Tarena International, Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 20-F (Mark One) ¨¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017. OR ¨¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 ___________ For the transition period from ___________ to ___________ Commission file number: 001-36363 Tarena International, Inc.(Exact name of Registrant as specified in its charter)N/A(Translation of Registrant’s name into English) Cayman Islands(Jurisdiction of incorporation or organization) Suite 10017, Building E, Zhongkun Plaza, A18 Bei San Huan West Road, Haidian DistrictBeijing 100098, People’s Republic of China(Address of principal executive offices) 1/F, Block A, Training Building, 65 Kejiyuan Road, Baiyang Jie Dao, Economic Development District,Hangzhou 310000, People’s Republic of China(Address of principal executive offices) Yuduo Yang, Chief Financial OfficerE-mail: yangyd@tedu.cnSuite 10017, Building E, Zhongkun Plaza, A18 Bei San Huan West Road, Haidian DistrictBeijing 100098, People’s Republic of ChinaTelephone: +86 10-6213 5687(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 Name of each exchange on which registeredAmerican Depositary Shares, each The NASDAQ Stock Market LLCrepresenting one Class A ordinary share, (The NASDAQ Global Select Market)par value US$0.001 per share Class A ordinary shares, The NASDAQ Stock Market LLCpar value US$0.001 per share (The NASDAQ Global Select Market)* *Not for trading, but only in connection with the listing on The NASDAQ Global Select Market of American depositary shares, each representing oneClass A ordinary share. Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: 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.As of December 31, 2017, there were 56,215,589 ordinary shares outstanding, par value $0.001 per share, being the sum of 49,009,530 Class A ordinaryshares and 7,206,059 Class B ordinary shares. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.¨ Yes x 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 theSecurities Exchange Act of 1934. ¨ Yes x 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 1934during 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 filingrequirements for the past 90 days. x Yes ¨ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).x 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. Seedefinition of “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨Accelerated filer x Non-accelerated filer ¨Emerging growth company x 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 notto use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of theExchange Act. x † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has been to prepare the financial statements included in this filing: U.S. GAAP xInternational 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 x No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmed by a court.¨ Yes ¨ No  TABLE OF CONTENTS INTRODUCTION1FORWARD-LOOKING INFORMATION1PART I.2ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS2ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE2ITEM 3.KEY INFORMATION2ITEM 4.INFORMATION ON THE COMPANY45ITEM 4.A.UNRESOLVED STAFF COMMENTS78ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS78ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES95ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS106ITEM 8.FINANCIAL INFORMATION109ITEM 9.THE OFFER AND LISTING110ITEM 10.ADDITIONAL INFORMATION111ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK122ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES123PART II.124ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES124ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS124ITEM 15.CONTROLS AND PROCEDURES125ITEM 16.A.AUDIT COMMITTEE FINANCIAL EXPERT126ITEM 16.B.CODE OF ETHICS126ITEM 16.C.PRINCIPAL ACCOUNTANT FEES AND SERVICES126ITEM 16.D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES127ITEM 16.E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS127ITEM 16.F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT127ITEM 16.G.CORPORATE GOVERNANCE127ITEM 16.H.MINE SAFETY DISCLOSURE128PART III.128ITEM 17.FINANCIAL STATEMENTS128ITEM 18.FINANCIAL STATEMENTS128ITEM 19.EXHIBITS128 i  INTRODUCTION In this annual report, except where the context otherwise requires and for purposes of this annual report only: ·“we,” “us,” “our company,” “our” and “Tarena” refer to Tarena International, Inc., a Cayman Islands company, and its subsidiaries, and, in thecontext of describing our operations, risk factors and financial results, also include our variable interest entity; ·“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau; ·“shares” or “ordinary shares” refers to our ordinary shares, par value US$0.001 per share, which include both Class A ordinary shares and Class Bordinary shares; ·“ADSs” refers to our American depositary shares, each of which represents one Class A ordinary share; the ADSs are evidenced by Americandepositary receipts, or “ADRs”; ·“K-12” refers to the year before the first grade through the last year of high school; ·“IT” refers to information technology; ·“STEAM education” refers to science, technology, engineering, arts, and mathematics education. ·“variable interest entity,” or “VIE,” refers to Beijing Tarena Jinqiao Technology Co., Ltd., which is a domestic PRC company in which we do nothave any equity interests but whose financial results have been consolidated into our consolidated financial statements in accordance with U.S.GAAP because we have effective financial control over, and Tarena International, Inc. is the primary beneficiary of such company. As the contextmay require, “variable interest entities” or “VIEs” may also include Shanghai Tarena Software Technology Co., Ltd., which used to be a variableinterest entity consolidated by our Group but was wound up in December 2016; and ·all references to “RMB” or “Renminbi” refer to the legal currency of China; all references to “US$,” “dollars” and “U.S. dollars” refer to the legalcurrency of the United States. FORWARD-LOOKING INFORMATION This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historicalfacts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”“believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections aboutfuture events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Theseforward-looking statements include, but are not limited to, statements about: ·our goals and growth strategies; ·our expectations regarding demand for and market acceptance of our courses; ·our ability to retain and increase our student enrollments; 1  ·our ability to maintain and increase the utilization rate of our learning centers; ·our ability to offer new courses in existing and new subject areas; ·our ability to replicate the success and growth of our adult education services to the kid education market; ·our ability to maintain and increase the tuition fees of our courses; ·our ability to deepen and expand our corporate employer relationships; ·our ability to maintain our relationships with universities and colleges; ·our future business development, results of operations and financial condition; ·the expected growth of, and trends in, the markets for our services in China; ·relevant government policies and regulations relating to our corporate structure, business and industry; and ·assumptions underlying or related to any of the foregoing. You should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future resultsmay be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impactour business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and itis 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 towhich any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualifyall of our forward-looking statements by these cautionary statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise. 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 Selected Consolidated Financial Data The following selected consolidated statements of comprehensive income data (other than ADS data) for the years ended December 31, 2015, 2016 and 2017and the selected consolidated balance sheet data as of December 31, 2016 and 2017 have been derived from our audited consolidated financial statementsincluded elsewhere in this annual report. The following selected consolidated statements of comprehensive income data (other than ADS data) for the yearsended December 31, 2013 and 2014 and the selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015 have been derived from ouraudited consolidated financial statements which are not included in this annual report. Our historical results for any period are not necessarily indicative ofresults to be expected for any future period. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety byreference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our auditedconsolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. 2  For the Year Ended December 31, 2013 2014 2015 2016 2017 RMB RMB RMB RMB RMB (in thousands, except for share, per share and per ADS data) Selected Consolidated Statements of ComprehensiveIncome Data: Net revenues 575,170 836,941 1,178,008 1,579,604 1,973,806 Cost of revenues(1) (180,097) (240,084) (333,559) (449,104) (599,199)Gross profit 395,073 596,857 844,449 1,130,500 1,374,607 Selling and marketing expenses(1) (187,430) (261,489) (384,954) (527,553) (713,120)General and administrative expenses(1) (100,518) (183,998) (251,298) (307,519) (392,296)Research and development expenses(1) (23,588) (33,454) (50,515) (65,594) (100,032)Operating income 83,537 117,916 157,682 229,834 169,159 Interest income 9,549 26,802 42,732 23,974 21,000 Loss on foreign currency forward contract — — — (12,898) — Foreign currency exchange gains (losses) — 7,539 (29,499) 3,760 (6,284)Income before income taxes 101,105 166,645 182,727 260,630 210,577 Net income 87,033 151,850 178,760 241,854 184,807 Net income (loss) attributable to ordinary shareholders (183,590) 148,320 178,760 241,854 184,807 Cash dividend declared per share(2) — — — 0.98 1.10 Weighted average number of class A and class Bordinary shares outstanding(3): Basic 10,930,412 41,223,389 53,767,810 55,540,670 56,849,332 Diluted 10,930,412 47,770,132 58,750,856 59,005,261 59,598,711 Earnings (losses) per Class A ordinary share, and perClass B ordinary share(4) Basic (16.80) 3.11 3.32 4.35 3.25 Diluted (16.80) 2.69 3.04 4.10 3.10 Earnings (losses) per ADS(5) Basic (16.80) 3.11 3.32 4.35 3.25 Diluted (16.80) 2.69 3.04 4.10 3.10 Notes: (1)Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows: 3  For the Year Ended December 31, 2013 2014 2015 2016 2017 RMB RMB RMB RMB RMB (in thousands) Cost of revenues 106 349 664 4,124 1,285 Sales and marketing expenses 280 1,036 1,959 5,496 4,863 General and administrative expenses 4,054 22,302 28,274 51,154 60,491 Research and development expenses 297 1,289 2,022 7,050 10,776 (2)On March 7, 2016, our board of directors approved for us to declare a cash dividend of US$0.15 per ordinary share to shareholders as of the close oftrading on April 6, 2016. On February 28, 2017, our board of directors approved for us to declare a cash dividend of US$0.16 per ordinary share toshareholders as of the close of trading on March 27, 2017. (3)The weighted average number of ordinary shares represents the sum of the weighted average number of Class A and Class B ordinary shares. See Note 14to our audited consolidated financial statements included in this annual report for additional information regarding the computation of the per shareamounts and the weighted average numbers of Class A and Class B ordinary shares. (4)As holders of Class A and Class B ordinary shares have the same dividend right and the same participation right in our undistributed earnings, the basicand diluted earnings per Class A ordinary share and Class B ordinary share are the same for all the periods presented. (5)Each ADS represents one Class A ordinary share. As of December 31, 2013 2014 2015 2016 2017 RMB RMB RMB RMB RMB (in thousands, except number of outstanding shares data) Selected Consolidated Balance Sheet Data: Cash and cash equivalents 159,368 261,035 513,938 810,672 686,691 Time deposits, including non-current portion 74,148 759,662 564,105 475,391 433,041 Restricted time deposits — — 150,000 — — Accounts receivable, net of allowance for doubtfulaccounts, including non-current portion 93,997 150,971 154,770 98,550 231,282 Property and equipment, net 78,074 81,835 127,864 437,337 519,691 Long-term investments — — 24,000 41,760 101,920 Total assets 449,177 1,333,661 1,653,891 2,085,012 2,282,645 Deferred revenue 94,426 117,954 164,524 266,061 302,163 Total liabilities 155,949 214,575 315,277 486,792 628,460 Total mezzanine equity 700,963 — — — — Total shareholders’ equity (deficit) (407,735) 1,119,086 1,338,614 1,598,220 1,654,185 Class A and Class B ordinary shares 107 355 374 388 401 Number of outstanding Class A and Class B ordinaryshares 12,226,558 52,445,782 54,563,321 56,055,497 56,215,589 Exchange Rate Information We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at anyparticular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMBinto foreign exchange and through restrictions on foreign trade. On April 20, 2018, the noon buying rate was RMB6.2945 to US$1.00. 4  The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. Exchange Rate Period Period End Average(l) Low High (RMB per US$1.00) 2013 6.0537 6.1412 6.0537 6.2438 2014 6.2046 6.1704 6.0402 6.2591 2015 6.4778 6.2869 6.1870 6.4896 2016 6.9430 6.6549 6.4480 6.9580 2017 6.5063 6.7350 6.4774 6.9575 October 6.6328 6.6254 6.5712 6.5633 November 6.6090 6.6200 6.5967 6.6385 December 6.5063 6.5932 6.6210 6.5063 2018 January 6.2841 6.4233 6.2841 6.5263 February 6.3280 6.3183 6.2649 6.3471 March 6.2726 6.3174 6.2685 6.3565 April (through April 20, 2018) 6.2945 6.2859 6.2655 6.3045 Source: Federal Reserve Statistical Release Note: (1)Annual averages are calculated using the average of month-end rates of the relevant year. Monthly averages are calculated using the average of the dailyrates during the relevant period. B.Capitalization and Indebtedness Not Applicable. C.Reasons for the Offer and Use of Proceeds Not Applicable. D.Risk Factors Risks Relating to Our Business If we are not able to continue to attract students to enroll in our courses, our business and prospects will be materially and adversely affected. The success of our business depends primarily on the number of students enrolled in our courses. Therefore, our ability to continue to attract students toenroll in our courses is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability todevelop new courses and enhance existing courses to respond to changes in market trends and student demands, expand our learning center network andgeographic footprint, manage our growth while maintaining consistent and high education quality, broaden our relationships with corporate employers andmarket our courses effectively to a broader base of prospective students, including young kids. Furthermore, our ability to attract students also depends onour ability to provide educational content that is perceived as more effective than the standard curricula of universities in China in terms of practical job-oriented training and as complementary to standard curricula of primary and secondary schools in China. If we are unable to continue to attract students toenroll in our courses, our net revenues may decline, which may have a material adverse effect on our business, financial condition and results of operations. 5  We may not be able to continue to recruit, train and retain qualified instructors and teaching assistants, who are critical to the success of our business andeffective delivery of our education services to students. Our instructors and teaching assistants are critical to maintaining the quality of our educational services and our reputation. We seek to hire highly qualifiedinstructors with rich industry experience and strong teaching skills. As our kid education program continues to develop, we will need to recruit more teachingassistants. We recruit dedicated teaching assistants primarily from outstanding graduates of our courses. There is a limited pool of instructors and teachingassistants with these attributes and we must provide competitive compensation packages to attract and retain them. We must also provide ongoing training toour instructors and teaching assistants to ensure that they stay abreast of changes in curriculum, student demands, industry standards and other trendsnecessary to teach and tutor effectively. We have not experienced major difficulties in recruiting, training or retaining qualified instructors and teachingassistants in the past. However, we may not always be able to recruit, train and retain enough qualified instructors and teaching assistants in the future to keeppace with our growth and maintain consistent education quality. A shortage of qualified teaching staff, a decrease in the quality of our teaching staff’sclassroom performance, whether actual or perceived, or a significant increase in compensation to retain qualified instructors and teaching assistants wouldhave a material adverse effect on our business, financial condition and results of operations. If we are not able to continually tailor our curriculum to market demand and enhance our courses to adequately and promptly respond to developments inthe professional job market, our courses may become less attractive to students. New trends in the global economy and rapid developments in the professional services industries may change the type of skills required for professionals inthe marketplace. This requires us to continually develop, update and enhance our course materials to adapt to the needs of the professional job market inChina. We may be unable to update our courses in a timely and cost-effective manner, or at all, to keep pace with changes in market requirements. Anyinability to track and respond to these changes in a cost-effective and timely manner or to tailor our courses to the professional services markets in Chinawould render our courses less attractive to students, which may materially and adversely affect our reputation and ability to continue to attract students andcause us to lose market share. If we fail to develop and introduce new courses in anticipation of market demand in a timely and cost-effective manner, our competitive position andability to generate revenues may be materially and adversely affected. Since inception, our primary focus has been on providing IT professional education services. We have since expanded our course offerings to include non-ITtraining courses, including digital art, online sales and marketing and accounting. We have also launched IT and non-IT training courses customized foryoung kids since December 2015, which primarily include computer programming, robotics programming, digital arts (including 3D printing) and codingmathematics. We intend to continue developing new courses in anticipation of market demand. The introduction of new courses is subject to risks anduncertainties. Unexpected technical, operational, logistical, regulatory or other problems could delay or prevent the introduction of one or more new courses.Moreover, we cannot assure you that any of these new courses will match the quality or popularity of those developed by our competitors, achievewidespread market acceptance or generate the desired level of income for our students. Offering new courses requires us to make investments in content development, recruit and train additional qualified instructors and teaching assistants,increase marketing efforts and re-allocate resources away from other uses. We may have limited experience with the content of new courses and may need tomodify our systems and strategies to incorporate new courses into our existing course offerings. In offering courses in new subject areas, we may face newrisks and challenges that we are not familiar with. Furthermore, we may experience difficulties in recruiting or otherwise identifying qualified instructors todevelop the content for these new courses. If we are unable to offer new courses in a timely and cost-effective manner, our results of operations and financialcondition could be adversely affected. 6  We rely on Java and digital art courses for a majority of our total net revenues, and a decrease in the popularity and usage of Java or Adobe designtechnology would have a material adverse effect on our business and results of operations. A majority of our total net revenues are generated from the Java and digital art courses. In 2015, 2016 and 2017, our Java course contributed 28.5%, 35.1%and 33.7% of our total student enrollments, and our digital art course contributed 30.8%, 27.6% and 36.0% of our total student enrollments, respectively. Thehistorical rapid growth of our business has been driven by the popularity and usage of Java technology and Adobe design, and we expect net revenues fromthese courses to continue to represent a substantial portion of our total net revenues in the near future. We believe our reliance on Java and digital art coursesis mainly attributable to the wide adoption and popularity of Java technology and Adobe design. However, whether Java as a programming language orAdobe design technology as a digital art tool can maintain their popularity is beyond our control. Any factor that materially and adversely affects studentenrollment in our Java or digital art courses, such as a decrease in the popularity and usage of Java technology or Adobe design would have a materialadverse effect on business and our results of operations. Our business depends on the market recognition of our brand, and if we are unable to maintain or enhance our brand recognition, our business, financialcondition and results of operations may be materially and adversely affected. We believe that the market recognition of our “Tarena” (达内) brand has significantly contributed to the success of our business and believe that maintainingand enhancing the reputation of this brand is critical to sustaining our competitive advantage. Our ability to maintain and enhance our brand recognition andreputation depends primarily on the perceived effectiveness and quality of our courses as well as the success of our marketing and promotion efforts. As wecontinue to grow and expand into new course areas, we may not be able to maintain the quality and consistency of our educational services as we did in thepast. We have devoted significant resources to promoting our courses and brand in recent years, including Internet-based marketing and advertising,traditional media advertising and sponsoring industry trade seminars and software design competitions. However, our marketing and promotion efforts maynot be successful or may inadvertently negatively impact our brand recognition and reputation. For example, if any governmental authority or competitorpublicly alleges that any of our advertisements are misleading, our brand reputation may be adversely impacted. If we are unable to maintain and furtherenhance our brand recognition and reputation and increase awareness of our courses, or if we incur excessive marketing and promotion expenses, our resultsof operations may be materially and adversely affected. If we are unable to sustain our brand image, we may not be able to maintain premium tuition fees overour competitors, which may further exacerbate the extent of any adverse effect on our results of operations. Furthermore, any negative publicity relating toour company or our courses and services, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business andoperating results. We may not be able to maintain our high job placement rate for students, which could harm our ability to attract student enrollments. We gather data on post-course job placement rates by conducting surveys of our graduates. Based on the survey responses, we calculate the six-month post-course job placement rates for a month by dividing (i) the number of job-seeking students enrolled in such month who (A) successfully graduated from ourprograms with graduation certificates awarded and (B) indicated that they had received employment offers within six months of graduation, by (ii) the totalnumber of job-seeking students enrolled in such month who later successfully graduated from our programs with graduation certificates awarded. Wecalculate the average six-month post-course job placement rate for a year by averaging the six-month post-course job placement rates of each month of suchyear. Our average six-month post-course job placement rate for each of 2015 and 2016 was over 90%. When calculating such job placement rates for 2015and 2016, a majority of the employment reported by relevant students was full-time employment, and a majority of the employment reported by relevantstudents was in the fields of their studies with us. All of the students enrolled in 2015 and 2016 who later successfully graduated from our programs withgraduation certificates awarded and who were job-seeking, have filled out our surveys. Among the students enrolled in 2015 and 2016, 86% and 88% of suchstudents, respectively, graduated from our programs with graduation certificates awarded. Among the students enrolled in 2015 and 2016 who latersuccessfully graduated from our programs with graduation certificates awarded, 77% and 77% of such students, respectively, were deemed to be job-seekingstudents. 7  Our student job placement rate depends on a wide range of external and internal factors. External factors include the macroeconomic conditions, theperformance of the professional services sector in China and the recruiting demand of corporate employers. Internal factors include our education quality, theefforts of our career services personnel, our ability to provide adequate staffing to achieve desired results and our relationships with corporate employers. Anumber of such external and internal factors are outside of our control. Our historical job placement rates have been high. However, we cannot assure you thatwe will be able to maintain our current level of job placement rate for our students in the future. Any decrease in our job placement rate could harm ourability to recruit students, which may materially and adversely affect our business, financial condition and results of operations. Our newly launched kid education programs may not be successful due to our limited experience in providing education services to minors. In December 2015, we launched our kid education programs under the brand name TongchengTongmei featuring IT training courses and non-IT trainingcourses for kid students. In March 2016, we rolled out another kid education program to offer kids robotics programming courses. In 2017, we continued toroll out a new kid education course in coding mathematics to further diversify our course offerings in kid education. Our kid education programs targetstudents aged between six and eighteen, and are the most important part of our efforts to enter into the K-12 STEAM education market. As we have beenprimarily engaging in adult vocational training programs since our inception, we have very limited experience in providing education programs to minors,who have distinct learning preference and mentality as compared to adult students and require tailored courses and dedicated class management. Althoughthe courses offered through our kid education programs are designed based on minors’ learning patterns and interests, we cannot guarantee you that our kideducation programs will be able to continue to attract students or be proved to achieve satisfactory education results. If students lose interests in our kideducation programs or find the courses offered in our kid education programs ineffective, our business, results of operations and financial conditions may beadversely affected. Our enrollment rate could be impacted by the operations of academic K-12 education and tutoring service providers, given our target students have limitedtime and energy and they need to choose among different courses and programs. The K-12 education and tutoring market is highly competitive and theconcept of STEAM education is relatively new in China. Students and their parents may prefer academic education and tutoring programs over our STEAMprograms. We cannot assure you that we will be successful in competing for students, and if we fail, our financial status and results of operation will beadversely impacted. 8  If the level of performance by the students of our kid education program deteriorates or satisfaction with our services declines, our business, financialcondition, results of operations and reputation could be adversely affected. The success of our business depends on our ability to deliver a satisfactory learning experience and improved educational results. Although the coursesprovided under our kid education programs do not directly link to the academic performance of our students, their effectiveness could be evaluated by ourstudents and their parents in an intuitive way by referring to the improvements in programming skills or performances in robotics competitions. Theperformance of our students in the IT training courses, non-IT training course, and kid robotics programming course will impact the acceptance of, and thestudent and parent satisfaction with, our courses. Accidents or injuries suffered by our students, their parents or other people caused by us, or perceived to be caused by us may adversely affect ourreputation, subject us to liability and cause us to incur substantial costs. We have a large number of students and their parents on our premises to attend classes and/or use our facilities, and they may suffer accidents or injuries orother harm on our premises, including those caused by or otherwise arise from the actions of our employees. Although we have enhanced preventive measuresto avoid such incidents, we cannot assure you that there will be no any incident in the future. We do not carry liability insurance for most of our students at our learning centers. In the event of accidents or injuries or other harm caused or perceived tobe caused by us, our facilities and/or services may be perceived to be unsafe, which may discourage prospective students from attending our classes andparticipate in our activities. We could also face claims alleging that we should be liable for the accidents or injuries, or we were negligent, providedinadequate supervision to our employees and therefore should be held jointly liable for harm caused by them. A material liability claim against us or any ofour teachers or other employees could adversely affect our reputation, enrollment and revenues. Even if unsuccessful, such a claim could create unfavorablepublicity, cause us to incur substantial expenses and divert the time and attention of our management. Our business, financial condition and results of operations may be adversely affected by a downturn in the global or Chinese economy. Because our student enrollment may depend on our students’ and potential students’ levels of disposable income, perceived job prospects and willingness tospend, as well as the level of hiring demand of professional services positions, our business and prospects may be affected by economic conditions in Chinaor globally. In addition, for our kid education programs, our student enrollment may depend on the disposable income and willingness to spend of theparents. The global macroeconomic environment is facing challenges, including the escalation of the European sovereign debt crisis since 2011, the end ofquantitative easing by the U.S. Federal Reserve, the economic slowdown in the Eurozone in 2014 and the expected exit of the United Kingdom from theEuropean Union. It is unclear whether the Chinese economy will resume its high growth rate. The Chinese economy has slowed down in recent years.According to the National Bureau of Statistics of China, in 2017, China’s gross domestic product grew at a rate of 6.9%. There have been concerns overunrest in the Middle East and Africa, which have resulted in volatility in oil and other markets, and over the prolonged crisis in Ukraine which contributed tothe collapse in the value of the Russian ruble, and the resulting Russian financial crisis. There have also been concerns about the territorial disputesinvolving China in Asia and the economic effects. Economic conditions in China, including the performance of the IT and other professional servicesindustries, are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overalleconomic growth rate in China. A decline in the economic prospects of IT and other professionals could alter current or prospective students’ spendingpriorities and the recruiting demand from professional service industries. We cannot assure you that professional education spending in general or withrespect to our course offerings in particular will increase, or not decrease, from current levels, or if the macroeconomic environment deteriorates, parents willcontinue to spend on STEAM education for their children. Therefore, a slowdown in China’s economy or the global economy may lead to a reduction indemand for education services, which could materially and adversely affect our financial condition and results of operations. 9  If we fail to successfully execute our growth strategies, our business and prospects may be materially and adversely affected. Our growth strategies include growing our student enrollments for existing courses, expanding our course offerings, further enhancing the quality of oureducation services and expanding our corporate employer network. We may not succeed in executing our growth strategies due to a number of factors,including, without limitation, the following: ·we may fail to market our courses in new markets or promote new courses in existing markets effectively; ·we may not be able to replicate our successful business model in other geographic markets or in new course subject areas; ·we may fail to identify new cities with sufficient growth potential to expand our network; ·we may not be able to replicate the success and growth of our adult education services to the kid education market; ·we may not be able to recruit and retain learning center managers, teaching assistants and other key personnel; ·our analysis for selecting suitable new locations may not be accurate and the demand for our services at such new locations may not materialize orincrease as rapidly as we expect; ·we may fail to obtain the requisite licenses and permits necessary to open learning centers at our desired locations from local authorities; ·we may not be able to continue to update our existing courses or offer new courses to adapt to changing market demand and technologicaladvances; and ·we may fail to achieve the benefits we expect from our expansion. If we fail to execute our growth strategies successfully, we may not be able to maintain our growth rate and our business and prospects may be materially andadversely affected as a result. We may not be able to manage our business expansion effectively, which could harm our financial condition and results of operations. We have expanded rapidly and we plan to continue to expand our operations in different geographic areas as we address the growth of our customer base andmarket opportunities. We increased the number of our learning centers for professional education services from 145 as of December 31, 2016 to 184 as ofDecember 31, 2017. We also increased the number of our learning centers exclusively for kid education programs from 6 as of December 31, 2016 to 30 as ofDecember 31, 2017. This expansion has resulted, and will continue to result, in substantial demands on our management, personnel and operational,technological and other resources. To manage the expected growth of our operations, we will be required to expand our existing operational, administrativeand technological systems and our financial systems, procedures and controls and to expand training and management of our growing employee base. Inaddition, the geographic dispersion of our operations requires significant management resources. We cannot assure you that our current and plannedpersonnel, systems, procedures and controls will be adequate to support our future operations, or that we will be able to effectively and efficiently manage thegrowth of our operations or recruit and retain qualified personnel to support our expansion. Any failure to effectively and efficiently manage our expansionmay materially and adversely affect our ability to capitalize on new business opportunities, which in turn may have a material adverse effect on our financialcondition and results of operations. 10  The growth of our business is in part dependent on our continuing access to a broad network of corporate employers. We derive both direct benefits, such as increased enrollment driven by employer-specific customized courses, and indirect benefits, such as higher studentjob placement rate and strengthening of the Tarena brand, from our access to a large number of corporate employers. We believe our access to a large numberof corporate employers in a wide range of industries is one of our core competitive strengths. If our access to these corporate employers were to becomeconstrained or limited, or the benefits we derive from this access were to be diminished, whether by our own actions or actions of our competitors, our growthprospects and our business would be harmed. Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be adversely affected if welose their services. Our future success depends heavily upon the continuing services of our senior management team. If any member of our senior management team leaves usand we fail to effectively manage a transition to new personnel, or if we fail to attract and retain experienced and passionate instructors, regional managersand other key personnel on acceptable terms, our business, financial conditions and results of operations could be adversely affected. We will need tocontinue to hire additional personnel, especially qualified instructors and regional managers, as our business grows. A shortage in the supply of personnelwith requisite skills or our failure to attract and retain high-quality executives or key personnel could impede our ability to increase revenues from ourexisting courses, to launch new course offerings and to expand our operations and would have an adverse effect on our business and financial results. Mr. Shaoyun Han, our founder, chairman and chief executive officer, has played an important role in the growth and development of our business since itsinception. To date, we have relied heavily on Mr. Han’s expertise in, and familiarity with, our business operations, his leadership, and his reputation in theprofessional education services industry. If Mr. Han is unable or unwilling to continue in his present positions, we may not be able to easily replace him andmay incur additional expenses to identify and train his successor. We do not maintain key man insurance on Mr. Han. The operations of certain of our learning centers are, or may be deemed by relevant PRC government authorities to be, beyond their authorized businessscope or without proper license or registration. If the relevant PRC government authorities take actions against such learning centers, our business andoperations could be materially and adversely affected. The principal regulations governing private education in China consist of the Education Law, the Private Education Law with its Amendment, and thePrivate Education Law Implementation Rules. See “Regulations—Regulations on Private Education—The Law for Promoting Private Education and itsImplementation Rules.” Under these PRC laws and regulations and related administrative requirements, private schools are classified as either non-profit private schools or for-profitprivate schools, and all kinds of private schools are required to obtain a school permit before their registration as legal entities with competent authorities.For-profit private training institutions shall be regulated and governed with reference to the abovementioned rules. To provide professional educationservices as a for-profit private school, a company may, in the capacity of a school sponsor, establish a private school which obtains a school permit fromcompetent human resources and social security authorities. After obtaining a school permit, the registration of a private school will be completed once thecompetent industry and commerce administration authorities include the relevant professional education services in the authorized scope of business asspecified in the business licenses of the private school. Under the Amendment to the Private Education Law and the Private Education Law ImplementationRules, a material change in a for-profit private school shall be approved by the competent education authorities or the authorities in charge of humanresources and social security before it can be registered with the competent local branch of the State Administration for Industry and Commerce, or SAIC, thepredecessor of the State Administration for Market Regulation newly established in April 2018. 11  However, since the Amendment to the Private Education Law just became effective on September 1, 2017 and the relevant detailed rules by national andmost of the local government authorities have not been issued, there remains uncertainties about the registration process for the newly established privateschools (including the private training institutions, similarly hereinafter) or the re-registration process for pre-existing private schools. In practice, theprofessional education services may be provided by a private school which holds a school permit issued by the human resources and social securityauthorities, and such a school can then establish and operate learning centers within the approved regions to provide professional education services,provided that learning centers located outside the region of the registered address of the private schools shall be registered with original approvingauthorities. Alternatively, professional education services may also be provided by a company obtaining approval from the competent industry andcommerce administration authorities to include the relevant professional education services in the authorized scope of business as specified in its businesslicenses, which approach has been adopted before the promulgation of the Amendment to the Private Education Law. A company with “professionaleducation services” or an equivalent statement included in its approved scope of business can operate learning centers by itself or through its registeredbranches. In addition, many local government authorities have different views on the relevant rules and regulations and have adopted different practices ingranting school permits to private schools or issuing business licenses to companies that provide professional education services. Although some cities, suchas Beijing, Shanghai and Hangzhou, allow companies to include “professional education services” in their business scope, the industry and commerceadministration authorities in certain other areas have adopted regional policies of not allowing “professional education services” or similar statement to beincluded in the business scope of any company. We use both ways discussed above to establish learning centers. As of December 31, 2017, we had a total of 214 learning centers, of which 65 were managedby schools and 149 were managed by our subsidiaries. Among the learning centers operated by our subsidiaries, 49 have neither professional educationservices nor education information related consultation as an authorized scope of business in the licenses of our subsidiaries or their registered branchesoperating these learning centers as of December 31, 2017, and these learning centers in the aggregate accounted for 17.6% of our student enrollments in2017. We were not able to include professional education services in these companies’ authorized business scope mainly because the industry and commerceadministration authorities in these areas have a general local policy prohibiting the inclusion of “professional education services” in the business scope ofany company. In addition, 13 learning centers operated by our subsidiaries only have “education information related consultation” rather than “professionaleducation services” in their respective authorized scopes of business, and these learning centers in the aggregate accounted for 4.3% of our studentenrollments in 2017. The difference between “educational services” and “education information related consultation” is not very clear under applicable PRClaws and regulations, and it is possible that the relevant PRC government authorities may determine that operating learning centers in the way as currentlyconducted by our relevant subsidiaries is beyond the scope of “education information related consultation.” For these learning centers, we have beencommunicating, and will continue to communicate, with the competent industry and commerce administration authorities to expand the authorized businessscope of the relevant subsidiaries to include “professional education services” or similar statement. For regions where it becomes apparent that we will not beable to expand the authorized business scope of the relevant subsidiaries, we will also explore the possibility of obtaining approval from the competentauthorities to set up private schools to take over the operations of the relevant subsidiaries. If the relevant PRC government authorities discover or determinethat our subsidiaries operate beyond their authorized business scope, they may order the relevant subsidiaries to complete the registration for change ofbusiness scope within a given period, failing which each company is subject to a one-time fine of RMB10,000 to RMB100,000, or may be ordered to ceaseits operation. We have been fined once for RMB50,000 for conducting business outside the authorized business scope since 2011. For our learning centers operated by schools, we are also required to obtain and maintain various licenses and permits and make filings for each learningcenter with the competent human resources and social security authorities and civil affairs authorities. As of December 31, 2017, 30 of our learning centersare operated by schools outside their registered address without being registered with the original approving authorities, which may subject us to fines ofRMB10,000 to RMB50,000, confiscation of the gains derived from the noncompliant operations or the suspension of the noncompliant learning centers.These 30 learning centers in the aggregate accounted for 18.3% of our total student enrollments in 2017. As of the date of this annual report, all of our 25schools have the school permit, among which two schools need to apply for updating their principal’s information. Besides, as of December 31, 2017, wehave set up five (5) schools registered as schools requiring “reasonable returns” provided in the Private Education Law. We are informed by the local humanresources and social security authorities in some cities in China that they have stopped issuing new school permits temporarily before any detailedimplementing rules being issued. 12  During such transitional period between the promulgation of the Amendment to the Private Education Law and the issuance of the relevant detailed rules bynational and most of the local government authorities, the above uncertainties and local policies and practices have created certain obstacles for us to complywith all applicable rules and regulations for all of our local operations. Although we have not been subject to any material fines or other penalties in relationto any non-compliance with licensing requirements in the past with respect to our learning centers operated by schools, if we fail to cure any non-compliancein a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliant operations or the suspension of our noncompliantlearning centers, which may materially and adversely affect our business and results of operation. On February 13, 2018, the MOE and other relevant authorities promulgated the Notice on Effectively Reducing Extracurricular Burdens of Primary andMiddle School Students and Conducting Special Administrative Actions for Off-campus Training Institutions, or the Notice, which proposes severalrectification requirements on "test-oriented" non-academic cultural and educational training institutions and requires relevant government authorities to payclose attention to the "strong test-oriented" training, such as "advance teaching", especially mathematics and Chinese courses provided by the off-campustraining institutions. According to the Notice, such off-campus training institutions shall obtain school permits and make filings regarding the classes,content, enrollment target and lecture time for disciplinary training with the local branches of the MOE. The coding mathematics course provided byTongchengTongmei shares similar content with elementary school mathematics courses, which may be regarded as the "strong test-oriented", and theinformatics olympiad training organized under IT-training courses by TongchengTongmei may be regarded as the primary school competition-relatedcourses, each of which may need to be rectified pursuant to the Notice. However, according to our oral consultation with the relevant local branches of theMOE, there has been no specific standards or implementation rules for the Notice and it is uncertain whether our coding mathematics course provided byTongchengTongmei or the informatics olympiad organized by TongchengTongmei are in compliance with the Notice. If our business is regarded as violatingthe Notice and we fail to cure any non-compliance in a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliantoperations or the suspension of our noncompliant business, which may materially and adversely affect our business and results of operation. We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectively with our present and futurecompetitors or to adjust effectively to changing market conditions and trends. The professional education services market in China is fragmented, rapidly evolving and highly competitive. We face competition in our offered courses andin many of the geographic markets in which we operate. As the IT professional education market in China matures, there is increased demand for highlyspecialized IT labor, and we may face competition from IT professional education providers that offer specialized training programs targeting certain nichejob markets in the IT industry. In the future, we may also face competition from new entrants into the Chinese IT professional education market. As weexpand beyond IT education into other fields of professional education, we also face competition for student enrollment from existing online and offlineproviders of professional education services, as well as smaller regional professional education services providers in China. Furthermore, we also facecompetition from other K-12 education service providers. Some of our competitors may be able to devote more resources than we can to the development, promotion and provision of their education services andrespond more quickly than we can to changes in student needs, market trends or new technologies. In addition, some of our competitors may be able torespond faster to changes in student preferences in some of our geographic markets and engage in price-cutting strategies. For our kid education programs,some of our competitors may have more experiences in designing courses based on minor’s preferences, mentality and learning curve. We cannot assure youthat we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respondto competitive pressure effectively, we may be forced to reduce our tuition fees and lose our market share, which will adversely impact our profitability. 13  Our business and financial results may be materially and adversely affected if we are unable to maintain our cooperative relationships with financingservice providers for student loans. In 2015, 2016 and 2017, a substantial portion of our students relied on loans provided or arranged by a number of financing service providers to pay ourtuition fees. We have entered into cooperative agreements with Baidu Small Loan Co., Ltd. (or Baidu Small Loan) and Bank of China Consumer Finance Co.,Ltd. (or BOC CFC), pursuant to which they provide loans to our students for the payment of our tuition fees. We have also entered into agreements withCreditEase Business Consulting (Beijing) Co., Ltd. (or CreditEase), RenRenDai and ShiTuDai, whereby they assisted our students in obtaining loans to payfor our tuition fees. In 2015, 2016 and 2017, approximately 50.4%, 55.1% and 52.4% of our students received loans provided or arranged by financingservice providers to pay for our tuition fees. Our financing service partners have full discretion in deciding whether or not to extend or arrange for loans to a particular student. Furthermore,macroeconomic conditions in China may force the financing service providers to decrease or eliminate the amount of credit available for our students,making it difficult for our prospective students to afford our education. In addition, if the default rates on the loans provided or arranged by these and otherfinancing service providers were to increase, they may raise the interest rates on the student loans, making such financing options less attractive to ourstudents. Although peer-to-peer lending is generally protected as private loans between individuals under PRC law and has flourished in recent years inChina, there are uncertainties as to the licensing requirements and the nature of business provided by those intermediaries, such as CreditEase, RenRenDaiand ShiTuDai, in facilitating the peer-to-peer lending. According to the Guide to the Record-filing of Online Lending Information Intermediaries, issued inNovember 2016, or the Record-filing Guidelines, and the Notice on Rectification and Inspection Acceptance of Risk of Peer-to-peer Lending, issued onDecember 2017, or Circular 57, certain local governmental authorities shall establish an inspection team to conduct risk rectification inspections on peer-to-peer lending information intermediaries within their jurisdictions. If a peer-to-peer lending information intermediary institution passes the inspection, thelocal governmental authorities shall complete its record-filling under the Record-filing Guidelines. Circular 57 also requires local governmental authoritiesto complete such record-filings of peer-to-peer lending information intermediaries within its jurisdiction by the end of April 2018, except that the deadlinefor certain complicated cases may be postponed to May 2018 or June 2018, as appropriate. According to the Notice of Further Regulating Campus Loansissued on June 29, 2017, the Notice of the Office of the Leading Group for the Special Campaign against Internet Financial Risks and the Office of theLeading Group for the Special Campaign against Peer-to-peer Lending Risks on the Regulation and Rectification of the “Cash Loan” Business issued onDecember 1, 2017, the “campus loans” services shall be prohibited and the peer-to-peer lending institutions shall not provide loan to any student in school orany borrower without source of repayment or repayment capacity. If those peer-to-peer lending institutions could not complete the record-filings or thecurrent services provided by peer-to-peer lending institutions to our student are prohibited, or more new PRC laws and/or regulations are passed in the futureprohibiting peer-to-peer lending facilitated by, or imposing significant licensing requirements on, intermediaries such as CreditEase, RenRenDai andShiTuDai, we cannot assure you that CreditEase, RenRenDai or ShiTuDai will be able to obtain relevant licenses and continue facilitating peer-to-peerlending in the future. If CreditEase, RenRenDai or ShiTuDai ceases to facilitate peer-to-peer lending to our students in the future, if our cooperativerelationships with the financing service providers are damaged or lost, or if the financing service providers significantly increase their interest rates, ourbusiness and financial results would be adversely affected. If we fail to protect our intellectual property rights, we may lose our competitive advantage and our brand and operations may suffer. We consider our copyrights, trademarks, trade names and domain names invaluable to our ability to continue to develop and enhance our brand recognition.Unauthorized use of our copyrights, trademarks, trade names and domain names may damage our reputation and brand. Our major brand names and logos areregistered trademarks in China. Our proprietary curricula and course materials, together with our Tarena Teaching System, or TTS, are protected bycopyrights. However, preventing copyright, trademark and trade name infringement or misuse could be difficult, costly and time-consuming, particularly inChina. The measures we take to protect our copyrights, trademarks and other intellectual property rights are currently based upon a combination of trademarkand copyright laws in China and may not be adequate to prevent unauthorized uses. Furthermore, application of laws governing intellectual property rightsin China is uncertain and evolving, and could involve substantial uncertainties to us. There had been several incidents in the past where third parties usedour “Tarena” (达内) brand without our authorization, and we had to resort to litigation to protect our intellectual property rights. These proceedings were allresolved in our favor and our brand and business were not materially harmed. However, if we are unable to adequately protect our trademarks, copyrights andother intellectual property rights in the future, we may lose our competitive advantage, our brand name may be harmed and our business may suffermaterially. Furthermore, our management’s attention may be diverted by violations of our intellectual property rights, and we may be required to enter intocostly litigation to protect our proprietary rights against any infringement or violation. 14  We may be subject to intellectual property rights claims or other claims which could result in substantial costs and diversion of our financial andmanagement resources away from our business. We cannot assure you that our course materials, other educational contents or other intellectual properties developed or used by us do not or will not infringeupon patents, valid copyrights or other intellectual property rights held by third parties. We have, and may from time to time be subject to legal proceedingsand claims relating to the intellectual property of others. In addition, some of our employees were previously employed at other companies, including ourcurrent and potential competitors. To the extent these employees are involved in content development at our company similar to content development inwhich they have been involved at their former employers, we may become subject to claims that such employees or we may have used or disclosed tradesecrets or other proprietary information of the former employers of our employees. In addition, our competitors may file lawsuits against us. If any such claimarises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future course materials orother content, which could result in substantial costs and diversion of our financial and management resources. Furthermore, if we are found to have violatedthe intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or developalternative intellectual property rights and be forced to pay fines and damages, any of which may materially and adversely affect our business. We recruit a significant portion of our students directly from our network of cooperative universities and colleges. If we lose these relationships, or thebenefits we derive from these relationships diminish, our growth and our business may be harmed. We have established various kinds of cooperative relationships with over 750 universities and colleges in China. We enroll a significant percentage of ourstudents directly from these universities and colleges through jointly offered majors, on-campus learning sites and university recruiting promotional events.We recruited approximately 15.7% of our students in 2017 from these universities and colleges. If our relationships with any of these universities andcolleges were to be damaged or lost, or the benefits we derive from these relationships were to be diminished, whether by our own actions, actions of one ormore governmental entities or actions of our competitors, our growth and our business may be harmed. Failure to control rental costs, obtain leases at desired locations at reasonable prices or protect our leasehold interests could materially and adverselyaffect our business. A majority of our offices and learning centers are located on leased premises. At the end of each lease term we must negotiate an extension of the lease. If weare not able to negotiate an extension on terms acceptable to us, we will be forced to move to a different location, or the rent may increase significantly. Thiscould disrupt our operations and adversely affect our profitability. All of our leases are subject to renewal at market prices, which could result in a substantialrent increase each renewal period. We compete with many other businesses for sites in certain highly desirable locations. As a result, we may not be able toobtain new leases at desirable locations or renew our existing leases on acceptable terms or at all, which could adversely affect our business. As of December31, 2017, we had received from our lessors copies of title certificates or proof of authorization to lease the properties to us for all leased properties. However,we cannot assure you that we will be able to obtain copies of title certificates or proof of authorization to lease any properties that we may lease in the futureor the title to these properties we currently lease or any properties that we may lease in the future will not be otherwise challenged. Furthermore, several of ourleased properties are owned by universities or built on allocated land in China. Such properties may not be legally leased to us under PRC law. Our leaseholdinterest in these properties may be challenged by relevant PRC governmental authorities to be invalid, and we may be forced to move out of such premises. 15  In addition, we have not registered most of our lease agreements with relevant PRC governmental authorities as required by PRC law, and although failure todo so does not in itself invalidate the leases, we may not be able to defend these leases against bona fide third parties. As of the date of this annual report, weare not aware of any actions, claims or investigations being contemplated by governmental authorities against us or our lessors with respect to the defects inour leased real properties or any challenges by third parties to our use of these properties. However, if any of our leases are terminated as a result of challengesby third parties or governmental authorities for lack of title certificates or proof of authorization to lease, we may not be able to protect our leasehold interestand may be forced to relocate the affected learning centers and incur additional expenses relating to such relocation. If we fail to find suitable replacementsites in a timely manner or on terms acceptable to us, our business and results of operations could be materially and adversely affected. Our accounts receivable have been relatively high. Inability to collect our accounts receivable on a timely basis, if at all, could materially and adverselyaffect our financial condition, liquidity and results of operations. Understanding the difficulty for recent college graduates to afford the tuition fees of our courses, we offered qualified students the post-graduation tuitionpayment option beginning in 2006, which led to our relatively high accounts receivable. As of December 31, 2015, 2016 and 2017, our outstanding accountsreceivable, net of allowance for doubtful accounts, were RMB155 million, RMB99 million and RMB231 million, respectively. Although we conductfinancial evaluations of our students applying to use our post-graduation tuition payment option, we do not require collateral or other security from ourstudents. Adverse changes in the macroeconomic environment and the earnings capacity of our students may negatively impact our ability to collect ouraccounts receivable. Furthermore, as time passes, it might be more difficult for us to collect historical accounts receivables. Our bad debt allowance chargedto expense decreased from RMB33.6 million in 2016 to RMB31.5 million in 2017. However, there is no guarantee that our bad debt allowance expense willkeep decreasing in the following years. Our inability to collect our accounts receivable on a timely basis, if at all, could cause our bad debt allowance toincrease or remain relatively high in the future, and materially and adversely affect our financial condition, liquidity and results of operations. Capacity constraints of our learning centers could cause us to lose students to our competitors. Our learning centers are limited in size and number of classrooms. We may not be able to admit all students who would like to enroll in our courses due to thecapacity constraints of our learning centers. If we fail to expand our physical capacity as quickly as the demand for our classroom-based services grows, wecould lose potential students to our competitors, which could adversely affect our results of operations and business prospects. As we further expand our kideducation programs, we may face more intense capacity challenges. We may not be able to recoup the capital expenditures or investments we make to expand and upgrade our teaching, administrative, research and othercapabilities. We purchased two office buildings in Beijing for an aggregate price of RMB231.9 million in 2016. The office buildings are mainly for teaching purpose, andto a lesser extent for an administrative function. We also purchased a building in Qingdao and another one in Haikou for an aggregate price of RMB49.6million in 2016. The purpose of these two buildings is for teaching purposes as learning centers to accommodate the growing demand in local market andenjoy local favorable policies. We may continue to invest in our teaching, administrative, research and other capabilities as our business further develops.Although we will evaluate the feasibility of each property purchase for the good of business operation, we are likely to incur costs associated with theseinvestments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect. Wemay not be able to recover our capital expenditures or investments, in part or in full, or the recovery of these capital expenditures or investments may takelonger than expected. As a result, the carrying value of the related assets may be subject to an impairment charge, which could adversely affect ourprofitability. 16  Our strategy of investments and acquiring complementary businesses and assets may fail. As part of our business strategy, we have pursued, and intend to continue to pursue, selective strategic investments and acquisitions of businesses and assetsthat complement our existing business. Investments and acquisitions involve uncertainties and risks, including: ·potential ongoing financial obligations and unforeseen or hidden liabilities, including liability for infringement of third-party copyrights or otherintellectual property; ·failure to achieve the intended objectives, benefits or revenue-enhancing opportunities; ·costs and difficulties of integrating acquired businesses and managing a larger business; ·potentially significant goodwill impairment charges; ·high acquisition and financing costs; ·possible loss of key employees of a target business; ·potential claims or litigation regarding our board’s exercise of its duty of care and other duties required under applicable law in connection with anyof our significant acquisitions or investments approved by the board; ·diversion of resources and management attention; and ·in the case of acquisitions of businesses or assets outside of China, the need to integrate operations across different business cultures and languagesand to address the particular economic, currency, political, and regulatory risks associated with specific countries. Any failure to address these risks successfully may have a material and adverse effect on our financial condition and results of operations. Investments andacquisitions may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capitalexpenditures. In addition, if we use our equity securities to pay for investments and acquisitions, we may dilute the value of our ADSs and the underlyingordinary shares. If we borrow funds to finance investments and acquisitions, such debt instruments may contain restrictive covenants that could, among otherthings, restrict us from distributing dividends. Moreover, acquisitions may also generate significant amortization expenses related to intangible assets. Wemay also incur impairment charges to earnings for investments and acquired businesses and assets which are determined to be impaired, and recognize theproportional share of the net losses of the investees to the extent of the amount of the investments for the equity method investments. The geographic concentration of our learning centers may unfavorably impact our operations. We derive a substantial portion of our net revenues from our entities in Hangzhou and Beijing. Revenue derived from the entities in Hangzhou accounted for33.0%, 31.9% and 30.0% of our net revenues in 2015, 2016 and 2017, respectively. Revenue derived from the entities in Beijing accounted for 12.3%,12.4%and 13.0% of our net revenues in 2015, 2016 and 2017, respectively. As a result of this geographic concentration, our results of operations are significantlyaffected by economic conditions in Hangzhou and Beijing. Furthermore, any natural disaster or health epidemics affecting the Hangzhou and Beijing regionscould significantly impact our operations. Although we have been and will be exploring opportunities of setting up additional learning centers in second tieror third-tier cities, we expect that we will continue to derive a substantial portion of our net revenues from Hangzhou and Beijing in the near future.Deterioration in economic conditions and the professional services industries in these markets could decrease the demand for our courses, which in turn couldnegatively impact our operations and business prospects. 17  Our historical financial and operating results, growth rates and profitability may not be indicative of future performance. Although we commenced operations in 2002, our significant business growth and expansion began in 2009. Our business and our prospects must beevaluated in light of the risks and uncertainties encountered by companies at a comparable stage of development. In addition, the professional educationservices market in China is still at an early stage of development, which makes it difficult to evaluate our business and future prospects. Furthermore, ourresults of operations may vary from period to period in response to a variety of other factors, including general economic conditions and regulations,government actions pertaining to the professional education services sector in China, changes in spending on professional education services, our ability tocontrol cost of revenues and operating expenses, and non-recurring charges incurred in connection with acquisitions or other extraordinary transactions orunder unexpected circumstances. Due to the above factors, some of which are beyond our control, our historical financial and operating results, growth ratesand profitability may not be indicative of our future performance and you should not rely on our past results or our historic growth rates as indicators of ourfuture performance. Our ability to broadcast our lectures live and to offer online learning modules on TTS depends upon the performance and reliability of our systems and theInternet infrastructure and telecommunications networks in China. We deliver live broadcasts of our lectures via a dedicated network provided by China Telecom and China Unicom to terminals located in selected learningcenters with high student enrollment and via public Internet infrastructure to other learning centers. Any unscheduled service interruption of the Internetinfrastructure and telecommunications networks in China could cause us to be unable to deliver these live broadcasts, forcing us to resort to using pre-recorded lectures in the event of such service interruptions. Our inability to broadcast live lectures during service interruptions may damage the quality of oureducation and student experience, which may hurt our reputation and negatively impact our financial condition and results of operations. Furthermore, ourgross profit and net income could be adversely affected if the prices that we pay for telecommunications and Internet services rise significantly. Our ability to offer online learning modules also depends on the performance and reliability of the Internet infrastructure in China. Disruptions to the Internetinfrastructure of China may deny our students access to the learning functionalities on our TTS or TMOOC.cn, which may hinder students from effectivelylearning our education contents. Furthermore, increases in the traffic on TTS or TMOOC.cn could also strain the capacity of our existing computer systems,which could lead to slower response times or system failures. This would cause a disruption or suspension in our course offerings, which would hurt our brandand reputation and negatively affect our revenue growth. We may need to incur additional costs to improve our systems in order to accommodate increaseddemand if we anticipate that our systems cannot handle higher traffic volume in the future. Accidents or injuries suffered by our students or other people on our premises may adversely affect our reputation, subject us to liability and cause us toincur substantial costs. We do not carry liability insurance for most of our students at our learning centers. In the event of accidents, injuries or other harm to students or other peopleon our premises, including those caused by or otherwise arising from the actions of our employees on our premises, our facilities may be perceived to beunsafe, which may discourage prospective students from attending our classes. We could also face claims alleging that we were negligent or providedinadequate supervision to our employees and therefore should be held jointly liable for harm caused by them or are otherwise liable for injuries suffered byour students or other people on our premises. A liability claim, even if unsuccessful, against us or any of our employees could adversely affect our reputation,enrollment and revenues, causing us to incur substantial expenses and divert the time and attention of our management. 18  If we fail to implement an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud or fail tomeet our reporting obligations, and investor confidence and the market price of our ADSs may be materially and adversely affected. We are subject to reporting obligations under the U.S. securities laws. Among other things, the Securities and Exchange Commission, or the SEC, as requiredby Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring every public company, including us, to include a managementreport on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of thecompany’s internal control over financial reporting. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JumpstartOur Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act, our independent registeredpublic accounting firm may be required to report on the effectiveness of our internal control over financial reporting. As a result of management’s assessment, our management identified a material weakness as of December 31, 2017, which was the insufficient review in areassubject to significant estimates and judgments. See “Item 15. Controls and Procedures.” This material weakness may result in a material misstatement to ourquarterly or annual consolidated financial statements that would not be prevented or detected. As a result of the material weakness, management hasconcluded that our internal control over financial reporting was ineffective as of December 31, 2017. Our management has been engaged in, and continues to be engaged in making necessary changes and improvements to the overall design of its controlenvironment to address the material weakness in internal control over financial reporting and the ineffectiveness of our disclosure controls and proceduresdescribed above. To remediate the material weakness described above with respect to controls over the period-end financial statement reporting and controls over significantcomplex transactions, we plan to continue to: (i) reinforce the oversight and review procedure over areas subject to significant estimates and judgments; and(ii) enhance our accounting manual to provide our accounting team with more comprehensive guidelines on the accounting policies under U.S. GAAP andSEC rules and requirements. We plan to continue to assess our standardized processes to further enhance the effectiveness of our financial review, includingthe analysis and monitoring of financial information in a consistent and thorough manner. We expect that we will incur more costs in the implementation of such measures. However, the implementation of these measures may not fully address thematerial weakness in our internal control over financial reporting. Our failure to correct the material weakness and control deficiency or our failure todiscover and address any other material weakness or control deficiencies could result in inaccuracies in our financial statements and could also impair ourability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financialcondition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffectiveinternal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from thestock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements fromprior periods. We have limited insurance coverage for our operations in China. Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies.We have determined that the risks of disruption or liability from our business, the loss or damage to our fixed assets, including our equipment and officefurniture, the cost of insuring for these risks, and the difficulties associated with acquiring such insurance on commercially reasonable terms render itcommercially impractical for us to have such insurance. As a result, we do not have any business interruption, litigation or property insurance coverage forour operations in China. Any uninsured occurrence of personal injury, loss or damage to fixed assets, or litigation or business disruption may result in theincurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results. Our business is subject to seasonal fluctuations, which may cause our operating results to fluctuate from quarter to quarter. This may result in volatility inand adversely affect the price of our ADSs. We have experienced, and expect to continue to experience, seasonal fluctuations in our net revenues and results of operations, primarily due to seasonalchanges in student enrollment. Historically, our courses tend to have the largest student enrollment, cash collection and net revenues in the third and fourthquarters. We generally generate less tuition fees in the first quarter of each year due to the Chinese New Year holiday. Our expenses, however, do notnecessarily correspond to changes in our student enrollment and net revenues. We make investments in marketing and promotion, instructor recruitment andtraining and course development throughout the year. We expect quarterly fluctuations in our net revenues and results of operations to continue. Thesefluctuations could result in volatility and adversely affect the price of our ADSs. As our net revenues grow, these seasonal fluctuations may become morepronounced. 19  Higher labor costs and inflation in China may adversely affect our business and our profitability. Labor costs in China have risen in recent years. We employed 9,582 employees in China as of December 31, 2017. The increases in labor cost may erode ourprofitability and materially harm our business, financial condition and results of operations. In addition, PRC government have promulgated some new lawsand regulations to enhance labor protection in recent years, such as the Labor Contract Law and the Social Insurance Law, which are also expected to causeour labor costs to increase. As the interpretation and implementation of these new laws and regulations are still evolving, our employment practice may notbe at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connectionwith labor disputes or investigation, our business and profitability may be adversely affected. Although we have not in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in thefuture by higher rates of inflation in China. We have granted share-based awards and may grant more share-based awards in the future, which may materially reduce our net income. We adopted a share plan in 2008, or the 2008 Plan, that permits granting of options to purchase our ordinary shares, restricted shares (or share appreciationrights or other similar awards) and rights to purchase restricted shares. Under the 2008 Plan, the maximum aggregate number of ordinary shares that may beissued pursuant to all awards under our share plan is 8,184,990 shares. In February 2014, we adopted a 2014 share incentive plan, or the 2014 Plan. Pursuantto the 2014 Plan, we may issue options, restricted shares and restricted share units to our qualified employees, directors and consultants on a regular basis.The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, or the Award Pool, is 1,833,696, provided thatthe shares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing with January 1, 2015, if the unissued sharesreserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstanding on a fully-diluted basis on December31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in the Award Pool immediately after each suchincrease shall equal 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31 of the immediately preceding calendaryear. As a result of grants and potential future grants under the 2008 Plan and the 2014 Plan, we have incurred and will continue to incur share-basedcompensation expenses. As of December 31, 2017, the unrecognized compensation cost related to unvested options and non-vested shares amounted toRMB59.3 million and RMB6.8 million, respectively, which will be recognized over a weighted average period of approximately 1.72 years and 7.46 years.Expenses associated with share-based compensation awards granted under our share plan may materially reduce our future net income. However, if we limitthe size of grants under our share plan to minimize share-based compensation expenses, we may not be able to attract or retain key personnel. Any natural catastrophes, severe weather conditions, health epidemics and other extraordinary events could severely disrupt our business operations. The occurrence of natural catastrophes such as earthquakes, floods, typhoons, tsunamis or any acts of terrorism may result in significant property damages aswell as loss of revenues due to interruptions in our business operations. Health epidemics such as outbreaks of Zika, Ebola, avian influenza, severe acuterespiratory syndrome (SARS) or the influenza A (H1N1), and severe weather conditions such as snow storm and hazardous air pollution, as well as thegovernment measures adopted in response to these events, could require the temporary closure of our learning centers. Furthermore, our ability to broadcast live lectures and provide our education services through TTS or TMOOC.cn depends on the continuing operation of ourtechnology system, which is vulnerable to damage or interruption from natural catastrophes and other extraordinary events. Our disaster recovery planningcannot account for every conceivable possibility. Any damage to or failure of our technology system could result in interruptions in our services, and ourbrand could be damaged if students believe our systems are unreliable. Such disruptions could severely interfere with our business operations and adverselyaffect our results of operations. 20  Risks Relating to Our Corporate Structure If the PRC government finds that the agreements that establish the structure for holding our ICP license do not comply with applicable PRC laws andregulations, we could be subject to severe penalties. Prior to 2012, we conducted a substantial portion of our operations through our consolidated VIEs and their subsidiaries and schools. On January 30, 2012,the PRC Catalogue for the Guidance of Foreign Investment Industries (amended) became effective, which listed professional education service as anindustry for which foreign investments are “encouraged” by the government. On April 10, 2015, the new PRC Catalogue for the Guidance of ForeignInvestment Industries (amended) became effective, which listed non-accredited professional education service as an industry for which foreign investmentsare “encouraged” by the government. On July 28, 2017, the new PRC Catalogue for the Guidance of Foreign Investment Industries (amended) becameeffective, which listed non-accredited professional education service as an industry for which foreign investments are “encouraged” by the government. Inlight of such change of law, starting from the second half of 2012, we began to transfer the operations, including related assets and liabilities, of ourconsolidated VIEs to Tarena Technologies Inc. (Tarena Tech) and its subsidiaries and schools. All of our learning center operations of VIEs had beentransferred to Tarena Tech and its subsidiaries and schools. In December 2016, we would up Shanghai Tarena, one of our VIEs. Pursuant to the Provisions onAdministration of Foreign Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001 and amended on September10, 2008, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%. Moreover, for a foreigninvestor to acquire any equity interest in a value-added telecommunication business in China, it must satisfy a number of stringent performance andoperational experience requirements, including demonstrating good track records and experience in operating value-added telecommunication businessoverseas. Foreign investors that meet these requirements must obtain approvals from the MIIT and the Ministry of Commerce, or the MOFCOM, or theirauthorized local counterparts, which retain considerable discretion in granting approvals. Pursuant to publicly available information, the PRC governmenthas issued telecommunications business operating licenses to only a limited number of foreign-invested companies, all of which are Sino-foreign jointventures engaging in the value-added telecommunication business. Although the Guidance Catalog of Industries for Foreign Investment amended in 2017and Circular 196 promulgated by MIIT in June 2015 allows a foreign investor to own up to 100% of the total equity interest in an E-Commerce business, wehave not engaged in any E-Commerce business. Due to the foreign ownership restriction on Internet content and other value-added telecommunicationservices, we operate our TMOOC.cn and www.it211.com.cn website through our VIE, Beijing Tarena. Beijing Tarena has added our TMOOC.cn andwww.it211.com.cn website under the ICP license held by Beijing Tarena. Beijing Tarena is 70% owned by Mr. Shaoyun Han, our founder, chairman and chiefexecutive officer, and 30% owned by Mr. Jianguang Li, our director. Mr. Han and Mr. Li are both PRC citizens. We entered into a series of contractualarrangements with Beijing Tarena and its shareholders, which enable us to: ·exercise effective financial control over Beijing Tarena; ·receive substantially all of the economic benefits and bear the obligation to absorb substantially all of the losses of Beijing Tarena; and ·have an exclusive option to purchase all or part of the equity interests in Beijing Tarena when and to the extent permitted by PRC law. Because of these contractual arrangements, we are the primary beneficiary of Beijing Tarena and consolidate its financial results in our consolidated financialstatements in accordance with U.S. GAAP. For a detailed discussion of these contractual arrangements, see “Item 4. Information on the Company—C.Organizational Structure.” 21  Han Kun Law Offices, our PRC legal counsel, is of the opinion that (i) the ownership structure of Beijing Tarena and Tarena Tech will not result in anyviolation of PRC laws or regulations currently in effect; and (ii) the contractual arrangements among Tarena Tech, Beijing Tarena and its shareholdersgoverned by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. There are,however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations concerning foreign investmentin the PRC, and their application to and effect on the legality, binding effect and enforceability of the contractual arrangements. In particular, we cannot ruleout the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view thatis inconsistent with the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to VIE will be adopted or ifadopted, what they would provide. In or around September 2011, various media sources reported that the China Securities Regulatory Commission, or theCSRC, had prepared a report proposing regulating the use of VIE structures, such as ours, in industries subject to foreign investment restrictions in China andoverseas listings by China-based companies. However, it is unclear whether the CSRC officially issued or submitted such a report to a higher levelgovernment authority or what such report provides, or whether any new PRC laws or regulations relating to the VIE structures will be adopted or if adopted,what they would provide. In January 2015, the MOFCOM published a discussion draft of the proposed Foreign Investment Law for public review andcomments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actualcontrol” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interestentities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However,the draft law has not taken a position on what actions will be taken with respect to existing companies with the “variable interest entity” structure, whether ornot these companies are controlled by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have anysubstantial changes from the draft. See “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Value–Added Telecommunications Services—The Discussion Draft PRC Foreign Investment Law” and “—Risks Relating to Doing Business in China—Substantialuncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impactthe viability of our current corporate structure, corporate governance and business operations.” If we or Beijing Tarena is found to be in violation of any existing or future PRC laws or regulations, or such arrangement is determined as illegal and invalidby the PRC court, arbitral tribunal or regulatory authorities, or fail to obtain, maintain or renew any of the required permits or approvals, the relevant PRCregulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: ·revoking the business and operating licenses of our PRC subsidiaries and Beijing Tarena; ·discontinuing or restricting the conduct of any transactions between our PRC subsidiaries and Beijing Tarena; ·imposing fines, confiscating the income from Beijing Tarena, or imposing other requirements with which we or Beijing Tarena may not be able tocomply; or ·requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with Beijing Tarena andderegistering the equity pledges of Beijing Tarena. We launched our TMOOC.cn online learning platform in March 2015 to cover a broader customer base. TMOOC.cn features sample lecture videos and classmaterials covering our course subjects. We offer our part-time class students the opportunity to complete a portion of lessons online using TMOOC.cn.TMOOC.cn is also important for our marketing efforts. Therefore, the imposition of any of these penalties could result in a material and adverse effect on ourability to provide online education services and conduct our marketing and promotional activities through TMOOC.cn. Beijing Tarena has added ourTMOOC.cn website under its ICP license. However, we cannot guarantee that Beijing Tarena will be successful in applying for the ICP license annualinspection. If we fail to go through the ICP annual inspection, our continued operation of TMOOC.cn may subject us to penalties, including confiscation ofillegal income and fines, and we may be ordered to shut down our TMOOC.cn website. 22  If the relevant PRC authorities determine that we can no longer own and operate certain of our learning centers through our PRC subsidiaries, we mayneed to restructure the ownership and operation of these learning centers (including possibly transferring these learning centers to our consolidated VIE),our business may be disrupted and we may be exposed to increased risks associated with the contractual arrangements relating to our consolidated VIE. Prior to 2012, we operated a substantial portion of our learning centers through our consolidated VIE and their subsidiaries and schools. After the PRCCatalogue for the Guidance of Foreign Investment Industries became effective on January 30, 2012 and as amended on April 10, 2015 and further amendedon June 28, 2017, non-accredited foreign investment in professional education services is now “encouraged” in China and there is no limitation with respectto maximum percentage of foreign ownership in a company conducting business in this area. In light of such change of law, starting from the second half of 2012, we began to transfer the operations, including related assets and liabilities, of ourconsolidated VIEs to our wholly-owned subsidiary, Tarena Tech, and its subsidiaries. All of our learning center operations of VIEs had been transferred toTarena Tech and its subsidiaries and schools. As of December 31, 2017, we operated 64 of our learning centers through private schools owned by subsidiariesof Tarena Tech. These 64 learning centers in the aggregate accounted for 37.1% of our total student enrollments in 2017. However, there are still uncertainties under current PRC laws as to whether a wholly foreign-owned enterprise (such as Tarena Tech) is allowed to indirectlyinvest in and own private schools through its PRC subsidiaries. On the one hand, the PRC Catalogue for the Guidance of Foreign Investment Industries(Amended) encourages and permit 100% foreign ownership of non-accredited professional training business in China and the Private Education Law doesnot expressly prohibit a subsidiary of a foreign-invested enterprise from investing in private schools. On the other hand, according to the Private EducationLaw, Chinese-foreign cooperation in operating schools is specifically governed by the Regulations on Operating Chinese-foreign Schools and itsimplementing rules, which requires specific approvals from those governmental authorities in charge of either human resources and social security oreducation and requires any foreign party to such Chinese-foreign cooperation in operating schools to be an educational institution with relevant experiencein providing educational services outside of China. In addition, the Regulations on Operating Chinese-foreign Schools prohibits foreign institutions orindividuals from independently establishing schools which provide educational services mainly for Chinese citizens in China. In practice, different localauthorities have different views and administrative policies on whether foreign institutions or individuals are permitted to use their direct or indirect wholly-owned subsidiary incorporated in China to establish a school under the Private Education Law without violating the Regulations on Operating Chinese-foreign Schools. Twenty-five private schools sponsored by our wholly-owned subsidiaries in China have obtained private school operating permits, andbased on the results of oral inquiries with the relevant governmental authorities of human resources and social security or education, we believe that therelevant government authorities have not challenged and are unlikely to challenge the ownership structure of our schools. However, if the relevant PRCgovernment authorities determine in the future that we can no longer own and operate our schools and their related learning centers through our PRCsubsidiaries, which are considered ineligible to act as sponsors of private schools, we may need to transfer these schools and the related learning centers toour consolidated VIE, which may severely disrupt our business and expose us to increased risks associated with the contractual arrangements relating to ourconsolidated VIE. See “—Risks Relating to Our Corporate Structure.” If we fail to restructure the ownership and operation of these schools or otherwiseaccommodate requests from the relevant PRC human resources and social security or education regulatory authorities in a timely manner or to theirsatisfaction, we may be subject to fines, the suspension or ceasing of our operations or other penalties, which may materially and adversely affect our businessand results of operations. 23  Any failure by Beijing Tarena or its shareholders to perform their obligations under our contractual arrangements with them would have an adverse effecton our business. If Beijing Tarena or its shareholders fail to perform their obligations under their contractual arrangements with us, we may have to incur substantial costs andexpend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specificperformance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if the shareholders of Beijing Tarena wereto refuse to transfer their equity interest in Beijing Tarena to us or our designee if we exercise the exclusive option agreements pursuant to these contractualarrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractualobligations. All the agreements under our 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 PRC legal procedures.The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal systemcould limit our ability to enforce these contractual arrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards within aprescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, whichwould require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effectivefinancial control over Beijing Tarena, and our ability to conduct our business may be negatively affected. If we had direct ownership of Beijing Tarena, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of BeijingTarena, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractualarrangements, we rely on the performance by Beijing Tarena and its shareholders of their obligations under the contracts to exercise control over BeijingTarena. Therefore, our contractual arrangements with Beijing Tarena may not be as effective in ensuring our control over the relevant portion of our businessoperations as direct ownership would be. The shareholders of Beijing Tarena may have potential conflicts of interest with us, which may materially and adversely affect our business and financialcondition. We have designated individuals who are PRC nationals to be the shareholders of Beijing Tarena. The equity interests of Beijing Tarena are held by Mr.Shaoyun Han and Mr. Jianguang Li. The interests of these individuals as the shareholders of Beijing Tarena may differ from the interests of our company as awhole. These shareholders may breach, or cause Beijing Tarena to breach, or refuse to renew, the existing contractual arrangements we have with them andBeijing Tarena, which would have a material and adverse effect on our ability to effectively control Beijing Tarena. We cannot assure you that when conflictsof interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we couldexercise our purchase option under the purchase option agreement with these shareholders to request him to transfer all of his equity ownership in BeijingTarena to a PRC entity or individual designated by us. We rely on Mr. Shaoyun Han and Mr. Jianguang Li, who are both our directors and who owe afiduciary duty to our company, to comply with the terms and conditions of the contractual arrangements. Such fiduciary duty requires directors to act in goodfaith and in the best interests of the company and not to use their positions for personal gains. If we cannot resolve any conflict of interest or dispute betweenus and the shareholders of Beijing Tarena, we would have to rely on legal proceedings, which could result in disruption of our business and subject us tosubstantial uncertainty as to the outcome of any such legal proceedings. Our contractual arrangements with our consolidated VIE may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additionaltaxes could substantially reduce our consolidated net income and the value of your investment. Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. Wecould face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among Tarena Tech and ourconsolidated VIE did not represent an arms-length price and adjust our consolidated VIE’ income in the form of a transfer pricing adjustment. A transferpricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our consolidated VIE, whichcould in turn increase their tax liabilities without reducing our tax liabilities. In addition, the PRC tax authorities may impose late payment fees and otherpenalties to our consolidated VIE for under-paid taxes. Our consolidated net income may be materially and adversely affected if our tax liabilities increase orif we are found to be subject to late payment fees or other penalties. 24  If Beijing Tarena becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy its assets, which could materiallyand adversely affect our business. Due to foreign ownership restrictions in the online value-added telecommunications business, we hold our ICP license through contractual arrangements withBeijing Tarena as well as its shareholders. As part of these arrangements, Beijing Tarena holds assets that are important to the operation of our business,including the domain name and ICP license for our www.it211.com.cn and TMOOC.cn websites. We do not have priority pledges and liens against Beijing Tarena’s assets. As a contractual and property right matter, this lack of priority pledges and lienshas remote risks. If Beijing Tarena undergoes an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of its assets and wemay not have priority against such third-party creditors on Beijing Tarena’s assets. If Beijing Tarena liquidates, we may take part in the liquidationprocedures as a general creditor under the PRC Enterprise Bankruptcy Law and recover any outstanding liabilities owed by Beijing Tarena to Tarena Techunder the applicable service agreements. To ameliorate the risks of an involuntary liquidation proceeding initiated by a third-party creditor, we closelymonitor the operations and finances of Beijing Tarena through carefully designed budgetary and internal controls to ensure that Beijing Tarena is wellcapitalized and is highly unlikely to trigger any third party monetary claims in excess of its assets and cash resources. Furthermore, Tarena Tech has theability, if necessary, to provide financial support to Beijing Tarena to prevent such an involuntary liquidation. If the shareholders of Beijing Tarena were to attempt to voluntarily dissolve or liquidate Beijing Tarena without obtaining our prior consent, we couldeffectively prevent such unauthorized voluntary liquidation by exercising our right to request Beijing Tarena’s shareholders to transfer all of their equityownership interest to a PRC entity or individual designated by us in accordance with the exclusive option agreements with the shareholders of BeijingTarena. In the event that the shareholders of Beijing Tarena initiate a voluntary liquidation proceeding without our authorization or attempts to distribute theretained earnings or assets of Beijing Tarena without our prior consent, we may need to resort to legal proceedings to enforce the terms of the contractualagreements. Any such legal proceeding may be costly and may divert our management’s time and attention away from the operation of our business, and theoutcome of such legal proceeding would be uncertain. The uncertainties in legal proceedings to enforce the terms of the contractual agreements are mainlycaused by PRC laws that prohibit domestic companies holding ICP licenses from assisting foreign investors in conducting value-added telecommunicationsbusiness in China. Under the MIIT Circular, a domestic company that holds an ICP license is prohibited from leasing, transferring or selling the license toforeign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, ormisappropriate or misuse these assets, our business and operations could be materially and adversely affected. In China, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts that our business relies on, aretypically executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed withthe relevant local branch of the SAIC. We generally execute legal documents by affixing chops or seals, rather than having the designated legalrepresentatives sign the documents. 25  We have three major types of chops—corporate chops, contract chops and finance chops. We use corporate chops generally for documents to be submitted togovernment agencies, such as applications for changing business scope, directors or company name, and for legal letters. We use contract chops for executingleases and commercial contracts. We use finance chops generally for making and collecting payments, including but not limited to issuing invoices. Use ofcorporate chops and contract chops must be approved by our legal department and administrative department, and use of finance chops must be approved byour finance department. The chops of our subsidiaries and our consolidated VIE are generally held by the relevant entities so that documents can be executedlocally. Although we usually utilize chops to execute contracts, the registered legal representatives of our PRC subsidiaries and our consolidated VIE havethe apparent authority to enter into contracts on behalf of such entities without chops, unless such contracts set forth otherwise. All designated legalrepresentatives of our PRC subsidiaries and our consolidated VIE have signed employment agreements with us under which they agree to abide by dutiesthey owe to us. In order to maintain the physical security of our chops, we generally store them in secured locations accessible only to the department heads of the legal,administrative or finance departments. Our designated legal representatives generally do not have access to the chops. Although we monitor our employees,including the designated legal representatives of our PRC subsidiaries and our consolidated VIE, the procedures may not be sufficient to prevent all instancesof abuse or negligence. There is a risk that our employees or designated legal representatives could abuse their authority, for example, by binding therelevant subsidiary or consolidated VIE with contracts against our interests, as we would be obligated to honor these contracts if the other contracting partyacts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtainscontrol of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legalrepresentative and to take legal action to seek the return of the chop, apply for a new chop with the relevant authorities, or otherwise seek legal remedies forthe legal representative’s misconduct. If any of the designated legal representatives obtains and misuses or misappropriates our chops and seals or othercontrolling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legalaction, which could involve significant time and resources to resolve while distracting management from our operations. Risks Relating to Doing Business in China Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In thelate 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters. The overall effect oflegislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China.Our PRC subsidiaries are subject to various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulationsare relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform andenforcement of these laws, regulations and rules involve uncertainties. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and courtauthorities have significant discretion in interpreting and implementing statutory terms, it may be more difficult to evaluate the outcome of administrativeand court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part ongovernment policies and internal rules (some of which are not published in a timely manner or at all) some of which may have retroactive effect. As a result,we may not be aware of our violation of these policies and rules until some time after the violation. Such uncertainties, including uncertainty over the scopeand effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatoryenvironment in China could materially and adversely affect our business and impede our ability to continue our operations. 26  Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. All of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects may be influencedto a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole. China’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level ofdevelopment, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment ofimproved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition,the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government alsoexercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated obligations,setting monetary policy, and providing preferential treatment to particular industries or companies. While China’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectorsof the economy, and the rate of growth has been slowing. Some of the government measures may benefit the overall Chinese economy, but may have anegative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capitalinvestments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which couldadversely affect our results of operations and financial condition. Affected under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Suchclassification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results ofoperations and the value of your investment. Under the PRC Enterprise Income Tax Law, or the EIT Law, that became effective on January 1, 2008, an enterprise established outside the PRC with “defacto management bodies” within the PRC is considered a PRC “resident enterprise” for PRC enterprise income tax purposes and is generally subject to auniform 25% enterprise income tax rate on its worldwide income. Under the Implementation Rules to the EIT Law, a “de facto management body” is definedas a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, financesand properties of an enterprise. In addition, a circular, known as Circular 82, issued in April 2009, as amended in January 2014, by the State Administration ofTaxation, or the SAT, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRCresident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for dailyproduction, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes ofboard meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Circular 82 also clarified thatdividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at arate of 10%, when recognized by shareholders that are non-PRC resident enterprises. Further to Circular 82, the SAT issued a bulletin, known as Bulletin 45,which took effect on September 1, 2011, to provide more guidance on the implementation of Circular 82 and clarify the reporting and filing obligations ofsuch “Chinese-controlled offshore-incorporated resident enterprises.” Bulletin 45 provides procedures and administrative details for the determination ofPRC resident enterprise status and administration on post-determination matters. Although both Circular 82 and Bulletin 45 only apply to offshoreenterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals like us, the determiningcriteria set forth in Circular 82 and Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied indetermining the tax resident enterprise status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups orby PRC or foreign individuals. 27  We do not believe that Tarena International, Inc. meets all of the conditions above and thus we do not believe that Tarena International, Inc. is a PRC residententerprise, despite the fact that all of the members of our management team as well as the management team of our offshore holding company are located inChina. However, if the PRC tax authorities determine that Tarena International, Inc. is a PRC resident enterprise for PRC enterprise income tax purposes, anumber of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our worldwide income,which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Second, althoughdividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the EIT Law, we cannot assure you thatsuch dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax ondividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are not controlledby any PRC enterprise or enterprise group and treated as resident enterprises for PRC enterprise income tax purposes. Finally, dividends we pay to our non-PRC enterprise shareholders and gains derived by our non-PRC shareholders from the sale of our shares maybe becomesubject to a 10% PRC withholding tax. In addition, future guidance may extend the withholding tax to dividends we pay to our non-PRC individualshareholders and gains derived by such shareholders from transferring our shares. In addition to the uncertainty in how the new “resident enterprise”classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. If PRC income tax were imposed ongains realized through the transfer of our ADSs or ordinary shares or on dividends paid to our non-resident investors, the value of the investment in our ADSsor ordinary shares may be materially and adversely affected. Furthermore, our ADS holders whose jurisdictions of residence have tax treaties or arrangementswith China may not qualify for benefits under such tax treaties or arrangements. We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our operating company’s equityinterests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursuein the future. In connection with the EIT Law, the Ministry of Finance and the SAT jointly issued a Circular 59 in April 2009, and the SAT issued a Circular 698 inDecember 2009. Both Circular 59 and Circular 698 became effective retroactively on January 1, 2008. On February 3, 2015, the SAT issued a Public Notice [2015] No.7, or Public Notice 7, to supersede the existing tax rules in relation to the Indirect Transferunder Circular 698. Under Public Notice 7, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests in a PRC“resident enterprise” or other taxable assets indirectly by disposing of the equity interests in an overseas holding company, the non-resident enterprise, beingthe transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonablecommercial purposes. In addition, Public Notice 7 provides clear criteria on how to assess reasonable commercial purposes and introduces safe harborscenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer asthey have to make self-assessment on whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. Since PublicNotice 7 was recently promulgated and it is unclear how this set of measures, and any future implementation rules thereof, will be interpreted, amended andimplemented by the relevant governmental authorities. Where non-resident investors were involved in our private equity financing, if such transactions weredetermined by the tax authorities to lack reasonable commercial purpose, we and our non-resident investors may become at risk of being taxed under PublicNotice 7 and may be required to expend valuable resources to comply with Public Notice 7 or to establish that we should not be taxed under Public Notice 7,which may have a material adverse effect on our financial condition and results of operations or the non-resident investors’ investments in us. 28  In October 2017, the SAT promulgated the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax ofNon-resident Enterprises at Source, or SAT Circular 37, which provides certain changes to the current withholding regime, repeals and replaces all otherprovisions under Circular 698 and amends certain provisions in Public Notice 7. For example, SAT Circular 37 requires that the transferor shall declare to thecompetent tax authority for payment of tax within seven (7) days after the tax payment obligation comes into being if the withholding agent fails to withholdthe tax due or withhold the tax due in full. However, according to SAT Circular 37, if the withholding agent fails to withhold and remit the income taxpayable, or is unable to perform its obligation in this regard, as long as the non-resident enterprise that earns the income voluntarily declares and pays the taxpayable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interestsin a PRC resident enterprise by a non-resident enterprise. The PRC tax authorities have the discretion under Circular 59, Public Notice 7 and SAT Circular 37to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment.Although we currently have no confirmed plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future thatmay involve complex corporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustmentsunder Circular 59 or Public Notice 7 or SAT Circular 37, our income tax costs associated with such potential acquisitions will be increased, which may havean adverse effect on our financial condition and results of operations. In addition, the State Administration of Taxation promulgated Administrative Measures on the General Anti-Avoidance Rule (Trial), or GAAR Measures, onDecember 12, 2014, which shows the authority’s intention to fight against tax avoidance scheme that is adopted to obtain unwarranted tax benefit withoutreasonable commercial purpose. A press release, made by the State Administration of Taxation to clarify certain issues relating to the application of theGAAR Measures, stated that the GAAR Measures may be applicable if any general tax-avoidance scheme exists in the offshore indirect transfer of equityinterests. Since GAAR Measures was recently promulgated and it is unclear how this set of measures, and any future implementation rules thereof, will beinterpreted, amended and implemented by the relevant governmental authorities, we cannot predict how these regulations will affect our business operation,future acquisitions or strategy. We face risks and uncertainties with respect to the licensing requirement for Internet audio-video programs and human resources intermediary service. In December 2007, the State Administration of Press Publication Radio Film and Television, or SAPPRFT, the predecessor of Administration of Radio andTelevision newly established in April 2018, and the Ministry of Industry and Information Technology, or MIIT, issued the Administrative MeasuresRegarding Internet Audio-Video Program Services, or the Internet Audio-Video Program Measures, which became effective on January 31, 2008. Amongother things, the Internet Audio-Video Program Measures stipulate that no entities or individuals may provide Internet audio-video program services withouta “License for Disseminating Audio-Video Programs through Information Network” issued by SAPPRFT or its local bureaus or completing the relevantregistration with SAPPRFT or its local bureaus, and only entities wholly owned or controlled by the PRC government may engage in the production, editing,integration or consolidation, and transmission to the public through the Internet, of audio-video programs, or the provision of audio-video programuploading and transmission services. In February 2008, SAPPRFT and MIIT jointly held a press conference in response to inquiries related to the InternetAudio-Video Program Measures, during which SAPPRFT and MIIT officials indicated that providers of audio-video program services established prior to thepromulgation date of the Internet Audio-Video Program Measures that do not have any regulatory non-compliance records can re-register with the relevantgovernment authorities to continue their current business operations. After the conference, the two authorities published a press release that confirmed theabove guidelines. There are still significant uncertainties relating to the interpretation and implementation of the Internet Audio-Video Program Measures, inparticular, the scope of “Internet Audio-Video Programs.” Furthermore, on April 1, 2010, SAPPRFT promulgated the Test Implementation of the Tentative Categories of Internet Audio-Visual Program Services, or theCategories, which clarified the scope of Internet audio-video programs services. According to the Categories, there are four categories of Internet audio-visualprogram services which are further divided into seventeen sub-categories. The third sub-category to the second category covers the making and editing ofcertain specialized audio-video programs concerning, among other things, educational content, and broadcasting such content to the general public online. 29  We transmit our audio-video educational programs through our TTS system and TMOOC.cn to enrolled course participants. In addition, we provide audio-video program uploading and transmission services. As a result, we might be subject to the Internet Audio-Video Program Measures. If the governmentalauthorities determine that our provision of lecture videos on TTS and/or TMOOC.cn falls within the Internet Audio-Video Program Measures, we may not beable to obtain the License for Disseminating Audio-Video Programs through Information Network. If this occurs, we may become subject to significantpenalties, fines, legal sanctions or an order to suspend our use of audio-video content, all of which could have a material adverse effect on our business,financial condition, results of operations and prospects. Pursuant to the Provisions on the Administration of Human Resources Markets issued by SAIC in 2001 and as amended in 2005 and 2015, respectively, ahuman resources service intermediary refers to any entity which provides intermediary services for employers and any potential employees, and no entitymay provide such services without a “License for Human Resources Intermediary Resources.” Any internet information service provider which providesintermediary services for employers and any potential employees via internet shall obtain such license. In January 2015, we launched a self-developed jobsearch website called Job Show (www.jobshow.cn), which serves as a dedicated open platform for our students and other job-seeking candidates to connectwith corporate employers more effectively. Although we have not entered into any agreement with corporate employers or any job-seeking candidates, wesource and list job opportunities from both IT and non-IT employers in China through the website, which may be deemed as a human resources serviceintermediary. Currently, we have recorded human resources intermediary services in our business license but we have not obtained the “License for HumanResources Intermediary Resources,” and if the relevant PRC government authorities determine that we shall obtain such license for the operation of Job Showand we fail to obtain such license, they may order us to shut down the website and subject us to a fine of RMB10,000 and if there is any illegal income, wemay be subject a fine of no more than three times of the illegal income, which shall not exceed RMB30,000. PRC regulations establish complex approval procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficultfor us to pursue growth through acquisitions in China. The transfers of our learning centers from our consolidated VIE to our wholly-owned subsidiariesin China may be subject to such approval procedures, in which case we may need to restructure the ownership and operation of the affected learningcenters, and as a result we may be exposed to increased risks associated with the contractual arrangements relating to our consolidated VIE. Six PRC regulatory agencies promulgated regulations effective in September 2006 that are commonly referred to as the M&A Rules. The M&A Rules establishprocedures and requirements that could make some acquisitions of PRC companies by foreign investors more time-consuming and complex, includingrequirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of aPRC domestic enterprise. In addition, national security review rules issued by the PRC governmental authorities in 2011 require acquisitions by foreigninvestors of domestic companies engaged in military-related or certain other industries that are crucial to national security to be subject to prior securityreview. Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholdsare triggered. We may expand our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rules, securityreview rules and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes, including obtainingapproval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business ormaintain our market share. 30  In addition, in accordance with the M&A Rules, approval of the MOFCOM is required for acquisitions of PRC domestic enterprises by foreign companies thatare established or controlled by PRC domestic companies, enterprises or individuals related to the target PRC domestic enterprises, or “Related PartyAcquisitions”, and the parties are not allowed to evade such requirements through investment by foreign investment enterprises in China or other ways.Although M&A Rules have become effective since September 2006, we are not aware of any precedent of approval by the MOFCOM of any Related PartyAcquisition conducted by PRC domestic individuals. Starting from the second half of 2012, we began to transfer our operations, including related assets andliabilities, of our consolidated VIEs to our wholly-owned subsidiary, Tarena Tech, and its subsidiaries, either through transferring the companies that operatelearning centers or that sponsor the schools, or through changing the schools’ sponsors. All of our learning center operations of VIEs had been transferred toTarena Tech and its subsidiaries and schools. As Mr. Shaoyun Han is a shareholder of both Tarena and our consolidated VIEs, even though the transfers of thecompanies, which operated 23 of our learning centers themselves or through schools they established as of December 31, 2017, from our consolidated VIEs toour wholly-owned subsidiaries in China are not “acquisitions by foreign investors of PRC domestic enterprises” under the M&A Rules, and Tarena Tech, ourwholly foreign invested enterprise in PRC, was converted into a wholly foreign invested enterprise before the effective date of M&A Rules, the requirementfor an approval from the MOFCOM may still be required for such transfers because of the above anti-evasion clause. Furthermore, it is unclear whether ourtransfers of the schools which operated 23 learning centers as of December 31, 2017, which are not enterprises, from subsidiaries of our consolidated VIEs toour wholly-owned subsidiaries, could be regarded as Related Party Transactions under the M&A Rules. If the MOFCOM determines that our previous transfersof learning centers from our consolidated VIEs to our wholly-owned subsidiaries are Related Party Transactions under the M&A Rules and we fail to obtainthe MOFCOM’s approvals on such transfers, the effectiveness of such transfers may be challenged and we may need to transfer these companies and schools,including the related learning centers, back to our consolidated VIE. Under such circumstances, our business may be disrupted and we may be exposed toincreased risks associated with the contractual arrangements relating to our consolidated VIE. See “—Risks Relating to Our Corporate Structure.” PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital ordistribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC law. The PRC State Administration of Foreign Exchange, or the SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to DomesticResidents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No. 37, effective on July 4, 2014, andits appendixes, that require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their directestablishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets orequity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37further requires an amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase ordecrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material events. In the event that a PRC shareholderholding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may beprohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the specialpurpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFEregistration requirements described above could result in liability under PRC law for foreign exchange evasion, including (i) the requirement by SAFE toreturn the foreign exchange remitted overseas within a period specified by SAFE, with a fine of up to 30% of the total amount of foreign exchange remittedoverseas and deemed to have been evasive and (ii) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount ofremitted foreign exchange deemed evasive. Furthermore, the persons-in-charge and other persons at our PRC subsidiaries who are held directly liable for theviolations may be subject to criminal sanctions. On February 28, 2015, SAFE promulgated a Notice on Further Simplifying and Improving ForeignExchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. In accordance with SAFE Notice 13,entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including thoserequired under the SAFE Circular No. 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, directly examine theapplications and conduct the registration. 31  These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that wemake in the future if our shares are issued to PRC residents. We have requested PRC residents who we know currently hold direct or indirect interests in ourcompany to make the necessary applications, filings and amendments as required under SAFE Circular No. 37 and other related rules. To our knowledge, all of our shareholders who are PRC citizens and hold interests in us, have registered with the local SAFE branch and/or qualified banks asrequired under SAFE Circular No. 37 and SAFE Notice 13. However, in practice, different local SAFE branches and/or qualified banks may have differentviews and procedures on the application and implementation of SAFE regulations. Therefore, we cannot assure you that they can successfully amend theirforeign exchange registrations with the local SAFE branch and/or qualified banks in full compliance with applicable laws. In addition, we may not beinformed of the identities of all the PRC residents holding direct or indirect interest in our company, and we cannot provide any assurances that these PRCresidents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by SAFE Circular No. 37,SAFE Notice 13 or other related rules. A failure by any of our current or future shareholders or beneficial owners who are PRC residents to comply with theSAFE regulations may subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit our PRC subsidiaries’ ability to makedistributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects. Furthermore, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended andimplemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. Forexample, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividendsand foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide toacquire a PRC domestic company, either we or the owners of such company, as the case may be, may not be able to obtain the necessary approvals orcomplete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisitionstrategy and could adversely affect our business and prospects. Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject thePRC plan participants or us to fines and other legal or administrative sanctions. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating inStock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules. Under the Stock Option Rules and other relevant rules andregulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its localbranches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which couldbe a PRC subsidiary of the overseas publicly-listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFEregistration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrustedinstitution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers.In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stockincentive plan, the PRC agent or the overseas entrusted institution or other material changes. See “Item 4. Information on the Company—B. BusinessOverview—Government Regulations—Regulations on Stock Incentive Plans.” We and our PRC employees who have been granted share options andrestricted share units are subject to these regulations and we have completed the registrations of our stock incentive plans, namely the 2008 Plan and the2014 Plan, with the local SAFE as required by PRC law. Failure of our PRC share option holders or restricted shareholders to complete their SAFEregistrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRCsubsidiaries, limited our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially and adversely affect our business. 32  PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delayor limit us from using the proceeds of offshore offerings to make additional capital contributions or loans to our PRC subsidiaries. Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries are subject to PRC regulations. Under PRC laws andregulations, we are permitted to utilize the proceeds from offshore offerings to fund our existing PRC subsidiaries only through loans or capital contributionsor to establish new PRC subsidiaries, subject to applicable government registration and approval requirements. None of our loans to a PRC subsidiary canexceed the difference between its total amount of investment and its registered capital approved under relevant PRC laws, and the loans must be registeredwith the local branch of SAFE. Our capital contributions to our PRC subsidiaries or establishment of new PRC subsidiaries must be approved by theMOFCOM or its local counterpart. We cannot assure you that we will be able to complete the necessary registration or obtain the necessary approval on atimely basis, or at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to make loans or equity contributions toour PRC subsidiaries may be negatively affected, which could adversely affect our PRC subsidiaries’ liquidity and their ability to fund their working capitaland expansion projects and meet their obligations and commitments. On March 30, 2015, the SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitalsof foreign-invested enterprises nationwide. Circular 19 came into force replacing both previous SAFE Circular 142 and SAFE Circular 36 on June 1, 2015.Circular 19 allows all foreign-invested enterprises established in the PRC to use their foreign exchange capitals to make equity investments and removescertain other restrictions provided under Circular 142 for these enterprises. However, Circular 19 continues to prohibit foreign-invested enterprises from,among other things, using the Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope, and providingentrusted loans or repaying loans between non-financial enterprises. The business scopes of Tarena Tech include research and development of computersoftware, hardware, internet technology and products and telecommunications technology, transfer of proprietary technologies, information technologyconsulting, technical services, computer technology training, sales of self-developed products and franchise business operations. The business scopes ofTarena Software Technology (Hangzhou) Co., Ltd., or Tarena Hangzhou, include technology development, technology consulting, technical services,computer software and hardware, network technology, telecommunication technology, services, non-certification computer technology training for adults(excluding business subject to pre-approvals), wholesale and retail of computer software and hardware and telecommunication equipment (excludingequipment subject to national controls and other special controls). Tarena Tech and Tarena Hangzhou may only use Renminbi converted from foreignexchange capital contribution for activities within their respective approved business scope. Therefore, we may not use such Renminbi funds converted tomake equity investments in the PRC through our PRC subsidiaries. In addition, the use of such Renminbi capital may not be altered without SAFE approval,and such Renminbi capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of SAFECircular 19 could result in severe monetary or other penalties. SAFE also promulgated a SAFE Circular 45 in November 2011, which, among other things, restricts a foreign-invested enterprise from using RMB convertedfrom its registered capital to provide entrusted loans or repay loans between non-financial enterprises. Those circulars may significantly limit our ability touse Renminbi converted from the net proceeds of offshore offerings to fund the establishment of new PRC subsidiaries by Tarena Tech and Tarena Hangzhouto invest in or acquire any other PRC companies, or to establish new PRC consolidated affiliated entities. 33  Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidityrequirements. We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries tosatisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any,determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of theirrespective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registeredcapital. Our PRC subsidiaries may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds attheir discretion. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, theinstruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our subsidiaries todistribute dividends to us or may restrict our ability to satisfy our liquidity requirements. In addition, the EIT Law, and its implementation rules provide that withholding tax rate of up to 10% will be applicable to dividends payable by Chinesecompanies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central governmentand governments of other countries or regions where the non-PRC-resident enterprises are incorporated. We may not be able to obtain certain treaty benefits on dividends paid to us by our PRC subsidiary through our Hong Kong Subsidiary. Under the EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company and distributed to a foreign parent company aresubject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferentialwithholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance ofDouble Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, or the Hong Kong Tax Treaty, which became effective on December 8,2006, a company incorporated in Hong Kong, such as Tarena HK, will be subject to withholding income tax at a rate of 5% on dividends it receives from itsPRC subsidiary if it holds a 25% or more interest in that particular PRC subsidiary, or 10% if it holds less than a 25% interest in that subsidiary. Pursuant tothe Notice of the SAT on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, the 5% withholding tax rate doesnot automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong enterprise must be the beneficialowner of the relevant dividends; and (b) the Hong Kong enterprise must directly hold at least 25% share ownership in the PRC enterprise during the 12consecutive months preceding its receipt of the dividends. However, a transaction or arrangement entered into for the primary purpose of enjoying apreferential tax treatment should not be a reason for the application of the preferential tax treatment under the Hong Kong Tax Treaty. If a taxpayerinappropriately is entitled to such preferential tax treatment, the competent tax authority has the power to make appropriate adjustments. According tothe Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT and has taken effect fromApril 1, 2018, or Circular 9, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends,interests or royalties in the tax treaties, several factors, including without limitation whether the applicant is obligated to pay more than 50% of his or herincome in twelve months to residents in a third country or region, whether the business operated by the applicant constitutes the actual business activities,and whether the counterparty country or region to the tax treaties levies any tax or grants tax exemption on relevant incomes or levies tax at an extremely lowrate, will be taken into account, and such determination will be analyzed according to the actual circumstances of the specific cases. Circular 9 furtherprovides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax authorityaccording to the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which was issued in August2015 by the SAT and became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval fromthe relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and filenecessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities.However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation proceduresfor anti-tax avoidance and adopt corresponding measures for subsequent administration. As a result, although our PRC subsidiary, Tarena Hangzhou, iscurrently wholly owned by our Hong Kong subsidiary Tarena HK, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy thefavorable 5% rate applicable under the Hong Kong Tax Treaty on dividends. If Tarena HK cannot be recognized as the beneficial owner of the dividends tobe paid by Tarena Hangzhou to us, such dividends will be subject to a normal withholding tax of 10% as provided by the EIT Law. Besides, according toCircular 81 and Circular 60, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying apreferential tax treatment, the relevant tax authorities may adjust the preferential withholding tax in the future. 34  Discontinuation or revocation of any of the preferential tax treatments and government subsidies or imposition of any additional taxes and surchargescould adversely affect our financial condition and results of operations. Our PRC subsidiaries are incorporated in the PRC and governed by applicable PRC tax laws and regulations. The EIT Law and its Implementing Rules, bothbecame effective on January 1, 2008, have adopted a uniform statutory enterprise income tax rate of 25% to all enterprises in China including foreign-invested enterprises. The EIT Law and its Implementation Rules also permit qualified “high and new technology enterprises,” or HNTEs, to enjoy apreferential enterprise income tax rate of 15% upon filing with relevant tax authorities. The qualification as a HNTE generally has a valid term of three yearsand the renewal of such qualification is subject to review by the relevant authorities in China. Tarena Tech obtained its HNTE certificate in 2009 andrenewed its HNTE certificate in 2012 and again in 2015, and is eligible to enjoy a preferential tax rate of 15% until the fourth quarter of 2018. If Tarena Techfails to maintain its HNTE qualification or renew its qualification when its current term expires, its applicable enterprise income tax rate may increase to 25%,which could have an adverse effect on our financial condition and results of operations. In addition, Tarena Hangzhou, one of our PRC subsidiaries, wasestablished in 2013 and is qualified as a “newly established software enterprise”, which entitles it to two years of full tax exemption followed by three yearsof 50% tax exemption, commencing from the year in which its taxable income is greater than zero, which was 2014. Tarena Hangzhou has also receivedfinancial subsidies from PRC local government authority in 2013, 2015 and 2016. In 2016, Tarena Hangzhou acquired Hanru Education & Technology Co.,Ltd., or Hanru Hangzhou, which was qualified as an eligible software enterprise and entitled to a full tax exemption of two years followed by a 50% taxexemption of three years, commencing from 2016. Preferential tax treatments and financial subsidies are subject to review and may be adjusted or revoked at any time in the future. The discontinuation of anypreferential tax treatments or financial subsidies or imposition of any additional taxes could adversely affect our financial condition and results of operations. Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment. The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economicconditions and China’s foreign exchange policies. The PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar in2005, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. However, the People’s Bank of China regularlyintervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. During the period between July 2008and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow range. However, the Renminbi fluctuatedsignificantly during that period against other freely traded currencies, in tandem with the U.S. dollar. Since June 2010, the RMB has fluctuated against theU.S. dollar, at times significantly and unpredictably. In August 2015, the People’s Bank of China changed the way it calculates the mid-point price ofRenminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. The value of the Renminbi depreciated approximately 5.8% against the U.S. dollarin 2015 and further by approximately 6.3% in 2016. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed theregular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, theJapanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar andpersistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbiinternationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that theRenminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC orU.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. 35  Significant revaluation of the RMB may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S.dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of the RMB against the U.S. dollar would have anadverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose ofmaking payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have anegative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the RMB relative to U.S. dollars wouldaffect the U.S. dollar equivalent of our earnings, regardless of any underlying change in our business or results of operations. In January 2016, we entered into a foreign currency forward contract with China Merchants Bank Co., Ltd. The notional amounts of the foreign currencyforward contracts were RMB564.1 million and the settlement date was on May 19, 2016. We incurred a loss of RMB12.9 million as a result of such forwardforeign currency contract in 2016. The contract expired in May 2017, and we do not have entered into any new foreign currency forward contract in 2017.Due to the fluctuation in the exchange rate between U.S. dollars and RMB, we may decide to enter into additional foreign currency contract in the future, theavailability 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 currencyexchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result,fluctuations in exchange rates may have a material adverse effect on your investment. The audit report included in this annual report is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, assuch, you are deprived of the benefits of such inspection. Auditors of companies that are registered with the U.S. Securities and Exchange Commission, or the SEC, and traded publicly in the United States, includingour independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board (United States), or PCAOB,and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United Statesand professional standards. Because our auditor is located in the Peoples’ Republic of China, a jurisdiction where the PCAOB is currently unable to conductinspections without the approval of the PRC authorities, our auditor is not currently inspected by the PCAOB. In May 2013, PCAOB announced that it hadentered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes acooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the CSRCor the PRC Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC and the PRC Ministryof Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges. 36  This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating inChina, including our auditor. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB to conductinspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures ascompared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information andprocedures and the quality of our financial statements. Proceedings instituted by the SEC against certain China-based accounting firms, including our independent registered public accounting firm, couldresult in financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or theExchange Act. On January 22, 2014, Judge Cameron Elliot, an SEC administrative law judge, issued an initial decision suspending the Chinese member firms of the “BigFour” accounting firms, including our independent registered public accounting firm, from, among other things, practicing before the SEC for six months. InFebruary 2014, the initial decision was appealed. While under appeal and in February 2015, the Chinese member firms of the “Big Four” accounting firmsreached a settlement with the SEC. As part of the settlement, each of the Chinese member firms of the “Big Four” accounting firms agreed to settlement termsthat include a censure; undertakings to make a payment to the SEC; procedures and undertakings as to future requests for documents by the SEC; andpossible additional proceedings and remedies should those undertakings not be adhered to. If the settlement terms are not adhered to, Chinese member firms of the “Big Four” accounting firms may be suspended from practicing before the SEC. If ourindependent registered public accounting firm were suspended, from practicing before the SEC and we were unable to timely find another registered publicaccounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with therequirements of the Exchange Act. Such a determination could ultimately lead to our delisting from the NASDAQ Global Select Market or deregistration fromthe SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States. Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and howit may impact the viability of our current corporate structure, corporate governance and business operations. The MOFCOM published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio ofexisting laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative JointVenture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draftForeign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailinginternational practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. While the Ministry ofCommerce solicited comments on this draft earlier this year, substantial uncertainties exist with respect to its enactment timetable, interpretation andimplementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporategovernance and business operations in many aspects. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” indetermining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entitiesestablished in China but “controlled” by foreign investors will be treated as FIEs. Once an entity is determined to be an FIE, it will be subject to the foreigninvestment restrictions or prohibitions set forth in a “negative list” to be separately issued by the State Council later. The “negative list” will consist of a listof industry categories where foreign investments are strictly prohibited and a list of industry categories where foreign investments are subject to certainrestrictions. Foreign investments in business sectors outside of the “negative list” will only be subject to filing procedures, whereas foreign investments in therestricted industries must apply for prior approval from the foreign investment administration authority. In case the underlying business of an FIE falls withinthe foreign investment restricted industries, upon market entry clearance by the MOFCOM, the FIE may file an application for being treated as a PRCdomestic investment if the FIE is “controlled” by PRC entities and/or citizens. In this connection, “control” is broadly defined in the draft law to cover thefollowing summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of thesubject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting powerto exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisiveinfluence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. 37  The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses andpermits in the industries that are currently subject to foreign investment restrictions in China. See “—Risks Relating to Our Corporate Structure—If the PRCgovernment finds that the agreements that establish the structure for holding our ICP license do not comply with applicable PRC laws and regulations, wecould be subject to severe penalties” and “Item 4. Information on the Company—C. Organizational Structure.” Under the draft Foreign Investment Law,variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreigninvestors. Therefore, for any companies with a VIE structure in an industry category that is on the “negative list,” the VIE structure may be deemed legitimateonly if the ultimate controlling person(s) is/are of PRC nationality (including PRC citizens, PRC governmental authorities and their affiliates, and the PRCcompanies controlled by the foregoing). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will betreated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal. Through our dual-class share structure, Mr. Shaoyun Han, our founder, chairman and chief executive officer, a PRC citizen, possessed and controlled 67.6%of the voting power of our company as of March 31, 2018. The draft Foreign Investment Law has not taken a position on what actions will be taken withrespect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties. Moreover, it is uncertain whetherthe Internet content and other value-added telecommunication service industry, in which our VIE operates, will be subject to the foreign investmentrestrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list”mandate further actions, such as MOFCOM market entry clearance or certain restructuring of our corporate structure and operations, to be completed bycompanies with existing VIE structure like us, we face substantial uncertainties as to whether these actions can be timely completed, or at all, and ourbusiness and financial condition may be materially and adversely affected. The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs.For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and theapplicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration ofinvestment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Anycompany found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminalliabilities, and the persons directly responsible may be subject to criminal liabilities. 38  Risks Relating to Our ADSs The trading prices of our ADSs have fluctuated and may be volatile, which could result in substantial losses to investors. The trading prices of our ADSs have fluctuated since we first listed our ADSs. The trading price of our ADSs has ranged from US$12.52 to US$21.70 per ADSin 2017. The last reported trading price on April 27, 2018 was US$10.01 per ADS. The trading prices of our ADSs may continue to fluctuate and be volatiledue to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices ofother companies with business operations located mainly in China that have listed their securities in the United States. In recent years, the widespreadnegative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations in China werebelieved to have negatively affected investors’ perception and sentiment towards companies with connection with China, which significantly and negativelyaffected the trading prices of some companies’ securities listed in the U.S. Any similar negative publicity or sentiment may affect the performances of ourADSs. A number of PRC companies have recently listed or are in the process of listing their securities on U.S. stock markets. The securities of some of thesecompanies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances ofthese PRC companies’ securities after their offerings may affect the attitudes of investors toward PRC companies listed in the United States in general andconsequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations,including the following: ·the financial projections that we may choose to provide to the public, any changes in those projections or our failure for any reason to meet thoseprojections; ·variations in our net revenues, net income and cash flow; ·announcements of new investments, acquisitions, strategic partnerships, or joint ventures; ·announcements of new services and expansions by us or our competitors; ·changes in financial estimates by securities analysts; ·additions or departures of key personnel; ·release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ·potential litigation, regulatory investigations or other legal proceedings involving us; and ·detrimental negative publicity about us or our industry. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding ourADSs, the market price for our ADSs and trading volume could decline. The trading market for our ADSs is influenced by research or reports that industry or securities analysts publish about our business. If one or more analystswho cover us downgrade our ADSs or publish unfavorable research about us, the market price for our ADSs would likely decline. If one or more of theseanalysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the marketprice or trading volume for our ADSs to decline. Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuingany change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share,while holders of Class B ordinary shares are entitled to ten votes per share, with Class A and Class B ordinary shares voting together as one class on allmatters subject to a shareholders’ vote. As of March 31, 2018, our Class B ordinary shares represent 12.8% of our total outstanding ordinary shares on an as-converted basis and entitle their holders to 59.4% of our total voting power. 39  As a result of the dual class share structure and the concentration of ownership, holders of our Class B ordinary shares have substantial influence over ourbusiness, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significantcorporate 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 deprive our shareholders of an opportunity to receive a premium for their shares as part of asale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and coulddiscourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs mayview as beneficial. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related PartyTransactions.” The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price. 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 ourADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales ofsecurities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price ofour ADSs. In addition, certain holders of our existing shareholders are entitled to certain registration rights, including demand registration rights, piggybackregistration rights, and Form F-3 or Form S-3 registration rights. Registration of these shares under the Securities Act would result in these shares becomingfreely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the publicmarket, or the perception that such sales could occur, could cause the price of our ADSs to decline. We may be classified as a passive foreign investment company for United States federal income tax purposes, which could result in adverse United Statesfederal 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 (a) 75% or more of our grossincome for such year consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of our assets (as determined on the basisof fair market value) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest,royalties, rents, annuities, net gains from the sale or exchange of passive assets (including property producing passive income) and net foreign currency gains.For this purpose, cash is categorized as a passive asset and the company’s unbooked intangibles associated with active business activity are taken intoaccount as a non-passive asset. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of anyother corporation in which we own, directly or indirectly, more than 25% (by value) of the stock. Based on our current income and assets and the value of our ADSs and outstanding ordinary shares, we do not believe that we were a PFIC for our taxableyear ended December 31, 2017 and we do not expect to be classified as a PFIC for our taxable year ending December 31, 2018 or in the foreseeable future. While we do not expect to become a PFIC, because the value of our assets for purposes of the asset test will generally be determined by reference to themarket price of our ADSs or ordinary shares, fluctuations in the market price of our ADSs or ordinary shares may cause us to become a PFIC for the current orsubsequent taxable years. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets,which will be affected by how, and how quickly, we use our liquid assets. Under circumstances where we determine not to deploy significant amounts of cashfor active purposes, our risk of being classified as a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rulesand 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 thecurrent taxable year or any future taxable year. 40  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 IncomeTax Considerations—Passive Foreign Investment Company Considerations”) may incur significantly increased United States income tax on gain recognizedon 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 ordistribution is treated as an “excess distribution” under the United States federal income tax rules and such holders may be subject to burdensome reportingrequirements. 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 tobe 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. AdditionalInformation—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.” You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we areincorporated 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 ofassociation, the Companies Law of the Cayman Islands (2016 Revision) and the common law of the Cayman Islands. The rights of shareholders to take actionagainst the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extentgoverned by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicialprecedent 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 clearlyestablished as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a lessdeveloped body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies ofcorporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in afederal court of the United States. The Cayman Islands courts are also unlikely: ·to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and ·to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities lawsthat are penal in nature. 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 certaincircumstances 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, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, membersof the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. Judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands company and almost all of our assets are located outside of the United States. All of our current operations are conducted in China.In addition, most of our current directors and executive officers are nationals and residents of countries other than the United States. As a result, it may bedifficult 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 rightshave been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of theCayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. 41  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 Aordinary 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 theprovisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your votinginstructions, the depositary will vote the underlying Class A ordinary shares in accordance with these instructions. You will not be able to directly exerciseyour right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and articles ofassociation, as amended, the minimum notice period required for convening a general meeting is ten clear days. When a general meeting is convened, youmay 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 foryour 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 youwill 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 notresponsible 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 toexercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested. 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 intend to take advantage of certain exemptions from various requirements that areapplicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditorattestation requirements of Section 404 for so long as we are an emerging growth company, which may be for as long as five years following our initial publicoffering in April 2014. As a result of our current status as an emerging growth company, our investors may not have access to certain information that theymay 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 suchdate that a private company is otherwise required to comply with such new or revised accounting standards. However, we had elected to “opt out” of thisprovision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. The decision toopt out of the extended transition period under the JOBS Act was irrevocable. 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 toUnited States domestic public companies. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in theUnited States that are applicable to U.S. domestic issuers, including: ·the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; ·the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under theExchange Act; ·the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders whoprofit from trades made in a short period of time; and ·the selective disclosure rules by issuers of material nonpublic information under Regulation FD. 42  We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a quarterly basisas press releases, distributed pursuant to the rules and regulations of the NASDAQ Global Select Market. Press releases relating to financial results andmaterial events are also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC are less extensiveand less timely as compared to that required to be filed with the SEC by United States domestic issuers. As a Cayman Islands company listed on the NASDAQGlobal Select Market, we are subject to the NASDAQ Global Select Market corporate governance listing standards. However, NASDAQ Global Select Marketrules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in theCayman Islands, which is our home country, may differ significantly from the NASDAQ Global Select Market corporate governance listing standards. We relied on the exemption available to foreign private issuers for the requirement that it hold an annual general meeting of shareholders no later thanDecember 31, 2017 in 2017. In this respect, we elected to follow home country practice and did not hold an annual general meeting of shareholders no laterthan December 31, 2017 in 2017. We may also continue to rely on this and other exemptions available to foreign private issuers in the future, and to theextent that we choose to do so in the future, our shareholders may be afforded less protection than they otherwise would under the NASDAQ Global SelectMarket corporate governance listing standards applicable to U.S. 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 United States domestic issuer. 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 orimpractical 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 Class A ordinary shares or otherdeposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class Aordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution availableto 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 underthe Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine thatit 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. Inthese cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinaryshares, 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 forthem 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. You may not be able to participate in rights offerings and may experience dilution of your holdings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will notdistribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registrationunder 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 notrequired 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 fromregistration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or toendeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and mayexperience dilution of their holdings as a result. 43  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 deemsexpedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including inconnection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its booksfor 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 depositarythinks 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 depositagreement, or for any other reason. We incur increased costs as a result of being a public company, and we cannot predict or estimate the amount of additional future costs we may incur orthe timing of such costs As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including additional costsassociated with our public company reporting obligations. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC andNASDAQ Global Select Market, impose various requirements on the corporate governance practices of public companies. As a company with less thanUS$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth companymay take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisionsinclude exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control overfinancial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.However, we had elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they areadopted for public companies. The decision to opt out of the extended transition period under the JOBS Act was irrevocable. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming andcostly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort towardensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. We are currently evaluating and monitoringdevelopments with respect to these rules and regulations, and we cannot predict or estimate with reasonable certainty the amount of additional costs we mayincur or the timing of such costs. In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the marketprice of that company’s securities. In the fourth quarter of 2015, several law firm in the U.S. announced that they were investigating potential securitiesclaims on behalf of our shareholders against us. We cannot predict whether such investigations will result in lawsuits, including class action suits, being filedagainst us. 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 businessand operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whetheror 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 maybe required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. 44  ITEM 4.INFORMATION ON THE COMPANY A.History and Development of the Company We began our operations in Beijing in September 2002 through Beijing Tarena Technology Co., Ltd. In November 2012, we changed the name of BeijingTarena Technology Co., Ltd. to Tarena Technologies Inc., or Tarena Tech. Tarena International, Inc., an exempted company with limited liability, wasincorporated in the Cayman Islands in October 2003 and became our ultimate holding company. We established Tarena Hong Kong Limited, or Tarena HK,as our wholly-owned subsidiary in October 2012. Tarena HK wholly owns Tarena Software Technology (Hangzhou) Co., Ltd., or Tarena Hangzhou, an entitythat we established in January 2013. On April 3, 2014, our ADSs began trading on the NASDAQ Global Select Market under the ticker symbol “TEDU.” We and certain selling shareholders sold atotal of 15,300,000 ADSs, representing 15,300,000 Class A ordinary shares, at an initial offering price of $9.00 per ADS. Concurrently with our initial publicoffering, we also issued 1,500,000 Class A ordinary shares at a price of US$9.00 per share to New Oriental Education & Technology Group Inc. Ltd. through aprivate placement. Prior to 2012, we conducted a substantial portion of our operations through our consolidated VIEs and their respective subsidiaries and schools. On January30, 2012, the PRC Catalogue for the Guidance of Foreign Investment Industries (amended) became effective, which listed professional education service asan industry for which foreign investments are “encouraged” by the government. On April 10, 2015, the new PRC Catalogue for the Guidance of ForeignInvestment Industries (amended) became effective, which listed non-accredited professional education service as an industry for which foreign investmentsare “encouraged” by the government. On July 28, 2017, the new PRC Catalogue for the Guidance of Foreign Investment Industries (amended) becameeffective, which listed non-accredited professional education service as an industry for which foreign investments are “encouraged” by the government. Inlight of such change of law, starting from the second half of 2012, we began to transfer the operations, including related assets and liabilities, of ourconsolidated VIEs to Tarena Tech and its subsidiaries and schools. All of our learning center operations of VIEs had been transferred to Tarena Tech and itssubsidiaries and schools. In December 2016, we wound up Shanghai Tarena, one of our VIEs. We expect to continue to control and consolidate BeijingTarena, which holds an Internet Content Provider license, or ICP license. Beijing Tarena has added our TMOOC.cn website under the ICP license held byBeijing Tarena. For a description of the risks relating to our corporate structure and the contractual arrangements we have entered into with our VIE, see “Item3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure.” In 2015, we invested RMB24.0 million in five PRC companies which are engaged in the provision of educational products and services. In 2016, we investedRMB12.8 million in three companies which are mainly engaged in the provision of educational products and services. In 2017, we invested RMB50.5million in three companies which are mainly engaged in the provision of IT, educational products and services. 45  The table below sets forth the respective revenues and assets of Tarena and our wholly-owned subsidiaries and our consolidated VIEs as of the dates and forthe periods indicated: Net Revenues(1) Total Assets(1) For the year ended December 31, 2015 For the year ended December 31, 2016 For the year ended December 31, 2017 As of December 31, 2017 Tarena and its wholly-owned subsidiaries 100% 100.0% 100.0% 95.4% Consolidated VIEs(2) 0.0%(3) 0.0%(3) 0.0%(3) 4.6% Total 100% 100% 100% 100.0% Notes: (1)The percentages exclude the inter-company transactions and balances between Tarena and wholly-owned subsidiaries and the consolidated VIEs. (2)Shanghai Tarena, one of our consolidated VIEs, was wound up in December 2016. (3)The net revenues from consolidated VIEs are immaterial and accounted for 0.0% due to rounding. We have dual headquarters in China. Our principal executive offices in Beijing are located at Suite 10017, Building E, Zhongkun Plaza, A18 Bei San HuanWest Road, Haidian District, Beijing, People’s Republic of China. Our telephone number at this address is +86 10 6213 5687. Our principal executive officesin Hangzhou are located at 1/F, Block A, Training Building, 65 Kejiyuan Road, Baiyang Jie Dao, Economic Development District, Hangzhou 310000,People’s Republic of China. Our telephone number at this address is +86 571 5602 0827. Our registered office in the Cayman Islands is located at the officesof Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands. Our agent forservice of process in the United States is Law Debenture Corporate Services Inc. located at 801 2nd Avenue, Suite 403, New York, NY 10017. B.Business Overview We provide professional education services in China. Our core strength is in IT professional education services. Since our inception in 2002, we have trainedover 509,000 students, cooperated with more than 750 universities and colleges and placed students with approximately 134,000 corporate employers in avariety of industries. We currently offer courses in thirteen IT subjects, three non-IT subjects and four kid education programs. For our adult students, our education platform combines live distance instruction, classroom-based tutoring and online learning modules. We deliverprofessional education lectures through a group of experienced and passionate instructors based in Beijing to a nationwide network of 184 directly managedlearning centers in 59 cities in China as of December 31, 2017. For each class, instructors deliver lectures from one classroom in Beijing to students in thesame classroom as well as to students at our learning centers across China via simultaneous webcast. To facilitate a disciplined and focused learningenvironment, we staff each classroom at our learning centers with one or two on-site teaching assistants to tutor and supervise students. We complement thelive instruction and tutoring with our proprietary learning management system TTS. TTS has five core functions, featuring course content, self-assessmentexams, student and teaching staff interaction tools, student management tools and an online student community. Through this education platform, weprovide job-oriented education with measurable outcomes, as demonstrated by our high job placement rates and students’ academic performance. In additionto our TTS platform, we launched TMOOC.cn in March 2015, which offers not only regular teaching video contents, but also continuing education coursesand job placement training courses, in order to cover a broader customer base. We offer our part-time class students the opportunity to complete a portion oflessons online using TMOOC.cn. TMOOC.cn is also important for our marketing efforts. 46  In December 2015, we launched new training programs TongchengTongmei featuring IT training courses and non-IT training courses for minors. In March2016, we rolled out kid robotics programming courses. In 2017, we launched coding mathematics to further diversify our course offerings in kid education.These new programs target and contain curriculum that is customized for primary to secondary school students aged between six and eighteen. Unlikeprograms designed for adult students, our courses for primary to high school students are taught by teaching assistants face-to-face in offline classrooms. Inorder to build a more vivid and concentrated learning environment, students will watch a series of interesting courseware videos step by step, under the leadof on-site teaching assistants. These programs are partly delivered through the facilities of existing learning centers to improve the utilization of the facilities.Since 2016, we also set up standalone flagship centers for kid education programs, which have further improved our brand recognition and teaching facilitiesand brought better learning experience for our students. By the end of 2017, there were 30 TongchengTongmei standalone centers, covering 24 cities inChina. We have a strong commitment to career services. We had 593 career counselors as of December 31, 2017, who advise students through mandatory job skillseminars, one-on-one interview workshops and systematic career assessment and planning. We had 310 employer cooperation representatives as of December31, 2017, who liaise closely with employers, alumni, human resources websites and other employment recruiters to maximize job opportunities for ourstudents. In January 2015, we launched a self-developed job search website called Job Show (www.jobshow.cn), which serves as a dedicated open platformfor our students and other job-seeking candidates to connect with corporate employers more effectively. Through Job Show, we source and list jobopportunities from both IT and non-IT employers in China. We have a track record of producing qualified, job-ready candidates for many corporateemployers in China, including Global Fortune 500 companies and leading technology companies. We are a holding company with no material operations of our own. We conduct our operations primarily through our wholly-owned subsidiaries in China.We also control and consolidate a VIE, Beijing Tarena. Beijing Tarena has added our TMOOC.cn website under the ICP license held by Beijing Tarena as ofDecember 31, 2017. Our wholly-owned subsidiaries in China are currently not eligible as wholly-owned foreign-invested enterprises to hold ICP licenses. Our Education Platform For our adult students, our education platform combines three key components: live distance instruction, classroom-based tutoring and online learningmodules. Live distance instruction From our headquarters in Beijing, our instructors deliver live courses primarily via live webcast to our learning centers across China. Students attending classwatch live audio-video broadcasts of lectures delivered using streaming media and other Internet-based technologies. Our full-time students typically watchlive lectures for approximately five hours a day and work on practice exercises assigned by instructors for approximately two hours every day during theclassroom sessions, which generally last from 9:00 a.m. to 6:00 p.m. five days a week. Our live broadcast method of lecture delivery ensures consistency in teaching quality across all our centers. All of our instructors to deliver the lecturethrough webcasting system are located in Beijing, where we centralize our training support. Our headquarter-level quality control department monitors theperformance of each lecturer on a daily basis. We typically have multiple instructors for each course, with each instructor focusing on separate topic areas. Webelieve this allows our instructors to focus, and offer more in-depth teaching, on their specific areas of expertise within a subject. Classroom-based tutoring Our students are generally required to physically attend classes at our learning centers. We believe physical attendance is important as it creates a disciplinedand focused learning environment for students to effectively master the course content. Requiring students to physically attend classes also facilitates thedelivery of personalized and systematic tutoring and job placement services to our students. 47  In terms of professional education programs, our classrooms are equipped with computers for each student, as well as projectors and other equipmentnecessary for the live broadcast of our lectures. Our classroom technology infrastructure allows students to interact with instructors online to receive help oncourse materials and to use online modules in TTS to take notes and conduct practice exercises. Our learning centers function both as classrooms for delivering lectures and self-study rooms after class hours. As of December 31, 2017, we directly manageda total of 184 learning centers in 59 major cities across China. Our learning centers vary in terms of size, typically having between 5 and 20 classrooms, witheach classroom typically able to host between 20 and 100 students. In addition to the learning centers that we operate directly, we also have one franchisedlearning center in Xi’an, and the franchise fee from such learning center was immaterial in 2017. The courses under our kid education programs are provided in offline classrooms and some of them share the learning centers with our professional programs.We believe such arrangement will help us to fully utilize our learning center resources and expand our K-12 education business at a fast pace. The following table provides an overview of our national network of learning centers that we manage directly and the adult courses offered in each city as ofDecember 31, 2017 and student enrollments in each city in 2017: 48  CitiesNumber of Learning CentersJavaC++DigitalArtSoftwareTestingPHPEmbeddedAndroid.NetiOSLinux and NetworkEngineeringOnline Sales& MarketingAccountingWeb FrontVR/ARBig DatapythonNetwork EngineerBeijing16●●●●●●●●●●●●●●●●●Hangzhou10●—●●●●———●——●—●——Shanghai8●●●●●————●●●●●●●—Zhengzhou8●—●—●————●●—●————Shenzhen8●—●●●●———●●—●—●●—Guangzhou8●●●●●●———●●—●●●●—Wuhan7●—●—●————●——●——●—Chengdu7●●●——————●●●●●—●—Chongqing6●—●—●—————●●●————Hefei6●—●———————●——————Nanjing6●●●—————————●——●—Changsha5●—●—●———————●————Jinan4●—●—●—————●—●————Qingdao4●—●———————●——————Shenyang4●—●——————————————Kunming4●—●———————●——————Tianjin4●—●——————————————Suzhou4●—●—————————●————Shijiazhuang4●—●——————————————Taiyuan4●—●———————●●—————Harbin3●—●——————————————Changchun3●—●——————————————Nanning3●—●——————————————Wuxi3●—●——————————————Nanchang3●—●——————————————Xi'An3●———●————●●—●——●—Dalian2●—●——————————————Yantai2●—●——————————————Xiamen2●—●——————————————Dongguan2●—●———————●——————Ningbo2●—●——————————————Fuzhou2●—●—————————●————Zhuhai1●—●——————————————Daqing1●—●——————————————Guiyang1●—●——————————————Haikou1●—●———————●——————Lanzhou1●—●——————————————Weifang1●—●——————————————Luoyang1●—●——————————————Linyi1●—●———————●——————Yuncheng1●—●———————●——————Wenzhou1●—●——————————————Huhehaote1●—●——————————————Qinhuangdao1●—●——————————————Nanyang1●—●——————————————Jinzhong1●—●——————————————Zibo1●—●——————————————Jining1●—●——————————————Wuhu1●—●——————————————Fushan1●—●——————————————Xuzhou1●—●——————————————Jinhua1●—●——————————————Baotou1●—●——————————————Bengbu1●—●——————————————Zhongshan1●—●——————————————Huizhou1●—●——————————————Mianyang1●—●——————————————Xiangyang1●—●——————————————Tangshan1●—●—————————————— Notes: ●currently offered —not currently offered 49  In 2017, we have entered 59 cities in China and recruited 128,776 students, approximately 56.2% of whom are from top 10 cities, namely Beijing,Guangzhou, Shenzhen, Hangzhou, Shanghai, Zhengzhou, Nanjing, Chengdu, Qingdao, Wuhan. Other cities accounted for 43.8% of total studentenrollments. Online learning modules Our live distance instruction and classroom-based tutoring are supplemented by our proprietary online learning modules featured on our TTS platform. TTShas the following five core functions: ·Course content. TTS contains lecture slides, key lecture video recordings, case studies, practice exercises and supplemental reading materials. Inaddition to recordings of past lectures, TTS also features exclusive online videos on key course materials. Students may view lecture videos usingthe computers at our learning centers. To foster effective learning of our course lecture materials, especially theoretical knowledge points, TTSfeatures software development case studies and practice exercises. TTS contains supplemental reading materials on areas in which we havehistorically received frequent questions from students. TTS also allows students to download coding materials and study notes that they haveprepared for reference in their future jobs. ·Self-assessment exams. TTS features daily and weekly interactive mock examinations to measure learning outcomes. Students use the mock exams toassess their learning results and gauge their grasp of course content. After students complete a self-assessment exam, TTS automatically providesstudents with detailed explanations on each of the exam questions. ·Student and teaching staff interaction. TTS allows students to interact with instructors and teaching assistants. In class, students may raise questionsfor instructors and teaching assistants using the messaging tools on TTS. After class, students can post questions to the teaching assistants throughthe online question and answer board in TTS. Teaching assistants are able to provide timely and accurate responses typically within 30 minutes aftera question is submitted. To ensure the accuracy of responses and to identify questions of common interest, our instructors also actively reviewquestions posted on TTS and regularly provide answers. Students are given the opportunity to provide feedback for each answer or tutorial serviceprovided by teaching assistants using the evaluation functions on TTS. ·Student management tools. TTS allows instructors to receive daily ratings and feedback from students. Instructors may then adjust their lecture paceand coverage of course materials each day. TTS enables teaching assistants to evaluate each student’s academic performance. The teaching assistantinterface of TTS contains each student’s monthly performance test scores, as well as each student’s ranking within the class and nationally. Teachingassistants are required to follow-up with underperforming students regarding their academic status and to adopt concrete action plans with suchstudents to improve their future performance. TTS also allows teaching assistants to monitor each student’s attendance and to log their daily tutoringactivities. ·Online student community. TTS serves as an online student community that fosters academic collaboration among students. We encourage studentsto post course-related articles and comments sharing their study experiences on the bulletin board forum. 50  In addition to our TTS platform, we launched TMOOC.cn in March 2015 to cover a broader customer base. TMOOC.cn offers two types of online learningproducts: continuing education courses and job placement training courses. Continuing education courses, composed of a library of video clips that focus onon-the-job practical skills, target working professionals and others with continuing education needs. Job placement training courses are full-length programsthat target job seekers. These recruitment-oriented courses are carefully chosen from existing courses at our learning centers and redesigned to be moresuitable for the online learning environment. Users who finish all modules in a job placement training course and pass the relevant Tarena certificationexamination will receive the same job placement services that we offer to students at learning centers. We also offer our part-time class students theopportunity to complete a portion of lessons online using TMOOC.cn. The number of registered TMOOC.cn users has reached more than 393,000 as ofDecember 31, 2017, and our proprietary content library offers more than 62,000 hours of video content. Our Course Offerings Our courses provide students with practical education to prepare them for jobs in industries with significant growth potential and strong hiring demand. Wealso provide kid students with STEAM education to help them develop their logical thinking ability as well as their practical skills. We currently offercourses in thirteen IT subjects, three non-IT subjects and four kid education programs. For adult students, we generally offer the following two types of classes in order to accommodate the different scheduling and training needs of our students: ·Full-time class. The term for a full-time class is typically four months and includes approximately 1,000 learning hours. Full-time classes meet fromMonday to Friday. In 2016, we also implemented “teaching at appropriate level” strategy and launched advanced courses with terms of one to fivemonths. For students enrolled in the joint major programs, they will finish their courses in three to four years alongside their college education. In2017, approximately 84.4% of our enrolled students attended our full-time classes. ·Part-time class. Part-time classes typically have terms of four to eight months. We allow students to attend part-time classes either exclusivelyduring weekends or on a combination of weekday nights and weekends, as these students typically have full-time jobs. We offer our part-time classstudents the opportunity to complete a portion of lessons online by watching videos available on TTS through TMOOC.cn. In 2017, approximately15.6% of our enrolled students attended our part-time classes. We have adopted stringent quality control procedures to ensure that we produce high-quality graduates. We use entrance exams to assess the level of ourstudents. Prospective full-time students with low entrance exam scores are recommended to enroll in preparatory training camps. We have a total of fourmonthly closed-book performance tests to evaluate the learning status of our students. For underperforming students who have failed the first monthlyperformance test, we offer them the opportunity to re-take the first month classes at no extra cost. We believe physical class attendance is important, andstudents with low attendance rates are generally not given graduation certificates and job opportunities referrals at the end of our program. Our full-time classes also include short-term, project-based training programs designed for college students to gain practical IT experience, which are notmaterial for our business as a whole. 51  IT education courses We offer education courses covering the following thirteen IT subjects: Subject Year of Launch Focus of Course ContentJava 2002 Programming for Windows and Linux-based desktop software and web-based software.NET 2007 Development of software based on the .NET framework that runs primarily on WindowsC++ 2009 Programming for Windows and Linux-based desktop softwareSoftware testing 2009 Practical software testing and quality assurance trainingEmbedded 2009 Development of software to control machines and devicesPHP 2010 Web-based software development for e-commerce industriesAndroid 2011 Programming for Android-based applicationsiOS 2012 Programming for iOS-based applicationsLinux and network engineering 2013 Linux operating system and network management technologyBig Data 2015 Hadoop, HBase, Hive, ZookeeperWeb front-end development 2015 HTML5, CSS3, JavaScript, jQuery, AJAX, Bootstrap, AngularJS, Web APPVR/AR 2016 Programming for developing a full range of VR/AR projectsPython 2017 Python and AI full stack of software development Graduates of our IT education courses receive Tarena Certified Software Developer certificates, or TCSD certificates. Holders of TCSD certificates arequalified to obtain the intermediate-advanced software engineer certificate issued by the Ministry of Industry and Information Technology of China, or theMIIT, for their respective field of study, subject to such graduates passing our internal examination. Graduates of our Java courses are granted ORACLECertified Java Programmer certificates by ORACLE Corporation after passing the relevant exams. Our Linux and network engineering course graduates mayalso sign up for Red Hat certification exams at our learning centers. Pursuant to our strategic partnership agreement with Alibaba Cloud Computing Co., Ltd.,or Aliyun, Aliyun will provide two opportunities to take the ACF (Ali Cloud Foundation) certification exams to each Tarena student. Non-IT education courses We began offering courses in non-IT subjects in 2013. We launched our digital art course in February 2013, our online sales and marketing course inNovember 2013 and our accounting course in October 2014. The following table describes the three non-IT courses that we currently offer: Subject Year of Launch Focus of Course ContentDigital art 2013 Latest Adobe user interface design technology for graphic, webpage and mobile sites designOnline sales and marketing 2013 Search engine marketing, search engine optimization, and other Internet based marketing, includingmicroblog marketingAccounting 2014 Accounting certificate, and chief accountant practice Since its launch in February 2013, our digital art course has registered strong growth in student enrollments and has become one of the largest courses interms of net revenue contribution in 2017. Our accounting course helps us target a broader student base. Graduates of our online sales and marketing coursesare awarded the Certificate issued by Baidu without additional examination. Graduates of our digital art courses are granted the certificates by ACAA orADOBE after passing the relevant exams. Kid Education Programs In December 2015, we launched new training programs under the brand name TongchengTongmei featuring IT training courses and non-IT training coursesfor kid students. In March 2016, we rolled out kids robotics programming courses. In 2017, we launched coding mathematics to further diversify our courseofferings in K-12 education. We treat the TongchengTongmei programs as our main effort to enter into the kid STEAM education market, and a significantlygrowing part of our operation. 52  Subject Year of Launch Focus of Course ContentComputer programming 2015 Programming skills training in JavaScript, Java, HTML5, Python, C++, iOS and Android, encompasssubjects in scratch, game programming, web programming, server programming, app development,etc.Digital art 2015 User interface design technology for graphic, webpage and mobile sites design, and 3D printingcoursesRobotics programming 2016 Introductions to programmable robots, including mechanic structure and relevant programming,advanced artificial intelligence and robot developmentCoding Mathematics 2017 Mathematics and algorithm logistics training based on scratch programming assistance Compared with the curriculum for adult students, the IT and non-IT courses offered under the TongchengTongmei programs feature materials that arecustomized for young kids. All of our kid education programs target and contain curriculum that is customized for primary to high school students agedbetween 6 and 18. Unlike programs designed for adult students, our courses for primary to high school students are taught by teaching assistants face-to-facein offline classrooms. In order to build a more vivid and concentrated learning environment, students will watch a series of interesting courseware videos stepby step, under the lead of on-site teaching assistants. Courses under TongchengTongmei programs typically have four levels, with each level consisting of 120 learning hours per year. Students begin from level 1and attend a 3-hour class per week. Depending on the age group, it generally takes approximately one year to complete each level. In 2017, ourTongchengTongmei programs are offered in 24 cities in China and recruited 9,580 students. Our Teaching Staff Our instructors As of December 31, 2017, we employed 357 full-time instructors based in Beijing. Most of our instructors for IT education courses have industrybackgrounds in global and domestic technology companies. Instructors for non-IT education courses are typically experts or veterans in their respectivespecialized fields. Our instructors also provide us with unique access to a large pool of experts on industry trends that is especially valuable in our decision-making and development process for new courses. We believe we attract highly qualified instructors by virtue of our respected brand, our well-establishedteaching infrastructure and sales team and our competitive compensation. We believe that developing and maintaining highly capable and motivated instructors is critical to our success. We seek qualified instructor candidates whohave extensive industry experience or come from other professional education service providers. These candidates are subject to multiple rounds ofinterviews conducted by our director of teaching, vice-president for teaching and the chief executive officer. All instructors are required to undergo trainingin teaching skills and techniques. We require our instructors to regularly update their course materials to remain current with evolving employer needs,industry developments and other key trends necessary to teach effectively. We typically have a backup instructor assigned to each course to meet anyemergency needs. To align incentives, instructors receive bonuses based on students’ ratings and the number of class sessions taught, in addition to their base compensation. Our teaching assistants We believe that our dedicated teaching assistants are essential to the success of our education model. Our teaching assistants interact with and tutor ourstudents on a daily basis, and are instrumental in facilitating a disciplined and focused learning environment. Each classroom is staffed with one or twoteaching assistants, who attend lectures together with students. Teaching assistants are available during class hours to answer student questions in person, andafter class hours to address inquiries online via TTS or on-site until 8:30 p.m. Teaching assistants are also responsible for offering focused tutoring services tounderperforming students and continuously monitoring their academic results. Our teaching assistants are also one of the key factors of the operation of ourkid education programs as we need our teaching assistants to guide our students throughout the course. We have adopted a comprehensive set of keyperformance indicators, or KPIs, to evaluate the performance of our teaching assistants. Such KPIs include student satisfaction, exam scores of students onmonthly performance tests, the improvement of underperforming students and employment results after graduation, among other indicators. 53  We primarily seek teaching assistant candidates from our graduates who have demonstrated strong command of materials in the relevant subject areas. Weprovide necessary training to newly hired teaching assistants to tutor effectively. Our teaching assistants are frequently evaluated by students on the qualityof their assistance. We had a total of 1,610 teaching assistants as of December 31, 2017. Course Content Development In addition to teaching, our instructors also develop the course content in their respective subject areas. We regularly update our existing courses, typicallyevery six months, to stay abreast of the latest technology developments and industry trends. Our instructors are also responsible for producing practiceexercises and exam questions for monthly performance tests to evaluate the effectiveness of our student self-assessment tests in TTS. We regularly engage innew course development in order to capture demands created by evolving job market and industry trends. We have a set of procedures for new coursedevelopment. Prior to developing a new course, we gather market intelligence by collecting job market demand information to ensure that we are developingrelevant and up-to-date courses. We conduct a series of surveys, each with clear parameters, to determine various aspects of the proposed new course. Once wegather enough market intelligence, we recruit, or identify from within Tarena, instructors with the appropriate industry and academic background to form acourse-specific development task team. The development of our kid education program courses is mostly programming centered. In addition, we focus onleveraging our experience in IT courses, especially programming courses, to develop coding- and programming-based courses for our kid educationprograms. All of our new courses are pilot tested in a selected learning center in Beijing for student satisfaction, training practicality and employment outcomes. In2017, we launched one new course in Python and one kid program in coding mathematics. Our software research and development department is tasked with improving the technical performance and user experience of TTS. Since introducing TTSstudent version 1.0 in 2006, we have produced eight upgrades to TTS. The current version that our students use is TTS student version 9.0. Our Students The majority of our students are college students and graduates. In 2017, approximately 74.0% of our enrolled students were either studying towards, oralready held, a post-secondary degree. We have experienced significant growth in student enrollment in recent years. Our student enrollment in professionaleducation courses reached 128,776 in 2017, and our student enrollment in kid education programs reached 9,580 in 2017. Student recruitment We rely primarily on Internet-based marketing to attract students and increase enrollments. We advertise on the Internet using search engine keywords onleading search engines. We also use banners and other advertising placements on targeted sites, such as education portals, career sites and industry-specificwebsites. We actively monitor the effectiveness of our advertising and adjust marketing spending accordingly. Our learning centers also host seminars,information sessions and preparatory training camps for prospective students. When a prospective student responds to our advertisements, an enrollment advisor generates a prospective student profile and advises the candidate, throughonline, telephone or a face-to-face meeting, on various aspects of our courses and educational experience. As of December 31, 2017, we had a total of 4,807employees in sales and marketing nationally. To promote brand awareness, we place advertisements in industry trade publications and present at industry trade seminars and conventions. We also beganto host our annual Tarena-Discovery Cup Chinese University Students Software Design Competition in April 2012. In 2015, we changed our logo from“Tarena Technology” (达内科技) to “Tarena Education” (达内教育) to better showcase our professional image in education. 54  We also encourage our students at schools to introduce their friends or classmates who are interested in taking professional education courses. Student referralhas become one of the key channels we access to new students. In addition to our marketing efforts and student referrals, we recruit a significant portion of our students directly from universities and colleges. As ofDecember 31, 2017, we have cooperated with over 750 universities and colleges in China under one of the three following modes of cooperation: ·Joint-majors. We offer joint-majors with 153 universities and colleges in China. These universities offer students the option to integrate our selectedcourses into their standard undergraduate curriculum. Students in selected majors at these universities take our courses and receive academic creditsfrom these universities and colleges after successfully completing our courses. Students can attend part of the courses in our established on-campuslearning sites and part of the courses at our learning centers. ·Enrollment cooperation. We have enrollment cooperation with over 750 universities and colleges in China. These universities and colleges allow usto organize marketing and promotional events on campus in order to attract students. We had a total of 374 university cooperation representatives as of December 31, 2017. Our university cooperation representatives are responsible forestablishing new and maintaining current cooperative relationships between us and universities in China. In 2017, we enrolled approximately 16% of ourstudents from universities and colleges with which we cooperated. Student job placement services We have an effective job placement program for our adult students. Each learning center retains full-time career counselors who meet with students on thefirst day of class to discuss their career goals and to build an employment profile for each student. Our career counselors host a series of mandatory careerdevelopment seminars for students throughout the term. During the final weeks of each course, our career counselors meet with students one-on-one to offertraining on interview and résumé preparation. In addition to the scheduled career service activities, our career counselors are generally available to meet withstudents one-on-one during office hours. Our career counselors also monitor the employment results of our students and actively offer personalized assistanceto students facing difficulties in securing job offers. We had a total of 593 career counselors as of December 31, 2017. Each learning center offering courses for adult students also retains full-time employer cooperation representatives who routinely collaborate with employers,alumni, human resources websites and other employment recruiters to maximize opportunities for job placements. We had a total of 310 employercooperation representatives as of December 31, 2017. We invite corporate employers to host recruiting events and interviews at our learning centers and offerstudents with interview opportunities across the country. In January 2015, we launched a self-developed job search website called Job Show (www.jobshow.cn), which serves as a dedicated open platform for ourstudents and other job-seeking candidates to connect with corporate employers more effectively. Through Job Show, we source and list job opportunitiesfrom both IT and non-IT employers in China. We gather data on post-course job placement rates by conducting surveys of our graduates. Based on the survey responses, we calculate the six-month post-course job placement rates for a month by dividing (i) the number of job-seeking students enrolled in such month who (A) successfully graduated from ourprograms with graduation certificates awarded and (B) indicated that they had received employment offers within six months of graduation, by (ii) the totalnumber of job-seeking students enrolled in such month who later successfully graduated from our programs with graduation certificates awarded. Wecalculate the average six-month post-course job placement rate for a year by averaging the six-month post-course job placement rates of each month of suchyear. Our average six-month post-course job placement rate for each of 2015 and 2016 was over 90%. When calculating such job placement rates for 2015and 2016, a majority of the employment reported by relevant students was full-time employment, and a majority of the employment reported by relevantstudents was in the fields of their studies with us. All of the students enrolled in 2015 and 2016 who later successfully graduated from our programs withgraduation certificates awarded and who were job-seeking, have filled out our surveys. Among the students enrolled in 2015 and 2016, 86% and 88% of suchstudents, respectively, graduated from our programs with graduation certificates awarded. Among the students enrolled in 2015 and 2016 who latersuccessfully graduated from our programs with graduation certificates awarded, 77% and 77% of such students, respectively, were deemed to be job-seekingstudents. 55  Our Network of Employers We have a track record of producing job-ready and highly qualified candidates for many corporate employers. Since our inception, our network of potentialemployers for our students covered approximately 134,000 corporate employers, including Global Fortune 500 companies, and leading technology, ITservices and Internet companies in China. We offer the following recruiting services to corporate employers: ·General recruiting services. We offer corporate employers candidate referral services and other recruitment-related services. Once an employercommunicates its hiring needs to us, we direct the relevant learning centers to produce a list of student candidates that meet the hiring criteria ofsuch employer, and refer such candidates to the employer for interviews and assessments. We also offer space at our learning centers for employers tohost recruiting events targeting our students and to conduct interviews. ·Customized courses. We offer customized courses targeting specific employers with large demands for trained professionals. Prospective students forour customized courses generally undergo interviews conducted by the employers before the start of classes. In addition to our standard curriculum,students enrolled in customized courses must participate in additional training provided by employers at our learning centers. Such additionaltraining is tailored according to the particular skill requirements of the employers. Successful graduates of our customized courses who have passedthe relevant qualifying exams are granted job offers by the employers. While we currently do not generate any material revenue from any of our recruiting services for corporate employers, we believe such services enhance ourbrand recognition and are instrumental in our ability to help students achieve high job placement rates. Tuition Fees For our full-time classes for adult students, our standard tuition fees generally range from RMB15,800 to RMB26,800 per course. We raised the standardtuition fees on selected courses offered in certain large cities by RMB1,000 to RMB2,000 per course in 2017. We also increased our tuition fees for part-timeclasses on selected courses offered in certain large cities by RMB1,000 to RMB2,000 per course in 2017. For our kid education programs, our standardtuition fees are between RMB11,400 and RMB19,200. Courses under kid education program typically are composed of four levels, with each levelconsisting of 120 learning hours in one year. We primarily offer two payment options for our adult students, including one-time full payment upon enrollment and multiple payments within two monthsof enrollment. We also offer an option whereby qualified adult students can pay our tuition fees within a period of time after graduation. To assist our students in paying our tuition fees, we mainly offered the following five credit sources to provide financing services for our students to makeone-time, up-front tuition payments in 2017: ·Baidu Small Loan Co., Ltd. We launched the Baidu student loan program in November 2015. 56  ·Bank of China Consumer Finance Co., Ltd. We launched the BOC CFC student loan program in April 2014. ·RenRenDai. We began to cooperate with RenRenDai, a third-party peer-to-peer lending service provider, in arranging loans for our students to payfor their tuition fees during January 2015 to September 2017. ·CreditEase. CreditEase, a credit management and microfinancing company in China, assists our students in obtaining loans to pay for their tuition.CreditEase began to offer this service to our students in July 2013. ·ShiTuDai. We have cooperated with ShiTuDai, a peer-to-peer lending service provided by an independent third party, in arranging loans for ourstudents to pay for their tuition fees since the second quarter of 2015. Approximately 52.4% of our students enrolled in 2017 obtained financing from one of the five abovementioned sources. Such financing arrangements arebilateral in nature, and are carried out between our students and the respective financing institution directly. Technology Building a reliable, scalable and secure technology infrastructure is crucial to our ability to support our live lecture broadcasts, online TTS, TMOOC.cn andthe various services that we provide to our students. We manage our lecture delivery system, TTS and TMOOC.cn using a combination of commerciallyavailable software and hardware systems. Since 2006, we have established a powerful online platform that enables thousands of students to simultaneouslylog onto our TTS and participate in activities online. All of our servers and routers, including backup servers, are currently hosted at our learning centers or by third-party service providers in multiple cities inChina. We regularly back up our databases. Our network administration department regularly monitors the performance of our websites and infrastructure toenable us to respond quickly to potential problems. We deliver live broadcast of audio and video of the lectures given in Beijing via the dedicated networkof China Telecom and China Unicom to terminals located in selected learning centers with high student enrollment, and via public Internet infrastructure toour other learning centers. We developed our CRM software in-house to manage our student and corporate employer information, as well as to integrate our key administrativefunctions. We will rely on our internal IT resources to upgrade the CRM system as needed. Seasonality Seasonal fluctuations have affected, and are likely to continue to affect, our business. Historically, we typically generate the highest net revenues in the thirdand fourth quarters because of the increased student enrollments during summer vacation. We generally generate less tuition fees in the first quarter of eachyear due to the Chinese New Year holiday. Our quarterly cost of revenue, selling and marketing expenses, general and administrative expenses and researchand development expenses have generally been increasing in absolute amounts since 2012 as we expanded our network of learning centers, increased thenumber of our personnel, enhanced our marketing efforts and offered more courses. Intellectual Property Our trademarks, copyrights, domain names, trade secrets and other intellectual property rights distinguish our courses and services from those of ourcompetitors and contribute to our ability to compete in our target markets. We rely on a combination of copyright and trademark law, trade secret protectionand confidentiality agreements with senior executive officers and most other employees, to protect our intellectual property rights. In addition, we requirecertain of our senior executive officers and other employees to enter into agreements with us under which they acknowledge that all inventions, utilitymodels, designs, know-how, copyrights and other forms of intellectual property made by them within the scope of their employment with us, pursuant to jobassignments or using our materials and technology, or during the two years after their employment that relates to their employment with us, are our propertyand they should assign the same to us if we so require. We also regularly monitor any infringement or misappropriation of our intellectual property rights. 57  As of December 31, 2017, we had registered 220 domain names relating to our business, including our www.tedu.cn, TMOOC.cn, jobshow.cn, www.IT61.cnand www.art61.cn websites, with the Internet Corporation for Assigned Names and Numbers and China Internet Network Information Center. Tarena Techholds 72 registered software copyrights, 54 trademarks and 220 registered domain names including www.tedu.cn. Beijing Tarena holds the domain nameTMOOC.cn. Competition The professional education services market in China is fragmented, rapidly evolving and highly competitive. We face competition in our offered courses andin many of the geographic markets in which we operate. For our IT training courses, we face competition from IT professional education providers that offerspecialized training programs targeting certain niche job markets in the IT industry. In the future, we may also face competition from new entrants into theChinese IT professional education market. For our non-IT training courses, we face competition for student enrollment from existing online and offlineproviders of professional education services, as well as smaller regional professional education services providers in China. As we enter the kid educationservices market, we also face competition from other national and regional providers of K-12 education services. Our enrollment rate could be impacted bythe operations of academic K-12 education and tutoring service providers, given our target students have limited time and energy and they need to chooseamong different courses and programs. We believe that the principal competitive factors in our markets include the following: ·scope and quality of course offerings and services; ·student placement and employer satisfaction with our graduates; ·brand recognition; ·ability to effectively market course offerings and services to a broad base of prospective students; ·cost effectiveness of the education; and ·ability to align course offerings and services to specific needs of students and employers. We believe that we are well-positioned to effectively compete in markets in which we operate on the basis of our innovative education platform, scalable andefficient business model, unparalleled access to corporate employers, training quality, strong content development capabilities and experienced managementteam. However, some of our current or future competitors may have longer operating histories, greater brand recognition, richer experience or greaterfinancial, technical or marketing resources than we do. For a discussion of risks relating to competition, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectivelywith our present and future competitors or to adjust effectively to changing market conditions and trends.” Insurance We do not maintain any property insurance policies covering students, equipment and facilities for injuries, death or losses due to fire, earthquake, flood orany other disaster. Consistent with customary industry practice in China, we do not maintain business interruption insurance, nor do we maintain key-manlife insurance. We maintain accident injury insurance and accident injury medical insurance for our employees based in our headquarters in Beijing, and wemaintain liability insurance for our students enrolled through university and college cooperation channel. Uninsured injury or death to our students or staff,or damage to any of our equipment or buildings could have a material adverse effect on our results of operations. See “Item 3. Key Information—D. RiskFactors—Risks Relating to Our Business—We have limited insurance coverage for our operations in China.” 58  Government Regulations Regulations on Private Education Education Law of the PRC On March 18, 1995, the NPC promulgated the Education Law of the PRC, or the Education Law. Pursuant to the Education Law, enterprises, socialorganizations and individuals are generally encouraged to operate schools and other types of educational organizations in accordance with PRC laws andregulations. It is provided in the Education Law that no organization or individual may establish or operate a school or any other educational institution forcommercial purposes. However, private schools may be operated for “reasonable returns” as described in more detail below. On December 27, 2015, theStanding Committee of the NPC released the Amendment to the Education Law of the PRC, taking into effect on June 1, 2016, pursuant to which theStanding Committee of the NPC narrowed the provision prohibiting the establishment or operation of schools or other educational institutions forcommercial purposes to only restricting a school or other educational institution founded with governmental funds or donated assets. Regulations on Professional Education On May 15, 1996, the Standing Committee of the NPC promulgated the Professional Education Law of the PRC, or the Professional Education Law, whichbecame effective on September 1, 1996. Pursuant to the Professional Education Law, professional training includes training pre-employment, training formilitary personnel transferring to civil positions, training for apprentices, on-the-job training, job-transfer training and other professional training.Professional training may be classified as junior, middle or senior level according to the actual situations. It shall be conducted by either professional traininginstitutions or professional schools, which may develop various professional training to satisfy the needs of the society. The PRC government encouragesinstitutional organizations, social organizations, other social groups and citizens to establish professional schools and professional training institutions, andthe financial allocation for professional schools and professional training institutions from the governments at various levels shall be gradually increased.The PRC government also encourages financial institutions to support and develop professional education by means of credit facilities. On August 3, 2007, the Standing Committee of the NPC promulgated the Employment Promotion Law of the PRC, or the Employment Promotion Law, whichbecame effective on January 1, 2008. Pursuant to the Employment Promotion Law, the PRC government at and above the county level shall encourage andsupport professional schools, professional training institutions and corporations to carry out pre-employment training, employment training, re-employmenttraining and entrepreneurship training, and encourage workers to attend various types of training programs. Corporations in China are requested to set asidefinancial resources for the training and continued education of their employees. The Law for Promoting Private Education and its Implementation Rules On December 28, 2002, the Standing Committee of the NPC promulgated the Law for Promoting Private Education, or the Private Education Law, whichbecame effective on September 1, 2003 and was first amended on June 29, 2013. On March 5, 2004, the PRC State Council promulgated the ImplementationRules for the Law for Promoting Private Education, or the Private Education Implementation Rules, which became effective on April 1, 2004. Under thePrivate Education Law and the Private Education Law Implementation Rules, “private schools” are defined as schools established by social organizations orindividuals using non-government funds. Private schools providing certifications, pre-school education, education for self-study aid and other academiceducation shall be subject to approval by the education authorities, while private schools engaging in professional qualification training and professionaleducation training shall be subject to approvals from the authorities in charge of human resources and social security. 59  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 schoolproviding certifications shall be approved by the governmental pricing authority and be publicly disclosed. A private school that does not providecertifications shall file its pricing information with the governmental pricing authority and publicly disclose such information. A private school shall file itsadvertisement and school enrollment brochure with the relevant governmental authorities of human resources and social security or education. According to the Private Education Law and the Private Education Implementation Rules, entities and individuals who establish private schools arecommonly referred to as “sponsors” rather than “owners” or “shareholders”. The economic substance of “sponsorship interest” that a sponsor holds in aprivate school is, for all other practical purposes, substantially equivalent under PRC law and practice to the “equity interest” a shareholder holds in acompany. A sponsor of a private school has the obligation to make capital contributions to the school in a timely manner. The contributed capital can be inthe form of tangible or non-tangible assets such as materials in kind, land use rights or intellectual property rights. The capital contributed by the sponsorbecomes assets of the school and the school has independent legal person status. In addition, the sponsor of a private school has the right to exercise ultimatecontrol over the school by becoming the member of and controlling the composition of the school’s decision making body. Specifically, the sponsor hascontrol over the private school’s constitutional documents and has the right to elect and replace the private school’s decision making bodies, such as theschool’s board of directors, and therefore controls the private school’s business and affairs. Nevertheless, before the Standing Committee of the NPCpromulgated the Decision on Amending the Law for Promoting Private Education of the PRC on November 7, 2016 which came into force on September 1,2017, or the Amendment to the Private Education Law, sponsors of a private school may choose to require “reasonable returns” from the annual net balanceof the school after deduction of costs for school operations, donations received, government subsidies (if any), the reserved development fund and otherexpenses as required by the regulations. However, none of the current PRC laws and regulations provides a formula or guidelines for determining “reasonablereturns”. Private schools whose sponsor does not require reasonable returns shall be entitled to the same preferential tax treatment as public schools, while thepreferential 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. As for private training institutions, the Private Education Law provides that the regulations applicable to private training institutions registered with theSAIC and its local counterparts shall be formulated by the State Council separately. On July 29, 2010, the PRC central government promulgated the Outlineof China’s National Plan for Medium- and Long-Term Education Reform and Development (2010-2020), which announced the policy that the governmentwill implement a reform to divide private schools into two categories: (i) for-profit private schools and (ii) not-for-profit private schools. On October 24,2010, the General Office of the State Council issued the Notices on the National Education System Innovation Pilot, pursuant to which the PRC governmentplans to implement a for-profit and non-profit classified management system for the private schools in Shanghai, Zhejiang, Shenzhen and Jilin HuaqiaoForeign Language School. The Amendment to the Private Education Law has followed the principles and spirits of the above outline and the pilot program, which establishes a newclassification system for private schools to be classified by whether they are established and operated for profit-making purposes. Under the Amendment tothe Private Education Law, sponsors of private schools may choose to establish non-profit or for-profit private schools at their own discretion. Nonetheless,school sponsors are not allowed to establish for-profit private schools that are engaged in compulsory education. In other words, the schools engaged incompulsory education should retain their non-profit status after the Amendment to the Private Education Law comes into force. 60  According to the Amendment to the Private Education Law, there are certain key features of the aforesaid new classification system for private schools,including but not limited to: (1) Sponsors of for-profit private schools are entitled to retain the profits and proceeds from the schools, and the operationsurplus may be allocated to the sponsors pursuant to the PRC Company Law and other relevant laws and regulations. But sponsors of non-profit privateschools are not entitled to the distribution of profits or proceeds from the non-profit schools and all operation surplus of non-profit schools shall be used forthe operation of the schools; (2) For-profit private schools are entitled to set their own tuition fees and other miscellaneous fees without the need to seek priorapprovals from or report to the relevant government authorities. The collection of fees by non-profit private schools, on the other hand, shall be regulated bythe provincial, autonomous regional or municipal governments; (3) 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 to thePrivate Education Law taking effect are still unclear as more specific provisions are yet to be introduced; (4) Where there is construction or expansion of anon-profit private school, the school may acquire the required land use rights in the form of allocation by the government as a preferential treatment. Wherethere 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;(5) The remaining assets of non-profit private schools after liquidation shall continue to be used for the operation of non-profit schools. The remaining assetsof for-profit private schools shall be distributed to the sponsors in accordance with the PRC Company Law; and (6) The people’s governments at or above thecounty level may support private schools by subscribing to their services, provision of student loans and scholarships, and leases or transfers of unused stateassets. The governments may further take such measures as government subsidies, bonus funds and incentives for donation in support of non-profit privateschools. On December 29, 2016, the State Council issued the Several Opinions of the State Council on Encouraging the Operation of Education by Social Forcesand Promoting the Healthy Development of Private Education, or the State Council Opinions, which require to ease the access to the operation of privateschools and encourages social forces to enter the education industry. The State Council Opinions also provide that each level of the people’s governmentsshall increase their support to the private schools in terms of financial investment, financial support, autonomy policies, preferential tax treatments, landpolicies, fee policies, autonomy operation, protecting the rights of teachers and students etc. Further, the State Council Opinions require each level of thepeople’s governments to improve its local policies on government support to for-profit and non-profit private schools by ways of preferential tax treatmentsetc. In addition, under the State Council Opinions, private schools shall strengthen its construction of organizations of the Chinese Communist Party, or theCCP, and further the theoretical system of Socialism with Chinese Characteristics by introducing such system into textbooks and teaching programs. Theconstruction 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 suchschools annual inspection. On December 30, 2016, the Implementation Rules for Private School Classification Registration was issued by the MOE, the Ministry of Human Resourcesand Social Welfare and other relevant authorities, which requires all private schools, including non-profit private schools and for-profit private schools, toobtain “school permits”. Existing private schools established before promulgation of the Amendment to the Private Education Law which choose to registeras for-profit private schools should apply for new school permits and complete the re-registration process. If such private schools chooses to register as a non-profit school, they shall amend their articles of association, continue their operation and complete the new registration process. The RegulatoryImplementation Rules for Profitable Private School issued by the MOE, the Ministry of Human Resources and Social Welfare and other relevant authoritiesfurther provide that the establishment, division, merger and other material changes of a for-profit private school shall first be approved by the educationauthorities or the authorities in charge of human resources and social welfare, and then be registered with the competent branch of SAIC. In addition, for-profit private training institutions shall also be regulated and governed with reference to such rules. On August 31, 2017, the Notice on the Work concerning the Administration of the Name Registration for Non-profit Private Schools was issued by the SAICand the MOE, which requires that non-profit private schools shall, in accordance with the relevant provisions of the PRC Company Law and the PrivateEducation Law, be registered as limited liability companies or joint stock limited companies, and their names shall comply with the provisions of relevantlaws and regulations on company registration administration and education. 61  Besides the Amendment to the Private Education Law and the above regulations, the details of the operation requirement of non-profit schools and for-profitschools will further be provided in implementation regulations which may include the Amendment to the Private Education Implementation Rules, the localregulations relating to legal person registration of for-profit and non-profit private schools, and the specific measure to be formulated and promulgated by thecompetent authorities responsible for the administration of private schools, including but not limited to the specific measures for registration of pre-existingprivate 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, measure for the collection of non-profit private schools’ fee. As of the date hereof, certain local governments, such as Shanghai, Jiangsu province, Hebei province, Sha’anxi province, and Qionghai of Hainan provincehave promulgated their local regulations relating to legal person registration and administration for private schools. However, these local regulations aresilent on the licensing and other administrative requirements for online education schools, and the implementation regulations in the nation level or forBeijing and most provinces in the PRC are yet to be introduced. On April 20, 2018, the MOE issued the Implementation Rules for the Law for PromotingPrivate Education (Revised Draft) (Draft for Public Comment), or the Revised Private Education Implementation Rules Draft. Among other things, theRevised Private Education Implementation Rules Draft clarifies the types of different private training institutions and the corresponding regulatoryprinciples: (i) the private training institutions which provide school education related courses or courses for the purpose of entrance exams facing kid andteenagers in pre-school education or basic education stage, shall be regulated as “private education training institutions" which are required to obtain aschool permit governed by the administrative department for education; (ii) the private training institutions which provide cultural education training, non-diploma continuing education or the training courses for the personal promotion purposes such as the course of language, art, sports, science or technologyetc. facing adults, do not need to obtain a school permit and could directly apply for registration as a legal person, provided that such training institutionscould not provide school education related courses or courses for the purpose of entrance exams facing kid and teenagers in pre-school education or basiceducation stage; and (iii) the private training institutions which provide school education related courses or courses for the purpose of entrance exams facingkid and teenagers in pre-school education or basic education stage, or the professional qualification and skills training, through the internet, shall obtain aschool permit governed by the provincial administrative department for education or the administrative department for human resources and social security,as the case maybe. However, it is uncertain when the Revised Private Education Implementation Rules Draft would be signed into law and whether the finalversion would have any substantial changes to the draft. Regulations on Kid Professional Education/Training Our new kid education programs launched in December 2015 are currently operated through our learning centers in 24 cities in China. The kid educationprograms contain IT training courses and non-IT training courses, both of which fall within the category of professional education training. Under PRCregulations, the kid education programs offered through professional education training institutions shall not be subject to supplemental governmental pre-approval. The governmental authorities that have approved the establishment of the professional education training institutions shall be the same authoritiesthat continue to regulate new programs launched by such training institutions. In the case of our learning centers operating our kid education programs, theirestablishments are approved by the relevant governmental authorities in charge of human resources and social security, and as such, the kid educationprograms will be under the governance of the same governmental authorities. Furthermore, current PRC laws and regulations do not specifically distinguishbetween adult professional education training and minor professional education training. Thus, from a regulatory prospective, the kid education programs donot have a material difference as compared with adult professional education training programs and shall follow the same PRC regulations that apply to ouradult professional education training programs. According to the Regulation on Prohibiting Primary to High Schools and Their Teachers from PaidTeaching after School issued by the MOE on June 29, 2015 and the implementation documents issued by local education authorities, only teachers ofprimary to high schools are not allowed to teach paid lessons after school nor act in a separate capacity as private tutors or teachers. None of teachers in ourkid education programs are teachers of primary to high schools, and most of such teachers are our full-time employees. Regulations on Chinese-Foreign Cooperation in Operating Schools Chinese-foreign cooperation in operating schools or training programs is specifically governed by the Regulations on Operating Chinese-foreign Schools,promulgated by the State Council in 2003 in accordance with the Education Law, the Occupational Education Law and the Private Education Law. TheImplementing Rules for the Regulations on Operating Chinese-foreign Schools, or the Implementing Rules, were issued by the MOE in 2004. TheRegulations on Chinese-Foreign Cooperation in Operating Schools and its Implementing Rules encourage substantive cooperation between overseaseducational organizations with relevant qualifications and experience in providing high-quality education and Chinese educational organizations to jointlyoperate various types of schools in the PRC. Cooperation in the areas of higher education and occupational/professional education is especially encouraged.Chinese-foreign cooperative schools are not permitted, however, to engage in compulsory education or military, police, political and other kinds ofeducation that are of a special nature in China. The Regulations on Operating Chinese-foreign Schools prohibits foreign institutions or individuals fromindependently establishing schools in China, which provide educational services mainly for Chinese citizens. 62  The Ministry of Human Resources and Social Security (formerly known as Ministry of Labor and Social Security) also promulgated the Regulations onOperation Chinese-foreign Cooperation School in Professional Education Training to implement the Regulations on Operating Chinese-foreign Schoolson July 26, 2006, which took effect on October 1, 2006. The Regulations on Operation Chinese-foreign Cooperation School in Professional EducationTraining prohibits foreign institutions or individuals from independently establishing professional education training institutions in China, which provideeducational services mainly for Chinese citizens. We have not operated or applied for any Chinese-foreign schools. Prior to 2012, we operated a substantial portion of our learning centers through subsidiariesof our consolidated VIEs and schools to which our consolidated VIEs or their respective subsidiaries are sponsors. Starting from the second half of 2012, webegan to transfer our operations to our wholly-owned subsidiary, Tarena Tech, and its subsidiaries. All of our learning center operations of VIEs had beentransferred to Tarena Tech and its subsidiaries and schools. As of December 31, 2017, we operated 64 of our learning centers through private schools ownedby subsidiaries of Tarena Tech. However, there are still uncertainties under the current PRC laws as to whether a wholly foreign owned enterprise (such asTarena Tech) is allowed to indirectly invest in and own private schools through its PRC subsidiaries. See “Item 3. Key Information—D. Risk Factors—RisksRelating to Our Business—If the relevant PRC authorities determine that we can no longer own and operate certain of our learning centers through our PRCsubsidiaries, we may need to restructure the ownership and operation of these learning centers (including possibly transferring these learning centers to ourconsolidated VIE), our business may be disrupted and we may be exposed to increased risks associated with the contractual arrangements relating to ourconsolidated VIE.” Foreign Investments in Professional Education Services The PRC Catalogue for the Guidance of Foreign Investment Industries, or the Catalogue, as promulgated and amended from time to time by the MOFCOMand the National Development and Reform Commission, is the principal guide to foreign investors’ investment activities in the PRC. The most updatedversion of the Catalogue, which was promulgated in March 2017 and became effective in July 2017, divides the industries into three categories: encouraged,restricted and prohibited. Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC laws andregulations. A wholly foreign-owned enterprise is generally permitted for encouraged industries and industries not listed in the Catalogue, while there aresome limitations to the ownership and/or corporate structure of the foreign-invested companies that operate in restricted industries. Industries in theprohibited category are not open to foreign investors. According to the latest Catalogue, foreign investment is encouraged in non-accredited professionaleducation services and there is no limitation with respect to the maximum percentage of foreign ownership in a company conducting business in professionaleducation services. Foreign investment is restricted to establishing Sino-foreign cooperative joint venture operations led by Chinese parties in pre-schooleducation institutions, ordinary senior high schools and institutions of higher learning. Foreign Investment is prohibited in compulsory educationinstitutions. Regulations on Online and Distance Education Pursuant to the Administrative Regulations on Educational Websites and Online and Distance Education Schools issued by the MOE on July 5, 2000,educational websites and online education schools may provide educational services in relation to higher education, elementary education, pre-schooleducation, teaching education, occupational/professional education, adult education, other education and public educational information services.“Educational websites” refer to organizations providing education or education-related information services to website visitors by means of a database oronline education platform connected via the Internet or an educational television station through an Internet Service Provider, or ISP. “Online educationschools” refer to education websites providing academic education services or training services with the issuance of various certificates. Setting up education websites and online education schools is subject to approval from relevant education authorities, depending on the specific types ofeducation. Any education website and online education school shall, upon the receipt of approval, indicate on its website such approval information as wellas the approval date and file number. 63  On June 29, 2004, the State Council promulgated the Decision on Setting Down Administrative Licenses for the Administrative Examination and ApprovalItems Really Necessary to be Retained, pursuant to which the administrative license for “online education schools” was retained, while the administrativelicense for “educational websites” was not retained. Accordingly, Beijing Tarena, our consolidated VIE engaging in online education-related services, is notrequired to obtain approval to operate “educational websites” from the MOE. On January 28, 2014, the State Council promulgated the Decision onAbolishing and Delegating Certain Administrative Examination and Approval Items, pursuant to which the administrative approval for “online educationschools” of higher education was abolished. Notwithstanding these decisions formulated by the State Council, as the Administrative Regulations on Educational Websites and Online Education Schoolswere not explicitly abolished, in practice, certain local authorities continue to implement the approval requirement for setting up education websites andonline education schools until February 3, 2016, when the State Council promulgated the Decision on Cancelling the Second Batch of 152 Items Subject toAdministrative Examination and Approval by Local Governments Designated by the Central Government, explicitly withdrew the approval requirements foroperating educational websites and online education schools as provided by the Administrative Regulations on Educational Websites and Online EducationSchools, and reiterated the principle that administrative approval requirements may only be imposed in accordance with the PRC Administrative LicensingLaw. In December 2017, Shanghai Municipal Government promulgated the Management Methods of Classified Registration of Private Schools, the SettingStandards for Private Training Institutions of Shanghai, the Management Measures for the For-profit Private Training Institutions of Shanghai, and theManagement Methods for the Non-Profit Private Training Institutions of Shanghai, pursuant to which, any management measures and regulations applied tothe institutions that provides training services only through the Internet will be further promulgated separately. However, such management measures andregulations have not yet been introduced as of the date hereof. Regulations on Online Publications On February 4, 2016, the State Administration of Press, Publication, Radio, Film and Television of the PRC (formerly the General Administration of Press andPublication), or the SAPPRFT and the Ministry of Industry and Information Technology, or the MIIT jointly promulgated the Internet Publishing ServiceAdministrative Measures, or the Internet Publishing Measures, which took effect on March 10, 2016 and replaced the Tentative Internet PublishingAdministrative Measures jointly promulgated by the General Administration of Press and Publication and MIIT on June 27, 2002. The Internet PublishingMeasures require entities that engage in Internet publishing to obtain an Internet Publishing License for engaging in Internet publishing from the SAPPRFT.Pursuant to the Internet Publishing Measures, the definition of “Internet publishing” is broad and refers to the act of online spreading of articles, whereby theInternet information service providers select, edit and process works created by themselves or others and subsequently post such works on the Internet ortransmit such works to the users’ end through Internet for the public to browse. These works include contents from books, newspapers, periodicals, audio-video products, electronic publications that have already been formally published or works that have been made public in other media. Beijing Tarena has offered videos of lectures on its website TMOOC.cn and has not obtained an Internet Publishing License from the SAPPRFT. However,governmental authorities could determine that Beijing Tarena’s online content services fall within the scope of “internet publishing,” and therefore requireBeijing Tarena to apply for an Internet Publishing License. Beijing Tarena may not be able to obtain such a license, and it may become subject to penalties,fines, legal sanctions or be ordered to suspend the video content on the website. 64  Regulation on Broadcasting Audio-Video Programs through the Internet or Other Information Network The SAPPRFT promulgated the Rules for Administration of Broadcasting of Audio-Video Programs through the Internet and Other Information Networks, orthe Broadcasting Rules, in 2004, which became effective on October 11, 2004. The Broadcasting Rules apply to the activities of broadcasting, integration,transmission, downloading of audio-video programs with computers, televisions or mobile phones as the main terminals and through various types ofinformation networks. Pursuant to the Broadcasting Rules, a Permit for Broadcasting Audio-video Programs via Information Network is required to engage inthese Internet broadcasting activities. On April 13, 2005, the State Council announced a policy on private investments in businesses in China that relate tocultural matters, which prohibits private investments in businesses relating to the dissemination of audio-video programs through information networks. On December 20, 2007, the SAPPRFT and MIIT issued the Internet Audio-Video Program Measures, which became effective on January 31, 2008 and wasamended on August 28, 2015. Among other things, the Internet Audio-Video Program Measures stipulate that no entities or individuals may provide Internetaudio-video program services without a Permit for Broadcasting Audio-video Programs via Information Network issued by the SAPPRFT or its localcounterparts and only entities wholly owned or controlled by the PRC government may engage in the production, editing, integration or consolidation, andtransfer to the public through the Internet, of audio-video programs, and the provision of audio-video program uploading and transmission services. OnSeptember 15, 2009, SAPPRFT promulgated the Notice on Several Issues regarding the Permit for Broadcasting Audio-video Programs via InformationNetwork. The Notice restates the necessity of applying for such license and sets forth the legal liabilities for those providing Internet audio-video programservices without the license. On April 1, 2010, SAPPRFT promulgated the Test Implementation of the Tentative Categories of Internet Audio-Visual Program Services, which wasamended on March 10, 2017, or the Categories, which clarified the scope of Internet audio-video programs services. According to the Categories, there arefour categories of Internet audio-visual program services which are further divided into seventeen sub-categories. The third sub-category to the secondcategory covers the making and editing of certain specialized audio-video programs concerning, among other things, educational content, and broadcastingsuch content to the general public online. On April 25, 2016, the SAPPRFT issued the Provisions on the Administration of Private Network and Targeted Communication Audiovisual ProgramServices, or Targeted Communication Rules, which replaced the Broadcasting Rules issued in 2004. The Target Communication Rules mainly focus onnetworks and services such as IPTV and private network mobile TV. In the course of offering our lecture videos, we transmit our audio-video educational programs live through the Internet to enrolled course participants. If thegovernmental authorities determine that our provision of lecture videos falls within the Internet Audio-Video Program Measures and demand us to apply forthe license, we may not be able to obtain the License for Disseminating Audio-Video Programs through Information Network. If this occurs, we may becomesubject to significant penalties, fines, legal sanctions or an order to suspend our use of audio-video content. Regulations on Value-Added Telecommunications Services Licenses for Value-Added Telecommunication Services On September 25, 2000, the Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, were issued by the PRC StateCouncil as the primary governing law on telecommunication services, which were subsequently amended in 2014 and 2016. The Telecom Regulations setout the general framework for the provision of telecommunication services by PRC companies. Under the Telecom Regulations, it is a requirement thattelecommunications service providers procure operating licenses prior to their commencement of operations. The Telecom Regulations draw a distinctionbetween “basic telecommunications services” and “value-added telecommunications services.” A “Catalog of Telecommunications Business” was issued asan attachment to the Telecom Regulations to categorize telecommunications services as basic or value-added. The Catalog was most recently updated inDecember 2015, and the information services are classified as value-added telecommunications services. 65  On March 5, 2009, the MIIT issued the Administrative Measures for Telecommunications Business Operating Permit, or the Telecom Permit Measures, whichtook effect on April 10, 2009 and was amended on July 3, 2017. The Telecom Permit Measures confirm that there are two types of telecom operating licensesfor operators in China, namely, licenses for basic telecommunications services and licenses for value-added telecommunications services. The operationscope of the license will detail the permitted activities of the enterprise to which it was granted. An approved telecommunication services operator shallconduct its business in accordance with the specifications recorded on its value-added telecommunications services operating license, or VATS License. Inaddition, a VATS License’s holder is required to obtain approval from the original permit-issuing authority prior to any change to its shareholders. On September 25, 2000, the State Council promulgated the Administrative Measures on Internet Information Services, or the Internet Measures, which wasamended in January 2011. Under the Internet Measures, commercial Internet information services operators shall obtain an ICP license from the relevantgovernment authorities before engaging in any commercial Internet information services operations within the PRC. The ICP license has a term of five yearsand shall be renewed within 90 days before expiration. Our consolidated VIE, Beijing Tarena, obtained an ICP license for thewebsite www.it211.com.cn issued by Beijing Communications Administration on March 1, 2012, which will expire on September 26, 2022. Beijing Tarenahas added TMOOC.cn and www.it211.com.cn to such ICP license. Foreign Investment in Value-Added Telecommunication Services Pursuant to the Provisions on Administration of Foreign Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001and amended respectively on September 10, 2008 and February 6, 2016, the ultimate foreign equity ownership in a value-added telecommunications servicesprovider (except E-Commerce) may not exceed 50%. The Guidance Catalog of Industries for Foreign Investment amended in 2017 allows a foreign investorto own up to 100% of the total equity interest in an E-Commerce business. Moreover, for a foreign investor to acquire any equity interest in a value-addedtelecommunication business in China, it must satisfy a number of stringent performance and operational experience requirements, including demonstratinggood track records and experience in operating value-added telecommunication business overseas. Foreign investors that meet these requirements mustobtain approvals from the MIIT and the MOFCOM or their authorized local counterparts, which retain considerable discretion in granting approvals.Pursuant to publicly available information, the PRC government has issued telecommunications business operating licenses to only a limited number offoreign-invested companies, all of which are Sino-foreign joint ventures engaging in the value-added telecommunication business. The MIIT Circular issued by the MIIT in July 2006 reiterated the regulations on foreign investment in telecommunications businesses, which require foreigninvestors to set up foreign-invested enterprises and obtain an ICP license to conduct any value-added telecommunications business in China. Under the MIITCircular, a domestic company that holds an ICP license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and fromproviding any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications businessillegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned bythe local ICP license holder or its shareholder. The MIIT Circular further requires each ICP license holder to have the necessary facilities for its approvedbusiness operations and to maintain such facilities in the regions covered by its license. Currently, Beijing Tarena, our consolidated VIE, owns the domainnames www.it211.com.cn and TMOOC.cn and holds the ICP license necessary to operate our www.it211.com.cn and TMOOC.cn websites in China, while thetrademarks relating to our operations are held by Tarena Tech, our WFOE. If the relevant PRC government authorities determine in the future that the currentownership of our trademarks do not comply with the relevant regulations and the trademarks relating to our operations must be held by our VIE, we may needto transfer the trademarks to our VIE, which may severely disrupt our business. The Internet Electronic Bulletin Board Service Administrative Measurespromulgated by the MIIT in October 2000 require ICP operators to obtain specific approvals before providing BBS services. BBS services include electronicbulletin boards, electronic forums, message boards and chat rooms. On July 4, 2010, the approval requirement for operating BBS services was terminated by adecision issued by the PRC State Council and on September 23, 2014, such measures were repealed and annulled. However, in practice, the competentauthorities in Beijing still require the relevant operating companies to obtain such approval for the operation of BBS services which we have not obtained. 66  In light of the aforesaid restrictions, we rely on Beijing Tarena, our consolidated VIE in China, to hold and maintain the licenses necessary to provide onlineeducation and other value-added telecommunications services in China. We operate our www.it211.com.cn and TMOOC.cn websites and value-addedtelecommunications services through Beijing Tarena. Beijing Tarena, our consolidated VIE in China, holds an ICP license that is valid until September 26,2022 for the operation of www.it211.com.cn and TMOOC.cn. Beijing Tarena is in the process of annual inspection for ICP license. The Discussion Draft PRC Foreign Investment Law In January 2015, the MOFCOM published a discussion draft of the proposed Foreign Investment Law for public review and comments. The draft ForeignInvestment Law purports to change the existing “case-by-case” approval regime to a “filing or approval” procedure for foreign investments in China. TheMOFCOM, together with other relevant authorities, will determine a catalogue for special administrative measures, or the “negative list,” which will consistof a list of industry categories where foreign investments are strictly prohibited and a list of industry categories where foreign investments are subject tocertain restrictions. Foreign investments in business sectors outside of the “negative list” will only be subject to filing procedures, in contrast to the existingprior approval requirements, whereas foreign investments in the restricted industries must apply for approval from the foreign investment administrationauthority. The draft Foreign Investment Law for the first time defines “foreign investor,” “foreign investment,” “Chinese investor” and “actual control.” A foreigninvestor is not only determined based on the place of its incorporation, but also on the conditions of the “actual control.” The draft Foreign Investment Lawspecifically provides that entities established in China but “controlled” by foreign investors, such as via contracts or trust, will be treated as FIEs, whereasforeign investment in China in the foreign investment restricted industries by a foreign investor may nonetheless apply for being, when approving marketentry clearance by the foreign investment administration authority, treated as a PRC domestic investment if the foreign investor is determined by the foreigninvestment administration authority as being “controlled” by PRC entities and/or citizens. In this connection, “actual control” is broadly defined in the draftForeign Investment Law to cover the following summarized categories: (i) holding 50% of more of the voting rights of the subject entity; (ii) holding lessthan 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision makingbodies, or having the voting power to material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) havingthe power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects ofbusiness operations. According to the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately“controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft Foreign Investment Law has not taken a positionon what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies arecontrolled by Chinese parties. The draft Foreign Investment Law emphasizes on the security review requirements, whereby all foreign investments concerning national security must bereviewed and approved in accordance with the security review procedure. In addition, the draft Foreign Investment Law imposes stringent ad hoc andperiodic information reporting requirements on foreign investors and the applicable FIEs. In addition to investment implementation report and investmentamendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investorsmeeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations maypotentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities. The draft Foreign Investment Law is now open for public review and comments. It is still uncertain when the draft would be signed into law and whether thefinal version would have any substantial changes from this draft. When the Foreign Investment Law becomes effective, the trio of existing laws regulatingforeign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law andthe Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations, will be abolished. See “Item 3. KeyInformation—D. Risk Factors—Risks Relating to Doing Business in China—Substantial uncertainties exist with respect to the enactment timetable,interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporategovernance and business operations.” 67  Regulations on Intellectual Property Rights Copyright and Software Products The NPC adopted the Copyright Law in 1990 and amended it in 2001 and 2010, respectively. The amended Copyright Law extends copyright protection toInternet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by theChina Copyright Protection Center. The amended Copyright Law also requires registration of a copyright pledge. To address the problem of copyright infringement related to the content posted or transmitted over the Internet, the National Copyright Administration andthe MIIT jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet on April 29, 2005. This measure became effectiveon May 30, 2005. In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001 and amended onJanuary 30, 2013, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, amended in June2004, which apply to software copyright registration, license contract registration and transfer contract registration. In compliance with, and in order to takeadvantage of the above rules, as of December 31, 2017, we had registered 72 software copyrights in China. Trademarks Trademarks are protected by the PRC Trademark Law which was adopted in 1982 and subsequently amended in 1993, 2001 and 2013 as well as theImplementation Regulation of the PRC Trademark Law most recently adopted by the State Council in 2014. The Trademark Office under the SAIC handlestrademark registrations and grants a term of ten years to registered trademarks which may be renewed for consecutive ten-year periods upon request by thetrademark owner. Trademark license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a “first-to-file”principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark whichhas already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, theapplication for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing rightfirst obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficientdegree of reputation” through such party’s use. We have registered 54 trademarks in China as of December 31, 2017. Regulations on Foreign Currency Exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, or the Foreign ExchangeRegulations, as amended on August 5, 2008. Under the Foreign Exchange Regulations, Renminbi is freely convertible for current account items, includingthe distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as directinvestments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and priorregistration with the SAFE is made. Though there are restrictions on the convertibility of Renminbi for capital account transactions, which principallyinclude investments and loans, we generally follow the regulations and apply to obtain the approval of the SAFE and other relevant PRC governmentalauthorities. On March 30, 2015, the SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitalsof foreign-invested enterprises nationwide. Circular 19 came into force replacing both previous SAFE Circular 142 and SAFE Circular 36 on June 1, 2015.Circular 19 allows all foreign-invested enterprises established in the PRC to use their foreign exchange capitals to make equity investments and removescertain other restrictions provided under Circular 142 for these enterprises. However, Circular 19 continues to prohibit foreign-invested enterprises from,among other things, using the Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope, and providingentrusted loans or repaying loans between non-financial enterprises. 68  On June 9, 2016, the SAFE promulgated Circular 16, which expands the application scope from only the capital of foreign-invested enterprises to the capital,foreign debt fund and fund from oversea public offering. Furthermore, Circular 16 allows foreign-invested enterprises to use their foreign exchange capitalsunder capital account to the extent permitted by the relevant laws and regulations. These circulars may delay or limit us from using the proceeds of offshore offerings to make additional capital contributions or loans to our PRC subsidiariesand violations of these circulars could result in severe monetary or other penalties. See also “Item 3. Key Information—D. Risk Factors—Risks Relating toDoing Business in China—PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control ofcurrency conversion may delay or limit us from using the proceeds of offshore offering to make additional capital contributions or loans to our PRCsubsidiaries.” Regulations on Dividend Distribution Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from Tarena Tech, which is a whollyforeign-owned enterprise incorporated in the PRC, to fund any cash and financing requirements we may have. The principal regulations governing thedistribution of dividends of foreign-invested enterprises include the Foreign Invested Enterprise Law, as amended respectively on October 31, 2000 andSeptember 3, 2016, and the Implementation Rules of the Foreign Invested Enterprise Law, as amended respectively on April 12, 2001 and February 19, 2014. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any,determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate atleast 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registeredcapital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accountingstandards to staff welfare and bonus funds. These reserves are not distributable as cash dividends. Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents Pursuant to SAFE’s Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through SpecialPurpose Vehicles, or SAFE Circular No. 37, issued and effective on July 4, 2014, and its appendixes, PRC residents, including PRC institutions andindividuals, must register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purposeof overseas investment and financing, with such PRC residents’ legally owned assets or equity interest in domestic enterprises or offshore assets or interests,referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires an amendment to the registration in the event of anysignificant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC individuals, share transfer orexchange, merger, division or other material events. On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, orSAFE Notice 13, which became effective on June 1, 2015. In accordance with SAFE Notice 13, entities and individuals are required to apply for foreignexchange registration of foreign direct investment and overseas direct investment, including those required under the SAFE Circular No. 37, with qualifiedbanks, instead of SAFE. The qualified banks, under the supervision of SAFE, directly examine the applications and conduct the registration. 69  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 thatspecial purpose vehicle may be prohibited from making distributions of profit to the offshore parent and from carrying out subsequent cross-border foreignexchange activities and the special purpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary. Further, failureto comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion. Theseregulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions and share transfer that we make inthe future if our shares are issued to PRC residents. We have requested PRC residents currently holding direct or indirect interests in our company to ourknowledge to make the necessary applications, filings and amendments as required under SAFE Circular No. 37 and other related rules. To our knowledge, allof our shareholders who are PRC citizens and hold interests in us, have registered with the local SAFE branch and/or qualified banks as required under SAFECircular No. 37 and SAFE Notice 13. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—PRC regulations relatingto offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, limitour ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC law.” Regulations on Stock Incentive Plans In February 2012, SAFE promulgated the Stock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents whoparticipate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain otherprocedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseaspublicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respectto the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connectionwith their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required toamend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseasentrusted institution or other material changes. The PRC agents must, on behalf of the PRC residents who have the right to exercise the employee shareoptions, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of theemployee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted anddividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution tosuch PRC residents. We adopted two share incentive plans, namely the 2008 Plan and the 2014 Plan. Pursuant to the 2008 Plan, we may issue options, restricted shares (or shareappreciation rights or other similar awards) and rights to purchase restricted shares to our qualified employees and directors and consultants on a regularbasis. Pursuant to the 2014 Plan, we may issue options, restricted shares and restricted share units to our qualified employees, directors and consultants on aregular basis. We have advised our employees and directors participating in the employee stock option plan to handle foreign exchange matters inaccordance with the Stock Option Rules, and we have completed the registrations of our stock incentive plans with the local SAFE as required by PRC law. In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in the PRCwho exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee shareoptions with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail topay or if we fail to withhold their income taxes as required by relevant laws and regulations, we may face sanctions imposed by the PRC tax authorities orother PRC government authorities. 70  Regulation on Tax PRC Enterprise Income Tax Law On March 16, 2007, the NPC enacted the EIT Law. Both the EIT Law and its Implementing Rules, which was enacted on December 6, 2007 by the StateCouncil, became effective on January 1, 2008. Under the EIT Law, enterprises are classified as PRC resident enterprises and non-PRC-resident enterprises.PRC resident enterprises typically pay an enterprise income tax at the rate of 25%. An enterprise established outside of the PRC with its “de factomanagement bodies” located within the PRC is considered a PRC “resident enterprise,” meaning that it shall be treated in a manner similar to a PRC residententerprise for enterprise income tax purposes. The Implementing Rules to the EIT Law defines “de facto management body” as a managing body that inpractice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of anenterprise. The SAT issued Circular 82 on April 22, 2009, as amended in December 2017. Circular 82 provides certain specific criteria for determining whether the “defacto management body” of a PRC-controlled and offshore-incorporated enterprise is located in China, which include all of the following conditions: (a) thelocation where senior management members responsible for an enterprise’s daily operations discharge their duties; (b) the location where financial andhuman resource decisions are made or approved by organizations or persons; (c) the location where the major assets and corporate documents are kept; and(d) the location where more than half (inclusive) of all directors with voting rights or senior management have their habitual residence. In addition, the SATissued a bulletin on July 27, 2011, effective from September 1, 2011 and amended respectively in 2015 and 2016, or Bulletin 45, providing more guidanceon the implementation of Circular 82. Bulletin 45 clarifies matters including PRC resident enterprise status determination, post-determination administrationand competent tax authorities etc. Although both Circular 82 and Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRCenterprise groups, not those controlled by PRC individuals or foreign individuals like us, the determining criteria set forth in Circular 82 and Bulletin 45 mayreflect the SAT’s general position on how the “de facto management body” test should be applied in determining the PRC tax resident enterprise status ofoffshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals. We do not believe that Tarena International, Inc. meets all of the conditions above, and thus we do not believe that Tarena International, Inc. is a PRCresident enterprise despite the fact that all members of our management team as well as the management team of our offshore holding company are located inChina. However, if the PRC tax authorities determine that Tarena International, Inc. is a PRC resident enterprise for PRC enterprise income tax purposes, anumber of unfavorable PRC tax consequences could follow. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classificationwould likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations andthe value of your investment.” 71  Pursuant to the Hong Kong Tax Treaty, and other applicable PRC regulations, if a Hong Kong resident enterprise is determined by the competent PRC taxauthority to have satisfied the relevant conditions and requirements under such Hong Kong Tax Treaty and other applicable regulations, the 10%withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approvalfrom in-charge tax authority. However, based on Circular 81, the 5% withholding tax rate does not automatically apply and certain requirements must besatisfied, including without limitation that (a) the Hong Kong enterprise must be the beneficial owner of the relevant dividends; and (b) the Hong Kongenterprise must directly hold at least 25% share ownership in the PRC enterprise during the 12 consecutive months preceding its receipt of the dividends.However, a transaction or arrangement entered into for the primary purpose of enjoying a preferential tax treatment should not be a reason for the applicationof the preferential tax treatment under the Hong Kong Tax Treaty. If a taxpayer inappropriately is entitled to such preferential tax treatment, the competenttax authority has the power to make appropriate adjustments. According to the Circular 9, effective from April 1, 2018, when determining the applicant’sstatus of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, includingwithout limitation whether the applicant is obligated to pay more than 50% of his or her income in twelve months to residents in a third country or region,whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treatieslevies any tax or grants tax exemption on relevant incomes or levies tax at an extremely low rate, will be taken into account, and such determination will beanalyzed according to the actual circumstances of the specific cases. Circular 9 further provides that applicants who intend to prove his or her status of the“beneficial owner” shall submit the relevant documents to the relevant tax authority according to Circular 60. Based on Circular 60, non-resident enterprisesare not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprisesand their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly applythe reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filingexaminations by the relevant tax authorities. However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules,it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration. See “Item 3. KeyInformation—D. Risk Factors—Risks Relating to Doing Business in China—We may not be able to obtain certain treaty benefits on dividends paid to us byour PRC subsidiary through our Hong Kong Subsidiary.” In January 2009, the SAT promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-residentEnterprises, or the Non-resident Enterprises Measures, pursuant to which, the entities which have the direct obligation to make certain payments to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise. Further, the Non-resident Enterprises Measures provides that in caseof an equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer paymentshall, by itself or engage an agent to, file tax declaration with the PRC tax authority located at the place of the PRC company whose equity has beentransferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise.On October 17, 2017, the SAT released Announcement Regarding Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, orSAT Announcement 37, effect from December 1, 2017, which replaced the Non-resident Enterprise Measures. On April 30, 2009, the MOF and the SATjointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59. On December 10,2009, the SAT issued the Notice on Strengthening the Administration of the Enterprise Income Tax concerning Proceeds from Equity Transfers by Non-resident Enterprises, or Circular 698. Both Circular 59 and Circular 698 became effective retroactively as of January 1, 2008. By promulgating andimplementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC residententerprise by a non-resident enterprise. On February 3, 2015, the SAT issued a Public Notice [2015] No.7, or Public Notice 7, to supersede the existing taxrules in relation to the Indirect Transfer as set forth in Circular 698. Under Public Notice 7, where a non-resident enterprise conducts an “indirect transfer” bytransferring the equity interests in a PRC “resident enterprise” or other taxable assets indirectly by disposing of the equity interests in an overseas holdingcompany, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusiveuse of company structure without reasonable commercial purposes. In addition, Public Notice 7 provides clear criteria on how to assess reasonablecommercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreigntransferor and transferee of the Indirect Transfer as they have to make self-assessment on whether the transaction should be subject to PRC tax and to file orwithhold the PRC tax accordingly. In October 2017, the SAT promulgated the Announcement of the State Administration of Taxation on Matters ConcerningWithholding of Income Tax of Non-resident Enterprises at Source, or SAT Circular 37, which provides certain changes to the current withholding regime,repeals and replaces all other provisions under Circular 698 and amends certain provisions in Public Notice 7. For example, SAT Circular 37 requires that thetransferor shall declare to the competent tax authority for payment of tax within seven (7) days after the tax payment obligation comes into being if thewithholding agent fails to withhold the tax due or withhold the tax due in full. However, according to SAT Circular 37, if the withholding agent fails towithhold and remit the income tax payable, or is unable to perform its obligation in this regard, as long as the non-resident enterprise that earns the incomevoluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise haspaid the tax in time. There are little guidance and practical experience as to the application of Public Notice 7 or SAT Circular 37. Where non-residentinvestors were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose,we and our non-resident investors may become at risk of being taxed under Public Notice 7 and may be required to expend valuable resources to comply withPublic Notice 7 or SAT Circular 37 or to establish that we should not be taxed under Public Notice 7 or SAT Circular 37. The PRC tax authorities have thediscretion under SAT Circular 59, Public Notice 7 or SAT Circular 37 to make adjustments to the taxable capital gains based on the difference between thefair value of the equity interests transferred and the cost of investment. 72  The State Administration of Taxation promulgated Administrative Measures on the General Anti-Avoidance Rule (Trial), or GAAR Measures, on December 2,2014, which shows the authority’s intention to fight against tax avoidance scheme that is adopted to obtain unwarranted tax benefit without reasonablecommercial purpose. A press release, made by the State Administration of Taxation to clarify certain issues relating to the application of the GAAR Measures,stated that the GAAR Measures may be applicable if any general tax-avoidance scheme exists in the offshore indirect transfer of equity interests. Since GAARMeasures was recently promulgated and it is unclear how this set of measures, and any future implementation rules thereof, will be interpreted, amended andimplemented by the relevant governmental authorities, we cannot predict how these regulations will affect our business operation, future acquisitions orstrategy. In addition, the EIT Law and its Implementation Rules permit certain “high and new technology enterprises strongly supported by the state” that holdindependent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or non-financial, as stipulated in theImplementation Rules and other regulations, to enjoy a reduced 15% enterprise income tax rate. The SAT, the Ministry of Science and Technology and theMinistry of Finance jointly issued the Administrative Measures on the Recognition for High and New Technology Enterprise delineating the specific criteriaand procedures for the “high and new technology enterprises” certification in April 2008, which was amended in January 2016. Enterprises recognized as“high and new technology enterprises,” or HNTEs, will enjoy a reduced 15% enterprise income tax rate after they go through tax reduction applicationformalities with relevant tax authorities. Tarena Tech, renewed its HNTE certificate in 2012 and again in 2015, and is eligible to enjoy a preferential tax rateof 15% until the end of 2017. Tarena Hangzhou was established in 2013 and is qualified as a “newly established software enterprise”, which entitles it to twoyears of full tax exemption followed by three years of 50% tax exemption, commencing from the year in which its taxable income is greater than zero, whichwas 2014. On January 25, 2016, we acquired 100% of the equity interests in Hangzhou Han Ru Education Technology Co., Ltd, which is qualified as a“newly established software enterprise”, which entitles it to two years of full tax exemption followed by three years of 50% tax exemption, commencing fromthe year in which its taxable income is greater than zero, which was 2016. PRC Value-added Tax (“VAT”) in lieu of Business Tax (the “VAT Pilot Program”) An enterprise or individual providing taxable service within the territory of China has been historically required to pay BT at the rate of 3% or 5% on therevenues generated from provision of such services in accordance with applicable PRC tax regulations. However, if the services provided are technicaltransfer or technical development, or technical consulting and technical service related to technology transfer or technical development, BT may beexempted subject to approval by the relevant tax authorities. In November 2011, the Ministry of Finance and the SAT promulgated the Notice on the Pilot Program in Shanghai Replacing BT with VAT inTransportation and Some Modern Service Sectors. Pursuant to this circular and other relevant notices, VAT shall be imposed in lieu of BT in transportationand some modern service sectors firstly in Shanghai starting from January 1, 2012. On August 1, 2013, the VAT Pilot Program was implemented throughoutChina in transportation and some modern services sectors. On April 29, 2014, the Ministry of Finance and the SAT issued the Circular on the Inclusion ofTelecommunications Industry in the Pilot Collection of Value-added Tax in Lieu of Business Tax. On March 23, 2016, the Ministry of Finance and the SATissued the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax. Effective from May 1,2016, the PRC tax authorities will collect VAT in lieu of Business Tax on a trial basis within the territory of China, and in industries such as constructionindustries, real estate industries, financial industries, and living service industries. The applicable VAT rates are 6% and 3% for the entities that are generaltaxpayers and small-scale taxpayers, respectively. 73  Local Surcharges The city construction tax and education surcharge are local surcharges imposed as a certain percentage of PRC turnover taxes (i.e., business tax, value-addedtax and consumption tax). The city construction tax is charged at rates of 1%, 5% or 7% (the applicable city construction tax rate depends on the location ofthe taxpayer) of the turnover tax paid while the education surcharge rate is currently at 3% of the turnover tax paid. Though in the past, foreign-investedenterprises, foreign enterprises and foreign individuals were exempted from such surcharges, these entities were required to make such payments fromDecember 1, 2010 according to a notice issued by PRC State Council in October 2010. In addition to the city construction tax and the education surcharge, the China Ministry of Finance issued Circular Caizong (2010) No. 98, or Circular 98,that requires all entities and individuals (including foreign-invested enterprises, foreign enterprises and foreign individuals) to pay a local educationsurcharge, or LES, at 2% on turnover tax paid. Local governments are required to report their implementation measures on LES to the Ministry of Finance.LES became applicable to all entities and individuals in Beijing on January 1, 2012. Employment Laws and Social Insurance We are subject to laws and regulations governing our relationship with our employees, including wage and hour requirements, working and safetyconditions, and social insurance, housing funds and other welfare. The compliance with these laws and regulations may require substantial resources. China’s National Labor Law, which became effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1,2008 and was amended on December 28, 2012, permit workers in both state-owned and private enterprises in China to bargain collectively. The NationalLabor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or workerrepresentatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws alsopermit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract. TheNational Labor Contract Law has enhanced rights for the nation’s workers, including permitting open-ended labor contracts and severance payments. Thelegislation requires employers to provide written contracts to their workers, restricts the use of temporary labor and makes it harder for employers to lay offemployees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed twice orthe employee has worked for the employer for a consecutive ten-year period. On October 28, 2010, the NPC promulgated the PRC Social Insurance Law, which became effective on July 1, 2011. In accordance with the PRC SocialInsurance Law and other relevant laws and regulations, China establishes a social insurance system including basic pension insurance, basic medicalinsurance, work-related injury insurance, unemployment insurance and maternity insurance. An employer shall pay the social insurance for its employees inaccordance with the rates provided under relevant regulations and shall withhold the social insurance that should be assumed by the employees. Theauthorities in charge of social insurance may request an employer’s compliance and impose sanctions if such employer fails to pay and withhold socialinsurance in a timely manner. Under the Regulations on the Administration of Housing Fund effective in 1999, as amended in 2002, PRC companies mustregister with applicable housing fund management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and theiremployees are required to contribute to the housing funds. 74  C.Organizational Structure The following diagram illustrates our corporate structure, including our subsidiaries and consolidated VIE and its subsidiaries, as of March 31, 2018: Notes: (1)Mr. Shaoyun Han, our founder, chairman and chief executive officer, owns 70% of the equity interest in Beijing Tarena. Mr. Jianguang Li, our director,owns 30% of the equity interest in Beijing Tarena. 75  (2)Mr. Shaoyun Han is the principal of Weifang Tarena Professional Education School. (3)Beijing Tongcheng Technology Co. Ltd. , which is a wholly owned subsidiary of Tarena Tech, wholly owns Wuhan Good Boy Robot Technology Co.,Ltd., which holds 100% of the sponsorship interest in Wuhan Jiang'an Good Boy Robot Education and Training School and Changsha Kaifu District,The Science Kid Robot Education Training School. (4)Mr. Shaoyun Han is the principal of Shenyang Tarena Professional Education School, Jinan Tarena Professional Education School, Wuhan TarenaProfessional Education School, Chongqing Jiulongpo Tarena Professional Education School, Kunming Guandu Tarena Professional Education School,Nanjing Tarena Professional Education School, Shenzhen Bao’an Tarena Professional Education School, Harbin Tarena Professional Education School,Zhengzhou Tarena Professional Education School, Dalian High-Tech Zone Tarena Professional Education School, Shenyang Tarena Times ProfessionalEducation School, Zhuhai Tarena Professional Education School, Chengdu High-Tech Zone Tarena Professional Education School, Chengdu TarenaProfessional Education School, Wuhan Technology Tarena Professional Education School, Shenzhen Longhua Xinqu Tarena Professional SkillsEducation School, Chongqing Nanan Tarena Professional Education School; Changchun Tarena Professional Education School and Ningbo TarenaProfessional Education School; De Xun Wang* is the principal of Guangzhou Tarena Software Professional Education School; Qian Li is the principal ofQingdao Tarena Professional Education School; Yue Qin Shen is the principal of Nanjing Weishang Tarena Professional Education School; Jing Liu* isthe principal of Dalian Shahekou Tarena Accounting Professional Education School; Li Zhe* is the principal of Wuhan Jiang'an Good Boy RobotEducation and Training School; Zhang Jianling is the principal of Changsha Kaifu District, the Science Kid Robot Education Training School. * De Xun Wang, Jing Liu and Li Zhe are no longer employed by us. The principal registration for each of Guangzhou Tarena Software ProfessionalEducation School, Dalian Shahekou Tarena Accounting Professional Education School and Wuhan Jiang'an Good Boy Robot Education and TrainingSchool has not been updated. Because of foreign ownership restriction on Internet content and other value-added telecommunication services in China, we operate our www.it211.com.cnand TMOOC.cn websites through our consolidated VIE, Beijing Tarena. Beijing Tarena is 70% owned by Mr. Shaoyun Han, our founder, chairman and chiefexecutive officer, and 30% owned by Mr. Jianguang Li, our director. Mr. Han and Mr. Li are both PRC citizens. We entered into a series of contractualarrangements with Beijing Tarena and its shareholders, which enable us to: ·exercise effective financial control over Beijing Tarena; ·receive substantially all of the economic benefits and bear the obligation to absorb substantially all of the losses of Beijing Tarena; and ·have an exclusive option to purchase all or part of the equity interests in Beijing Tarena when and to the extent permitted by PRC law. Because of these contractual arrangements, we are the primary beneficiary of Beijing Tarena and consolidate its financial results in our consolidated financialstatements in accordance with U.S. GAAP. The following is a summary of the currently effective contracts by and among Tarena International, our subsidiary Tarena Tech, our VIE, Beijing Tarena, andthe shareholders of Beijing Tarena. Exclusive Business Cooperation Agreement Under the exclusive business cooperation agreement between Beijing Tarena and Tarena Tech, as amended and restated, Tarena Tech has the exclusive rightto provide, among other things, technical support, business support and related consulting services to Beijing Tarena and Beijing Tarena agrees to accept allthe consultation and services provided by Tarena Tech. Without Tarena Tech’s prior written consent, Beijing Tarena is prohibited from engaging any thirdparty to provide any of the services under this agreement. In addition, Tarena Tech exclusively owns all intellectual property rights arising out of or createdduring the performance of this agreement. Beijing Tarena agrees to pay a monthly service fee to Tarena Tech at an amount determined solely by Tarena Techafter taking into account factors including the complexity and difficulty of the services provided, the time consumed, the seniority of the Tarena Techemployees providing services to Beijing Tarena, the value of services provided, the market price of comparable services and the operating conditions ofBeijing Tarena. Furthermore, to the extent permitted under the PRC law, Tarena Tech agrees to provide financial support to Beijing Tarena if Beijing Tarenahas any operating loss or suffered any critical operation adversity. The term of the agreement will remain effective unless Tarena Tech terminates theagreement in writing or a competent governmental authority rejects the renewal applications by either Beijing Tarena or Tarena Tech to renew its respectivebusiness license upon expiration. Without the consent of Tarena Tech, Beijing Tarena is not permitted to terminate this agreement in any event unlessrequired by applicable laws. 76  Power of Attorney Pursuant to the power of attorney, as amended and restated, the shareholders of Beijing Tarena each irrevocably appointed Tarena Tech as the attorney-in-factto act on their behalf on all matters pertaining to Beijing Tarena and to exercise all of their rights as a shareholder of Beijing Tarena, including but notlimited to attend shareholders’ meetings, vote on their behalf on all matters of Beijing Tarena requiring shareholders’ approval under PRC laws andregulations and the articles of association of Beijing Tarena, and designate and appoint directors and senior management members. Tarena Tech may assignits rights under this power of attorney to any other person or entity at its sole discretion without prior notice to the shareholders of Beijing Tarena. Eachpower of attorney will remain in force until the shareholder ceases to hold any equity interest in Beijing Tarena. Equity Interest Pledge Agreements Under the equity interest pledge agreements between Tarena Tech, Beijing Tarena and the shareholders of Beijing Tarena, as amended and restated, theshareholders pledged all of their equity interests in Beijing Tarena to Tarena Tech to guarantee Beijing Tarena’s and Beijing Tarena’s shareholders’performance of their obligations under the contractual arrangements including, but not limited to the service fees due to Tarena Tech. If Beijing Tarena orany of Beijing Tarena’s shareholders breaches its contractual obligations under the contractual arrangements, Tarena Tech, as the pledgee, will be entitled tocertain rights and entitlements, including receiving proceeds from the auction or sale of whole or part of the pledged equity interests of Beijing Tarena inaccordance with legal procedures. Tarena Tech has the right to receive dividends generated by the pledged equity interests during the term of the pledge. Ifany event of default as provided in the contractual arrangements occurs, Tarena Tech, as the pledgee, will be entitled to dispose of the pledged equityinterests in accordance with PRC laws and regulations. The equity interest pledge agreements became effective on the date when the agreements were dulyexecuted. The pledge was registered with Changping Bureau of Beijing Administration for Industry and Commerce in December 2013 and April 2017,respectively. The pledge will remain binding until Beijing Tarena and its shareholders discharge all their obligations under the contractual arrangements.The registration of the equity pledge enables Tarena Tech to enforce the equity pledge against third parties who acquire the equity interests in Beijing Tarenain good faith. Exclusive Option Agreements Under the exclusive option agreements between Tarena International, Inc., Tarena Tech, each of the shareholders of Beijing Tarena and Beijing Tarena, asamended and restated, each of the shareholders irrevocably granted Tarena International, Inc. or its designated representative(s) an exclusive option topurchase, to the extent permitted under PRC law, all or part of his equity interests in Beijing Tarena. In addition, Tarena International, Inc. has the option toacquire the equity interests in Beijing Tarena for a specified price equal to the loan provided by Tarena Tech to the individual shareholders. If the lowestprice permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Tarena International, Inc. or itsdesignated representative(s) has sole discretion as to when to exercise such options, either in part or in full. Without Tarena International, Inc.’s prior writtenconsent, Beijing Tarena’s shareholders shall not sell, transfer, mortgage, or otherwise dispose any equity interests in Beijing Tarena. These agreements willremain effective until all equity interests in Beijing Tarena held by its shareholders are transferred or assigned to Tarena International, Inc. or TarenaInternational, Inc.’s designated representatives. 77  Loan Agreements Pursuant to the loan agreements between Tarena Tech and each individual shareholder of Beijing Tarena, as amended and restated, Tarena Tech providedloans with an aggregate amount of RMB5 million to the individual shareholders of Beijing Tarena for the sole purpose of providing capital for BeijingTarena. The loans can only be repaid in a manner determined by Tarena Tech at its sole discretion, which repayment may take the form of transferring theindividual shareholders’ equity interest in Beijing Tarena to Tarena or its designated person pursuant to the exclusive option agreements. The loan shall beinterest-free, unless the transfer price exceeds the principal of the loan when each individual shareholder of Beijing Tarena transfers his equity interests inBeijing Tarena to Tarena or its designated person(s). Such excess over the principal of the loan shall be deemed the interest of the loan to the extent permittedunder PRC law. The term of each loan agreement is ten years from the date of the agreement expiring in 2026 and can be extended with the written consent ofboth parties before expiration. In the opinion of our PRC counsel, Han Kun Law Offices, these contractual arrangements are valid, binding and enforceable under current PRC laws.However, these contractual arrangements may not be as effective in providing control as direct ownership. There are substantial uncertainties regarding theinterpretation and application of current or future PRC laws and regulations. For a description of the risks relating to our contractual arrangements, please see“Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure.” D.Property, Plants and Equipment We have dual headquarters in China, located in Beijing and Hangzhou. Our principal executive offices in Beijing comprise of approximately 2,640 squaremeters and accommodate certain of our management and general and administrative activities, as well as our research and development activities. We alsohave approximately 26,344 square meters in leased classroom space in Beijing. Our principal executive offices and classrooms in Hangzhou comprise ofapproximately 17,190 square meters of leased space. Our principal executive offices in Hangzhou accommodate certain of our management and general andadministrative activities. In addition to our principal executive offices in Beijing and Hangzhou, we maintain a number of offices, classrooms and student dormitories with anaggregate of approximately 264,742 square meters in 59 cities in the PRC. For our leased facilities, we leased them from unrelated third parties. Our leaseterms range from one to ten years. We purchased two office buildings in Beijing in 2016, mainly for teaching purpose, and to a lesser extent foradministrative function. We paid an aggregate of RMB231.9 million for these two office buildings. We also purchased a building in Qingdao and anotherone in Haikou for an aggregate price of RMB50 million in 2016. The purpose of these two buildings is mainly teaching and partly for administration. We believe that the facilities that we currently own or lease are adequate to meet our needs for the foreseeable future, and we believe that we will be able toobtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansion plans. ITEM 4.A.UNRESOLVED STAFF COMMENTS Not Applicable. 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 consolidatedfinancial statements and their related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See “Forward-Looking Information.” 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 on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks anduncertainties. 78  A.Operating Results Overview Net Revenues We derive substantially all of our net revenues from tuition fees that we charge students. In 2015, 2016 and 2017, we generated net revenues of RMB1,178.0million, RMB1,579.6 million and RMB1,973.8 million, respectively. We record tuition fees that we collect in advance as deferred revenues. Our net revenuesare presented net of business tax and surcharges. Number of Course and Student Enrollments Our ability to generate and increase revenues is primarily driven by our ability to increase the number of course enrollments and student enrollments. Ourtotal adult course enrollments increased from 78,729 in 2015 to 102,298 in 2016 and further to 120,162 in 2017. Our total adult student enrollmentsincreased from 84,041 in 2015 to 107,493 in 2016 and further to 128,776 in 2017. Total student enrollments in kid education programs increased from 2,354in 2016 to 9,580 in 2017. Our total student enrollments are affected by the continuing popularity of our existing courses and programs and the number and popularity of new coursesand new programs we offer. In 2017, our digital arts course was the largest course in terms of revenues and number of student enrollments. Since inception, wehave developed and launched sixteen new courses, as well as four new education programs targeting kids. Our total student enrollments are also affected by our ability to maintain our cooperative relationships with financing service providers for student loans. Asignificant portion of our students enrolled in 2017 relied on loans provided or arranged by Baidu Small Loan, BOC CFC, RenRenDai, CreditEase, andShiTuDai to pay for our tuition fees. In 2017, approximately 52.4% of our students received loans provided or arranged by Baidu Small Loan, BOC CFC,RenRenDai, CreditEase, and ShiTuDai to pay for our tuition fees. Tuition fees Our net revenues are affected by the tuition fees for each of our courses. For our full-time classes for adult students, our standard tuition fees generally rangefrom RMB15,800 to RMB26,800 per course. We raised the standard tuition fees on selected courses offered in certain large cities by RMB1,000 to RMB2,000 per course in 2016. We also increased our tuition fees for part-time classes on selected courses offered in certain large cities by RMB1,000 toRMB2,000 per course in 2017. For our kid education programs, our standard tuition fees are between RMB11,400 and RMB19,000. Courses under kideducation program typically are composed of four levels, with each level consisting of 120 learning hours in one year. The actual tuition fees of our courses for adult students may vary according to the recruiting channel through which a student is enrolled. We recruit studentseither through our direct marketing efforts or from our network of cooperative universities and colleges. We generally offer certain discount for studentsenrolled through our network of cooperative universities and colleges. In 2017, we recruited approximately 16% of our students from these universities andcolleges. Our tuition fees of our courses for adult students are also affected by the payment option selected by our students. We primarily offer two payment options forour students, including one-time full payment upon enrollment and multiple payments within two months of enrollment. We also allow qualified students topay our tuition fees within a period of time after graduation. We generally charge approximately RMB1,000 to RMB5,000 higher in tuition fees to studentselecting to pay in multiple payments, as compared to students who elect to pay in full upfront. Our tuition fees for TongchengTongmei education programsare required to be fully paid up-front. 79  For our post-graduation payment option, qualified students are given a grace period of up to six months after graduation to look for employment, duringwhich time no repayment needs to be made. After such grace period, students are given a ten-month repayment period. In order to qualify for such paymentoption, students must pass our credit screening by furnishing to us a number of supporting documents, for instance a credit report from the People’s Bank ofChina. Cost of Revenues Our cost of revenues primarily consists of payroll and employee benefits for our instructors (as apportioned based on the amount of time that they devote toteaching), teaching assistants, career counselors and employer cooperation representatives, as well as rental payments for our learning centers, and to a lesserextent, depreciation relating to property and equipment used at our learning centers. The following table sets forth a breakdown of our cost of revenues inabsolute amounts and as percentages of net revenues for the periods indicated: For the Year Ended December 31, 2015 2016 2017 RMB % of net revenues RMB % of net revenues RMB % of net revenues (in thousands, except percentages) Personnel cost and welfare 123,341 10.5 173,240 11.0 238,898 12.1 Rental cost 97,927 8.3 125,856 8.0 169,824 8.6 Others 112,291 9.5 150,008 9.4 190,477 9.7 Total cost of revenues 333,559 28.3 449,104 28.4 599,199 30.4 Our cost of revenues is primarily affected by the number of our learning centers. In terms of the professional education business, we had a total of 134, 145and 184 learning centers as of December 31, 2015, 2016 and 2017, respectively. We also have a total of 30 learning centers for kid students as of December31, 2017. Our cost of revenues as a percentage of net revenues was 28.3%, 28.4% and 30.4% in 2015, 2016 and 2017, respectively. We expect our cost ofrevenues to continue to increase as we plan to open more learning centers. Operating Expenses Our operating expenses consist primarily of selling and marketing expenses, general and administrative expenses and, to a lesser extent, research anddevelopment expenses. The following table sets forth our operating expenses in absolute amounts and as percentages of net revenues for the periodsindicated: For the Year Ended December 31, 2015 2016 2017 RMB % of net revenues RMB % of net revenues RMB % of net revenues (in thousands, except percentages) Selling and marketing expenses 384,954 32.7 527,553 33.4 713,120 36.1 General and administrativeexpenses 251,298 21.3 307,519 19.5 392,296 19.9 Research and developmentexpenses 50,515 4.3 65,594 4.1 100,032 5.1 Total operating expenses 686,767 58.3 900,666 57.0 1,205,448 61.1 80  Our selling and marketing expenses primarily consist of compensation expenses relating to our personnel involved in selling and marketing, including ourenrollment advisors and our university cooperation representatives based at our learning centers, advertising expenses relating to our marketing activities,and, to a lesser extent, rental expenses relating to our selling and marketing functions. We expect our selling and marketing expenses to increase as we furtherexpand our business. Our general and administrative expenses primarily consist of compensation expenses relating to our management and administrative personnel, includingshare-based compensation, and bad debt allowance associated with our post-graduation tuition installment payment option for qualified students. To a lesserextent, our general and administrative expenses include office expenses relating to administrative functions. We expect our general and administrative expenses to increase in the future on an absolute basis as our business grows and we incur costs related tocomplying with our reporting obligations as a public company under U.S. securities laws. Our research and development expenses primarily consist of a portion of the personnel costs of our instructors as determined based on the amount of time thatthey devote to research and development-related activities, as well as the personnel costs of our software engineers. Seasonality Seasonal fluctuations have affected, and are likely to continue to affect, our business. Historically, we typically generate the highest net revenues in the thirdand fourth quarters because of the increased student enrollments during summer vacation. We generally generate less tuition fees in the first quarter of eachyear due to the Chinese New Year holiday. Our quarterly cost of revenue, selling and marketing expenses, general and administrative expenses and researchand development expenses have generally been increasing in absolute amounts since 2012 as we expanded our network of learning centers, increased thenumber of our personnel and enhanced our marketing efforts. Internal Control Over Financial Reporting We are subject to reporting obligations under the U.S. securities laws. Among other things, the Securities and Exchange Commission, or the SEC, as requiredby Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring every public company, including us, to include a managementreport on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of thecompany’s internal control over financial reporting. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JumpstartOur Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act, our independent registeredpublic accounting firm may be required to report on the effectiveness of our internal control over financial reporting. As a result of such assessment, our management identified a material weakness as of December 31, 2017, which was the insufficient review in areas subject tosignificant estimates and judgments. This material weakness may result in a material misstatement to our quarterly or annual consolidated financialstatements that would not be prevented or detected. As a result of the material weakness, management has concluded that our internal control over financialreporting was ineffective as of December 31, 2017. Our management has been engaged in, and continues to be engaged in making necessary changes and improvements to the overall design of its controlenvironment to address the material weakness in internal control over financial reporting and the ineffectiveness of our disclosure controls and proceduresdescribed above. To remediate the material weakness described above, we plan to continue to: (i) reinforce the oversight and review procedure over areassubject to significant estimates and judgments; and (ii) enhance our accounting manual to provide our accounting team with more comprehensive guidelineson the accounting policies under U.S. GAAP and SEC rules and requirements. We plan to continue to assess our standardized processes to further enhance theeffectiveness of our financial review, including the analysis and monitoring of financial information in a consistent and thorough manner. We expect that we will incur more costs in the implementation of such measures. However, the implementation of these measures may not fully address thematerial weakness in our internal control over financial reporting. See “Item 3. Key Information – D. Risk Factors—Risks Related to Our Business—If we failto maintain an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud or fail to meet ourreporting obligations, and investor confidence and the market price of our ADSs may be materially and adversely affected.” Taxation Cayman Islands We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition,dividend payments are not subject to withholding tax in the Cayman Islands. Hong Kong Our wholly-owned subsidiary in Hong Kong, Tarena Hong Kong Limited, is subject to Hong Kong profits tax on its activities conducted in Hong Kong. Noprovision for Hong Kong profits tax has been made in the consolidated financial statements as Tarena Hong Kong Limited has no assessable income since itsinception on October 22, 2012 to December 31, 2017. China Pursuant to the EIT Law and its Implementation Rules, which became effective on January 1, 2008, foreign-invested enterprises and domestic companies aresubject to enterprise income tax at a uniform rate of 25%. In addition, “high and new technology enterprises,” or HNTEs, will enjoy a preferential enterpriseincome tax rate of 15% under the EIT Law. Tarena Tech qualified as a HNTE under the EIT Law and is eligible for a preferential enterprise income tax rate of15% for the period from 2009 to the end of 2017. Tarena Hangzhou was established in 2013 and qualified as a “newly established software enterprise”, whichentitles it to two years of full exemption followed by three years of 50% exemption, commencing from the year in which its taxable income is greater thanzero, which was 2014. On Jan 25, 2016, we acquired 100% of the equity interests in Hangzhou Han Ru Education Technology Co., Ltd, which is qualified asa “newly established software enterprise”, which entitles it to two years of full tax exemption followed by three years of 50% tax exemption, commencingfrom 2016. Certain of our subsidiaries qualify as “Small Profit Enterprises” in 2015, 2016 and 2017, and therefore are subject to the preferential income taxrate of 20%. Subject to the approvals from the tax authorities in certain locations in the PRC, our subsidiaries and consolidated VIE that are based in theselocations are required to use the deemed profit method to determine their income tax. Under the deemed profit method, these subsidiaries are subject toincome tax at 25% on its deemed profit which is calculated based on revenues less deemed expenses equal to 85% to 90% of revenues. 81  Critical Accounting Policies We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect(i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) thereported amounts of revenues and expenses during each reporting period. We continually evaluate these judgments, estimates and assumptions based on ourown historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on availableinformation, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates isan integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higherdegree of judgment than others in their application. When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertaintiesaffecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. We believe the followingaccounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. Revenue recognition We derive substantially all of our net revenues from tuition fees, a portion of which we allow qualified students to pay on installment for a period of timeexceeding one year. When tuition services are sold on repayment terms that exceed one year beyond the point in time that revenue is recognized, thereceivable, and therefore the revenue is recorded at the present value of the total payments. The difference between the present value of the receivable and thenominal or principal value of the tuition fees is recognized as interest income over the contractual collection period using the effective interest rate method.The interest rate used to determine the present value of the total amount receivable is the rate at which students can obtain financing of a similar nature fromother sources at the date of the transaction. We enter into arrangements with certain students that purchase multiple services, including classroom training and extended on-line case studies, or multiple-element arrangements. We treat training contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes andrecognizes revenue during the contract period when each deliverable service is provided. We allocate the contract price among all the deliverables at theinception of the arrangement on the basis of their relative selling prices according to the selling price hierarchy established by Accounting Standard UpdateNo. 2009-13, Revenue Recognition - Multiple-Deliverable Revenue Arrangements. We first use vendor-specific objective evidence (VSOE) of selling price, ifit exists, otherwise the third-party evidence of selling price is used. If neither VSOE of selling price nor third-party evidence of selling price exists, we use ourbest estimate of selling price for the deliverables. Allowance for doubtful accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our students to make payments according to theirrespective payment plans stipulated on the arrangement. We determine the allowance by analyzing students’ accounts that have known or potentialcollection issues and applying historical loss rates to the aging of the remaining balances of accounts receivable. In the event that we believe an accountreceivable will become uncollectible, we record an additional provision to increase the allowance for doubtful accounts. 82  Long-lived assets Our long-lived assets include property and equipment. We depreciate our property and equipment using the straight-line method over the estimated usefullives of the assets. We make estimates of the useful lives of property and equipment, including the salvage values, in order to determine the amount ofdepreciation expense to be recorded during each reporting period. We amortize leasehold improvements of our learning center facilities and offices over theshorter of the lease term or the estimated useful life of the assets. We estimate the useful lives of our other property and equipment at the time the assets areacquired based on historical experience with similar assets, as well as anticipated technological or other changes. If technological changes were to occur morerapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may be shortened, which would result in therecognition of increased depreciation expense in future periods. There has been no change to the estimated useful lives or salvage values of our property andequipment in 2015, 2016 and 2017. We evaluate property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may notbe recoverable. We assess recoverability by comparing the carrying amount of a long-lived asset or asset group to the estimated undiscounted future cashflows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cashflows, we recognize an impairment charge based on the amount by which the carrying amount exceeds the estimated fair value of the asset or asset group. Weestimate the fair value of the asset or asset group based on the best information available, including prices for similar assets, and in the absence of anobservable market price, the results of using a present value technique to estimate the fair value of the asset or asset group. No impairment on our long-lived assets was recognized in 2015, 2016 and 2017. Share-based Compensation We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award andrecognize the cost over the period the employee is required to provide service in exchange for the award, which is generally the vesting period. We haveelected to recognize the compensation cost for an award with only service conditions that have a graded vesting schedule on a straight-line basis over therequisite service period for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized at any date atleast equals the portion of the grant-date value of such award that is vested at that date. Forfeiture rates are estimated based on historical and futureexpectations of employee turnover rates. On September 22, 2008, we adopted the 2008 Plan, pursuant to which we can issue share options and other share-based awards to our key employees,directors and consultants to purchase up to 6,002,020 of our ordinary shares (being retroactively adjusted to reflect the effect of the share split). On November28, 2012, we increased the number of our ordinary shares authorized for issuance under the 2008 Plan to 8,184,990. Share options issued before September22, 2008 are also administered under the 2008 Plan. In February 2014, we adopted the 2014 Plan, pursuant to which we were authorized to issue options, restricted shares and restricted share units to ourqualified employees, directors and consultants. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, orthe Award Pool, is 1,833,696, provided that the shares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing withJanuary 1, 2015, if the unissued shares reserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstandingon a fully-diluted basis on December 31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in theAward Pool immediately after each such increase shall equal 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31of the immediately preceding calendar year. From January 1, 2015 to December 31, 2017, our board of directors has granted the following options to our executive officers and employees: 83  Number of Options Exercise Price (US$) Fair Value of Ordinary Shares (US$) Grant date March 1, 2015 to December 6, 2015 615,624 0.89-4.36 9.28-12.85 January 1, 2016 to December 31, 2016 1,115,807 0.058-4.36 9.99-16.54 January 1, 2017 to December 31, 2017 682,435 0.058-4.36 14.27-19.03 In 2015, 2016 and 2017, Mr. Shaoyun Han exercised 2,439,014, 483,816 and 1,355,730 share options respectively to purchase Class A ordinary shares. In determining the fair value of share options granted to executive officers and certain employees, we have used the binomial option pricing model. Underthis option pricing model, certain assumptions, including the risk-free interest rate, the expected dividends on the underlying ordinary shares and theexpected volatility of the price of the underlying shares for the contract term of the options, are required in order to determine the fair value of the options.Changes in these assumptions could significantly affect the fair value of share options and hence the amount of compensation expense we recognize in ourconsolidated financial statements. For the options granted, we used the following assumptions on the date of grant in determining the estimated fair value per option: Options Granted In 2015 Options Granted In 2016 Options Granted In 2017 Expected volatility 62.3%-70.9% 63.5%-68.8% 63.7%-67.8%Expected dividends yield 0% 0% 0%Exercise multiple 2.0 2.0 2.0 Risk-free interest rate per annum 2.68%-2.99% 2.15%-3.18% 2.88%-3.22%The fair value of underlying ordinary shares (per share) US$9.28-US$12.85 US$9.99-US$16.54 US$14.27-US$19.03 The fair values of underlying ordinary shares are closing prices of our stock traded in the open market as of each grant date. For the purpose of determiningthe estimated fair value of our share options, we believe the expected volatility is the most critical assumption. The expected volatility of our future ordinary share price was estimated with reference to the price volatility of the shares of the Company and comparablepublic traded companies engaged in the similar industry. Income taxes The realization of the future tax benefits of deferred income tax assets is dependent on future taxable income against which such tax benefits can be appliedor utilized and any tax planning strategies. In assessing the realizability of deferred income tax assets, we consider whether it is more likely than not thatsome portion or all of the deferred income tax assets will not be realized. All available evidence must be considered in determining the realizability of thedeferred income tax assets. Such evidence includes, but is not limited to, the financial performance of subsidiaries and consolidated VIE, the marketenvironment in which these entities operate, the utilization of past tax credits, and the length of relevant carryforward periods. Sufficient negative evidence,such as a cumulative net loss during a three-year period that includes the current year and the prior two years, may require that a valuation allowance beestablished with respect to existing and future deferred income tax assets. In view of cumulative losses sustained by our PRC subsidiaries and consolidatedVIEs, valuation allowances of RMB20.1 million, RMB26.5 million and RMB36.9 million were provided as of December 31, 2015, 2016 and 2017,respectively. If, in the future, taxable incomes are available for each tax-paying component, the valuation allowances against our deferred income tax assetsmay be adjusted. 84  In order to assess uncertain tax positions, we adopt a more likely than not threshold and a two-step approach for the tax position measurement and financialstatement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of availableevidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. Thesecond step is to measure the tax benefit as the largest amount that is greater than 50% likely to be realized upon settlement. The unrecognized tax benefitswere RMB53.4 million, RMB69.8 million and RMB91.5 million as of December 31, 2015, 2016 and 2017, respectively. No interest and penalty expenseswere recorded for the years ended December 31, 2015, 2016 and 2017. Recently Issued Accounting Policies See note 2 to our audited consolidated financial statements included in this annual report for recently issued accounting standards that we believe may haveimplications on our consolidated financial statements for future periods. Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages ofour net revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annualreport. The operating results in any period are not necessarily indicative of the results that may be expected for any future period. For the Year Ended December 31, 2015 2016 2017 RMB % of Net Revenues RMB % of Net Revenues RMB % of Net Revenues (in thousands, except percentages) Net revenues 1,178,008 100.0 1,579,604 100.0 1,973,806 100.0 Cost of revenues(1) (333,559) (28.3) (449,104) (28.4) (599,199) (30.4)Gross profit 844,449 71.7 1,130,500 71.6 1,374,607 69.6 Operating expenses(1): Selling and marketing (384,954) (32.7) (527,553) (33.4) (713,120) (36.1)General and administrative (251,298) (21.3) (307,519) (19.5) (392,296) (19.9)Research and development (50,515) (4.3) (65,594) (4.2) (100,032) (5.1)Operating income 157,682 13.4 229,834 14.6 169,159 8.6 Interest income 42,732 3.6 23,974 1.5 21,000 1.1 Other income 11,812 1.0 15,960 1.0 26,702 1.4 Loss on foreign currency forward — — (12,898) (0.8) — — Foreign currency exchange gains(losses) (29,499) (2.5) 3,760 0.2 (6,284) (0.3)Income before income taxes 182,727 15.5 260,630 16.5 210,577 10.7 Income tax expense (3,967) (0.3) (18,776) (1.2) (25,770) (1.3)Net income 178,760 15.2 241,854 15.3 184,807 9.4 Notes: (1)Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows: 85  For the Year Ended December 31 2015 2016 2017 RMB RMB RMB (in thousands) Cost of revenues 664 4,124 1,285 Selling and marketing expenses 1,959 5,496 4,863 General and administrative expenses 28,274 51,154 60,491 Research and development expenses 2,022 7,050 10,776 The Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016 Net revenues Our net revenues increased by 25% from RMB1,579.6 million in 2016 to RMB1,973.8 million in 2017. This increase was primarily due to increased courseenrollments and to a lesser extent, an increase in the standard tuition fees. The number of total student enrollments grew by 19.8% from 107,493 in 2016 to128,776 in 2017, and we experienced a significant increase in our total student enrollments in kid education programs, a 307.0% year-over-year increasefrom 2,354 in 2016 to 9,580 in 2017. The number of our total student enrollments is affected by the continuing popularity of our existing courses andprograms and the number and popularity of new courses and new programs we offer. In the past year, we experienced a significant increase in studentenrollments for the courses, such as Java and digital arts. The number of our learning centers increased from 145 as of December 31, 2016 to 184 as ofDecember 31, 2017 to cater to the increased demand for our courses. Our K-12 business has expanded into 24 cities by the end of 2017. In 2017, we raised thestandard tuition fees on selected courses offered in certain large cities by RMB1,000 to RMB2,000 per course. We generally offer a discount of aroundRMB4,000 per person per full-time course for students enrolled through our network of cooperative universities and colleges. In 2017, we recruitedapproximately 16% of our students from these universities and colleges, as compared with 14.7% in 2016. Cost of Revenues Our cost of revenues increased by 33.4% from RMB449.1 million in 2016 to RMB599.2 million in 2017. This increase was mainly due to an increase inpersonnel cost and welfare expenses resulting from growing number of teaching and advisory staff at our learning centers, rental cost resulting from higherseat capacity, as well as depreciation expenses for our learning centers. Our instructors, teaching assistants, career counselors and employer cooperationrepresentatives at our learning centers increased from 2,236 as of December 31, 2016 to 2,931 as of December 31, 2017. The increase was mainly due to thesignificant increase in the number of our teaching assistants and employer cooperation representatives. The number of our learning centers increased from145 as of December 31, 2016 to 184 as of December 31, 2017. The centers exclusively for kid education programs reached 30 as of December 31, 2017. Gross Profit and Gross Margin As a result of the foregoing, our gross profit increased by 21.6% from RMB1,130.5 million in 2016 to RMB1,374.6 million in 2017. Our gross profit margindecreased from 71.6% in 2016 to 69.6% in 2017, which was mainly due to the expansion of our center network. We added a net of 39 learning centers androlled out to 13 new cities during 2017. 86  Operating Expenses Our operating expenses increased by 33.8% from RMB900.7 million in 2016 to RMB1,205.4 million in 2017 as a result of increases in our selling andmarketing, general and administrative and research and development expenses. Selling and Marketing Expenses Our selling and marketing expenses increased by 35.2% from RMB527.6 million in 2016 to RMB713.1 million in 2017. This increase was partially due to anincrease in personnel cost and welfare expenses related to the growth in our selling and marketing headcount from 2,717 as of December 31, 2016 to 4,807 asof December 31, 2017, and marketing efforts as we expanded our course offerings and network of learning centers. The amount of personnel cost and welfareexpenses for our selling and marketing staff increased from RMB245.1 million in 2016 to RMB367.1 million in 2017. The increase in selling and marketingexpenses was also due to expanded marketing efforts, which increased advertising expenses from RMB201.3 million in 2016 to RMB237 million, primarilyas a result of increased spending on search engine advertising as we expanded our network of learning centers. General and Administrative Expenses Our general and administrative expenses increased by 27.6% from RMB307.5 million in 2016 to RMB392.3 million in 2017 primarily due to an increase incompensation cost for our increased number of general and administrative personnel to support our growing operations, from 1,304 as of December 31, 2016to 1,844 as of December 31, 2017 and an increase in share-based compensation expenses from 51,154 in 2016 to 60,491 in 2017. Since July 2015, we focused more on tracking and updating the personal information of our alumni who used the post-graduation payment option, and webegan to (i) task our career counselors with accounts receivable collection from their former students in such class and (ii) add accounts receivable collectionrate as a KPI for our regional managers, learning center managers and career counselors. In 2016, as we devote more resources towards accounts receivablemanagement, we observed a decrease in the cumulative default amount of accounts receivable for students enrolled between 2014 and 2015 who used thepost-graduation payment option. In 2017, our bad debt allowance continued to decrease, from RMB33.6 million in 2016 to RMB31.5 million in 2017. Webelieve that our stricter tracking and management of accounts receivable have been effective in generally reducing the overall delinquency risk. Research and Development Expenses Our research and development expenses increased by 52.5% from RMB65.6 million in 2016 to RMB100.0 million in 2017 primarily due to an increase inpersonnel cost and welfare expenses of our instructors and teaching assistants allocated to their system and content development activities for our courses, aswell as growing number of research and development staff as we expanded our course offerings and operations, which increase from 1,548 in 2016 to 2,028 in2017. Interest Income Our interest income decreased from RMB24.0 million in 2016 to RMB21.0 million in 2017. Our interest income in both periods consisted of interest earnedon our cash, cash equivalents and time deposits in commercial banks and interest income recognized in relation to our installment payment plan for students.The decrease in interest income in 2017 was primarily due to the lower interest rate on bank deposits. Income Tax Expense Our income tax expense was RMB25.8 million in 2017, compared to RMB18.8 million in 2016. The increase was mainly due to an increase in the effectivetax rate. 87  The effective income tax rate of 12.2% in 2017 was lower than the statutory income tax rate of 25% primarily because of (i) the preferential income tax rate of15% enjoyed by Tarena Tech, (ii) the preferential income tax rate of 12.5% enjoyed by one of our subsidiaries, (iii) the tax holiday enjoyed by one of oursubsidiaries, and (iv) the effect of research and development expenses bonus deduction allowed under PRC tax regulations, partially offset by recognition ofvaluation allowances for deferred income tax assets of certain subsidiaries, which were at cumulative loss position. There was less taxable income entitledwith preferential income tax rate which led to a higher effective income tax rate in 2017 comparing to that in 2016. The effective income tax rate of 7.2% in 2016 was lower than the statutory income tax rate of 25% primarily because of (i) the preferential income tax rate of15% enjoyed by Tarena Tech, (ii) the preferential income tax rate of 12.5% enjoyed by one of our subsidiaries, (iii) the tax holiday enjoyed by one of oursubsidiaries, and (iv) the effect of research and development expenses bonus deduction allowed under PRC tax regulations, partially offset by recognition ofvaluation allowances for deferred income tax assets of certain subsidiaries, which were at cumulative loss position. Net Income As a result of the foregoing, our net income decreased by 23.6% from RMB241.9 million in 2016 to RMB184.8 million in 2017. The Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015 Net revenues Our net revenues increased by 34.1% from RMB1,178.0 million in 2015 to RMB1,579.6 million in 2016. This increase was primarily due to increasedstudent enrollments and, to a lesser extent, an increase in the standard tuition fees. The number of total student enrollments grew by 27.9% from 84,041 in2015 to 107,493 in 2016. The number of our total student enrollments is affected by the continuing popularity of our existing courses and programs and thenumber and popularity of new courses and new programs we offer. In the past year, we experienced a significant increase in student enrollments for thecourses, such as Java, digital art, and Web front. The number of our learning centers increased from 134 as of December 31, 2015 to 145 as of December 31,2016 to cater to the increased demand for our courses. The increase in our average revenue per student was primarily a result of an increase in the standardtuition fees and the decrease in the percentage of our students recruited through our network of cooperative universities and colleges. In 2016, we raised thestandard tuition fees on selected courses offered in certain large cities by RMB1,000 to RMB 2,000 per course. We generally offer a discount of aroundRMB4,000 per person per full-time course for students enrolled through our network of cooperative universities and colleges. In 2016, the percentage of ourstudents recruited from our network of cooperative universities and colleges was approximately 14.7%, as compared with 16.2% in 2015. Cost of Revenues Our cost of revenues increased by 34.6% from RMB333.6 million in 2015 to RMB449.1 million in 2016. This increase was mainly due to an increase inpersonnel cost and welfare expenses resulting from growing number of teaching and advisory staff at our learning centers, rental cost resulting from higherseat capacity, as well as depreciation expenses for our learning centers. Our instructors, teaching assistants, career counselors and employer cooperationrepresentatives at our learning centers increased from 1,729 as of December 31, 2015 to 2,236 as of December 31, 2016. The number of our learning centersincreased from 134 as of December 31, 2015 to 145 as of December 31, 2016. Gross Profit and Gross Margin As a result of the foregoing, our gross profit increased by 33.9% from RMB844.4 million in 2015 to RMB1,130.5 million in 2016. Our gross profit marginslightly decreased from 71.7% in 2015 to 71.6% in 2016, which was mainly due to higher personnel cost and welfare expenses and higher share-basedcompensation expenses. 88  Operating Expenses Our operating expenses increased by 31.1% from RMB686.8 million in 2015 to RMB900.7 million in 2016 as a result of increases in our selling andmarketing, general and administrative and research and development expenses. Selling and Marketing Expenses Our selling and marketing expenses increased by 37.0% from RMB385.0 million in 2015 to RMB527.6 million in 2016. This increase was partially due toincreased personnel cost and welfare expenses related to growth in our selling and marketing headcount from 2,300 as of December 31, 2015 to 2,717 as ofDecember 31, 2016. The amount of personnel cost and welfare expenses for our selling and marketing staff increased from RMB182.3 million in 2015 toRMB245.1 million in 2016. The increase in selling and marketing expenses was also due to expanded marketing efforts, which increased advertisingexpenses from RMB151.5 million in 2015 to RMB201.3 million in 2016, primarily as a result of increased spending on search engine advertising as weexpanded our network of learning centers. General and Administrative Expenses Our general and administrative expenses increased by 22.4% from RMB251.3 million in 2015 to RMB307.5 million in 2016 primarily due to higherpersonnel costs and welfare expenses for our increased headcount of general and administrative personnel, from 1,015 as of December 31, 2015 to 1,304 as ofDecember 31, 2016 to support our growing operations, and an increase in share-based compensation expenses, which increased from RMB28.3 million in2015 to RMB51.2 million in 2016. Since July 2015, we focused more on tracking and updating the personal information of our alumni who used the post-graduation payment option, and webegan to (i) task our career counselors with accounts receivable collection from their former students in such class and (ii) add accounts receivable collectionrate as a KPI for our regional managers, learning center managers and career counselors. In 2016, as we devote more resources towards accounts receivable management, we observed a decrease in the cumulative default amount of accountsreceivable for students enrolled between 2014 and 2015 who used the post-graduation payment option. We believe that our stricter tracking and managementof accounts receivable have been effective in generally reducing the overall delinquency risk. Research and Development Expenses Our research and development expenses increased by 29.9% from RMB50.5 million in 2015 to RMB65.6 million in 2016 primarily due to increasedpersonnel costs and welfare expenses of our instructors allocated to their content development activities for our new courses, as well as increased number ofresearch and development staff as we expanded our course offerings and operations. Interest Income Our interest income decreased from RMB42.7 million in 2015 to RMB24.0 million in 2016. Our interest income in both periods consisted of interest earnedon our cash and time deposits in commercial banks and interest income recognized in relation to our installment payment plan for students. The decrease ininterest income was primarily due to lower bank deposits and interest rate, as well as lower tuition interest income in relation to our installment payment planfor students. Income Tax Expense Our income tax expense was RMB18.8 million in 2016, compared to RMB4.0 million in 2015. The increase was mainly due to an increase in the effectiveincome tax rate and higher taxable income. The effective income tax rate of 2.2% in 2015 was lower than the statutory income tax rate of 25% primarily because of (i) the preferential income tax rate of15% enjoyed by Tarena Tech, (ii) the tax holiday enjoyed by one of our subsidiaries and (iii) the effect of research and development expenses bonusdeduction allowed under PRC tax regulations, partially offset by recognition of valuation allowances for deferred income tax assets of certain subsidiaries,which were at cumulative loss position. 89  The effective income tax rate of 7.2% in 2016 was lower than the statutory income tax rate of 25% primarily because of (i) the preferential income tax rate of15% enjoyed by Tarena Tech, (ii) the preferential income tax rate of 12.5% enjoyed by one of our subsidiaries, (iii) the tax holiday enjoyed by one of oursubsidiaries, and (iv) the effect of research and development expenses bonus deduction allowed under PRC tax regulations, partially offset by recognition ofvaluation allowances for deferred income tax assets of certain subsidiaries, which were at cumulative loss position. Net Income As a result of the foregoing, our net income increased by 35.3% from RMB178.8 million in 2015 to RMB241.9 million in 2016. Inflation Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, theyear-over-year percent changes in the consumer price index for December 2015, 2016 and 2017 were increases of 1.6%, 2.1% and 1.6%, respectively. Impact of Foreign Currency Fluctuation See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Fluctuations in exchange rates could have a material adverseeffect on our results of operations and the value of your investment.” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—ForeignExchange Risk.” Impact of Governmental Policies See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China” and “Item 4. Information on the Company—B. BusinessOverview—Government Regulations.” B.Liquidity and Capital Resources Cash Flows and Working Capital Our principal sources of liquidity have been cash generated from operating activities and proceeds from the issuance and sale of our shares. As of December31, 2017, we had RMB1,119.7 million in cash and time deposits and we had no bank borrowings. Our cash consists of cash on hand and cash in bank, whichare unrestricted as to withdrawal. Cash of our consolidated VIEs, in the amount of RMB0.3 million as of December 31, 2017, can be used only to settleobligations of our consolidated VIEs. Cash equivalents consist of interest-bearing certificates of deposit with initial term of no more than three months whenpurchased. Time deposits, which mature within one year as of the balance sheet date, represent interest-bearing certificates of deposit with an initial term ofgreater than three months when purchased, while the time deposits that mature over one year as of the balance sheet date are included in non-current assets. We believe that our current cash, cash equivalents, time deposits and anticipated cash flow from operations will be sufficient to meet our anticipated cashneeds, including our cash needs for working capital and capital expenditures, for at least the next 12 months. See Cash, cash equivalents and time deposits under Note 2(d) to our audited consolidated financial statements included in this annual report for informationregarding the currencies in which cash, cash equivalents and time deposits were held as of December 31, 2017. 90  The following table sets forth a summary of our cash flows for the periods indicated: For the Year Ended December 31, 2015 2016 2017 RMB RMB RMB (in thousands) Net cash provided by operating activities 347,698 524,030 288,657 Net cash used in investing activities (72,309) (156,449) (223,122)Net cash used in financing activities (26,899) (78,044) (184,222)Effect of foreign currency exchange rate changes on cash and cash equivalents 4,413 7,197 (5,294)Net increase (decrease) in cash and cash equivalents 252,903 296,734 (123,981)Cash and cash equivalents at the beginning of the year 261,035 513,938 810,672 Cash and cash equivalents at end of the year 513,938 810,672 686,691 Operating Activities Net cash provided by operating activities decreased to RMB288.7 million in 2017 from RMB524.0 million in 2016, primarily due to an increase ofapproximately RMB141.7 million in cash collected from our students in 2017, which was offset by an increase of approximately RMB370.2 million in cashoperating expenditures, an increase of approximately RMB6.5 million in income tax payment and a decrease of proceeds from tax refund of approximatelyRMB0.3 million in 2016. Net cash provided by operating activities increased to RMB524.0 million in 2016 from RMB347.7 million in 2015, primarily due to an increase ofapproximately RMB546.3 million in cash collected from our students in 2016, which were partially offset by an increase of approximately RMB368.2million in cash operating expenditures, an increase of approximately RMB0.9 million in income tax payment and a decrease of proceeds from tax refund ofapproximately RMB0.9 million in 2016. Net cash provided by operating activities increased to RMB347.7 million in 2015 from RMB175.3 million in 2014, primarily due to an increase ofapproximately RMB400.2 million in cash collected from our students in 2015, a decrease of approximately RMB1.3 million in income tax payment andproceeds from tax refund of approximately RMB1.3 million in 2015, which were partially offset by an increase of approximately RMB230.4 million in cashoperating expenditures. Investing Activities Our cash used in investing activities is primarily related to investments in time deposits, short-term financial products and other entities with a greatdevelopment prospect, and purchase of buildings, property and equipment and leasehold improvements. Net cash used in investing activities was RMB223.1 million in 2017, consisting of purchase of short-term investment of approximately RMB1,970.0 million,purchase of time deposits of approximately RMB509.7 million, purchase of property and equipment, including computers and servers, of approximatelyRMB176.8 million in connection with the expansion of our network of learning centers, and payment for long-term investment and long-term investmentdeposit of approximately RMB54.9 million, and net payment for loans to employees of approximately RMB30.0 million; and partially offset by the maturityof short-term investment of approximately RMB1,989.3 million, and maturity of time deposits of approximately RMB529.0 million. Net cash used in investing activities was RMB156.4 million in 2016, consisting of purchase of short-term investment of approximately RMB1,937.0 million,purchase of time deposits of approximately RMB421.2 million, purchase of four office buildings, mainly for teaching purpose, and to a lesser extent, foradministrative functions, with a total consideration of RMB282.0 million, purchase of property and equipment, including computers and servers, ofapproximately RMB100.0 million in connection with the expansion of our network of learning centers, and payment for long-term investment andacquisition of Hanru Hangzhou of approximately RMB17.0 million, and net payment for loans to employees of approximately RMB15.4 million; andpartially offset by the maturity of short-term investment of approximately RMB1,937.0 million, and maturity of time deposits of approximately RMB678.7million. 91  Net cash used in investing activities was RMB72.3 million in 2015, consisting of purchase of short-term investment of approximately RMB945.0 million,purchase of time deposits of approximately RMB639.0 million, purchase of property and equipment, including computers and servers, of approximatelyRMB100.0 million in connection with the expansion of our network of learning centers, and payment for long-term investment and acquisition of HanruHangzhou of approximately RMB25.0 million; and partially offset by the maturity of short-term investment of approximately RMB945.0 million, andmaturity of time deposits of approximately RMB690.3 million. Financing Activities Net cash used in financing activities in 2017 was RMB184.2 million, which was primarily attributable to the payment for repurchase of treasury stock under ashare repurchase plan in the amount of RMB143.4 million, payment for dividend in the amount of RMB63.1 million, and partially offset by proceeds fromIssuance of Class A ordinary shares in connection with exercise of share options of RMB22.3 million. Net cash used in financing activities in 2016 was RMB78.0 million, which was primarily attributable to the payment for repurchase of treasury stock under ashare repurchase plan in the amount of RMB44.4 million, payment for dividend in the amount of RMB54.0 million, and partially offset by proceeds fromIssuance of Class A ordinary shares in connection with exercise of share options of RMB20.4 million. Net cash used in financing activities in 2015 was RMB26.9 million, which was primarily attributable to the payment for repurchase of treasury stock under ashare repurchase plan in the amount of RMB49.4 million, and partially offset by proceeds from Issuance of Class A ordinary shares in connection withexercise of share options of RMB22.5 million. Capital Expenditures Our capital expenditures are primarily related to purchase of office building, property and equipment, leasehold improvements and investments in computers,network equipment and software. Our capital expenditures were RMB100.0 million, RMB382.0 million and RMB177.3 million in 2015, 2016 and 2017,respectively. We have made and may continue to make acquisitions of businesses and properties that complement our operations. We purchased twobuildings in Beijing, two buildings respectively in Qingdao and in Haikou for an aggregate price of RMB282 million in 2016. The purchase contracts forthese two buildings are filed as exhibits to this annual report. The office buildings are mainly for teaching purpose, and to a lesser extent for administrativefunctions. We expect our capital expenditures will continue to be significant for the near future as we continue to expand our network of learning centers. Weexpect to fund our future capital expenditures with our current cash, cash equivalents, time deposits and anticipated cash flow from operations. Holding Company Structure We are a holding company with no material operations of our own. We conduct our operations primarily through our wholly-owned subsidiaries in China. Asa result, our ability to pay dividends depends upon dividends paid by our wholly-owned subsidiaries. If our wholly-owned subsidiaries or any newly formedsubsidiaries incur any debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly-ownedsubsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards andregulations. Under PRC law, each of our subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory surplusreserve until such reserve reaches 50% of its registered capital. Although the statutory surplus reserves can be used to increase the registered capital andeliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the eventof liquidation. As a result of these PRC laws and regulations, as of December 31, 2017, we had RMB130.3 million in statutory surplus reserves that are notdistributable as cash dividends. Our PRC subsidiaries have not historically paid any dividends to our offshore entities from their accumulated profits.However, we do not expect that the statutory surplus reserve requirement will materially limit our ability to pay dividends to our shareholders or our plan toexpand our business because we are only required to set aside an additional RMB243.4 million to satisfy the maximum requirement of statutory surplusreserves for all of our PRC subsidiaries as of December 31, 2017. In addition, our private schools requiring reasonable returns are required to appropriate noless than 25% of their net income to a statutory development fund, whereas in the case of private schools requiring no reasonable return, this amount shall beno less than 25% of the annual increase of their net assets. As of December 31, 2017, we had RMB23.6 million in statutory development fund that are notdistributable as cash dividends. 92  C.Research and Development, Patents and Licenses, etc. Research and Development Building a reliable, scalable and secure technology infrastructure is crucial to our ability to support our live lecture broadcasts, online TTS, TMOOC.cn andthe various services that we provide to our students. We manage our lecture delivery system, TTS and TMOOC.cn using a combination of commerciallyavailable software, hardware systems and proprietary technology. Since 2006, we have established a powerful online platform that enables thousands ofstudents to simultaneously log onto our TTS and participate in activities online. We developed our CRM software in-house to manage our student and corporate employer information, as well as to integrate our key administrativefunctions. We rely on our internal IT resources to upgrade the CRM system as needed. Our research and development expenses primarily consist of a portion of the personnel costs of our instructors as determined based on the amount of time thatthey devote to research and development-related activities, as well as the personnel costs of our software engineers. Our research and development expenseswere RMB50.5 million, RMB65.6 million and RMB100.0 million in 2015, 2016 and 2017, respectively. Intellectual Property Our trademarks, copyrights, domain names, trade secrets and other intellectual property rights distinguish our courses and services from those of ourcompetitors and contribute to our ability to compete in our target markets. We rely on a combination of copyright and trademark law, trade secret protectionand confidentiality agreements with senior executive officers and most other employees, to protect our intellectual property rights. In addition, we requirecertain of our senior executive officers and other employees to enter into agreements with us under which they acknowledge that all inventions, utilitymodels, designs, know-how, copyrights and other forms of intellectual property made by them within the scope of their employment with us, pursuant to jobassignments or using our materials and technology, or during the one year after their employment that relates to their employment with us, are our propertyand they should assign the same to us if we so require. We also regularly monitor any infringement or misappropriation of our intellectual property rights. As of December 31, 2017, we had registered 220 domain names relating to our business, including our www.tedu.cn, TMOOC.cn, jobshow.cn, www.IT61.cnand www.art61.cn websites, with the Internet Corporation for Assigned Names and Numbers and China Internet Network Information Center. Tarena Techholds 72 registered software copyrights, 54 trademarks and 220 registered domain names including www.tedu.cn. Beijing Tarena holds the domain nameTMOOC.cn. 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 period fromJanuary 1, 2017 to December 31, 2017 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capitalresources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. 93  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. We have not entered intoany 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 risksupport to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support tous or engages in leasing, hedging or research and development services with us. F.Tabular Disclosure of Contractual Obligations The following table sets forth our contractual obligations as of December 31, 2017: Payment due by December 31, Total 2018 2019 2020 2021 2022 2023 and thereafter (in thousands) Operating leasecommitments(1) 610,550 166,291 163,956 114,695 71,122 46,378 48,108 Note: (1)Represents our non-cancelable leases for our offices and learning centers. G.Safe Harbor This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historicalfacts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”“believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections aboutfuture events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Theseforward-looking statements include, but are not limited to, statements about: ·our goals and growth strategies; ·our expectations regarding demand for and market acceptance of our courses; ·our ability to retain and increase our student enrollments; 94  ·our ability to maintain and increase the utilization rate of our learning centers; ·our ability to offer new courses in existing and new subject areas; ·our ability to replicate the success and growth of our adult education services to the kid education market; ·our ability to maintain and increase the tuition fees of our courses; ·our ability to deepen and expand our corporate employer relationships; ·our ability to maintain our relationships with universities and colleges; ·our future business development, results of operations and financial condition; ·the expected growth of, and trends in, the markets for our services in China; ·relevant government policies and regulations relating to our corporate structure, business and industry; and ·assumptions underlying or related to any of the foregoing. You should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future resultsmay be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impactour business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and itis 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 towhich any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualifyall of our forward-looking statements by these cautionary statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise. 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 Age Position/TitleShaoyun Han 48 Founder, chairman and chief executive officerJianguang Li 54 DirectorYongji Sun 54 Independent directorXiaosong Zhang 55 Independent directorYa-Qin Zhang 53 Independent directorYuduo Yang 44 Chief financial officerYing Sun 42 Vice presidentYinan Qi 40 Vice president Shaoyun Han is our founder and has served as chairman of our board of directors and chief executive officer since our inception. Before founding Tarena inSeptember 2002, Mr. Han was deputy chief engineer and director of the software division of AsiaInfo-Linkage between 1995 and 2002, responsible forsoftware research and development and corporate management. Mr. Han received a bachelor’s degree in computer application from Jilin University in China. 95  Jianguang Li has served as our director since January 2004. Mr. Li has been a partner of IDG Capital Partners since March 2006, responsible for providingventure capital and private equity investment-related advice. Between 1999 and 2006, Mr. Li served as a vice-president of IDG Technology VentureInvestment Inc. Prior to joining IDG in 1999, Mr. Li worked in Crosby Assets Management Limited as an investment manager. Mr. Li has been a non-executive director of HC International, Inc., a company listed on the Hong Kong Stock Exchange, since August 2006. Mr. Li has been a non-executivedirector of China Binary Sale Technology Limited, a company listed on the Hong Kong Stock Exchange, since April, 2015. Mr. Li has been a director ofOlympique Lyonnais Groupe SA, a company listed on the Paris Stock Exchange, since December 2016. Mr. Li has also been the chairman of the board ofdirectors of Beijing Xingzhi Sports Co., Ltd., a company listed on the PRC National Equities Exchange and Quotations, since March 2017. Mr. Li received abachelor’s degree in management from Peking University and a master’s of science degree from the University of Guelph. Yongji Sun has served as our independent director since April 2014. Mr. Sun currently serves as the chairman of Dilato Infotech Inc. Between 2011 and 2014,Mr. Sun served as the chief executive officer of Shangxue Education Technology Inc. Between 2005 and 2011, Mr. Sun served as executive vice president ofspecial projects and strategic relationships at HiSoft Technology International Ltd., or HiSoft . Prior to joining HiSoft in November 2005, Mr. Sun foundedBeijing Tianhai Hongye International Software Co., Ltd. (Ensemble) in 2002 and served as its chief executive officer from 2003 to 2005. He founded andserved as chief executive officer of Newland Network Co. from 2000 to 2002. He founded Lotus China in 1993 and served as the head of the research anddevelopment center until 1998. Mr. Sun received a bachelor’s degree from North Eastern Machinery Institute in 1985, a master’s degree in Computer Sciencefrom Nanjing Aerospace & Aeronautic University in 1988, and received a master of business administration from Babson College in 2000. Xiaosong Zhang has served as our independent director since April 2014. Mr. Zhang currently serves as the chief financial officer of Momo Inc., a NASDAQ-listed company. Mr. Zhang served as an independent director and chairman of the audit committee of Sungy Mobile Limited, a NASDAQ-listed mobileinternet company, between November 2013 and July 2014. Mr. Zhang served as the chief financial officer of iSoftStone Holdings Limited, a NYSE-listedcompany, between July 2010 and April 2014, and was an independent director of iSoftStone between February 2010 and July 2010. Prior to joiningiSoftStone, Mr. Zhang served as chief financial officer of BJB Career Education Company Limited from 2009 to June 2010, as chief financial officer ofEmarket Holding Group, Ltd. from 2008 to 2009, as chief financial officer of Chinacars, Inc. from 2007 to 2008 and as chief financial officer of VimicroInternational Corporation, a NASDAQ-listed company, from 2004 to 2007. From 2000 to 2004, Mr. Zhang was a manager and then a senior manager at theBeijing office of PricewaterhouseCoopers. From 1995 to 1999, Mr. Zhang was an auditor and then a senior auditor at the Los Angeles office of KPMG LLP.Mr. Zhang received his master degree in accountancy from University of Illinois, his master degree in professional meteorology from Saint Louis University,and his bachelor degree in meteorology from Peking University. Mr. Zhang is a Certified Public Accountant in the State of California. Ya-Qin Zhang has served as our independent director since April 2014. Mr. Zhang has served as president of Baidu, Inc., a NASDAQ-listed company, sinceSeptember 2014. Mr. Zhang has been a non-executive director of Chinasoft International Ltd., a company listed on the Hong Kong Stock Exchange, sinceDecember 2008. Mr. Zhang has served as a director of ChinaCache International Holdings Ltd., a NASDAQ-listed company, between September 2010 andJuly 2017. Mr. Zhang has been a non-executive director of China Digital Video Holdings Limited, a company listed on the Hong Kong Stock Exchange,since January 2011. Mr. Zhang served as an independent director and member of the audit committee of Autohome Inc., a NYSE-listed company, betweenDecember 2013 and January 2015. Mr. Zhang served as the chairman of Microsoft Asia-Pacific R&D Group between 2005 and September 2014 and was incharge of the research and development of Microsoft Corporation in the Asia-Pacific region. Mr. Zhang is one of the founding members of the MicrosoftResearch Asia lab, where he served as managing director and chief scientist, and he also founded the Advanced Technology Center in 2003. Before joiningMicrosoft in 1999, Mr. Zhang was a director for the Multimedia Technology Laboratory at Sarnoff Corp. and worked as a senior technical staff member forGTE Laboratories Inc. and Contel Corp. Mr. Zhang received his bachelor’s and master’s degrees in electrical engineering from the University of Science andTechnology of China and a Ph.D. in electrical engineering from George Washington University. 96  Yuduo Yang has served as our co-chief financial officer since November 2015 and as our chief financial officer since April 2016. Prior to joining us, Mr. Yangwas a vice president at Beijing Fengshun Lubao Car Auction Company Limited from March 2015 to November 2015. From December 2013 to October 2014,Mr. Yang was a finance director at Bybon Group Company Limited. From June 2010 to December 2013, Mr. Yang was a finance director at South BeautyGroup, a well-known restaurant chain operator in China. Prior to that, Mr. Yang was a finance manager at Google and Lucent Technologies from December2007 to May 2010, and from April 2005 to November 2007, respectively, and an auditing manager at KPMG Beijing Office from July 1997 to April 2005.Mr. Yang received a bachelor’s degree in economics from Renmin University of China, as well as an MBA degree from Fordham University. Ying Sun is our vice president. Ms. Sun has served as our vice president since December 2009, responsible for our nation-wide operations. Ms. Sun joined usin June 2005 as the general manager of our Beijing learning centers. Between 2007 and 2009, she was the general manager of our northern region. From 1999to 2005, Ms. Sun worked in Gloria Hotels and Resorts, serving in various sales and human resources-related roles. Ms. Sun received a bachelor’s degree intourism economics management from Dongbei University of Finance and Economics in China. Yinan Qi is our vice president. Mr. Qi has served as our vice president since September 2013, responsible for student recruitment through retail channels. Mr.Qi served as our general manager of northern region between 2010 and 2014, responsible for our operations in Northern China. Mr. Qi joined us in March2007, previously serving in roles including the deputy general manager of northern region, deputy general manager of our Beijing learning centers anddirector of our Hangzhou learning center. Prior to joining us, Mr. Qi served as the general manager of the Beihang campus of GAMFE between 2005 and2006 and as director of technology at Zhonghe Wangxun (Beijing) Information Technology Co., Ltd. between 2002 and 2005. Mr. Qi received a bachelor’sdegree in optoelectronic technology from China Jiliang University and a master’s degree in multimedia technologies from the University of Science andTechnology Beijing. B.Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2017, we paid an aggregate of approximately RMB2.7 million in cash to our executive officers, and we paid anaggregate of RMB0.7 million in cash to our non-executive directors. For share incentive grants to our directors and executive officers, see “—Share IncentivePlan.” Our PRC subsidiaries and consolidated affiliated entities are required by law to make contributions equal to certain percentages of each employee’s salary forhis or her pension insurance, medical insurance, housing fund, unemployment and other statutory benefits. In July 2016, we purchased a health insurancepolicy for Mr. Shaoyun Han with a total premium of RMB31,097 and a sum insured of RMB8.0 million. Other than the above-mentioned statutorycontributions mandated by applicable PRC law and the health insurance policy, we have not set aside or accrued any amount to provide pension, retirementor other similar benefits to our executive officers and directors. Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for aspecified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer,such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, or misconduct or afailure to perform agreed duties. We may also terminate an executive officer’s employment without cause upon three-month advance written notice. In suchcase of termination by us, we will provide severance payments to the executive officer as expressly required by applicable law of the jurisdiction where theexecutive officer is based. The executive officer may resign at any time with a three-month advance written notice. 97  Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not touse, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any confidential informationor trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we haveconfidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which theyconceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist usin obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets. In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment andtypically for two years following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients,customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doingbusiness with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide servicesto any of our competitors, or engage, whether as a principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seekdirectly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’s termination, or in theyear preceding such termination, without our express consent. We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify ourdirectors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being adirector or officer of our company. Share Incentive Plan The 2008 Plan We have adopted the 2008 Plan in September 2008. The purpose of the 2008 Plan is to attract and retain the best available personnel for positions ofsubstantial responsibility, to provide additional incentives to selected directors, officers, employees and consultants and to promote the success of Tarena’sbusiness by offering these individuals an opportunity to acquire a proprietary interest in Tarena. Under the 2008 Plan, the maximum aggregate number of shares which may be issued is 8,184,990. As of March 31, 2018, options to purchase 752,202 ClassA ordinary shares are issued and outstanding, and there are 276,412 Class A ordinary shares available for future issuance upon the exercise of future grantsunder the 2008 Plan. Options to purchase a total of 3,815,000 Class A ordinary shares were granted prior to our adoption of the 2008 Plan. Such options were ratified by our boardand included in the 2008 Plan. The following paragraphs summarize the terms of the 2008 Plan. Types of Awards. The 2008 Plan permits the awards of options, restricted shares (or share appreciation rights or other similar awards) and rights to purchaserestricted shares. Plan Administration. Our board of directors or a committee appointed by our board will administer the 2008 Plan. The committee or the full board ofdirectors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms andconditions of each award grant, among other things. Award Agreement. Awards granted under the 2008 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 and the provisions applicable in the event of the grantee’s employment or service terminates. 98  Eligibility. We may grant awards to our employees, directors and consultants of our company, as well as trusts or companies established in connection withany of our employee benefit plan for the benefit of our employees, directors or consultants. Acceleration. The plan administrator may accelerate the vesting or exercisability of an option or lapsing of a repurchase or redemption right to whichrestricted shares may be subject. 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 ofoption 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 thetenth anniversary after the date of a grant. Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or applicable laws of descent and distribution orpursuant to a qualified domestic relations order and by trusts or companies established in connection with any of our employee benefit plan for the benefit ofan employee, director or consultant, except as otherwise provided by the plan administrator. Termination of Employment or Service. In the event that a grantee ceases employment with us or ceases to provide services to us, any vested options willgenerally terminate after a period of time following the termination of employment if the grantee does not exercise the options during this period. Restrictions on Issue of Shares. Options granted under the 2008 Plan can only be exercised and ordinary shares can only be issued upon the occurrence of (i)the consummation of a qualified initial public offering, (ii) the consummation of a liquidation event or (iii) the expiry of the five year period commencingfrom the grant date. Termination of the 2008 Plan. Unless terminated earlier, the 2008 Plan will terminate automatically in 2018. Our board of directors has the authority toamend or terminate the plan subject to shareholder approval if required by applicable law. The 2014 Plan We adopted the 2014 Plan in February 2014. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, orthe Award Pool, is 1,833,696, provided that the shares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing withJanuary 1, 2015, if the unissued shares reserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstandingon a fully-diluted basis on December 31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in theAward Pool immediately after each such increase shall equal 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31of the immediately preceding calendar year. The number of Class A ordinary shares available for future issuance upon the exercise of future grants under the2014 Plan was 1,186,680 as of January 1, 2018. As of March 31, 2018, options to purchase 2,632,140 Class A ordinary shares are issued and outstandingunder the 2014 Plan and 102,343 restricted share units were granted and outstanding under the 2014 Plan. The following paragraphs summarize the terms ofthe 2014 Plan. Types of Awards. The 2014 Plan permits the awards of options, restricted shares and restricted share units. Plan Administration. Our board or a committee of one or more members of our board duly authorized for the purpose of the 2014 Plan can act as the planadministrator. Award Agreement. Options, restricted shares or restricted share units granted under the 2014 Plan are evidenced by an award agreement that sets forth theterms, conditions and limitations for each grant. 99  Eligibility. We may grant awards to our employees, consultants or directors. However, we may grant options that are intended to qualify as incentive shareoptions only to our employees and employees of our parent companies and subsidiaries. Acceleration of Awards upon Change in Control. If a change in control, liquidation or dissolution of our company occurs, the plan administrator may, in itssole discretion, provide for (i) all awards outstanding to terminate at a specific time in the future and give each participant the right to exercise the vestedportion of such awards during a specific period of time, or (ii) the purchase of any award for an amount of cash equal to the amount that could have beenattained upon the exercise of such award, or (iii) the replacement of such award with other rights or property selected by the plan administrator in its solediscretion, or (iv) payment of award in cash based on the value of ordinary shares on the date of the change-in-control transaction plus reasonable interest. Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion ofoption 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 thetenth anniversary after the date of a grant. Exercise Price of Options. The exercise price in respect of any option shall be determined by the plan administrator and set forth in the award agreementwhich may be a fixed or variable price related to the fair market value of the shares. The exercise price per share subject to an option may be amended oradjusted in the absolute discretion of the plan administrator, the determination of which shall be final, binding and conclusive. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement. Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except asotherwise provided by the plan administrator. Termination. Unless terminated earlier, the 2014 Plan will terminate automatically in 2024. The following table summarizes, as of March 31, 2018, the outstanding options granted to our directors and executive officers under our share plan. Name Ordinary Shares Underlying Options Awarded Exercise Price (US$/Share) Date of Grant Date of ExpirationShaoyun Han * 4.360 February 20, 2014 February 19, 2024 * 1.830 February 20, 2014 February 19, 2024 * 4.360 March 1, 2015 February 28, 2025 * 1.830 December 31, 2016 December 29, 2026 * 1.000 April 1, 2017 March 30, 2027 * 1.000 January 1, 2018 December 30, 2027Jianguang Li * 0.058 January 1, 2004 September 21, 2023Yongji Sun — Xiaosong Zhang — Ya-Qin Zhang — Yuduo Yang * 1.000 May 17, 2016 May 15, 2026 * 1.000 January 1, 2017 December 31, 2026 * 1.000 January 1, 2018 December 30, 2027Ying Sun * 1.830 January 1, 2013 September 21, 2023 * 4.360 February 20, 2014 February 19, 2024 * 4.360 March 1, 2015 February 28, 2025 * 1.000 January 1, 2016 December 31, 2026 * 1.830 December 31, 2016 December 29, 2026 * 1.000 January 1, 2017 December 31, 2026 * 1.000 January 1, 2018 December 30, 2027Yinan Qi * 1.830 January 1, 2013 September 21, 2023 * 4.360 February 20, 2014 February 19, 2024 * 4.360 March 1, 2015 February 28, 2025 * 4.360 July 1, 2015 June 30, 2025 * 1.000 January 1, 2016 December 31, 2025 * 1.000 January 1, 2017 December 31, 2026 * 1.000 January 1, 2018 December 30, 2027Total 1,115,149 *The aggregate number of ordinary shares underlying the outstanding options held by this individual is less than 1% of our total outstanding shares as ofMarch 31, 2018. 100  The following table summarizes, as of March 31, 2018, the outstanding restricted share units we granted to our directors and executive officers under the2014 Plan. Name Number of Class A Ordinary Shares Underlying Restricted Share Units Date of GrantShaoyun Han — Jianguang Li — Yongji Sun * April 3, 2017Xiaosong Zhang * April 3, 2017Ya-Qin Zhang * April 3, 2017Yuduo Yang * February 28, 2017Ying Sun — Yinan Qi * February 28, 2017Total * *Less than 1% of our total outstanding shares as of March 31, 2018. As of March 31, 2018, other individuals as a group hold outstanding options to purchase a total of 2,269,193 Class A ordinary shares of our company, withexercise prices ranging from US$0.058 to US$4.36 per share. C.Board Practices Board of Directors Our board of directors currently consists of five directors. A director is not required to hold any shares in our company. Subject to the rules of the NASDAQGlobal Select Market and disqualification by the chairman of the relevant board meeting, a director may vote with respect to any contract, proposed contract,or arrangement in which he or she is materially interested. The board 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 anythird party. There is no age limit requirement for directors. The service agreements between us and the directors do not provide benefits upon termination oftheir services. 101  Committees of the Board of Directors We have an audit committee, a compensation committee and a nominating and corporate governance committee under the board of directors. We haveadopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Messrs. Xiaosong Zhang, Yongji Sun and Ya-Qin Zhang and is chaired by Mr. Xiaosong Zhang. Eachmember of our audit committee satisfies the “independence” requirements of Rule5605(c)(2) of the NASDAQ Stock Market Rules and meets theindependence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have determined that Mr.Xiaosong Zhang qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and theaudits 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 bythe 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; ·monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures toensure proper compliance; and ·reporting regularly to the board. Compensation Committee. Our compensation committee consists of Messrs. Ya-Qin Zhang, Yongji Sun and Xiaosong Zhang, and is chaired by Ya-QinZhang. Each member of our compensation committee satisfies the “independence” requirements of Rule5605(c)(2) of the NASDAQ Stock Market Rules. Thecompensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to ourdirectors and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberatedupon. 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 executiveofficers; ·reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; ·reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors ·selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’sindependence from management. 102  Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Messrs. Yongji Sun, Xiaosong Zhangand Ya-Qin Zhang, and is chaired by Mr. Yongji Sun. Each member of our nominating and corporate governance committee satisfies the “independence”requirements of Rule5605(c)(2) of the NASDAQ Stock Market Rules. The nominating and corporate governance committee assists the board in selectingindividuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governancecommittee 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, experienceand 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, aswell 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 significantdevelopments 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 have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty toexercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. Infulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder may have the right toseek damages in our name if a duty owed by our directors is breached. Terms of Directors and Officers 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 theyresign or are removed from office by ordinary resolution of our shareholders. A director will be removed from office automatically if, among other things, thedirector (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by our company to be of unsound mind. D.Employees We have dual headquartered in Beijing and Hangzhou, where our instructors, software engineers and certain general and administrative staff are based. Wehave divided our national network of learning centers into three regions, namely northern region, southern region, and central and western region, and wehave regional offices that are responsible for managing the daily operations of learning centers located within each territory. We had a total of 5,066, 6,257 and 9,582 employees as of December 31, 2015, 2016 and 2017, respectively. As of December 31, 2017, we had 1,825employees in Beijing, 514 employees in Hangzhou and 7,243 employees in other areas within China. The following table sets forth the number of ouremployees, categorized by function, as of December 31, 2017: 103  Functions Number of Employees Teaching and content development 2,028 Selling and marketing 4,807 Career development 593 Employer cooperation 310 General and administration 1,844 Total 9,582 As required by regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments,including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are requiredunder PRC law to make contributions from time to time to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances ofour employees, up to a maximum amount specified by the local government. Our employees are not covered by any collective bargaining agreement. We believe that we maintain a good working relationship with our employees, andwe have not experienced any significant labor disputes. E.Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2018by: ·each of our directors and executive officers; and ·each person known to us to own beneficially more than 5% of our ordinary shares. The calculations in the table below are based on 56,429,631 ordinary shares outstanding as of March 31, 2018, comprising of 49,223,572 Class A ordinaryshares and 7,206,059 Class B ordinary shares. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by aperson and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through theexercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of thepercentage ownership of any other person. Ordinary Shares Beneficially Owned Class A ordinary shares Class B ordinary shares Total ordinary shares on an as-converted basis % of total ordinary shares on an as-converted basis % of aggregate voting power † Directors and Executive Officers:** Shaoyun Han(1) 10,263,575 7,206,059 17,469,634 30.7 67.6 Jianguang Li(2) * — * * * Yongji Sun(3) * — * * * Xiaosong Zhang(4) * — * * * Ya-Qin Zhang(5) * — * * * Yuduo Yang * — * * * Ying Sun * — * * * Yinan Qi * — * * * All directors and executive officers as a group 10,659,521 7,206,059 17,865,580 31.3 67.8 Principal Shareholders: KKR funds(6) 6,826,263 — 6,826,263 12.1 5.6 AERO Holdings Limited(7) 6,673,982 — 6,673,982 11.8 5.5 Trafalgar Trading Fund Inc. (8) 3,368,837 — 3,368,837 6.0 2.8 Learningon Limited(9) 2,193,223 6,060,000 8,253,223 14.6 51.8 Connion Capital Limited(10) 4,070,352 — 4,070,352 7.2 3.3 Techedu Limited(11) 2,000,000 1,146,059 3,146,059 5.6 11.1 Davis Selected Advisers, L.P.(12) 4,347,615 — 4,347,615 7.7 3.6 104  Notes: *Less than 1%. **Except for Mr. Jianguang Li, Mr. Yongji Sun, Mr. Xiaosong Zhang and Mr. Ya-Qin Zhang, the business address of our directors and executive officers isSuite 10017, Building E, Zhongkun Plaza, A18 Bei San Huan West Road, Haidian District, Beijing, 100098, PRC. †For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by suchperson 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 entitledto one vote per share and each holder of our Class B ordinary shares is entitled to ten votes per share on all matters submitted to them for a vote. OurClass 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 mayotherwise 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-onebasis. (1)Represents (i) 6,060,000 Class B Ordinary Shares held by Learningon Limited, (ii) 1,146,059 Class B Ordinary Shares held by Techedu Limited, (iii)2,000,000 Class A Ordinary Shares held by Techedu Limited, (iv) 2,000,000 Class A Ordinary Shares held by Moocon Education Limited, (v) 3,594,439restricted American depositary shares (“ADSs”) representing 3,594,439 Class A Ordinary Shares held by Connion Capital Limited, (vi) 2,193,223restricted ADSs representing 2,193,223 Class A Ordinary Shares held by Learningon Limited, and (vii) 475,913 Class A Ordinary Shares that ConnionCapital Limited may purchase upon exercise of options within 60 days of March 31, 2018. Each of Connion, Learningon and Techedu is principally aninvestment holding vehicle. Each of Connion and Learningon is a company organized and existing under the laws of the British Virgin Islands, and isultimately wholly owned by HANQQ Trust. TMF (Cayman) Ltd. is the trustee of HANQQ Trust, with Mr. Han as settlor and Mr. Han and his family asbeneficiaries. Techedu Limited is a company organized and existing under the laws of the British Virgin Islands and is wholly owned by Mr. ShaoyunHan. Mr. Han is the sole director of each of Connion, Learningon and Techedu, which do not have any executive officer. The registered office address ofeach of Connion, Learningon and Techedu is the offices of Trident Trust Company, (B.V.I.) Ltd., Trident Chambers, Wickhams Cay, P.O. Box 146, RoadTown, Tortola, British Virgin Islands. (2)The business address of Mr. Li is 6/F., COFCO Plaza, No.8 Jianguomennei Ave, Jiannei St, Dongcheng District, Beijing, 100020, PRC. (3)The business address of Mr. Sun is 4th Floor, Jingban Xinxigang, No.3, East Yumin Road, Xicheng District, Beijing, PRC. (4)The business address of Mr. Zhang is 20th Floor, Block B, Tower 2, Wangjing SOHO, No.1 Futongdong Street, Chaoyang District, Beijing, PRC. (5)The business address of Mr. Zhang is Baidu Campus, No. 10 Shangdi 10th Street, Haidian District, Beijing 100085 PRC. (6)Consists of 6,826,263 Class A ordinary shares held by Talent Fortune Investment Limited, a Cayman Islands company, as of July 14, 2015 (as reported ina Schedule 13D amendment filed by KKR & Co. L.P. on August 30, 2017). Talent Fortune Holdings Limited is the sole shareholder of Talent FortuneInvestment Limited. KKR China Growth Fund L.P. is the controlling member of Talent Fortune Holdings Limited. KKR Associates China Growth L.P. isthe sole general partner of KKR China Growth Fund L.P. KKR China Growth Limited is the sole general partner of KKR Associates China Growth L.P.KKR Fund Holdings L.P is the sole shareholder of KKR Associates China Growth L.P. KKR Fund Holdings GP Limited is a general partner of KKR FundHoldings L.P. KKR Group Holdings L.P. is the sole shareholder of KKR Fund Holdings GP Limited and a general partner of KKR Fund Holdings L.P.KKR Group Limited is the general partner of KKR Group Holdings L.P. KKR & Co. L.P. is the sole shareholder of KKR Group Limited. KKRManagement LLC is the general partner of KKR & Co. L.P. The designated members of KKR Management LLC are Messrs. Henry R. Kravis and GeorgeR. Roberts. The business address of Talent Fortune Investment Limited is c/o KKR Asia Limited, Level 56, Cheung Kong Center, 2 Queen’s RoadCentral, Hong Kong. The percentage of beneficial ownership and voting power was calculated based on the total number of our ordinary sharesoutstanding as of March 31, 2018. (7)The number of ordinary shares beneficially owned is as of April 20, 2017, as reported in a Schedule 13G filed by AERO Holdings Limited on April 20,2017, and consists of (i) 6,355,741 ADSs, representing 6,355,741 Class A ordinary shares, held by Orchid Asia VI, L.P. and (ii) 318,241 ADSs,representing 318,241 Class A ordinary shares, held by Orchid Asia V Co-Investment Limited. The general partner of Orchid Asia VI, L.P. is OAVIHoldings, L.P., whose general partner is Orchid Asia VI GP, Limited. Orchid Asia VI GP, Limited is wholly owned by Orchid Asia V Group Management,Ltd., which is wholly owned by Orchid Asia V Group, Limited. AERO Holdings Limited is the controlling shareholder of Orchid Asia V Group, Limitedand Orchid Asia V Co-Investment Limited. Ms. Lam Lai Ming is the sole shareholder of AERO Holdings Limited. The business address of AEROHoldings Limited is Suites 6211-12, 62nd Floor, The Center, 99 Queen’s Road, Central, Hong Kong. The percentage of beneficial ownership and votingpower was calculated based on the total number of our ordinary shares outstanding as of March 31, 2018. 105  (8)Represents 3,368,837 Class A ordinary shares in the form of ADSs held by Trafalgar Trading Fund Inc., a Cayman Islands limited liability company,which is registered with the Cayman Islands Monetary Authority as a mutual fund. Trafalgar Trading Fund Inc. became our principle shareholder after itacquired 1,679,647 and 1,689,190 Class A ordinary shares in December 2016 and February 2017, respectively. The registered office address of TrafalgarTrading Fund Inc. is c/o Mourant Ozannes Corporate Services (Cayman) Limited 94 Solaris Avenue, P.O. Box 1348, Grand Cayman, KY1-1108, CaymanIslands. Trafalgar Trading Fund Inc. is managed by Trafalgar Capital Management (HK) Limited, with its business address at 18/F The Workstation, 43Lyndhurst Terrace, Central, Hong Kong. (9)Represents (i) 6,060,000 Class B ordinary shares and (ii) 2,193,223 ADSs representing 2,193,223 Class A ordinary shares. The registered office address ofLearingon Limited is the offices of Trident Trust Company (B.V.I.) Limited, Trident Chambers, P.O. Box 146, Road Town, Tortola, the British VirginIslands. Learingon Limited is ultimately owned by Mr. Shaoyun Han through a trust. (10)The registered office address of Connion Capital Limited is the offices of Trident Trust Company (B.V.I.) Limited, Trident Chambers, P.O. Box 146,Road Town, Tortola, the British Virgin Islands. Connion Capital Limited is ultimately owned by Mr. Shaoyun Han through a trust. (11)Represents (i) 2,000,000 Class A ordinary shares and (ii) 1,146,059 Class B ordinary shares. (12)Represents 4,347,615 Class A ordinary shares in the form of ADSs held by Davis Selected Advisers, L.P. as of February 13, 2018 (as reported on theSchedule 13G filed by Davis Selected Advisers, L.P. on February 13, 2018). The percentage of beneficial ownership was calculated based on the totalnumber of our ordinary shares outstanding as of March 31, 2018. The principal business address of Davis Selected Advisers, L.P. is 2949 East ElviraRoad, Suite 101, Tucson, Arizona 85756. Davis Selected Advisers, L.P. is a limited partnership established and existing under the law of Colorado, U.S. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share,while holders of Class B ordinary shares are entitled to ten votes per share. We issued Class A ordinary shares represented by our ADSs in our initial publicoffering in April 2014. Holders of our Class B ordinary shares may choose to convert their Class B ordinary shares into the same number of Class A ordinaryshares at any time. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. To our knowledge, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any other natural or legalpersons, severally or jointly. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. To our knowledge, as of March 31, 2018, 40,708,993 of our Class A ordinary shares are held by one record holder in the United States, which is thedepositary of our ADS program, representing 82.7% of our total issued and outstanding Class A ordinary shares as of such date. The number of beneficialowners 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. As of March31, 2018, none of our Class B ordinary shares are held by any record holder in the United States. For options and restricted share unit granted to our officers, directors and employees, see “—B. Compensation of Directors and Executive Officers—ShareIncentive Plan.” 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 VIE See “Item 4. Information on the Company—C. Organizational Structure.” 106  Transactions with Shareholders and Affiliates Transactions with Chuanbang. Starting from the second half of 2011, Chuanbang, a company owned by our chief executive officer, Mr. Shaoyun Han, beganto offer person-to-person lending to enable qualified students to borrow unsecured loans from unrelated individuals to pay for our tuition fees. Under theperson-to-person lending service offered by Chuanbang to students enrolled prior to January 1, 2014, a student enters into a loan agreement with Mr. Han, asthe designated representative of Chuanbang, to borrow an amount equal to our tuition fees. Mr. Han then assigns the existing loan agreement to an unrelatedindividual lender identified by Chuanbang, or the person-to-person lender, with us serving as the guarantor of the loan to the student. Upon the receipt ofcash from the person-to-person lenders, Mr. Han remits the cash to us directly on behalf of the student for the payment of such student’s tuition fees.Chuanbang services the student loans by collecting repayments on behalf of the person-to-person lenders from students, made to an account opened in thename of Mr. Han. The “interest spread” between (i) the interest rate under the loan agreement between the student and Mr. Han and (ii) the “anticipatedannual yield” under the assignment agreement between Mr. Han and the person-to-person lender represents compensation for Chuanbang’s estimated costsincurred in originating and servicing the student loans, plus the amount payable to us for guaranteeing the student loans. Chuanbang ceased offering loanservices to our students enrolled since January 1, 2014. As of December 31, 2017, our maximum exposure to guarantees of student loans was nil. All the third-party lenders were repaid. Pursuant to our agreement with Chuanbang, Chuanbang provided cash collection service on our accounts receivable to better manage our cash collectionsince August 2013. The fee is calculated based on 2%~12% of the amount collected. The staff of Chuanbang includes our former employees who joinedChuanbang in July 2013. Chuanbang also provides similar cash collection service to other financial institutions. The cash collection service fees wereRMB2.1 million, RMB6.4 million and RMB3.2 million for 2015, 2016 and 2017, respectively. In September 2015, Precise, which is owned by an executive of Kohlberg Kravis Roberts & Co. L.P, or KKR, a shareholder of the Company, provided cashadvances in the amount of RMB1.4 million to us in order to fund its share repurchase plan. We have fully repaid the advances in October 2015. Registration Rights Registration Rights Granted in 2011 In connection with our issuance of Series C preferred shares, we and all our then shareholders entered into an amended and restated shareholders agreementon September 6, 2011. Pursuant to our amended and restated shareholders agreement dated September 6, 2011, we have granted certain registration rights tocertain of our shareholders. Set forth below is a description of the registration rights granted under the agreement. Demand Registration Rights. At any time after the completion of our initial public offering in April 2014, upon a written request from the holders of at least10% of the registrable securities held by our preferred shareholders, we must file a registration statement covering the offer and sale of the registrablesecurities held by the requesting shareholders and other holders of registrable securities who choose to participate in the offering. Registrable securitiesinclude, among others, our ordinary shares issued or to be issued upon conversion of the preferred shares. However, we are not obligated to proceed with a demand registration if we have, within the six-month period preceding the date of such request, alreadyeffected a registration under the Securities Act pursuant to the exercise of the holders’ registration rights, unless the registrable securities of the holders wereexcluded from such registration. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in goodfaith that the filing of a registration statement would be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more thanonce in any 12-month period. Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from the holders of a majority of the registrablesecurities held by our preferred shareholders, we must file a registration statement on Form F-3 covering the offer and sale of the registrable securities. 107  We are not obligated to effect a Form F-3 registration, among other things, if we already effected a registration under the Securities Act pursuant to theexercise of the holders’ demand or piggyback registration rights, unless the registrable securities of the holders were excluded from such registration. Wehave the right to defer filing of a registration statement for up to 60 days if our board of directors determines in good faith that the filing of a registrationstatement would be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period. Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our ordinary shares on a form that would be suitable forregistrable securities, we must offer holders of registrable securities an opportunity to include in that registration all or any part of their registrable securities.The underwriters of any underwritten offering have the right to limit the number of shares with registration rights to be included in the registration statement,subject to certain limitations. Expenses of Registration. We will pay all expenses relating to any demand, Form F-3, or piggyback registration, with certain limited exceptions. Termination of Obligations. We shall have no obligation to effect any demand, Form F-3, or piggyback registration on the earlier of (a) the date that is fiveyears after the completion of our initial public offering, or (b) as to any holder of registrable securities, the time when all registrable securities held by suchholder may be sold in any 90-day period without registration pursuant to Rule 144 under the Securities Act. Registration Rights Granted in 2015 We entered into a registration rights agreement with Talent Fortune Investment Limited, or KKR, an affiliate of KKR & Co. L.P., on July 17, 2015, pursuant towhich we granted certain registration rights to KKR. Set forth below is a description of the registration rights granted under the agreement. Securities Act Registration on Request. Upon a written request from KKR, we must use reasonable best efforts to effect a registration under the Securities Actcovering the registrable securities requested by KKR to register. However, we are not obligated to effect more than a total of three registration requests and at least a period of 180 days shall have elapsed since the previousregistration request and the previous registration in which KKR had an opportunity to participate pursuant to its piggyback registration rights. Piggyback Registration Rights. If we propose to register our securities under the Securities Act, subject to limited exceptions, we must offer KKR anopportunity to include in that registration all or any part of its registrable securities. The managing underwriter of any underwritten offering have the right tolimit the number of shares with registration rights to be included in the registration statement, subject to certain limitations. Postponements. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in good faith that the filingof a registration statement would be materially adversely affect us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period. Expenses of Registration. We will pay all expenses relating to any requested or piggyback registration, with certain limited exceptions. Termination of Obligations. Our obligations under this registration rights agreement shall terminate when all registrable shares of KKR could be sold withoutrestriction under Rule 144(e) under the Securities Act within a 90-day period. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Employment Agreements andIndemnification Agreements.” 108  Share Option Grants See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plan.” C.Interests of Experts and Counsel 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. Legal Proceedings We are currently not a party to, and are not aware of any threat of, any legal, arbitration or administrative proceedings that, in the opinion of our management,are likely to have a material and adverse effect on our business, financial condition or results of operations. From time to time, we have become, and may inthe future become, a party to various legal or administrative proceedings or claims arising in the ordinary course of our business. Regardless of the outcome,legal or administrative proceedings or claims may have an adverse impact on us because of defense and settlement costs, diversion of management attentionand other factors. Dividend Policy On March 5, 2018, we declared a cash dividend of US$0.12 per ordinary share. Holders of our ADS, each representing one Class A ordinary share, areaccordingly entitled to the cash dividend of US$0.12 per ADS. The cash dividend will be paid on or about June 9, 2018 to shareholders of record as of theclose of business on April 5, 2018. In June 2017, we paid an approximately RMB63.1 million (US$9.2 million) cash dividend, US$0.16 per ADS, to our shareholders of record as of the close oftrading on June 9, 2017, which was declared on February 28, 2017. In May 2016, we paid a RMB54.0 million (US$8.4 million) cash dividend, US$0.15 perADS, to our shareholders as of the close of trading on April 6, 2016, which was declared on March 7, 2016. The dividends were funded by surplus cash on ourbalance sheet. Our board of directors has complete discretion whether to declare dividends, subject to the Companies Law, our articles of association, and the common lawof the Cayman Islands. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommendedby our directors. Even if our board of directors decides to declare dividends, their form, frequency and amount will depend upon our future operations andearnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deemrelevant. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in nocircumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Holders of our ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement, to the same extent as the holders of our ClassA common shares. Cash dividends will be paid to the depositary of our ADSs in U.S. dollars, which will distribute them to the holders of ADSs after feesaccording to the terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to the holders of ADSs in any means it deems legal,fair and practical. We are a holding company incorporated in the Cayman Islands. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See“Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Dividend Distribution.” 109  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 financialstatements included in this annual report. ITEM 9.THE OFFER AND LISTING A.Offering and Listing Details. Our ADSs, each representing one Class A ordinary share, have been listed on the NASDAQ Global Select Market since April 3, 2014 under the symbol“TEDU.” Update until April 26, 2018 (starting from April 3, 2014), the trading price of our ADSs on the NASDAQ Global Select Market ranged from US$6.65to US$21.7 per ADS. The following table provides the high and low trading prices for our ADSs on the NASDAQ Global Select Market for the periods indicated below. Trading Price High Low Annual Highs and Lows 2015 14.83 6.65 2016 17.75 8.35 2017 21.70 12.52 Quarterly Highs and Lows First Quarter 2016 11.38 8.28 Second Quarter 2016 11.61 9.68 Third Quarter 2016 15.19 9.87 Fourth Quarter 2016 17.75 13.92 First Quarter 2017 19.68 14.05 Second Quarter 2017 20.29 16.90 Third Quarter 2017 21.70 12.52 Fourth Quarter 2017 15.97 13.02 First Quarter 2018 15.45 10.83 Monthly Highs and Lows October 2017 15.20 14.06 November 2017 15.97 13.02 December 2017 15.02 13.14 January 2018 15.45 12.88 February 2018 13.80 11.48 March 2018 13.90 10.83 April 2018 (through April 27, 2018) 11.71 9.78 B.Plan of Distribution Not applicable. C.Markets Our ADSs, each representing one Class A ordinary share, have been listed on the NASDAQ Global Select Market under the symbol “TEDU” since April 3,2014. D.Selling Shareholders Not applicable. 110  E.Dilution Not applicable. F.Expenses of the Issue Not applicable. ITEM 10.ADDITIONAL INFORMATION A.Share Capital Not applicable. B.Memorandum and Articles of Association The following are summaries of material provisions of our currently effective fifth amended and restated memorandum and articles of association, as well asthe Companies Law (2016 Revision) insofar as they relate to the material terms of our ordinary shares. Registered Office and Objects Our registered office in the Cayman Islands is located at the offices of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box2681, Grand Cayman KY1-1111, Cayman Islands. As set forth in article 3 of our fifth amended and restated memorandum of association, the objects for whichour company is established are unrestricted. Board of Directors See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” Ordinary Shares General. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. All of our outstandingordinary shares are fully paid and non-assessable. 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. Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors, provided that dividends may bedeclared and paid out of funds legally available therefor, namely out of either profit, our share premium account or any other fund or account which can beauthorized for this purpose in accordance with the Companies Law. Holders of Class A ordinary shares and Class B ordinary shares will be entitled to thesame amount of dividends, if declared. Voting Rights. Holders of our ordinary shares are entitled to ten calendar days notice of meetings of our shareholders. In respect of all matters subject to ashareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes, voting together as one class.Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or anyshareholder present in person or by proxy. A quorum required for a meeting of shareholders consists of two shareholders who hold at least 50% of all voting power of our share capital in issue at themeeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings may beheld annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting. Extraordinary general meetings maybe called by a majority of our board of directors or our chairman or upon a requisition of shareholders holding at the date of deposit of the requisition not lessthan 1/3 of the aggregate voting power of our company. Advance notice of at least ten calendar days is required for the convening of our annual generalmeeting and other general meetings. 111  An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinaryshares cast at a meeting, while a special resolution requires the affirmative vote of no less than 2/3 of the votes cast attaching to the outstanding ordinaryshares at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our fifth amended and restatedmemorandum and articles of association. 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 notconvertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder to any person or entity which isnot an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equivalent number of Class A ordinaryshares. Transfer of Ordinary Shares. Subject to the restrictions set out below and the provisions above in respect of Class B ordinary shares, any of our shareholdersmay transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board ofdirectors. Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have alien. Our board of directors may also decline to register any transfer of any ordinary share unless: ·the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as ourboard of 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 ordinary shares; ·the instrument of transfer is properly stamped, if required; ·in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and ·a fee of such maximum sum as the NASDAQ Global Market may determine to be payable or such lesser sum as our directors may from time to timerequire 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 thetransferor and the transferee notice of such refusal. The registration of transfers may, after compliance with any notice required of the NASDAQ Global Market, be suspended and the register closed at suchtimes and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not besuspended nor the register closed for more than thirty days in any year as our board may determine. Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available fordistribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available fordistribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.Any distribution of assets or capital to a holder of a Class A ordinary share and a holder of a Class B ordinary share will be the same in any liquidation event. Calls on Ordinary Shares and Forfeiture of Ordinary Shares. Our board of directors may from time to time make calls upon shareholders for any amountsunpaid on their ordinary shares in a notice served to such shareholders at least fourteen calendar days prior to the specified time of payment. The ordinaryshares that have been called upon and remain unpaid are subject to forfeiture. 112  Repurchase and Redemption of Ordinary Shares. The Companies Law and our fifth amended and restated articles of association permit us to purchase ourown shares. In accordance with our fifth amended and restated articles of association and provided the necessary shareholders or board approval have beenobtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in suchmanner, including out of capital, as may be determined by our board of directors. Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be variedwith the written consent of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a general meetingof the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly providedby 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 ofshares. 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 ofshareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10. AdditionalInformation—H. Documents on Display.” Issuance of Additional Shares. Our fifth amended and restated memorandum of association authorizes our board of directors to issue additional ordinaryshares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our fifth amended and restated memorandum of association also authorizes our board of directors to establish from time to time one or more series of preferredshares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including: ·the designation of the series; ·the number of shares of the series; ·the dividend rights, dividend rates, voting rights; and ·the rights and terms of redemption and liquidation preferences. Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilutethe voting power of holders of ordinary shares. Anti-Takeover Provisions. Some provisions of our fifth amended and restated memorandum and articles of association may discourage, delay or prevent achange of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors toissue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without anyfurther vote or action by our shareholders. Exempted Company. We are an exempted company with limited liability under the Companies Law. “Limited liability” means that the liability of eachshareholder is limited to the amount unpaid by the shareholder on the shares of the company. The Companies Law distinguishes between ordinary residentcompanies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands mayapply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except thatan exempted company: ·does not have to file an annual return of its shareholders with the Registrar of Companies; ·is not required to open its register of members for inspection; ·does not have to hold an annual general meeting; ·may issue negotiable or bearer shares or shares with no par value; 113  ·may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); ·may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; ·may register as a limited duration company; and ·may register as a segregated portfolio company. Our fifth amended and restated memorandum and articles of association do not provide provisions that are different from those that are applicable to anexempted company as set forth above, except that they do not permit us to issue bearer shares or shares with no par value. C.Material Contracts We have not entered into any material contracts other than in the ordinary course of business and other than those described above and in “Item 4.Information on the Company” or elsewhere in this annual report on Form 20-F. D.Exchange Controls See “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Foreign Exchange Registration of OverseasInvestment by PRC Residents,” “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Foreign CurrencyExchange” and “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Dividend Distribution.” E.Taxation The following summary of certain Cayman Islands, PRC and United States federal income tax consequences of an investment in our ADSs or ordinary sharesis based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change or differinginterpretation, possibly with retroactive effect. This summary does not deal with all possible tax consequences relating to an investment in our ADSs orordinary shares, such as the tax consequences under other federal, state, local and other tax laws not addressed herein. To the extent that the discussion relatesto matters of Cayman Islands tax law, it represents the opinion of Conyers Dill & Pearman, our Cayman Islands counsel. To the extent that the discussionrelates to matters of PRC tax law, it represents the opinion of Han Kun Law Offices, our PRC counsel. 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 thenature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be material to holders ofADSs or ordinary shares. The Cayman Islands is a party to double taxation treaty with the United Kingdom but otherwise is not party to any double taxtreaties. There are no exchange control regulations or currency restrictions in the Cayman Islands. Pursuant to Section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council: (i) 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 ouroperations; and (ii) that 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 twenty years from March 25, 2014. 114  People’s Republic of China Taxation Under the EIT Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” forPRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income as well as tax reportingobligations. Under the Implementation Rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall managementand control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, Circular 82issued by the SAT in April 2009, as amended in December 2017, specifies that certain offshore-incorporated enterprises controlled by PRC enterprises or PRCenterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel anddepartments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties,accounting books, company seal, minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors havingvoting rights. Further to Circular 82, the SAT issued the Bulletin 45, which took effect in September 2011 and amended respectively in 2015 and 2016, toprovide more guidance on the implementation of Circular 82. Bulletin 45 provides for procedures and administration details of determination on PRCresident enterprise status and administration on post-determination matters. We do not believe that Tarena International, Inc. is a PRC resident enterprise. Ifthe PRC tax authorities determine that Tarena International, Inc. is a PRC resident enterprise for PRC enterprise income tax purposes, a number ofunfavorable PRC tax consequences could follow. One example is that a 10% withholding tax would be imposed on dividends we pay to our non-PRCenterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares or ADSs and potentially a 20%of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRCindividual shareholders from transferring our shares or ADSs. Under the EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company and distributed to a foreign parent company aresubject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferentialwithholding arrangement. Pursuant to the Hong Kong Tax Treaty, which was promulgated on August 21, 2006, a company incorporated in Hong Kong, suchas Tarena HK, will be subject to withholding income tax at a rate of 5% on dividends it receives from its PRC subsidiary if it holds a 25% or more interest inthat particular PRC subsidiary, or 10% if it holds less than a 25% interest in that subsidiary. However, based on Circular 81, the 5% withholding tax rate doesnot automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong enterprise must be the beneficialowner of the relevant dividends; and (b) the Hong Kong enterprise must directly hold at least 25% share ownership in the PRC enterprise during the 12consecutive months preceding its receipt of the dividends. However, a transaction or arrangement entered into for the primary purpose of enjoying apreferential tax treatment should not be a reason for the application of the preferential tax treatment under the Hong Kong Tax Treaty. If a taxpayerinappropriately is entitled to such preferential tax treatment, the competent tax authority has the power to make appropriate adjustments. According to theCircular 9, effective from April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection withdividends, interests or royalties in the tax treaties, several factors, including without limitation whether the applicant is obligated to pay more than 50% ofhis or her income in twelve months to residents in a third country or region, whether the business operated by the applicant constitutes the actual businessactivities, and whether the counterparty country or region to the tax treaties levies any tax or grants tax exemption on relevant incomes or levies tax at anextremely low rate, will be taken into account, and such determination will be analyzed according to the actual circumstances of the specific cases. Circular 9further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant taxauthority according to Circular 60. Based on Circular 60, non-resident enterprises are not required to obtain pre-approval from the relevant tax authority inorder to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmationthat the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supportingdocuments when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. However, if a competent taxauthority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance andadopt corresponding measures for subsequent administration. 115  The State Administration of Tax issued the Notice on Promulgating the Administrative Measures for Special Tax Investigation Adjustments and MutualAgreement Procedures, or Notice 6, on March 17, 2017. Notice 6 further regulates and strengthens the transfer pricing administration on outbound paymentsby a PRC enterprise to its overseas related parties. In addition to emphasizing that outbound payments by a PRC enterprise to its overseas related parties mustcomply with arm’s-length principles, Notice 6 specifies certain circumstances whereby such payments that do not comply with arm’s-length principles maybe subject to the special tax adjustments by the tax authority, including payments to an overseas related party which does not undertake any function, bearany risk or has no substantial operation or activities, payments for services which do not enable the PRC enterprise to obtain direct or indirect economicbenefits, royalties paid to an overseas related party which only owns the legal rights of the intangible assets but has no contribution to the value of suchintangible assets, royalties paid to an overseas related party for the transfer of the right to use of the intangible assets with no economic benefits, and royaltiespaid to an overseas related party for the incidental benefits generated from the listing activities. Although we believe all our related party transactions,including all payments by our PRC subsidiaries and consolidated affiliated entities to our non-PRC entities, are made on an arm’s-length basis and ourestimates are reasonable, the ultimate decisions by the relevant tax authorities may differ from the amounts recorded in our financial statements and maymaterially affect our financial results in the period or periods for which such determination is made. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income tax treaties oragreements entered into between China and other countries or areas. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business inChina—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Suchclassification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results ofoperations and the value of your investment.” The SAT issued a Circular 59 together with the Ministry of Finance in April 2009 and a Circular 698 in December 2009. Both Circular 59 and Circular 698became effective retroactively as of January 1, 2008. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced theirscrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. On February 3, 2015, the SAT issued aPublic Notice [2015] No.7, or Public Notice 7, to supersede the existing tax rules in relation to the Indirect Transfer as set forth in Circular 698. Under PublicNotice 7, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests in a PRC “resident enterprise” or other taxableassets indirectly by disposing of the equity interests in an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRCenterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. In addition,Public Notice 7 provides clear criteria on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal grouprestructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer as they have to make self-assessment onwhether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. In October 2017, the SAT promulgated theAnnouncement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source, or SATCircular 37, which provides certain changes to the current withholding regime, repeals and replaces all other provisons under Circular 698 and amendscertain provions in Public Notice 7. For example, SAT Circular 37 requires that the transferor shall declare to the competent tax authority for payment of taxwithin seven (7) days after the tax payment obligation comes into being if the withholding agent fails to withhold the tax due or withhold the tax due in full.However, according to SAT Circular 37, if the withholding agent fails to withhold and remit the income tax payable, or is unable to perform its obligation inthis regard, as long as the non-resident enterprise that earns the income voluntarily declares and pays the tax payable before the tax authority orders it to doso within required time limits, it shall be deemed that such enterprise has paid the tax in time. There is little guidance and practical experience as to theapplication of Public Notice 7 or SAT Circular 37. Where non-resident investors were involved in our private equity financing, if such transactions weredetermined by the tax authorities to lack reasonable commercial purpose, we and our non-resident investors may become at risk of being taxed under PublicNotice 7 or SAT Circular 37 and may be required to expend valuable resources to comply with Public Notice 7 or SAT Circular 37 or to establish that weshould not be taxed under Public Notice 7 or SAT Circular 37. The PRC tax authorities have the discretion under SAT Circular 59, Public Notice 7 or SATCircular 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost ofinvestment. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We face uncertainty regarding the PRC taxreporting obligations and consequences for certain indirect transfers of our operating company’s equity interests. Enhanced scrutiny over acquisitiontransactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.” 116  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 ordinaryshares by a U.S. Holder, as defined below, that holds our ADSs or ordinary shares as “capital assets” (generally, property held for investment) under the UnitedStates Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal income tax law, which issubject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) withrespect to any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contraryposition. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of theirindividual circumstances, including investors subject to special tax rules (such as, for example, certain financial institutions, insurance companies, regulatedinvestment companies, real estate investment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships and their partners,tax-exempt organizations (including private foundations), investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10%or more of the voting power or value of our stock, investors that hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive saleor other integrated transaction, or investors that have a functional currency other than the United States dollar, all of whom may be subject to tax rules thatdiffer significantly from those summarized below). In addition, this discussion does not address any state, local, alternative minimum tax, or non-UnitedStates tax considerations, or the Medicare contribution tax on net investment income. Each potential investor is urged to consult its tax advisor regarding theUnited 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, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for United States federal income tax purposes, (i)an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income taxpurposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which isincludible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject tothe primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisionsof 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 treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or ordinary shares, thetax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships and partnersof a partnership holding our ADSs or ordinary shares are urged to consult their tax advisors regarding an investment in our ADSs or ordinary shares. 117  Based in part on certain representations from the depositary bank, a U.S. Holder of ADSs will be treated as the beneficial owner for United States federalincome tax purposes of the underlying shares represented by the ADSs. 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 federalincome tax purposes, if, in the case of any particular taxable year, either (i) 75% or more of its gross income for such year consists of certain types of “passive”income or (ii) 50% or more of its average quarterly assets (as determined on the basis of fair market value) during such year produce or are held for theproduction of passive income. For this purpose, cash is categorized as a passive asset and the company’s unbooked intangibles associated with activebusiness activities may generally be classified as active assets. Passive income generally includes, among other things, dividends, interest, royalties, rents,annuities, net gains from the sale or exchange of passive assets (including property producing passive income) and net foreign currency gains. We will betreated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directlyor indirectly, more than 25% (by value) of the stock. Based on our current income and assets and the value of our ADSs and ordinary shares, we do not believe that we were a PFIC for our taxable year endedDecember 31, 2017 and we do not expect to be classified as a PFIC for our taxable year ending December 31, 2018 or in the foreseeable future. While we do not expect to become a PFIC in the current or future taxable years, the determination of whether we will be or become a PFIC will depend uponthe composition of our income and assets and the value of our assets from time to time, including, in particular the value of our goodwill and other unbookedintangibles (which may depend upon the market value of our ADSs or ordinary shares from time to time, which may be volatile). Among other factors, ifmarket capitalization is less than anticipated or subsequently declines, we may be classified as a PFIC for the current or future taxable years. It is also possiblethat the IRS may challenge our classification or valuation of our goodwill and other unbooked intangibles or determine that such assets should not beincluded in the determination of whether we are classified as a PFIC, which may result in our company being, or becoming classified as, a PFIC for the currentor one or more future taxable years. The determination of whether we will be or become a PFIC may also depend, in part, on how, and how quickly, we use our liquid assets. Under circumstanceswhere we determine not to deploy significant amounts of cash for active purposes, our risk of being classified as a PFIC may substantially increase. Becausethere 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 were classified as a PFIC for any year duringwhich a U.S. holder held our ADSs or ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S.holder held our ADSs or 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 aPFIC 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 taxableyear or any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.” Dividends Any cash distributions paid on our ADSs or ordinary shares (including the amount of any PRC tax withheld) out of our current or accumulated earnings andprofits, as determined under United States federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend incomeon the day actually or constructively received by the U.S. Holder, in the case of ordinary shares, or by the depositary bank, in the case of ADSs. Because wedo not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be treatedas a “dividend” for United States federal income tax purposes. Individuals and other non-corporate recipients of dividend income will generally be subject totax on dividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather than the marginal tax rates generally applicableto ordinary income provided that certain holding period and other requirements are met. 118  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 precedingtaxable year) will generally be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with theUnited States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange ofinformation program, or (b) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is readily tradable on an establishedsecurities market in the United States. United States Treasury guidance indicates that common or ordinary shares, or ADSs representing such shares, areconsidered for the purpose of clause (b) above to be readily tradable on an established securities market in the United States if they are listed on the NASDAQGlobal Select Market, as are our ADSs. Since we do not expect that our ordinary shares will be listed on established securities markets, it is unclear whetherdividends that we pay on our ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate. There can be noassurance 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 aresident enterprise under the EIT Law, we may be eligible for the benefits of the United States-PRC income tax treaty (which the U.S. Treasury Departmenthas determined is satisfactory for this purpose) and we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinaryshares or ADSs. U.S. Holders are urged to consult their tax advisors regarding the availability of the reduced tax rate on dividends in their particularcircumstances. Dividends received on our ADSs or ordinary shares will not be eligible for the dividends received deduction allowed to corporations. For United States foreign tax credit purposes, dividends paid on our ADSs or ordinary shares will generally be treated as income from foreign sources and willgenerally 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 besubject to PRC withholding taxes on dividends paid, if any, on our ADSs or ordinary shares. A U.S. Holder may be eligible, subject to a number of complexlimitations, to claim a foreign tax credit in respect of any nonrefundable foreign withholding taxes imposed on dividends received on our ADSs or ordinaryshares. 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 incometax 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 rulesgoverning the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit undertheir particular circumstances. Sale or Other Disposition of ADSs or Ordinary Shares A U.S. Holder will generally recognize capital gain or loss, if any, upon the sale or other disposition of ADSs or ordinary shares in an amount equal to thedifference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or ordinary shares. Any capital gain or loss willbe long-term gain or loss if the ADSs or ordinary shares have been held for more than one year and will generally be United States source gain or loss forUnited States foreign tax credit purposes. In the event that we are treated as a PRC resident enterprise under the PRC Enterprise Income Tax Law, and gainfrom the disposition of the ADSs or ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source gain for foreign tax credit purposesunder 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 taxadvisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or ordinary shares, including the availability of the foreigntax 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 ordinary shares, unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether weremain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution received during a taxable year by a U.S.Holder that is greater than 125% of the average annual distributions received by such U.S. Holder during the three preceding taxable years or, if shorter, theU.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certaincircumstances, a pledge, of ADSs or ordinary shares. Under the PFIC rules: 119  ·the excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or 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 weare classified as a PFIC, or 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 ineffect 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 ordinary shares and any of our non-United States subsidiaries is also aPFIC, 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 ofthese rules. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries. 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 on the NASDAQ Global Market. In addition, we do not expect that holders of ordinary shares that are notrepresented by ADSs will be eligible to make a mark-to-market election. We believe that our ADSs qualify as being regularly traded, but no assurances can begiven in this regard. If a mark-to-market election is made, the U.S. Holder will generally (i) include as ordinary income for each taxable year that we are aPFIC 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 (ii) deduct as anordinary 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 tothe 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 wouldbe 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 yearthat 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 ordinaryloss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. 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, theU.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 classifiedas a PFIC. Because, as a technical matter, 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 ournon-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 taxtreatment different from the general tax treatment for PFICs described above. 120  As discussed above under “Dividends”, dividends that we pay on our ADSs or ordinary shares will not be eligible for the reduced tax rate that applies toqualified 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 ordinary shares during any taxable year that we are a PFIC, the holder must file an annual report with the IRS. U.S. Holders are urgedto consult their tax advisors concerning the United States federal income tax consequences of purchasing, holding, and disposing ADSs or ordinary shares ifwe 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 Individual U.S. Holders and certain entities may be required to submit to the IRS certain information with respect to his or her beneficial ownership of theADSs or ordinary shares, if such ADSs or ordinary shares are not held on his or her behalf by a U.S. financial institution. An individual U.S. Holder may besubject to penalties if such 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 United States backup withholding with respect to dividends on and proceedsfrom the sale or other disposition of our ADSs or ordinary shares. Backup withholding will not apply to you, however, if you furnish a correct taxpayeridentification number and make any other required certification or that are otherwise exempt from backup withholding. U.S. Holders that are required toestablish their exempt status generally must provide such certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding theapplication of the United States information reporting and backup withholding rules to their particular circumstances. Backup withholding is not an additional tax. Amounts withheld as backup withholding can be credited against your United States federal income taxliability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refundwith the IRS and furnishing any required information in a timely manner. F.Dividends and Paying Agents Not Applicable. G.Statement by Experts Not Applicable. H.Documents on Display We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-194191), as amended, including the prospectus containedtherein, to register our Class A ordinary shares in relation to our initial public offering. We have also filed with the SEC a related registration statement on F-6(Registration No. 333-194662) to register the ADSs. We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or 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 withinfour months after the end of each fiscal year, which is December 31. Copies of reports and other information, when so filed, may be inspected without chargeand may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Room1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regardingregistrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the ExchangeAct prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from thereporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. 121  We will furnish Citibank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual auditedconsolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communicationsthat 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 fromus. In accordance with NASDAQ Stock Market Rules 5250(d), we will post this annual report on Form 20-F on our website at http://ir.tarena.com.cn. I.Subsidiary Information Not applicable. ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Exchange Risk Substantially all of our net revenues, costs and expenses are denominated in Renminbi. The Renminbi is not freely convertible into foreign currencies forcapital account transactions. Our exposure to foreign exchange risk primarily relates to the U.S. dollar proceeds of the offerings of our equity securities. Wehad a net foreign exchange loss of RMB6.3 million in 2017. The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economicconditions and China’s foreign exchange policies. In 2005, the PRC government changed its decade-old policy of pegging the value of the RMB 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, thisappreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the RMB hasfluctuated against the U.S. dollar, at times significantly and unpredictably. In August 2015, the People’s Bank of China changed the way it calculates themid-point price of Renminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spotrate, foreign-exchange demand and supply as well as changes in major currency rates. The value of the Renminbi depreciated approximately 5.8% against theU.S. dollar in 2015 and further by approximately 6.3% in 2016. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF)completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect fromOctober 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar,the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S.dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization andRenminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you thatthe Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC orU.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. To the extent that we need to convert the U.S. dollars we received from our equity offerings into Renminbi to fund our operations, acquisitions, or for otheruses within the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from theconversion. To the extent that we seek to convert Renminbi into U.S. dollars, depreciation of the Renminbi against the U.S. dollar would have an adverseeffect on the U.S. dollar amount we receive from the conversion. On the other hand, a decline in the value of the Renminbi against the U.S. dollar couldreduce the value of your investment in the company and the dividends that we may pay in the future, if any, all of which may have a material adverse effecton the prices of our ADS. 122  A hypothetical 10% decrease in the exchange rate of the U.S. dollar against the RMB would have resulted in an increase of RMB23.2 million in the value ofour U.S. dollar-denominated financial assets at December 31, 2017. Interest Rate Risk Our exposure to interest rate risk primarily relates to interest income generated by excess cash invested in demand deposits with original maturities of 6months to 5 years. Interest-earning instruments carry a degree of interest rate risk. We have not used any significant derivative financial instruments tomanage our interest rate risk exposure. We have not been exposed, nor do we anticipate being exposed to, material risks due to changes in interest rates.However, our future interest income may be different from expectations due to changes in market interest rates. 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. D.American Depositary Shares Fees and Charges Our ADS holders May Have to Pay Holders of our ADSs will be required to pay the following service fees to the depositary bank: Service FeesIssuance of ADSs Up to U.S. 5¢ per ADS issuedCancellation of ADSs Up to U.S. 5¢ per ADS canceledDistribution of cash dividends or other cash distributions Up to U.S. 5¢ per ADS heldDistribution of ADSs pursuant to stock dividends, free stock distributions orexercise of rights Up to U.S. 5¢ per ADS heldDistribution of securities other than ADSs or rights to purchase additionalADSs Up to U.S. 5¢ per ADS heldDepositary Services Up to U.S. 5¢ per ADS held on the applicable record date(s) established bythe depositary bank Holders of our ADSs will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental chargessuch as: ·fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e.,upon deposit and withdrawal of ordinary shares); ·expenses incurred for converting foreign currency into U.S. dollars; ·expenses for cable, telex and fax transmissions and for delivery of securities; ·taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit); and ·fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit. 123  Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients)receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank forcancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADSholders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e.,stock dividend, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSsregistered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable recorddate ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through thesystems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTCaccounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to thedepositary banks. In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service untilpayment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. The fees and charges holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary bank. Fees and Other Payments Made by the Depositary to Us The depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADS program upon suchterms and conditions as we and the depositary may agree from time to time. In 2017, we received US$0.2 million from the depository for expenses incurred inconnection with the establishment and maintenance of the ADS program. PART II. ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 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—B. Memorandum and Articles of Association—Ordinary Shares” 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: 333-19419) in relation to theinitial public offering of 15,300,000 ADSs representing 15,300,000 of our Class A ordinary shares, at an initial offering price of US$9.00 per ADS. We offeredand sold 11,500,000 ADSs and the selling shareholders offered and sold 3,800,000 ADSs in our initial public offering. Our initial public offering closed inApril 2014. Goldman Sachs (Asia) L.L.C. and Credit Suisse Security (USA) LLC were the representatives of the underwriters for our initial public offering.The aggregate price of the offering amount registered and sold was US$137.7 million. 124  We received net proceeds of approximately US$92.2 million from our initial public offering. Our expenses incurred and paid to others in connection with theissuance and distribution of the ADSs in our initial public offering totaled US$13.6 million, which included US$9.6 million for underwriting discounts andcommissions and US$4.0 million for other expenses. Among the US$13.6 million in expenses, US$4.8 million were paid to Goldman Sachs (Asia) L.L.C., anaffiliate of ours and one of the underwriters for our initial public offering. For the period from April 2, 2014, the date that the F-1 Registration Statement was declared effective by the SEC, to December 31, 2017, we invested the netproceeds from our initial public offering in term deposits and still intend to use the proceeds from our initial public offering for general corporate purposes,which may include investing in course development, expanding our learning center network, sales and marketing activities, technology infrastructure andcapital expenditures, upgrading facilities, paying dividends, repurchasing shares and other general and administrative matters. We may also use a portion ofthe net proceeds for investing in, or acquiring, complementary businesses. ITEM 15.CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this annual report, our management, with the participation of our chief executive officer and chief financial officer, hasperformed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rules 13a-15(e) and 15d-15(e) of the ExchangeAct. Based upon this evaluation, our management has concluded that, as of December 31, 2017, our existing disclosure controls and procedures were ineffectivebecause of the material weakness described below under “Management’s Annual Report on Internal Control over Financial Reporting.” We have undertakenthe remedial steps to address the material weakness in our disclosure controls and procedures as set forth below under “Management’s Plan for Remediationof Material Weakness.” 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 defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance withgenerally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of acompany’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of a company’s assets that could have a material effect on the consolidated financial statements. Our management, with the participation of ourchief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our company’s internal control over financial reporting asof December 31, 2017 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 Framework). Based on this evaluation, our management identified a material weakness as of December 31, 2017, which was theinsufficient review in areas subject to significant estimates and judgments. This material weakness may result in a material misstatement to the Company’squarterly or annual consolidated financial statements that would not be prevented or detected. As a result of the material weakness, management hasconcluded that our internal control over financial reporting was ineffective as of December 31, 2017. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of anyevaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. See “Item 3. Key Information—D. RiskFactors—Risks Relating to Our Business—If we fail to implement an effective system of internal controls, we may be unable to accurately report our resultsof operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of our ADSs may be materially andadversely affected.” 125  This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting as we qualify as an “emerging growth company” under section 3(a) of the Securities Exchange Act of 1934, as amended, and are therefore exemptfrom the attestation requirement. Management’s Plan for Remediation of Material Weakness Our management has been engaged in, and continues to be engaged in making necessary changes and improvements to the overall design of its controlenvironment to address the material weakness in internal control over financial reporting and the ineffectiveness of our disclosure controls and proceduresdescribed above. To remediate the material weakness described above, we plan to continue to: (i) reinforce the oversight and review procedure over areas subject to significantestimates and judgments; and (ii) enhance our accounting manual to provide our accounting team with more comprehensive guidelines on the accountingpolicies under U.S. GAAP and SEC rules and requirement. We plan to continue to assess our standardized processes to further enhance the effectiveness of ourfinancial review, including the analysis and monitoring of financial information in a consistent and thorough manner. Changes in Internal Control over Financial Reporting We have adopted the following measures during the year ended December 31, 2017, which effectively improved our internal controls over financial reportingin areas subject to financial reporting disclosure. We have (i) executed improved workflow of system upgrade and performed quality control proceduresregarding system design, development, testing and implementation, etc.; and (ii) reinforced the reasonableness test by accounting personnel over the systemextracted data. However, we have insufficient review in areas subject to significant estimates and judgments. As such, management concluded that there was amaterial weakness at December 31, 2017. We will continue to implement the necessary procedures and policies, including those outlined above, to improve our internal controls over financialreporting and remediate any potential significant deficiencies as we prepare for our initial Section 404 reporting requirement under the Sarbanes-Oxley Act of2002. Other than those measures mentioned above, there were no changes in our internal controls over financial reporting that occurred during the period coveredby this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 16.A.AUDIT COMMITTEE FINANCIAL EXPERT Our board of directors has determined that Mr. Xiaosong Zhang, an independent director and member of our audit committee, is an audit committee financialexpert. ITEM 16.B.CODE OF ETHICS Our board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of us and our subsidiaries, whether they work forus on a full-time, part-time, consultative, or temporary basis. Certain provisions of the code apply specifically to our chief executive officer, chief financialofficer, senior finance officer, controller, senior vice presidents, vice presidents and any other persons who perform similar functions for us. We have posted acopy of our code of business conduct and ethics on our website at http://ir.tarena.com.cn/. ITEM 16.C.PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth the aggregate fees by the categories specified below in connection with certain professional services rendered by KPMGHuazhen LLP, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our auditors during the periodsindicated below. 2016 2017 (in thousands) Audit Fees(1) 5,659 5,875 Audit-related Fees(2) - 763 Tax Fees(3) 294 667 (1)“Audit fees” means the aggregate fees in each of the fiscal years listed for professional services rendered by our independent registered public accountingfirm for the audit of our annual financial statements or services that are normally provided by the auditors in connection with and regulatory filing orengagements. 126  (2)“Audit-related Fees” represent the aggregate fees for services rendered by our independent registered public accounting firm for assistance indocumenting internal control policies and procedures over financial reporting. (3) “Tax fees” means the aggregate fees billed or payable for services rendered by independent registered public accounting firm for tax advisory, taxretainer and compliance. The policy of our audit committee is to pre-approve all audit and non-audit services provided by KPMG Huazhen LLP, including audit services, tax servicesand other services as described above. ITEM 16.D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not Applicable. ITEM 16.E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On August 20, 2015, our board of directors authorized a share repurchase plan under which we may repurchase up to US$20 million of our shares over thenext 12 months. For the period from May 27, 2016 to July 20, 2016, we repurchased 648,867ADSs for an aggregate consideration of RMB44.4 million(US$6.7 million) under our share repurchase plan. On August 21, 2017, our board of directors authorized a share repurchase plan under which the Company may repurchase up to US$30 million of its sharesover the next 12 months. For the period from August 25, 2017 to December 12, 2017, we repurchased 1,755,666 ADSs for an aggregate consideration ofRMB161.3 million (US$24.5 million) under our share repurchase plan. The following table sets forth a summary of our repurchase of our ADSs made in the year 2017 under the share repurchase programs described in theparagraph above. Period Total Number of ADSs Purchased(1) Average Price Paid Per ADS(1) Total Number of ADSs Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of ADSs that May Yet Be Purchased Under Plans or Programs (US$) August (from August 25 to August 31) 488,924 13.3930 488,924 23,451,855 September (from September 1 to September 29) 982,541 14.3769 982,541 9,326,008 November (from November 29 to November 30) 76,496 13.4940 76,496 8,293,768 December (from December 1 to December 12) 207,705 13.3853 207,705 5,513,565 (1)Each ADS represents one Class A ordinary share. ITEM 16.F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16.G.CORPORATE GOVERNANCE As a Cayman Islands company listed on the NASDAQ Global Select Market, we are subject to the NASDAQ corporate governance listing standards. However,NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governancepractices in the Cayman Islands, which is our home country, may differ significantly from the NASDAQ corporate governance listing standards. 127  We relied on the exemption available to foreign private issuers for the requirement that it hold an annual general meeting of shareholders no later thanDecember 31, 2017 in 2017. In this respect, we elected to follow home country practice and did not hold an annual general meeting of shareholders in 2017.If we continue to rely on this and other exemptions available to foreign private issuers in the future, our shareholders may be afforded less protection thanthey otherwise would under the NASDAQ corporate governance listing standards applicable to U.S. domestic issuers. See “Item 3. Key Information—D. RiskFactors—Risks Relating to Our ADSs—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exemptfrom certain provisions applicable to United States domestic public companies.” ITEM 16.H.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 The consolidated financial statements of Tarena International, Inc. and its subsidiaries are included at the end of this annual report. ITEM 19.EXHIBITS ExhibitNumber Description of Document 1.1 Fifth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 2.1 Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3) 2.2 Registrant’s Specimen Certificate for Class A ordinary shares (incorporated herein by reference to Exhibit 4.2 to the registration statementon Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 2.3 Deposit Agreement, among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated herein byreference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-197226) filed with the SEC on July 3, 2014) 2.4 Second Amended and Restated Shareholders Agreement dated as of September 6, 2011 among the Registrant and certain shareholders ofthe Registrant. (incorporated herein by reference to Exhibit 4.4 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 2.5 Registration Rights Agreement dated as of April 8, 2014 among the Registrant and New Oriental Education & Technology Group Inc.(incorporated herein by reference to Exhibit 2.5 to the annual report on Form 20-F (File No. 001-36363) filed with the SEC on April 15,2015) 128  ExhibitNumber Description of Document 2.6 Registration Rights Agreement dated as of July 17, 2015 among the Registrant and Talent Fortune Investment Limited (incorporatedherein by reference to Exhibit 2.6 to the annual report on Form 20-F (File No. 001-36363) filed with the SEC on April 20, 2016) 4.1 2008 Share Incentive Plan, as amended on November 28, 2012 (incorporated herein by reference to Exhibit 10.1 to the registrationstatement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 4.2 2014 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 4.3 Form of Indemnification Agreement with the Registrant’s directors (incorporated herein by reference to Exhibit 10.3 to the registrationstatement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 4.4 Form of Employment Agreement between the Registrant and an Executive Officer of the Registrant (incorporated herein by reference toExhibit 10.5 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27,2014) 4.5 Amended and Restated Exclusive Business Cooperation Agreement dated November 25, 2013 between Tarena Tech and Beijing Tarena(incorporated herein by reference to Exhibit 10.6 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.6 Power of Attorney dated November 25, 2013 granted to Tarena Tech by Mr. Shaoyun Han and acknowledged by Beijing Tarena(incorporated herein by reference to Exhibit 10.7 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.7 Power of Attorney dated November 25, 2013 granted to Tarena Tech by Mr. Jianguang Li and acknowledged by Beijing Tarena(incorporated herein by reference to Exhibit 10.8 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.8 Amended and Restated Exclusive Option Agreement dated November 25, 2013 among Tarena, Tarena Tech, Mr. Shaoyun Han andBeijing Tarena (incorporated herein by reference to Exhibit 10.9 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 4.9 Amended and Restated Exclusive Option Agreement dated November 25, 2013 among Tarena, Tarena Tech, Mr. Jianguang Li and BeijingTarena (incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1 (File No. 333-194191), as amended,initially filed with the SEC on February 27, 2014) 4.10 Amended and Restated Loan Agreement dated November 25, 2013 between Tarena Tech and Mr. Shaoyun Han in connection withBeijing Tarena (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 129  ExhibitNumber Description of Document 4.11 Amended and Restated Loan Agreement dated November 25, 2013 between Tarena Tech and Mr. Jianguang Li in connection with BeijingTarena (incorporated herein by reference to Exhibit 10.12 to the registration statement on Form F-1 (File No. 333-194191), as amended,initially filed with the SEC on February 27, 2014) 4.12 Amended and Restated Share Pledge Agreement dated November 25, 2013 among Tarena Tech, Mr. Shaoyun Han and Beijing Tarena(incorporated herein by reference to Exhibit 10.13 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.13 Amended and Restated Share Pledge Agreement dated November 25, 2013 among Tarena Tech, Mr. Jianguang Li and Beijing Tarena(incorporated herein by reference to Exhibit 10.14 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.14 Spousal consent letter dated November 25, 2013 signed by Ying Sun in connection with Beijing Tarena (incorporated herein by referenceto Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27,2014) 4.15 Spousal consent letter dated November 25, 2013 signed by Nan Li in connection with Beijing Tarena (incorporated herein by reference toExhibit 10.16 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27,2014) 4.16 Amended and Restated Exclusive Business Cooperation Agreement dated November 25, 2013 between Tarena Tech and Shanghai Tarena(incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.17 Power of Attorney dated November 25, 2013 granted to Tarena Tech by Mr. Shaoyun Han and acknowledged by Shanghai Tarena(incorporated herein by reference to Exhibit 10.18 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.18 Power of Attorney dated November 25, 2013 granted to Tarena Tech by Mr. Jianguang Li and acknowledged by Shanghai Tarena(incorporated herein by reference to Exhibit 10.19 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.19 Amended and Restated Exclusive Option Agreement dated November 25, 2013 among Tarena, Tarena Tech, Mr. Shaoyun Han andShanghai Tarena (incorporated herein by reference to Exhibit 10.20 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 4.20 Amended and Restated Exclusive Option Agreement dated November 25, 2013 among Tarena, Tarena Tech, Mr. Jianguang Li andShanghai Tarena (incorporated herein by reference to Exhibit 10.21 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 4.21 Amended and Restated Loan Agreement dated November 25, 2013 between Tarena Tech and Mr. Shaoyun Han in connection withShanghai Tarena (incorporated herein by reference to Exhibit 10.22 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 130  ExhibitNumber Description of Document 4.22 Amended and Restated Loan Agreement dated November 25, 2013 between Tarena Tech and Mr. Jianguang Li in connection withShanghai Tarena (incorporated herein by reference to Exhibit 10.23 to the registration statement on Form F-1 (File No. 333-194191), asamended, initially filed with the SEC on February 27, 2014) 4.23 Amended and Restated Share Pledge Agreement dated November 25, 2013 among Tarena Tech, Mr. Shaoyun Han and Shanghai Tarena(incorporated herein by reference to Exhibit 10.24 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.24 Amended and Restated Share Pledge Agreement dated November 25, 2013 among Tarena Tech, Mr. Jianguang Li and Shanghai Tarena(incorporated herein by reference to Exhibit 10.25 to the registration statement on Form F-1 (File No. 333-194191), as amended, initiallyfiled with the SEC on February 27, 2014) 4.25 Spousal consent letter dated November 25, 2013 signed by Ying Sun in connection with Shanghai Tarena (incorporated herein byreference to Exhibit 10.26 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC onFebruary 27, 2014) 4.26 Spousal consent letter dated November 25, 2013 signed by Nan Li in connection with Shanghai Tarena (incorporated herein by referenceto Exhibit 10.27 to the registration statement on Form F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27,2014) 4.27 Power of Attorney dated July 5, 2016 granted to Tarena Tech by Mr. Shaoyun Han and acknowledged by Beijing Tarena (incorporatedherein by reference to Exhibit 4.27 from our annual report on Form 20-F (File No. 001-36363), filed with the Securities and ExchangeCommission on April 25, 2017) 4.28 Power of Attorney dated July 5, 2016 granted to Tarena Tech by Mr. Jianguang Li and acknowledged by Beijing Tarena (incorporatedherein by reference to Exhibit 4.28 from our annual report on Form 20-F (File No. 001-36363), filed with the Securities and ExchangeCommission on April 25, 2017) 4.29 Second Amended and Restated Exclusive Option Agreement dated July 5, 2016 among Tarena, Tarena Tech, Mr. Shaoyun Han andBeijing Tarena (incorporated herein by reference to Exhibit 4.29 from our annual report on Form 20-F (File No. 001-36363), filed with theSecurities and Exchange Commission on April 25, 2017) 4.30 Second Amended and Restated Exclusive Option Agreement dated July 5, 2016 among Tarena, Tarena Tech, Mr. Jianguang Li andBeijing Tarena (incorporated herein by reference to Exhibit 4.30 from our annual report on Form 20-F (File No. 001-36363), filed with theSecurities and Exchange Commission on April 25, 2017) 4.31 Second Amended and Restated Loan Agreement dated July 5, 2016 between Tarena Tech and Mr. Shaoyun Han in connection withBeijing Tarena (incorporated herein by reference to Exhibit 4.31 from our annual report on Form 20-F (File No. 001-36363), filed with theSecurities and Exchange Commission on April 25, 2017) 131  ExhibitNumber Description of Document 4.32 Second Amended and Restated Loan Agreement dated July 5, 2016 between Tarena Tech and Mr. Jianguang Li in connection withBeijing Tarena (incorporated herein by reference to Exhibit 4.32 from our annual report on Form 20-F (File No. 001-36363), filed with theSecurities and Exchange Commission on April 25, 2017) 4.33 Second Amended and Restated Share Pledge Agreement dated July 5, 2016 among Tarena Tech, Mr. Shaoyun Han and Beijing Tarena(incorporated herein by reference to Exhibit 4.33 from our annual report on Form 20-F (File No. 001-36363), filed with the Securities andExchange Commission on April 25, 2017) 4.34 Second Amended and Restated Share Pledge Agreement dated July 5, 2016 among Tarena Tech, Mr. Jianguang Li and Shanghai Tarena(incorporated herein by reference to Exhibit 4.34 from our annual report on Form 20-F (File No. 001-36363), filed with the Securities andExchange Commission on April 25, 2017) 4.35 Commodity Housing Presale Contract dated May 5, 2016 between Beijing Jingkai-Gongda Investment Management Co., Ltd. and TarenaTechnologies Inc. (incorporated herein by reference to Exhibit 4.35 from our annual report on Form 20-F (File No. 001-36363), filed withthe Securities and Exchange Commission on April 25, 2017) 4.36 Commodity Housing Presale Contract dated November 5, 2016 between Beijing Jingkai-Gongda Investment Management Co., Ltd. andTarena Software Technology (Hangzhou) Co., Ltd.(incorporated herein by reference to Exhibit 4.36 from our annual report on Form 20-F(File No. 001-36363), filed with the Securities and Exchange Commission on April 25, 2017) 8.1* List of Subsidiaries of the Registrant 11.1 Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement onForm F-1 (File No. 333-194191), as amended, initially filed with the SEC on February 27, 2014) 12.1* CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 12.2* 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* Consent of Conyers Dill & Pearman 15.2* Consent of Han Kun Law Offices 15.3* Consent of KPMG Huazhen 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 *Filed herewith. **Furnished herewith. 132  SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf. Tarena International, Inc. By:/s/ Shaoyun Han Name:Shaoyun Han Title:Chairman and Chief Executive Officer Date: April 30, 2018 133  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageConsolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets as of December 31, 2016 and 2017 F-3Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2016 and 2017 F-4Consolidated Statements of Changes in Equity for the years ended December 31, 2015, 2016 and 2017 F-5Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2016 and 2017 F-6Notes to the Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of DirectorsTarena International, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Tarena International, Inc. and subsidiaries (the Company) as of December 31, 2016 and2017, the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period endedDecember 31, 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements presentfairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2017, and the results of their operations and their cashflows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theseconsolidated 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 theapplicable 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 reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required tohave, 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 anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 disclosuresin the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG Huazhen LLP We have served as the Company’s auditor since 2012. Beijing, ChinaApril 30, 2018 F-2 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and US Dollar (“US$”),except for number of shares and per share data) December 31, Note 2016 2017 RMB RMB ASSETS Current assets: Cash and cash equivalents (including cash of VIEs of RMB630 and RMB294 as of December 31,2016 and 2017, respectively) 810,672 686,691 Time deposits 416,724 432,536 Accounts receivable, net of allowance for doubtful accounts 3 97,374 216,700 Amounts due from a related party 11 — 231 Prepaid expenses and other current assets 4 126,088 156,360 Total current assets 1,450,858 1,492,518 Time deposits 58,667 505 Accounts receivable, net of allowance for doubtful accounts 3 1,176 14,582 Property and equipment, net (including property and equipment, net of VIEs of RMB3 and nil as ofDecember 31, 2016 and 2017, respectively) 5 437,337 519,691 Goodwill 3,365 3,365 Long term investments, including investment measured at fair value of RMB15,000 andRMB24,750 as of December 31, 2016 and 2017 (including long term investments of VIEs ofRMB35,000 and RMB71,250 as of December 31, 2016 and 2017, respectively) 6 41,760 101,920 Other non-current assets (including other non-current assets of VIEs of RMB716 and RMB3,564 asof December 31, 2016 and 2017, respectively) 91,849 150,064 Total assets 2,085,012 2,282,645 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable 4,502 11,351 Amounts due to a related party 11 79 — Income taxes payable (including income taxes payable of VIEs of RMB3,729 and RMB3,052 as ofDecember 31, 2016 and 2017, respectively) 10 91,240 125,971 Deferred revenue 266,061 302,163 Accrued expenses and other current liabilities (including accrued expenses and other currentliabilities of VIEs of RMB176 and RMB308 as of December 31, 2016 and 2017, respectively) 7 117,867 184,646 Total current liabilities 479,749 624,131 Other non-current liabilities (including other non-current liabilities of VIEs of RMB267 andRMB267 as of December 31, 2016 and 2017, respectively) 7,043 4,329 Total liabilities 486,792 628,460 Commitments and contingencies 15 — — Shareholders’ equity: Class A ordinary shares (US$0.001 par value, 860,000,000 shares authorized, 48,735,228 and52,340,176 shares issued, 47,160,248 and 49,009,530 shares outstanding as of December 31,2016 and 2017, respectively) 12 302 327 Class B ordinary shares (US$0.001 par value, 40,000,000 shares authorized, 8,895,249 shares and7,206,059 shares issued and outstanding as of December 31, 2016 and 2017, respectively) 12 86 74 Treasury shares (1,574,980 and 3,330,646 Class A ordinary shares as of December 31, 2016 and2017, respectively, at cost) 12 (93,761) (255,103)Additional paid-in capital 995,216 1,094,872 Accumulated other comprehensive income 58,204 54,122 Retained earnings 638,173 759,893 Total shareholders’ equity 1,598,220 1,654,185 Total liabilities and shareholders’ equity 2,085,012 2,282,645 The accompanying notes are an integral part of these consolidated financial statements. F-3 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands of RMB and US$,except for number of shares and per share data) Year Ended December 31, Note 2015 2016 2017 RMB RMB RMB Net revenues 8 1,178,008 1,579,604 1,973,806 Cost of revenues(a) (333,559) (449,104) (599,199) Gross profit 844,449 1,130,500 1,374,607 Selling and marketing expenses(a) (384,954) (527,553) (713,120)General and administrative expenses(a) (251,298) (307,519) (392,296)Research and development expenses(a) (50,515) (65,594) (100,032) Operating income 157,682 229,834 169,159 Interest income 42,732 23,974 21,000 Other income 11,812 15,960 26,702 Loss on foreign currency forward contract 9 — (12,898) - Foreign currency exchange gains (losses) (29,499) 3,760 (6,284) Income before income taxes 182,727 260,630 210,577 Income tax expense 10 (3,967) (18,776) (25,770) Net income 178,760 241,854 184,807 Net income attributable to Class A and Class B ordinary shareholders 178,760 241,854 184,807 Basic earnings per Class A and Class B ordinary share 14 3.32 4.35 3.25 Diluted earnings per Class A and Class B ordinary share 14 3.04 4.10 3.10 Net income 178,760 241,854 184,807 Other comprehensive income (loss) Foreign currency translation adjustment, net of nil income taxes 34,748 22,972 (13,832)Unrealized holding gains on available-for-sale securities, net of RMB42 andRMB2,818 income taxes for the year 2016 and 2017 — 5,235 26,246 Less: Reclassification adjustment for gains on available-for-sale securitiesrealized in net income, net of RMB42 and RMB2,818 income taxes for the year2016 and 2017 — (235) (16,496) Comprehensive income 213,508 269,826 180,725 (a) Includes share-based compensation expense as follows (note 13): Cost of revenues (664) (4,124) (1,285)Selling and marketing expenses (1,959) (5,496) (4,863)General and administrative expenses (28,274) (51,154) (60,491)Research and development expenses (2,022) (7,050) (10,776) The accompanying notes are an integral part of these consolidated financial statements. F-4 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in thousands of RMB and US$, except for number of shares and per share data) Ordinary Shares Number ofClass AOrdinaryShares Amount Number ofClass BOrdinaryShares Amount TreasuryShares AdditionalPaid-inCapital Accumulated OtherComprehensiveIncome (loss) RetainedEarnings TotalShareholders’Equity RMB RMB RMB RMB RMB RMB RMB Balance as of December 31,2014 23,712,758 146 28,733,024 209 — 851,662 (4,516) 271,585 1,119,086 Net income — — — — — — — 178,760 178,760 Conversion of Class Bordinary shares to Class Aordinary shares 18,158,128 111 (18,158,128) (111) — — — — — Issuance of Class A ordinaryshares upon exercise ofshare options and vesting ofnon-vested shares 3,043,652 19 — — — 22,437 — — 22,456 Foreign currency translationadjustment, net of nilincome taxes — — — — — — 34,748 — 34,748 Share-based compensation — — — — — 32,919 — — 32,919 Purchase of Class A ordinaryshares — — — — (49,355) — — — (49,355)Balance as of December 31,2015 44,914,538 276 10,574,896 98 (49,355) 907,018 30,232 450,345 1,338,614 Net income — — — — — — — 241,854 241,854 Conversion of Class Bordinary shares to Class Aordinary shares 1,679,647 12 (1,679,647) (12) — — — — — Issuance of Class A ordinaryshares upon exercise ofshare options and vesting ofnon-vested shares 2,141,043 14 — — — 20,374 — — 20,388 Foreign currency translationadjustment, net of nilincome taxes — — — — — — 22,972 — 22,972 Share-based compensation — — — — — 67,824 — — 67,824 Unrealized holding gains onavailable-for-sale security,net of RMB42 income taxes — — — — — — 5,235 — 5,235 Reclassification adjustmentfor gains on available-for-sale securities realized in netincome, net of RMB42income taxes — — — — — — (235) — (235)Dividends — — — — — — — (54,026) (54,026)Purchase of Class A ordinaryshares — — — — (44,406) — — — (44,406)Balance as of December 31,2016 48,735,228 302 8,895,249 86 (93,761) 995,216 58,204 638,173 1,598,220 Net income — — — — — — — 184,807 184,807 Conversion of Class Bordinary shares to Class Aordinary shares 1,689,190 12 (1,689,190) (12) — — — — Issuance of Class A ordinaryshares upon exercise ofshare options and vesting ofnon-vested shares 1,915,758 13 — — — 22,241 — — 22,254 Foreign currency translationadjustment, net of nilincome taxes — — — — — — (13,832) — (13,832)Share-based compensation — — — — — 77,415 — — 77,415 Unrealized holding gains onavailable-for-sale security,net of RMB2,818 incometaxes — — — — — — 26,246 — 26,246 Reclassification adjustmentfor gains on available-for-sale securities realized in netincome, net of RMB2,818income taxes — — — — — — (16,496) — (16,496)Dividends — — — — — — — (63,087) (63,087)Purchase of Class A ordinaryshares — — — — (161,342) — — — (161,342)Balance as of December 31,2017 52,340,176 327 7,206,059 74 (255,103) 1,094,872 54,122 759,893 1,654,185 The accompanying notes are an integral part of these consolidated financial statements. F-5 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands RMB and US$, except for number of shares and per share data) Year Ended December 31, 2015 2016 2017 RMB RMB RMB Operating activities: Net income 178,760 241,854 184,807 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 54,981 72,757 100,724 Bad debt expense 63,103 33,605 31,499 Loss on disposal of property and equipment 500 297 917 Deferred income tax benefit (21,614) (18,895) (18,473)Share based compensation expense 32,919 67,824 77,415 Investment income — 29 (19,267)Foreign currency exchange losses (gains), net 29,499 (3,760) 6,471 Changes in operating assets and liabilities, net of effects from acquisition of Hanru Hangzhou Accounts receivable (66,901) 22,928 (164,231)Prepaid expenses and other current assets (16,713) (60,362) (18,712)Accrued interest income on time deposits (655) 5,264 1,809 Other non-current assets (3,757) (7,071) (12,432)Accounts payable 533 (248) (196)Amounts due from /(to) a related party 879 (800) (310)Income taxes payable 23,287 34,947 34,731 Deferred revenue 46,570 101,439 36,102 Accrued expenses and other current liabilities 27,362 36,781 50,407 Other non-current liabilities (1,055) (2,559) (2,604) Net cash provided by operating activities 347,698 524,030 288,657 Investing activities: Purchase of property and equipment (99,961) (381,982) (177,251)Proceeds from disposal of property and equipment 1,040 358 462 Purchase of short-term investments (945,000) (1,937,000) (1,970,000)Proceeds from maturity of short-term investments 945,000 1,937,000 1,989,314 Purchase of long-term investments (24,000) (12,755) (50,500)Payment of long-term investment deposit — — (4,380)Payment for acquisition of Hanru Hangzhou (1,000) (4,360) — Cash acquired from acquisition of Hanru Hangzhou — 148 — Purchase of time deposits (639,019) (421,170) (509,739)Proceeds from maturity of time deposits 690,250 678,741 528,999 Issuance of loans to employees (1,227) (18,525) (35,379)Proceeds from repayment of loans from employees 1,608 3,096 5,352 Net cash used in investing activities (72,309) (156,449) (223,122) Financing activities: Amounts received on behalf of a related party 1,432 — — Repayment of amounts received on behalf of a related party (1,432) — — Issuance of Class A ordinary shares in connection with exercise of share options 22,456 20,388 22,254 Payment of dividend — (54,026) (63,087)Repurchase of treasury shares (49,355) (44,406) (143,389) Net cash used in financing activities (26,899) (78,044) (184,222) Changes in cash and cash equivalents 248,490 289,537 (118,687)Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash 4,413 7,197 (5,294)Net change in cash, cash equivalents and restricted cash 252,903 296,734 (123,981) Cash, cash equivalents and restricted cash at beginning of year 261,035 513,938 810,672 Cash, cash equivalents and restricted cash at end of year 513,938 810,672 686,691 Supplemental disclosure of cash flow information: Income taxes paid 2,246 3,096 9,512 Non-cash investing and financing activities: Accrual for purchase of equipment 3,685 3,692 10,737 Payable for repurchase of treasury shares - - 17,953 The accompanying notes are an integral part of these consolidated financial statements. F-6 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS (a)Description of business Tarena International, Inc. (“Tarena International”), through its wholly-owned subsidiaries and consolidated variable interest entities or VIEs(collectively referred to hereinafter as the “Company”), is principally engaged in providing professional education services including professionalinformation technology (“IT”) training courses and non-IT training courses across the People’s Republic of China (“PRC”). To a lesser extent, theCompany is also engaged in providing IT and non-IT training courses for children. All of the Company’s operations are located in the PRC withnearly all of its customers located in the PRC. (b)Organization Tarena International is a holding company that was incorporated in the Cayman Islands on October 8, 2003 by Mr. Han Shaoyun (“Mr. Han”), thefounder and chief executive officer of the Company, and five other individuals. Tarena International is the parent company of a number of wholly-owned subsidiaries that are engaged in professional education services. The Company’s education services in certain locations of the PRC werepreviously conducted through Beijing Tarena Jinqiao Technology Co., Ltd. (“Beijing Tarena”) and Shanghai Tarena Software Technology Co., Ltd.(“Shanghai Tarena”)(collectively, the “Tarena Entities”), and their subsidiaries, in order to comply with the PRC laws and regulations whichrestricted foreign investments in companies that were engaged in education services. Tarena Entities and their subsidiaries were principally engagedin providing professional education services including professional IT training courses in those locations and operated 23 learning centers as ofDecember 31, 2011. Pursuant to the VIE Agreements as described below, Tarena International has effective financial control over Tarena Entitiesand their initial capital funding was provided by Tarena Technologies Inc., (a wholly-owned subsidiary of Tarena International or the “WOFE”,formerly known as Beijing Tarena Technology Co., Ltd.). The recognized and unrecognized revenue-producing assets that were held by TarenaEntities and their subsidiaries primarily consisted of property and equipment, operating leases for the learning premises, ICP license, www.tmooc.cnwebsite and assembled workforce in those learning centers. Because of change in PRC laws and regulations in 2012 which encourages foreigninvestments in education services, the Company began to transfer most of the operations, including related assets and liabilities of Tarena Entitiesand their subsidiaries to the wholly-owned subsidiaries of Tarena International. As of December 31, 2013, all of the learning center operations ofTarena Entities and their subsidiaries have been transferred to other subsidiaries of Tarena International. Beijing Tarena invested in five PRCcompanies which mainly engaged in provision of educational products and services in 2016 and invested in two more companies with similarbusiness in 2017. The total carrying amount of such investment was RMB35,000 and RMB71,250, respectively, as of December 31, 2016 and 2017. Upon the establishment of Tarena Entities in 2005, the registered capital of Beijing Tarena and Shanghai Tarena were RMB2,000 and RMB1,000,respectively. In 2016, Beijing Tarena received additional capital injection of RMB3,000 through its nominee equity holders. All of the equityinterests of Tarena Entities are legally held by Mr. Han and Mr. Li Jianguang (“Mr. Li”), a director of Tarena International. Both individuals arenominee equity holders of Tarena Entities and holding their equity interests on behalf of Tarena International. Through a series of contractualagreements and arrangements (the “VIE Agreements”), among Tarena International, WOFE, Tarena Entities and their nominee equity holders, thenominee equity holders of Tarena Entities have granted all their legal rights including voting rights and disposition rights of their equity interests inTarena Entities to Tarena International. The nominee equity holders of Tarena Entities do not participate significantly in income and loss and do nothave the power to direct the activities of the Tarena Entities that most significantly impact their economic performance. Accordingly, the TarenaEntities are considered variable interest entities. F-7 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (b)Organization (continued) In accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A, Tarena International has a controlling financial interest in TarenaEntities because Tarena International has (i) the power to direct activities of Tarena Entities that most significantly impact the economicperformance of Tarena Entities; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of TarenaEntities that could potentially be significant to Tarena Entities. Thus, Tarena International is the primary beneficiary of the Tarena Entities. Under the terms of the VIE Agreements, Tarena International has (i) the right to receive economic benefits that could potentially be significant toTarena Entities in the form of service fees under the exclusive business cooperation agreements; (ii) the right to receive all dividends declared byTarena Entities and the right to all undistributed earnings of Tarena Entities; (iii) the right to receive the residual benefits of Tarena Entities throughits exclusive option to acquire 100% of the equity interests in Tarena Entities, to the extent permitted under PRC law. Accordingly, the financialstatements of Tarena Entities are consolidated in Tarena International’s consolidated financial statements. Under the terms of the VIE Agreements, Tarena Entities’ nominee equity holders have no rights to the net assets nor have the obligations to fund thedeficit, and such rights and obligations have been vested to Tarena International. All of the equity (net assets) and net income of Tarena Entities areattributed to Tarena International. The key terms of the VIE Agreements are as follows: Loan Agreements: The WOFE provided RMB6,000 loans in aggregate to Tarena Entities’ nominee equity holders for the sole purpose of theircontribution of Tarena Entities’ registered capital. The nominee equity holders of Tarena Entities can only repay the loans by transferring all of theirlegal equity interest in Tarena Entities to the WOFE or its designated representatives pursuant to the exclusive option agreements. The loans shall beinterest-free, unless the transfer price exceeds the principal of the loans when each nominee equityholder of Tarena Entities transfers his equityinterests in Tarena Entities to Tarena International or its designated representatives. Such excess over the principal of the loan shall be deemed as theinterest of the loans to the extent permitted under the PRC law. The initial terms of the loans expire in 2026, which can be extended with the writtennotice of both the WOFE and Tarena Entities before expiration. In March 2017, the Company dissolved Shanghai Tarena and obtained therepayment of RMB1,000 from Shanghai Tarena’s nominee equity holders. Exclusive Option Agreements: Each of the nominee equity holders irrevocably granted Tarena International, Inc. or its designated representativesan exclusive option to purchase, to the extent permitted under PRC law, all or part of his equity interests in Tarena Entities. In addition, TarenaInternational has the option to acquire the equity interests of Tarena Entities for a specified price equal to the loan provided by the WOFE to thenominee equity holders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shallapply. Without Tarena International’s prior written consent, the nominee equity holders shall not sell, transfer, mortgage, or otherwise dispose anyequity interests in Tarena Entities. These agreements will remain effective until all equity interests held in Tarena Entities by the nominee equityholders are transferred or assigned to Tarena International or its designated representatives. F-8 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (b)Organization (continued) Exclusive Business Cooperation Agreements: The WOFE has the exclusive right to provide, among other things, technical support, businesssupport and related consulting services to Tarena Entities and Tarena Entities agree to accept all the consultation and services provided by theWOFE. Without the WOFE’s prior written consent, Tarena Entities are prohibited from engaging any third party to provide any of the services underthis agreement. In addition, the WOFE exclusively owns all intellectual property rights arising out of or created during the performance of thisagreement. Tarena Entities agree to pay a monthly service fee to the WOFE at an amount determined solely by the WOFE after taking into accountfactors including the complexity and difficulty of the services provided, the time consumed, the seniority of the WOFE employees providingservices to Tarena Entities, the value of services provided, the market price of comparable services and the operating conditions of Tarena Entities.Furthermore, to the extent permitted under the PRC law, the WOFE agrees to provide financial support to Tarena Entities. The term of the agreementwill remain effective unless the WOFE terminates the agreement in writing or a competent governmental authority rejects the renewal applicationsby either Tarena Entities or the WOFE to renew its respective business license upon expiration. Tarena Entities are not permitted to terminate thisagreement in any event unless required by applicable laws. Power of Attorney: Each nominee equity holder of Tarena Entities appointed the WOFE as the attorney-in-fact to act on all matters pertaining toTarena Entities and to exercise all of their rights as an equity holder of Tarena Entities, including but not limited to attend shareholders’ meetings,vote on their behalf on all matters of Tarena Entities requiring shareholders’ approval under PRC laws and regulations and the articles of associationof Tarena Entities, designate and appoint directors and senior management members. The WOFE may authorize or assign its rights under thisappointment to any other person or entity at its sole discretion without prior notice to the nominee equity holders of Tarena Entities. Each power ofattorney will remain effective until the nominee equity holder ceases to hold any equity interest in Tarena Entities. Equity Interest Pledge Agreements: Pursuant to the equity interest pledge agreement, Tarena Entities’ nominee equity holders pledged all of theirequity interests in Tarena Entities to the WOFE to guarantee their performance of the obligations under the contractual arrangements including butnot limited to, the service fees due to the WOFE. If Tarena Entities or any of Tarena Entities’ nominee equity holders breaches its contractualobligations under the contractual arrangements, the WOFE, as the pledgee, will be entitled to certain rights and entitlements, including receivingproceeds from the auction or sale of whole or part of the pledged equity interests of Tarena Entities in accordance with legal procedures. The WOFEhas the right to receive dividends generated by the pledged equity interests during the term of the pledge. If any event of default as provided in thecontractual arrangements occurs, the WOFE, as the pledgee, will be entitled to dispose of the pledged equity interests in accordance with PRC lawsand regulations. The equity interest pledge agreements became effective on the date when the agreements were duly executed. The pledge wasregistered with the relevant local administration for industry and commerce in December 2013 and April 2017 and will remain binding until TarenaEntities and their nominee equity holders discharge all their obligations under the contractual arrangements. The registration of the equity pledgeenables the WOFE to enforce the equity pledge against third parties who acquire the equity interests of Tarena Entities in good faith. F-9 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (b)Organization (continued) Tarena International relies on the VIE Agreements to operate and control the Tarena Entities. However, these contractual arrangements may not be aseffective as direct equity ownership in providing Tarena International with control over Tarena Entities. Any failure by Tarena Entities or thenominee equity holders to perform their obligations under the VIE Agreements would have a material adverse effect on the consolidated financialposition and consolidated financial performance of the Company. All the VIE Agreements are governed by PRC law and provide for the resolutionof disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes wouldbe resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as some other jurisdictions, such as theUnited States. As a result, uncertainties in the PRC legal system could limit Tarena International’s ability to enforce these contractual arrangements.In addition, if the legal structure and the VIE Agreements were found to be in violation of any existing or future PRC laws and regulations, TarenaInternational may be subject to fines or other legal or administrative sanctions. In the opinion of management, based on the legal opinion obtained from the Company’s PRC legal counsel, the above contractual arrangements arelegally binding and enforceable and do not violate current PRC laws and regulations. However, there are uncertainties regarding the interpretationand application of existing and future PRC laws and regulations. Accordingly, Tarena International cannot be assured that PRC regulatoryauthorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and the VIE Arrangements arefound to be in violation of any existing or future PRC laws and regulations, the PRC government could: •revoke the business and operating licenses of the WOFE, its subsidiaries and Tarena Entities; •discontinue or restrict the conduct of any transactions between the WOFE, its subsidiaries and Tarena Entities; •impose fines, confiscate the income from Tarena Entities, or impose other requirements with which the Company may not be able to comply; •require Tarena International to restructure its ownership structure or operations, including terminating the contractual arrangements with TarenaEntities and deregistering the equity pledges of Tarena Entities; and •restrict or prohibit the use of the proceeds of future offering to finance the Company’s business and operations in the PRC. If the imposition of any of these government actions causes Tarena International to lose its right to direct the activities of Tarena Entities or its rightto receive substantially all the economic benefits and residual returns from Tarena Entities and Tarena International is not able to restructure itsownership structure and operations in a satisfactory manner, Tarena International would no longer be able to consolidate the financial results ofTarena Entities and their subsidiaries. In the opinion of management, the likelihood of deconsolidation of the Tarena Entities and their subsidiariesis remote based on current facts and circumstances. F-10 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (b)Organization (continued) The equity interests of Tarena Entities are legally held by Mr. Han and Mr. Li as nominee equity holders on behalf of the Company. Mr. Han and Mr.Li are also directors of Tarena International. Mr. Han and Mr. Li each holds 66.6% and 0.1% of the total voting rights as of December 31, 2017,respectively, assuming the exercise of all outstanding options held by Mr. Han and Mr. Li as of such date. The Company cannot assure that whenconflicts of interest arise, either of the nominee equity holders will act in the best interests of the Company or such conflicts will be resolved in theCompany’s favor. Currently, the Company does not have any arrangements to address potential conflicts of interest between the nominee equityholders and the Company, except that Tarena International could exercise the purchase option under the exclusive option agreement with thenominee equity holders to request them to transfer all of their equity ownership in Tarena Entities to a PRC entity or individual designated byTarena International. The Company relies on the nominee equity holders, who are both Tarena International’s directors and who owe a fiduciaryduty to Tarena International, to comply with the terms and conditions of the contractual arrangements. Such fiduciary duty requires directors to actin good faith and in the best interests of Tarena International and not to use their positions for personal gains. If the Company cannot resolve anyconflict of interest or dispute between the Company and the nominee equity holders of Tarena Entities, the Company would have to rely on legalproceedings, which could result in disruption of the Company’s business and subject the Company to substantial uncertainty as to the outcome ofany such legal proceedings. The Company’s involvement with Tarena Entities under the VIE Agreements affected the Company’s consolidated financial position, results ofoperations and cash flows as indicated below. The assets and liabilities of Tarena Entities and their subsidiaries that were included in the accompanying consolidated financial statements as ofDecember 31, 2016 and 2017 are as follows: December 31, 2016 2017 RMB RMB Cash 630 294 Amounts due from related parties 21,650 30,781 Total current assets 22,280 31,075 Property and equipment, net 3 - Long term investments 35,000 71,250 Other non-current assets 716 3,564 Total assets 57,999 105,889 Income taxes payable 3,729 3,052 Accrued expenses and other current liabilities 176 308 Amounts due to related parties, including amounts due to WOFE for accrued service fees 46,486 78,180 Total current liabilities 50,391 81,540 Other non-current liabilities 267 267 Total liabilities 50,658 81,807 Amounts due from/to related parties represents the amounts due from/to Tarena International and its wholly-owned subsidiaries, which areeliminated upon consolidation. F-11 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (b)Organization (continued) The financial performance and cash flows of Tarena Entities and their subsidiaries that were included in the accompanying consolidated financialstatements for the years ended December 31, 2015, 2016 and 2017 are as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Net revenues 177 - - Net (loss)/income (2,415) (892) 1 Net cash used in operating activities (2,201) (2,166) (841)Net cash used in investing activities (18,000) (11,886) (29,380)Net cash provided by financing activities 19,755 13,639 29,885 All of the assets of Tarena Entities and their subsidiaries can be used only to settle obligations of Tarena Entities and their subsidiaries. None of theassets of Tarena Entities and their subsidiaries have been pledged or collateralized. The creditors of Tarena Entities and their subsidiaries do nothave recourse to the general credit of Tarena International and its wholly-owned subsidiaries. Assets of Tarena Entities and their subsidiaries that canbe used only to settle obligations of Tarena Entities and their subsidiaries and liabilities of Tarena Entities and their subsidiaries for which creditors(or beneficial interest holders) do not have recourse to the general credit of Tarena International and its wholly owned subsidiaries have beenpresented parenthetically alongside each balance sheet caption on the face of the consolidated balance sheets. During the periods presented, Tarena International and its wholly-owned subsidiaries provided financial support to Tarena Entities that they werenot previously contractually required to provide in the form of advances. To the extent Tarena Entities require financial support, pursuant to theexclusive business cooperation agreements, the WOFE may, at its option and to the extent permitted under the PRC law, provide such support toTarena Entities through loans to Tarena Entities’ nominee equity holders or entrustment loans to Tarena Entities. (c)Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”). F-12 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 1DESCRIPTION OF BUSINESS, ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT CONCENTRATIONS AND RISKS(CONTINUED) (d)Significant concentrations and risks Revenue concentration A substantial portion of the Company’s total net revenues are generated from Java, Digital Arts and Web Front courses. The percentages of theCompany’s total net revenues from Java, Digital Arts and Web Front training courses are as follows: Year Ended December 31, 2015 2016 2017 Digital Arts 32.2% 28.0% 33.6%Java 28.8% 34.3% 32.8%Web Front 4.2% 12.7% 6.6%Total 65.2% 75.0% 73.0% The Company expects net revenues from these three training courses to continue to represent a substantial portion of its total net revenues in thefuture. Negative factors that adversely affect net revenues generated by these three training courses will have a material adverse effect on theCompany’s business, financial condition and results of operations. There were no other courses that represented revenues greater than 10% of totalrevenues. A substantial portion of the Company’s students financed their tuition fees through the loans offered to them by Baidu Small Loan Co., Ltd.,RenRenDai, Bank of China Consumer Finance Co., Ltd., CreditEase Business Consulting (Beijing) Co., Ltd., and Shitudai during the three-yearsperiod ended December 31, 2017. The Company expects students financed by these companies to continue to represent a substantial portion of itstotal students in the future. The Company believes other companies could provide similar loans to its students on comparable terms. However,negative factors that adversely affect these companies will have a material adverse effect on the Company’s business, financial condition and resultsof operations. Geographic concentration A substantial portion of the Company’s total net revenues are derived from its business operations in Beijing and Hangzhou. The percentages of theCompany’s total net revenues generated from its business operations in Beijing and Hangzhou are as follows: Year Ended December 31, 2015 2016 2017 Hangzhou 33.0% 31.9% 30.0%Beijing 12.3% 12.4% 13.0%Total 45.3% 44.3% 43.0% The Company expects revenues derived from its business operations in Beijing and Hangzhou to continue to represent a significant portion of itstotal net revenues. Negative factors that adversely affect professional education services in Beijing or Hangzhou will have a material adverse effecton the Company’s business, financial condition and results of operations. There were no other cities that represented revenues greater than 10% oftotal revenues. F-13 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)Principles of consolidation The consolidated financial statements include the financial statements of Tarena International, its wholly-owned subsidiaries, VIEs in which TarenaInternational is the primary beneficiary and their wholly-owned subsidiaries. All significant intercompany balances and transactions have beeneliminated upon consolidation. (b)Use of estimates The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Significant items subject to such estimates and assumptions include the estimated selling price of deliverables in multiple element arrangements, thefair values of share-based compensation awards and available-for-sale investments, the collectability of accounts receivable, the realizability ofdeferred income tax assets, the accruals for tax uncertainties and other contingencies, the recoverability of the carrying amounts of property andequipment and the useful lives of property and equipment. The current economic environment has increased the degree of uncertainty inherent inthose estimates and assumptions. (c)Foreign currency The functional currency of Tarena International and Tarena Hong Kong Limited (“Tarena HK”) is the USD. The functional currency of TarenaInternational’s PRC subsidiaries, consolidated VIEs, and the subsidiaries of the VIEs is the RMB. Transactions denominated in currencies other thanthe functional currency are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rate at the balance sheet date.The resulting exchange differences are recorded in foreign currency exchange gains (losses) in the consolidated statements of comprehensiveincome. Assets and liabilities of entities with functional currencies other than RMB are translated into RMB using the exchange rate on the balance sheetdate. Revenues and expenses are translated into RMB at average rates prevailing during the reporting period. The resulting foreign currencytranslation adjustment are recorded in accumulated other comprehensive income (loss) within shareholders’ equity. Since the RMB is not a fully convertible currency, all foreign exchange transactions involving RMB must take place either through the People’sBank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchangetransactions are the rates of exchange quoted by the PBOC. F-14 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d)Cash, cash equivalents and time deposits Cash consist of cash on hand and cash in bank, which are unrestricted as to withdrawal. Cash equivalents consist of interest-bearing certificates ofdeposit with initial term of no more than three months when purchased. Time deposits, which mature within one year as of the balance sheet date, represent interest-bearing certificates of deposit with an initial term ofgreater than three months when purchased. Time deposits which mature over one year as of the balance sheet date are included in non-current assets. Cash, cash equivalents and time deposits maintained at banks consist of the following: December 31, 2016 2017 RMB RMB RMB denominated bank deposits with financial institutions in the PRC 867,811 910,804 US dollar denominated bank deposits with a financial institutions in the PRC 152,792 135,686 US dollar denominated bank deposits with financial institutions in Hong Kong Special AdministrativeRegion (“HK SAR”) 3,535 4,387 HK dollar denominated bank deposits with a financial institution in HK SAR 1 1 RMB denominated bank deposits with a financial institution in HK SAR 3 21 US dollar denominated bank deposits with financial institutions in the U.S. 261,913 68,795 To limit exposure to credit risk relating to bank deposits, the Company primarily places bank deposits only with large financial institutions in thePRC, HK SAR and the U.S. with acceptable credit rating. (e)Short-term investment During the years ended December 31, 2015, 2016 and 2017, the Company invested RMB945,000, RMB1,937,000 and RMB1,970,000,respectively, in financial products managed by three financial institutions in the PRC. The terms of the financial products range between 14 daysand 91 days. The financial products matured before December 31, 2016 and 2017, respectively. The Company earned investment income ofRMB5,961, RMB12,676 and RMB19,314, respectively on the financial products, which was included in other income in the consolidatedstatements of comprehensive income for the years ended December 31, 2015, 2016 and 2017. F-15 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f)Accounts receivable Accounts receivable primarily represent tuition fees due from students. Accounts receivable which are due over one year as of the balance sheet dateare presented as non-current assets. The unearned interest on accounts receivable which are due over one year is reported in the consolidated balancesheets as a direct deduction from the principal amount of accounts receivable. See note 2(j). The Company maintains an allowance for doubtfulaccounts for estimated losses resulting from the inability of its customers to make required payments. Accounts receivable is considered past duebased on its contractual terms. In establishing the allowance, management considers historical losses, the students’ financial condition, the amountof accounts receivables in dispute, the accounts receivables aging and the students’ payment patterns. Accounts receivable which are deemed to beuncollectible are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is consideredremote. There is a time lag between when the Company estimates a portion of or the entire account balances to be uncollectible and when a write offof the account balances is taken. The Company takes a write off of the account balances when the Company can demonstrate all means of collectionon the outstanding balances have been exhausted. (g)Property and equipment Property and equipment are recorded at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Theestimated useful life of property and equipment is as follows: Office buildings 45 yearsFurniture 5 yearsOffice equipment 3 to 4 yearsLeasehold improvements Shorter of the lease term or the estimated useful life of the assets Ordinary maintenance and repairs are charged to expenses as incurred, while replacements and betterments are capitalized. When items are retired orotherwise disposed of, income is charged or credited for the difference between net book value of the item disposed and proceeds realized thereon. Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value of such assets maynot be recoverable. Recoverability of a long-lived asset or asset group to be held and used is measured by a comparison of the carrying amount of anasset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying value of anasset or asset group exceeds its estimated undiscounted future cash flows, an impairment loss is recognized by the amount that the carrying valueexceeds the estimated fair value of the asset or asset group. Fair value is determined through various valuation techniques including discounted cashflow models, quoted market values and third party independent appraisals, as considered necessary. Assets to be disposed are reported at the lower ofcarrying amount or fair value less costs to sell, and are no longer depreciated. No impairment of long-lived assets was recognized for any of the yearspresented. (h)Goodwill The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheets as goodwill. Goodwill is notamortized, but tested for impairment annually or more frequently if event and circumstances indicate that it might be impaired. F-16 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h)Goodwill (continued) ASC 350-20, Goodwill, permits the Company to first assess qualitative factors to determine whether it is "more likely than not" that the fair value ofa reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test, using atwo-step approach. If this is the case, the two-step goodwill impairment test is required. If it is more likely-than-not that the fair value of a reportingunit is greater than its carrying amount, the two-step goodwill impairment test is not required. If the two-step goodwill impairment test is required, the first step compares the fair value of a reporting unit to its carrying amount, includinggoodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired and the second step is notrequired. If the fair value of the reporting unit is less than its carrying amount, the second step of the impairment test measures the amount of theimpairment loss, if any, by comparing the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds itsimplied fair value, an impairment loss is recognized equal to that excess. The implied fair value of goodwill is calculated in the same manner thatgoodwill is calculated in a business combination, whereby the fair value of the reporting unit is allocated to all of the assets and liabilities of thatunit, with the excess purchase price over the amounts assigned to assets and liabilities representing the implied fair value of goodwill. (i)Long-term investments The Company’s long-term investments consist of cost method investments, equity method investment and available-for-sale investment. Cost method investments Investments in entities in which the Company does not have an ability to exercise significant influence over the operating and financial matters ofthe investees and which do not have readily determinable fair value are accounted for using the cost method, under which the Company carries theinvestments at cost and recognizes as income for any dividend received from distribution of the investees’ earnings. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significantadverse effect on the fair value of the investment. No events or circumstances indicating a potential impairment were identified as of or for the yearended December 31, 2016 and 2017. The Company determines that it is not practicable to estimate fair value of a cost method investments as ofDecember 31, 2016 and 2017, because the sales prices or bid-and-asked quotations of the equity interests of these entities are not currently availableand the cost of obtaining an independent valuation appears excessive considering the materiality of the investments to the Company. Equity method investment Investment in entity in which the Company has the ability to exercise significant influence, but does not have a controlling interest throughinvestment in common shares or in-substance common shares, are accounted for using the equity method. Under the equity method, the Companyinitially records its investment at cost, its share of the post-acquisition profits or losses of the investee is recognized in the Company’s consolidatedstatements of comprehensive income; and the Company’s share of post-acquisition movements in equity is recognized in equity in the Company’sconsolidated balance sheets. Unrealized gains on transactions between the Company and an investee in which the Company has recorded an equityinvestment are eliminated to the extent of the Company’s interest in the investee. To the extent of the Company’s interest in the investment,unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. F-17 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i)Long-term investments (continued) Available-for-sale investment For investment in debt security, the Company accounts for it as available-for-sale investment when it is not classified as either trading or held-to-maturity investments. Available-for-sale security is reported at fair value, with unrealized holding gains or losses, net of the related tax effect,excluded from earnings and recorded as a separate component of accumulated other comprehensive income until realized. Realized gains or lossesfrom the sale of available-for-sale investment are determined on a specific identification basis. The Company’s consolidated statements of comprehensive income reflects the full impairment (that is, the difference between the security’samortized cost basis and fair value) on debt securities that the Company intends to sell or would more-likely than-not be required to sell before theexpected recovery of the amortized cost basis. For available-for-sale investment that management has no intent to sell and believes that it morelikely than-not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while therest of the fair value loss is recognized in accumulated other comprehensive income. A decline in the market value of any available-for-sale investments below cost that is deemed to be other-than-temporary results in an impairment toreduce the carrying amount to fair value. To determine whether an impairment is other-than-temporary, the Company considers all availableinformation relevant to the collectability of the financial product, including past events, current conditions, and reasonable and supportableforecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for theimpairment, the severity and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and thegeneral market condition in the geographic area or industry the investee operates in. (j)Revenue recognition Revenue is recognized when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or serviceshave been rendered, the price is fixed or determinable and collectability is reasonably assured. These criteria as they relate to each of the followingmajor revenue generating activities are described below. Revenue is presented net of business tax and value added taxes (“VAT”) at rates rangingbetween 3% and 6%, and surcharges. VAT and business tax collected from customers, net of VAT paid for purchases, is recorded as a liability in theconsolidated balance sheets until it is paid to the tax authorities. Tuition fees Tuition fees are recognized as revenue proportionately as the training courses are delivered, with unearned portion of tuition fees being recorded asdeferred revenue. Certain qualified students are allowed to pay their tuition fees on installment for a period of time exceeding one year. Whentuition services are sold on installment terms that exceeds one year beyond the point in time that revenue is recognized, the receivable, and thereforethe revenue is recorded at the present value of the payments. The difference between the present value of the receivable and the nominal or principalvalue of the tuition fees is recognized as interest income over the contractual repayment period using the effective interest rate method. The interestrate used to determine the present value of total amount receivable is the rate at which the students can obtain financing of a similar nature fromother sources at the date of the transaction. F-18 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j)Revenue recognition (continued) The Company enters into arrangements with certain students that purchase multiple services, including classroom training and extended on-linecase studies (“multiple-element arrangements”). Each element within the multiple-element arrangements is accounted for as a separate unit ofaccounting provided the following criteria are met: the delivered services have value to the customer on a standalone basis; and for an arrangementthat includes a general right of return relative to the delivered services, delivery or performance of the undelivered service is considered probableand is substantially controlled by the Company. A deliverable has standalone value if the service is sold separately by the Company or anothervendor. The Company’s revenue arrangements do not include a general right of return relative to the delivered services. The Company treats training contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes andrecognizes revenue during the contract period when each deliverable service is provided. The Company allocates the contract price among all thedeliverables at the inception of the arrangement on the basis of their relative selling prices according to the selling price hierarchy established byAccounting Standard Update No. 2009-13, Revenue Recognition - Multiple-Deliverable Revenue Arrangements. The Company first uses vendor-specific objective evidence (VSOE) of selling price, if it exists, otherwise the third-party evidence of selling price is used. If neither VSOE of sellingprice nor third-party evidence of selling price exists, the Company uses management’s best estimate of selling price for the deliverables. Certification service revenue The Company provides certification service to students who complete the training course and enroll for the exams. The Company is responsible forthe certification service, including organization, proctoring and grading of exams. All certificates are issued by third parties to the students who passthe exam. The Company acts as the principal in providing this service and recognizes revenue on gross basis because the Company is the primaryobligor in the arrangement and is responsible for fulfilling the ordered services by the students. Cash received before the students taking the exam, isrecorded as deferred revenue, and subsequently recognized as certification service revenue upon completion of the certification service, whichoccurs when the certificates are provided to the students. Loan referral service revenue In 2016, pursuant to the agreements between the Company and a number of financial service providers, the Company promotes loan products ofthese financial service providers to its students, who need financial assistance for the payment of their tuition fees, in exchange for a referral fee at arate of between 4% to 8% of the principal amount of the loans. The Company does not provide guarantee for the loans, which are between thefinancial service providers and its students. Loan referral service revenue is recognized upon the initiation of the loans. (k)Cost of revenues Cost of revenues consists of payroll and employee benefits, rent expenses of learning centers, depreciation relating to property and equipment usedfor operating the learning centers, and other operating costs that are directly attributed to the provision of training services. (l)Advertising costs Advertising costs are expensed as incurred and included in selling and marketing expenses. Advertising costs were RMB151,533, RMB201,298 andRMB237,340 for the years ended December 31, 2015, 2016 and 2017, respectively. F-19 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m)Operating lease The Company leases premises for learning centers and offices under non-cancellable operating leases. Leases with escalated rent provisions arerecognized on a straight-line basis commencing with the beginning of the lease term. There are no capital improvement funding, other leaseconcessions or contingent rent in the lease agreements. The lease terms of the Company’s learning centers range between 1 and 10 years. TheCompany has no legal or contractual asset retirement obligations at the end of the lease term. Certain learning centers of the Company sublease a portion of the areas to certain students for their living accommodation. Income from subleases isrecognized on a straight-line basis over the term of the lease and recognized as reduction of costs of revenues. (n)Government grant Government grant is recognized when there is reasonable assurance that the Company will comply with the conditions attach to it and the grant willbe received. Government grant for the purpose of giving immediate financial support to the Company with no future related costs or obligation isrecognized in the Company’s consolidated statements of comprehensive income when the grant becomes receivable. Government grants ofRMB5,851, RMB3,199 and RMB7,435 were recognized and included in other income for the years ended December 31, 2015, 2016 and 2017,respectively. (o)Research and development expense Research and development costs are expensed as incurred. (p)Employee benefits Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipaland provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 24.3% to 53.1% on a standard salarybase as determined by local social security bureau. Contributions to the defined contribution plans are charged to the consolidated statements ofcomprehensive income when the related service is provided. For the years ended December 31, 2015, 2016, and 2017, the costs of the Company’sobligations to the defined contribution plans amounted to RMB69,370, RMB85,325, and RMB117,798, respectively. The Company has no otherobligation for the payment of employee benefits associated with these plans beyond the contributions described above. (q)Income taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective taxbases and tax loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assetsand liabilities of a change in tax rates or tax laws is recognized in the consolidated statements of comprehensive income in the period the change intax rates or tax laws is enacted. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is consideredmore likely than not that some portion or all of the deferred income tax assets will not be realized. F-20 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q)Income taxes (continued) The Company recognizes in the consolidated financial statements the impact of a tax position, if that position is more likely than not of beingsustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount thatis greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgmentoccurs. The Company has elected to classify interest and penalties related to an unrecognized tax benefits, if and when required, as part of incometax expense in the consolidated statements of comprehensive income. (s)Share based compensation The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value ofthe award and recognizes the cost over the period the employee is required to provide service in exchange for the award, which generally is thevesting period. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on astraight-line basis over the requisite service period for the entire award, net of estimated forfeitures, provided that the cumulative amount ofcompensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date. Forfeiture ratesare estimated based on historical and future expectations of employee turnover rates. (t)Commitments and contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, thatcover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual fora loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If apotential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of thecontingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. (u)Earnings per share Basic earnings per Class A and Class B ordinary share is computed by dividing net income attributable to Tarena International’s Class A and Class Bordinary shareholders by the weighted average number of Class A and Class B ordinary shares outstanding during the year using the two-classmethod. Under the two-class method, net income attributable to Tarena International’s Class A and Class B ordinary shareholders is allocatedbetween Class A and Class B ordinary shares and other participating securities, if any, based on participating rights in undistributed earnings. F-21 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (u)Earnings per share (continued) Diluted earnings per share is calculated by dividing net income attributable to Tarena International’s Class A and Class B ordinary shareholders asadjusted for the effect of dilutive Class A and Class B ordinary share equivalents, if any, by the weighted average number of Class A and Class Bordinary and dilutive Class A and Class B ordinary share equivalents outstanding during the year. Class A and Class B ordinary share equivalentsinclude the Class A and Class B ordinary shares issuable upon the exercise of the outstanding share options (using the treasury stock method).Potential dilutive securities are not included in the calculation of diluted earnings per Class A and Class B ordinary share if the impact is anti-dilutive. (v)Segment reporting The Company uses the management approach in determining its operating segments. The management approach considers the internal reportingused by the Company’s chief operating decision maker for making decisions about the allocation of resources to and the assessment of theperformance of the segments of the Company. Management has determined that the Company has one operating segment, which is the trainingsegment. All of the Company’s operations and customers are located in the PRC. Consequently, no geographic information is presented. (w)Fair value measurements The Company applies the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assetsand financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financialstatements on a recurring and nonrecurring basis. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements forassets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which itwould transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC Topic 820 also establishes aframework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value. ASC Topic 820 establishes three levels of inputs that may be used to measure fair value. Thehierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and thelowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are asfollows: •Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to accessat the measurement date. •Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly orindirectly. •Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant tothe fair value measurement in its entirety. In situations where there is little, if any, market activity for the asset or liability at the measurement date,the fair value measurement reflects management’s own judgments about the assumptions that market participants would use in pricing the asset orliability. Those judgments are developed by management based on the best information available in the circumstances. F-22 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (w)Fair value measurements (continued) The carrying amounts of cash and cash equivalents, current time deposits, accounts receivable, loans to employees, amounts due from a relatedparty, accounts payable, amounts due to a related party, accrued expenses and other current liabilities as of December 31, 2016 and 2017approximate their fair value because of short maturity of these instruments. The carrying amounts of non-current time deposits as of December 31, 2016 and 2017 approximates their fair value since the interest rates of thetime deposits did not differ significantly from the market interest rates for similar types of time deposits. The fair values of time deposits as of December 31, 2016 and 2017 are categorized as Level 2 measurement. Available-for-sale investment as of December 31, 2017 is valued using a discounted cash flow analysis and is categorized as Level 3 measurement. (x)Recently issued accounting standards The Financial Reporting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts withCustomers, in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers inan amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should alsodisclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, anduncertainty of revenue and cash flows arising from contracts with customers. In 2016, the FASB issued further guidance that offers narrow scopeimprovements and clarifies certain implementation issues related to revenue recognition, including principal versus agent considerations, theidentification of performance obligations and licensing. These additional updates have the same effective date as the new revenue guidance. Thenew standard and its related amendments are collectively known as “ASC 606”. The new standard is effective for annual reporting periods beginningafter December 15, 2017. The Company adopted the new revenue standard beginning January 1, 2018. The new standard allows two methods of adoption: (i) full retrospective method and (ii) modified retrospective method. The Company adopted ASC606 as of January 1, 2018 using the modified retrospective transition method, and will recognize the cumulative effect of adopting this guidance asan adjustment to the opening balance of accumulated retained earnings. Prior periods will not be retrospectively adjusted. The Company used portfolios historical data to perform its analysis and calculated the cumulative effect of the new guidance. This approach wasapplied by adopting a five step model to all open contracts as of December 31, 2017. The Company has substantially completed its evaluation andhas initially concluded that there is no impact on the retained earnings as of January 1, 2018. F-23 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (x)Recently issued accounting standards (continued) Under ASC 605, all contract acquisition related costs are recorded in the income statement as incurred. The new standard requires certainincremental contract acquisition costs to be capitalized and amortized over the period of the associated revenue. The Company elects to applypractical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset thatthe entity otherwise would have recognized is one year or less. As a result, contract acquisition costs will be expensed when incurred which is thesame as the Company’s current accounting policy. The impact of the incremental costs of obtaining a contract will be immaterial. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840,Leases. The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with terms longerthan 12 months. The Company plans to make a policy election that will keep leases with an initial term of 12 months or less off the balance sheetand will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term.Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarilywill depend on its classification as a financing or operating lease. However, unlike current GAAP, which requires only capital leases to berecognized on the balance sheet, ASU 2016-02 will require both types of leases to be recognized on the balance sheet. As a result, lessees will berequired to put most leases on their balance sheets while recognizing expense on their income statements in a manner similar to current accounting.In addition, this guidance requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 specifies amodified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented inthe financial statements and that the new and enhanced disclosures be provided for each period presented (including comparative periods). OnMarch 7, 2018, the FASB affirmed its proposed ASU, Leases (Topic 842): Targeted Improvements, which provides entities with an additional (andoptional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing acumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for thecomparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordancewith current GAAP, including disclosures. The new standard will be effective for the Company starting from January 1, 2019. The Companycontinues to evaluate the impact that the adoption of this ASU will have on its consolidated financial statements and disclosures, including theeffect of certain optional practical expedients permitted under the transition guidance. Based on the assessment to date, the Company expects theadoption of ASU 2016-02 will result in a significant increase in lease-related assets and liabilities on its consolidated balance sheets. The ultimateimpact of adopting the new standard will depend on the Company’s lease portfolio as of the adoption date. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, to simplify the accounting for employee share-based payment transactions, including the income tax consequences, classification ofexcess tax benefits on the statement of cash flows, introduction of accounting policy election on forfeitures, and the change of the threshold of sharewithholding by the employer for settlement of employees' tax without causing the award to be classified as a liability. The Company has adoptedASU 2016-09 in its financials as of December 31, 2017 and has elected to continue estimating forfeitures each period. Additionally, the statement ofcash flows classification of prior financial years has not changed as a result of adoption. F-24 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (x)Recently issued accounting standards(continued) In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expectedcredit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportableforecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured atamortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Earlyapplication will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. TheCompany is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement ofcash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash orrestricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cashand cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The standardis effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, includingadoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company willadopt this new standard starting January 1, 2018. The adoption of this ASU will not have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies thedefinition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for asacquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interimperiods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. TheCompany does not expect this standard to have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of a goodwillimpairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’scarrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for theannual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwillimpairment tests performed on testing dates after January 1, 2017. The Company does not expect this standard to have a material impact on itsconsolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and FinancialLiabilities, or ASU 2016-01, which requires equity investments to be measured at fair value with changes in fair value recognized in net income.However, equity investments without readily determinable fair values can either be measured at fair value or use a measurement alternative whichadjusts cost for changes in observable prices minus impairment. ASU 2016-01 requires separate presentation of financial assets and liabilities bycategory and form. ASU 2016-01 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods.To further clarify ASU 2016-01, the FASB issued Accounting Standards Update No. 2018-03, Technical Corrections and Improvements to FinancialInstruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2018-03, in February2018. ASU 2018-03 requires application of a prospective transition approach only for those equity investments for which the new measurementalternative is being applied. Additionally, if an entity voluntarily discontinues using the measurement alternative, the investment and all identicalor similar investments of the same issuer must be measured at fair value. Public business entities with fiscal years beginning between December 15,2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018. Early adoption ispermitted. The Company currently holds equity investments without readily determinable fair values that are accounted for under the cost method.The Company believes that the carrying amounts of cost-method investments are close to fair value. Therefore, the Company does not expect thisstandard to have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting, whichprovides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modificationaccounting in ASC 718. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or theclassification of the award (as equity or liability) changes as a result of the change in terms or conditions. Early application will be permitted for allentities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company does not expect thisstandard to have a material impact on its consolidated financial statements. F-25 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 3ACCOUNTS RECEIVABLE Accounts receivable consists of the following: December 31, 2016 2017 RMB RMB Accounts receivable: Gross 214,142 354,057 Unearned interest (15,130) (24,544)Total accounts receivable 199,012 329,513 Less: allowance for doubtful accounts (100,462) (98,231)Accounts receivable, net 98,550 231,282 The classification of accounts receivable is as follows: December 31, 2016 2017 RMB RMB Accounts receivable, net – current portion 97,374 216,700 Accounts receivable, net – non-current portion 1,176 14,582 Total accounts receivable, net 98,550 231,282 The movements of the allowance for doubtful accounts are as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Balance at the beginning of the year 35,347 66,857 100,462 Additions charged to bad debt expense 63,103 33,605 31,499 Write-off of bad debt allowance (31,593) - (33,730)Balance at the end of the year 66,857 100,462 98,231 The aging analysis of our accounts receivable based on due date is as follows: As of December 31, 2016 2017 RMB RMB Aging: – current 78,276 130,551 – 1-3 months past due 15,306 96,307 – 4-6 months past due 10,846 19,861 – 7-12 months past due 22,748 13,741 – greater than one year past due 71,836 69,053 Total accounts receivable 199,012 329,513 F-26 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 4PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: December 31, 2016 2017 RMB RMB Prepaid expenses and other current assets: Prepaid rental expenses 25,038 43,283 Interest receivable from time deposits 5,945 12,495 Prepaid advertising deposits 11,875 12,325 Prepaid advertising expenses 14,193 26,393 Prepaid value-added tax 50,587 28,616 Housing loans made to employees (a) 4,968 11,859 Staff advances (b) 1,404 2,136 Others (c) 12,078 19,253 Total prepaid expenses and other current assets 126,088 156,360 (a)The Company provides one-year housing loans to the employees to help them finance their purchase of apartments. Starting from 2016, theCompany also began to provide five-year loans to the employees, which amounted to RMB12,751 and RMB16,814 in 2016 and 2017 respectively.These loans provided to employees were recognized in investing activities in the statements of cash flows. As of December 31, 2016 and 2017, thebalance of the five-year loans to the employees were RMB 12,751 and RMB 29,565 respectively, and were included in other non-current assets. (b)Staff advances are provided to staff for traveling and related expenses and are expensed when incurred. (c)Others mainly represent other deposits, professional fees and other miscellaneous prepaid expenses. 5PROPERTY AND EQUIPMENT, NET Property and equipment consists of the following: December 31, 2016 2017 RMB RMB Office buildings 281,541 288,046 Furniture 18,078 29,405 Office equipment 271,862 362,254 Leasehold improvements 64,383 100,577 Total property and equipment 635,864 780,282 Less: accumulated depreciation (198,527) (260,591)Property and equipment, net 437,337 519,691 Depreciation expense for property and equipment was allocated to the following: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Cost of revenues 48,553 61,967 85,887 Selling and marketing expenses 2,694 3,226 5,313 General and administrative expenses 3,031 6,455 8,064 Research and development expenses 703 1,109 1,460 Total 54,981 72,757 100,724 F-27 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 6LONG-TERM INVESTMENTS Long-term investments consisted of the following: December 31, 2016 2017 RMB RMB Cost method investments A company providing mechanic training (a) 12,000 12,000 A company providing intelligent robot products (b) - 24,000 A company providing information sharing IT platform (c) - 22,500 Other cost method investments (d) 14,000 18,000 Total cost method investments 26,000 76,500 Equity method investment (e) 760 670 Available-for-sale investment (f) 15,000 24,750 Total 41,760 101,920 (a)In October 2015, the Company paid RMB12,000 in cash to acquire 2.86% of the total equity interest in an education company, which providestraining for senior mechanics in vehicle maintenance and repair. (b)In May 2017, the Company paid RMB24,000 in cash to acquire 6% of the total equity interest in a company, which provides intelligent robotproducts. (c)In July 2017, the Company paid RMB22,500 in cash to acquire 15% of the total equity interest in a company, which provides an informationsharing IT platform. (d)During the years ended December 31, 2016 and December 31, 2017, the Company acquired minority equity interest in several third-partycompanies. The Company accounts for these investments under the cost method as the Company has no ability to exercise significant influenceover the investees. (e)In October 2016, the Company paid RMB790 in cash to acquire 28.5% of equity interest of a hockey program management company throughinvestment in its common shares and accounts for the investment using the equity method. (f)In October 2016, the Company paid RMB10,000 in cash to acquire 13.9% equity interest in a private company, which provides employmentcourse trainings and recruitment services. Because the investment terms contain both substantive liquidation preference over common stock andsubstantive redemption provision that is not available to common shareholders, the investment is not substantially similar to common stock. Inaddition, since the investment is redeemable at the option of the Company, the investment qualifies as a debt security. The Company recordedthe investment as available-for-sale investment and recorded an increase of RMB5,000 and RMB9,750 in fair value of the investment with nilincome tax effect in 2016 and 2017, respectively, as a component of other comprehensive income. Due to a new private placement by theinvestee, the Company owns 11.25% of equity interest in this company as of December 31, 2017. F-28 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 7ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES December 31, 2016 2017 RMB RMB VAT and other tax payables 29,995 31,623 Accrued payroll and employee benefits 59,512 88,713 Others 28,360 64,310 Total 117,867 184,646 Others payable mainly related to repurchase of treasury shares, current deferred income under American Depositary Receipt program, accrual foremployee reimbursement, rental expenses and other miscellaneous expenses. 8NET REVENUES Net revenues consist of the following: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Tuition fee 1,174,596 1,545,680 1,909,692 Certification service fee 27,466 35,980 50,638 Loan referral service fee - 8,750 30,803 Others 1,136 1,875 2,821 Business taxes and surcharges (25,190) (12,681) (20,148)Total net revenues 1,178,008 1,579,604 1,973,806 Others mainly include franchise fee and miscellaneous revenues. 9LOSS ON FOREIGN CURRENCY FORWARD CONTRACT The Company entered into a foreign currency forward contract on January 29, 2016 to sell its time deposits denominated in RMB for US dollars at afixed rate at 6.7070 on May 19, 2016 with the notional amount of RMB564,095. The Company settled the forward contract on May 19, 2016 andincurred a loss on foreign currency forward contract in the amount of RMB12,898 for the year ended December 31, 2016. F-29 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 10INCOME TAXES Under the current laws of the Cayman Islands, Tarena International is not subject to tax on its income or capital gains. For the period from its inceptionon October 22, 2012 to December 31, 2017 Tarena HK did not have any assessable profits arising in or derived from HK SAR. Tarena International’s PRCsubsidiaries and consolidated VIEs and the subsidiaries of the VIEs file separate tax returns in the PRC. Effective from January 1, 2008, the PRC statutoryincome tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007. Under the CIT Law, entities that qualify as “Advanced and New Technology Enterprise” (“ANTE”) are entitled to a preferential income tax rate of 15%.In 2009, the WOFE qualified as an ANTE, which entitled it to the preferential income tax rate of 15% from January 1, 2009 to December 31, 2011. In2012, the WOFE renewed its ANTE qualification, which entitled it to the preferential income tax rate of 15% from January 1, 2012 to December 31,2014. In 2015, the WOFE renewed its ANTE qualification, which entitled it to the preferential income tax rate of 15% from January 1, 2015 toDecember 31, 2017. One of the Chinese subsidiaries of the Company was established in 2013 and qualified as an eligible software enterprise. As a result of this qualification,it is entitled to a tax holiday of a two-year full exemption followed by a three-year 50% exemption, commencing from the year in which its taxableincome is greater than zero. As a result, its income tax rates for the years ended December 31, 2015, 2016 and 2017 were nil, 12.5% and 12.5%,respectively. In 2016, another Chinese subsidiary of the Company was qualified as an eligible software enterprise, and was entitled to a tax holiday of a two-year fullexemption followed by a three-year 50% exemption, commencing from the year in which its taxable income is greater than zero. As a result, the incometax rate of this Chinese subsidiary for the years ended December 31, 2016 and 2017 was nil. Certain Tarena International’s subsidiaries and branches in China qualified as “Small Profit Enterprises” in 2015, 2016 and 2017, and therefore aresubject to the preferential income tax rate of 20%. In 2017, one of the Chinese subsidiaries of the Company was established and qualified to be entitled to a tax holiday until the end of year 2020. As aresult, the income tax rate of this Chinese subsidiary for the year ended December 31, 2017 was nil. According to the approvals from the tax authorities in certain locations in the PRC, Tarena International’s subsidiaries and consolidated VIEs and thesubsidiaries of the VIEs that are based in these locations are required to use the deemed profit method to determine their income tax. Under the deemedprofit method, these subsidiaries are subject to income tax at 25% on its deemed profit which is calculated based on revenues less deemed expensesequal to 85% and 90% of revenues. F-30 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 10INCOME TAXES(CONTINUED) The components of income before income taxes are as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB PRC 200,789 272,745 212,227 Hong Kong (1,908) (573) (2,415)Cayman Islands (16,154) (11,542) 765 Total income before income taxes 182,727 260,630 210,577 Income tax expense consists of the following: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Current income tax expense 25,581 37,671 44,243 Deferred income tax benefit (21,614) (18,895) (18,473)Total 3,967 18,776 25,770 The actual income tax expense reported in the consolidated statements of comprehensive income for each of the years ended December 31, 2015, 2016and 2017 differs from the amount computed by applying the PRC statutory income tax rate to income before income taxes due to the following: Year Ended December 31, 2015 2016 2017 PRC statutory income tax rate 25.0% 25.0% 25.0%Increase (decrease) in effective income tax rate resulting from: Cayman and HK entities not subject to income taxes 2.5% 1.2% 0.2%Research and development bonus deduction (3.3%) (2.7%) (5.6%)Non-deductible selling, general and administrative expenses Share based compensation 4.5% 6.5% 9.2%Other non-deductible selling, general and administrative expenses 0.6% 0.1% 0.1%ANTE preferential tax rate 0.1% (0.7%) (0.2%)One of the subsidiaries preferential tax rate 0.7% 0.5% (3.0%)Change in valuation allowance 3.1% 2.5% 5.0%Two of the subsidiaries tax holiday (31.1%) (25.2%) (18.1%)One of the subsidiaries tax holiday - - (0.3%)Others 0.1% 0.0% (0.1%)Actual income tax expense 2.2% 7.2% 12.2% Basic per Class A ordinary share and Class B ordinary share effect of the Company’s tax holiday for the year ended December 31, 2015, 2016 and 2017was RMB1.06, RMB1.18 and RMB 0.68, respectively. Diluted per Class A ordinary share and Class B ordinary share effect of the Company’s taxholiday for the year ended December 31, 2015, 2016 and 2017 was RMB0.97, RMB1.11 and RMB 0.65, respectively. F-31 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 10INCOME TAXES (CONTINUED) The principal components of deferred income tax assets are as follows: December 31, 2016 2017 RMB RMB Deferred income tax assets: Accounts receivable 47,126 58,421 Tax loss carry forwards 9,984 21,601 Advertising expense 23,401 29,160 Accrued expenses and other current liabilities 123 364 Total deferred income tax assets 80,634 109,546 Valuation allowance (26,507) (36,946)Deferred income tax assets, net 54,127 72,600 The movements of the valuation allowance are as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Balance at the beginning of the year 14,362 20,115 26,507 Additions of valuation allowance 9,069 13,076 15,868 Reduction of valuation allowance (3,316) (6,684) (5,429)Balance at the end of the year 20,115 26,507 36,946 The valuation allowance as of December 31, 2016 and 2017 was primarily provided for the deferred income tax assets of certain Tarena International’sPRC subsidiaries, consolidated VIEs, and the subsidiaries of the VIEs, which were at cumulative loss positions. In assessing the realization of deferredincome tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which thosetemporary differences become deductible or utilizable. Management considers projected future taxable income and tax planning strategies in makingthis assessment. As of December 31, 2017, the Company had tax losses carryforwards of RMB 86,405. Tax losses of RMB227, RMB10,774, RMB6,072,RMB16,225, and RMB53,107 will expire, if unused, by 2018, 2019, 2020, 2021, and 2022, respectively. The CIT Law and its implementation rules impose a withholding income tax at 10%, unless reduced by a tax treaty or arrangement, on the amount ofdividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulatedbeginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholdingincome tax. The Company has considered temporary differences on the book to tax differences pertaining to all investment in subsidiaries including thedetermination of the indefinite reinvestment assertion that would apply to each foreign subsidiary. The Company evaluated each entity’s historical,current business environment and plans to indefinitely reinvest all earnings accumulated in its respective jurisdiction for purpose of future businessexpansion. Due to the plan to indefinitely reinvest its earnings in the PRC, the Company has not provided for deferred income tax liabilities on undistributedearnings of RMB937,735 and RMB1,245,786 as of December 31, 2016, and 2017, respectively. It is not practicable to estimate the unrecognizeddeferred income tax liabilities thereof. F-32 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 10INCOME TAXES (CONTINUED) A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2015, 2016 and 2017 is asfollows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Balance at beginning of year 36,921 53,404 69,822 Increase related to current year tax positions 51,050 66,122 87,838 Settlement (34,567) (49,704) (66,122)Balance at end of year 53,404 69,822 91,538 RMB49,198, RMB69,263 and RMB89,265 of unrecognized tax benefits as of December 31, 2015, 2016 and 2017, if recognized, would affect theeffective tax rate. No interest and penalty expenses were recorded for the years ended December 31, 2015, 2016 or 2017. RMB42,489, RMB62,665, andRMB77,802 of unrecognized tax benefits as of December 31, 2015, 2016, and 2017 were included in income taxes payable. RMB3,700, RMB3,700 andRMB3,700 of unrecognized tax benefits as of December 31, 2015, 2016, and 2017 were included in other non-current liabilities. The remainingRMB7,215, RMB3,457, and RMB10,036 unrecognized tax benefit as of December 31, 2015, 2016, and 2017, respectively were presented as a reductionof the deferred income tax assets for tax loss carry forwards since the uncertain tax position would reduce the tax loss carry forwards under the tax law.The unrecognized tax benefits represent the estimated income tax expenses the Company would be required to pay should its revenue for tax purposesbe recognized in accordance with current PRC tax laws and regulations. Management believes that it is reasonably possible that RMB87,838unrecognized tax benefits as of December 31, 2017 will be recognized in the next twelve months as a result of such revenue being reported in the incometax filing during the next twelve months. According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due tocomputational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstanceswhere the underpayment of taxes is more than RMB100. In the case of transfer pricing issues, the statute of limitation is 10 years. There is no statute oflimitation in the case of tax evasion. The income tax returns of Tarena International’s PRC subsidiaries, consolidated VIEs, and the subsidiaries of theVIEs for the years from 2012 to 2017 are open to examination by the PRC tax authorities. F-33 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 11RELATED PARTY TRANSACTIONS During the years ended December 31, 2015, 2016, and 2017, the Company entered into related party transactions with Mr. Han, Chuanbang BusinessConsulting (Beijing) Co., Ltd. (“Chuanbang”), which is wholly owned by Mr. Han, and Precise Advance Limited (“Precise”), which is owned by anexecutive of the Company’s shareholder. The significant related party transactions are summarized as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Transactions with Chuanbang Cash collection service fee (a) 2,053 6,445 3,230 Transactions with others Advances from Precise (b) (1,432) — — Repayment of advances from Precise (b) 1,432 — — Notes: (a)Pursuant to an agreement between Chuanbang and the Company, beginning August 2013, Chuanbang provides cash collection service on theCompany’s accounts receivable. The fee for the service is calculated based on 2%~12% of the amount collected. Employees of Chuanbang includeformer employees of the Company who worked in the credit evaluation department. Chuanbang also provides similar cash collection service tofinancial institutions in the PRC. The cash collection service fee which is included in general and administrative expenses in the consolidatedstatement of comprehensive income was RMB2,053, RMB6,445, and RMB3,230 for the years ended December 31, 2015, 2016 and 2017,respectively. There was a receivable balance of RMB447 resulted from being a guarantor of historical student loans as of December 31, 2016 and December 31,2017. There was no new transactions occurred during 2015, 2016 and 2017 as the guarantee business was terminated before the year of 2015. There was a payable balance of RMB526 and RMB216 resulted from Chuanbang’s cash collection services mentioned above as of December 31,2016 and December 31, 2017. The amount due to Chuanbang as of December 31, 2016 was RMB79, which has been fully paid by March 31, 2017. The amount due fromChuanbang as of December 31, 2017 was RMB231. (b)In September 2015, Precise, which is owned by an executive of Kohlberg Kravis Roberts & Co. L.P (“KKR”), a shareholder of the Company,provided cash advances in the amount of RMB1,432 to the Company in order to fund its share repurchase plan. The Company has fully repaid theadvances in October 2015. F-34 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 12ORDINARY SHARES AND STATUTORY RESERVE (a)Ordinary shares As of December 31, 2014, 860,000,000 Class A ordinary shares and 40,000,000 Class B ordinary shares had been authorized, 52,445,782ordinary shares had been issued and outstanding, of which 23,712,758 were Class A ordinary shares and 28,733,024 were Class B ordinary shares From January 1, 2015 to December 31, 2015, a total of 18,158,128 Class B ordinary shares were converted to Class A ordinary shares. 3,043,652Class A ordinary shares were issued upon exercise of share options and vesting of non-vested shares. From January 1, 2016 to December 31, 2016,a total of 1,679,647 Class B ordinary shares were converted to Class A ordinary shares. 2,141,043 Class A ordinary shares were issued uponexercise of share options and vesting of non-vested shares. From January 1, 2017 to December 31, 2017, a total of 1,689,190 Class B ordinaryshares were converted into Class A ordinary shares. 1,915,758 Class A ordinary shares were issued upon exercise of share options and vesting ofnon-vested shares. As of December 31, 2017, 860,000,000 Class A ordinary shares and 40,000,000 Class B ordinary shares have been authorized, 52,340,176 and49,009,530 Class A ordinary shares have been issued and outstanding, respectively, and 7,206,059 Class B ordinary shares have been issued andoutstanding. (b)Treasury shares On August 20, 2015, the board of directors of the Company authorized a share repurchase plan under which the Company may repurchase up toRMB 133,556 of its ordinary shares over the next 12 months. The Company repurchased 926,113 ordinary shares on the open market withconsideration of approximately RMB49,355 for the year ended December 31, 2015. For the year ended December 31, 2016, 648,867 ordinaryshares were repurchased on the open market in the amount of RMB44,406. In the second quarter of 2017, the board of directors has authorized a share repurchase plan under which the Company may repurchase up toUS$30 million of its shares over the next 12 months. For the year ended December 31, 2017, 1,755,666 ordinary shares were repurchased on theopen market in the amount of RMB161,342. (c)Statutory reserves Under PRC rules and regulations, Tarena International’s PRC subsidiaries, consolidated VIEs, and the subsidiaries of the VIEs (the “PRCEntities”) are required to appropriate 10% of their net profit, as determined in accordance with PRC accounting rules and regulations, to astatutory surplus reserve until the reserve balance reaches 50% of their registered capital. In addition, private schools (held by the PRC Entities)which require reasonable returns are required to appropriate 25% of their net profit, as determined in accordance with PRC accounting rules andregulations, to a statutory development fund, whereas in the case of private schools which do not require reasonable return, 25% of the annualincrease of their net assets. The appropriation to these statutory reserves must be made before distribution of dividends to Tarena Internationalcan be made. For the years ended December 31, 2015, 2016 and 2017, the PRC Entities made appropriations to the statutory reserves of RMB36,524,RMB40,491 and RMB38,563, respectively. As of December 31, 2016 and 2017, the accumulated balance of the statutory reserves wasMB74,752, RMB115,243 and RMB153,806, respectively. F-35 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 12ORDINARY SHARES AND STATUTORY RESERVE(CONTINUED) (d)Dividend On March 7, 2016, the Company’s board of directors approved to declare a cash dividend of US$0.15 per ordinary share to shareholders as of theclose of trading on April 6, 2016. The aggregate amount of cash dividends was approximately RMB54,026, which was paid in May 2016. On February 28, 2017, the Company’s board of directors approved to declare a cash dividend of US$0.16 per ordinary share to shareholders as ofthe close of trading on March 27, 2017. The aggregate amount of cash dividends was approximately RMB63,087, which was paid in May 2017. 13SHARE BASED COMPENSATION Share incentive plans On September 22, 2008, Tarena International adopted the 2008 Share Plan (the “2008 Plan”), pursuant to which Tarena International is authorized toissue share options and other share-based awards to key employees, directors and consultants of the Company to purchase up to 6,002,020 of itsClass A ordinary shares (being retroactively adjusted to reflect the effect of the share split) under the 2008 Plan. On November 28, 2012, theCompany increased the number of Class A ordinary shares authorized for issuance under the 2008 Plan to 8,184,990 Class A ordinary shares. Shareoptions issued before September 22, 2008 are also administered under the 2008 Plan. On February 1, 2014, Tarena International adopted the 2014 Share Plan (the “2014 Plan”), pursuant to which Tarena International was authorized toissue options, non-vested shares and non-vested share units to qualified employees, directors and consultants of the Company. The maximumaggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, or the Award Pool, is 1,833,696, provided that theshares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing with January 1, 2015, if the unissued sharesreserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstanding on a fully-diluted basis onDecember 31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in the Award Poolimmediately after each such increase shall equal 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31 ofthe immediately preceding calendar year. Share options On January 1, 2011 and September 26, 2011, the board of directors of Tarena International approved the grant of options to purchase 124,000 and1,533,020 ordinary shares of Tarena International to certain employees and directors. These options vest over a five-year period. The option holderscan only exercise their vested options upon the occurrence of the earliest of (i) a qualified IPO as defined in the Plan, (ii) a liquidation event asdefined in the Company’s Memorandum and Articles of Association, or (iii) the five-year anniversary of the option grant date. The options have acontractual term of ten years. The fair value of Tarena International’s ordinary shares on January 1, 2011 and September 26, 2011 was determined tobe US$0.63 and US$0.83 per share, respectively. On January 1, 2013, the board of directors of Tarena International approved the grant of options to certain employees to purchase 2,029,386ordinary shares of Tarena International. These options vest over a four year period. The option holders can only exercise their vested options uponthe occurrence of the earliest of (i) a qualified IPO as defined in the Plan, (ii) a liquidation event as defined in the Company’s Memorandum andArticles of Association, or (iii) the five-year anniversary of the option grant date. The options have a contractual term of ten years. On September 16, 2013, the board of directors of Tarena International approved the grant of options to an employee to purchase 30,000 ordinaryshares of Tarena International. 25% of the options will be vested at the closing of the Company’s IPO while the remaining 75% will vest over a four-year period, that can only be exercised upon the occurrence of the earliest of (i) a qualified IPO, (ii) a liquidation event, or (iii) the five-yearanniversary of the option grant date. The options have a contractual term of ten years. F-36 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 13SHARE BASED COMPENSATION (CONTINUED) Share options (continued) On September 16, 2013, the board of directors of Tarena International approved the grant of options to an officer to purchase 458,424 ordinaryshares of Tarena International. If the Company undertakes any additional round of financing or any other activities to effect an increase of the totalshares outstanding on a fully diluted basis before the IPO, the officer will be granted additional share options at the same exercise price. The totalnumber of share options the officer will be granted will be equal to not less than 1% of the Company’s total shares outstanding on a fully dilutedbasis on the date immediately preceding the closing of the Company’s IPO. 25% of the options will be immediately and fully vested at the closingof the Company’s IPO while the remaining 75% will vest over a four-year period, that can only be exercised upon the occurrence of the earliest of (i)a qualified IPO, (ii) a liquidation event, or (iii) the five-year anniversary of the option grant date. The options have a contractual term of ten years.The fair value of Tarena International’s ordinary shares on January 1, 2013 and September 16, 2013 was determined to be US$3.75 and US$5.69 pershare, respectively. On February 20, 2014, the board of the directors of Tarena International approved the grant of options to certain officers and employees to purchase1,805,784 ordinary shares of Tarena International. The options vest over a four year period. The option holders can only exercise their vestedoptions upon the occurrence of the earliest of (i) a qualified IPO, (ii) a liquidation event, or (iii) the five-year anniversary of the option grant date.The options have a contractual term of ten years. The fair value of Tarena International’s ordinary shares on February 20, 2014 was determined to beUS$8.60 per share. During the year ended December 31, 2015, the board of the directors of Tarena International approved the grant of options to certain officers andemployees to purchase 615,624 ordinary shares of Tarena International at exercise prices ranging from US$0.89 to US$4.36 per share. These optionsvest over a period ranging between 1 year and 4 years. The options have a contractual term of ten years. During the year ended December 31, 2016, the board of the directors of Tarena International approved the grant of options to certain officers andemployees to purchase 1,115,807 ordinary shares of Tarena International at exercise prices ranging from US$0.058 to US$4.36 per share. Theseoptions vest over a period ranging between 0.5 year and 4 years. The options have a contractual term of ten years. During the year ended December 31, 2017, the board of the directors of Tarena International approved the grant of options to certain officers andemployees to purchase 682,435 ordinary shares of Tarena International at exercise prices ranging from US$0.058 to US$4.36 per share. Theseoptions vest over a period ranging between 0.17 year and 4 years. The options have a contractual term of ten years. F-37 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 13SHARE BASED COMPENSATION (CONTINUED) Share options (continued) A summary of share options activity for the years ended December 31, 2015, 2016 and 2017 is as follows: Number ofShareOptions WeightedAverageExercise PriceUS$ WeightedAverageRemainingContractualYears AggregateIntrinsicValue US$ Outstanding at December 31, 2014 8,038,950 1.44 Granted 615,624 3.38 Exercised (3,015,872) 1.20 Forfeited (56,926) 3.33 Expired — — Outstanding at December 31, 2015 5,581,776 1.77 5.68 48,412 Granted 1,115,807 1.90 Exercised (2,106,043) 1.46 Forfeited (263,671) 2.98 Expired — — Outstanding at December 31, 2016 4,327,869 1.88 5.84 56,743 Granted 682,435 0.88 Exercised (1,898,391) 1.74 Forfeited (100,279) 3.21 Expired — — Outstanding at December 31, 2017 3,011,634 1.70 5.83 40,031 Vested and expected to vest as of December 31, 2017 2,716,474 1.57 5.61 36,454 Exercisable as of December 31, 2017 1,724,139 1.15 4.30 23,860 The total intrinsic value of options exercised during the years ended December 31, 2015, 2016 and 2017were RMB235,831, RMB141,040 andRMB210,265, respectively. The Company calculated the fair value of the share options on the grant date using the Binomial option-pricing valuation model. The assumptions usedin the valuation model are summarized in the following table. Year Ended December 31, 2015 2016 2017 US$ US$ US$Expected volatility 62.3%-70.9% 63.5%-68.8% 63.7%-67.8%Expected dividends yield 0% 0% 0%Exercise multiple 2.0 2.0 2.0Risk-free interest rate per annum 2.68%-2.99% 2.15%-3.18% 2.88%-3.22%The fair value of underlying ordinary shares (per share) US$9.28-US$12.85 US$9.99-US$16.54 US$14.27-US$19.03 F-38 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 13SHARE BASED COMPENSATION (CONTINUED) Share options (continued) The expected volatility was based on the historical volatilities of the Company and comparable publicly traded companies engaged in the similarindustry. The estimated fair value of the underlying ordinary shares on each date of grant prior to September 2013, was determined by management based on aretrospective valuation conducted by American Appraisal. The estimated fair values of the underlying ordinary shares on September 16, 2013 andFebruary 20, 2014 were determined by management based on a contemporaneous valuation conducted by American Appraisal. The Company firstdetermined its enterprise value by using income approach, which required the estimation of future cash flows, and the application of an appropriatediscount rate with reference to comparable listed companies engaged in the similar industry to convert such future cash flows to a single present value,and then allocated the enterprise value between the ordinary shares and preferred shares. The fair values of the underlying ordinary shares on each date ofgrant after April 2014, were the closing prices of the Company’s Class A ordinary shares traded in the Stock Exchange. No income tax benefit was recognized in the consolidated statements of comprehensive income as the share-based compensation expense was not taxdeductible. The fair values of the options granted for the years ended December 31, 2015, 2016 and 2017 are as follows: Year Ended December 31, 2015 2016 2017 US$ US$ US$ Weighted average grant date fair value of option per share 9.16 10.17 15.99 Aggregate grant date fair value of options 5,641 11,352 10,915 As of December 31, 2017, there was approximately RMB 59,273 of total unrecognized compensation cost related to unvested share options. Theunrecognized compensation costs are expected to be recognized over a weighted average period of approximately 1.72 years. Non-vested shares On April 3, 2014, the board of directors of Tarena International approved the grant of two batches of non-vested shares to three independent directors.The number of the first batch of non-vested shares is equal to 27,780 shares, which was calculated as US$250 divided by US$9 per share, i.e. the IPOprice of ordinary share of Tarena International. Conditioned on the Grantee’s continuous services as a director of the Company, a second batch of non-vested shares should be granted with the number equal to US$250 divided by the closing price of ordinary share of Tarena International on April 3,2015, which was calculated as US$250 divided by US$10 per share, with 25,000 non-vested shares were granted on April 3, 2015. The two batches ofnon-vested shares shall vest on the April 3, 2015 and 2016, respectively. On November 11, 2014, the board of directors of Tarena International approved the grant of 1,944 non-vested shares to 8 employees. One hundredpercent of the non-vested shares shall vest immediately on the grant date. On April 3, 2016, the board of directors of Tarena International approved the grant of 20,000 non-vested shares to three independent directors, 25% ofwhich vest at the end of every quarter within one year. Grantees of non-vested shares have no voting rights or dividend rights with respect to shares thathave not been vested. On February 28, 2017, the board of directors of Tarena International approved the grant of 700 non-vested shares to 7 employees. One hundred percent ofthe non-vested shares shall vest immediately on the grant date. On April 3, 2017, the board of directors of Tarena International approved the grant of13,335 non-vested shares to three independent directors, 25% of which vest at the end of every quarter within one year. On February 28, 2017, the boardof directors of Tarena International approved the grant of 28,475 and 87,325 non-vested shares to employees, of which the vest period is eight and nineyears, respectively. Grantees of non-vested shares have no voting rights or dividend rights with respect to shares that have not been vested. F-39 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 13SHARE BASED COMPENSATION (CONTINUED) Non-vested shares (continued) A summary of the non-vested shares activity under the 2014 Share Plan is summarized as follows: Number of Non-vested Shares Weighted AverageGrant Date FairValue US$ Outstanding as of December 31, 2014 27,780 9.06 Granted 25,000 9.63 Vested (27,780) 9.06 Forfeited - - Outstanding as of December 31, 2015 25,000 9.63 Granted 20,000 10.82 Vested (35,000) 9.97 Forfeited - - Outstanding as of December 31, 2016 10,000 10.82 Granted 129,835 14.93 Vested (17,367) 14.08 Forfeited (15,701) 14.47 Outstanding as of December 31, 2017 106,767 14.75 As of December 31, 2017, there was approximately RMB6,845 of total unrecognized compensation cost related to non-vested shares, which is expectedto be recognized over a weighted average period of approximately 7.46 years. The total fair value of shares vested during the year ended December 31,2016 and 2017 was RMB2,316 and RMB1,652 respectively. F-40 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 14EARNINGS PER SHARE Basic and diluted earnings per share is calculated as follows: Year Ended December 31, 2015 2016 2017 RMB RMB RMB Numerator: Net income attributable to Class A and Class B ordinary shareholders 178,760 241,854 184,807 Net income for basic and diluted earnings per share 178,760 241,854 184,807 Denominator: Denominator for basic earnings per share: Weighted average number of Class A and Class B ordinary shares outstanding 53,767,810 55,540,670 56,849,332 Dilutive effect of outstanding share options 4,983,046 3,464,591 2,749,379 Denominator for diluted earnings per share 58,750,856 59,005,261 59,598,711 Basic earnings per Class A and Class B ordinary share 3.32 4.35 3.25 Diluted earnings per Class A and Class B ordinary share 3.04 4.10 3.10 F-41 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 15COMMITMENTS AND CONTINGENCIES (a)Operating lease commitments Future minimum lease payments under non-cancelable operating lease agreements as of December 31, 2017 were as follows. The Company’s leasesdo not contain any contingent rent payment terms. RMB Year ending December 31, 2018 166,291 2019 163,956 2020 114,695 2021 71,122 2022 46,378 2023 and thereafter 48,108 Total 610,550 Gross rent expenses incurred under operating leases were RMB108,992, RMB136,076 and RMB181,352 for the years ended December 31, 2015,2016, and 2017, respectively. Sublease rental income of RMB382, RMB460, and RMB632 for the years ended December 31, 2015, 2016, and 2017,respectively, were recognized as reductions of gross rental expenses. F-42 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 16PARENT ONLY FINANCIAL INFORMATION The following presents condensed parent company financial information of Tarena International. Condensed Balance Sheets December 31, 2016 2017 RMB RMB ASSETS Current assets: Cash and cash equivalents 43,770 17,658 Time deposits 242,795 65,342 Prepaid expenses and other current assets 1,855 970 Total current assets 288,420 83,970 Investments and loans to subsidiaries 1,316,552 1,595,299 Total assets 1,604,972 1,679,269 LIABILITIESAND SHAREHOLDERS’ EQUITY Current liabilities: Accrued expenses and other current liabilities 3,409 24,454(1)Total current liabilities 3,409 24,454 Other non-current liabilities 3,343 630 Total liabilities 6,752 25,084 Commitments and contingencies — — Shareholders’ equity: Class A ordinary shares (US$0.001 par value,860,000,000 shares authorized, 48,735,228 and 52,340,176 sharesissued, 47,160,248 and 49,009,530 shares outstanding as of December 31, 2016 and 2017, respectively) 302 327 Class B ordinary shares (US$0.001 par value, 40,000,000 shares authorized, 8,895,249 shares and 7,206,059shares issued and outstanding as of December 31, 2016 and 2017, respectively) 86 74 Treasury shares (1,574,980 and 3,330,646 class A ordinary shares as of December 31, 2016 and 2017,respectively, at cost) (93,761) (255,103)Additional paid-in capital 995,216 1,094,872 Accumulated other comprehensive income 58,204 54,122 Retained earnings 638,173 759,893 Total shareholders’ equity 1,598,220 1,654,185 Total liabilities and shareholders’ equity 1,604,972 1,679,269 (1)Mainly related to repurchase of treasury shares. F-43 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 16PARENT ONLY FINANCIAL INFORMATION (CONTINUED) Condensed Statements of Comprehensive Income Year Ended December 31, 2015 2016 2017 RMB RMB RMB General and administrative expenses (4,241) (4,477) (5,218)Operating loss (4,241) (4,477) (5,218)Equity in income of subsidiaries 194,914 253,396 184,042 Foreign currency exchange losses (31,923) (4,753) (422)Interest income 17,610 8,027 2,327 Loss on foreign currency forward contract — (12,898) — Other income 2,400 2,559 4,078 Income before income taxes 178,760 241,854 184,807 Income tax expense — — — Net income 178,760 241,854 184,807 Other comprehensive income (loss) Foreign currency translation adjustment, net of nil income tax 34,748 22,972 (13,832)Unrealized holding gains on available for sale securities, net of RMB42 andRMB2,818 income taxes for the year 2016 and 2017 — 5,235 26,246 Less: Reclassification adjustment for gains on available for sale securities realized innet income, net of RMB42 and RMB2,818 income taxes for the year 2016 and 2017 — (235) (16,496)Comprehensive income 213,508 269,826 180,725 F-44 TARENA INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of RMB and US$,except for number of shares and per share data) 16PARENT ONLY FINANCIAL INFORMATION (CONTINUED) Condensed Statements of Cash Flows Year Ended December 31, 2015 2016 2017 RMB RMB RMB Operating activities: Net cash provided by (used in) operating activities 9,770 (10,272) (17,594)Investing activities: Purchase of time deposits (588,426) (298,688) (196,771)Proceeds from maturity of time deposits 603,501 620,607 363,533 Investments made to subsidiaries — (198,137) — Foreign currency exchange losses — — 10,691 Net cash provided by investing activities 15,075 123,782 177,453 Financing activities: Advances from a related party 1,432 — — Repayment of advances from a related party (1,432) — — Issuance of Class A ordinary shares in connection with exercise of share options 22,456 20,388 22,254 Payment of dividends — (54,026) (63,087)Repurchase of treasury shares (49,355) (44,406) (143,389) Net cash used in financing activities (26,899) (78,044) (184,222)Changes in cash and cash equivalents (2,054) 35,466 (24,363)Effect of foreign currency exchange rate changes on cash and cash equivalents 398 2,029 (1,749)Net increase (decrease) in cash and cash equivalents (1,656) 37,495 (26,112)Cash and cash equivalents at beginning of year 7,931 6,275 43,770 Cash and cash equivalents at end of year 6,275 43,770 17,658 Non-cash financing activities: Payable for repurchase of treasury shares - - 17,953 17SUBSEQUENT EVENTS On February 27, 2018, the Company acquired 100% of equity interest of Wuhan Haoxiaozi Robot Technology Co., Ltd, ("RTEC"), which provides K-12robotics programming education services in China. The total consideration was RMB58,200 in cash. The transaction will be accounted for as a businesscombination. Given the recent timing of the transaction and pending completion of the valuations for identifiable net assets acquired and liabilitiesassumed, at the time these financial statements were authorized for issuance, the initial accounting for the business combination is incomplete.Accordingly, not all relevant disclosures are available for the business combination. On January 15, 2018, the Company acquired 20% of equity interest of a company providing IT consulting services, programming outsourcing, and ITprofessional recruiting services in China. The total consideration was RMB14,000 in cash. The transaction will be accounted for as an equity-methodinvestment. On March 5, 2018, the Company announced that its board of directors approved and declared a cash dividend of US$0.12 per ordinary share, includingboth Class A ordinary shares and Class B ordinary shares. The Company expects that the aggregate amount of the dividend will not exceed US$7.1million. Holders of Tarena’s ADS, each representing one Class A ordinary share, are accordingly entitled to the cash dividend of US$0.12 per ADS. Thecash dividend will be paid on or about June 9, 2018 to shareholders of record as of the close of business on April 5, 2018. F-45  Exhibit 8.1 List of Major Subsidiaries and Variable interest entity Name Jurisdiction of Incorporation Affiliate Relationship with The RegistrantTarena Hong Kong Limited Hong Kong Wholly-owned subsidiaryTarena Software Technology (Hangzhou) Co., Ltd. PRC Wholly-owned subsidiaryTarena Technologies Inc. PRC Wholly-owned subsidiaryHangzhou Tarena Weishang Technology Co., Ltd. PRC Wholly-owned subsidiary of Tarena Software Technology(Hangzhou) Co., Ltd.Hangzhou Hanru Education Technology co., Ltd. PRC Wholly-owned subsidiary of Tarena Software Technology(Hangzhou) Co., Ltd.Dalian Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryShenyang Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryBeijing Yingcai Tianyi Technology Co., Ltd. PRC Wholly-owned subsidiaryChengdu Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryZhengzhou Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryHarbin Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryChangchun Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryHeilongjiang Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryGansu Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryLuoyang Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryBeijing Tongcheng Technology Co., Ltd.. PRC Wholly-owned subsidiaryHuhehaote Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryNanyang Tarena Softare Co., Ltd. PRC Wholly-owned subsidiaryBeijing Tarena Weishang Technology Co., Ltd. PRC Wholly-owned subsidiaryBaotou Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryMianyang Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryHerguosi Weiying Information Technology Co., Ltd. PRC Wholly-owned subsidiaryBeijing Pairuite Internet Technology Co., Ltd. PRC Wholly-owned subsidiaryWeihai Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryBeijing Caixiu Renren Technology Co., Ltd. PRC Wholly-owned subsidiaryShenzhen Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryJinan Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryQingdao Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryShenzhen Tarena Weishang Software Co., Ltd. PRC Wholly-owned subsidiaryWuxi Tarena Technology Co., Ltd. PRC Wholly-owned subsidiarySuzhou Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryLinyi Tarena Technology Software Co., Ltd. PRC Wholly-owned subsidiary  Name Jurisdiction of Incorporation Affiliate Relationship with The RegistrantYantai Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryWeifang Tarena Times Software Co., Ltd. PRC Wholly-owned subsidiaryHefei Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryNanjing Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryNanjing Tarena Weishang Information Technology Co., Ltd. PRC Wholly-owned subsidiaryZibo Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryJining Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryWuhu Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryBengbu Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryXuzhou Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryKunming Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryTianjin Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryShanghai Tarena Weishang Software Technology Co., Ltd. PRC Wholly-owned subsidiaryChongqing Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryShijiazhuang Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryXi’an Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryTaiyuan Tarena Technology Co., Ltd PRC Wholly-owned subsidiaryGuizhou Tarena Technologies Co., Ltd. PRC Wholly-owned subsidiaryTianjin Weiying Information Technology Co., Ltd. PRC Wholly-owned subsidiaryYuncheng Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryQinhuangdao Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryJinzhong Tarena Computer Technology Co. Ltd. PRC Wholly-owned subsidiaryTangshan Tatsu Software Technology Co. Ltd. PRC Wholly-owned subsidiaryNingbo Tarena Information Technology Co., PRC Wholly-owned subsidiaryFuzhou Tarena Information Technology Co., PRC Wholly-owned subsidiaryGuangxi Nanning Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryZhuhai Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryGuangzhou Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryXiamen Tarena Information Technology Co., Ltd. PRC Wholly-owned subsidiaryDongguan Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryHaikou Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryWuhan Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryTarena (Wuhan) Technology Co., Ltd. PRC Wholly-owned subsidiaryHainan Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryNanchang Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryChangsha Tarena Software Co., Ltd. PRC Wholly-owned subsidiaryWuhan Tarena Accounting Consultative Service Co., Ltd. PRC Wholly-owned subsidiary  Name Jurisdiction of Incorporation Affiliate Relationship with The RegistrantWenzhou Tarena information technology co., Ltd. PRC Wholly-owned subsidiaryZhongshan Tarena Software Technology Co., Ltd. PRC Wholly-owned subsidiaryFoshan Dendan age technology co. Ltd. PRC Wholly-owned subsidiaryHuizhou Tarena Technology Co., Ltd. PRC Wholly-owned subsidiaryJinhua Tarena Technology Co.,Ltd. PRC Wholly-owned subsidiaryWeifang Tarena Professional Education School PRC School sponsored by Tarena Technology Co., Ltd.Chongqing Jiulongpo Tarena Professional Education School PRC School sponsored by Chongqing Tarena Software Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Qingdao Tarena Professional Education School PRC School sponsored by Qingdao Tarena Software Technology Co.,Ltd., a wholly-owned subsidiary of Tarena International, Inc.Nanjing Tarena Professional Education School PRC School sponsored by Nanjing Tarena Software Co., Ltd., a wholly-owned subsidiary of Tarena International, Inc.Nanjing Tarena Weishang Education School PRC School sponsored by Nanjing Tarena Weishang InformationTechnology Co., Ltd., a wholly-owned subsidiary of TarenaInternational, Inc.Kunming Guandu Tarena Professional Education School PRC School sponsored by Kunming Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Zhengzhou Tarena Professional Education School PRC School sponsored by Zhengzhou Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Shenyang Tarena Times Professional Education School PRC School sponsored by Shenyang Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Shenyang Tarena Professional Education School PRC School sponsored by Shenyang Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Harbin Tarena Professional Education School PRC School sponsored by Harbin Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Dalian High-Tech Zone Tarena Professional Education School PRC School sponsored by Dalian Tarena Software Co., Ltd., a wholly-owned subsidiary of Tarena International, Inc.  Name Jurisdiction of Incorporation Affiliate Relationship with The RegistrantChangchun Tarena Professional Education School PRC School sponsored by Changchun Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Chengdu Tarena Professional Education School PRC School sponsored by Chengdu Tarena Technology Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Jinan Tarena Professional Education School PRC School sponsored by Jinan Tarena Software Co., Ltd., a wholly-owned subsidiary of Tarena International, Inc.Wuhan Tarena Professional Education School PRC School sponsored by Wuhan Tarena Software Co., Ltd., a wholly-owned subsidiary of Tarena International, Inc.Zhuhai Tarena Professional Education School PRC School sponsored by Zhuhai Tarena Software Co., Ltd., a wholly-owned subsidiary of Tarena International, Inc.Guangzhou Tarena Software Professional Education School PRC School sponsored by Guangzhou Tarena Information TechnologyCo., Ltd., a wholly-owned subsidiary of Tarena International, Inc.Shenzhen Bao’an Tarena Professional Education School PRC School sponsored by Shenzhen Tarena Software Co., Ltd., awholly-owned subsidiary of Tarena International, Inc.Dalian Shahekou Tarena Accounting Professional EducationSchool PRC School sponsored by Dalian Tarena Software Technology Co., Ltd.Chengdu High-tech Zone Tarena Professional EducationSchool PRC School sponsored by Chengdu Tarena Technology Co., Ltd.Chongqing Nanan Tarena Professional Education School PRC School sponsored by Chongqing Tarena Software Co., Ltd.Shenzhen Longhua Xinqu Tarena Professional SkillsEducation School PRC School sponsored by Shenzhen Tarena Software Technology Co.,Ltd.Wuhan Technology Tarena Professional Education School PRC School sponsored by Wuhan Tarena Software Co., Ltd.Ningbo Tarena Professional Education School PRC School sponsored by Ningbo Tarena Information Technology Co.,Ltd.Nanjing Weishang Tarena Professional Education School PRC School sponsored by Nanjing Tarena Weishang InformationTechnology Co., Ltd.Wuhan Jiang'an Good Boy Robot Education and TrainingSchool PRC School sponsored by Wuhan Good Boy Robot Technology Co.,Ltd.Changsha Kaifu District, the Science Kid Robot EducationTraining School PRC School sponsored by Wuhan Good Boy Robot Technology Co.,Ltd.Beijing Tarena Jinqiao Technology Co., Ltd. PRC Variable interest entityGuangzhou Huicai Software Co., Ltd. PRC Subsidiary of Variable interest entityHangzhou Tarena Technology Co., Ltd. PRC Subsidiary of Variable interest entity  Exhibit 12.1 Certification by the Principal Executive Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Shaoyun Han, certify that: 1.I have reviewed this Annual Report on Form 20-F of Tarena International, Inc.; 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the period 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 inExchange 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: aDesigned 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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 bythe annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financialreporting; 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 theCompany’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 arereasonably 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 internalcontrol over financial reporting. Date: April 30, 2018 /s/ Shaoyun Han Name:Shaoyun Han Title:Chief Executive Officer  Exhibit 12.2 Certification by the Principal Financial Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Yuduo Yang, certify that: 1.I have reviewed this Annual Report on Form 20-F of Tarena International, Inc.; 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the period 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 inExchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theCompany 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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 bythe annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financialreporting; 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 theCompany’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 arereasonably 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 internalcontrol over financial reporting. Date: April 30, 2018 /s/ Yuduo Yang Name:Yuduo YangTitle:Chief Financial Officer  Exhibit 13.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Tarena International, Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2017 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shaoyun Han, 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 theCompany. April 30, 2018 /s/ Shaoyun Han Name:Shaoyun Han Title:Chief Executive Officer  Exhibit 13.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Tarena International, Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2017 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yuduo Yang, 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 theCompany. April 30, 2018 /s/ Yuduo Yang Name:Yuduo Yang Title:Chief Financial Officer  Exhibit 15.1 30 April, 2018 Matter No.: 824093Doc Ref: 103291636852 2842 9556Christopher.bickleyl@conyersdill.com Tarena International, Inc.Suite 10017, Building E, Zhongkun PlazaA18 Bei San Huan West RoadHaidian DistrictBeijing 100098The People’s Republic of China Dear Sirs, Re: Tarena International, Inc. We consent to the reference to our firm under the heading “Item 10. Additional Information — E. Taxation — Cayman Islands Taxation” in TarenaInternational, Inc.’s Annual Report on Form 20-F for the year ended 31 December 2017 (the “Annual Report”), which will be filed with the Securities andExchange Commission (the “SEC”) in the month of April 2018, and further consent to the incorporation by reference into the Registration Statements onForm S-8 (File No.: 333-197226) filed on July 3, 2014 and on Form S-8 (File No.: 333-204494) filed on May 28, 2015, in each case pertaining to TarenaInternational, Inc.’s 2008 share plan and 2014 share incentive plan of the summary of our opinion under the heading “Item 10. Additional Information — E.Taxation — Cayman Islands Taxation” in the Annual Report. We also consent to the filing with the SEC of this consent letter as an exhibit to the AnnualReport. 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 Actof 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder. Yours faithfully, /s/ Conyers Dill & Pearman Conyers Dill & Pearman  Exhibit 15.2 [Han Kun Law Offices Letterhead] April 30, 2018 Tarena International, Inc.Suite 10017, Building E, Zhongkun PlazaA18 Bei San Huan West Road, Haidian DistrictBeijing 100098 The People’s Republic of China Dear Sir/Madam: We hereby consent to the reference of our name under the heading “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure,”“Item 4. Information on the Company—C. Organizational Structure” and “Item 10. Additional Information—E. Taxation—People’s Republic of ChinaTaxation” in Tarena International, Inc.’s Annual Report on Form 20-F for the year ended December 31, 2017 (the “Annual Report”), which will be filed withthe Securities and Exchange Commission (the “SEC”) in the month of April 2018, and further consent to the incorporation by reference into the RegistrationStatements on Form S-8 (File No.: 333-197226) filed on July 3, 2014 and on Form S-8 (File No.: 333-204494) filed on May 28, 2015, in each case pertainingto Tarena International, Inc.’s 2008 share plan and 2014 share incentive plan of the summary of our opinion under the heading “Item 3. Key Information—D.Risk Factors—Risks Relating to Our Corporate Structure,” “Item 4. Information on the Company—C. Organizational Structure” and “Item 10. AdditionalInformation—E. Taxation—People’s Republic of China Taxation” in the Annual Report. We also consent to the filing of this consent letter with the SEC asan 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 Actof 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder. Very truly yours, /s/ Han Kun Law Offices Han Kun Law Offices  Exhibit 15.3 Consent of Independent Registered Public Accounting Firm The Board of DirectorsTarena International, Inc.: We consent to the incorporation by reference in the registration statements (No. 333-333-204494 and No. 333-197226) on Form S-8 of Tarena International,Inc. of our report dated April 30, 2018, with respect to the consolidated balance sheets of Tarena International, Inc. as of December 31, 2016 and 2017, andthe related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December31, 2017, and the related notes (collectively, the consolidated financial statements), which report appears in the December 31, 2017 annual report on Form20-F of Tarena International, Inc. /s/ KPMG Huazhen LLP Beijing, China April 30, 2018 

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