
Accrued expenses and other current liabilities (including accrued expenses and other current
liabilities of the consolidated VIEs without recourse to Bright Scholar Education Holdings
Limited of RMB 364,734 and RMB 394,880 as of August 31, 2019 and 2020,
respectively)
Short term loan (including short term loan of the consolidated VIEs without recourse to
Bright Scholar Education Holdings Limited of nil and 7,500 as of August 31, 2019 and
2020, respectively)
Income tax payable (including income tax payable of the consolidated VIEs without recourse
to Bright Scholar Education Holdings Limited of RMB 50,968 and RMB 34,992 as of
August 31, 2019 and 2020, respectively)
Contract liabilities (including contract liabilities of the consolidated VIEs without recourse to
Bright Scholar Education Holdings Limited of RMB 1,157,774 and RMB 1,291,781 as of
August 31, 2019 and 2020, respectively)
Refund liabilities (including refund liabilities of the consolidated VIEs without recourse to
Bright Scholar Education Holdings Limited of RMB 19,132 and RMB 23,804 as of
August 31, 2019 and 2020, respectively)
Operating lease liabilities (including operating lease liabilities of the consolidated VIEs
without recourse to Bright Scholar Education of nil and RMB 30,601 as of August 31,
2019 and August 31, 2020, respectively)
Total current liabilities
Non-current contract liabilities (including non-current portion of contract liabilities of the
consolidated VIEs without recourse to Bright Scholar Education of nil and RMB 1,772 as
of August 31, 2019 and August 31, 2020, respectively)
Deferred tax liabilities, net (including deferred tax liabilities, net of the consolidated VIEs
without recourse to Bright Scholar Education Holdings Limited of RMB 35,895 and RMB
34,641 as of August 31, 2019 and 2020, respectively)
Bond payable
Other non-current liabilities due to related parties (including non-current liabilities due to
related parties of the consolidated VIEs without recourse to Bright Scholar Education
Holdings Limited of RMB 21,736 and RMB 26,843 as of August 31, 2019 and 2020,
respectively)
Other non-current liabilities (including other non-current liabilities of the consolidated VIEs
without recourse to Bright Scholar Education Holdings Limited of RMB 7,621 and RMB
11,364 as of August 31, 2019 and 2020, respectively)
Long term loan (including long term loan of the consolidated VIEs without recourse to Bright
Scholar Education of nil and RMB 77,500 as of August 31, 2019 and August 31, 2020,
respectively)
Operating lease liabilities – non current (including operating lease liabilities – non current of
the consolidated VIEs without recourse to Bright Scholar Education of nil and RMB
222,693 as of August 31, 2019 and August 31, 2020, respectively)
Total non-current liabilities
TOTAL LIABILITIES
Commitments and Contingencies
EQUITY
Share capital (US$0.00001 par value; 120,585,274 shares issued and outstanding as of August
31, 2019, 119,488,962 shares issued and outstanding as of August 31, 2020)
Additional paid-in capital
Statutory reserves
Accumulated other comprehensive income
Accumulated retained earnings
Shareholders’ equity
Non-controlling interests
Total equity
TOTAL LIABILITIES AND EQUITY
27
27
4
17
21
5
27
6
7
8
11
10
19
9
15
21
13
14
17
17
15
19
12
21
14
15
22
16
23
3,246,995
18,019
241,270
21,528
10,652
177,150
26,234
3,741,848
—
899,510
88,204
552,011
2,090,078
28,455
5,251
30,333
338,585
13,362
—
4,045,789
7,787,637
94,295
110,038
3,377,684
1,044,853
13,695
19,271
18,521
198,593
28,013
4,700,630
1,400
1,076,590
86,076
597,527
2,284,109
55,137
4,822
35,678
—
16,654
1,964,686
6,122,679
10,823,309
93,090
86,563
493,280
152,591
2,000
2,814
2,705
29,003
4,091
686,484
204
157,226
12,571
87,263
333,573
8,052
704
5,210
—
2,432
286,924
894,159
1,580,643
13,595
12,642
615,082
633,397
92,500
50,000
938,300
137,030
93,479
118,716
17,337
1,529,137
1,544,184
225,514
20,259
70,711
—
2,512,290
210,082
3,695,043
—
1,772
53,689
2,106,000
57,826
2,017,369
21,736
26,843
10,654
19,612
—
—
2,192,079
4,704,369
8
2,105,189
64,945
78,955
472,339
2,721,436
361,832
3,083,268
7,787,637
77,919
1,802,544
4,003,885
7,698,928
8
1,854,262
65,567
185,371
632,722
2,737,930
386,451
3,124,381
10,823,309
10,327
30,681
539,626
259
8,445
294,618
3,920
2,864
11,379
263,245
584,730
1,124,356
1
270,798
9,575
27,072
92,403
399,849
56,438
456,287
1,580,643
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 2018, 2019 AND 2020
(Amounts in thousands, except for share and per share data)
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Other operating income
Impairment loss on operating lease right-of-
use assets
Impairment loss on goodwill
Operating income
Interest income/ (expense), net
Investment income
Other expenses
Income before income taxes and share of
equity in income of unconsolidated
affiliates
Income tax expense
Share of equity in loss of unconsolidated
affiliates
Net income
Net income attributable to non-controlling
interests
Net income attributable to ordinary
shareholders
Net earnings per share attributable to
ordinary Shareholders
Basic
Diluted
Weighted average shares used in
calculating net earnings per ordinary
share:
Basic
Diluted
19
23
20
20
20
20
Note
17
2018
RMB
2019
RMB
2020
RMB
1,718,871
(1,090,595)
628,276
(368,141)
12,027
2,563,005
(1,586,014)
976,991
(691,900)
15,435
3,366,503
(2,144,786)
1,221,717
(871,154)
38,661
—
—
272,162
27,297
21,669
(4,803)
316,325
(67,382)
(40)
248,903
—
—
300,526
24,254
17,414
(8,617)
333,577
(80,580)
(239)
252,758
(12,772)
(68,723)
307,729
(159,352)
106,675
(11,291)
243,761
(78,992)
(595)
164,174
USD
Note 2(g)
491,647
(313,226)
178,421
(127,224)
5,646
(1,866)
(10,036)
44,941
(23,272)
15,579
(1,649)
35,599
(11,536)
(87)
23,976
1,934
11,659
3,169
463
246,969
241,099
161,005
23,513
2.02
2.02
1.97
1.97
1.34
1.34
0.20
0.20
122,088,201
122,186,796
122,322,894 120,158,001 120,158,001
122,430,457 120,158,001 120,158,001
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED AUGUST 31, 2018, 2019 AND 2020
(Amounts in thousands)
Net income
Other comprehensive income, net of tax
Foreign currency translation adjustment
Other comprehensive income
Comprehensive income
Less: comprehensive income attributable to non-
controlling interests
Comprehensive income attributable to
ordinary shareholders
2018
RMB
2019
RMB
2020
RMB
248,903
252,758
164,174
112,264
112,264
361,167
3,247
3,247
256,005
106,387
106,387
270,561
1,934
11,721
3,140
USD
Note 2(g)
23,976
15,537
15,537
39,513
458
359,233
244,284
267,421
39,055
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands, except for share data)
Share capital
Additional
paid-in
capital
Balance at August 31, 2017
Net income for the year
Acquisition of subsidiaries (Note 23)
Issuance of ordinary shares upon follow on
offering, net of offering cost
Foreign currency translation adjustment
Repurchase of ordinary shares*
Share-based compensation (Note 18)
Disposal of a subsidiary
Balance at August 31, 2018
Net income for the year
Acquisition of subsidiaries (Note 23)
Capital injection
Foreign currency translation adjustment
Repurchase of ordinary shares*
Cancellation of treasury stock*
Share-based compensation (Note 18)
Issuance of ordinary shares upon vesting of
shares option (Note 18)
Cumulative-effect adjustment upon of
ASC606 (Note 2)
Balance at August 31, 2019
Net income for the year
Acquisition of subsidiaries (Note 23)
Capital injection
Foreign currency translation adjustment
Repurchase of ordinary shares*
Cancellation of Treasury Stock*
Share-based compensation(Note 18)
Provision for statutory reserves
Distribution of dividends to shareholders**
Distribution of dividends to non-controlling
shareholders
Disposal of a subsidiary (Note 23)
Balance at August 31, 2020 in RMB
Balance at August 31, 2020 in USD
Number of
shares
117,250,000
—
—
10,000,000
—
—
—
—
127,250,000
—
—
—
—
—
(6,679,183)
—
14,457
—
120,585,274
—
—
—
—
—
(569,732)
—
—
—
—
—
120,015,542
120,015,542
RMB
7
—
—
2
—
—
—
—
9
—
—
—
—
—
(1)
—
—
—
8
—
—
—
—
—
—
—
—
—
—
—
8
1
RMB
1,403,608
—
—
1,151,700
—
(114,554)
29,061
—
2,469,815
—
—
—
—
(417,149)
1
51,664
858
—
2,105,189
—
—
—
—
(56,058)
—
(10,631)
—
(184,238)
—
—
1,854,262
270,798
Accumulated Accumulated
(deficit)/
retained
earnings
RMB
other
comprehensive
(loss)/income
RMB
Statutory
reserves
RMB
64,945
—
—
—
—
—
—
—
64,945
—
—
—
—
—
—
—
—
—
64,945
—
—
—
—
—
—
622
—
—
—
65,567
9,575
(15,933)
246,969
—
—
—
—
—
—
231,036
241,099
—
—
—
—
—
—
—
204
472,339
161,005
—
—
—
—
—
(622)
—
—
—
632,722
92,403
(36,494)
—
—
—
112,264
—
—
—
75,770
—
—
—
3,185
—
—
—
—
—
78,955
—
—
—
106,416
—
—
—
—
—
—
—
185,371
27,072
Total
RMB
1,416,133
246,969
—
1,151,702
112,264
(114,554)
29,061
—
2,841,575
241,099
—
—
3,185
(417,149)
—
51,664
858
204
2,721,436
161,005
—
—
106,416
(56,058)
—
(10,631)
—
(184,238)
—
—
2,737,930
399,849
Non-
controlling
interests
RMB
3,325
1,934
166,718
—
—
—
—
(1,953)
170,024
11,659
179,429
500
62
—
—
—
—
158
361,832
3,169
27,583
2,650
(29)
—
—
—
—
—
(3,104)
(5,650)
386,451
56,438
Total
equity
RMB
1,419,458
248,903
166,718
1,151,702
112,264
(114,554)
29,061
(1,953)
3,011,599
252,758
179,429
500
3,247
(417,149)
—
51,664
858
362
3,083,268
164,174
27,583
2,650
106,387
(56,058)
—
(10,631)
—
(184,238)
(3,104)
(5,650)
3,124,381
456,287
The accompanying notes are an integral part of these consolidated financial statements.
Note*: The repurchase of ordinary shares is accounted for under the cost method whereby the entire cost of the acquired stock is recorded as
treasury stock. During the years ended August 31, 2018, 2019 and 2020, the Group repurchased a total of 1,207,465 , 5,471,718 and 1,096,312
shares from the market for a cash consideration of RMB 114,554, RMB 417,149 and RMB 56,058, respectively. Total of 6,679,183 and 569,732
shares have been cancelled by the Group during the years ended August 31, 2019 and 2020, respectively. As of August 31, 2020, the number of
treasury stock is 526,580.
Note**: Board of directors (the "Board") has approved and declared a cash dividend of US$0.10 and US$0.12 per ordinary shares in September
2019 and July 2020, respectively. The total amount of cash dividends distributed is US$26,000 (equivalents to RMB 184,238). The cash
dividend has been fully paid as of August 31, 2020.
F-6
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2018, 2019 AND 2020
(Amounts in thousands)
Note
2018
RMB
2019
RMB
2020
RMB
USD
Note 2(g)
Cash flows from operating activities
Net income for the year
Adjustments to reconcile net cash flows from operating activities:
Depreciation
Amortization of land use rights
Amortization of intangible assets
Noncash lease expense
Impairment loss on goodwill
Impairment loss on operating lease right-of-use assets
Finance costs
Loss on disposal of property and equipment
Share of equity in loss of unconsolidated affiliates
Share-based compensation
Gain on disposal of a subsidiary
Investment income
Deferred income taxes
Changes in operating assets and liabilities and other, net:
Accounts receivable
Inventories
Amounts due from related parties
Other receivables, deposits and other assets
Accounts payable
Amounts due to related parties
Accrued expenses and other current liabilities
Contract liabilities
Deferred revenue
Refund liabilities
Other assets and liabilities
Lease liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchase of short-term investments
Purchase of long-term investments
Proceed from redemption of short-term investments upon maturity
Additions of property and equipment and intangible assets
Proceeds from sale of property and equipment
Acquisition of subsidiaries, net of cash acquired of RMB 60,155, RMB 185,106 and RMB 41,413 in 2018, 2019 and
2020, respectively
Payment for acquisition deposits
Payment for an equity method investment
Disposal of a subsidiary, net of cash disposed of RMB 9,034, nil and RMB 6,192 in 2018, 2019 and 2020,
respectively
Net cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from follow-on offering, net of offering cost paid of RMB 5,996 in 2018
Advances from related parties
Repayments to related parties
Repurchase of ordinary shares
Dividend to shareholders
Dividend to non-controlling interests
Proceeds from bank loan
Repayment to bank loan
Proceeds from issuance of bonds
Issuance cost of bonds
Repurchase of bonds
Capital injection from non-controlling interests
Proceeds on exercise of stock options
Payment for acquisition of Hangzhou Impression
Payment for acquisition of Chengdu Yinzhe
Payment for acquisition of Xinqiao Group
Net cash provided by financing activities
Net increase in cash and cash equivalents, and restricted cash
Cash and cash equivalents and restricted cash at beginning of the year
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at end of the year
Supplemental disclosure of cash flow information:
Income tax paid
Non-cash investing activities:
For the year ended of August 31, 2018, 2019 and 2020
Acquisition of subsidiaries
Other payable related to stock repurchase
Accounts payable balance for acquisition of property and equipment
Amounts due to related parties balance for acquisition of property and equipment
Right-of-use assets obtained in exchange for the new operating lease liabilities (Note 15)
Decrease of Right-of-use assets for early termination
4
4
27
The accompanying notes are an integral part of these consolidated financial statements.
F-7
248,903
78,286
973
6,620
—
—
—
—
117
40
29,061
(2,443)
(19,226)
6,691
(424)
(468)
(7,674)
(13,948)
(2,738)
(5,865)
50,920
—
190,575
—
(5,184)
—
554,216
(1,897,000)
(190,920)
1,922,616
(117,556)
859
(179,571)
(8,854)
—
(2,034)
(472,460)
1,151,702
—
—
(108,938)
—
—
49,840
—
—
—
—
—
—
—
—
—
1,092,604
1,174,360
1,896,662
93,059
3,164,081
252,758
106,107
1,357
23,355
—
—
—
19,089
2,945
239
51,664
—
(7,373)
(4,549)
1,564
(14,723)
6,573
(10,516)
(3,477)
16,955
104,458
293,322
—
6,309
18,931
—
864,988
(688,360)
(13,416)
669,127
(155,204)
1,552
(1,721,123)
(338,585)
(10,000)
—
(2,256,009)
—
694,751
(694,751)
(417,149)
—
—
50,000
(50,021)
2,069,160
(32,971)
—
500
858
(21,000)
(30,375)
(89,469)
1,479,533
88,512
3,164,081
12,421
3,265,014
164,174
153,850
2,128
41,447
142,519
68,723
12,772
15,161
438
595
(10,631)
(14,865)
(211)
(12,971)
5,467
(1,345)
(7,868)
9,973
(7,876)
3,605
6,256
(25,249)
—
23,802
30,847
(109,514)
491,227
(2,156,550)
—
2,390,010
(149,763)
1,539
5,179
—
(42,000)
24,152
72,567
—
—
(8,732)
(56,058)
(184,238)
(3,104)
1,016,219
(50,000)
—
—
(10,659)
2,650
—
—
(30,375)
—
675,703
1,239,497
3,265,014
(80,574)
4,423,937
65,136
56,472
67,869
—
(5,616)
(5,751)
(27,869)
—
—
49,238
—
(8,738)
(16,909)
—
—
38,416
—
(13,038)
(15,545)
75,752
14,019
23,976
22,468
311
6,053
20,814
10,036
1,866
2,214
63
87
(1,553)
(2,171)
(31)
(1,894)
798
(196)
(1,149)
1,456
(1,150)
526
914
(3,687)
—
3,476
4,506
(15,994)
71,739
(314,944)
—
349,039
(21,872)
226
756
—
(6,134)
3,527
10,598
—
—
(1,275)
(8,187)
(26,906)
(454)
148,410
(7,302)
—
—
(1,557)
387
—
—
(4,436)
—
98,680
181,017
476,825
(11,767)
646,075
9,912
5,610
—
(1,904)
(2,270)
11,063
2,047
Table of Contents
BRIGHT SCHOLAR EDUCATION HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except for share and per share data, unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Bright Scholar Education Holdings Limited (the "Company") was incorporated under the laws of Cayman Islands
on December 16, 2016. The Company, its subsidiaries, schools, its variable interest entities (the "VIE"s) and its
VIEs' subsidiaries (collectively referred to as the "Group") are principally engaged in the provision of full spectrum
private fundamental education and complementary education services including kindergarten, primary, middle, high
school and international schools in the People's Republic of China (the "PRC"), and education programs and
services including independent schools and colleges in United Kingdom (the "UK"), the United States ( the "US")
and Canada.
As of August 31, 2020, details of the material Company's subsidiaries, its VIEs and the VIE's major subsidiaries and
schools were as follows:
Place of
establishment
Date of
establishment
Cayman
April 1, 2014
Equity interest
attributed to the
Group as of
August 31, 2020
Name
Major wholly owned subsidiaries:
Impetus Investment Limited ("Impetus")
Zhuhai Hengqin Bright Scholar Management Consulting Co.
Ltd ("Zhuhai Bright Scholar")
Time Education China Holdings Limited
Bright Scholar (Enlightenment) Investment Holdings Limited
Time Elan Education Technology Co., Ltd.
Shenzhen Qianhai Xingkeyucai Trading Co., Ltd.
Guangdong Bright Scholar Education Technology Co., Ltd.
Bright Scholar (UK) Holdings Limited
CATS Colleges Holdings Limited
Cambridge Arts and Science Limited
CATS Canterbury Limited
CATS College London Limited
CATS Academy Boston Inc.
Major subsidiaries and schools of VIE
Guangdong Country Garden Education Investment
Management Co., Ltd. ("BGY Education Investment")
Guangdong Country Garden School ("GCGS")
Huanan Country Garden School ("HCGS")
Huanan Country Garden Bilingual Kindergarten
Phoenix City Bilingual School ("PCBS")
Phoenix City Bilingual Kindergarten
Jurong Country Garden School
Country Garden Venice Bilingual School ("CGBS")
Lanzhou Country Garden School
The PRC
Hong Kong
Cayman
The PRC
The PRC
The PRC
The UK
The UK
The UK
The UK
The UK
The US
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
January 24, 2017
August 16, 2013
December 27, 2017
December 6, 2013
December 15, 2016
September 26, 2017
July 31, 2018
March 13, 2019
October 23, 1997
August 29, 2007
November 17, 2010
July 5, 2012
October 16, 2014
January 3, 1994
June 2, 2004
June 22, 2004
April 1, 2004
April 16, 2008
September 1, 2013
September 1, 2007
September 1, 2016
Principal activities
Investment holding
Management consulting service
Investment holding
Investment holding
Complementary education services
Complementary education services
Complementary education services
Investment holding
Investment holding
Overseas School
Overseas School
Overseas School
Overseas School
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Investment holding
100 %
100 % Kindergarten and formal education services*
100 %
100 %
100 %
100 %
100 % Kindergarten and formal education services*
100 %
100 % Kindergarten and formal education services*
Formal education services*
Kindergarten education services
Formal education services*
Kindergarten education services
Formal education services*
* Formal education services includes primary, middle, high and international school services in the PRC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The consolidated financial statements the Group have been prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP").
(b) Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, schools, its
VIEs and the VIEs' subsidiaries and schools. All inter-company transactions and balances have been eliminated
upon consolidation.
F-8
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(b) Principles of consolidation - continued
Consolidation of VIEs
PRC laws and regulations currently prohibit foreign ownership of companies and institutions providing compulsory
education services at primary and middle school levels, and restrict foreign investment in education services at the
kindergarten and high school level. In addition, the PRC government regulates the provision of education services
through strict licensing requirements.
Accordingly, the Company, through its WFOE, Zhuhai Bright Scholar, have entered into the following contractual
arrangements with BGY Education Investment, BGY Education Investment's schools and subsidiaries and BGY
Education Investment's shareholders that enable the Company to (1) have power to direct the activities that most
significantly affects the economic performance of the VIE, and (2) receive the economic benefits of the VIE that
could be significant to the VIE.
Agreements that provide the Group with effective control over the VIEs include:
Voting Rights Proxy Agreement & Irrevocable Power of Attorney
Under voting right proxy agreement and irrevocable power of attorney, each of the shareholders of BGY Education
Investment has executed a power of attorney to grant Zhuhai Bright Scholar the power of attorney to act on his or
her behalf on all matters pertaining to the BGY Education Investment and to exercise all of his or her rights as a
shareholder of BGY Education Investment, including but not limited to convene, attend and vote at shareholders’
meetings, designate and appoint directors and senior management members. The proxy agreement will remain in
effect unless Zhuhai Bright Scholar terminates the agreement by giving a prior written notice or gives its consent to
the termination by BGY Education Investment.
Exclusive Call Option Agreement
Under the exclusive call option agreement, each of the shareholders of BGY Education Investment granted Zhuhai
Bright Scholar or its designated representative(s) an irrevocable and exclusive option to purchase their equity
interests in BGY Education Investment when and to the extent permitted by PRC law. Zhuhai Bright Scholar or its
designated representative(s) has sole discretion as to when to exercise such options, either in part or in full. Without
Zhuhai Bright Scholar’s written consent, the shareholders of BGY Education Investment shall not transfer, donate,
pledge, or otherwise dispose any equity interests of BGY Education Investment in any way. The acquisition price
for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time when
the option is exercised. The agreement cannot be terminated by BGY Education Investment or their shareholders.
Equity Pledge Agreement
Under the equity pledge agreement, each of the shareholders pledged all of their equity interests in BGY Education
Investment to Zhuhai Bright Scholar as collateral to secure their obligations under the equity pledge agreements. If
the shareholders of BGY Education Investment breach their respective contractual obligations, Zhuhai Bright
Scholar, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests.
Pursuant to the agreement, the shareholders of BGY Education Investment shall not transfer, assign or otherwise
create any new encumbrance on their respective equity interest in BGY Education Investment without prior written
consent of Zhuhai Bright Scholar. The equity pledge right held by Zhuhai Bright Scholar will expire when the
shareholders of BGY Education Investment and Zhuhai Bright Scholar have fully performed their respective
obligations under the Consulting Services Agreement and Operating Agreement, or the shareholder is no longer a
shareholder of BGY Education Investment or the satisfaction of all its obligations by BGY Education Investment
under the VIE contractual arrangements.
F-9
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(b) Principles of consolidation - continued
The agreements that transfer economic benefits of BGY Education Investment to the Group include:
Exclusive Management Services and Business Cooperation Agreement
Under the exclusive management services and business cooperation agreement, BGY Education Investment engages
Zhuhai Bright Scholar as its exclusive technical and operational consultant and under which Zhuhai Bright Scholar
agrees to assist in business development and related services necessary to conduct BGY Education Investment’s
operational activities. BGY Education Investment shall not seek or accept similar services from other providers
without the prior written approval of Zhuhai Bright Scholar. The agreements will be effective as long as BGY
Education Investment exists. Zhuhai Bright Scholar may terminate this agreement at any time by giving a prior
written notice to BGY Education Investment.
Under the above agreements, the shareholders of BGY Education Investment irrevocably granted Zhuhai Bright
Scholar the power to exercise all voting rights to which they were entitled. In addition, Zhuhai Bright Scholar has
the option to acquire all of the equity interests in BGY Education Investment, to the extent permitted by the then-
effective PRC laws and regulations, for nominal consideration. Finally, Zhuhai Bright Scholar is entitled to receive
service fees for certain services to be provided to BGY Education Investment.
The Call Option Agreement and Voting Rights Proxy Agreement provide the Group with effective control over the
BGY Education Investment, while the Equity Pledge Agreements secure the obligations of the shareholders of BGY
Education Investment under the relevant agreements. Because the Group, through Zhuhai Bright Scholar, has (i) the
power to direct the activities of BGY Education Investment, that most significantly affect the entity's economic
performance and (ii) the right to receive substantially all of the benefits from BGY Education Investment, the Group
is deemed the primary beneficiary of BGY Education Investment. Accordingly, the Company consolidates BGY
Education Investment's financial results of operations, assets and liabilities in the Group's consolidated financial
statements.
The Group believes that the contractual arrangements with the VIEs are in compliance with the PRC law and
regulations and are legally enforceable. However, the contractual arrangements are subject to risks and uncertainties,
including:
● BGY Education Investment and their shareholders may have or develop interests that conflict with the Group’s
interests, which may lead them to pursue opportunities in violation of the aforementioned contractual
arrangements. If the Group cannot resolve any conflicts of interest or disputes between the Group and the
shareholders of BGY Education Investment, the Group would have to rely on legal proceedings, which could
result in disruption of its business, and there may be substantial uncertainty as to the outcome of any such legal
proceedings.
● BGY Education Investment and their shareholders could fail to obtain the proper operating licenses or fail to
comply with other regulatory requirements. As a result, the PRC government could impose fines, new
requirements or other penalties on the VIEs or the Group, mandate a change in ownership structure or
operations for the VIEs or the Group, restrict the VIEs or the Group’s use of financing sources or otherwise
restrict the VIEs or the Group’s ability to conduct business.
● The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the
relevant regulations, have a different interpretation of such regulations, or otherwise determine that the Group
or the VIEs have failed to comply with the legal obligations required to effectuate such contractual
arrangements.
● If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations,
the PRC government may restrict or prohibit the Group’s use of the proceeds of the additional public offering
to finance the Group’s business and operations in China.
F-10
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(b) Principles of consolidation - continued
The Group’s ability to conduct its business may be negatively affected if the PRC government were to carry out of
any of the aforementioned actions. As a result, the Group may not be able to consolidate BGY Education
Investment in its consolidated financial statements as it may lose the ability to exert effective control over BGY
Education Investment and their shareholders, and it may lose the ability to receive economic benefits from BGY
Education Investment.
The following amounts and balances of BGY Education Investment were included in the Group’s consolidated
financial statements after the elimination of intercompany balances and transactions.
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Short term investments
Accounts receivable, net of allowance of nil and nil as of
August 31, 2019 and 2020, respectively
Amounts due from related parties
Other receivables, deposits and other assets
Inventories
Total current assets
Restricted cash - non current
Property and equipment, net
Land use rights, net
Intangible assets, net
Goodwill
Long-term investments
Prepayments for construction contract
Deferred tax assets, net
Deposits for acquisition
Operating lease right-of-use assets non-current
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Accounts payable
Amounts due to related parties
Accrued expenses and other current liabilities
Short-term loan
Income tax payable
Contract liabilities
Refund liabilities
Operating lease liabilities
Total current liabilities
Deferred tax liabilities, net
Long-term loan
Operating lease liabilities – non current
Non-current portion of contract liabilities
Other non-current liabilities due to related parties
Other non-current liabilities due to third parties
Total non-current liabilities
TOTAL LIABILITIES
F-11
As of August 31
2019
RMB
2020
RMB
975,513
17,670
19,600
802
5,479
42,551
25,324
1,086,939
—
538,683
88,204
143,993
505,392
11,401
380
16,797
5,137
—
8,843
1,318,830
2,405,769
32,842
76,117
364,734
—
50,968
1,157,774
19,132
—
1,701,567
35,895
—
—
—
21,736
7,621
65,252
1,766,819
2,516,494
9,917
—
5,181
2,126
33,508
25,544
2,592,770
1,400
548,113
86,076
127,907
473,398
53,130
2,096
4,277
—
249,864
12,597
1,558,858
4,151,628
28,691
52,567
394,880
7,500
34,992
1,291,781
23,804
30,601
1,864,816
34,641
77,500
222,693
1,772
26,843
11,364
374,813
2,239,629
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(b) Principles of consolidation - continued
Total revenue
Net income
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in)/ provided by financing activities
Net increase in cash and cash equivalents and
2018
RMB
1,621,872
67,224
192,745
(82,407)
—
For the year ended August 31,
2019
RMB
2,102,396
47,898
730,145
(519,082)
(119,844)
2020
RMB
2,130,124
23,698
1,534,031
(47,946)
48,543
restricted cash
110,338
91,219
1,534,628
Cash and cash equivalents and restricted cash at
beginning of year
791,626
901,964
993,183
Cash and cash equivalents and restricted cash at
end of year
901,964
993,183
2,527,811
BGY Education Investment contributed an aggregate of 94.4%, 82.0% and 63.3% of the consolidated revenue for
the three years ended August 31, 2018, 2019 and 2020, respectively. As of August 31, 2019 and 2020, BGY
Education Investment accounted for an aggregate of 30.9% and 38.4%, respectively, of the consolidated total assets,
and 37.6% and 29.1%, respectively, of the consolidated total liabilities.
There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that
require the Company or its subsidiaries to provide financial support to BGY Education Investment. However, if
BGY Education Investment were ever to need financial support, the Group may, at its option and subject to statutory
limits and restrictions, provide financial support to its VIEs through loans to the shareholders of BGY Education
Investment or entrustment loans to BGY Education Investment.
The Group believes that there are no assets held in the BGY Education Investment that can be used only to settle
obligations of BGY Education Investment, except for registered capital and the PRC statutory reserves. As the BGY
Education Investment is incorporated as a limited liability company under the PRC Company Law, creditors of the
BGY Education Investment do not have recourse to the general credit of the Company for any of the liabilities of
the BGY Education Investment. Relevant PRC laws and regulations restrict BGY Education Investment from
transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the
Company in the form of loans and advances or cash dividends. Please refer to Note 26 for disclosure of restricted
net assets.
(c) Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual results may differ from these
estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the
Group's financial statements include purchase price allocation relating to business combination, assessment of
realization of deferred tax assets, impairment assessment of goodwill and long-lived assets, impairment assessment
on investments, valuation of share-based compensation and discount rate for leases. Actual results may differ
materially from those estimates.
F-12
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(d) Fair value
Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the
principal or most advantageous market in which it would transact and considers assumptions that market
participants would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its
entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or
liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1
that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data. The Group has short-term investment and long-term investment in
USD fund-linked notes that are measured at fair value with different maturity date and classified as level 2 fair value
measurements (see Note 4 and Note 10). Various inputs for the investment valuation, including time value, volatility
factors, current market and contractual prices for the underlying financial instruments, as well as other relevant
economic measures, substantially are observable in the marketplace, can be derived from observable data or are
supported by observable levels at which transactions are executed in the marketplace.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are
significant to the measurement of the fair value of the assets or liabilities.
The carrying values of financial instruments, which consist of cash and cash equivalents, restricted cash, short-term
investments, accounts receivable, amounts due from related parties, other receivables, deposits, accounts payable,
amounts due to related parties, short-term loan and other current liabilities are recorded at cost which approximates
their fair value due to the short-term nature of these instruments.
(e) Foreign currency translation
The Group’s reporting currency is Renminbi (“RMB”). The functional currency of the affiliates incorporated outside
of mainland China includes the United States dollar (“US dollar” or “US$”), Great Britain Pound ("GBP"), Hong
Kong dollar (“HKD” or “HK$”), and Canadian dollar (“CAD”). The functional currency of all the other subsidiaries
and the VIEs is RMB.
Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are
translated into the functional currencies at the prevailing rates of exchange at the balance sheet date. Nonmonetary
assets and liabilities are remeasured into the applicable functional currencies at historical exchange rates. Exchange
gains and losses are recognized in the consolidated statement of operation. All assets and liabilities are translated at
exchange rates at the balance sheet date and revenue and expenses are translated at the average yearly exchange
rates and equity is translated at historical exchange rate. Any translation adjustments are not included in determining
net income but are included in foreign exchange adjustment to other comprehensive income.
F-13
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(f) Foreign currency risk
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority
of the People’s Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is
subject to changes in central government policies, international economic and political developments affecting
supply and demand in the China Foreign Exchange Trading System market. The Group's cash and cash equivalents
and restricted cash denominated in RMB amounted to RMB 1,418,745 and RMB 2,915,649 as of August 31, 2019
and 2020, respectively.
(g) Convenience translation
The Group's reporting currency is RMB. However, periodic reports made to shareholders will include current period
amounts translated into US dollars using the then current exchange rates, for the convenience of the readers.
Translations of balances in the consolidated balance sheets, and the related consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows from RMB into US dollars as of and for the year ended
August 31, 2020 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB
6.8474, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board
on August 31, 2020. No representation is made that the RMB amounts could have been, or could be, converted,
realized or settled into US$ at that rate on August 31, 2020, or at any other rate.
(h) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks and highly liquid investments which are
unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.
(i) Restricted cash
The Group's restricted cash mainly represents (a) deposit held in a designated bank account for the sole purpose of
business operation including the establishment of new schools and subsidiaries; (b) deposit restricted as to
withdrawal or use under government regulations; and (c) deposits in connection with the long-term loan disclosed in
note 14.
(j) Investments
Short-term investments primarily consist of wealth management products, which are certain deposits with different
interest rates and fixed maturity dates ranging from three months to one year.
The Group reviews its short-term investments for other-than-temporary impairment (“OTTI”) based on the specific
identification method. The Group considers available quantitative and qualitative evidence in evaluating the
potential impairment of its short-term investments. If the cost of an investment exceeds the investments fair value,
the Group considers, among other factors, general market conditions, expected future performance of the investees,
the duration and the extent to which the fair value of the investment is less than the cost, and the Groups intent and
ability to hold the investments. OTTI is recognized as a loss in the consolidated statements of operations.
Long-term investments include held-to-maturity investment with maturity date which is longer than one year, equity
securities without readily determinable fair values and equity method investments.
● Equity securities without readily determinable fair values
F-14
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(j) Investments - continued
Starting on September 1, 2018, with the adoption of ASU 2016-01 Financial Instruments-Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), the Group elected a practicability
exception to fair value measurement for the equity securities without readily determinable fair values, under which
these investments are measured at cost, less impairment, plus or minus observable price changes of an identical or
similar investment of the same issuer with fair value change recorded in the consolidated statements of operations.
The Group reviews its equity securities without readily determinable fair value for impairment at each reporting
period. If a qualitative assessment indicates that the investment is impaired, the Group estimates the investment's
fair value in accordance with the principles of ASU 2011-4: Fair Value Measurement (ASC 820). If the fair value is
less than the investment's carrying value, the Group recognizes an impairment loss equal to the difference between
the carrying value and fair value in the consolidated statements of operations.
● Equity method investments
Investee companies over which the Group has the ability to exercise significant influence, but does not have a
controlling interest through investment in common shares or in-substance common shares, are accounted for using
the equity method. Significant influence is generally considered to exist when the Group has an ownership interest
in the voting stock of the investee between 20% and 50%, and other factors, such as representation on the investee's
board of directors, voting rights and the impact of commercial arrangements, are also considered in determining
whether the equity method of accounting is appropriate. For certain investments in limited partnerships, where the
Group holds less than a 20% equity or voting interest, the Group may also have significant influence.
Under the equity method, the Group initially records its investment at cost and subsequently recognizes the Group's
proportionate share of each equity investee's net income or loss after the date of investment into the consolidated
statements of operations and accordingly adjusts the carrying amount of the investment.
The Group reviews its equity method investments for impairment whenever an event or circumstance indicates that
an OTTI has occurred. The Group considers available quantitative and qualitative evidence in evaluating potential
impairment of its equity method investments. An impairment charge is recorded when the carrying amount of the
investment exceeds its fair value and this condition is determined to be other-than-temporary.
(k) Inventories
Inventories are stated at the lower of cost or net realizable value.
F-15
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(l) Property and equipment, net
Property and equipment is generally stated at historical cost and depreciated on a straight-line basis over the
estimated useful lives of the assets. Depreciation expense is included in either cost of revenue or selling, general and
administrative expenses, as appropriate. Property and equipment consist of the following and depreciation is
calculated on a straight-line basis over the following estimated useful lives:
Buildings
Leasehold improvement
Motor vehicles
Electronic equipment
Office equipment
Furniture and other equipment
Others
Construction in progress
20 - 50 years
3 – 20 years or the lesser of remaining life of lease
4 - 10 years
4 - 10 years
3 - 5 years
3 - 5 years
3 years
*
Note*: The Group constructs certain of its property. In addition to cost under the construction contracts, external
costs, including consulting fee directly related to the construction of such facilities, are capitalized. Depreciation is
recorded at the time assets are ready for the intended use.
The Group assesses lands with indefinite life for impairment periodically.
(m) Land use rights, net
Land use right represents the amount paid and relevant costs incurred for the Group's leases for the right of use of
land located in PRC and is recorded at cost less accumulated amortization. Amortization is provided over the term
of the land use right agreement on a straight-line basis over the term of the agreement, which is 40-50 years.
(n) Impairment of long-lived assets
The Group evaluates the recoverability of long-lived assets with determinable useful lives whenever events or
changes in circumstances indicate that an asset's carrying amount may not be recoverable. The Group measures the
carrying amount of long-lived asset against the estimated undiscounted future cash flows associated with it.
Impairment exists when the sum of the expected future net cash flows is less than the carrying value of the asset
being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its
fair value. Fair value is estimated based on various valuation techniques, including the discounted value of
estimated future cash flows. The evaluation of asset impairment requires the Group to make assumptions about
future cash flows over the life of the asset being evaluated. These assumptions require judgment and actual results
may differ from assumed and estimated amounts. The Group recorded nil, nil and RMB 12,772 impairment loss on
operating lease right-of-use assets during the year ended August 31, 2018, 2019 and 2020, respectively (Note 15).
(o) Goodwill, net
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable net assets
acquired in a business combination. Goodwill is not amortized but is tested for impairment on an annual basis as of
August 31, or more frequently if events or changes in circumstances indicate that it might be impaired. The Group
has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step
quantitative goodwill impairment test. In the qualitative assessment, the Group considers primary factors such as
industry and market considerations, overall financial performance of the reporting unit, and other specific
information related to the operations. The Group will perform the quantitative impairment test if the Group bypasses
the qualitative assessment, or based on the qualitative assessment, if it is more likely than not that the fair value of
each reporting unit is less than the carrying amount.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(o) Goodwill, net - continued
On September 1, 2019, the Group early adopted ASU No. 2017-04, Simplifying the Test for Goodwill Impairment,
which simplifies the accounting for goodwill impairment by eliminating Step two from the goodwill impairment
test. Under the new guidance, if the fair value of a reporting unit exceeds its carrying amount, goodwill is not
impaired and no further testing is required. If the fair value of a reporting unit is less than the carrying value, an
impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair
value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
The Group recorded nil, nil and RMB 68,723 impairment loss on goodwill during the years ended August 31, 2018,
2019 and 2020, respectively (Note 11).
(p) Intangible assets
Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible
asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows.
Intangible assets with indefinite lives consist of oversea schools' brand name and is tested for impairment annually,
or whenever events are indicators of impairment occur between annual impairment tests. Management expects to
use the brand name indefinitely.
Acquired intangible assets, other than goodwill, consist of trademarks and brand names, customer relationship,
backlog and student base, non-compete agreements and core curriculum are carried at cost, less accumulated
amortization and impairment. The amortization periods by major intangible asset classes are as follows:
Trademarks and brand names
Core curriculum
Customer relationship, backlog and student base
Non-compete agreements
Software
License
10 years-indefinite
10 years
0.6-7 years
4-8 years
5 years
3 years
The Group did not recognize any impairment loss on intangible assets during the years ended August 31, 2018,
2019 and 2020.
(q) Leases
Before September 1, 2019, the Group applies ASC Topic 840 (“ASC 840”), Leases, and each lease is classified at
the inception date as either a capital lease or an operating lease.
On September 1, 2019, the Group adopted the New Leasing Standard (“ASC 842”), using the modified retrospective
transition method resulting in the recording of operating lease right-of-use (ROU) assets of RMB1,906,562 and
operating lease liabilities of RMB 1,902,180 upon adoption. Prior period amounts have not been adjusted and
continue to be reported in accordance with the previous accounting guidance. The adoption of the new guidance did
not have a material effect on the consolidated statements of operations. As of August 31, 2020, the Group
recognized operating lease ROU assets of RMB 1,964,686 and total lease liabilities RMB 2,012,626, including non-
current portion at the amount of RMB 1,802,544.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(q) Leases - continued
The Group determines if an arrangement is a lease or contains a lease at lease inception. Operating leases are
required to be recorded in the balance sheets as ROU and lease liabilities, initially measured at the present value of
the lease payments. The Group has elected the package of practical expedients, which allows the Group not to
reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease
classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any expired or
existing leases as of the adoption date. The Group adopts the practical expedient to account for each separate lease
component and the non-lease components associated with that lease component as a single lease component. Lastly,
the Company also has elected to utilize the short-term lease recognition exemption and, for those leases that
qualified, the Group did not recognize operating lease ROU assets or operating lease liabilities.
As the rate implicit in the lease is not readily determinable, the Group estimates its incremental borrowing rate
based on the information available at the commencement date in determining the present value of lease payments.
The incremental borrowing rate is estimated in a portfolio approach to approximate the interest rate on a
collateralized basis with similar terms and payments in a similar economic environment. Lease terms may include
options to extend or terminate the lease when it is reasonably certain that the Group will exercise that option. Lease
expenses are recorded on a straight-line basis over the lease term.
The Group evaluates the carrying value of right-of-use assets, including the operating lease obligation of the asset
group if there are indicators of impairment and reviews the recoverability of the related asset group. If the carrying
value of the asset group determined to not be recoverable and is in excess of the estimated fair value, the Group
records an impairment loss in the consolidated statement of operations. Based on the impairment assessments of the
ROU assets, the Group recognized impairments of RMB 12,772 related to the value of certain operating lease right-
of-use assets as of August 31, 2020.
During the fiscal year ended August 31, 2020, the Group received Coronavirus Disease 2019 ("COVID-19") related
rent concessions. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in
April 2020, the Group elected to treat COVID-19-related rental discount as variable rent and applied payable
approach to COVID-19 related deferral of rent payment. Rental discount, amounting to RMB 2,719, were
recognized as an offset to rent expense within selling, general and administrative expenses and cost of revenue on
the Group's consolidated statement of operations. Deferral payments, amounting to approximately RMB 16,448,
were recognized as concession payable within accrued expenses and other current liabilities on the Group's
consolidated balance sheets.
(r) Revenue recognition
As of September 1, 2018, the Group adopted ASU 2014-09, Revenue from Contracts with Customers ("Topic 606")
and all subsequent ASUs that modified ASC 606, using the modified retrospective method for all contracts not
completed as of September 1, 2018. Results for reporting periods beginning on September 1, 2018 are presented
under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting
standards in effect for the prior periods.
Revenue is recognized when control of promised goods or services is transferred to the Group's customers in an
amount of consideration to which Group expects to be entitled to in exchange for those goods or services. The
Group follows the five steps approach for revenue recognition under Topic 606: (i) identify the contract(s) with a
customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the
group satisfies a performance obligation. The primary sources of the Group's revenues are as follows:
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(r) Revenue recognition - continued
Income from educational programs and services
The educational programs and services consist of tuition, boarding and meal service from international schools,
bilingual schools and kindergartens in the PRC and overseas schools in the UK, the US and Canada. Each contract
of educational programs and services is accounted for as a single performance obligation which is satisfied
proportionately over the service period. The program and service fee is generally collected in advance prior to the
beginning of each semester, or prior to the beginning of the education programs, and is initially recorded as contract
liabilities. Refunds are provided to students if they decide within the predetermined period that they no longer want
to take the course or enroll in the program. After the predetermined period as agreed in the contract, if a student
withdraws from the program, the program fee is no longer available for refund. The Group determines the
transaction price to be earned based on the tuition fee and the estimated refund liability. The refund liability is
determined based on historical refund ratio on a portfolio basis using the expected value method. Historically, the
Group has not had material refunds in this respect.
During the year ended August 31, 2020, in response to the COVID-19 pandemic, the Group temporarily stopped
providing offline tuition, boarding and meal services to students, instead it offered online tuition services to students
during the schools' temporary closure period, except for kindergartens. The amount of considerations relating to
boarding and meal services to all oversea schools students in which service have not been provided amount to RMB
45,833 are recognized as refund liability. The Company has refunded an insignificant amount of tuition service
related to the kindergarten students during the period, which were not provided. As of August 31, 2020, the Group
recorded RMB 14,078 refund liability related to the educational programs and services fee in the PRC.
Complementary training course and program fees
The Group offers various types of after-school tutoring services and art training services, which primarily consist of
after-school group class courses, personalized tutoring courses and art training courses. The tutoring services and art
training services are accounted for as a single performance obligation. Tutoring services and art training service fees
is recognized proportionately as the tutoring sessions and art training courses are delivered. The course fees are
generally collected in advance and are initially recorded as contract liability. Tuition refunds are provided to
students if they decide within the trial period that they no longer want to take the course. For certain courses, the
Group also offers refunds for any unutilized classes for students who withdraw from the course. The Group
determines the transaction price to be earned based on the tutoring services and art training service fees and the
estimated refund liability. The refund liability is determined based on historical refund ratio on a portfolio basis
using the expected value method.
Commission income
The Group earns commission revenue by providing referral services to overseas education universities and
institutions. Students' referral service is accounted for as a single performance obligation. Commission income is
recognized at the point in time when the referred students enrolled at the overseas education universities or
institutions' program, with the tuition fees are paid and upon the Group is entitled to the commission income.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(r) Revenue recognition - continued
Consulting service fees
The Group offers study abroad consulting and career consulting services to students/candidates who intend to study
abroad and to successfully obtain target job offer respectively. Study-abroad consulting services and career
consulting services are accounted for as a single performance obligation respectively. The Group charges each
student/candidate an up-front prepaid fee based on the scope of consulting services requested by the
student/candidate. Portion of the prepaid services fee are refundable if the student/candidate does not successfully
gain admission or obtain target job offer. The Group determines the transaction price to be earned based on the
consulting service fees and the estimated refund liability. The refund liability is determined based on historical
refund ratio on a portfolio basis using the expected value method. The Group has not experienced significant
refunds in the past or in the current year. The Group recognizes revenue over the consulting service period.
Camp service income
The Group offers camp services for students during school vacations. Camp service is accounted for as a single
performance obligation. Camp service fees are generally collected upfront and are initially recorded as contract
liability. Portion of the prepaid service fees are refundable if the student requests for refund prior to the camp starts.
The Group determines the transaction price to be earned based on the camp service fee and the estimated refund
liability. The refund liability is determined based on historical refund ratio on a portfolio basis using the expected
value method. The Group has not experienced significant refunds in current year. The Group recognizes revenue
over the camping period.
Practical expedients and exemptions
The Group has applied the new revenue standard requirements to a portfolio of contracts (or performance
obligations) with similar characteristics for transactions where it is expected that the effects on the financial
statements of applying the revenue recognition guidance to the portfolio would not differ materially from applying
this guidance to the individual contracts (or performance obligations) within that portfolio. Therefore, the Group
elects the portfolio approach in applying the new revenue guidance.
The Group has elected to record the incremental costs of obtaining a contract as an expense when incurred if the
amortization period of the asset that the entity otherwise would have recognized is one year or less.
(s) Cost of revenues
Cost of revenues consists of the following:
● staff costs, which primarily consist of salaries and other benefits for the teachers,
● education expenses, which primarily consist of expenses related to educational activities, including teaching
material expenses and student activity expenses,
● utilities and maintenance costs for the schools,
● cost of goods sold for ancillary services, which primarily consist of cost of goods sold at the on-campus
canteens,
● commission expenses to agents in relation to referral services and overseas school enrollment.
(t) Government Subsidies
The Group recognizes government subsidies as other operating income when they are received because they are not
subject to any past or future conditions, there are no performance conditions or conditions of use, and they are not
subject to future refunds. Government subsidies received and recognized as other operating income totaled RMB
9,088, RMB 9,419 and RMB 28,249 for the years ended August 31, 2018, 2019 and 2020, respectively. The
government subsidies income recognized for the year ended August 31, 2020 were primarily from the remuneration
compensation plan executed by UK government due to COVID-19.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(u) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be
recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets for amounts
more likely than not to be realized.
The determination of Group's provision for income taxes requires significant judgment, the use of estimates, and the
interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and
amounts of deductible and taxable items.
The Group record unrecognized tax benefit liabilities for known or anticipated tax issues based on the Group's
analysis of whether, and the extent to which, additional taxes will be due. The Group accrues interest and penalties
related to unrecognized tax benefits in other liabilities and recognizes the related expense in income tax expense.
(v) Employee Benefits
Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense
in profit or loss in the period during which services are rendered by employees. Pursuant to the relevant labor
rules and regulations in the PRC, the Group participates in defined contribution retirement schemes (the “Schemes”)
organized by the relevant local government authorities for its eligible employees whereby the Group is required to
make contributions to the Schemes at certain percentages of the deemed salary rate announced annually by the local
government authorities.
The Group provides housing subsidies benefit for certain employees of GCGS. In June 2018, the Group canceled
the housing subsidies benefit program, however, the employees who were entitled to the subsidy prior to the
cancelation are still eligible to claim the payments. The Group estimates the expenses and related costs on the basis
of the probability of GCGS’ entitled employees’ claiming for payment taking into consideration of assumptions
including the employees’ turnover rate and historical rate of claiming for payments.
The Company also makes payments to other defined contribution plans for the benefit of employees employed by
subsidiaries outside of the PRC (see Note 25).
The Group has no other material obligation for payment of pension benefits associated with those schemes beyond
the annual contributions described above.
(w) Share-based compensation
Share-based payment transactions with employees are measured based on the grant date fair value of the equity
instrument issued and recognized as compensation expense net of a forfeiture rate on a straight-line basis, over the
requisite service period, with a corresponding impact reflected in additional paid-in capital.
For the share option with both service condition and performance condition, the Group recognizes the compensation
cost, net of estimated forfeitures, if it is probable that the performance condition will be achieved at the end of each
reporting period.
The Group will reassess the probability of achieving the performance conditions at each reporting period and record
a cumulative catch-up adjustment for any changes to its assessment.
For the share option with service condition only, changes in estimated forfeiture rate will be adjusted on a
prospective basis.The estimate of forfeiture rate will be adjusted over the requisite service period to the extent that
actual forfeiture rate differs, or is expected to differ, from such estimates.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(x) Comprehensive income
Comprehensive income is defined to include all changes in equity from transactions and other events and
circumstances from non-owner sources. For the years presented, the Group’s comprehensive income includes net
income and foreign currency translation adjustments and is presented in the consolidated statements of
comprehensive income.
(y) Segment
The Group uses management approach to determine operating segment. The management approach considers the
internal organization and reporting used by the Group's chief operating decision maker ("CODM'') for making
decisions, allocation of resource and assessing performance. The CODM had previously been identified as the Chief
Executive Officer. Due to the reorganization of the business units and change in internal reporting, the CODM has
been defined as the management committee who reviews the financial information of the six operating and
reportable segments when making decisions about allocation of resources and assessing performance. The Group
operates in six reportable segments, including International Schools, Bilingual Schools, Kindergartens, Overseas
Schools, Education technology and Complementary Education Services. The change in segment reporting was
reflected retrospectively and is presented in Note 24 of the Notes to the consolidated financial statements.
(z) Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist
primarily of cash and cash equivalents, restricted cash, short-term investments and long-term investments. As of
August 31, 2020, substantially all of the Group's cash and cash equivalents, term deposits, short-term investments
and long-term investments were deposited with financial institutions with high-credit ratings.
(aa) Earnings per Share
Basic earnings per share are computed by dividing earning attributable to holders of ordinary shares by the weighted
average number of ordinary shares outstanding during the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common shares were exercised into common shares.
The Group had share options which could potentially dilute basic earnings per ordinary share in the future. To
calculate the number of shares for diluted earnings per ordinary shares, the effect of the share options is computed
using the treasury stock method.
(ab) Recent accounting pronouncements adopted
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (ASC 842
). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating
leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially
measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee
is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public
companies, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. Early application of the guidance is permitted. In July 2018, ASU 2016-02 was updated
with ASU 2018-11, Targeted Improvements to ASC 842, which provides entities with relief from the costs of
implementing certain aspects of the new leasing standard. Specifically, under the amendments in ASU 2018-11, (1)
entities may elect not to recast the comparative periods presented when transitioning to ASC 842 and (2) lessors
may elect not to separate lease and nonlease components when certain conditions are met. Before ASU 2018-11 was
issued, transition to the new lease standard required application of the new guidance at the beginning of the earliest
comparative period presented in the financial statements.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
The Group adopted this standard on September 1, 2019 and elected not to recast the comparative periods presented.
In addition, the Group accounts for lease and non-lease components separately. The consolidated balance sheets and
the consolidated statements of operations and cash flows for reporting periods beginning after September 1, 2019
are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance
with the historic accounting under ASC 840. The adoption did not have a material impact on the Group’s
consolidated statements of operations or consolidated statements of cash flows, and the adoption of ASC 842 did
not result in a cumulative-effect adjustment to the opening balance of retained earnings. Further information is
disclosed in Note 15.
In January 2017, the FASB issued ASU 2017-04: Intangibles—Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2
from the goodwill impairment test. Under the amendments in this update, an entity should perform its annual, or
interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity
should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s
fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting
unit. The update also eliminates the requirements for any reporting unit with a zero or negative carrying amount to
perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment
test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the
quantitative impairment test is necessary. The update should be applied on a prospective basis. An entity is required
to disclose the nature of and reason for the change in accounting principle upon transition. A public business entity
that is a SEC filer should adopt the amendments in this update for its annual or any interim goodwill impairment
tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017. The Group early adopted ASU 2017-04 for the
annual goodwill impairment test on September 1, 2019.
(ac)Recent accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses (Topic 326) Measurement of
Credit Losses on Financial Instrument. This ASU significantly changes how entities will measure credit losses for
most financial assets and certain other instruments that are not measured at fair value through net income. The
standard will replace today's incurred loss approach with an expected loss model for instruments measured at
amortized cost. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in which the guidance is effective. In April 2019, the FASB issued
ASU 2019-04, Codification Improvements to Topic 326, which clarifies the scope of the credit losses standard and
address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments,
among other things. In addition, in May 2019, the FASB issued ASU 2019-05, Financial Instruments: Credit Losses
(Topic 326), Targeted Transition Relief. The ASU provides an option to irrevocably elect the fair value option for
certain financial assets previously measured at amortized cost basis. The ASUs are effective for fiscal years
beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted
for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The Group is in
the process of completing the assessment of the impact on its consolidated financial statements from the adoption of
the new guidance.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
(ac)Recent accounting pronouncements not yet adopted - continued
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—
Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU improve the
effectiveness of fair value measurement disclosures and modify the disclosure requirements on fair value
measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement,
Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the
consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in
unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop
Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied
prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All
other amendments should be applied retrospectively to all periods presented upon their effective date. Early
adoption is permitted. The Group does not expect any material impact on its consolidated financial statements and
related disclosures as a result of adopting this standard.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related
Party Guidance for Variable Interest Entities. ASU 2018-17 changes how entities evaluate decision-making fees
under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest,
an entity considers indirect interests held through related parties under common control on a proportional basis,
rather than in their entirety. The amendments in this ASU are effective for public business entities with fiscal years
beginning after December 15, 2019, and interim periods within those fiscal years. All entities are required to apply
the amendments in this ASU retrospectively with a cumulative-effect adjustment to retained earnings at the
beginning of the earliest period presented. Early adoption is permitted. The Group is in the process of evaluating the
impact of the adoption of this pronouncement on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by
eliminating certain exceptions to the guidance in ASC740 related to the approach for intra-period tax allocation, the
methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for
outside basis differences. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and
interim periods within those annual periods, with early adoption permitted. The Group is in the process of
evaluating the impact of the adoption of this pronouncement on its consolidated financial statements.
3. BUSINESS COMBINATION
Business combinations in fiscal year 2019:
Acquisition of Chengdu Yinzhe
On December 1, 2018, the Group acquired 75% equity interest of Chengdu Yinzhe Education and Technology Co.,
Ltd. and its subsidiaries ("Chengdu Yinzhe") with a total consideration of approximately RMB 188,299. As of
August 31, 2019, the total unpaid discounted consideration was RMB 49,238, which will be paid in 2.5 years and
recorded in amounts due to related parties and other non-current liability due to related parties (non-controlling
shareholder of Chengdu Yinzhe) in the consolidated balance sheets. In fiscal year 2020, the Company paid cash
consideration RMB 30,375 according to the share purchase agreement. As of August 31, 2020, the unpaid
discounted consideration was RMB 21,736, which will be paid in 1.5 years and recorded in amounts due to related
parties and other non-current liability due to related parties in the consolidated balance sheets. Chengdu Yinzhe is
primarily engaged in offering online career and education counselling services to Chinese students overseas.
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3. BUSINESS COMBINATION - continued
In addition, certain retained management team members of Chengdu Yinzhe have the right to receive up to an
additional RMB 6,464 in cash, based upon continued employment and financial performance condition of Chengdu
Yinzhe. Payouts under the agreements are contingent upon the future employment of these management team
members with the Company and achievement of the financial performance condition, and therefore were not
included as consideration in recording the business combination but will be recorded as compensation expense as
earned. During the year ended August 31, 2019 and 2020, the Company has accrued RMB 1,616 and RMB 2,155 as
expenses based on the estimated probability of meeting such conditions. The unpaid amounts due to the retained
management team members are recorded in other non-current liabilities in the consolidated balance sheets.
The acquisition of 75% equity interest of Chengdu Yinzhe has been accounted for using the acquisition method of
accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date of
acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired and liabilities assumed was recorded as goodwill, which is not tax deductible. The results of these
acquired entities' operations have been included in the consolidated financial statements since the date of
acquisition. The purchase price was allocated as of December 1, 2018, the date of acquisition, as follows:
Cash and cash equivalents
Other current assets
Property and equipment, net
Intangible assets
Software
Non-compete agreement
Trademark
Goodwill
Other investment
Account payables
Other current liabilities
Deferred tax liabilities
Contract liabilities
Non-controlling interests
Total consideration and value to be allocated to net
assets
Amortization
period
3-5 years
5 years
6 years
10 years
RMB
81,197
920
551
2,600
4,000
32,000
192,510
1,500
(2,766)
(5,695)
(5,674)
(50,078)
(62,766)
188,299
The identifiable tangible and intangible assets acquired and any non-controlling interests in the acquiree are required
to be recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets
either the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination.
Fair value of fixed assets acquired approximates the net book value of these assets. The goodwill was assigned to
the complementary education services segment as a result of these acquisitions. The goodwill was primarily
attributable to the synergy from growth in the student base, program designing, developing and marketing and the
optimization of IT system.
Acquisition of Hangzhou Impression
On December 1, 2018, the Group acquired 70% equity interest of Hangzhou Impression Arts Training Limited Co.,
Ltd. ("Hangzhou Impression") with a total cash consideration of RMB 70,000, which has been fully paid as of
August 31, 2019. Hangzhou Impression is a Zhejiang-based art training institution providing training services to art
students.
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3. BUSINESS COMBINATION - continued
The acquisition of 70% equity interest of Hangzhou Impression has been accounted for using the acquisition method
of accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date of
acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired was recorded as goodwill which is not tax deductible. The results of these acquired entities'
operations have been included in the consolidated financial statements since the date of acquisition. The purchase
price was allocated as of December 1, 2018, the date of acquisition, as follows:
Cash and cash equivalents
Other current assets
Property and equipment, net
Intangible assets
Brand name
Backlog
Non-compete agreement
Goodwill
Other current liabilities
Contract liabilities
Deferred tax liabilities
Non-controlling interests
Total consideration and value to be allocated to net assets
Amortization
period
3-5 years
20 years
0.6 year
4 years
RMB
24,224
533
1,059
17,100
1,800
3,300
76,766
(9,510)
(9,722)
(5,550)
(30,000)
70,000
The identifiable tangible and intangible assets acquired and any non-controlling interests in the acquiree are required
to be recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets
either the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination.
Fair value of fixed assets acquired approximates the net book value of these assets. The goodwill was assigned to
the complementary education services segment as a result of these acquisitions. The goodwill was primarily
attributable to the synergy from the joint students recruiting events and channel.
Acquisition of Shandong-based Qiqiaoban
On March 1, 2019, the Group acquired 85% equity interest of Heze Qiqiaoban Education Technology Limited and
its eight kindergartens ("Shandong-based Qiqiaoban") with a total cash consideration of RMB 70,550, which has
been paid in full as of August 31, 2019. Shandong-based Qiqiaoban operates eight kindergartens under the brand
name of "Qiqiaoban" in Heze, the PRC.
F-26
Table of Contents
3. BUSINESS COMBINATION - continued
The acquisition of 85% equity interest of Shandong-based Qiqiaoban has been accounted for using the acquisition
method of accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date
of acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired was recorded as goodwill which is not tax deductible. The results of these acquired entities'
operations have been included in the consolidated financial statements since the date of acquisition. The purchase
price was allocated as of March 1, 2019, the date of acquisition, as follows:
Cash and cash equivalents
Other current assets
Property and equipment, net
Intangible assets
Brand name
Customer relationship
Non-compete agreement
Goodwill
Other current liabilities
Contract liabilities
Deferred tax liabilities
Non-controlling interests
Total consideration and value to be allocated to net assets
RMB
Amortization
period
5,250
2,010
12,817 3-50 years
20 years
3.5 years
4.8 years
13,600
6,200
3,200
52,514
(2,706)
(4,135)
(5,750)
(12,450)
70,550
The identifiable tangible and intangible assets and any non-controlling interests in the acquiree are required to be
recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets either
the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination. Fair
value of fixed assets acquired approximates the net book value of these assets. The goodwill was assigned to the
domestic kindergarten segment as a result of these acquisitions.
Acquisition of Wuhan Sannew
On May 1, 2019, the Group acquired 80% equity interest of Wuhan Sannew Education Development Co., Ltd. and
its subsidiaries ("Wuhan Sannew") with a total cash consideration of RMB 296,850, which has been fully paid as of
August 31, 2019. Wuhan Sannew operates an American style private boarding school in Wuhan.
F-27
Table of Contents
3. BUSINESS COMBINATION - continued
The acquisition of 80% equity interest of Wuhan Sannew has been accounted for using the acquisition method of
accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date of
acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired was recorded as goodwill which is not tax deductible. The results of these acquired entities'
operations have been included in the consolidated financial statements since the date of acquisition. The purchase
price was allocated as of May 1, 2019, the date of acquisition, as follows:
Cash and cash equivalents
Other current assets
Property and equipment, net
Land use rights
Intangible assets
Brand name
Customer relationship
Non-compete agreement
Goodwill
Other current liabilities
Contract liabilities
Deferred tax liabilities
Non-controlling interests
Total consideration and value to be allocated to net assets
F-28
RMB
Amortization
period
3-50 years
50 years
20 years
5 years
7.7 years
5,559
2,614
177,754
55,840
25,700
10,900
18,100
125,155
(16,001)
(17,295)
(17,263)
(74,213)
296,850
Table of Contents
3. BUSINESS COMBINATION - continued
The identifiable tangible and intangible assets acquired and any non-controlling interests in the acquiree are required
to be recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets
either the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination.
The goodwill was assigned to the domestic international schools segment as a result of these acquisitions.
Acquisition of CATS
On July 12, 2019, the Group acquired 100% equity interest of CATS Colleges Holdings Limited and its subsidiaries
("CATS"), with a total consideration of GBP 150,460 (with equivalent to RMB 1,299,365), including GBP 40,208
cash consideration and GBP 110,252 of debt settlement on behalf of CATS. Total consideration has been fully paid
as of August 31, 2019. CATS provides education services to international students with global campuses located
across the United Kingdom, the United States, and Canada.
The acquisition of 100% equity interest of CATS has been accounted for using the acquisition method of
accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date of
acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired was recorded as goodwill which is not tax deductible. The results of these acquired entities'
operations have been included in the consolidated financial statements since the date of acquisition. The purchase
price was allocated as of July 12, 2019, the date of acquisition, as follows:
Cash and cash equivalents
Account receivable, net
Other current assets
Property and equipment, net
Deferred tax assets
Intangible assets
Brand name
Student base
Goodwill
Other current liabilities
Contract liabilities
Deferred tax liabilities
Total consideration and value to be allocated to net assets
Amortization
Period
3 years-
indefinite or the
lesser of
remaining of
life of lease
Indefinite
1 year
RMB
68,616
22,044
80,684
116,911
12,875
342,925
16,348
1,025,504
(179,214)
(200,098)
(7,230)
1,299,365
The identifiable tangible and intangible assets and any non-controlling interests in the acquiree are required to be
recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets either
the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination. The
goodwill was assigned to the overseas schools segment as a result of these acquisitions. The goodwill was primarily
attributable to the synergy from the joint students recruiting events and channel, program designing, developing and
marketing, and teacher training and recruiting opportunities.
Other acquisitions
On December 1, 2018, the Group acquired 100% equity interest of Bournemouth Collegiate School ("BCS") with a
total cash consideration of approximately RMB 91,958, which has been fully paid as of August 31, 2019. BCS is an
independent co-educational day and boarding school for pupils aged 2 to18, located in Bournemouth, Dorset,
England. The goodwill acquired from the acquisition was insignificant.
F-29
Table of Contents
3. BUSINESS COMBINATION - continued
Pro forma results of acquisitions (unaudited)
The following table summarizes unaudited pro forma results of operations for the years ended August 31, 2018 and
2019, assuming that these acquisitions occurred as of the beginning of the comparable annual reporting period.
These pro forma results have been prepared for comparative purpose only based on management's best estimate and
do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions
occurred as of the beginning of period:
Pro forma for the year ended August 31, 2018 and 2019
Pro forma revenue
Pro forma income from operations
Pro forma net income attributable to the Group
Business combinations in fiscal year 2020:
2018
2019
Unaudited
Unaudited
2,567,416
309,667
263,314
3,262,903
378,279
299,833
Acquisition of St. Michael's School ("STM") and Bosworth Independent School ("BIC")
On September 2, 2019, the Group acquired 100% equity interest of STM and BIC, with a total consideration of GBP
40,730 (with equivalent to RMB 352,699). Prior to fiscal year 2020, the Group has made a deposit of GBP 38,310
(approximately RMB 333,348 ), and remaining consideration has been fully paid as of August 31, 2020. STM and
BIC provide independent boarding education services to students from the UK and abroad in the UK.
The acquisition of 100% equity interest of STM and BIC has been accounted for using the acquisition method of
accounting, and accordingly, the acquired assets and liabilities were recorded at their fair value at the date of
acquisition. The Group engaged a third party valuation firm to assist with the valuation of assets acquired and
liabilities assumed in this business combination. The excess of the total consideration over the fair value of the
assets acquired was recorded as goodwill which is not tax deductible. The results of these acquired entities’
operations have been included in the consolidated financial statements since the date of acquisition. The purchase
price was allocated as of September 2, 2019, the date of acquisition, as follows:
Cash and cash equivalents
Account receivable, net
Other current assets
Property and equipment, net
Intangible assets
Brand names
Student base
Goodwill
Other current liabilities
Contract liabilities
Deferred tax liabilities
Total consideration and value to be allocated to net assets
Amortization
period
4-50 years
Indefinite
7 years
RMB
18,076
737
21,474
149,635
45,063
5,509
161,831
(8,232)
(32,324)
(9,070)
352,699
The identifiable tangible and intangible assets and any non-controlling interests in the acquiree are required to be
recognized and measured at fair value as of the acquisition date. An intangible asset is identified if it meets either
the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination. The
goodwill was assigned to the overseas schools segment as a result of these acquisitions. The goodwill was primarily
attributable to the synergy from the joint students recruiting events and channel, program design, development and
marketing, and teacher training and recruitment opportunities.
F-30
Table of Contents
3. BUSINESS COMBINATION - continued
Other acquisitions
During the year ended August 31, 2020, the Group made two other business acquisitions.
The Group acquired 51% equity interest of Shanghai Huodai Business Information Consulting Co., Ltd.
(“Linstitute”) with a total consideration of approximately RMB 28,709. As of August 31, 2020, the total unpaid
consideration was RMB 16,469, at present value, which will be paid in 2.75 years and recorded in amounts due to
related parties and other non-current liability due to related parties (non-controlling shareholder of Linstitute) in the
consolidated balance sheets. The goodwill and non-controlling interests acquired from the acquisition were
approximately RMB 47,799 and RMB 27,583, respectively. The Group also has options to purchase additional 29%
equity interest in Linstitute if certain performance condition are met.
The Group acquired 100% equity interest of a company, which is primarily engaged in education services in China,
for which the cash consideration of approximately RMB 5,500 was paid in full as of August 31, 2020. The goodwill
acquired from the acquisition was insignificant.
Pro forma results of acquisitions (unaudited)
The following table summarizes the unaudited pro forma results of operations for the years ended August 31, 2019
and 2020, assuming that these acquisitions occurred as of the beginning of the comparable annual reporting period.
These pro forma results have been prepared for comparative purpose only based on management's best estimate and
do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions
occurred as of the beginning of period:
Pro forma for the year ended August 31, 2019 and 2020
Pro forma revenue
Pro forma income from operations
Pro forma net income attributable to the Group
2019 Unaudited 2020 Unaudited
3,397,563
308,057
161,251
3,380,844
380,311
305,239
4. SHORT-TERM INVESTMENTS
Short-term investments consist primarily of wealth management products, which are certain deposits with different
interest rates and fixed maturity dates ranging from three months to one year. The Group has the positive intent and
ability to hold the investments to maturity. There has been no impairment recognized and no sales of any short
term investments before maturities during the periods presented. Due to the short term nature of investments, the
carrying amount approximates its fair value.
As of August 31, 2019, the balance of short-term investments amount to RMB 241,270, which consists of
investment in a USD fund-linked note with a maturity date on May 28, 2020 (the "Notes"), representing
approximately RMB 221,670, and a PRC bank wealth management product with an aggregate amount of RMB
19,600. The Notes was redeemed at the maturity date at the amount of its notional amount of USD 30,000 in the
year ended August 31, 2020.
As of August 31, 2020, the balance of short-term investments pertains to investments in a USD Global Medium
Term Note (the "GMT Note") with a maturity date on May 4, 2021 with an aggregate notional amount of USD
2,000 (approximately RMB 13,695).
F-31
Table of Contents
5. OTHER RECEIVABLES, DEPOSITS AND OTHER ASSETS
Other receivables, deposits and other assets consisted of the following:
Other receivables from third parties (a)
Advances to employees
Deposits
Interest receivable
Prepaid tax and deductible value-added tax-in
Rental prepayment (b)
Prepayment for suppliers
Others
Total
As of August 31,
2020
RMB RMB
2019
69,857
10,207
11,914
1,830
8,929
20,108
36,351
17,954
177,150
70,452
17,027
16,977
4,517
16,811
6,375
43,308
23,126
198,593
(a) Other receivables from third parties includes USD 8,711(approximately RMB 59,648) deposit paid for
acquisition of equity interest of an US education group. The deposit was expected to be repaid in August
of 2020 and was classified as current asset in prior year due to the termination agreed by contract parties.
As of the date of this financial statements, the Company is in active negotiation on the repayment
arrangement with the seller.
(b) Rental prepayment represents the prepayment of rent related to leases less than 12 months.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
Lands
Buildings
Leasehold improvement
Motor vehicles
Electronic equipment
Office equipment
Furniture and other equipment
Others
Less: accumulated depreciation
Construction in progress
Property and equipment, net
2019
RMB
60,142
As of August 31,
2020
RMB
66,467
912,986
435,153
15,660
59,266
123,915
124,810
84,529
767,368
21,172
1,076,590
750,458
342,860
13,449
49,744
101,401
114,421
51,191
613,913
29,757
899,510
For the years ended August 31, 2018, 2019 and 2020, depreciation expenses were RMB 78,286, RMB 106,107 and
RMB 153,850 respectively.
7. LAND USE RIGHTS, NET
Land use rights, net, consisted of the following:
Cost
Less: accumulated amortization
Land use rights, net
F-32
As of August 31,
2020
2019
RMB
RMB
94,760
8,684
86,076
94,760
6,556
88,204
Table of Contents
7. LAND USE RIGHTS, NET - continued
The lease period of the land use rights in PRC is 40-50 years. For the years ended August 31, 2018, 2019 and 2020,
amortization expenses were RMB 973, RMB 1,357, and RMB 2,128 respectively.
8. INTANGIBLE ASSETS, NET
Intangible assets, net, consisted of the following:
Brand names
with indefinite lives
with definite lives
Trademarks
Customer relationship
Non-compete agreements
Student base
Others*
Total costs
Less: accumulated amortization
Intangible assets, net
As of August 31,
2020
RMB RMB
2019
345,624
104,586
32,016
35,100
45,700
16,476
6,500
586,002
33,991
552,011
411,240
113,786
32,016
35,100
49,100
23,152
9,190
673,584
76,057
597,527
* Others include core curriculum, software, backlog and license.
Amortization expenses for the intangible assets for the years ended August 31, 2018, 2019 and 2020 were RMB
6,620, RMB 23,355 and RMB 41,447 respectively. As of August 31, 2020, the estimated amortization expenses
related to intangible assets for each of the next five years is expected to be RMB 29,087, RMB 26,715,
RMB 21,535, RMB 19,172, and RMB 15,199 respectively.
9. DEPOSITS FOR ACQUISITION
On May 20, 2019, The Group entered into an agreement to acquire the equity interests in a company engaged in
education services for a total consideration of RMB 5,500. As of August 31, 2019, the Group paid RMB 5,137 as
the deposit for the acquisition. The acquisition was completed during the year ended August 31, 2020 and the
deposit paid was applied to the total purchase price (see Note 3 for details).
During the year ended August 31, 2019, the Group made a deposit of GBP 38,310 (approximately RMB 333,448)
relating to the acquisition of 100% equity interests of STM and BIC in the UK. The acquisition was completed
during the year ended August 31, 2020 and the deposit paid was applied to the total purchase price (see Note 3 for
details).
F-33
Table of Contents
10. LONG-TERM INVESTMENTS
Long-term investments, consisted of the following:
Equity method investments:
Foshan Yingrui Gaoze Equity Investment Partnership (Limited
Partnership) ("Gaoze Partnership") (a)
Startcamp Education Technology Limited ("Startcamp") (b)
BOTO Academic English Co., Ltd. ("BOTO") (c)
Other investments (d)
Equity securities without readily determinable fair value (e)
Held-to-maturity investments (f)
Total
As of August 31,
2020
2019
RMB RMB
— 42,000
9,362
1,468
724
1,583
—
55,137
9,901
1,483
777
1,583
14,711
28,455
(a)
In June 1, 2020, Gaoze Partnership was established with the total committed capital of RMB 1,270,000. The
Group participates in Gaoze Partnership as a limited partner and invested RMB 42,000 as of August 31, 2020.
The Group accounts for the investment under the equity method in accordance with ASC 323 because the
Group is a limited partner and owns 19.84% interest in Gaoze Partnership.
(b) The Group acquired 25% equity interest in Startcamp for total cash consideration RMB 10,000 in the year
ended August 31, 2019. The Group accounts for the investment under the equity method because the Group has
the ability to exercise significant influence but does not have control over the investee. Loss of RMB 99 and
RMB 539 was recorded for the year ended August 31, 2019 and 2020, respectively.
(c) The Group holds 30% equity interest in BOTO through acquisition of Can-achieve group. The Group accounts
for the investment under the equity method because the Group has the ability to exercise significant influence
but does not have control over the investee. Loss of RMB 25, RMB 21 and RMB 15 were recorded for the
years ended August 31, 2019 and 2020, respectively.
(d) The other investments include 46% equity interest in Beijing Cloud Apply Co., Ltd. through the acquisition of
Can-achieve Group and 50% equity interest in Sanli Foundation Education Limited through the acquisition of
FGE Group. The Group accounts for these investments under the equity method because the Group has the
ability to exercise significant influence but does not have control over the investees. Loss of RMB 18, RMB 32
and RMB 53 were recorded for the years ended August 31, 2019 and 2020, respectively.
(e) The Group accounted for these equity investments using the measurement alternative when equity method is
not applicable and there is no readily determinable fair value for the investments. No impairment loss was
recorded during the years ended August 31, 2018, 2019 and 2020, respectively.
(f) Held-to-maturity investments primarily consist of wealth management products, which are certain deposits
with different interest rates and fixed maturity dates of more than one year. As of August 31, 2019, the Group's
long-term investments pertains to investments in the GMT Note with a maturity date of May 4, 2021 and an
aggregate notional amount of USD 2,000 (approximately RMB 13,695). The GMT Note will be redeemed at
the maturity date at an amount determined by reference to the performance of the underlying fund and such
performance will therefore affect the nature and value of the investment return on the GMT Note. As of August
31, 2019, the carrying amount of the GMT Note was RMB 14,711; and it has been reclassified as short-term
investments as of August 31, 2020.
F-34
Table of Contents
11. Goodwill
The following table summarizes the change in the carrying amount of goodwill by segment for the years ended
August 31, 2020 and 2019:
International
Schools
RMB
Kindergartens
RMB
Overseas
Schools
RMB
Complementary Education
Education Services Technology
RMB
RMB
Total
RMB
Balance as of August
31, 2018
Additions (a)
Exchange realignment
Balance as of August
31, 2019
Additions (a)
Disposal (b)
Impairment (c)
Exchange realignment
Balance as of August
31, 2020
—
125,155
—
125,155
—
—
(68,723)
—
119,735
—
52,514 1,025,504
8,118
—
172,249 1,033,622
161,831
—
—
64,194
2,704
—
—
—
489,776
609,511
76,766 192,510 1,472,449
8,118
—
—
—
566,542 192,510 2,090,078
212,334
47,799
(13,774)
—
(68,723)
—
64,194
—
—
(13,774)
—
—
56,432
174,953 1,259,647
552,768 240,309 2,284,109
Note:
(a) For the year ended August 31, 2019, the addition to goodwill reflects the excess of the consideration paid over
the fair values of the identifiable net assets acquired of Chengdu Yinzhe, Hangzhou Impression, Shandong-
based Qiqiaoban, Wuhan Sannew and CATS acquisitions (Note 3).
For the year ended August 31, 2020, the additions to goodwill reflects the excess of the consideration paid over
the fair values of the identifiable net assets acquired of STM and BIC, Linstitute and an education service
provider (Note 3).
(b) During the year ended August 31, 2020, the Company disposed its 60.46% equity interest in a subsidiary,
Guangzhou Zangxing Network Technology Co., Ltd. ("Zangxing") with a total cash consideration of RMB
30,344, resulting in the derecognition of goodwill RMB 13,774. Gain on disposal of Zangxing amounted to
RMB 14,865 was recognized for the year ended August 31, 2020.
(c) For each of the years ended August 31, 2018, 2019 and 2020, the Company performed impairment test of its
goodwill. The impairment test performed during fiscal years ended August 31, 2018 and 2019 did not result in
the fair value exceeding the carrying value; therefore, the Group recorded nil impairment loss on goodwill for
the respective years. For the year ended August 31, 2020, the Group has determined that the underperformance
of the Wuhan Sannew reporting unit since the acquisition date, market conditions and other factors including
the uncertainty in the Sino-US relationship and adverse impacts from COVID-19, it was more likely than not
that there were indications of impairment. The Group utilized the discounted cash flow model to and concluded
the carrying amount of Wuhan Sannew reporting unit exceeded its fair value. Accordingly, the Group recorded
RMB 68,723 as impairment loss on goodwill on the consolidated statement of operations for the year ended
August 31, 2020. The impairment is recorded in international schools reportable segment.
F-35
Table of Contents
12. BOND PAYABLE
On July 31, 2019, the Company issued USD 300,000 (approximately RMB 2,146,190) in aggregate principal
amount of bond due on July 31, 2022 (the "Bond"), unless earlier redeemed by the company. The Bond bears
interest at a rate of 7.45% per year, payable semi-annually in arrears on the business day on or nearest to January 31
and July 31 of each year, beginning on January 31, 2020.
The net proceeds from the Bond, after deducting the issuance costs, were USD 294,224 (approximately RMB
2,104,964). The Company has accounted for the Bond as a single instrument as bond payable. The value of the
Bond is measured by the cash received.
The Company may at its option redeem the Bond, in whole but not in part, at any time prior to July 31, 2022, at a
redemption price equal to 100% of the principal amount of the Bond plus the premium defined in the Bond terms,
and accrued and unpaid interest, if any, to (but not including), the redemption date. The premium is the greater of
(1) 1.00% of the principal amount of the Bond or (2) the excess of (A) the present value at the redemption date of
the redemption price of the Bond at July 31, 2022 plus all required remaining scheduled interest payments due on
the Bond (but excluding accrued and unpaid interest to the redemption date) through July 31, 2022 computed using
a discount rate defined in the Bond terms, over (B) the principal amount of such Bond on such redemption date.
At any time and from time to time prior to July 31, 2022, the Company may at its option redeem up to 35% of the
aggregate principal amount of the Bond at a redemption price of 107.45% of the principal amount of the Bond, plus
accrued and unpaid interest, if any, to (but not including) the redemption date, with the proceeds from sales of
certain kinds of the Company's capital stock, subject to certain conditions.
During the year ended August 31, 2020, the Group repurchased principal amount of USD 1,500 Bond in the open
market with cash payment of RMB 10,659. As of August 31, 2019 and 2020, the carrying amount of the bond
payable is USD 294,368 (approximately RMB 2,106,000) and USD 294,618 (approximately RMB 2,017,369),
respectively. For the year ended August 31, 2019 and 2020, the Group recognized interest expense of USD 2,007
(approximately RMB 14,361) and USD 24,057 (approximately RMB 169,143) respectively. The effective interest
rate is 8.35% and 8.37% per annum before and after the date of repurchase, respectively.
13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
Payroll and related benefits
Temporary receipt from students
Deposits received
Education subsidy
Loan payables
Accrual rental expense
Concession payable (b)
Professional fee
Commission fee
Housing subsidies-current
Offering subsidies-current
Other tax payable
Restructuring cost (a)
Accrual utilities expense
Others
Total
F-36
As of August 31,
2019
RMB
247,459
149,408
71,075
6,540
13,325
20,757
—
34,898
11,462
4,818
1,733
13,448
—
6,622
33,537
615,082
2020
RMB
255,674
124,248
62,506
7,339
35,656
1,430
16,448
18,929
7,455
3,006
1,659
14,593
12,596
10,745
61,113
633,397
Table of Contents
13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - continued
Note:
(a) For the Group's overseas schools operation, the Group is in the process of establishing a center of excellence to
centralize certain functions of management, such as finance and IT. The restructuring cost primarily includes the
compensation for the contract termination during the year ended August 31, 2020.
(b) Concession payable represents the deferred rent payments related to COVID-19.
14. SHORT-TERM AND LONG-TERM LOAN
During the year ended August 31, 2019, the Group entered into a 6-month loan agreement of RMB 50,000 with
China Merchants Bank - Foshan Branch with an annual interest rate of 4.35%. As of August 31, 2020, principal of
RMB 50,000 has been fully repaid.
In September 2019, the Group entered into a seven-year loan agreement of RMB121,500 with SPD Bank with an
annual interest rate of 4.90%. Under the agreement, the Group is able to draw down up to RMB 121,500 from SPD
Bank for the acquisition of Chengdu Yinzhe during the period from September 30, 2019 to September 30, 2021.
Refer to Note 3 for details regarding business combination of Chengdu Yinzhe. The loan facility is secured by the
Group's equity interest in Chengdu Yinzhe. As of August 31, 2020, the Group drew down RMB 85,000 from SPD
Bank, of which, RMB 7,500 is to be repaid within one year as of August 31, 2020 and classified as short-term loan.
In January 2020, the Group entered into a banking facility agreement of RMB 930,800 with Agricultural Bank of
China with a fixed interest rate of Loan Prime Rate (released by the National Inter-Bank Funding Center of the
PRC) plus 20 basis points. The term of the loan agreement is one year with a maturity date of January 18, 2021. The
loan is intended for general working capital purposes. The loan facility is secured by a bank deposit pledge of USD
150,000 (approximately RMB 1,027,110) which is recorded as restricted cash on the consolidated balance sheet as
of August 31, 2020.
In April 2020, one of the Canadian subsidiary of the Group received an interest free loan amounted to CAD 80
(approximately RMB 419) from the government of Canada under the program named Canada Emergency Business
Account due on or before December 31, 2022. The program intends to support small businesses during the COVID-
19 pandemic.
15. LEASES
The Group has operating leases mainly for campuses, office space and learning centers, the lease term ranges from
less than 12 months to 28 years. Leases with an initial term of 12 months or less are not recorded on the balance
sheet. The Group does not have options to extend or terminate leases, as the renewals or terminations of these leases
are on negotiation basis. None of these leases contain material residual value guarantees or material restrictive
covenants.
Supplemental balance sheet information related to the leases are as follows:
ROU assets
Operating lease liabilities—current
Operating lease liabilities—non - current
Weighted-average remaining lease term
Weight-average discount rate
F-37
As of August 31, 2020
RMB
1,964,686
210,082
1,802,544
15.91 years
4.31 %
Table of Contents
15. LEASES - continued
The components of lease costs of these operating leases for the year ended August 31, 2020 are as follow:
Operating lease cost for fixed payments
Short - term lease costs
Variable lease costs
Total lease costs
For the Year Ended August 31, 2020
RMB
221,337
53,421
(2,719)
272,039
Supplemental cash flow information related to the operating leases is as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Supplemental noncash information:
ROU assets obtained in exchange for new operating lease liabilities
Decrease of ROU assets for early terminations
For the Year Ended August 31, 2020
RMB
194,524
75,752
(14,019)
The following table provides the maturities of the operating lease liabilities as of August 31, 2020:
Fiscal year ending
August 2021
August 2022
August 2023
August 2024
August 2025
August 2026 and thereafter
Total future undiscounted lease payments
Less : imputed interest
Total present value of operating lease liabilities
Operating leases
211,907
205,739
179,975
178,055
166,317
1,857,135
2,799,128
786,502
2,012,626
The future minimum lease payments under the Group’s non-cancelable operating lease agreements based on ASC
840 as of August 31, 2019 are as follows:
Fiscal year ending:
August 2020
August 2021
August 2022
August 2023
August 2024
August 2025 and thereafter
RMB
194,285
185,839
179,723
158,329
158,339
2,030,659
2,907,174
Impairment loss on operating lease right-of-use assets
The Group tests its long-lived assets for recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. As a result of the adverse impacts of the COVID-19 pandemic on the
economic environment and the Group's business strategy, the Group determined to close certain language training
centers in the US resulting in four idled operating leases. The Group determine the fair value of the ROU assets
based on the discounted value of estimated future cash flows including cash flows related to subleases, if any. For
the year ended August 31, 2020, the Group recorded impairment loss of RMB 12,772 related to the ROU assets
within the overseas schools reportable segment.
F-38
Table of Contents
16. SHARE CAPITAL
Holders of Class A Ordinary Shares and Class B Ordinary Shares are entitled to the same rights except for voting
and conversion rights. In respect of matters requiring a shareholder’s vote, each Class A Ordinary Share is entitled
to one vote and each Class B Ordinary Share is entitled to 20 votes. Class B Ordinary Shares are convertible at any
time by the holder thereof into Class A Ordinary Shares on a one-for-one basis.
The Company was incorporated on December 16, 2016. As of the incorporation date, the total issued share capital
of the Company is USD 0.0001 consisting of 10 ordinary shares with a par value of USD 0.00001 and total
authorized share capital is USD 50 divided into 5,000,000,000 shares.
The Company completed a follow-on public offering of American Depositary Shares (“ADSs”) priced at
US$19.00 per ADS on March 2, 2018. The Company issued and sold 10,000,000 ADSs, each representing one
Class A Ordinary Share of the Company.
In April 2018, the Board of Directors approved a stock repurchase program (the “2018 Repurchase Program”)
which authorized the repurchase of up to US$100,000 of the Company’s common stock. Under the 2018
Repurchase Program, the Group repurchased 1,207,465 and 5,471,718 shares during the year ended August 31,
2018 and the year ended August 31, 2019, respectively with a cost of US$16,822 (approximately RMB 114,554)
and US$60,539 (approximately RMB 417,149), respectively. For the year ended August 31, 2019, the Board of
Directors approved to cancel and retire all these repurchased shares.
In September 2019, the Board of Directors approved a US$30,000 share repurchase program (the "2019 Repurchase
Program"). Under the 2019 Repurchase Program, the Group repurchased 1,096,312 shares during the year ended
August 31, 2020 with a cost of US$ 8,721 (approximately RMB 56,058). For the year ended August 31, 2020, the
Board of Directors approved to cancel and retire 569,732 shares that were repurchased.
17. REVENUE
The Group provides domestic K-12 and international education program in PRC and overseas. Overseas business
includes arts programs, language programs and university foundation programs. The Group’s revenue includes
tuition income from education programs, meal income, boarding income, commission income, study-abroad and
career consulting service income, camp service and other education services related revenue. Revenue for the years
ended August 31, 2018, 2019 and 2020 were primarily generated in the PRC, Hong Kong, Canada, the UK and US.
Please refer to Note 24 for disaggregation of Revenue by geographical areas. The Group recognized majority of its
revenue over time and have insignificant amount of revenue recognized at a point in time.
(a) Disaggregation of revenue
Tuition income from education programs
Tuition income from complementary training institutes
Meal income
Boarding income
Commission income
Consulting service income
Other revenues
Less: sales tax
Total
F-39
For the year ended August 31,
2019
RMB
1,689,952
123,895
225,665
118,723
138,587
124,072
145,703
2018
RMB
1,254,390
85,098
187,307
72,357
50,236
18,987
53,191
2,695
1,718,871
2020
RMB
2,210,159
137,083
251,572
262,145
142,856
160,469
206,025
3,806
3,366,503
3,592
2,563,005
Table of Contents
17. REVENUE - continued
(b) Contract balances
Account receivable
Contract liabilities - Current
Non-current contract liabilities
Refund liabilities
As of August 31,
2019
RMB
21,528
1,529,137
—
20,259
2020
RMB
19,271
1,544,184
1,772
70,711
Contract liabilities principally relate to customer advances received prior to performance of services. Substantially
all contract liabilities at the beginning of the year ended August 31, 2020 were recognized as revenue during the
year ended August 31, 2020.
Refund liabilities mainly related to the estimated refunds that are expected to be provided to students if they decide
they no longer want to take the course. Refund liabilities estimates are based on historical refund ratio on a portfolio
basis using the expected value method.
18. SHARE-BASED COMPENSATION
Share incentive plan
On December 15, 2017, the Company adopted the Bright Scholar Education Holdings Limited 2017 Share Incentive
Plan (the “2017 Plan”). In 2017, the Company provided up to an aggregate of 845,000 Class A ordinary shares of
the Company as stock based compensation to school principals and management team members with vesting period
varying from 3 to 5 years.
On September 1, 2018, the Company granted 167,138 Class A ordinary shares to management of Can-achieve
Group per ordinary share pursuant to the 2017 Plan. The vesting period of option is 3 year, and the vesting is subject
to the performance indicator of the option holders. During any authorized leave of absence, the vesting of the option
shall be suspended after the leave of absence exceeds a period of 90 days.
On January 18, 2019, the Company granted 2,545,000 Class A ordinary shares to certain member of the Company’s
senior management team, pursuant to the Company's 2017 plan, in which, one tenth was vested and exercisable on
grant date and the remaining options will vest over 6 years from grant date. Vesting is subject to the continuous
services of the option holders to the Company and the financial and operating performance of the Group. During
any authorized leave of absence, the vesting of the option shall be suspended after the leave of absence exceeds a
period of 90 days.
In the event of termination of the option holders' continuous service for cause, the option holders' right to exercise
the option shall terminate concurrently, except otherwise determined by the plan administrator, and the Group shall
have the rights to repurchase all vested options purchased by the option holders. The Company uses the Binomial
tree of lattice pricing model to determine the estimated fair value for each option granted below with the assistance
of an independent valuation firm. The post-vesting forfeiture rate is estimated by the Group at the range
of 0%-15% by different level of principals and management team members.
The assumptions used in determining the fair value of the share options on the grant date were as follows:
Assumptions
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life
Exercise multiples
Fair value of underlying ordinary shares (US$/share)
2018
0%
1.84%-2.35%
42%-51%
2 or 10 years
2.20-2.80 times
9.29-12.25
2019
0%
2.75%-2.85%
50%-51%
8.90 or 9.29 years
2.20-2.80 times
6.28-6.83
F-40
Table of Contents
18. SHARE-BASED COMPENSATION - continued
Notes:
(1) The expected dividend yield was estimated by the Company based on its dividend policy over the expected life
of the options.
(2) The risk-free interest rate was estimated based on the US Government Bond yield with the maturity
commensurate with the expected life.
(3) The expected volatility of the underlying ordinary shares was estimated based on historical volatility of the
Company for the period before the valuation date with length commensurate to expected life of the options.
(4) The expected life was the contractual life of the share options.
(5) The Company estimated the exercise multiple based on a consideration of various research studies regarding
exercise pattern from historical statistical data.
(6) The fair values of ordinary shares were determined based on the closing price in the market.
For the year ended August 31, 2018, 2019 and 2020, the share options movement were as follows:
Number
of share
options
Weighted
average
exercise
price
US$
Weighted Weighted
average
average
fair value
remaining
at grant
contractual
date
years
US$
Aggregate
intrinsic
value
US$
—
845,000
—
(47,896)
797,104
2,712,138
(14,457)
(421,471)
3,073,314
—
(2,232,547)
—
8.74
—
8.74
8.74
8.74
8.74
8.74
8.74
—
8.74
—
8.63
—
8.21
8.66
8.29
—
8.30
8.33
—
7.29
11.4
2,630,442
7.98
(1,407,301)
840,767
8.74
7.29
10.73
(823,950)
471,200
8.74
7.29
10.13
(461,776)
As of August 31, 2017
Granted
Exercised
Forfeited/Cancelled
As of August 31, 2018
Granted
Exercised
Forfeited/Cancelled
As of August 31, 2019
Granted
Forfeited/Cancelled
Outstanding as of August 31,
2020
Vested and exercisable as of
August 31, 2020
For the year ended August 31, 2018, 2019 and 2020, the Group recognized share-based payment expenses of RMB
29,061, RMB 51,664 and RMB (10,631), respectively, in connection with the share options granted to employees.
The share-based award granted to members of senior management requires both a performance condition and
service condition. During the fiscal year ended August 31, 2020, the Group assessed that the performance condition
of certain employees is not probable of being met and recorded a reversal of share-based compensation amounting
to RMB 34,252.The total fair value of share options vested was RMB 3,712, RMB 32,276 and RMB 32,851,
respectively.
The total compensation expense is recognized on a straight-line basis over the respective vesting periods. As of
August 31, 2018, 2019 and 2020, there was RMB 31,586, RMB 91,147 and RMB 4,098 unrecognized compensation
expense, respectively, related to un-vested share options granted to executive and employees of the Group. As of
August 31, 2019 and 2020, the unvested share options expense relating to the share options of the Group is expected
to be recognized over a weighted average vesting period of 2.94 years and 1.39 years, respectively.
F-41
Table of Contents
19. INCOME TAX EXPENSE
Income tax expense consisted of the following:
Current income tax expense (benefit):
The PRC
Canada
Hong Kong
The US
The UK
Deferred income tax expense (benefit):
PRC
Canada
The US
The UK
Total income tax expense:
Cayman Islands
For the year ended August 31,
2020
2019
2018
RMB
RMB
RMB
60,278 73,142
—
11,225
379
411
170
243
—
—
85,668
—
(897)
4,192
1,629
6,599
92
—
—
(3,446)
(144)
(514)
(473)
67,382 80,580
5,841
(178)
(4,605)
(12,658)
78,992
The Company and Impetus are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands,
the Company and Impetus are not subject to income or capital gains taxes. In addition, dividend payments are not
subject to withholdings tax in the Cayman Islands.
The US
Can-achieve Global Education, Inc. (Los Angeles), Cambridge Education Group Holding Inc.(US) and its
subsidiaries are located in US and are subject to an income tax rate of 21% for taxable income earned in the US.
The UK
The Company's subsidiaries operating in UK are subjected to income tax rate at 19%.
Canada
Can-Achieve International Education Limited (Vancouver) operating in Vancouver , Can-Achieve Academy Limited
and CEG Holdings Canada Inc. and its subsidiaries operating in Toronto are subject to income tax rate ranging from
26% to 26.5% according to the province tax rates.
Hong Kong
The Group's subsidiaries operating in Hong Kong are subject to a two-tiered income tax rate for taxable income
earned in Hong Kong effectively since April 1, 2018. The first 2 million Hong Kong dollars of profits earned by a
company are subject to be taxed at an income tax rate of 8.25%, while the remaining profits will continue to be
taxed at the existing tax rate, 16.5%.
The PRC
The subsidiaries and VIEs incorporated in the PRC were generally subject to a corporate income tax rate of 25%.
Effective from January 1, 2008, a new Enterprise Income Tax Law, or (“the New EIT Law”), consolidated the
previous income tax laws for foreign invested and domestic invested enterprises in the PRC by the adoption a
unified tax rate of 25% for most enterprises with the following exceptions.
F-42
Table of Contents
19. INCOME TAX EXPENSE - continued
Zhuhai Bright Scholar is a company registered in Hengqin New Area whose main business, providing outsourcing
consulting services, falls within the preferential enterprise income tax (“EIT”) catalogue of Hengqin New Area in
Zhuhai and whose revenue derived from its main business accounts for more than 70% of its total revenue. Zhuhai
Bright Scholar was classified as a domestically-owned enterprise in Hengqin New Area, Zhuhai in an encouraged
industry sector, and was approved by the PRC tax authorities to enjoy a preferential EIT rate of 15% from
January 24, 2017 (date of incorporation). If Zhuhai Bright Scholar continues to meet the relevant requirements, it
may be eligible for the preferential EIT rate until December 31, 2020.
Chengdu Yinzhe Education and Technology Co., Ltd. and Chengdu Laizhe Education and Technology Co., Ltd.
established in the western development area of the PRC were subject to preferential tax rate of 15% of taxable profit
for the year ended August 31, 2020.
Entities qualified as Software Enterprises ("SEs") enjoy EIT exemption for two years starting from its first
profitable calendar year, followed by a 50% reduction for the subsequent three calendar years. Chengdu Zhi Yi
Meng Software Technology Co., Ltd. was qualified as SEs and enjoyed the zero preferential tax rate in calendar
year 2019 and 2020.
Further, according to Guoshui [2019]13 No.2, certain subsidiaries in the PRC qualified as “small-scaled minimal
profit enterprise”. The first RMB 1 million of taxable income earned by a qualified company is subject to
preferential income tax rate of 5%, while the remaining profits will be subject to income tax rate of 10%.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The Group's deferred tax
assets and liabilities were as follows:
Deferred tax assets:
Net operating loss carry-forward
Others
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Total deferred tax liabilities
Movement in valuation allowance is as follows:
Beginning balance
Additions from acquisition
Additions
Reversal
Expired
Ending balance
F-43
As of August 31,
2020
RMB
2019
RMB
54,697
5,409
29,773
30,333
132,609
3,231
100,162
35,678
53,689
53,689
57,826
57,826
370
For the year ended August 31,
2020
2019
2018
RMB
RMB
RMB
29,773
18,580
67,706
(13,751)
(2,146)
100,162
12,283 18,164
—
8,963 14,025
(2,268)
(3,395)
(148)
(57)
18,164 29,773
Table of Contents
19. INCOME TAX EXPENSE - continued
As of August 31, 2018, 2019 and 2020, the tax loss carry-forward in the PRC amounted to RMB 143,424, RMB
179,400 and RMB 562,244, respectively, which would expire by the end of calendar year 2023, 2024 and 2025.
During the year ended August 31, 2020, the Group acquired an international education services provider and an
online international courses training company with the accumulated tax loss carry-forward of approximately RMB
74,320 in the UK and the PRC, in which the UK accumulated tax loss can be carried forward indefinitely to offset
future taxable income. The Group operates its business through its subsidiaries and VIEs. The Group does not file
consolidated tax returns, therefore, losses from individual subsidiaries or the VIEs may not be used to offset other
subsidiaries’ or VIEs’ earnings within the Group. Valuation allowance is considered on each individual subsidiary
and VIE basis. A valuation allowance of RMB 18,164, RMB 29,773 and RMB 100,162 had been established as of
August 31, 2018, 2019 and 2020, respectively, in respect of certain deferred tax assets as it is considered more likely
than not that the relevant deferred tax assets will not be realized in the foreseeable future.
A deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial
reporting amounts over tax basis amounts, including those differences attributable to a more than 50% interest in a
domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which
the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately
use that means. The Company has not recorded any such deferred tax liability attributable to the undistributed
earnings of its financial interest in VIEs because it believes such excess earnings can be distributed in a manner that
considered to be indefinitely reinvested and thus would not be subject to income tax.
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that
is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position
will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes
will be classified as a component of the provisions for income taxes. The Group has concluded that there are no
significant uncertain tax positions requiring recognition in consolidated financial statements for the years ended
August 31, 2018, 2019 and 2020. The Group did not incur any interest and penalties related to potential underpaid
income tax expenses and also does not anticipate any significant increases or decreases in unrecognized tax benefits
in the next 12 months. The Group has no material unrecognized tax benefits which would favorably affect the
effective income tax rate in future periods.
According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the
underpayment of taxes is due to computational errors made by the taxpayer or withholding agent. The statute of
limitations will be extended five years under special circumstances, which are not clearly defined (but an
underpayment of tax liability exceeding RMB 1 million is specifically listed as a special circumstance). In the case
of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of
tax evasion. From inception to 2020, the Group is subject to examination of the PRC tax authorities.
F-44
Table of Contents
19. INCOME TAX EXPENSE - continued
Reconciliation between the provision for income taxes computed by applying the PRC EIT rates of 25% in year
2018, 2019 and 2020 to income before income taxes and the actual provision for income tax were as follows:
Net income before provision for income tax
PRC statutory tax rate
Income tax at statutory tax rate
Effect of expenses that are not deductible in
determining taxable profit
Unrecognized tax losses
Utilization of tax losses previously not recognized
Expiration of tax losses previously recognized
Utilization of tax losses against pre-acquisition profits
Effect of tax rate difference from tax holiday and
statutory rate in other jurisdictions
Others
Income tax expense recognized in profit or loss
2018
RMB
316,325
For the year ended August 31,
2019
RMB
333,577
2020
RMB
243,761
25 %
25 %
25 %
79,081
83,394
60,940
8,238
8,963
(3,395)
—
—
13,481
14,025
(2,268)
—
8,837
(25,497)
(8)
67,382
(36,889)
—
80,580
17,323
67,706
(13,751)
1,721
—
(54,286)
(661)
78,992
If the tax holidays granted to certain schools and entities of the Group were not available, the Group's income tax
expense would have increased by RMB 25,497, RMB 33,127 and RMB 47,597 for the years ended August 31,
2018, 2019 and 2020, respectively. The basic net earnings per share attributable to the Company would decrease by
RMB 0.21, RMB 0.27 and RMB 0.40 for the years ended August 31, 2018, 2019 and 2020, respectively.
20. EARNINGS PER SHARE
Numerator used in basic and diluted earnings
per share:
Net earnings attributable to Bright Scholar
Education Holdings Limited
Earnings available for future distribution
Shares (denominator):
Weighted average common shares outstanding
used in computing basic earnings per share
Weighted average common shares outstanding
For the year ended August 31,
2019
RMB
2020
RMB
2018
RMB
246,969
246,969
241,099
241,099
161,005
161,005
122,088,201
122,322,894
120,158,001
used in computing diluted earnings per share
122,186,796
122,430,457
120,158,001
Net earnings per share
Basic
Diluted
2.02
2.02
1.97
1.97
1.34
1.34
As of August 31, 2018, 2019 and 2020, there are 361,307, 2,318,716 and 840,767 employee stock options or non-
vested ordinary shares, were excluded from the computation of diluted net earnings per share in the periods
presented, as their inclusion would have been anti-dilutive for the years presented.
F-45
Table of Contents
21. RELATED PARTY TRANSACTIONS
The table below sets forth the major related parties and their relationships with the Group:
Name of related parties
Country Garden Intelligent Services Group Co., Ltd.
Guangdong Phoenix Holiday International Travel Service Co., Ltd.
Guangdong Shunde Chuang Xi Bang Sheng Furniture Co., Ltd.
Foshan Shunde Country Garden Property Development Co., Ltd.
Zengcheng Crystal Water Plant Co., Ltd.
Guangdong Shunde Phoenix Optimal Commercial Co., Ltd.
Huidong Country Garden Real Estate Development Co., Ltd.
Zhaoqing Contemporary Zhumei Furnishing Co., Ltd.
Guangdong Elite Architectural Co., Ltd.
Guangdong Teng An Mechanics and Electrics Engineering Co., Ltd.
Guangdong Giant Leap Construction Co., Ltd.
Dongguan Country Garden Real Estate Development Co., Ltd.
Kaiping Country Garden Property Development Co., Ltd.
Changsha Ningxiang Country Garden Property Development Co., Ltd.
Can-Achieve Global Edutour Co., Ltd.
Guangzhou Biyouwei Catering Co., Ltd.
Laian Country Garden Property Development Co., Ltd.
Chuzhou Country Garden Property Development Co., Ltd.
Wuhan Country Garden Property Management Co., Ltd.
Baoding Baigou New town Honghua Eaton commerce co., Ltd.("Baoding Baigou")
Shaoguan Shunhong Real Estate Development Co., Ltd.
Guangzhou Country Garden Shuttle Bus Services Limited
Huaihua Zhiyi Network Technology Limited Partnership
Huaihua Yimeng Network Technology Limited Partnership
Fine Nation Group Limited
Shanghai Hanlue Information Technology Center Limited Partnership
Relationship with the group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by non-controlling interest shareholder
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Non-controlling interests shareholder of a subsidiary of the
Group
Entities controlled by the chairperson of the Group
Entities controlled by the chairperson of the Group
Entities controlled by non-controlling interest shareholder
Non-controlling interests shareholder of a subsidiary of the
Group
Entities controlled by the immediate family of the chairperson
of the Group
Non-controlling interests shareholder of a subsidiary of the
Group
The Group entered into the following transactions with its related parties:
For the year ended August 31,
2020
2019
2018
RMB RMB RMB
Purchases of services and materials provided by other entities
controlled by the chairperson are as below
Country Garden Intelligent Services Group Co., Ltd.
Guangdong Phoenix Holiday International Travel Service Co.,
Ltd.
Guangdong Shunde Chuang Xi Bang Sheng Furniture Co., Ltd.
Foshan Shunde Country Garden Property Development Co., Ltd.
Zengcheng Crystal Water Plant Co., Ltd.
Guangdong Shunde Phoenix Optimal Commercial Co., Ltd.
Guangzhou Country Garden Shuttle Bus Services Limited
Huidong Country Garden Real Estate Development Co., Ltd.
Zhaoqing Contemporary Zhumei Furnishing Co., Ltd.
Dongguan Country Garden Real Estate Development Co., Ltd.
Others
Total
328
5,982
3,801
3,209
2,446
2,063
2,069
1,543
1,532
1,386
1,296
999
—
727
760
200
814
47
—
—
—
1,872
1,663
11,117 17,819
548
358
2,026
944
893
155
—
327
988
1,175
11,215
F-46
Table of Contents
21. RELATED PARTY TRANSACTIONS - continued
Construction services provided by other entities controlled by the
chairperson are as below
Guangdong Elite Architectural Co., Ltd.
Guangdong Teng An Mechanics and Electrics Engineering Co.,
Ltd.
Guangdong Giant Leap Construction Co., Ltd.
Total
Services provided to other entities controlled by the chairperson
are as below
Huidong Country Garden Real Estate Development Co., Ltd.
Kaiping Country Garden Property Development Co., Ltd.
Changsha Ningxiang Country Garden Property Development Co.,
Ltd.
Guangzhou Biyouwei Catering Co., Ltd.
Others
Total
For the year ended August 31,
2020
2019
2018
RMB RMB RMB
—
817
—
5,728
5,728
791
—
1,608
—
—
—
—
For the year ended August 31,
2020
2019
2018
RMB RMB RMB
3,445
1,500
1,595
—
2,024
353
2,186
—
37
7,168
848
—
—
2,443
356
348
117
3,198
During fiscal year 2019, Fine Nation Group Limited issued a promissory note with a principal amount of USD
100,000 to the Company, which has been fully paid as of August 31, 2019 with an interest expense of RMB 4,547.
The following table presents amounts owed from and to related parties as of August 31, 2019 and 2020:
Amounts due from related parties
Foshan Shunde Country Garden Property Development Co., Ltd. (1)
Shaoguan Shunhong Real Estate Development Co., Ltd.(4)
Changsha Ningxiang Country Garden Property Development Co., Ltd.
(2)
Kaiping Country Garden Property Development Co., Ltd. (3)
Can-Achieve Global Edutour Co., Ltd. (4)
Others
Total
As of August 31,
2020
2019
RMB RMB
3,576
—
—
10,000
474
1,590
3,144
1,868
10,652
1,172
1,607
3,915
1,827
18,521
Amounts due from related parties are non-interest bearing, unsecured, and due on demand.
(1) The amount mainly represents the advance payment for purchasing services and materials or construction
services provided by the entity controlled by Ms. Huiyan Yang("Ms. H "), chairperson of the Group.
(2) The amounts mainly represent the receivables of the enrolment tuition discount provided to the owners of
properties which were subsidized by real estate entities controlled by Ms. H.
(3) The amounts mainly represent the receivables of providing consulting services on pre-opening schools to
Kaiping Country Garden Property Development Co., Ltd.
(4) The amounts mainly represent the receivables from the respective entities in which consist of expense were
paid on behalf of entities controlled by Ms.H. and a non-controlling interest shareholder, respectively.
F-47
Table of Contents
21. RELATED PARTY TRANSACTIONS - continued
Amounts due to related parties
Laian Country Garden Property Development Co., Ltd.(1)
Changsha Ningxiang Country Garden Property Development Co., Ltd.
11,550
11,550
As of August 31,
2020
2019
RMB RMB
(1)
Chuzhou Country Garden Property Development Co., Ltd. (1)
Wuhan Country Garden Property Management Co., Ltd. (1)
Guangdong Teng An Mechanics and Electrics Engineering Co., Ltd. (2)
Guangdong Giant Leap Construction Co., Ltd. (2)
Baoding Baigou New Town Honghua Eaton Commerce Co., Ltd. (3)
Shanghai Hanlue Information Technology Center Limited Partnership (6)
Huaihua Zhiyi Network Technology Limited Partnership (4)
Huaihua Yimeng Network Technology Limited Partnership (4)
Huidong Country Garden Real Estate Development Co., Ltd. (5)
Others
Total
8,732
30,769
3,154
6,515
10,166
3,000
—
30,769
3,154
4,076
10,166
6,000
— 11,573
—
—
3,515
5,760
86,563
18,335
9,167
3,110
5,540
110,038
Amounts due to related parties are non-interest bearing, unsecured, and due on demand.
Other non-current liabilities due to related parties
Huaihua Zhiyi Network Technology Limited Partnership (4)
Huaihua Yimeng Network Technology Limited Partnership (4)
Shanghai Hanlue Information Technology Center Limited
Partnership (6)
Total
As of August 31,
2019
RMB
2020
RMB
14,490
7,246
—
21,736
14,490
7,246
5,107
26,843
Other non-current liabilities due to related parties are non-interest bearing and unsecured.
(1) The amounts mainly represent financing funds for maintaining daily operation of schools held by subsidiaries
and the VIEs from other entities controlled by Ms. H, Chairperson of the Group.
(2) The amounts mainly represent construction services provided by other entities controlled by Ms. H,
Chairperson of the Group.
(3) The amounts represent the financing funds for maintaining daily operation from Baoding BaiGou, the non-
controlling interest shareholder.
(4) The amounts represent the acquisition payables due to Huaihua Zhiyi Network Technology Limited Partnership
and Huaihua Yimeng Network Technology Limited Partnership for the acquisition of Chengdu Yinzhe in fiscal
year 2019.
(5) The amount mainly represents the advance payment from Huidong Country Garden Real Estate Development
Co., Ltd., the entities controlled by Ms.H, as the enrolment tuition discount to the owners of properties. The
Group utilizes facilities and equipment provided by other real-estate subsidiaries controlled by Ms. H. In return,
the Group gives enrolment priorities to the owners of properties with these affiliated companies when providing
its educational services.
(6) The amounts represent the acquisition payables to Shanghai Hanlue Information Technology Center Limited
Partnership for the acquisition of Linstitute in fiscal year 2020.
F-48
Table of Contents
22. COMMITMENTS AND CONTINGENCIES
Capital commitment
As of August 31, 2020, future minimum capital commitments under non-cancelable contracts were as follows:
Capital commitment for construction of schools
Capital commitment for an equity method investment
Total
23. NON-CONTROLLING INTERESTS
RMB
36,466
210,000
246,466
The following table summarizes the changes in non-controlling interests from August 31, 2017 through August 31,
2020.
Can-achieve
RMB
Xinqiao
Group
Chengdu Wuhan
Sannew
Yinzhe
Hangzhou
Impression
RMB RMB RMB RMB
Linstitute
Total
RMB RMB RMB
Others
Balance at August 31, 2017
Income attributable to non-controlling interests
Disposal of a subsidiary*
Acquisition of subsidiaries
Balance at August 31, 2018
Capital injection from non-controlling interest
shareholders
Income attributable to non-controlling interests
Effect of ASC606 new revenue standard
Foreign currency translation
Acquisition of subsidiaries
Balance at August 31, 2019
Capital injection from non-controlling interest
shareholders
Income attributable to non-controlling interests
Foreign currency translation
Acquisition of subsidiaries (Note 3)
Disposal of a subsidiary*
Distribution of dividends to shareholders
Balance at August 31, 2020
—
2,338
—
113,288
115,626
—
10,176
164
(25)
—
125,941
—
(4,017)
(54)
—
—
—
121,870
—
1,276
—
38,156
39,432
—
(1,518)
—
—
—
37,914
—
(3,875)
—
—
—
—
34,039
—
—
—
—
—
—
5,919
—
—
62,766
68,685
—
5,750
—
—
—
—
74,435
—
—
—
—
—
—
(1,135)
—
—
74,213
73,078
—
(84)
—
—
—
—
72,994
—
—
—
—
—
—
119
—
—
30,000
30,119
—
123
—
—
—
(3,104)
27,138
—
—
—
—
—
—
—
—
—
—
—
—
990
—
27,583
—
—
28,573
3,325
(1,680)
(1,953)
15,274
14,966
500
(1,902)
(6)
87
12,450
26,095
2,650
4,282
25
—
(5,650)
—
27,402
3,325
1,934
(1,953)
166,718
170,024
500
11,659
158
62
179,429
361,832
2,650
3,169
(29)
27,583
(5,650)
(3,104)
386,451
Note*: During the year ended August 31, 2018, the Company disposed its equity interest in a subsidiary with a total
consideration of RMB 7,000, and the carrying amount of the non-controlling interests of the disposed subsidiary as
of the disposal date was RMB 1,953.
During the year ended August 31, 2020, the Company disposed its equity interest in a subsidiary with a total
consideration of RMB 30,344, and the carrying amount of the non-controlling interests of the disposed subsidiary as
of the disposal date was RMB 5,650.
24. SEGMENT INFORMATION
The CODM reviews financial information of operating segments based on internal management report when
making decisions about allocating resources and assessing the performance of the Group.
In the fiscal year 2018, the Group identified four reportable segments, including International Schools, Bilingual
Schools, Kindergartens and Complementary Education Services. During the year ended August 31, 2019, the Group
acquired the overseas businesses and has assessed these businesses as one additional reportable segment. As of
August 31, 2019, the Group has five reportable segments, including International Schools, Bilingual Schools,
Kindergartens, Overseas Schools and Complementary Education Services. During the year ended August 31, 2020,
the Group changed its internal management structure and has expanded the service offerings in utilizing technology
to deliver online study programs, which forms an additional reportable segment called, Education Technology.
F-49
Table of Contents
24. SEGMENT INFORMATION - continued
The Group's CODM evaluates performance based on the operating segment's revenue and their operating results.
The revenue and operating results by segments were as follows:
For the year ended August 31, 2018
International
Schools
RMB
589,599
(373,391)
216,208
Domestic K-12 Schools
Bilingual
Schools
RMB
534,008
(346,868)
187,140
Kindergartens
RMB
399,249
(223,397)
175,852
Revenue
Costs of revenue
Gross profit
For the year ended August 31, 2019
International
Schools
RMB
745,015
(456,003)
289,012
Domestic K-12 Schools
Bilingual
Schools
RMB
650,433
(400,043)
250,390
Kindergartens
RMB
495,024
(279,315)
215,709
Revenue
Costs of revenue
Gross profit
For the year ended August 31, 2020
International
Schools
RMB
872,857
(502,186)
370,671
Domestic K-12 Schools
Bilingual
Schools
RMB
722,396
(421,894)
300,502
Kindergartens
RMB
373,028
(272,261)
100,767
Revenue
Costs of revenue
Gross profit
Overseas
Schools
RMB
Complementary
Education Services
RMB
Education
Technology
RMB
—
—
—
196,015
(146,939)
49,076
—
—
—
Consolidated
RMB
1,718,871
(1,090,595)
628,276
Overseas
Schools
RMB
181,793
(145,625)
36,168
Complementary
Education Services
RMB
420,760
(286,925)
133,835
Education
Technology
RMB
69,980
(18,103)
51,877
Consolidated
RMB
2,563,005
(1,586,014)
976,991
Overseas
Schools
RMB
835,927
(588,839)
247,088
Complementary
Education Services
RMB
458,968
(321,089)
137,879
Education
Technology
RMB
103,327
(38,517)
64,810
Consolidated
RMB
3,366,503
(2,144,786)
1,221,717
The Group's CODM review the financial position at consolidated level, thus total assets of each operating segment
is not presented.
GEOGRAPHIC INFORMATION
The Group's revenues are attributed to geographic areas based on the selling location.
The following table presents total revenues for the years ended August 31, 2018, 2019 and 2020 from a
geographical perspective:
For the year ended August 31,
2019
2020
2018
Revenues from sales originated:
China **
Canada
The US
The UK
Total
1,710,756
3,668
4,447
—
1,718,871
2,366,078
10,226
24,977
161,724
2,563,005
2,528,591
16,914
188,111
632,887
3,366,503
F-50
Table of Contents
The following table presents long-lived assets including property and equipment, net, land use rights, net and
operating and finance lease right-of-use assets as of August 31, 2019 and 2020 from a geographical perspective:
China **
Canada
The US
The UK
Total
** Includes mainland China and Hong Kong.
25. CONTRIBUTION PLAN
As of August 31,
2019
776,483
3,013
52,184
156,034
987,714
2020
1,107,759
12,918
440,053
1,566,622
3,127,352
In mainland China, full-time employees of the Group in the PRC participate in a government-mandated defined
contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee
housing fund and other welfare benefits are provided to employees. The PRC labor regulations require the Group to
accrue for these benefits based on certain percentages of the employees' salaries. Total contributions for such
employee benefits were RMB 118,864, RMB 165,472 and RMB 138,235 for the years ended August 31, 2018, 2019
and 2020, respectively.
The Company also provides other defined contribution plans for the benefit of overseas employees. Total
contribution for such employee benefits for the year ended August 31, 2020 was recorded in consolidated income
statement RMB 16,748.
26. STATUTORY RESERVES AND RESTRICTED NET ASSETS
As stipulated by the relevant PRC laws and regulations applicable to the Group’s entities in the PRC, the Group is
required to make appropriations from net income as determined in accordance with the PRC GAAP to non-
distributable reserves, which include a statutory surplus reserve and a statutory welfare reserve. The PRC laws and
regulations require that annual appropriations of 10% of after-tax income should be set aside prior to payments of
dividends as reserve fund, and in private school sector, the PRC laws and regulations require that annual
appropriations of 25% of after-tax income should be set aside prior to payments of dividend as development fund.
The appropriations to statutory surplus reserve are required until the balance reaches 50% of the PRC entity
registered capital.
26. STATUTORY RESERVES AND RESTRICTED NET ASSETS - continued
The statutory reserve may be applied against prior year losses, if any, and may be used for general business
expansion and production or increase in registered capital of the entities. For the years ended August 31, 2018, 2019
and 2020, the Group made apportions of nil, nil and RMB 622 to the statutory surplus reserve fund, respectively,
and nil, nil and nil to the development fund, respectively.
F-51
Table of Contents
As a result of these PRC laws and regulations and the requirement that distributions by PRC entities can only be
paid out of distributable profits computed in accordance with PRC GAAP, the PRC entities are restricted from
transferring a portion of their net assets to the Group. Restricted net asset include paid-in capital, additional paid-in
capital, the statutory reserves and the retained earnings of the Company's PRC subsidiaries and VIEs.
Paid in capital
Additional paid in capital
Statutory reserves
Retained earnings
Total
As of August 31
2019
RMB
682,000
124,151
2,396
853,039
1,661,586
2020
RMB
645,662
113,492
3,118
1,172,995
1,935,267
27. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
For the purpose of the consolidated statement of cash flows, cash and cash equivalents, and restricted cash included
cash on-hand and in banks and restricted cash. Cash and cash equivalents, and restricted cash at the end of reporting
year end as shown in the consolidated statements of cash flows can be reconciled to the related items in the
consolidated balance sheets as follow:
Cash and cash equivalents
Restricted cash
Total
28. SUBSEQUENT EVENTS
As of August 31
2019
RMB
3,246,995
18,019
3,265,014
2020
RMB
3,377,684
1,046,253
4,423,937
On November 11, 2020, the Company announced that the Board of Directors has approved a US$50 million share
repurchase program, effective from November 20, 2020 and expiring on November 19, 2021.
The COVID-19 pandemic has resulted in quarantines, travel restrictions in most parts of the world and the
temporary closure of certain public services. While the pandemic has been mostly under control in China, the
pandemic may continue to affect the Group's overseas related businesses and its financial condition and operating
results for fiscal year 2021, including but not limited to negative impact to the Group's total revenues and growth
outlook or impairment to the Group's long-lived assets, long term investments and others.
F-52
Table of Contents
SCHEDULE 1-CONDENSED FINANCIAL STATEMENT OF BRIGHT SCHOLAR EDUCATION HOLDINGS
LIMITED
BALANCE SHEET
(Amounts in thousands)
As of August 31,
2019
RMB
As of August 31,
2020
RMB
USD
Note 2(g)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Amounts due from subsidiaries and VIEs
Amounts due from related parties
Other receivables, deposits and other assets
Short-term investments
Total current assets
Investment in subsidiaries and VIEs
Long-term investments
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Accrued expenses and other current liabilities
Amounts due to subsidiaries and VIEs
Non-current liabilities
Other non-current liabilities
Bond payable
TOTAL LIABILITIES
EQUITY
Share capital (US$0.00001 par value; 120,585,274 shares
issued and outstanding as of August 31, 2019, 119,488,962
shares issued and outstanding as of August 31, 2020)
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
F-53
1,496,959
—
2,172,665
7
64,384
221,670
3,955,685
883,559
14,711
898,270
4,853,955
220,523
1,027,110
2,514,030
7
69,876
13,695
3,845,241
1,029,229
—
1,029,229
4,874,470
23,475
11
19,970
97,957
3,033
2,106,000
2,132,519
1,244
2,017,369
2,136,540
8
2,105,189
78,955
537,284
2,721,436
4,853,955
8
1,854,262
185,371
698,289
2,737,930
4,874,470
32,205
150,000
367,151
1
10,206
2,000
561,563
150,309
—
150,309
711,872
2,916
14,306
182
294,618
312,022
1
270,798
27,072
101,979
399,850
711,872
Table of Contents
SCHEDULE 1-CONDENSED FINANCIAL STATEMENT OF BRIGHT SCHOLAR EDUCATION HOLDINGS
LIMITED
STATEMENTS OF OPERATIONS COMBINED AND COMPREHENSIVE INCOME FOR THE YEARS ENDED
AUGUST 31, 2020
(Amounts in thousands)
Other operating income
Selling, general and administrative expenses
Other expenses
Interest income, net
Investment income
Equity in earnings of subsidiaries and VIEs
Net income
Other comprehensive income
Comprehensive income
2018
RMB
1,590
(34,753)
(49)
21,249
—
258,932
246,969
112,264
359,233
2019
RMB
1,670
(58,025)
(60,612)
17,482
7,373
333,211
241,099
3,185
244,284
2020
RMB
2,147
2,805
(26)
8,792
1,617
145,670
161,005
106,416
267,421
USD
Note 2(g)
314
410
(4)
1,284
236
21,273
23,513
15,542
39,055
F-54
Table of Contents
SCHEDULE 1-CONDENSED FINANCIAL STATEMENT OF BRIGHT SCHOLAR EDUCATION HOLDINGS
LIMITED
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities
Net income for the year
Share-based compensation
Investment income
Finance costs
Equity in earnings of subsidiaries and VIEs
Other receivables, deposits and other assets
Accrued expenses and other current liabilities
Amounts due to subsidiaries and VIE
Other non-current assets and liabilities
Amounts due from subsidiaries and VIE
Amounts due from related parties
Net cash used in operating activities
2018
RMB
2019
RMB
2020
RMB
246,969
29,061
—
—
(258,932)
(2,131)
903
—
4,654
(378,388)
—
(357,864)
241,099
51,664
(7,373)
18,908
(333,211)
(60,380)
(3,857)
11
(1,621)
(1,727,903)
(7)
(1,822,670)
161,005
(10,631)
(211)
12,288
(145,670)
(3,050)
(3,572)
100,209
(1,789)
(254,001)
—
(145,422)
USD
Note 2
23,513
(1,553)
(31)
1,795
(21,273)
(445)
(522)
14,635
(261)
(37,095)
—
(21,237)
Cash flows from investing activities
Purchase of investments
Proceed from redemption of investments upon maturity
Net cash used in investing activities
(190,920)
—
(190,920)
(13,416)
—
(13,416)
—
213,860
213,860
—
31,232
31,232
Cash flows from financing activities
Dividend to shareholders
Proceeds from follow-on offering
Repurchase of ordinary shares
Proceeds from issuance of bonds
Issuance cost of bonds
Proceeds on exercise of stock options
Repurchase of bonds
Net cash provided by/ (used in) financing activities
Net change in cash and cash equivalents
Cash, cash equivalents and restricted cash at beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash, cash equivalents and restricted cash at end of the year
—
1,151,702
(108,938)
—
—
(417,149)
— 2,069,160
(32,971)
—
858
—
—
—
1,042,764
493,980
1,094,979
113,845
1,702,804
1,619,898
(216,188)
1,702,804
10,343
1,496,959
(184,238)
—
(56,058)
—
—
—
(10,659)
(250,955)
(182,517)
1,496,959
(66,809)
1,247,633
(26,906)
—
(8,187)
—
—
—
(1,557)
(36,650)
(26,655)
218,617
(9,757)
182,205
F-55
Table of Contents
Note to Schedule 1
(In thousands)
Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X,
which require condensed financial statements as to the financial position, changes in financial position and results of
operations of a parent company as of the same dates and for the same periods for which audited consolidated financial
statements have been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries
(including variable interest entities) together exceed 25 percent of consolidated net assets as of the end of the most
recently completed fiscal year. As of August 31, 2020, RMB 1,935,267 of the restricted capital and reserves are not
available for distribution, and as such, the condensed financial statements of the Company have been presented for the
years ended August 31, 2018, 2019 and 2020.
1.Basis of preparation
The condensed financial statements of the Company has been prepared using the same accounting policies as set out in its
financial statements, except that the Company has used the equity method to account for its subsidiaries and its variable
interest entities. Accordingly, the condensed financial information presented herein represents the financial information of
the Company.
Detailed footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. The footnote discloses certain
supplemental information relating to the operations of the Company and, as such, the condensed financial statements of
the Company should be read in conjunction with the notes to the accompanying financial statements of the Group.
2. Convenience translation
Translations of balances in condensed financial information of parent company balance sheets, statements of operations
statements of comprehensive income and statements of cash flows from RMB into US dollars as of and for the year ended
August 31, 2020 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.8474,
representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on August 31,
2020. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into
U.S. dollar at that rate on August 31, 2020, or at any other rate.
F-56
Exhibit 2.5
Description of rights of each class of securities
registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”)
American Depositary Shares (“ADSs”), each representing one Class A ordinary share of Bright Scholar Education Holdings Limited
(“we,” “our,” “our company,” or “us”), are listed and traded on the New York Stock Exchange and, in connection with this listing (but
not for trading), the Class A ordinary shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description
of the rights of (i) the holders of Class A ordinary shares and (ii) the holders of ADSs. Class A ordinary shares underlying the ADSs are
held by The Bank of New York Mellon, as depositary, and holders of ADSs will not be treated as holders of the Class A ordinary shares.
Description of Class A Ordinary Shares
The following is a summary of material provisions of our amended and restated memorandum and articles of association (the
“Memorandum and Articles of Association”), as well as the Companies Act (as amended) of the Cayman Islands (the “Companies Act”)
insofar as they relate to the material terms of our ordinary shares. Notwithstanding this, because it is a summary, it may not contain all
the information that you may otherwise deem important. For more complete information, you should read the entire Memorandum and
Articles of Association, which has been filed with the SEC as an exhibit to our Registration Statement on Form F-1 (File No. 333-
217359).
Type and Class of Securities (Item 9.A.5 of Form 20-F)
The par value of Class A ordinary share is US$0.00001 per share. The number of Class A ordinary shares that had been issued as of
August 31, 2020 is provided on the cover of the annual report on Form 20-F for the fiscal year ended August 31, 2020. Certificates
representing the ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely
hold and transfer their ordinary shares.
Preemptive Rights (Item 9.A.3 of Form 20-F)
Our shareholders do not have preemptive rights.
Limitations or Qualifications (Item 9.A.6 of Form 20-F)
We have a dual-class voting structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. Each
Class A ordinary share shall entitle the holder thereof to one vote on all matters that require a shareholder’s vote, and each Class B
ordinary share shall entitle the holder thereof to twenty (20) votes on all matters that require a shareholder’s vote. Due to the weighted
voting power of Class B ordinary share holder, the voting power of the Class A ordinary shares may be materially limited.
Rights of Other Types of Securities (Item 9.A.7 of Form 20-F)
Not applicable.
Rights of Class A Ordinary Shares (Item 10.B.3 of Form 20-F)
Classes of Ordinary Shares
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class A ordinary shares and
Class B ordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued in registered
form and are issued when registered in our register of shareholders. We may not issue shares to bearer. Our shareholders who are non-
residents of the Cayman Islands may freely hold and transfer their shares.
Conversion
Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are
not convertible into Class B ordinary shares under any circumstances. Upon any sale of Class B ordinary shares by a holder thereof to
any person or entity that is not an affiliate (as defined in our amended and restated articles of association) of such holder, such Class B
ordinary shares will be automatically and immediately converted into an equal number of Class A ordinary shares.
Dividends
Subject to the Companies Act, our directors may declare dividends in any currency to be paid to our shareholders. Dividends may be
declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our directors determine is no
longer needed. Our board of directors may also declare and pay dividends out of the share premium account or any other fund or account
that can be authorized for this purpose in accordance with the Companies Act. Except in so far as the rights attaching to, or the terms of
issue of, any share otherwise provides, (1) all dividends shall be declared and paid according to the amounts paid up on the shares in
respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for this purpose as paid up on
that share and (2) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion
or portions of the period in respect of which the dividend is paid.
Our directors may also pay interim dividends, whenever our financial position, in the opinion of our directors, justifies such payment.
Our directors may deduct from any dividend or bonus payable to any shareholder all sums of money (if any) presently payable by such
shareholder to us on account of calls or otherwise.
No dividend or other money payable by us on or in respect of any share shall bear interest against us. In respect of any dividend proposed
to be paid or declared on our share capital, our directors may resolve and direct that (1) such dividend be satisfied wholly or in part in the
form of an allotment of shares credited as fully paid up, provided that our shareholders entitled thereto will be entitled to elect to receive
such dividend (or part thereof if our directors so determine) in cash in lieu of such allotment or (2) the shareholders entitled to such
dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the
dividend as our directors may think fit. Our shareholders may, upon the recommendation of our directors, by ordinary resolution resolve
in respect of any particular dividend that, notwithstanding the foregoing, a dividend may be satisfied wholly in the form of an allotment
of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such
allotment.
Any dividend interest or other sum payable in cash to the holder of shares may be paid by check or warrant sent by mail addressed to the
holder at his registered address, or addressed to such person and at such addresses as the holder may direct. Every check or warrant shall,
unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order
of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the
check or warrant by the bank on which it is drawn shall constitute a good discharge to us.
All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by our board of directors for
the benefit of our company until claimed. Any dividend unclaimed after a period of six years from the date of declaration of such
dividend shall be forfeited and reverted to us.
Whenever our directors have resolved that a dividend be paid or declared, our directors may further resolve that such dividend be
satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to
subscribe for our securities or securities of any other company. Where any difficulty arises with regard to such distribution, our directors
may settle it as they think expedient. In particular, our directors may issue fractional certificates, ignore fractions altogether or round the
same up or down, fix the value for distribution purposes of any such specific assets, determine that cash payments shall be made to any
of our shareholders upon the footing of the value so fixed in order to adjust the rights of the parties, vest any such specific assets in
trustees as may seem expedient to our directors, and appoint any person to sign any requisite instruments of
transfer and other documents on behalf of the persons entitled to the dividend, which appointment shall be effective and binding on our
shareholders.
Voting Rights
On a show of hands each shareholder is entitled to one vote or, on a poll, each shareholder is entitled to one vote for each Class A
ordinary share and 20 votes for each Class B ordinary share, voting together as a single class, on all matters that require a shareholder’s
vote. Voting at any shareholders’ meeting is by show of hands of shareholders who are present in person or by proxy or, in the case of a
shareholder being a corporation, by its duly authorized representative, unless a poll is demanded. A poll may be demanded by the
chairman of such meeting or any shareholder present in person or by proxy.
No shareholder shall be entitled to vote or be reckoned in a quorum, in respect of any share, unless such shareholder is duly registered as
our shareholder and all calls or installment due by such shareholder to us have been paid.
If a clearing house (or its nominee(s)) or a central depositary entity, being a corporation, is our shareholder, it may authorize such person
or persons as it thinks fit to act as its representative(s) at any meeting or at any meeting of any class of shareholders provided that, if
more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such
person is so authorized. A person authorized pursuant to this provision is entitled to exercise the same powers on behalf of the clearing
house or central depositary entity (or its nominee(s)) as if such person was the registered holder of our shares held by that clearing house
or central depositary entity (or its nominee(s)) including the right to vote individually in a show of hands.
Meetings
Shareholders’ meetings may be convened by a majority of our board of directors or chairman. Advance notice of at least ten clear days is
required for the convening of our annual general meeting and any other general meeting of our shareholders. A quorum required for a
meeting of shareholders consists of at least two shareholders present in person or by proxy, representing not less than one-third in
nominal value or par value of the total issued voting shares in our company throughout the meeting.
Notwithstanding that a meeting is called by shorter notice than that mentioned above, but, subject to the Companies Act , it will be
deemed to have been duly called, if it is so agreed (1) in the case of a meeting called as an annual general meeting by all of our
shareholders entitled to attend and vote at the meeting; and (2) in the case of any other meeting, by a majority in number of the
shareholders holding not less than 95% in nominal value of the issued shares giving that right.
No business other than the appointment of a chairman may be transacted at any general meeting unless a quorum is present at the
commencement of business. However, the absence of a quorum will not preclude the appointment of a chairman. If present, the chairman
of our board of directors shall be the chairman presiding at any shareholders’ meetings.
A corporation being a shareholder shall be deemed for the purpose of our amended and restated articles of association to be present in
person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing
body of such corporation to act as its representative at the relevant general meeting or at any relevant general meeting of any class of our
shareholders. Such duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation that he
represents as that corporation could exercise if it were our individual shareholder.
Transfer of Ordinary Shares
Subject to any applicable restrictions set forth in our amended and restated articles of association, including, for example, the board of
directors’ discretion to refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve,
or any share issued under share incentive plans for employees upon which a restriction on transfer imposed thereby still subsists, or a
transfer of any share to more than four joint
holders, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or common form or
in a form prescribed by the NYSE or in another form that our directors may approve.
Our directors may decline to register any transfer of any share which is not paid up or on which we have a lien. Our directors may also
decline to register any transfer of any share unless:
● the instrument of transfer is lodged with us and is accompanied by the certificate for the shares to which it relates and such other
evidence as our directors may reasonably require to show the right of the transferor to make the transfer;
● the instrument of transfer is in respect of only one class of share;
● the instrument of transfer is properly stamped (in circumstances where stamping is required); and
● fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our directors may from time to time
require is paid to us in respect thereof.
If our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice requirement of the NYSE, be suspended and the register closed at
such times and for such periods as our directors may from time to time determine; provided, however, that the registration of transfers
shall not be suspended nor the register closed for more than 30 days in any year as our directors may determine.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
Subject to our Memorandum and Articles of Association and to the terms of allotment our board of directors may from time to time make
calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days
prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Ordinary Shares
We are empowered by the Companies Act and our amended and restated articles of association to purchase our own shares, subject to
certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Act , our amended and restated
memorandum and articles of association and to any applicable requirements imposed from time to time by the NYSE, the Securities and
Exchange Commission, or by any other recognized stock exchange on which our securities are listed. Under the Companies Act, the
redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for
the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the
company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under
the Companies Act no such share may be redeemed or repurchased (1) unless it is fully paid up, (2) if such redemption or repurchase
would result in there being no shares outstanding, or (3) if the company has commenced liquidation. In addition, our company may
accept the surrender of any fully paid share for no consideration.
Inspection of Books and Records
Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or
our corporate records. However, we will provide our shareholders with annual audited financial statements.
Requirements to Change the Rights of Holders of Class A Ordinary Shares (Item 10.B.4 of Form 20-F)
Variations of Rights
Subject to the Company Act, all or any of the special rights for the time being attached to the shares or any class of shares may, unless
otherwise provided by the terms of issue of the shares of that class, from time to time (whether or not the Company is being wound up)
be varied, modified or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of the shares
of that class. To every such separate general meeting all the provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply, but so that:
● separate general meetings of the holders of a class or series of shares may be called only by (i) the Chairman of the Board, or
(ii) a majority of the entire Board (unless otherwise specifically provided by the terms of issue of the shares of such class or
series).
● the necessary quorum (whether at a separate general meeting or at its adjourned meeting) shall be a person or persons (or in the
case of a Member being a corporation, its duly authorized representative) together holding or representing by proxy not less
than one-third in nominal or par value of the issued shares of that class (but so that if at any adjourned meeting of such holders a
quorum as above defined is not present, those Members who are present shall form a quorum);
● every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him; and
● any holder of shares of the class present in person or by proxy or authorised representative may demand a poll.
Limitations on the Rights to Own Class A Ordinary Shares (Item 10.B.6 of Form 20-F)
There are no limitations under the laws of the Cayman Islands or under the Memorandum and Articles of Association that limit the right
of non-resident or foreign owners to hold or vote Class A ordinary shares, other than anti-takeover provisions contained in the
Memorandum and Articles of Association to limit the ability of others to acquire control of our company or cause our company to
engage in change-of-control transactions.
Provisions Affecting Any Change of Control (Item 10.B.7 of Form 20-F)
Anti-Takeover Provisions
Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a change of
control of our company or management that shareholders may consider favorable, including provisions that authorize our board of
directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such
preferred shares without any further vote or action by our shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and
Articles of Association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Ownership Threshold (Item 10.B.8 of Form 20-F)
There are no provisions under Cayman Islands law applicable to the Company, or under our Memorandum and Articles of Association ,
governing the ownership threshold above which shareholder ownership must be disclosed.
Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)
The Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent United Kingdom
statutory enactments, and accordingly there are significant differences between the Companies Act and the current Companies Act of
England. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth
below is a summary of the significant
differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the State
of Delaware.
Mergers and Similar Arrangements
The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies
and non-Cayman Islands companies. For these purposes, (1) “merger” means the merging of two or more constituent companies and the
vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (2) a “consolidation” means
the combination of two or more constituent companies into a combined company and the vesting of the undertaking, property and
liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each
constituent company must approve a written plan of merger or consolidation, which must then be authorized by (1) a special resolution of
the shareholders of each constituent company, and (2) such other authorization, if any, as may be specified in such constituent company’s
articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a
declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company
and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each
constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting
shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the
Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger
or consolidation which is effected in compliance with these statutory procedures.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the
arrangement is approved by a majority in number of each class of shareholders or creditors with whom the arrangement is to be made,
and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are
present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and
subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the
right to express to the court the view that the transaction ought not to be approved, the Grand Court can be expected to approve the
arrangement if it determines that:
● the statutory provisions as to the required majority vote have been met;
● the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without
coercion of the minority to promote interests adverse to those of the class;
● the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his
interest; and
● the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.
When a takeover offer is made and accepted by holders of 90.0% of the shares affected within four months, the offeror may, within a
two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares to transfer such
shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the
case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights,
which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment
in cash for the judicially determined value of the shares.
Shareholders’ Suits and Protection of Minority Shareholders
In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule a derivative action
may not be brought by a minority shareholder. However, based on English authorities, which
would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to apply and follow
the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to
commence a class action against, or derivative actions in the name of, a company to challenge the following:
● an act which is illegal or ultra vires;
● an act which, although not ultra vires, could only be effected duly if authorized by a special or qualified majority vote that has
not been obtained; and
● an act which constitutes a fraud on the minority where the wrongdoers are themselves in control of the company.
In the case of a company (not being a bank) having its share capital divided into shares, the Grand Court of the Cayman Islands may, on
the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine the
affairs of the company and to report thereon in such manner as the Grand Court of the Cayman Islands shall direct.
Any of our shareholders may petition the Grand Court of the Cayman Islands which may make a winding up order if the Grand Court of
the Cayman Islands is of the opinion that it is just and equitable that we should be wound up or, as an alternative to a winding up order,
(1) an order regulating the conduct of our affairs in the future, (2) an order requiring us to refrain from doing or continuing an act
complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained we have omitted to do,
(3) an order authorizing civil proceedings to be brought in our name and on our behalf by the shareholder petitioner on such terms as the
Grand Court of the Cayman Islands may direct, or (4) an order providing for the purchase of the shares of any of our shareholders by
other shareholders or us and, in the case of a purchase by us, a reduction of our capital accordingly.
Generally, claims against us must be based on the general laws of contract or tort applicable in the Cayman Islands or individual rights as
shareholders as established by our amended and restated articles of association.
Indemnification of Directors and Executive Officers and Limitation of Liability
Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for
indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be
contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our
Memorandum and Articles of Association permit indemnification of officers and directors for losses, damages, costs and expenses
incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers. This
standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with
additional indemnification beyond that provided in our Memorandum and Articles of Association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling
us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This
duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care
that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and
disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires
that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate
position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the
corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not
shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith
and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by
evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director
must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company
and therefore it is considered that he or she owes the following duties to the company—a duty to act in good faith in the best interests of
the company, a duty not to make a personal profit based on his or her position as director (unless the company permits him or her to do
so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or
her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman
Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in
the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and
experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and
care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by
amendment to its certificate of incorporation. Under Cayman Islands law, a company may eliminate the ability of shareholders to
approve corporate matters by way of written resolution signed by or on behalf of each shareholder who would have been entitled to vote
on such matters at a general meeting without a meeting being held by amending the articles of association. Our memorandum and articles
of association do not allow shareholders to act by written resolutions.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,
provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or
any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
With respect to shareholder proposals, Cayman Islands law is essentially the same as Delaware law. Cayman Islands Companies Act does
not provide shareholders with an express right to put forth any proposal before an annual meeting of the shareholders. However, Cayman
Islands Companies Act may provide shareholders with limited rights to requisition a general meeting but such rights must be stipulated
in the articles of association of the Company. Any one or more shareholders holding not less than two-thirds of the votes attaching to the
total issued and paid up share capital of the Company at the date of deposit of the requisition shall at all times have the right, by written
requisition to the board of directors or the secretary of the company, to require an extraordinary general meeting to be called by the board
of directors for the transaction of any business specified in such requisition.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority
shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a
single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in
relation to cumulative voting under the laws of the Cayman Islands but our amended and restated articles of association do not provide
for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a
Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our
amended and restated articles of association, directors may be removed with or without cause, by an ordinary resolution of our
shareholders.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the
corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited
from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person
becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more
of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to
make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other
things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business
combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer
of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the
Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and
its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company, for
a proper purpose and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding Up and Liquidation
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be
approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of
directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation
to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special
resolution of its members or if the company is unable to pay its debts as they fall due. The court has authority to order winding up in a
number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
Subject to any future shares which are issued with specific rights, (1) if we are wound up and the assets available for distribution among
our shareholders are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess
shall be distributed pari passu among those shareholders in proportion to the amount paid up at the commencement of the winding up on
the shares held by them, respectively, and (2) if we are wound up and the assets available for distribution among the shareholders as such
are insufficient to repay the whole of the paid-up capital, those assets shall be distributed so that, as nearly as may be, the losses shall be
borne by the shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them,
respectively.
If we are wound up (whether the liquidation is voluntary or by the court), the liquidator may with the sanction of our special resolution
and any other sanction required by the Companies Act, divide among our shareholders in specie or kind the whole or any part of our
assets (whether or not they shall consist of property of the same kind) and may, for such purpose, set such value as the liquidator deems
fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different
classes of shareholders.
The liquidator may also vest the whole or any part of these assets in trustees upon such trusts for the benefit of the shareholders as the
liquidator shall think fit, but so that no shareholder will be compelled to accept any assets, shares or other securities upon which there is a
liability.
The consideration received by each holder of a Class A ordinary share and a holder of a Class B ordinary share will be the same in any
liquidation event.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of
the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Alterations to our Memorandum and
Articles of Association mayonly be made by special resolution, meaning a majority of not less than two-thirds of votes cast at a
shareholders’ meeting.
If at any time, our share capital is divided into different classes of shares, all or any of the special rights attached to any class of shares
may, subject to the provisions of the Companies Act, be varied with the sanction of a special resolution passed at a general meeting of the
holders of the shares of that class. Consequently, the rights of any class of shares cannot be detrimentally altered without a majority
of two-thirds of the vote of all of the shares in that class. The provisions of our amended and restated articles of association relating to
general meetings shall apply similarly to every such separate general meeting, but so that the quorum for the purposes of any such
separate general meeting or at the adjourned meeting shall be a person or persons together holding (or represented by proxy) on the date
of the relevant meeting not less than one-third in nominal value of the issued shares of that class, that every holder of shares of the class
shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in
person or by proxy may demand a poll.
The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari
passu with such existing class of shares.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of
the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under Cayman Islands law, our
Memorandum and Articles of Association may only be amended with a special resolution of our shareholders.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our Memorandum and Articles of Association on the rights of non-resident or foreign shareholders
to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles of Association
governing the ownership threshold above which shareholder ownership must be disclosed.
Changes in Capital (Item 10.B.10 of Form 20-F)
We may from time to time by ordinary resolution in accordance with the Companies Act alter the conditions of our amended and restated
memorandum of association to:
● increase our capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe;
● consolidate and divide all or any of our share capital into shares of larger amounts than our existing shares;
● cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and
diminish the amount of its share capital by the amount of the shares so canceled subject to the provisions of the Companies Act;
● sub-divide our shares or any of them into shares of smaller amount than is fixed by our amended and restated memorandum of
association, subject nevertheless to the Companies Act, so that the resolution whereby any share is sub-divided may determine
that, as between the holders of the shares resulting from such subdivision, one or more of the shares may have any such
preferred or other special rights over, or may have such deferred rights or be subject to any such restrictions as compared with
the others, as we have power to attach to unissued or new shares; and
● divide shares into several classes and without prejudice to any special rights previously conferred on the holders of existing
shares, attach to the shares respectively any preferential, deferred, qualified or special rights, privileges, conditions or such
restrictions that in the absence of any such determination in a general meeting may be determined by our directors.
We may, by special resolution, subject to any confirmation or consent required by the Companies Act , reduce our share capital or any
capital redemption reserve in any manner authorized by law.
Debt Securities (Item 12.A of Form 20-F)
Not applicable.
Warrants and Rights (Item 12.B of Form 20-F)
Not applicable.
Other Securities (Item 12.C of Form 20-F)
Not applicable.
Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
The Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS
will represent one Class A ordinary share (or a right to receive one Class A ordinary share) deposited with The Hongkong and Shanghai
Banking Corporation Limited, as custodian for the depositary in Hong Kong. Each ADS will also represent any other securities, cash or
other property which may be held by the depositary. The depositary’s office at which the ADSs will be administered is located at
101 Barclay Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at 225 Liberty
Street, New York, New York 10286.
You may hold ADSs either (A) directly (1) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate
evidencing a specific number of ADSs, registered in your name, or (2) by having uncertificated ADSs registered in your name, or
(B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect
participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred
to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures
of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your
broker or financial institution to find out what those procedures are.
Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.
As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. The laws of the Cayman
Islands govern shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs,
you will have ADS holder rights. A deposit agreement among us, the
depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights
and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the
entire deposit agreement and the form of ADR. See “Where You Can Find Additional Information” for directions on how to obtain
copies of those documents.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on
shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in
proportion to the number of shares your ADSs represent.
● Cash. The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can
do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government
approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only
to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the
ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest. Before
making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Taxation.”
It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange
rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the
distribution.
● Shares. The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution.
The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or
ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not
distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the
distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that
distribution.
● Rights to purchase additional shares. If we offer holders of our securities any rights to subscribe for additional shares or any
other rights, the depositary may (1) exercise those rights on behalf of ADS holders, (2) distribute those rights to ADS holders or
(3) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and
expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will
receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory
assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which
the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing
ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability
of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and
the securities distributed may be subject to restrictions on transfer.
● Other Distributions. The depositary will send to ADS holders anything else we distribute on deposited securities by any means
it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to
sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we
distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to
distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to
make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and
expenses in connection with that distribution. U.S. securities laws may
restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be
subject to restrictions on transfer.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We
have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any
other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the
distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you .
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or
persons that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of
any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited
securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your
request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary may charge you a fee
and its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will
cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated
ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of
uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
Voting Rights
How do you vote?
ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary
to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send
or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may
instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The
depositary will try, as far as practical, subject to the laws of the Cayman Islands and the provisions of our articles of association or
similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not
request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to
vote as you instruct, but it is not required to do so.
Except by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and
withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any event, the
depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed or as
described in the following sentence. If we asked the depositary to solicit your instructions at least 30 days before the meeting date but the
depositary does not receive voting instructions from you by the specified date, it will consider you to have authorized and directed it to
give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by your
ADSs. The depositary will give a discretionary proxy in those circumstances to vote on all questions at to be voted upon unless we notify
the depositary that:
● we do not wish to receive a discretionary proxy;
● there is substantial shareholder opposition to the particular question; or
● the particular question would have an adverse impact on our shareholders.
We are required to notify the depositary if one of the conditions specified above exists.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares.
In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your shares are
not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to Deposited Securities,
if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be
voted upon at least 30 days in advance of the meeting date.
Fees and Expenses
Persons depositing or withdrawing shares or
ADS holders must pay:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
For:
Issuance of ADSs, including issuances resulting from a
distribution of shares or rights or other property Cancelation of
ADSs for the purpose of withdrawal, including if the deposit
agreement terminates
US$0.05 (or less) per ADS
Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if securities
distributed to you had been shares and the shares had been
deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited
securities (including rights) that are distributed by the depositary to
ADS holders
US$0.05 (or less) per ADS per calendar year
Depositary services
Registration or transfer fees
Expenses of the depositary
Transfer and registration of shares on our share register to or from
the name of the depositary or its agent when you deposit or
withdraw shares
Cable, telex and facsimile transmissions (when expressly provided
in the deposit agreement) converting foreign currency to U.S.
dollars
Taxes and other governmental charges the depositary or the
custodian has to pay on any ADSs or shares underlying ADSs,
such as stock transfer taxes, stamp duty or withholding taxes
As necessary
Any charges incurred by the depositary or its agents for servicing
the deposited securities
As necessary
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for
the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by
deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may
collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-
entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution
payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The
depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment
and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the
fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign
currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or
commissions.
The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and
not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction
spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate
assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when
buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in
any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method
by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit
agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by
any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities
represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities
represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary
sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or
send to ADS holders any property, remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities
The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder
surrendering ADSs and subject to any conditions or procedures the depositary may establish.
If deposited securities are redeemed or otherwise purchased for cash in a transaction that is mandatory for the depositary as a holder of
deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money
to the holders of called ADSs upon surrender of those ADSs.
If there is any change in the deposited securities such as a sub-division, combination or other reclassification, sale of assets substantially
as an entirety, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the
depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement
securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful and to hold the
replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may
instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary
may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new
ADRs identifying the new deposited securities.
If there are no deposited securities underlying ADSs, including if the deposited securities are canceled, or if the deposited securities
underlying ADSs have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon
notice to the ADS holders.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment
adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees,
facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for
outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes
effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit
agreement as amended.
How may the deposit agreement be terminated?
The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the
deposit agreement if
● 60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and
accepted its appointment;
● we delist our shares from an exchange on which they were listed and do not list the shares on another exchange;
● we appear to be insolvent or enter insolvency proceedings;
● all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities; or
● there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless.
If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time
after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on
the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro
rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the
termination date.
After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited
securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would
interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all
the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the
termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on
deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the
deposit agreement except as described in this paragraph.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of
the depositary. We and the depositary:
● are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
● are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or
counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;
● are not liable if we or it exercises discretion permitted under the deposit agreement;
● are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for
any breach of the terms of the deposit agreement;
● have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your
behalf or on behalf of any other person;
● are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
● may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the
proper person.
In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the
depositary may require:
● payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties
for the transfer of any shares or other deposited securities;
● satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
● compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of
transfer documents.
The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books
are closed or at any time if the depositary or we think it advisable to do so.
Your Right to Receive the Class A Ordinary Shares Underlying your ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:
● when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books;
(2) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our shares;
● when you owe money to pay fees, taxes and similar charges; or
● when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs
or to the withdrawal of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the
ADSs. The depositary may also deliver shares upon cancelation of pre-released ADSs (even if the ADSs are canceled before the pre-
release transaction has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The
depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following
conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in
writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other
collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five
business days’ notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-
release, although the depositary may disregard the limit from time to time if it thinks it is appropriate to do so.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS,
and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that
facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and
a DTC participant. Profile is feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of
uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the
DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that
transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement
understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in
requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS
holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the
depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance
with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder Communications; Inspection of Register of Holders of ADSs
The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited
securities that we make generally available to holders of deposited securities. The depositary will send you copies of those
communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of
holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
Exclusive Management Service and Business Cooperation Agreement
(English translation)
Exhibit 4.37
This Exclusive Management Service and Business Cooperation Agreement (this “Agreement”) is entered into as of November 26,
2019, by and among the following parties in Beijing, the People’s Republic of China (“PRC”):
Party A: Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd.
Party B: Beijing Haidian Bright Scholar Training School
Party C: Beijing Elib Technology Co., Ltd.
(Each of Party A, Party B and Party C, a “Party”, and collectively the “Parties”.)
WHEREAS,
(1) Party A is a wholly foreign-owned enterprise duly registered and validly existing under the PRC laws, owning resources to provide
technical support and consulting services;
(2) Party B is a limited liability company duly registered and validly existing under the PRC laws and engages in English Training
(“Educational Services”).
(3) Party C is the shareholder of Party B and owns 100% of the equity interests of Party B;
(4) Party A agreed to provide exclusive education management consultant, intellectual property license, technical support and operation
support service to Party B with Party A’s advantages in human resource, technology and information. Party B agreed to accept such
relevant services from Party A.
NOW THEREFORE, the Parties through amiable negotiations agree as follows:
1. Provision of Services
1.1 In accordance with the terms and conditions herein, Party B and Party C appoint Party A as Party B ’ exclusive technical and
service provider to provide full-scope education management consultant, intellectual property license, technical support and
consultant services as provided in Appendix I. Party B are referred to as “Service Accepting Party”.
Party B shall determine the specific contents of services within the scope listed in Appendix II with Party A or any entity
designated by Party A based on the actual need in their business. Both parties confirm that the services provided by Party A
are confined to the approved operation scope. In the event Party B require Party A to provide services beyond the approved
operation scope, Party A is entitled to designate a third party or expand Party A’s operation scope with accordance to PRC
laws and obtain relevant approvals, to provide such services.
1.2 Party B and Party C further agree that during the effective period of this Agreement, Party B and Party C shall not, and shall
cause the affiliates of them not to, directly and indirectly obtain the same or similar exclusive technical and services as provided
under this Agreement from any third party, or establish any similar business cooperative relation with any third party with
respect to the matters stipulated herein.
1.3 To ensure the normal operation of the ordinary business of Party B, Party A may, but is not obligated to, in its discretion and in
accordance with the PRC laws, provide guarantee for the performance of the agreements entered into by Party B or with any
third party with respect to the business of Party B. Party B and Party C hereby agree and confirm that if they need to provide
any guarantee for the performance under any agreement or loan of Party B and/or during their operation, they will ask Party A
to act as their guarantor first.
2. Service Fee and Payment
2.1 By considering the contents of specific services provided and the target of service, Party A may determine, in its discretion, a
fair service fee and proper payment arrangement according to the income and student number of Party B in a fixed period. The
calculation and payment arrangement of the service fee is provided in Appendix I of the Agreement.
2.2 If Party A determines the fee calculation mechanism specified herein should no longer apply due to whatever reason and need
to be adjusted, Party A shall actively and faithfully propose an adjustment scheme to determine a new fee standard or
mechanism. If Service Accepting Party does not respond within seven (7) days after receiving the adjustment scheme as
mentioned above, it shall be deemed as having accepted the adjustments proposed by Party A.
3.
Intellectual Properties
3.1 Party A shall solely and exclusively enjoy any ownership, interest and right of the intellectual properties produced by
performance under this Agreement, including but not limited to copyrights, patents, rights of application for patents, technical
secrets and business secrets, and without Party A’s consent, Party B have no rights other than those provided herein and shall
actively take all necessary measures to help Party A obtain such intellectual properties. For avoidance of doubt, any intellectual
property that is in the process of filing with governmental authorities or owned by Party B or shall be transferred by the
beneficial owner or the applicant of such intellectual property to Party A or its affiliate as appointed by Party A and Party B
shall execute transfer agreement for such intellectual property unless Party A have confirmed that such intellectual properties
are necessary for Party B or in their ordinary business or such intellectual properties shall be held by Party B or according to
relevant PRC laws and regulations.
3.2 If a development made by Party A is based on the intellectual properties owned by Party B, Party B shall ensure that such
intellectual properties are flawless. Otherwise, Party B shall indemnify Party A for all damages and losses caused to Party A by
any flaw of such intellectual properties. If Party A is liable to any third party for such reason, Party A is entitled to recover all of
its losses from Party B.
3.3 This Article 3 shall survive any modification, dissolution or termination of this Agreement.
4. Exercise of Party A’s rights
In view of Article 1 in this Agreement, in order to specify respective rights and obligations of each Party, to ensure Party A’s actual
performance in providing management services to Party B under this Agreement, and to ensure the implementation of business
services between Party A, Party B and the payment of the amounts that shall be paid by Party B to Party A, Party B and Party C
agree as below:
4.1 Party A is entitled to provide suggestions and requirements with respect to Party B’ operation, financial management and
employment, and Party B shall strictly carry out or abide by such suggestions or requirements.
4.2 Party C, Party B shall elect directors of Party B as designated by Party A according to laws, regulations and Articles of
Association of the companies or schools, cause such elected directors to elect the person recommended by Party A as the
chairman of the board of directors, and appoint the persons designated by Party A as senior managers of Party B , including but
not limited to the headmaster of schools, manager, the chief financial officer, the responsible officers of each branch of business,
financial managers, financial superintendents and accountants.
4.3 Party C, Party B and/or shall dismiss any director and/or senior manager of Party B in accordance with the requirement of Party
A, and elect and engage others as designated by Party A.
4.4 For the purpose of Article 4.3, Party C, Party B shall conduct necessary internal and external procedures in accordance with
law, Articles of Association and this Agreement to complete such dismissal and engagement procedures.
4.5 Party A is entitled to inspect accounts of Party B periodically and at any time. Party B shall keep accounts timely and
accurately, and provide accounts, audit reports, financial statements and any operation records, business contracts, financial
materials for Party A upon Party A’s requests. During the effective period of this Agreement and in accordance with relevant
laws, Party B shall assist Party A and any third party designated by Party A to conduct audit (including but not limited to audit
of affiliated transactions and any other audits), provide information and materials with respect to Party B ’ operation, business,
clients, finance and employees, and permit Party A or Party A’s affiliates to disclose such information and materials to satisfy
securities supervision requirement.
4.6 Party C hereby agrees that as of the date hereof, it shall execute a Power of Attorney the form and substance of which shall be
satisfied by Party A, and shall comprehensively, appropriately, and completely perform the obligation under such Power of
Attorney, including but not limited to unconditionally and irrevocably authorize Party A or the party designated by Party A (the
“Trustee”, and Party C shall not be such Trustee) to exercise the rights of shareholder and/or director of Party B as Party C’s
agent according to the Trustee’s own will.
4.7 Upon Party A’s requests in writing, Party B and Party C shall set all accounts receivable and/or other legal assets which could
be disposed as collaterals to guarantee service fee payment under Article 2.1 of this Agreement. During the effective period of
this Agreement, Party B shall maintain complete licenses necessary for its business operation and the right and capacity to
conduct relevant business in China.
4.8 In the event Party B conduct the dissolution or the liquidation for whatever reason, Party C, Party B shall assign personnel
recommended by Party A as liquidators permitted by PRC laws and regulations to manage the property of Party B. In the event
Party B conduct the dissolution or the liquidation, no matter Article 4.9 can be enforced or not and subject to the restriction
under PRC law, Party C, Party B shall respectively deliver all residual property obtained from the liquidation of Party B or
under PRC laws and regulations to Party A.
4.9 Without Party A’s prior written consent, Party B shall not conduct any transaction that may have substantial effect on their
assets, obligations, rights or operation, including but not limited to the followings:
a)
b)
c)
d)
e)
conducting any business beyond the scope of normal operation or in the way different from prior usual manners;
raising a loan from a third party or undertaking any debts;
changing or removing any director or any senior manager;
selling, purchasing or disposing any asset or interest in any manner from/to any third party, including but not limited to
intellectual properties;
using corporate assets or intellectual properties as collaterals, providing warranties in any other ways, or placing any other
encumbrances on corporate assets other than for the debts owed by Party B;
f)
modifying the Articles of Association or the scope of operation;
g) modifying corporate operation modes, business procedures or any significant internal regulations;
h) making significant adjustment on business modes, marketing strategies, operation tactics or client relationship;
i)
j)
k)
l)
distributing profits and dividend in any manner;
conducting liquidation and distributing residual properties;
transferring or assigning rights and obligations hereunder to any third party;
entering into any agreement or arrangement that conflicts with this Agreement or may damage Party A’s rights and
interests under this Agreement;
m)
engaging in any arrangement of contractual operation, leasing management, merger, division, join venture, shareholding
reform or other method to change the method of operation and equity structure, or disposing any or all asset or equity
interest of Party B or by transfer, sale, conversion or any other manners.
Furthermore, Party C shall cause Party B to notify Party A timely of any event that has or may have significant adverse
effect on business and operation of Party B, and make their best effort to prevent the occurrence of such event and/or the
expansion of damages.
4.10Party B hereby grants to Party A an irrevocable and exclusive Purchase Right which subject to the PRC laws allows Party A to
purchase, at its option, any or all of the asset and business of Party B with the lowest price as permitted under PRC
laws. Parties shall separately execute an agreement for such transfer of assets and business and determine the terms and
conditions for such transfer of assets and business.
5. Term and Right of Termination
5.1 The Agreement is executed and becomes effective as of the date stated above.
5.2 Unless all Parties reach an agreement to early terminate this Agreement, the term of this Agreement shall be effective during the
business operation period of Party A, Party B.
5.3 Party A shall have the option to terminate this Agreement at any time. During the performance of this Agreement, Party A is
entitled to terminate this Agreement with written notice at any time.
5.4 Without Party A’s written consent, Party B and/or Party C have no right to terminate this Agreement.
6. Representations and Warranties
6.1 Party A represents and warrants to Party B as follows:
a)
b)
c)
Party A is a wholly foreign-owned enterprise duly registered and validly existing under the PRC laws, and has the
capability to take civil responsibilities;
Party A has the corporate power to execute and deliver this Agreement and perform the obligations under this Agreement.
Once this Agreement is executed, Party A assumes legal, effective and binding obligations and such obligations are
enforceable according to this Agreement;
Neither the execution of this Agreement nor the performance of obligations under this Agreement by Party A shall
conflict with, breach or violate (i) any operation license of Party A or any article of Party A’s Articles of Association, (ii)
any law, regulation, rule, authorities or approval of government authorities or departments applicable to Party A, or (iii)
any provision of contracts or agreements executed by Party A.
6.2 Party B separately and jointly represent and warrant to Party A as follows:
a)
b)
c)
d)
Party B is a limited liability company duly registered and validly existing under the PRC laws, and have the capability to
take civil responsibilities with their registered capital;
Party B has the corporate power to execute and deliver this Agreement and perform the obligations under this Agreement.
Once this Agreement is executed, Party B assume legal, effective and binding obligations and such obligations are
enforceable according to this Agreement;
Neither the execution of this Agreement nor the performance of obligations under this Agreement by Party B shall
conflict with, breach or violate (i) any operation license of Party B or any article of Party B’ Articles of Association, (ii)
any law, regulation, rule, authorities or approval of government authorities or departments applicable to Party B, or (iii)
any provision of contracts or agreements executed by Party B ;
Party B shall provide relevant information and documents to Party A as required by Party A, and arrange special
personnel to correspond and coordinate with Party A and assist Party A with on-site research and collection of materials in
Party B;
e)
f)
g)
h)
i)
j)
If necessary, Party B shall provide requisite working facilities and conditions to the special personnel arranged by Party A,
and bear related expenses and costs incurred by such personnel during the period of the provision of the management
service;
Develop and operate education service in effective, prudent and legal manners, and maintain and renew in time requisite
licenses and authorities of Educational Services provided by Party B under this Agreement to keep the effective and entire
legal validity of such licenses and authorities; establish and maintain an independent account for education service;
Provide Party A with any requisite technology or other materials deemed necessary by Party A, and provide Party A with
the access to requisite places and facilities for service under this Agreement.;
Party B shall operate in accordance with relevant laws and regulations, complete all relevant procedure necessary for
operation, and provide duplicates of such licenses;
Party B possess all permissions, licenses, authorities, approvals and facilities, and guarantee such permissions, licenses,
authorities and approvals are continually effective and legitimate during the whole effective period of this Agreement;
Pay the service fee to Party A on time.
7. Confidentiality
7.1 This Agreement and all clauses hereof are confidential information. The Parties shall not be disclosed to any third party except
for relevant senior officers, directors, employees, agents or professional consultants of such Parties or their affiliates who are
relevant with the transaction contemplated under this Agreement and who are obligated to keep such confidential information
confidential. This clause shall not apply in the event the Parties are required by relevant laws or regulations or relevant
securities exchange institutions to disclose information or contents relating to this Agreement to any governmental authorities,
the public or the shareholders, or file this Agreement with relevant authorities for record.
7.2 This clause shall survive any modification or termination of this Agreement.
8. Liabilities for Breach of Agreement
8.1 In the event any Party fails to perform any of its obligations under this Agreement, or made any untrue or inaccurate
representation or warranty, such Party shall be liable for all the losses of other Parties for breach of the Agreement, or pay the
penalties to the other Parties as agreed by the relevant Parties.
8.2 In the event that Party B and/or is deemed as breach of the Agreement in accordance with Article 8.1, Party B and/or shall
compensate for entire loses, damages or responsibilities of Party A for the performance under this Agreement or provision of
services, including but not limited to damages and costs caused by any suits, claims of compensation, or other requests.
8.3 This clause shall survive any modification or termination of this Agreement.
9. Force Majeure
Force Majeure Event shall mean any objective circumstance, the occurrence of which is unforeseeable, unavoidable,
uncontrollable and insurmountable at the time of execution of this Agreement (including but not limited to earthquake, typhoon,
flood, fire, strike, war, and rebellion).
In the event the performance of the Agreement is influenced by any Force Majeure, the Party suffering Force Majeure shall
(i) notify the other parties by telegram, facsimile or other electronic means immediately after the occurrence of such Force Majeure
and shall provide written documents evidencing the occurrence of such
Force Majeure within fifteen (15) business days; (ii) take all reasonable and viable manners to mitigate or remove the effect of
force majeure, and continue its performance of the Agreement after such effect is mitigated or removed.
10. Assignment of this Agreement and the Change of Parties
10.1Without prior written consent of Party A, Party C and Party B shall not transfer, assign any right or obligation under this
Agreement to any third party.
10.2Part B hereby agrees that Party A shall have the right to transfer or assign any of its rights and obligations by informing Party B
in writing and without Party B’s prior consent.
10.3Rights and obligations under this Agreement shall be legally binding upon assignees, successors of the Parties, no matter such
assignment of obligations and rights is caused by takeover, restructuring, success, assignment or any other reason.
10.4In the event that Party C no longer possesses any shares of Party B, Party C shall be deemed no longer as a party of this
Agreement. In the event that any other third party becomes a shareholder of Party B, Party B and Party C shall take effort to
cause this third party executing relevant legal documents and becoming one of Party C of this Agreement.
11. Miscellaneous
11.1This Agreement and any related matters shall be governed by and construed in accordance with the PRC laws. All disputes
arising out of or in connection with this Agreement shall be conciliated friendly by and between the Parties. When the disputes
could not be solved by conciliation, such disputes may be submitted to China International Economic and Trade Arbitration
Commission and be finally settled under the Rules of Arbitration of the China International Economic and Trade Arbitration
Commission by arbitrators appointed in accordance with rules then effective of such arbitration commission. The arbitration
award shall be final and binding upon all Parties. The language used in arbitration shall be in Chinese. The place of arbitration
shall be in Beijing. The Parties hereto shall continue to perform its obligations and exercise its rights hereunder except for those
submitted for arbitration. The validity of this Article 11.1 shall not be influenced by the modification, rescission and termination
of this Agreement.
11.2Upon the execution of this Agreement, the Agreement shall substitute any and all covenants, memorandums, agreements or
other documents concerning the matters involved in this Agreement.
11.3This Agreement shall be performed within the scope stipulated by laws. In the event any article or any part of an article is
deemed as illegal, invalid or unenforceable by any competent authority or court, such illegality, invalidity or unenforceability
shall not affect other articles of this Agreement or other part of this article, and other articles of this Agreement or other part of
this article shall remain valid. Parties shall make their best effort to modify such illegal, invalid or unenforceable articles to
achieve the purpose of the original articles.
11.4 All appendixes hereto are integral parts of this Agreement and shall be equally binding with other parts of this Agreement.
11.5 The Agreement is in Chinese and executed in four (4) counterparts, each of Party A, Party B and Party C holds one counterpart.
[The remainder of this page has been left intentionally blank]
Party A: Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd.
(Seal) Seal of Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. Affixed
By:
Name:
Title:
Party B: Beijing Haidian Bright Scholar Training School.
(Seal) Seal of Beijing Haidian Bright Scholar Training School Affixed
By:
Name:
Title:
Party C: Beijing Elib Technology Co., Ltd.
(Seal) Seal of Beijing Elib Technology Co., Ltd. Affixed
By:
Name:
Title:
Appendix I: Contents of Service, Calculation and Payment of the Service Fee
1. Contents of Service
(1) Providing opinions and advice for assets, business operation and negotiation, execution and performance of material contracts;
(2) Providing services for middle or short term market development and market planning;
(3) Providing service of market research, study and consulting service;
(4) Providing opinions and advises for handling creditor’s rights and debts;
(5) Providing the opinions and advices for merger and acquisition;
(6) Providing services for human resources management, occupation and pre-occupation skills training for employees;
(7) Licensing of intellectual properties including software, trademark, domain name, technology secrets and etc.,
(8) Providing services for developing and supporting education software, education courseware, and tutoring;
(9) Providing consulting and training services for running schools and international courses;
(10) Providing services of technology development, technology transfer, and technology consulting;
(11) Providing services for management and maintenance of the human resources information management system, payment
management information system, internal informatization management system and other management system;
(12) Providing services for developing, upgrading of network and the ordinary maintenance, supervision, adjustment and trouble
removal of computer network equipment;
(13) Providing technology consultation and solution for questions about the network facilities, technology products and software of
Service Accepting Party;
(14) Providing services for public relationship;
(15) Providing services for sale of self-made products;
(16) Providing ordinary maintenance for office equipment;
(17) Providing services for seeking and electing appropriate third-party service providers for Service Accepting Party;
(18) Providing ordinary management service of third-party service providers for the Service Accepting Party;
(19) Other services determined from time to time by Party A and the Service Accepting Party according to the need of business and
capacity of provision of services.
2. Calculation and Payment of the Service Fee
(1) The Fee for the services provided under this Agreement is calculated as the balance of general income deducting costs, taxes
and other reserved fees stipulated by laws and regulations, the sum of Fee shall be determined by Party A in its discretion taking
account of the following factors:
(a) The technical difficulty and complexity of the services;
(b) The resources expenditures of Party A and the time costs of employees of Party A concerning the services;
(c) The contents and commercial value of the services;
(d) The market price of similar services;
(e) The operation performance of Service Accepting Party.
(2) Party A will calculate the fee payable on a fixed term, which is to be determined by Party A and Service Accepting Party shall
agree to such decision, and send Service Accepting Party the bill of service fee for the previous term. Service Accepting Party
shall pay the fee to the bank account designated by Party A within ten business days after receipt of the bill, and send copy of
the remittance certificate by facsimile or mail to Party A within ten business days after payment.
(3) In addition to the service fee, Service Accepting Party shall bear any and all reasonable cost, advance payment and out-of-
pocket expense in any kind (“Expense”) for Party A resulting from or relevant to the performing or providing the services and
shall reimburse Party A for all such Expenses.
(4) Service Accepting Party shall pay to the Party A the service fees and shall reimburse all Expenses according to this Agreement
and its supplemental agreements executed from time to time. Party A shall provide to the Service Accepting Party all the
official receipts of the service fees and Expense in time. All payment made by Service Accepting Party to Party A shall pay by
remittance or in other methods as agreed by both Parties to the bank account designated by Party A. Both Parties agreed that
Party A may change the payment instruction from time to time by delivering notice to Service Accepting Party.
Rights and Obligations Assumption Letter
Exhibit 4.38
This entity, Baoding Baigou New City Shenghua Country Garden Kindergarten Co., Ltd., is the subsidiary established by
BGY Education Investment Management Co., Ltd. (“Investor”) and registered in Baoding City at Baigou New Town branch
office of the Administration for Market Regulation on August 22, 2019. Baoding Baigou New City Bright Scholar Shenghua
Education Consulting Co., Ltd., which is the subsidiary of the Investor, holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Baoding Baigou New City Shenghua Country Garden Kindergarten Co., Ltd.
(Seal) Baoding Baigou New City Shenghua Country Garden Kindergarten Co., Ltd. Affixed
/s/ Wei Tang
By:
Name: Wei Tang
Title:
Date:
Legal Representative
August 31, 2019
Rights and Obligations Assumption Letter
Exhibit 4.39
This entity, Heze Economic Development Zone Qiqiaoban OTC Kindergarten, is the subsidiary established by BGY
Education Investment Management Co., Ltd. (“Investor”) and registered in Heze City at Economic Development Zone
district branch office of the Municipal Bureau of Administrative Services on July 22, 2020. Heze Qiqiaoban Education
Technology Limited, which is the subsidiary of the Investor, holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Heze Economic Development Zone Qiqiaoban OTC Kindergarten
(Seal) Heze Economic Development Zone Qiqiaoban OTC Kindergarten Affixed
By:
Name:
Title:
Date:
/s/ Yuling Shen
Yuling Shen
Legal Representative
September 30, 2020
Rights and Obligations Assumption Letter
Exhibit 4.40
This entity, Caoxian Qiqiaoban Kindergarten, is the subsidiary established by BGY Education Investment Management Co.,
Ltd. (“Investor”) and registered in Heze City at Cao County branch office of the Municipal Bureau of Administrative
Services on October 15, 2020. Heze Qiqiaoban Education Technology Limited, which is the subsidiary of the Investor, holds
100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Caoxian Qiqiaoban Kindergarten
(Seal) Caoxian Qiqiaoban Kindergarten Affixed
/s/ Jing Li
By:
Name:Jing Li
Title: Legal Representative
Date: December 15, 2020
Rights and Obligations Assumption Letter
Exhibit 4.41
This entity, Guangyuan Lizhou Kasijia Kindergarten, is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Guangyuan City at Lizhou district branch office of the Ministry of
Civil Affairs on November 30, 2018. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangyuan Lizhou Kasijia Kindergarten
(Seal) Guangyuan Lizhou Kasijia Kindergarten Affixed
/s/ Zhou Wang
By:
Name:Zhou Wang
Title: Legal Representative
Date: August 31, 2019
Rights and Obligations Assumption Letter
Exhibit 4.42
This entity, Beijing Huanxue Tianxia International Travel Limited, is the subsidiary of BGY Education Investment
Management Co., Ltd. (“Investor”) registered in Beijing city at the Haidian District branch office of the Administration for
Market Regulation on December 27, 2011. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Beijing Huanxue Tianxia International Travel Limited
(Seal) Beijing Huanxue Tianxia International Travel Limited Affixed
/s/ Huanyu Li
By:
Name: Huanyu Li
Title: Legal Representative
Date: January 31, 2020
Rights and Obligations Assumption Letter
Exhibit 4.43
This entity, Chengdu Zhiyimeng Software Technology Co., Ltd., is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Chengdu City at Gaoxin district branch office of the Administration
for Market Regulation on July 5, 2019. Chengdu Yinzhe Education and Technology Co., Ltd., which is the subsidiary of the
Investor, holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Chengdu Zhiyimeng Software Technology Co., Ltd.
(Seal) Chengdu Zhiyimeng Software Technology Co., Ltd. Affixed
/s/ Yong Lv
By:
Name: Yong Lv
Title: Legal Representative
July 25, 2019
Date:
Rights and Obligations Assumption Letter
Exhibit 4.44
This entity, Guangzhou Xingzhu Information Technology Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Guangzhou City at Tianhe district branch office of the
Administration for Market Regulation on August 27, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangzhou Xingzhu Information Technology Co., Ltd.
(Seal) Guangzhou Xingzhu Information Technology Co., Ltd. Affixed
Date: August 31, 2019
Rights and Obligations Assumption Letter
Exhibit 4.45
This entity, Dongguan Humen Bright Scholar Country Garden Kindergarten, is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Dongguan City at Dongguan City’s branch office of the
Ministry of Civil Affairs on October 15, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Dongguan Humen Bright Scholar Country Garden Kindergarten
(Seal) Dongguan Humen Bright Scholar Country Garden Kindergarten Affixed
/s/ Lizhu Wu
By:
Name: Lizhu Wu
Title: Legal Representative
Date: December 2, 2020
Rights and Obligations Assumption Letter
Exhibit 4.46
This entity, Foshan Shunde Ronggui Street Country Garden Kindergarten, is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Foshan City at the Shunde District branch office of the
Ministry of Civil Affairs, Human Resources and Social Security on June 9, 2020. The Investor holds 100% of the interests in
this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Foshan Shunde Ronggui Street Country Garden Kindergarten
(Seal) Foshan Shunde Ronggui Street Country Garden Kindergarten Affixed
/s/ Xiaoyong He
By:
Name: Xiaoyong He
Title:
Date:
Legal Representative
June 16, 2020
Rights and Obligations Assumption Letter
Exhibit 4.47
This entity, Dongguan Dongcheng Bright Scholar Kindergarten Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Dongguan City at the Dongguan City’s branch office of the
Administration for Market Regulation on March 27, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Dongguan Dongcheng Bright Scholar Kindergarten Co., Ltd.
(Seal) Dongguan Dongcheng Bright Scholar Kindergarten Co., Ltd. Affixed
/s/ Juan Chen
By:
Name: Juan Chen
Title:
Date: March 31, 2020
Legal Representative
Rights and Obligations Assumption Letter
Exhibit 4.48
This entity, Huizhou Huiyang Lelebao Shenhui City Kindergarten Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Huizhou City at the Huiyang District branch office of the
Administration for Market Regulation on September 21, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Huizhou Huiyang Lelebao Shenhui City Kindergarten Co., Ltd.
(Seal) Huizhou Huiyang Lelebao Shenhui City Kindergarten Co., Ltd. Affixed
/s/ Simin Liang
By:
Name: Simin Liang
Title:
Date: December 10, 2020
Legal Representative
Rights and Obligations Assumption Letter
Exhibit 4.49
This entity, Chengdu Pidu Bright Scholar Kindergarten Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Chengdu City at the Pidu District branch office of the
Municipal Bureau of Administrative Services on September 11, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Chengdu Pidu Bright Scholar Kindergarten Co., Ltd.
(Seal) Chengdu Pidu Bright Scholar Kindergarten Co., Ltd. Affixed
/s/ Ning Yang
By:
Name: Ning Yang
Title:
Date:
Legal Representative
December 3, 2020
Rights and Obligations Assumption Letter
Exhibit 4.50
This entity, Tianjin Beichen Lelebao Kindergarten, is the subsidiary established by BGY Education Investment Management
Co., Ltd. (“Investor”) and registered in Tianjin City at the Beichen District branch office of the Municipal Bureau of
Administrative Services on August 25, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Tianjin Beichen Lelebao Kindergarten
(Seal) Tianjin Beichen Lelebao Kindergarten Affixed
/s/ Xiaogang Li
By:
Name: Xiaogang Li
Title:
Date:
Legal Representative
August 30, 2020
Rights and Obligations Assumption Letter
Exhibit 4.51
This entity, Guangzhou Zengcheng Fettes College Kindergarten Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Guangzhou City at the Zengcheng District branch office of
the Administration for Market Regulation on September 15, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangzhou Zengcheng Fettes College Kindergarten Co., Ltd.
(Seal) Guangzhou Zengcheng Fettes College Kindergarten Co., Ltd. Affixed
/s/ Li Cheng
By:
Name:Li Cheng
Title: Legal Representative
Date: June 15, 2020
Rights and Obligations Assumption Letter
Exhibit 4.52
This entity, Guigang Gangbei Country Garden Lelebao Kindergarten, is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Guigang City at the Gangbei District branch office of the
Ministry of Civil Affairs on October 13, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guigang Gangbei Country Garden Lelebao Kindergarten
(Seal) Guigang Gangbei Country Garden Lelebao Kindergarten Affixed
/s/ Xiaogang Li
By:
Name: Xiaogang Li
Title: Legal Representative
Date: October 21, 2020
Rights and Obligations Assumption Letter
Exhibit 4.53
This entity, Jinan Zhangqiu Phoenix City Lelebao Kindergarten, is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Jinan City at the Zhangqiu District branch office of the Municipal
Bureau of Administrative Services on September 24, 2020. The Investor holds 75% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Jinan Zhangqiu Phoenix City Lelebao Kindergarten
(Seal) Jinan Zhangqiu Phoenix City Lelebao Kindergarten Affixed
/s/ Wanpeng Mi
By:
Name:Wanpeng Mi
Title: Legal Representative
Date: December 14, 2020
Rights and Obligations Assumption Letter
Exhibit 4.54
This entity, Heze Mudan District Cultural City Kindergarten, is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Heze City at the Mudan District branch office of the Municipal Bureau
of Administrative Services on August 20, 2020. The Investor holds 85% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Heze Mudan District Cultural City Kindergarten
(Seal) Heze Mudan District Cultural City Kindergarten Affixed
/s/ Xianmin Wang
By:
Name:Xianmin Wang
Title: Legal Representative
Date: December 17, 2020
Rights and Obligations Assumption Letter
Exhibit 4.55
This entity, Fettes College Experimental School of Zengcheng, Guangzhou, is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Guangzhou City at the Zengcheng District branch office of
the Ministry of Civil Affairs on June 5, 2020. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Fettes College Experimental School of Zengcheng, Guangzhou
(Seal) Fettes College Experimental School of Zengcheng, Guangzhou Affixed
/s/ Jinsheng Cheng
By:
Name: Jinsheng Cheng
Title: Legal Representative
June 15, 2020
Date:
Rights and Obligations Assumption Letter
Exhibit 4.56
This entity, Shanghai Huodai Commercial Information Consulting Co., Ltd., is the subsidiary of BGY Education Investment
Management Co., Ltd. (“Investor”) registered in Shanghai city at the Jingan District branch office of the Administration for
Market Regulation on December 14, 2017. The Investor holds 51% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Shanghai Huodai Commercial Information Consulting Co., Ltd.
(Seal) Shanghai Huodai Commercial Information Consulting Co., Ltd. Affixed
/s/ Xi Yu
By:
Name: Xi Yu
Title: Legal Representative
Date: July 20, 2020
Rights and Obligations Assumption Letter
Exhibit 4.57
This entity, Shanghai Youxun Education Technology Co., Ltd., is the subsidiary of BGY Education Investment Management
Co., Ltd. (“Investor”) registered in Shanghai city at the Pudong New District branch office of the Administration for Market
Regulation on May 28, 2019. Shanghai Huodai Commercial Information Consulting Co., Ltd., which is the subsidiary of the
Investor, holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Shanghai Youxun Education Technology Co., Ltd.
(Seal) Shanghai Youxun Education Technology Co., Ltd. Affixed
/s/ Xi Yu
By:
Name: Xi Yu
Title: Legal Representative
Date: May 26, 2020
Rights and Obligations Assumption Letter
Exhibit 4.58
This entity, Shanghai Hanlin Education Technology Co., Ltd., is the subsidiary of BGY Education Investment Management
Co., Ltd. (“Investor”) registered in Shanghai city at the Fengxian District branch office of the Administration for Market
Regulation on March 3, 2017. Shanghai Huodai Commercial Information Consulting Co., Ltd., which is the subsidiary of the
Investor, holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Shanghai Hanlin Education Technology Co., Ltd.
(Seal) Shanghai Hanlin Education Technology Co., Ltd. Affixed
/s/ Xi Yu
By:
Name: Xi Yu
Title: Legal Representative
Date: July 20, 2020
Rights and Obligations Assumption Letter
Exhibit 4.59
This entity, Guangdong Lebeimeng Education Consulting Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Foshan City at the Shunde District branch office of the
Administration for Market Regulation on November 22, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangdong Lebeimeng Education Consulting Co., Ltd.
(Seal) Guangdong Lebeimeng Education Consulting Co., Ltd. Affixed
/s/ Xiaogang Li
By:
Name: Xiaogang Li
Title: Legal Representative
Date: November 29, 2019
Rights and Obligations Assumption Letter
Exhibit 4.60
This entity, Guangdong Lelebao Education Technology Co., Ltd., is the subsidiary established by BGY Education
Investment Management Co., Ltd. (“Investor”) and registered in Foshan City at the Shunde District branch office of the
Administration for Market Regulation on November 21, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangdong Lelebao Education Technology Co., Ltd.
(Seal) Guangdong Lelebao Education Technology Co., Ltd. Affixed
/s/ Xiaogang Li
By:
Name: Xiaogang Li
Title: Legal Representative
Date: November 30, 2019
Rights and Obligations Assumption Letter
Exhibit 4.61
This entity, Jinan Boshixing Education Consulting Co., Ltd., is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Jinan City at the Lixia District branch office of the Municipal Bureau
of Administrative Services on January 14, 2020. Shandong Boshiyou Education Consulting Limited, which is the subsidiary
of the Investor, holds 75% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Jinan Boshixing Education Consulting Co., Ltd.
(Seal) Jinan Boshixing Education Consulting Co., Ltd. Affixed
/s/ Wanpeng Mi
By:
Name: Wanpeng Mi
Title:
Date:
Legal Representative
January 27, 2020
Rights and Obligations Assumption Letter
Exhibit 4.62
This entity, Jining Boshiwei Education Consulting Limited, is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Jining City at the Rencheng District branch office of the Municipal
Bureau of Administrative Services on October 16, 2019. Shandong Boshiyou Education Consulting Limited, which is the
subsidiary of the Investor, holds 57% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Jining Boshiwei Education Consulting Limited
(Seal) Jining Boshiwei Education Consulting Limited Affixed
/s/ Hongling Huo
By:
Name:Hongling Huo
Title: Legal Representative
Date: October 29, 2019
Rights and Obligations Assumption Letter
Exhibit 4.63
This entity, Taishan Lebeimeng Education Consulting Co., Ltd., is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Taishan City at the Taishan City’s branch office of the Administration
for Market Regulation on December 6, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Taishan Lebeimeng Education Consulting Co., Ltd.
(Seal) Taishan Lebeimeng Education Consulting Co., Ltd. Affixed
/s/ Xiaozhen Li
By:
Name:Xiaozhen Li
Title: Legal Representative
Date: December 26, 2019
Rights and Obligations Assumption Letter
Exhibit 4.64
This entity, Weifang Boshixin Education Consulting Co., Ltd., is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Weifang City at the Comprehensive Free Trade Zone branch office of
the Administration for Market Regulation on March 18, 2020. Shandong Boshiyou Education Consulting Limited, which is
the subsidiary of the Investor, holds 75% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Weifang Boshixin Education Consulting Co., Ltd.
(Seal) Weifang Boshixin Education Consulting Co., Ltd. Affixed
/s/ Wanpeng Mi
By:
Name: Wanpeng Mi
Title: Legal Representative
Date: March 29, 2020
Rights and Obligations Assumption Letter
Exhibit 4.65
This entity, Foshan Shunde Beijiao Town Country Garden Ivy League Education Training Centre Co., Ltd., is the subsidiary
established by BGY Education Investment Management Co., Ltd. (“Investor”) and registered in Foshan City at the Shunde
District branch office of the Administration for Market Regulation on August 26, 2020. The Investor holds 100% of the
interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Foshan Shunde Beijiao Town Country Garden Ivy League Education Training Centre Co., Ltd.,
(Seal) Foshan Shunde Beijiao Town Country Garden Ivy League Education Training Centre Co., Ltd., Affixed
/s/ Li Li
By:
Name: Li Li
Title: Legal Representative
Date: December 7, 2020
Rights and Obligations Assumption Letter
Exhibit 4.66
This entity, Guangdong Bright Scholar Ivy League Education Science Research Institute Co., Ltd., is the subsidiary
established by BGY Education Investment Management Co., Ltd. (“Investor”) and registered in Foshan City at the Shunde
District branch office of the Administration for Market Regulation on October 16, 2020. The Investor holds 100% of the
interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Guangdong Bright Scholar Ivy League Education Science Research Institute Co., Ltd.
(Seal) Guangdong Bright Scholar Ivy League Education Science Research Institute Co., Ltd. Affixed
/s/ Li Li
By:
Name:Li Li
Title: Legal Representative
Date: December 7, 2020
Rights and Obligations Assumption Letter
Exhibit 4.67
This entity, Shanghai Bolai Training Center Co., Ltd., is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Shanghai City at the Hongkou District branch office of the
Administration for Market Regulation on October 14, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Shanghai Bolai Training Center Co., Ltd.
(Seal) Shanghai Bolai Training Center Co., Ltd. Affixed
By:
Name:
Title:
Date:
/s/ Yan Yuan
Yan Yuan
Legal Representative
December 7, 2020
Rights and Obligations Assumption Letter
Exhibit 4.68
This entity, Wuhan Qiaokou Mierdun Training School Limited, is the subsidiary established by BGY Education Investment
Management Co., Ltd. (“Investor”) and registered in Wuhan City at the Qiaokou District branch office of the Municipal
Bureau of Administrative Services on November 11, 2019. The Investor holds 100% of the interests in this entity.
In accordance with the Exclusive Management Service and Business Cooperation Agreement (“Agreement”) entered into
by and between Investor, Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd. and other relevant parties on
January 25, 2017, this entity shall join the Agreement according to Article 10.1 of the Agreement as a “New Subsidiary of
Party B” under the Agreement.
This entity hereby agrees to join the Agreement as a new Subsidiary of Party B of the Investor, enjoy the rights under the
Agreement, and perform the obligations according to the Agreement. This Assumption Letter came into effect upon the date
of execution.
Wuhan Qiaokou Mierdun Training School Limited
(Seal) Wuhan Qiaokou Mierdun Training School Limited Affixed
Date:
November 20, 2019
Subsidiaries
Impetus Investment Limited
Bright Scholar (Enlightenment) Investment Holdings Limited
New Bridge Management Co., Ltd
CEG Holdings Canada Inc.
976821 Ontario Inc.
744648 Alberta Inc.
Bright Scholar (Canada) Holdings Limited
Can-Achieve Academy Limited
Can-Achieve International Education Limited (Vancouver)
Time Education China Holdings Limited
Xin Rui Management Co., Ltd.
Foundation Education China Limited
Foundation Academy Limited
Foundation Education Services Limited
Foundation Global Education Limited
Can-Achieve International Education Limited
CEG Hong Kong JV Limited
Bright Can-Achieve Limited
FGE Holdings Limited
Zhuhai Hengqin Bright Scholar Management Consulting Co., Ltd.
Time Elan Education Technology Co., Ltd.
Guangdong Zhixing Weilai Logistics Management Co., Ltd.
Shenzhen Qianhai Xingkeyucai Trading Co., Ltd.
Beijing Bright Scholar Education Consulting Limited Co., Ltd.
-1-
Exhibit 8.1
Place of Incorporation
Cayman
Cayman
Cayman
Canada
Canada
Canada
Canada
Canada
Canada
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
The British Virgin Islands
The PRC
The PRC
The PRC
The PRC
The PRC
Foshan Shunde Elan Education Training Co., Ltd.
Beijing Bolai Reading Culture Co., Ltd.
Shenzhen Elan Education Training Co., Ltd.
Guangdong Bright Scholar Education Technology Co., Ltd.
Guangzhou Elan Education Consulting Co., Ltd.
Beijing Jingshiboda Education Technology Co., Ltd.
Zhuhai Hengqin Kaidi Education Consulting Co., Ltd.
Zhuhai Xin Xu Education Management Co., Ltd.
Foundation Information Consulting (Shenzhen) Co., Ltd.
Can-achieve (Beijing) Education Consulting Co., Ltd.
Guangzhou Can-achieve Global Consulting Co., Ltd.
Zhengzhou Dahua Education Consulting Co., Ltd.
Bright Scholar Wanjia (Beijing) Education Consulting Co., Ltd.
Bright Scholar Education Consulting (Huizhou) Co., Ltd.
Hangzhou Impression Arts Training Co., Ltd.
Cambridge Education Technology (Shanghai) Co., Limited (China)
Beijing Yinxiang Bright Scholar Education Consulting Co., Ltd.
Shanghai Yinle Arts Training Co., Ltd.
Beijing Can-achieve Lingying Information Consulting Co., Ltd.
Zhuhai Hengqin Dingjia Education Consulting Limited
Bright Scholar (UK) Holdings Limited
Bright Scholar (BCS) Property Limited
Bright Scholar (BCS) Management Limited
CATS Colleges Holdings Limited
-2-
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
United Kingdom
United Kingdom
United Kingdom
United Kingdom
CEG Colleges Limited
Cambridge Arts and Science Limited
CATS Canterbury Limited
CATS College London Limited
Cambridge School of Visual and Performing Arts Limited
CATS Retail Limited
Cambridge School of Art and Design Limited
Stafford House Companies Limited
Stafford House School of English Limited
Stafford House Study Holidays Limited
Study Holidays Limited
CEG Properties Limited
Bright Scholar (BCS) Limited
CGS Administrative Services Limited
Bright Scholar (BIC) Limited
Bright Scholar (BIC) Management Limited
Bright Scholar (SM) Hold Co. Limited
Bright Scholar (SM) Limited
Bright Scholar (SM) Management Limited
Cambridge Education Group Holdings Inc.
Can-achieve Global Education, Inc. (Los Angeles)
CATS Academy Boston Inc.
Boston Academy of English Inc.
Intrax English Academies LLC
-3-
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
United States
United States
United States
United States
Affiliated Entity
BGY Education Investment Management Co., Ltd.
Schools/subsidiaries held by Affiliated Entity
Baoding Baigou New City Bright Scholar Shenghua Education Consulting Co., Ltd.
Baoding Baigou New City Shenghua Country Garden Kindergarten Co., Ltd.
Beijing Huanxue International Travel Limited
Chengdu Boxuele Education Management Consulting Co., Ltd.
Chengdu Zhiyimeng Software Technology Co., Ltd.
Chuzhou Country Garden Foreign Language School
Chuzhou Country Garden Kindergarten
Country Garden Experimental School
Country Garden Huacheng Kindergarten
Country Garden Huacheng School
Country Garden Silver Beach Kindergarten
Country Garden Silver Beach School
Country Garden Venice Bilingual School
Country Garden Venice Kindergarten
Dalang Country Garden Kindergarten
Danyang Country Garden Kindergarten
Chengdu Yinzhe Education and Technology Co., Ltd.
Dongguan Humen Bright Scholar Country Garden Kindergarten
Dongguan Qingxi Country Garden Kindergarten
-4-
Place of Incorporation
The PRC
Place of Incorporation
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
Dongguan Qishi Country Garden Kindergarten
Chengdu Laizhe Education and Technology Co., Ltd.
Dreambig Career Limited
Enping Country Garden Kindergarten
Fengxin Country Garden Kindergarten
Foshan Shunde Beijiao Country Garden Guilanshan Kindergarten Co., Ltd.
Foshan Shunde Shengbo Culture and Arts Training Co., Ltd.
Gaoming Country Garden Kindergarten
Guangdong Country Garden School
Guangdong Lebeimeng Education Consulting Co., Ltd.
Guangdong Lelebao Education Technology Co., Ltd.
Guangdong Xingjian Education Co., Ltd.
Guangyuan Lizhou Kasijia Kindergarten
Guangzhou Huihua Education Consulting Co., Ltd.
Guangzhou Xingzhu Information Technology Co., Ltd.
Haiyang Country Garden Kindergarten
Haoting Country Garden Kindergarten
Heshan Country Garden Kindergarten
Heshan Country Garden School
Heze Qiqiaoban Education Technology Limited
Huadu Holiday Peninsula Kindergarten
Huanan Country Garden Bilingual Kindergarten
Huanan Country Garden Cuiyun Mountain Kindergarten
Huanan Country Garden School
Huaxi Country Garden International Kindergarten
-5-
The PRC
The PRC
Hong Kong
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
Huaxi Country Garden International School
Hubei Sannew Education Development Limited
Huidong Silver Beach Education Consulting Co., Ltd.
Huiyang Country Garden Kindergarten
Jining Boshiwei Education Consulting Limited
Jurong Country Garden School
Kaiping Country Garden Jade Bay Kindergarten
Kaiping Country Garden School
Laian Country Garden Foreign Language School
Laian Country Garden Kindergarten
Lanzhou Country Garden School
Licheng Country Garden Bilingual Kindergarten
Maoming Country Garden Kindergarten
Nansha Country Garden Bilingual Kindergarten
Ningxiang Country Garden Foreign Language Training School
Ningxiang Country Garden Kindergarten
Ningxiang Country Garden School
Phoenix City Bilingual Kindergarten
Phoenix City Bilingual School
Phoenix City Country Garden Kindergarten
Phoenix City Fengyan Kindergarten
Qingyuan Country Garden Bilingual Kindergarten
Heze Economic Development Zone Electric Kindergarten
Heze Economic Development Zone Qiqiaoban-OCT Kindergarten
Caoxian Qiqiaoban Kindergarten
-6-
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
HeZe Qiqiaoban Juancheng Kindergarten
Juye Phoenix Qiqiaoban Dongfang Xintiandi Kindergarten
Qiqiaoban Oscar Kindergarten
Juancheng Shuncheng International Kindergarten
Heze Mudan District Yihai Kindergarten
Sannew American Middle School
Shangdong Boshiyou Education Consulting Limited
Shanghai Elan Education and Training Co., Ltd.
Shanghai Bolai Training Center Co., Ltd.
Shaoguan Country Garden Foreign Language School
Shaoguan Zhenjiang Country Garden Foreign Language Kindergarten
Shawan Country Garden Kindergarten
Guangzhou Elan Education and Training Co., Ltd.
Shenghua Country Garden Bilingual School
Taishan Country Garden School
Shenzhen Time Elan Technology Co., Ltd.
Time Elan Education Technology (Beijing) Co., Ltd.
Wuhan Country Garden Kindergarten
Wuhan Country Garden School
Wuhan Donghu Tech Development Zone Xinqiao Kindergarten
Wuhan Donghu Tech Development Zone Xinqiao-Jinxiu Longcheng Kindergarten
Wuhan Dongxihu District Dongqiao Kindergarten
Wuhan Hongshan District Xinqiao Aijia Kindergarten
Wuhan Mierdun Education Technology Limited
Wuhan Qiaokou Mierdun Training School Limited
-7-
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
Wuhan Qiaosheng Education Investment Co., Ltd.
Wuhan Qingshan District Bilingual Kindergarten
Wuhan Ruijiang Bright Scholar Education Industry Investment Fund Limited Partnership
Wuyi Country Garden Bilingual School
Xiangtan Yisuhe Country Garden Kindergarten
Xiju Country Garden Kindergarten
Zengcheng Country Garden Kindergarten
Zengcheng Country Garden School
Beijing Huanxue Tianxia International Travel Limited
Dongguan Dongcheng Bright Scholar Kindergarten Co., Ltd
Chengdu Pidu Bright Scholar Kindergarten Co., Ltd.
Tianjin Beichen Lelebao Kindergarten
Huizhou Huiyang Lelebao Shenhui City Kindergarten Co., Ltd.
Guangzhou Zengcheng Fettes College Kindergarten Co., Ltd.
Fettes College Experimental School of Zengcheng, Guangzhou
Guigang Gangbei Country Garden Lelebao Kindergarten
Zhaoqing Lelebao Xingfuli Kindergarten
Lanzhou Lelebao Hyde Country Kindergarten
Lanzhou Lelebao Yorkshire Kindergarten
Lanzhou Lelebao Edinburgh Kindergarten
Jinan Zhangqiu Phoenix City Lelebao Kindergarten
Jining Jizhou Yinxiang Lelebao Kindergarten
Jining Feicuiwan Lelebao Kindergarten
Heze Mudan District Culture City Kindergarten
Shanghai Huodai Commercial Information Consulting Co., Ltd.
-8-
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
Shanghai Youxun Education Techology Co., Ltd.
Shanghai Hanlin Education Techology Co., Ltd.
Weifang Boshixin Education Consulting Co., Ltd.
Jinan Boshixing Education Consulting Co., Ltd.
Foshan Shunde Beijiao Town Country Garden Ivy League Education Training Centre Co., Ltd.
Guangdong Bright Scholar Ivy League Education Science Research Institute Co., Ltd.
Foshan Shunde Ronggui Street Country Garden Kindergarten
Taishan Lebeimeng Education Consulting Co., Ltd.
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
The PRC
-9-
Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Wanmei Li, certify that:
1. I have reviewed this annual report on Form 20-F of Bright Scholar Education Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in
this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;
and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date:
December 23, 2020
/s/ Wanmei Li
By:
Name: Wanmei Li
Title:
Co-Chief Executive Officer
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Zi Chen, certify that:
1. I have reviewed this annual report on Form 20-F of Bright Scholar Education Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in
this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;
and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: December 23, 2020
/s/ Zi Chen
By:
Name: Zi Chen
Title: Co-Chief Executive Officer
-2-
Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Dongmei Li, certify that:
1. I have reviewed this annual report on Form 20-F of Bright Scholar Education Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in
this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;
and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date:
December 23, 2020
/s/ Dongmei Li
By:
Name: Dongmei Li
Title:
Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the Annual Report of Bright Scholar Education Holdings Limited (the “Company”) on Form 20-F for the year ended
August 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wanmei Li, Co-Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: December 23, 2020
/s/ Wanmei Li
By:
Name: Wanmei Li
Title: Co-Chief Executive Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Bright Scholar Education Holdings Limited (the “Company”) on Form 20-F for the year ended
August 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zi Chen, Co-Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: December 23, 2020
/s/ Zi Chen
By:
Name: Zi Chen
Title: Co-Chief Executive Officer
-2-
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the Annual Report of Bright Scholar Education Holdings Limited (the “Company”) on Form 20-F for the year ended
August 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dongmei Li, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: December 23, 2020
/s/ Dongmei Li
By:
Name: Dongmei Li
Title: Chief Financial Officer
[Letterhead of Frost & Sullivan]
Exhibit 15.1
December 23, 2020
Bright Scholar Education Holdings Limited
No.1, Country Garden Road
Beijiao Town, Shunde District Foshan, Guangdong 528300
People’s Republic of China.
Re: Consent of Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.
Ladies and Gentlemen,
We understand that Bright Scholar Education Holdings Limited (the “Company”) plans to file an annual report on Form 20-
F for the fiscal year ended August 31, 2020 (“Form 20-F”) with the United States Securities and Exchange Commission (the
“SEC”).
We hereby consent to the references to our name and the inclusion of information, data and statements from our research
reports and amendments thereto (collectively, the “Reports”), and any subsequent amendments to the Reports, as well as the
citation of the Reports and amendments thereto, (i) in the Company’s Form 20-F or any other future filings with the SEC
(including with limitation, Form F-1, Form F-3, Form 6-K and other SEC filings) by the Company (collectively, the “SEC
Filings”), (ii) in any written correspondence with the SEC, (iii) on the websites or in the publicity materials of the
Company and its subsidiaries and affiliates, (iv) in institutional and retail roadshows and other activities in connection with
the Company’s future equity or debt offerings. We further hereby consent to the filing of this letter as an exhibit to the Form
20-F and any amendments thereto and as an exhibit to any other SEC Filings.
Yours faithfully,
For and on behalf of
Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.
/s/ Yves Wang
Name:Yves Wang
Title:Managing Director, China
Exhibit 15.2
Suite 1301, 13/F, E Building, G.T.Land Plaza
13 Zhujiang East Road, Zhujiang New Town
Tianhe District, Guangzhou 510623, P. R. China
T: (86-20) 2805-9088
F: (86-20) 2805-9099
December 23, 2020
Bright Scholar Education Holdings Limited
No.1, Country Garden Road
Beijiao Town, Shunde District
Foshan, Guangdong, PRC
528300
Dear Sirs,
We consent to the references to our firm under “Item 3 Key Information—D. Risk Factors,” “Item 4 Information
on the Company—A. History and development of the company,” “Item 4 Information on the Company—B
Business Overview—Regulations,” “Item 4 Information on the Company—C Organizational Structure” and
“Item 5 Operating and Financial Review and Prospects—A Operating Results—Critical Accounting Policies and
Estimates” included in Bright Scholar Education Holdings Limited’s annual report on Form 20-F for the year
ended August 31, 2020 (the “Annual Report”), which is filed with the Securities and Exchange Commission (the
“SEC”) on December 23, 2020. We also consent to the filing with the SEC of this consent letter as an exhibit to
the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each
case, as amended, or the regulations promulgated thereunder.
Yours faithfully,
/s/ JunHe LLP
JunHe LLP
Beijing Head Office
Tel: (86-10) 8519-1300
Fax: (86-10) 8519-1350
Chengdu Office
Tel: (86-28) 6739-8000
Fax: (86-28) 6739-8001
Hong Kong Office
Tel: (852) 2167-0000
Fax: (852) 2167-0050
Shanghai Office
Tel: (86-21) 5298-5488
Fax: (86-21) 5298-5492
Qingdao Office
Tel: (86-532) 6869-5000
Fax: (86-532) 6869-5010
New York Office
Tel: (1-212) 703-8702
Fax: (1-212) 703-8720
Guangzhou Office
Tel: (86-20) 2805-9088
Fax: (86-20) 2805-9099
Dalian Office
Tel: (86-411) 8250-7578
Fax: (86-411) 8250-7579
Silicon Valley Office
Tel: (1-888) 886-8168
Fax: (1-888) 808-2168
Shenzhen Office
Tel: (86-755) 2939-5288
Fax: (86-755) 2939-5289
Haikou Office
Tel: (86-898) 6851-2544
Fax: (86-898) 6851-3514
Hangzhou Office
Tel: (86-571) 2689-8188
Fax: (86-571) 2689-8199
Tianjin Office
Tel: (86-22) 5990-1301
Fax: (86-22) 5990-1302
www.junhe.com
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-222072 on Form S-8 of our report dated December
23, 2020, relating to the financial statements and the financial statement schedule of Bright Scholar Education Holdings Ltd. appearing
in the Annual Report on Form 20-F for the year ended August 31, 2020.
Exhibit 15.3
/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP
Guangzhou, China
December 23, 2020