CHINA YUHUA EDUCATION CORPORATION LIMITED

China YuHua Education Corporation Limited

6169

KYG2120K1094

School, College & University

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2023	China YuHua Education Corporation Limited Reports Earnings Results for the Full Year Ended August 31, 2023	CI
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China Yuhua Education : MAJOR TRANSACTION - ACQUISITION OF JINAN SHUANGSHENG EDUCATION CONSULTING CO., LTD.*

December 01, 2019 at 06:38 pm EST

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China YuHua Education Corporation Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

CHINA YUHUA EDUCATION CORPORATION LIMITED

中国宇华教育集团有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 6169)

MAJOR TRANSACTION

ACQUISITION OF JINAN SHUANGSHENG EDUCATION

CONSULTING CO., LTD.*

A letter from the Board is set out on pages 4 to 26 of this circular.

2 December 2019

CONTENTS
	Pages
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I - FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II - ACCOUNTANT'S REPORT OF THE TARGET GROUP . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III - PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV - GENERAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1

- i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

"2019 Contractual Arrangements"	a series of contracts and documents entered into in July 2019 between
	the WFOE, the Transferee and the Registered Shareholders that
	allows the WFOE to exercise control over the Transferee and enjoy
	the economic benefits arising from the business of the Transferee and
	its subsidiaries, including the Target Group
"Agreement"	the agreement dated 19 July 2019 entered into by the Transferee, the
	Transferors, the Target Company and the Target University in respect
	of the Transaction
"Announcement"	the announcement of the Company dated 22 July 2019 in relation to
	the Transaction
"Board"	the board of director(s) of the Company from time to time
"business day"	any day on which the Stock Exchange is open for the business of
	dealing in securities
"BVI"	the British Virgin Islands
"BVI YuHua"	China YuHua Education Investment Limited, a company incorporated
	in the BVI and a wholly-owned subsidiary of the Company
"China" or "PRC"	the People's Republic of China and for the purposes of this circular,
	excluding Hong Kong, the Macau Special Administrative Region of
	the People's Republic of China and Taiwan
"Company"	China YuHua Education Corporation Limited (中国宇华教育集团有限
	公司), an exempted company with limited liability incorporated in the
	Cayman Islands
"Completion"	completion of the Transaction pursuant to the Agreement
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Controlling Shareholder"	has the meaning ascribed to it under the Listing Rules
"Directors"	the director(s) of the Company from time to time
"Enlarged Group"	the Group (inclusive of the entities acquired by the Group during the
	year ended 31 August 2018) as enlarged by the consolidation of the
	Target Group as a result of the Transaction
"Group"	the Company, its subsidiaries and its consolidated affiliated entities
	from time to time
	- 1 -

	DEFINITIONS
"GuangYu Investment"	GuangYu Investment Holdings Limited, a company incorporated in
	the BVI with limited liability and a Controlling Shareholder of the
	Company
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the People's
	Republic of China
"HongKong Yuhua"	China HongKong Yuhua Education Limited, a company incorporated
	in Hong Kong with limited liability and a wholly-owned subsidiary of
	the Company
"IFRS"	International Financial Reporting Standards, as issued from time to
	time by the International Accounting Standards Board
"Independent Third Party(ies)"	an entity or person who is not a connected person of the Company
	within the meaning ascribed thereto under the Listing Rules
"IPO"	initial public offering of the Shares on 16 February 2017
"Latest Practicable Date"	21 November 2019, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information contained
	herein
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock Exchange
	of Hong Kong Limited
"Model Code"	the Model Code for Securities Transactions by Directors of Listed
	Issuers set out in Appendix 10 of the Listing Rules
"Mr. Li"	Mr. Li Guangyu (李光宇), a Director and a Controlling Shareholder
"Ms. Li"	Ms. Li Hua (李花), a Director
"PRC Legal Adviser"	Tian Yuan Law Firm
"Pre-IPO Share Option Scheme"	the share option scheme effective from 1 September 2016, the
	principal terms of which are set out in the section headed "Statutory
	and General Information - D. Pre-IPO Share Option Scheme and
	Share Award Scheme - 1. Pre-PO Share Option Scheme" in
	Appendix V to the Prospectus
"Prospectus"	the prospectus of the Company published on 16 February 2017 in
	connection with the IPO on the Stock Exchange
"Registered Shareholders"	Mr. Li and Ms. Li, and each of them a Registered Shareholder
	- 2 -

	DEFINITIONS
"RMB"	Renminbi, the lawful currency of the PRC
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong), as amended, supplemented or otherwise modified from
	time to time
"Shares"	ordinary share(s) in the Company
"Shareholders"	holder(s) of the Share(s)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"subsidiary(ies)"	has the meaning ascribed to it under the Listing Rules
"Target Company"	Jinan Shuangsheng Education Consulting Co., Ltd.* (濟南雙勝教育諮
	詢有限公司), a company established under the laws of the PRC with
	limited liability
"Target Group"	the Target Company and its subsidiaries
"Target University"	Shandong Yingcai University (山東英才學院), a private higher
	education institution in China
"Transaction"	the acquisition of an aggregate of 90% equity interest in the Target
	Company by the Transferee pursuant to the terms and conditions of
	the Agreement
"Transferee"	Zhengzhou Hanchen Education Technology Co., Ltd.* (鄭州漢晨教育
	科技有限公司), a company established under the laws of the PRC with
	limited liability and a subsidiary of the Company
"Transferors"	Mr. Xia and Ms. Yang, who are shareholders of the Target Company,
	directors of the Target University, and are Independent Third Parties
"WFOE"	Xizang Yuanpei Information Technology Management Company
	Limited* (西藏元培信息科技管理有限公司), a company established in
	the PRC with limited liability and a wholly-owned subsidiary of the
	Company
"%"	per cent

For identification purposes only.

- 3 -

LETTER FROM THE BOARD

CHINA YUHUA EDUCATION CORPORATION LIMITED

中国宇华教育集团有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 6169)

Executive Directors:	Registered Office:
Mr. Li Guangyu (Chairman)	The offices of Maples Corporate Services Limited
Ms. Li Hua (Vice Chairman)	PO Box 309, Ugland House
Ms. Qiu Hongjun	Grand Cayman, KY1-1104
	Cayman Islands
Independent Non-executive Directors:	Head Office and Principal Place of Business in China:
Mr. Chen Lei	No. 21, 4/F, Block 10
Mr. Xia Zuoquan	3 Mazhuang Street
Mr. Zhang Zhixue	Zhengdong New District
	Zhengzhou, PRC
	Principal Place of Business in Hong Kong:
	31/F, Tower Two, Times Square
	1 Matheson Street, Causeway Bay
	Hong Kong

2 December 2019

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

ACQUISITION OF JINAN SHUANGSHENG EDUCATION

CONSULTING CO., LTD.*

1. INTRODUCTION

Reference is made to the Announcement, in which it was disclosed that the Transferee (being a subsidiary of the Company), the Transferors, the Target Company and the Target University had entered into the Agreement, pursuant to which the Transferors had conditionally agreed to transfer an aggregate 90% equity interest in the Target Company, which holds the entire sponsorship interest in the Target University, to the Transferee. The purpose of this circular is to provide:

further details of the Transaction;
the financial information of the Group;
the financial information of the Target Group; and
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LETTER FROM THE BOARD

the property valuation report of the Target Group.

2. THE AGREEMENT

The principal terms of the Agreement are summarised below:

Date

19 July 2019

Parties

The Transferee;
The Transferors;
The Target Company; and
The Target University

To the best of the Directors' knowledge, information and belief and having made all reasonable enquiries, the Transferors, the Target Company and the Target University are Independent Third Parties.

Consideration

The total consideration for the Transaction is RMB1,491,552,000 (the "Purchase Price").

Payment of consideration

The Purchase Price was agreed to be paid by the Transferee to the Transferors in four installments in the following manner:

RMB149,155,200, being 10% of the Purchase Price (the "First Installment"), payable within five working days after the date of signing the Agreement;
RMB894,931,200, being 60% of the Purchase Price (the "Second Installment"), payable within
(A) five working days after the date on which the condition below has been fulfilled (which has already been fulfilled as of the date on which the Agreement took effect), or (B) fifteen working days after the date of signing the Agreement, whichever is later:

1. the transfer of equity interest in the Target Company having been registered with the relevant industrial and commercial authority;
RMB372,888,000, being 25% of the Purchase Price (the "Third Installment"), payable within (A) five working days after the date on which the condition below has been fulfilled or waived in writing by the Transferee, or (B) thirty working days after the date of signing the Agreement, whichever is later:
1. the originals of the relevant licenses and corporate seals (including the company seal and the accounts seal) and the relevant bank accounts information of the Target Company and its subordinate units having been delivered to personnel appointed by the Transferee; and

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LETTER FROM THE BOARD

RMB74,577,600, being 5% of the Purchase Price (the "Fourth Installment"), payable within five working days after the expiration of six months from the date on which the Agreement takes effect.

As of the date of this circular, the conditions for payment of the First Installment, the Second Installment and the Third Installment have all been met and the corresponding payments have been made by the Transferee to the Transferors in accordance with the Agreement. The Fourth Installment is expected to be paid on or around 19 January 2020, being the date falling six months from the date of the Agreement.

Basis of consideration

The consideration was arrived at after arm's length negotiations between the Transferee and the Transferors with reference to and taking into account the track record, geographical location, ranking, number of students, course offerings and tuition fee levels of the Target University, in which the Target Company holds the entire sponsorship interest.

The Board notes the considerable difference in the audited and unaudited financial information of the Target Group. While there will be no adjustment to the consideration, the Board considers that the Transaction is still in the best interests of the Company and its Shareholders for the following reasons:

it is natural to have adjustments to the unaudited financial figures when they are audited;
the audited revenue figures are largely in line with those unaudited revenue figures disclosed in the Announcement;
the audited total assets as at 31 August 2019 are considerably higher than the unaudited total assets as at 31 May 2019 disclosed in the Announcement; and
the Board believes that the value of the Target Group lies primarily in its unique, well-developed and high quality assets and leading position in the Shandong market, and that there is significant room for improving the operational efficiency and financial efficiency of the Target Group following the completion of the Transaction. The Board takes the view that the significance of these foregoing factors far outweighs the difference in the audited and unaudited financial information of the Target Group.

Taking into consideration of the above factors, the Directors are of the view that the consideration of the Transaction is fair and reasonable.

Completion

Completion took place upon the condition precedent to the payment of the Second Installment (see sub-paragraph (b) under the heading "Payment of consideration" above) being fulfilled.

Governance of the Target Company and its subordinate units

In relation to the Target Company:

the Transferee shall have the right to nominate the supervisors, general managers and financial controllers of the Target Company; and

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LETTER FROM THE BOARD

for as long as the Transferors or their related parties still hold an equity interest in the Target Company, the Target Company shall have a board of directors consisting of three directors, of which the Transferors shall have the right to nominate one director and the Transferee shall have the right to nominate two directors.

In relation to the Target University: for as long as the Transferors or their related parties still hold equity interest in the Target Company, the board shall consist of one person nominated by the Transferors and four directors nominated by the Transferee; and when the Transferors or their related parties no longer hold any equity interest in the Target Company, all directors of the board shall be nominated by the Transferee.

Guarantee by the Company

As required by the Agreement, each of Mr. Li, Ms. Li and the Company, who ultimately control the Transferee, has executed an irrevocable letter of guarantee in favour of the Transferors in a form agreeable to the Transferors to secure all of the Transferee's obligations under the Agreement and any related transaction documents.

3. INFORMATION ABOUT THE TRANSFEREE

The Transferee is a company established under the laws of the PRC with limited liability and a subsidiary of the Company. The Transferee is controlled by the Company through the 2019 Contractual Arrangements.

The Company is a private school operator in central China that provides education from kindergarten to university and also operates an international university in Thailand.

4. INFORMATION ABOUT THE TRANSFERORS

The Transferors are two private individuals who prior to the Completion together owned the entire equity interest in the Target Company, and are directors of the Target University.

5. THE 2019 CONTRACTUAL ARRANGEMENTS

On 1 July 2019 and 17 July 2019, WFOE, a wholly-owned subsidiary of the Company, the Transferee, the Registered Shareholders and the Target Group entered into the 2019 Contractual Arrangements, which consist of:

an exclusive management consultancy and business cooperation agreement dated 1 July 2019 (together with the joinder agreements mentioned in item (f) below, the "Exclusive Management Consultancy and Business Cooperation Agreement") between (i) WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Transferee and the Registered Shareholders agreed to engage WFOE as the exclusive service provider to provide the Transferee (and its subsidiaries from time to time) with corporate management consultancy services, education management consultancy services, intellectual property licensing services as well as technical and business support services in return for service fees;
an exclusive call option agreement dated 1 July 2019 (the "Exclusive Call Option Agreement") between (i) WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Registered Shareholders granted WFOE an exclusive, unconditional and irrevocable option to purchase from the Registered Shareholders all or part of the equity interests in the Transferee;
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LETTER FROM THE BOARD

an equity pledge agreement dated 1 July 2019 (the "Equity Pledge Agreements") between (i) WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Registered Shareholders unconditionally and irrevocably pledged all of his or her equity interest in the Transferee to WFOE;
powers of attorney executed on 1 July 2019 by each of Mr. Li and Ms. Li (the "Powers of Attorney") appointing WFOE (or any person designated by WFOE, excluding Mr. Li, Ms. Li or any other non-independent persons or persons who may give rise to conflicts of interests) as his or her attorney-in-fact to appoint directors and vote on his or her behalf on all matters of the Transferee requiring shareholders' approval under its articles of association and under the relevant PRC laws and regulations;
power of attorney executed on 17 July 2019 by the Transferee (the "Transferee Power of Attorney") appointing WFOE (or any person designated by WFOE) as its attorney-in-fact to appoint directors and vote on its behalf on all matters of the Target Group requiring shareholders' or sponsors' (as applicable) approval under its articles of association and under the relevant PRC laws and regulations; and
joinder agreements executed on 17 July 2019 by each member of the Target Group, pursuant to which each member of the Target Group agreed to join the Exclusive Management Consultancy and Business Cooperation Agreement as a party, and assume all the obligations and enjoy all the rights of the subsidiaries of the Transferee.

Operation of the 2019 Contractual Arrangements

The terms and conditions of the 2019 Contractual Arrangements are substantially the same as those of the contractual arrangements described under the section headed "Contractual Arrangements" in the Prospectus; please refer to the paragraphs headed "Contractual Arrangements - Operation of the Contractual Arrangements" on pages 143 to 150 of the Prospectus for a detailed description of the terms and conditions and the operation of such contractual arrangements.

Pursuant to the 2019 Contractual Arrangements, WFOE is able to exercise control over the Transferee and receive substantially all of the economic benefits arising from the business of the Transferee. As a result, the financial results of the Transferee are consolidated into the Company's financial statements. As the Transferee holds 90% equity interest in the Target Company upon Completion, the financial results of the Target Company are in turn consolidated into the financial results of the Transferee and reflected in the Company's financial statements. Accordingly, the Transferee and the Target Company are treated as subsidiaries of the Company.

Appropriate arrangements have been made to protect the Company's interests in the relevant Transferee and its subsidiaries or subordinated units from time to time, including the Target Group (the "Relevant Consolidated Affiliated Entities"), under the 2019 Contractual Arrangements, including:

Exclusive Management Consultancy and Business Cooperation Agreement

Pursuant to the Exclusive Management Consultancy and Business Cooperation Agreement, without the prior written approval from WFOE, the Relevant Consolidated Affiliated Entities shall not enter into any transaction (save as those transactions entered into in the ordinary course of business) that may affect its assets, obligations, rights or operation, including but not limited to (i) the provision of any security or guarantee in favour of any third party or the creation of any encumbrances in relation to its assets; (ii) the entering into of any loan or debt

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LETTER FROM THE BOARD

obligations in favour of any third party; and (iii) in relation to any third party the disposal, acquisition or otherwise dealing of any assets (including but not limited to intellectual properties) with a value higher than RMB500,000.

In addition, under the Exclusive Management Consultancy and Business Cooperation Agreement, without the prior written consent of WFOE, none of the Relevant Consolidated Affiliated Entities shall change or remove the members of its board of directors who are appointed by WFOE in accordance with the articles of association of each of the Relevant Consolidated Affiliated Entities. WFOE also has the right to appoint the school principals, general managers, financial controllers and other senior managers of the Relevant Consolidated Affiliated Entities. WFOE has absolute control over the distribution of dividends or any other amounts to the shareholders of the Relevant Consolidated Affiliated Entities as the Relevant Consolidated Affiliated Entities and their shareholders have undertaken not to make any distribution without WFOE's prior written consent.

Exclusive Call Option Agreement

In order to prevent the flow of the assets and value of the Relevant Consolidated Affiliated Entities to their respective shareholders, pursuant to the Exclusive Call Option Agreement, none of the assets of the Transferee are to be sold, transferred or otherwise disposed of without the written consent of WFOE. In addition, under the Exclusive Call Option Agreement, none of the Registered Shareholders may transfer or permit the encumbrance of or allow any guarantee or security to be created on any of his or her equity interests in the Transferee without WFOE's prior written consent.

In the event that the Registered Shareholders receive any profit distribution or dividend from the Transferee, the Registered Shareholders must immediately pay or transfer such amount (subject to the relevant tax payment being made under the relevant laws and regulations) to WFOE or its designated third party. If WFOE exercises this option, all or any part of the equity interests in the Transferee acquired would be transferred to WFOE and the benefits of equity ownership would flow to WFOE and its shareholders.

The Registered Shareholders unconditionally and irrevocably agreed to grant WFOE or its designated third party an exclusive option to purchase all or part of the equity interests in the Transferee, as the case may be, for the minimum amount of consideration permitted by applicable PRC laws and regulations, under circumstances in which WFOE or its designated third party is permitted under PRC laws and regulations to own all or part of the equity interests in the Transferee. Where the purchase price is required by the relevant PRC laws and regulations to be an amount other than nil consideration, the Registered Shareholders shall return the amount of purchase price they received to WFOE or its designated third party.

Equity Pledge Agreement

Under the Equity Pledge Agreement, the Registered Shareholders have agreed that, without the prior written consent of WFOE, they will not transfer or dispose the pledged equity interests or create or allow any third party to create any encumbrance on the pledged equity interests that would prejudice WFOE's interest.

The Company's PRC Legal Adviser has confirmed that the Equity Pledge Agreement have been duly registered with the relevant PRC legal authority pursuant to the PRC laws and regulations.

To further enhance the Company's security over the schools held under the Transferee, the Company has taken measures to ensure that the company seals of the schools are properly secured, are within the full control of the Company and cannot be used by the Registered Shareholders without the Company's permission. Such

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LETTER FROM THE BOARD

measures include arranging for the company seals of the schools to be kept in the safe custody of the finance department of the Group and setting up lines of authority for using the company seals, financial chops and business registration certificates such that the company seals, financial chops and business registration certificates can only be used under direct authorisation of the Company.

Powers of Attorney

Pursuant to the Powers of Attorney, WFOE (or any person designated by WFOE, excluding Mr. Li, Ms. Li or any other non-independent persons or persons who may give rise to conflicts of interests) is appointed by each of Mr. Li and Ms. Li as his or her attorney-in-fact to appoint directors and vote on his or her behalf on all matters of the Transferee requiring shareholders' approval under its articles of association and under the relevant PRC laws and regulations. Pursuant to the Transferee Power of Attorney, WFOE (or any person designated by WFOE) is appointed by the Transferee as its attorney-in-fact to appoint directors and vote on its behalf on all matters of the Target Group requiring shareholders' or sponsors' (as applicable) approval under its articles of association and under the relevant PRC laws and regulations

The articles of association of the Transferee and members of the Target Group stipulate that the shareholders, in a shareholders' meeting (or the school sponsors, as the case may be), have the power to approve its operating strategy and investment plan, elect the members of the board of directors and approve their compensation, and review and approve the annual budget and earning distribution plan. Therefore, through the irrevocable power of attorney arrangement, the Company, via WFOE, has the ability to exercise effective control over the Relevant Consolidated Affiliated Entities through shareholder votes (or school sponsor's votes, as the case may be) and, through such votes, to also control the composition of the board of directors for the Relevant Consolidated Affiliated Entities.

Those of WFOE's (and hence the Company's) powers to direct the activities of the Relevant Consolidated Affiliated Entities that most significantly impact their economic performance include: as the attorney-in-fact of shareholders (or school sponsors, as the case may be), WFOE elects all members of the board of directors of the Relevant Consolidated Affiliated Entities, approve the director compensation, review and approve annual budget and vote on all matters that requiring approval from shareholders; through the control over the board of directors, WFOE appoints all senior management, approve executive compensation and review and approve operating, investing, and financing plans; and through control over the management team, WFOE effectively controls the daily operations of the Relevant Consolidated Affiliated Entities.

Succession

The provisions set out in the 2019 Contractual Arrangements are also binding on the successors of the Registered Shareholders, as if each of the successors was a signing party to the 2019 Contractual Arrangements. Although the 2019 Contractual Arrangements do not specify the identity of the successors to such shareholders, under the succession law of the PRC, the statutory successors include the spouse, children, parents, brothers, sisters, paternal grandparents and the maternal grandparents and any breach by the successors would be deemed to be a breach of the 2019 Contractual Arrangements. In case of a breach, WFOE or the Company can enforce its right against the successors. Further, pursuant to the Powers of Attorney, in the event of death or any other event which causes the inability of any of the Registered Shareholders to perform their day-to-day obligations, the successor of any of the Registered Shareholders is to inherit any of the rights and obligations of any of the Registered Shareholders subject to him or her being bound by the provisions of the Powers of Attorney.

Therefore, the Company's PRC Legal Adviser is of the view that (i) the 2019 Contractual Arrangements provide protection to the Group even in the event of death of the Registered Shareholders; and (ii) the death of

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LETTER FROM THE BOARD

any of the Registered Shareholders would not affect the validity of the 2019 Contractual Arrangements, and WFOE or the Company can enforce its rights under the 2019 Contractual Arrangements against the successors of the Registered Shareholders.

Conflicts of Interests

To ensure the Group's effective control over the Relevant Consolidated Affiliated Entities, the Group has implemented measures to protect against any potential conflicts of interest between the Company and the Registered Shareholders. Pursuant to the Exclusive Call Option Agreements, the Registered Shareholders granted the Group or its designated third party an exclusive option to purchase part or all of the equity interests in the Transferee, under circumstances in which the Group or its designated third party is permitted under PRC laws and regulations to own all or part of the equity interests in the Transferee. Under the irrevocable Powers of Attorney executed by each of the Registered Shareholders, they appointed WFOE, or any person designated by WFOE (excluding Mr. Li, Ms. Li or other non-independent persons or persons who may give rise to conflicts of interests) as their respective attorney-in-fact to appoint directors and vote on their behalf on all matters of the Transferee requiring shareholders' approval under their articles of associations and under the relevant PRC laws and regulations.

Furthermore, there are mechanisms in place to protect against the spouses of Mr. Li and Ms. Li from exercising any control or influence over the Relevant Consolidated Affiliated Entities. Each of the spouses of Mr. Li and Ms. Li executed an irrevocable undertaking dated 1 July 2019 (the "Spouse's Undertaking") whereby the spouse expressly and irrevocably (i) acknowledge the entry into of the 2019 Contractual Arrangements by Mr. Li and Ms. Li (as the case may be); (ii) undertake that he or she shall not take any actions that are in conflict with purpose and intention of the 2019 Contractual Arrangements, including but not limited to acknowledging that any equity interests held by Mr. Li or Ms. Li (as the case may be) do not fall within the scope of their community properties; and (iii) confirm that his or her consent and approval is not required for the implementation of the 2019 Contractual Arrangements, any amendments thereto or the termination thereof.

The Registered Shareholders have undertaken that during the period that the 2019 Contractual Arrangements remain effective, (i) unless otherwise agreed to by WFOE in writing, they will not, directly or indirectly (either on their own account or through any natural person or legal entity) participate, or be interested, or engage in, acquire or hold (in each case whether as a shareholder, partner, agent, employee or otherwise) any business which is or may potentially be in competition with the businesses of the Relevant Consolidated Affiliated Entities or any of their respective affiliates; and (ii) they will not obtain any benefit from any entities or businesses which are or may potentially be in competition with businesses of the Relevant Consolidated Affiliated Entities. Based on the above, the Directors are of the view that the measures the Group has adopted are sufficient to mitigate the risks associated with the potential conflicts of interest between the Group and the Registered Shareholders and that these measures are sufficient to protect the Group's interest in the Relevant Consolidated Affiliated Entities.

Loss Sharing

None of the agreements constituting the 2019 Contractual Arrangements provide that the Company or WFOE is obligated to share the losses of the Relevant Consolidated Affiliated Entities or provide financial support to the Relevant Consolidated Affiliated Entities. Further, the Transferee is a limited liability company and shall be solely liable for its own debts and losses with assets and properties owned by it. Under PRC laws and regulations, the Company or WFOE, as the primary beneficiary of the Relevant Consolidated Affiliated Entities, is not required to share the losses of the Relevant Consolidated Affiliated Entities or provide financial

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LETTER FROM THE BOARD

support to the Relevant Consolidated Affiliated Entities. Despite the foregoing, given that the Group conducts businesses in the PRC through the Relevant Consolidated Affiliated Entities which hold the requisite PRC licences and approvals, and that the Relevant Consolidated Affiliated Entities' financial condition and results of operations are consolidated into the Company's consolidated financial statements and results of operations under the applicable accounting principles, the Company's business, financial condition and results of operations would be adversely affected if the Relevant Consolidated Affiliated Entities suffer losses. Therefore, the provisions in the 2019 Contractual Arrangements are tailored so as to limit, to the greatest extent possible, the potential adverse effect on WFOE and the Company resulting from any loss suffered by the Relevant Consolidated Affiliated Entities.

For instance, as provided in the Exclusive Call Option Agreement, none of the assets of the Relevant Consolidated Affiliated Entities are to be sold, transferred or otherwise disposed of without the written consent of the Company. In addition, under the Exclusive Call Option Agreement, none of the Registered Shareholders may transfer or permit the encumbrance of or allow any guarantee or security to be created on any of his or her equity interests in the Transferee without the Company's prior written consent.

In addition, under the Exclusive Management Consultancy and Business Cooperation Agreement, without the prior written consent of WFOE, the Relevant Consolidated Affiliated Entities shall not change or remove the members of the boards of directors who are appointed by WFOE in accordance with the memorandum and articles of association of each of the Relevant Consolidated Affiliated Entities. WFOE also has the right to appoint the school principals, financial controllers and other senior managers of the Relevant Consolidated Affiliated Entities. WFOE has absolute control over the distribution of dividends or any other amounts to the shareholders of the Relevant Consolidated Affiliated Entities as the Relevant Consolidated Affiliated Entities and their Registered Shareholders have undertaken not to make any distribution without the prior written consent of WFOE. WFOE also has the right to periodically receive or inspect the accounts of the Relevant Consolidated Affiliated Entities and the financial results of the Relevant Consolidated Affiliated Entities can be consolidated into the Group's financial information as if they were the Group's subsidiaries.

Liquidation

According to the Exclusive Management Consultancy and Business Cooperation Agreement and the Exclusive Call Option Agreement, the Registered Shareholders have undertaken to appoint a committee designated by WFOE as the liquidation committee upon the winding up of the Relevant Consolidated Affiliated Entities to manage their assets. However, in the event of a mandatory liquidation required by PRC laws or bankruptcy liquidation, all of the remaining assets and residual interests of the Relevant Consolidated Affiliated Entities shall be transferred to WFOE after such liquidation pursuant to PRC laws.

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LETTER FROM THE BOARD

The following simplified diagram illustrates the corporate structure of the Target Group after the

Completion:

The Company

		100%
	BVI YuHua

		100%

	HongKong
	Yuhua
Offshore		100%
Onshore		(1)

	WFOE

Mr. Li		Ms. Li

40%60%

2019 Contractual

Arrangements

Transferee

90%

Target Company

Subsidiaries of the

Target Company

Notes:

This denotes the control by WFOE over Mr. Li and Ms. Li, each a Registered Shareholder of the Transferee and a PRC national, through
1. powers of attorney to exercise all shareholders' rights in the Transferee, (b) exclusive options to acquire all or part of the equity interests in the Transferee and (c) equity pledges over the equity interests in the Transferee.
This denotes a contractual relationship whereby the WFOE provides management and consultation services in consideration of service fees.

Waiver from the Stock Exchange

Pursuant to the conditions of the waiver (the "Waiver Conditions") granted to the Company at the time of the IPO as described on pages 186 to 188 of the Prospectus, and on the basis that the existing contractual arrangements of the Company (as described under the section headed "Contractual Arrangements" in the Prospectus) provide an acceptable framework for the relationship between the Company and its subsidiaries in which the Company has direct shareholding, on the one hand, and the consolidated affiliated entities, on the other hand, the Company is permitted to renew or reproduce the existing contractual arrangements with respect to any new wholly foreign owned enterprise or operating company engaging in the same business as that of the Group, without obtaining the approval of the Shareholders, on substantially the same terms and conditions as the existing contractual arrangements.

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LETTER FROM THE BOARD

As the terms and conditions of the 2019 Contractual Arrangements are substantially the same as those of the contractual arrangements described under the section headed "Contractual Arrangements" in the Prospectus, and the principal business of the Target Group - the provision of private higher education, is within the scope of the Group's principal businesses - the provision of private education services from kindergarten to university, the 2019 Contractual Arrangements therefore fall within the parameters of the Waiver Conditions.

Reasons for the use of the 2019 Contractual Arrangements

Regulatory framework relating to foreign ownership in the education industry in the PRC

Foreign investment activities in the PRC are subject to the restrictions as set out in the Administrative Measures of Foreign Investment Admission (Negative List) (2019 Version) (《外商投資准入特別管理措施（負面清單）（2019年版）》) (the "Negative List"), which is promulgated and amended from time to time jointly by the National Development and Reform Commission of the PRC and Ministry of Commerce of the PRC. The latest version of the Negative List was released on 30 June 2019 and became effective on 30 July 2019. Foreign investments in industries falling within the Negative List are subjected to special administrative measures as set forth therein.

According to the Negative List, operation of kindergartens, high schools and higher education institutions (the "Relevant Business") shall be restricted to Sino-foreign cooperation, which means that foreign investors may only operate kindergartens, high schools and higher education institutions through joint ventures with PRC incorporated entities that are in compliance with the Regulation on Sino-ForeignCooperation in Operating Schools of the People's Republic of China (《中華人民共和國中外合作辦學條例》), promulgated by the State Council in 2003 and amended on 18 July 2013 (the "Sino-ForeignCooperation Regulation"). The Negative List also provides that the domestic party shall play a dominant role in the Sino-foreign cooperation, meaning that (a) the principal or other chief executive officer of the schools or education institutions shall be a PRC national; and (b) the representative of the domestic party shall account for not less than half of the total members of the board of directors, the executive council or the joint administration committee of the Sino-foreign cooperative educational institution.

Pursuant to the Implementation Opinions on Encouraging and Guiding Private Fund's Entry into the Education Sector and Promoting Healthy Development of Private Education (《關於鼓勵和引導民間資金進入教育領域促進民辦教育健康發展的實施意見》) promulgated by the Ministry of Education of the PRC on 18 June 2012 (the "Implementation Opinions"), foreign-investedcompanies that engage in educational activities in the PRC should comply with the Negative List.

Pursuant to the Sino-Foreign Cooperation Regulation, the foreign investor in a Sino-foreign joint venture school for PRC students at a kindergarten, high school and higher education institution (a "Sino-ForeignJoint Venture Private School") must be a foreign education institution with relevant qualification and high quality of education (the "Qualification Requirement").

The Company's PRC Legal Adviser has advised that it is currently uncertain as to what specific criteria must be met by a foreign investor (such as length of experience and form and extent of ownership in the foreign jurisdiction) in order to demonstrate to the relevant education authority that it meets the Qualification Requirement. The Group has adopted a specific plan and undertaken concrete steps which the Company reasonably believes are meaningful endeavours to demonstrate compliance with the Qualification Requirement, as disclosed on pages 35 to 37 of the annual report of the Company for the year ended 31 August 2018.

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LETTER FROM THE BOARD

Furthermore, pursuant to the Implementation Opinions, the foreign portion of the total investment in a Sino- Foreign Joint Venture Private School should be below 50% and the establishment of these schools is subject to approval of education authorities at the provincial or national level.

Further details of the regulatory framework are set out in the section headed "Contractual Arrangements - PRC laws and regulations relating to foreign ownership in the education industry" on pages 137 to 143 of the Prospectus.

The 2019 Contractual Arrangements

The provision of private higher education, which is the principal business of the Target Group, falls within the Relevant Business and is subject to the restrictions described above. Pursuant to the 2019 Contractual Arrangements, the Company, through WFOE and the Transferee, is able to gain control over and receive substantially all of the economic benefits associated with 90% equity interest in the Target Company.

The Directors (including the independent non-executive Directors) consider that the 2019 Contractual Arrangements are fundamental to the Group's legal structure and business operations and have been entered into:

in the ordinary and usual course of business of the Company; (ii) on normal commercial terms; and (iii) in accordance with the respective agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole.

Legality of the 2019 Contractual Arrangements

As the terms and conditions of the 2019 Contractual Arrangements are substantially the same as those of the contractual arrangements described under the section headed "Contractual Arrangements" in the Prospectus, please refer to the paragraphs headed "Contractual Arrangements - Legality of the Contractual Arrangements" on pages 150 to 153 of the Prospectus for a discussion of the legality of the Company's contractual arrangements.

The Company's PRC Legal Adviser is of the opinion that the Contractual Arrangements are narrowly tailored to minimise the potential conflict with relevant PRC laws and regulations and that:

each of WFOE and the Relevant Consolidated Affiliated Entities is a duly incorporated and validly existing company or school, and their respective establishment is valid, effective and complies with the relevant PRC laws, each of the Registered Shareholders is a natural person with full civil and legal capacity, and each of WFOE, the Relevant Consolidated Affiliated Entities and the Registered Shareholders has obtained all necessary board and shareholder approvals and authorisations to execute and perform the 2019 Contractual Arrangements;
as of the date of their legal opinion, no PRC laws and regulations explicitly prohibit contractual arrangements in the private education industry in the PRC and none of the content or the execution of the 2019 Contractual Arrangements violates any provisions of PRC laws. Parties to each of the agreements are entitled to execute the agreements and perform their respective obligations thereunder. Each of the agreements is binding on the parties thereto and none of them would be deemed as "concealment of illegal intentions with a lawful form" and void under the PRC Contract Law;
the 2019 Contractual Arrangements do not violate any provisions of the articles of association of the Relevant Consolidated Affiliated Entities or WFOE;
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LETTER FROM THE BOARD

the 2019 Contractual Arrangements is binding on the assignees or successors of the parties thereto. In the event of bankruptcy of any of the Relevant Consolidated Affiliated Entities, WFOE or the Company is entitled to enforce its rights against the assignees or successors of any of the shareholder of the Relevant Consolidated Affiliated Entities;
the parties to the 2019 Contractual Arrangements are not required to obtain any approvals or authorisations from the PRC governmental authorities, except that the Exclusive Call Option Agreement is subject to approval by the MOFCOM or its branch, and registration with the local administration bureau for industry and commerce upon the exercise by the Company of its rights under the Exclusive Call Option Agreement to acquire all or part of the equity interests in the Transferee.
neither WFOE nor the Company is obligated to share the losses of the Relevant Consolidated Affiliated Entities and the Registered Shareholders or provide financial support to the Relevant Consolidated Affiliated Entities and the Registered Shareholders. Each of the Relevant Consolidated Affiliated Entities is a limited liability company or school and is solely liable for its own debts and losses attributable to the assets and properties owned by it;
each of the documents underlying the 2019 Contractual Arrangements is valid, legal and binding under PRC laws, except for the following provisions regarding dispute resolution and the liquidating committee:
1. the 2019 Contractual Arrangements provide that any dispute shall be submitted to the China International Economic and Trade Arbitration Centre for arbitration, in accordance with the then effective arbitration rules. The arbitration shall be conducted in Beijing. They also provide that the arbitrator may award interim remedies over the shares or land assets of the Relevant Consolidated Affiliated Entities or injunctive relief (e.g. for the conduct of business or to compel the transfer of assets) or order the winding up of the Relevant Consolidated Affiliated Entities; and the courts of Hong Kong, the Cayman Islands (being the place of incorporation of the Company) and the PRC (being the place of incorporation of the Relevant Consolidated Affiliated Entities) also have jurisdiction for the grant and/or enforcement of the arbitral award and the interim remedies against the shares or properties of the Relevant Consolidated Affiliated Entities. However, the Company's PRC Legal Adviser has advised that the tribunal has no power to grant such injunctive relief, nor will it be able to order the winding up of the Relevant Consolidated Affiliated Entities pursuant to the current PRC laws. In addition, interim remedies or enforcement order granted by overseas courts such as those of Hong Kong and the Cayman Islands may not be recognisable or enforceable in the PRC; and
2. the 2019 Contractual Arrangements provide that the shareholders of the Relevant Consolidated Affiliated Entities undertake to appoint a committee designated by WFOE as the liquidation committee upon the winding up of the Relevant Consolidated Affiliated Entities to manage their assets. However, in the event of a mandatory liquidation required by PRC laws or bankruptcy liquidation, these provisions may not be enforceable under PRC Laws.

The Directors are of the view that the 2019 Contractual Arrangements are narrowly tailored because the 2019 Contractual Arrangements are only used to enable the Group to control the Relevant Consolidated Affiliated Entities which engage in the operation of higher education where the PRC laws and regulations currently restrict operation of higher education institutions to Sino-foreign ownership, in addition to imposing Qualification Requirements on the foreign owners and withholding government approval in respect of Sino-foreign ownership which are currently impracticable for us to meet or obtain.

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LETTER FROM THE BOARD

The Company's PRC Legal Adviser advises (i) that the Group's ability to enforce its rights and protect its interests under the 2019 Contractual Arrangements is no less effective than in the case where the 2019 Contractual Arrangements were entered into directly between WFOE, the Registered Shareholders and each of the Relevant Consolidated Affiliated Entities only; and (ii) that the current structure of the 2019 Contractual Arrangement offers the best available protection in the Group's favour under the PRC laws and regulations due to the existence of the Transferee and the pledge over the equity interests in the Transferee created pursuant to the Equity Pledge Agreement. As advised by the Company's PRC Legal Adviser, schools sponsors cannot pledge their interests in their schools and any purported pledge of such interests (if any) would be unenforceable under the PRC laws and regulations. Accordingly, it is necessary and in the Group's best interest for WFOE to adopt the current structure of the Contractual Arrangements to maintain the Group's control over the Relevant Consolidated Affiliated Entities.

The Company's PRC Legal Adviser further advises that WFOE's right to receive the service fees from the Relevant Consolidated Affiliated Entities does not contravene any PRC laws or regulations and that the payment of service fees under the Contractual Arrangements should not be regarded as part of the distribution of returns or profits to the sponsors of the schools. The service fees are paid by the Relevant Consolidated Affiliated Entities as consideration for obtaining services provided by WFOE. The services provided by WFOE include, among other things, providing educational software and course materials, employee training, technology development, transfer and consultation services, public relation services, market surveys, and trademark and know-how licensing, in each case as required by the Relevant Consolidated Affiliated Entities in their ordinary course of business. According to the Company's PRC Legal Adviser, no current PRC laws or regulations restrict or prohibit WFOE's contractual rights to receive service fees from the Relevant Consolidated Affiliated Entities for the services rendered under the Contractual Arrangements.

The Company PRC Legal Adviser has advised, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities will not in the future take a view that is contrary to the above opinion of the PRC Legal Adviser. See the paragraphs headed "Risks Relating to the 2019 Contractual Arrangements" below.

As at the Latest Practicable Date, the Group had not encountered any interference of encumbrance from any PRC governing bodies in operating its businesses through the consolidated affiliated entities under its contractual arrangements.

Risks relating to the 2019 Contractual Arrangements

As the terms and conditions of the 2019 Contractual Arrangements are substantially the same as those of the contractual arrangements described under the section headed "Contractual Arrangements" in the Prospectus, please refer to the paragraphs headed "Risk Factors - Risks relating to our Contractual Arrangements" on pages 40 to 48 of the Prospectus for a discussion of the risks associated with the use of such contractual arrangements, which include the following:

if the PRC government finds that the agreements that establish the structure for operating the Group's business do not comply with applicable PRC laws and regulations, it may subject the Group to severe penalties and the Group's business may be materially and adversely affected;
substantial uncertainties exist in relation to its interpretation and implementation of Foreign Investment Law and how it may impact the viability of the Group's current corporate structure, corporate governance and business operations;
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LETTER FROM THE BOARD

the Group's contractual arrangements may not be as effective in providing control over the Group's consolidated affiliated entities as direct ownership;
the beneficial owners of the Group's consolidated affiliated entities may have conflicts of interest with the Group, which may materially and adversely affect the Group's business and financial condition;
the exercise of the option to acquire the equity interest of the Group's consolidated affiliated entities may be subject to certain limitations and the Group may incur substantial costs;
any failure by the Group's consolidated affiliated entities or their respective shareholders to perform their obligations under the Group's contractual arrangements would potentially lead to the incurrence of additional costs and the expending of substantial resources on the Group's part to enforce such arrangements, temporary or permanent loss of control over the Group's primary operations or loss of access to the Group's primary sources of revenue;
the Group's contractual arrangements may be subject to scrutiny of the PRC tax authorities and additional tax may be imposed, which may materially and adversely affect the Group's results of operation and value of the Shareholders' investment;
certain terms of the Group's contractual arrangements may not be enforceable under PRC laws;
the Company may rely on dividend and other payments from the wholly foreign owned entities in its contractual arrangements to pay dividends and other cash distribution to the Shareholders and any limitation on the ability of such wholly foreign owned entities to pay dividends to the Company could materially and adversely limit its ability to pay dividends to the Shareholders;
the Group's consolidated affiliated entities may be subject to limitations on their ability to operate private education business or make payments to related parties; and
if any of the Group's consolidated affiliated entities becomes subject to winding up or liquidation proceedings, the Group may lose the ability to enjoy certain important assets, which would negatively impact the Group's business and materially and adversely affect its ability to generate revenue.

The Company does not maintain an insurance policy to cover the risks relating to its contractual arrangements (including the 2019 Contractual Arrangements).

Recent developments relating to the Foreign Investment Law

On 15 March 2019, the National People's Congress of the PRC approved the Foreign Investment Law of the People's Republic of China (《中華人民共和國外商投資法》) (the "Foreign Investment Law"), which will come into effect on 1 January 2020 and replace the trio of existing laws regulating foreign investment in the PRC, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.

The Foreign Investment Law embodies the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment Law, "foreign investment"

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LETTER FROM THE BOARD

refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in the PRC. Though it does not explicitly classify "variable interest entity" structure ("VIE structure") as a form of foreign investment, there is no assurance that foreign investment via VIE structure would not be interpreted as a type of indirect foreign investment activities under the aforementioned definition of "foreign investment" in the future. In addition, the aforementioned definition of "foreign investment" contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for VIE structure as a form of foreign investment.

Impact of the Foreign Investment Law on the Group's contractual arrangements

The VIE structure has been adopted by many fully or partially foreign-owned companies which, through its subsidiaries in the PRC, assumes control over an operating company incorporated in the PRC which holds the necessary licenses and permits in the industries that are currently subject to foreign investment restrictions or prohibitions in the PRC. It will be uncertain whether the VIE structure will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.

In addition, the Foreign Investment Law further specifies that foreign investments shall be conducted in line with the Negative List. If a foreign invested enterprise or a foreign invested entity (the "FIE") proposes to conduct business in an industry subject to restrictions in the Negative List, the FIE must meet certain conditions under the Negative List before being established. It is uncertain whether the businesses operated by the consolidated affiliated entities of the Group from time to time will be or continue to be subject to the foreign investment restrictions under the negative list to be issued in future.

Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to the Group's contractual arrangements, there will be substantial uncertainties as to whether such actions can be completed by the Group in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance requirements could materially and adversely affect the Group's current corporate structure and business operations in the PRC subject to the foreign investment restrictions.

Potential risks to the Company

The Company's contractual arrangements, in the worst case scenario, may be regarded as invalid and illegal. As a result, the Group may be required to dispose of the business under its contractual arrangements and will lose rights to receive the economic benefits from the consolidated affiliated entities, such that the financial results of the consolidated affiliated entities would no longer be consolidated into the Company's financial results and the Company will have to de-recognise assets and liabilities of the consolidated affiliated entities according to the relevant accounting standards. If such disposal of the business under the Group's contractual arrangements would lead to the Group no longer having a sustainable business, the Stock Exchange may delist the Company.

Measures adopted by the Company to mitigate against any potential risk arising from the Foreign Investment Law

As aforementioned, there are uncertainties with respect to the interpretation and implementation of the newly enacted Foreign Investment Law, the Board will closely monitor the development of the Foreign Investment Law with the help of the Company's PRC Legal Adviser, including but not limited to any new

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LETTER FROM THE BOARD

negative list issued by or approved to be issued by the State Council, or any future laws, administrative regulations or provisions prescribed by relevant governmental authorities.

The Company will then discuss with the PRC Legal Adviser in order to assess any possible impact arising from the development of the Foreign Investment Law on its contractual arrangements and the business operations involved thereunder.

In case there would be material and adverse effect on the Company or the business of the Target Group Companies arising from the Foreign Investment Law, the Company will disclose, as soon as possible: (i) updates of material development to the Foreign Investment Law as and when it occurs; and (ii) specific measures taken by the Company to fully comply with the development to the Foreign Investment Law and any material impact of the development of the Foreign Investment Law on the Company's operations and financial position.

6. INFORMATION OF THE TARGET GROUP

Background

The Target Company is a company established under the laws of the PRC with limited liability. The Target Company holds the entire sponsorship interest in the Target University.

The Target University is a private higher education institution located in Jinan, Shandong, China. According to the information provided by the Target University, the Target University was founded in 1998 and is a leading private higher education institution in Shandong, China. It has been ranked within the top three private universities in China for the past seven consecutive years, according to the China Private University Rankings (中國民辦大學排行榜). The grounds of the Target University span 189 acres (approximately 766.7 thousand square meters). The Target University currently has approximately 31,500 students, among which approximately 21,000 students are enrolled in undergraduate (本科) programs, 10,000 students in junior college (專科) programs and 500 students in vocational-technical programs. The average tuition fee of the Target University is RMB15,000 per student per year. The Target University holds a school operating license which expires in 2021.

Financial information of the Target Group

The following is a summary of the consolidated financial information of the Target Group for the three financial years ended 31 August 2017, 2018 and 2019. The consolidated financial information of the Target Group was prepared in accordance with IFRS.

	For the year ended		For the year ended	For the year ended
	31 August 2017		31 August 2018	31 August 2019
	(audited)		(audited)	(audited)
	RMB'000		RMB'000	RMB'000
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	420,240	450,155	488,928
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	195,739	226,912	247,110
Net profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55,183	79,338	96,306
Net profit after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55,183	79,211	96,306

As at 31 August 2017, 2018 and 2019, the net assets of the Target Group amounted to approximately RMB264.5 million, RMB344.3 million and RMB439.6 million, respectively. As at 31 August 2019, the total assets of the Target Group amounted to approximately RMB1,479.9 million.

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7. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

The following discussion and analysis should be read in conjunction with the financial information of the Target Group for the years ended 31 August 2017, 2018 and 2019, as set out in Appendix II to this circular.

Business Overview

For the years ended 31 August 2017, 2018 and 2019, the Target Company did not have any material business operation other than serving as an investment holding company. As at 31 August 2017, 2018 and 2019, the Target Company did not have material assets other than the entire sponsorship interests in the Target University. For further information of the Target University, please refer to "6. Information of the Target Group" above. The Target Group focuses on the provision of tertiary education services.

Liquidity, financial position and capital structure

As at 31 August 2017, 2018 and 2019, the total assets of the Target Group amounted to RMB1,400.0 million, RMB1,332.7 million and RMB1,479.9 million, respectively.

As at 31 August 2017, 2018 and 2019, the total liabilities of the Target Group amounted to RMB1,135.6 million, RMB988.4 million and RMB1,040.3 million, respectively.

As at 31 August 2017, the current assets and current liabilities of the Target Group were RMB217.8 million and RMB950.2 million, respectively; the current assets mainly comprised wealth management products purchased from banks, cash and cash equivalents and trade and other receivables; the current liabilities mainly comprised borrowings, deferred revenue and trade and other payables; the current ratio, represented by the current assets as a percentage of the current liabilities, was approximately 22.9%; and the gearing ratio, represented by the total interest bearing loans as a percentage of the total equity, was 297.5%.

As at 31 August 2018, the current assets and current liabilities of the Target Group were RMB137.6 million and RMB685.6 million, respectively; the current assets mainly comprised cash and cash equivalents and trade and other receivables; the current liabilities comprised borrowings, deferred revenue and trade and other payables; the current ratio, represented by the current assets as a percentage of the current liabilities, was approximately 20.1%; and the gearing ratio, represented by the total interest bearing loans as a percentage of the total equity, was 177.4%.

As at 31 August 2019, the current assets and current liabilities of the Target Group were RMB290.3 million and RMB969.1 million, respectively; the current assets mainly comprised cash and cash equivalents and trade and other receivables; the current liabilities mainly comprised borrowings, contract liabilities and trade and other payables; the current ratio, represented by the current assets as a percentage of the current liabilities, was approximately 30.0%; and the gearing ratio, represented by the total interest bearing loans as a percentage of the total equity, was 103.9%.

As at 31 August 2017, 2018 and 2019, the borrowings of the Target Group amounted to RMB786.9 million, RMB610.7 million and RMB456.9 million, respectively, while the weighted effective interest rates (per annum) were 8.54%, 7.98% and 9.77%, respectively; all bank borrowings of the Target Group were denominated in RMB.

As at 31 August 2019, RMB607.9 million, RMB313.7 million and RMB391.1 million of the borrowings were repayable within one year.

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Net profit

The Target Group achieved a profit (before taxation and extraordinary items) of RMB55.2 million, RMB79.3 million and RMB96.3 million for the years ended 31 August 2017, 2018 and 2019, respectively.

The Target Group achieved a net profit (after taxation and extraordinary items) of RMB55.2 million, RMB79.2 million and RMB96.3 million for the years ended 31 August 2017, 2018 and 2019, respectively.

Employment and remuneration policies

The Target Group had approximately 1,281, 1,264 and 1,238 employees as at 31 August 2017, 2018 and 2019, respectively. The Target Group remunerated their employees by reference to their qualifications, experiences, responsibilities and profitability of the Target Group.

Significant investments held and future plans for material investments

As at 31 August 2017, 2018 and 2019, the Target Group did not have any significant investments, other than wealth management products of RMB129 million held by the Target Group as at 31 August 2017 (which were redeemed in January 2018). There is no immediate plan for material investments by the Target Group.

Capital commitment and contingent liabilities

As at 31 August 2017, 2018 and 2019, the Target Group had no material capital commitments for the acquisition of fixed assets or intangible assets.

As at 31 August 2017, 2018 and 2019, the Target Group had no material contingent liabilities.

As at 31 August 2017, 31 August 2018 and 31 August 2019, the Target Group had capital commitments for land under non-cancelable operating lease agreements. For further details, please refer to "APPENDIX II ACCOUNTANT'S REPORT OF THE TARGET GROUP - Note 25 Commitments".

Foreign exchange exposure

The principal assets and liabilities of the Target Group were denominated in RMB and were not exposed to any material foreign exchange risk. As such the Target Group did not take any hedging measures.

The Target Group did not record any foreign exchange gain or losses for the years ended 31 August 2017,

2018 and 2019, respectively.

Treasury policy and hedging arrangement

During the years ended 31 August 2017, 2018 and 2019, the Target Group did not have any treasury policy or hedging arrangement.

Acquisitions and disposals

There were no material acquisitions or disposals of subsidiaries, jointly controlled entities and associated companies by the Target Group during the years ended 31 August 2017, 2018 and 2019.

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Segment information

During the years ended 31 August 2017, 2018 and 2019, all revenue of the Target Group was derived from provision of education services.

Charges on assets

As at 31 August 2017, 2018 and 2019, the carrying amount of assets pledged by the Target Group as security for borrowings amounted to RMB248.0 million, RMB291.9 million and RMB248.8 million, respectively.

Future plans

The Target Group focuses on the provision of tertiary education services and the Company does not intend to change this focus. The Target Group had not identified any target for investment or acquisition as at the Latest Practicable Date.

8. REASONS FOR AND BENEFITS OF THE TRANSACTION

The Target University is the largest private university in Shandong province and has an excellent reputation in the higher education industry. The Transferors and the Transferee are committed to together further improving the quality, management and sustainable development of the Target University. The Company believes that consolidating the Target University will significantly expand and diversify the Company's education offerings and geographical reach, and that it would be able to leverage the leading position of the Target University in Shandong province to enhance its competitive edge against other private education providers in the north China region, thereby offering a greater potential for profit and long-term business sustainability.

Based on the above, the Directors consider that the terms of the Agreement are on normal commercial terms and the Transaction is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

9. FINANCIAL EFFECT OF THE TRANSACTION

Upon payment of the Third Installment on 2 August 2019, each of the members of the Target Group has become a non-wholly owned subsidiary of the Company and its financial results has been consolidated into the Group in accordance with IFRS and accounting policies of the Company.

Revenue and earnings

For the years ended 31 August 2017, 2018 and 2019, the Target Group recorded revenue of RMB420.2 million, RMB450.2 million and RMB488.9 million, respectively, and net profit (after taxation) of RMB55.2 million, RMB79.2 million and RMB96.3 million, respectively. In view of the profit-making track record of the Target Group, the Directors expect that the earnings of the Group will be enhanced by the Transaction.

Assets and liabilities

Further information on the effects of the Transaction on the statement of assets and liabilities of the Group will be set out in the annual results announcement of the Company for the year ended 31 August 2019.

- 23 -

LETTER FROM THE BOARD

10. PROPERTY VALUATION

Asia-Pacific Consulting and Appraisal Limited ("APA"), an independent property valuer, has valued the property interests held by the Target Group (the "Property Interests") as at 30 September 2019. The full text of the letter and valuation certificate issued by APA is included in Appendix III to this circular.

The table below sets out the reconciliation between the net book value of the Property Interests as at 31 August 2019 as set out in Appendices III to this circular and the valuation of the Property Interests as at

30 September 2019 as set out in Appendix III to this circular:

	RMB'000
Net book value of the following properties as at 31 August 2019
Buildings and Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	909,581
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	146,412
*Less: Depreciation for 1 month ended 30 September 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(2,164)
Unaudited net book value as at 30 September 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,053,829
Valuation surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	811,161
Valuation as at 30 September 2019 (Note) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,864,990

Note: Market value of RMB1,646,628,000 and reference value of RMB218,271,000 (which is extracted from Appendix III-4 notes 1 and 2).

11. LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Transaction is more than 25% or more but all percentage ratios are less than 100%, the Transaction constitutes a major transaction for the Company and is therefore subject to the notification, announcement and Shareholders' approval requirements under the Listing Rules.

Pursuant to the Listing Rules, Shareholders' approval is required for a major transaction. As no Shareholders have a material interest in the Transaction, no Shareholders would be required to abstain from voting if the Company was to convene a general meeting for approving the Transaction. The Company will not be required to convene a general meeting for approving the Transaction for being a major transaction because the Company has obtained the written shareholder's approval from GuangYu Investment in lieu of convening a general meeting as permitted by Rule 14.44 of the Listing Rules. GuangYu Investment controls 2,137,500,000 Shares, representing approximately 65.01% of the issued share capital of the Company as at the Latest Practicable Date.

Waiver from strict compliance with Rule 14.67(6)(a)(ii) of the Listing Rules

Rule 14.67(6)(a)(ii) of the Listing Rules provides that on an acquisition of any business, company or companies, the Company should include in its circular a pro forma statement of the assets and liabilities of the Group combined with the assets and liabilities of the business, company or companies being acquired on the same accounting basis as that adopted by the accountants' report on the business, company or companies being acquired prepared in accordance with Chapter 4 of the Listing Rules (the "Pro Forma Statement").

As set out in this circular, the Target Company became an indirect subsidiary of the Company upon payment of the Third Installment on 2 August 2019, and the financial results, assets and liabilities of the Target Group have been consolidated into the financial results, assets and liabilities of the Group for the year ended 31 August 2019.

- 24 -

LETTER FROM THE BOARD

The Company applied for a waiver from the requirement to include the Pro Forma Statement in this circular in strict compliance with the requirement of Rule 14.67(6)(a)(ii) of the Listing Rules for the following reasons:

the annual results announcement of the Company for the year ended 31 August 2019 (the "Annual Results Announcement") to be published on or before 30 November 2019 will contain audited consolidated financial statements of the Group for the period, which will include the financial results of the Target Group (as the Target Company became a subsidiary of the Company upon payment of the Third Installment on 2 August 2019) prepared based on the same accounting standards adopted in the Group's consolidated financial statements (i.e. IFRS) and accounting policies which are materially consistent with the Group's and will be prepared in compliance with Chapter 4 of the Listing Rules;
the audited consolidated financial statements of the Group in the annual results announcement will largely cover all financial information required in the Pro Forma Statement, and that the Annual Results Announcement will be published at around the same time as this circular. The inclusion of the Pro Forma Statement in this circular will not provide shareholders and potential investors of the Company with any additional meaningful information not already included in the Annual Results Announcement;
on the other hand, if the Company is permitted to exclude the Pro Forma Statement in this circular, it will save substantial financial and administrative resources under this arrangement;
given that the Annual Results Announcement and this circular will need to be published at around the same time and that it would take substantial time to complete the audit work relating to the Group and the Target Group (the financial information of which was only accessible in July), the Company is not able to prepare and finalize this circular until closer to the end of November 2019; and
as alternative disclosure to the Pro Forma Statement in this circular, the Company will include in this circular clear references to the Annual Results Announcement for (i) the financial results of the Group as enlarged by the acquisition of the Target Group, and (ii) specific disclosures regarding business combinations of the Group illustrating the impact of the acquisition of the Target Group on the financial results of the Group.

Based on the information provided by the Company, the Stock Exchange granted the Company the waiver from strict compliance with the requirements under Rule 14.67(a)(ii) of the Listing Rules.

12. RECOMMENDATIONS

The Directors, including the independent non-executive Directors, are of the view that the terms of the Agreement and the Transaction are fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, should a resolution be put at a general meeting of the Company for the Shareholders to consider the same, the Directors would recommend the Shareholders to vote in favour of such resolution. As disclosed above, the Company has obtained the written approval of GuangYu Investment for approving the Transaction.

- 25 -

LETTER FROM THE BOARD

13. FURTHER INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

By order of the Board

China YuHua Education Corporation Limited

Li Guangyu

Chairman and Executive Director

- 26 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

SUMMARY OF FINANCIAL RESULTS

Financial information of the Group for the year ended 31 August 2016 is set out on pages I-1 to I-54 of the Prospectus while that for the years ended 31 August 2017 and 2018 is set out on pages 69 to 141 of the annual report of the Company for the year ended 31 August 2017 and pages 80 to 177 of the annual report of the Company for the year ended 31 August 2018, respectively. Both the Prospectus and the annual reports are published on the website of the Stock Exchange at www.hkexnews.hk and the website of the Company at www.yuhuachina.com. Quick links to the Prospectus and annual reports of the Company are set out below:

Prospectus:

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0216/LTN20170216015.pdf

Annual report of the Company for the year ended 31 August 2017:

https://www1.hkexnews.hk/listedco/listconews/sehk/2017/1220/ltn20171220856.pdf

Annual report of the Company for the year ended 31 August 2018:

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/1228/ltn20181228390.pdf

The annual results announcement of the Company for the year ended 31 August 2019 is expected to be published on the date of this circular and will contain the financial results of the Group as enlarged by the acquisition of the Target Group. For specific disclosures regarding business combinations of the Group that illustrate the impact of the acquisition of the Target Group on the financial results of the Group, please see Note 14 to the consolidated financial statements of the Group for the year ended 31 August 2019 set out in the said annual results announcement.

II. INDEBTEDNESS STATEMENT

(a) Statement of indebtedness and contingent liabilities

As at the close of business on 31 October 2019, being the most recent practicable date prior to the printing of this circular for the purpose of ascertaining information contained in this indebtedness statement, the Enlarged Group's had the following indebtedness:

RMB'000

Bank loans and other borrowings

Current

Bank loans

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,499

- unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Finance lease liabilities

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,350 Loans from other financial institutions

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,808

Non-Current

Bank loans

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,945

- unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 Finance lease liabilities

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,948 Loans from other financial institutions

- secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,637

740,187

- I-1 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Bank loans

As at 31 October 2019, the Enlarged Group had bank loans amounting to RMB633.4 million. Certain bank loan amounting to RMB350.8 million was pledged by equity interests of a subsidiary of the Enlarged Group, in which RMB31.9 million will be due within one year. Certain bank loan amounting to RMB100.0 million was guaranteed by a related party of the Enlarged Group and will be due within one year. Certain bank loan amounting to RMB62.7 million was pledged by land use rights and buildings of a subsidiary of the Enlarged Group, in which RMB19.6 million will be due within one year. Certain bank loan amounting to RMB120.0 million was unsecured, in which RMB30.0 million will be due within one year. As at 31 October 2019, the Enlarged Group's borrowings were denominated in RMB, USD and THB.

As at 31 October 2019, the Enlarged Group's finance lease liabilities amounting to RMB21.3 million was under a finance lease agreement for leasing students' dormitories for twenty years, which was dated from 1 September 2006.

(d) Loans from other financial institutions

As at 31 October 2019, loans from other financial institutions amounting to RMB85.4 million were secured with the Enlarged Group's certain property, plant and equipment.

Save as disclosed above, as at the close of business on 31 October 2019, the Group did not have any debt securities issued and outstanding, or authorised or otherwise created but unissued, or term loans, or other borrowings or indebtedness in the name of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, or mortgages and charges, and there were no other contingent liabilities nor guarantees.

III. WORKING CAPITAL

After taking into account the Enlarged Group's available resources, including internally generated funds and external borrowings, in the absence of unforeseen circumstances, the Directors are of the opinion that the Enlarged Group will have sufficient working capital to meet its present requirements for the next 12 months from the date of this circular.

IV. FINANCIAL TRADING PROSPECTS OF THE ENLARGED GROUP

The Group continues to be optimistic about the growth prospects of its businesses. The Group believes that after Completion it will be able to leverage the leading position of the Target University in Shandong province to enhance its competitive edge against other private education providers in the north China region. The Transaction will significantly expand and diversify the Group's education offerings and geographical reach, thereby offering a greater potential for profit and long-term business sustainability.

- I-2 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The following is the text of a report set out on pages II-1 to II-2, received from the Company's reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

ACCOUNTANT'S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF CHINA YUHUA EDUCATION CORPORATION LIMITED

Introduction

We report on the historical financial information of Jinan Shuangsheng Education Consulting Co., Ltd. (the "Target") and its subsidiaries (together, the "Target Group") set out on pages II-3 to II-55, which comprises the consolidated and company statements of financial position as at 31 August 2017, 2018 and 2019, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the periods then ended (the "Track Record Period") and a summary of significant accounting policies and other explanatory information (together, the "Historical Financial Information"). The Historical Financial Information set out in Section I to III forms an integral part of this report, which has been prepared for inclusion in Appendix II to the circular of China YuHua Education Corporation Limited (the "Company") dated 2 December 2019 (the "Circular") in connection with the proposed acquisition of the Target by the Company.

Directors' responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Note 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

The financial statements of the Target Group for the Track Record Period ("Underlying Financial Statements"), on which the Historical Financial Information is based, were prepared by the directors of the Company based on the previously issued financial statements of the Target Group for the Track Record Period. The directors of the Target are responsible for the preparation and fair presentation of the previously issued financial statements of the Target Group in accordance with International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Reporting accountant's responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants' Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

- II-1 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant's judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity's preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Note 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountant's report, a true and fair view of the financial position of the Target as at 31 August 2017, 2018 and 2019 and the consolidated financial position of the Target Group as at 31 August 2017, 2018 and 2019 and of its consolidated financial performance and its consolidated cash flows for the Track Record Period in accordance with the basis of presentation and preparation set out in Note 2.1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements

have been made.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong

2 December 2019

- II-2 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

HISTORICAL FINANCIAL INFORMATION OF THE TARGET GROUP
Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integrated part of this accountant's report.

The Underlying Financial Statements, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with International Standards on Auditing issued by the International Auditing and Assurance Standards Board ("IAASB").

The Historical Financial Information is presented in Renminbi ("RMB") and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.

- II-3 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
				Year ended 31 August
		Note		2017		2018		2019
				RMB'000	RMB'000	RMB'000
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 5		420,240		450,155		488,928
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 8		(224,501)	(223,243)	(241,818)
. . . . . . . .Gross profit . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			195,739		226,912		247,110
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 8		(10,497)	(11,300)	(12,144)
Administrative expenses . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 8		(98,983)	(102,080)	(100,893)
Net impairment losses on financial assets . . . . . . . .	. . . . . . . . . . . . . . . .			-	(281)	(1,526)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 6		16,038		6,698		8,252
Other gains - net . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 7		6,719		4,567		5,037
Operating profit . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .			109,016		124,516		145,836
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 10		827		114		182
Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 10		(54,660)	(45,292)	(49,712)

Finance expenses - net . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(53,833)	(45,178)	(49,530)
Profit before income tax . . . . . . . . . . . .
. . . . . . . . . . . . . . . .			55,183		79,338		96,306
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . 11		-	(127)	-
Profit for the year . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .			55,183		79,211		96,306
Profit attributable to:

Owners of the Target Company . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			55,190		79,217		96,306
Non-controlling interests . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(7)	(6)	-

				55,183		79,211		96,306

The above consolidated statements of profit or loss should be read in conjunction with the accompanying notes.

- II-4 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
					Year ended 31 August
		Note		2017			2018			2019
				RMB'000	RMB'000	RMB'000
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			55,183			79,211			96,306
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets . . . . . . . . .	3.3		521			285				-
Items that will not be reclassified to profit or loss
Changes in the fair value of equity investments at fair value through
other comprehensive income . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	3.3			-		-	(918)
Other comprehensive income for the year, net of tax
		521			285			(918)
Total comprehensive income for the year . . . .
. . . . . . . . . . . . . . . . . .			55,704			79,496			95,388
Total comprehensive income attributable to:


Owners of the Target Company . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			55,711			79,502			95,388
Non-controlling interests . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			(7)	(6)		-

				55,704			79,496			95,388

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.

- II-5 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
CONSOLIDATED BALANCE SHEETS
					As at 31 August
		Note		2017		2018		2019
				RMB'000		RMB'000	RMB'000
Assets
Non-current assets
Prepaid land lease payments . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 12		153,932	150,172		146,412
Property, plant and equipment . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 13		1,007,258	1,020,746		1,021,884
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 14		11,233	16,278		16,335
Investments accounted for using the equity method	. . . . . . . . . . . . .			2,000		-	-
Available-for-sale financial assets . . . . . . . . . . . . .	. . . . . . . . . . . . . . 18		3,956	4,241		-
Financial assets at fair value through other comprehensive income
(FVOCI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 18		-		-	3,323
Other non-current assets . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 15		3,835	3,704		1,668
Total non-currentassets . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .			1,182,214	1,195,141		1,189,622
Current assets

Trade and other receivables . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 16		50,441	39,547		33,699
Financial assets at fair value through profit or loss	. . . . . . . . . . . . . . 18		129,000		-	-
Cash and cash equivalents . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 17		38,383	98,026		256,600
Total current assets . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .			217,824	137,573		290,299
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .			1,400,038	1,332,714		1,479,921

- II-6 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
					As at 31 August

		Note	2017		2018		2019

				RMB'000	RMB'000	RMB'000
Equity and liabilities
Equity attributable to owners of the Target Company
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 19		20,500		20,500		20,500
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 20		956		1,241		323
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .			243,380		322,597		418,761

				264,836		344,338		439,584
Non-controllinginterests . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .			(373)	-	-
Total equity . . . . . . . . . . . . .
. . . . . . . . . . . . . .			264,463		344,338		439,584
Liabilities


Non-current liabilities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 23		179,006		296,979		65,735
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 22		6,349		5,750		5,541
. . . . . . . . . . . . . . . .Total non-currentliabilities	. . . . . . . . . . . . . .			185,355		302,729		71,276
Current liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 21		207,539		185,819		230,012
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 2.2, 5		134,798		186,111		-
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 2.2, 5		-	-	347,914
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . 23		607,883		313,717		391,135
Total current liabilities . . .
. . . . . . . . . . . . . .			950,220		685,647		969,061
Total liabilities . . . . . . . . . .
. . . . . . . . . . . . . .			1,135,575		988,376		1,040,337
Total equity and liabilities .
. . . . . . . . . . . . . .			1,400,038		1,332,714		1,479,921

The above consolidated balance sheets should be read in conjunction with the accompanying notes.

- II-7 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
BALANCE SHEETS OF THE TARGET COMPANY
						As at 31 August
		Note		2017			2018			2019
				RMB'000		RMB'000	RMB'000
Assets
Non-current assets
Investments in subsidiaries . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			20,000		20,000			20,000
Current assets

Trade and other receivables . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .				-	334				-
Cash and cash equivalents . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .				20,514			283			319
					20,514			617			319
. . . . . . . . .Total assets . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			40,514		20,617			20,319
Equity

Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . 19		20,500		20,500			20,500
Retained earnings/(accumulated losses) . . . . . . . .	. . . . . . . . . . . . . . . . . .				14			(4,154)	(4,879)
. . . . . . . . .Total equity . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .				20,514			16,346			15,621
Liabilities
Current liabilities
Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .			20,000		4,271			4,698
Total liabilities . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .			20,000		4,271			4,698
Total equity and liabilities . . . . . . . . .
. . . . . . . . . . . . . . . . . .			40,514		20,617			20,319

The above balance sheets should be read in conjunction with the accompanying notes.

- II-8 -

APPENDIX II						ACCOUNTANT'S REPORT OF THE TARGET GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
		Attributable to owners of the Target Company
																		Non-
		Share			Capital		Other	Retained					controlling
		capital			reserve		reserves		earnings			Total		interests		Total equity
	RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
At 1 September 2016 . . . . . . . .		-	20,000			435			188,190	208,625		(366)		208,259
Comprehensive income
Profit for the year . . . . . . . . . . .		-			-		-	55,190	55,190		(7)		55,183
Other comprehensive income
Changes in the fair value of
available-for-sale financial
assets . . . . . . . . . . . . . . . . . . .		-			-	521			-	521			-	521
Transactions with owners in
their capacity as owners
Capital contribution from the
Transferors (Note 19) . . . . . .	20,500				-		-	-	20,500			-	20,500
Deemed distribution to the
Transferors (Note 19) . . . . . .		-	(20,000)		-	-	(20,000)		-	(20,000)
Total transactions with

owners in their capacity as
owners . . . . . . . . . . . . . . . . .		20,500			(20,000)		-	-	500			-	500

At 31 August 2017 . . . . . . . . . .		20,500				-			956			243,380	264,836		(373)		264,463
At 1 September 2017 . . . . . . . .
20,500				-	956			243,380	264,836		(373)		264,463
Comprehensive income
Profit for the year . . . . . . . . . . .		-			-		-	79,217	79,217		(6)		79,211
Other comprehensive income
Changes in the fair value of
available-for-sale financial
assets . . . . . . . . . . . . . . . . . . .		-			-	285			-	285			-	285
Transactions with owners in
their capacity as owners
Disposal of a subsidiary . . . . . .		-			-		-	-			-	379			379

At 31 August 2018 . . . . . . . . . .	20,500				-	1,241			322,597	344,338			-	344,338

- II-9 -

APPENDIX II						ACCOUNTANT'S REPORT OF THE TARGET GROUP
				Attributable to owners of the Target Company
																		Non-

				Share		Capital			Other			Retained			controlling
	Note			capital		reserve		reserves			earnings		Total		interests		Total equity
			RMB'000		RMB'000		RMB'000		RMB'000	RMB'000	RMB'000	RMB'000
At 31 August 2018 . . . . .	20,500				-	1,241		322,597		344,338			-	344,338
Changes in accounting
policy . . . . . . . . . . . . . . 2.2		-			-			-	(142)	(142)		-	(142)
At 1 September 2018

(Restated) . . . . . . . . . .	20,500				-	1,241		322,455		344,196			-	344,196
Comprehensive income
Profit for the year . . . . . . .		-			-			-	96,306		96,306			-	96,306
Other comprehensive
income
Changes in the fair value
of equity investments at
fair value through other
comprehensive
income . . . . . . . . . . . . .		-				-			(918)			-	(918)		-	(918)

At 31 August 2019 . . . . .		20,500				-			323		418,761		439,584			-	439,584

The above consolidated statements of changes in equity should be read in conjunction with the

accompanying notes.

- II-10 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
				Year ended 31 August
		Note		2017		2018		2019
				RMB'000	RMB'000	RMB'000
Cash flows from operating activities
Cash generated from operations . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	24		83,355		231,688		390,842
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(35,860)	(19,780)	(47,555)
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			827		114		182
Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			-	(127)	-
Net cash generated from operating activities . . . . .	. . . . . . . . . . . . . . . .			48,322		211,895		343,469
Cash flows from investing activities
Purchase of property, plant and equipment . . . . . . .	. . . . . . . . . . . . . . . .			(58,977)	(55,295)	(51,371)
Purchase of intangible assets . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(4,498)	(4,108)	(5,157)
Purchase of financial assets at fair value through profit or loss . . . . . . .	3.3		(388,000)	(142,895)	(289,219)
Proceeds from disposal of property, plant and equipment and
intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			658		23		168
Proceeds from disposal of an investment accounted for using the
equity method . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			-	2,000		-
Disposal of financial assets at fair value through profit or loss . . . . . . .			269,000		271,895		289,219
Disposal of available-for-sale financial assets . . . .	. . . . . . . . . . . . . . . .			200		200		-
Interest received on financial assets at fair value through profit or
loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	7		1,161		1,527		4,799
Government grants for property, plant and equipment . . . . . . . . . . . . . .			10,824		2,939		4,000
Pledged deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(2,100)	(351)

Net cash (used in)/generated from investing activities . . . . . . . . . . . . . .			(171,732)	75,935		(47,561)
Cash flows from financing activities

Proceeds from borrowings . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			224,276		100,874		-
Repayments of borrowings . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(270,037)	(309,061)	(157,334)
Proceeds from capital contribution from the Transferors . . . . . . . . . . . .	19		20,500		-	-
Payment as the deemed distribution to the Transferors . . . . . . . . . . . . .			-	(20,000)	-
Proceeds from a related party . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	27		-		-		20,000
Net cash used in financing activities . . . . . . . . . . . .	. . . . . . . . . . . . . . . .			(25,261)	(228,187)	(137,334)
Net (decrease)/increase in cash and cash equivalents
		(148,671)	59,643		158,574
Cash and cash equivalents, at beginning of the year	. . . . . . . . . . . . . . . .			187,054		38,383		98,026
Cash and cash equivalents at end of the year . . .
. . . . . . . . . . . . . . . .			38,383		98,026		256,600

The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.

- II-11 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 General information

Jinan Shuangsheng Education Consulting Co., Ltd. ("Jinan Shuangsheng" or the "Target Company") was incorporated as a limited liability company in Jinan, Shandong Province of the People's Republic of China (the "PRC") on 26 October 2016. The address of the Target Company's registered office is at No 1-323, Qingnian East Road, Lixia District, Jinan, Shandong province PRC. The Target Company is an investment holding company and its subsidiaries (collectively referred to as the "Target Group") provides private university education and related services in Shandong province of the PRC (the "Target Business").

On 19 July 2019, Zhengzhou Hanchen Education Technology Co., Ltd. ("Zhengzhou Hanchen" or the "Purchaser"), a wholly owned subsidiary of China Yuhua Education Corporation Limited, entered into an acquisition agreement with the Mr. Xia Jiting and Ms. Yang Wen (collectively, the "Transferors"), pursuant to which the Transferors agreed to transfer an aggregate of 90% equity of the Target Company to the Purchaser at a total consideration of RMB 1,491,552,000 (the "Yuhua Acquisition"). Upon completion of the Yuhua Acquisition on 2 August 2019, the Target Company became a non-wholly owned subsidiary of the Purchaser.

Before the Yuhua Acquisition, the ultimate controlling shareholder of the Target Group was Mr. Xia Jiting, who owned 51% equity interest of the Target Company since its establishment.

Upon completion of the Yuhua Acquisition on 2 August 2019, the Purchaser owned 90% of the equity interest of the Target Company and became the controlling shareholder of the Target Group. Mr. Xia Jiting and Ms. Yang Wen each owned 5% equity interest of the Target Company and collectively held the remaining 10% equity interest. Upon completion of the Yuhua Acquisition, GuangYu Investment Holdings Limited and Mr. Li Guangyu became the ultimate holding company and ultimate controlling party of the Target Group, respectively.

Reorganisation of the Target Business

Prior to the establishment of the Target Company and the completion of the reorganisation (the "Reorganisation") as described below, the Target Business was mainly carried out by Shandong Yingcai University (山東英才學院) and its subsidiaries.

Shandong Yingcai University was established in Shandong Province in the PRC in May 1998 and Mr. Xia Jiting held the entire sponsorship of Shandong Yingcai University.

During Track Record Period, the Target Business underwent the Reorganisation which involved the followings:

On 26 October 2016, the Target Company was established by the Transferors at an aggregate cash capital contribution of RMB 20,500,000 by Mr. Xia Jiting and Ms. Yang Wen, the spouse of Mr. Xia Jiting, who respectively owned 51% and 49% equity of the Target Company since its establishment.
On 31 August 2017, the Target Company acquired the entire sponsorship interest in Shandong Yingcai University held by Mr. Xia Jiting at a cash consideration of RMB 20,000,000 and the Target Company became the sponsor of the Shandong Yingcai University.
- II-12-

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Immediately prior to and after the Reorganisation, the Target Business had been and continues to be conducted by Shandong Yingcai University and its subsidiaries. Pursuant to the Reorganisation, the Target Business was transferred to and held by the Target Company. The Target Company has not been involved in any other business prior to the Reorganisation and does not meet the definition of a business. The Reorganisation is merely a reorganisation of the Target Business with no change in management of such business. Accordingly, the Target Group resulting from the Reorganisation is regarded as a continuation of the Target Business conducted by Shandong Yingcai University and its subsidiaries and, for the purpose of this Historical Financial Information, the companies comprising the Target Group has been presented using the carrying values of the Target Business for all periods presented.

Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated on combination.

The Target Company's subsidiaries as at 31 August 2017, 2018 and 2019 are set out below.

Attributable equity

interests of the

Target Group As at

31 August

As at the

Place and date of

Registered

date of

Principal

incorporation/

and paid-up

this

activities/place of

Company name

establishment

capital

2017

2018

2019

report

operation

Directly owned by the Target

Company:

Shandong Yingcai University

Shandong /

RMB

Education service,

(山東英才學院) . . . . . . . . . . . . . .

May 1998

20,000,000

100% 100% 100%

100%

Shandong

Indirectly owned by the Target

Company:

Shandong Yingcai Highly

Mechanic School

Shandong /

RMB

Education service,

(山東英才高級技工學校) . . . . . .

August 2014

5,000,000

100% 100% 100%

100%

Shandong

Jinan Baobeijia Education

consulting Ltd

(濟南寶貝佳教育諮詢有限公司)

Shandong /

RMB

Education service,

("Jinan Baobeijia")* . . . . . . . . . .

August 2011

500,000

97%

Shandong

Shandong Institute of

Contemporary Private Economy

Shandong /

RMB

Research service,

(山東當代經濟研究院) . . . . . . . . September 2015

5,000,000

100% 100% 100%

100%

Shandong

Shandong Yingcai Institute of

Education Development

Foundation

Shandong /

RMB

Foundation,

(山東英才發展基金會) . . . . . . . .

June 2012

3,000,000

100% 100% 100%

100%

Shandong

Jinan Baobeijia was established in August 2011 and operated several kindergartens in Jinan, Shandong Province. Jinan Baobeijia was 97% indirectly owned by the Target Company and the remaining 3% was held by a non-controlling shareholder, which was a third party of the Target Group. In May 2018, the Target Group disposed of its entire 97% equity interests in Jinan Baobeijia to a related party (Note 27) at a disposal consideration of RMB485,000. A loss of RMB 168,000 arose from the disposal.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.

- II-13 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

2.1 Basis of preparation

The principal accounting policies applied in the preparation of the Historical Financial Information which are in accordance with IFRSs issued by the IASB are set out below.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Target Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

2.1.1 Going Concern

As at 31 August 2019, the current liabilities of the Target Group and the Target Company exceeded its current assets by RMB678,762,000 and RMB4,379,000, respectively. Included in the current liabilities of the Target Group as at 31 August 2019 were contract liabilities of RMB347,914,000 relating to tuition and boarding fees received in advance (Note 5(c)) and current borrowings of RMB391,135,000 (Note 23). In addition, as at 31 August 2019, the Target Group had non-current borrowings of RMB65,735,000, the principals of which were all repayable more than twelve months from the year end in accordance with the respective borrowing agreements. The Target Group and the Target Company had cash and cash equivalents of RMB256,600,000 and RMB319,000, respectively, as at 31 August 2019.

In view of such circumstance, China Yuhua Education Corporation Limited, the controlling shareholder of the Target Company has provided unconditional financial support to the Target Group and the Target Company for them to meet their liabilities and commitments as and when they fall due and carry on their businesses without a significant curtailment of operations in the next twelve months from 31 August 2019. Given such financial support, management considers that the Target Group and the Target Company will have adequate financial resources to enable them to operate and meet their liabilities and commitments as and when they fall due within the next twelve months from 31 August 2019. Accordingly, the Target Group and the Target Company have prepared the Historical Financial Information on a going concern basis.

2.1.2 Historical cost convention

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through other comprehensive income, available-for-sale financial assets or financial assets at fair value through profit or loss, which are carried at fair value.

2.1.3 New and amended standards adopted by the Target Group

Other than IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which were applied for the first time from 1 September 2018, the Target Group has applied all of the other standards and amendments that are effective for the financial year beginning on or after 1 September 2018 consistently throughout the Track Record Period.

- II-14 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The Target Group had to change its accounting policies and make certain retrospective adjustments following the adoption of IFRS 9 and IFRS 15 and the impact of the adoption of these standards and the new accounting policies are disclosed in Note 2.2, Note 2.10 and Note 2.21 below.

2.1.4 New and amended standards not yet adopted by the Target Group

The following new and amended standards and interpretations are effective for the fiscal year beginning on

1 September 2019 and have not been early adopted by the Target Group:

		Effective for annual
		periods beginning
		on or after
IFRS 16	Lease	1 September 2019
IFRIC 23	Uncertainty over income tax treatments	1 September 2019
IAS 19	Employee benefits on plan amendment,
	curtailment or settlement	1 September 2019
Amendments to IAS 28	Long-term interests in associates and joint
	ventures	1 September 2019
Amendments to IFRS 10 and IAS 28	Sales or contribution of assets between an
	investor and its associates or joint venture	To be determined
Amendments to IAS 1 and IAS 8	Definition of Material	1 September 2020
Amendments to IFRS 3	Definition of a Business	1 September 2020
Conceptual Framework for Financial	Conceptual Framework for Financial
Reporting	Reporting	1 September 2020

None of these is expected to have a significant effect on the consolidated financial statements of the Target Group, except the following set out below:

IFRS 16 Leases

IFRS 16 was issued in January 2016. It will results in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short- term and low-value leases.

The accounting for lessors will not significantly change.

The standard will affect primarily the accounting for the Target Group's operating leases. As at the reporting date, the Target Group has non-cancellable operating lease commitments of RMB 3,719,000. However, the Target Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Target Group's profit and classification of cash flows.

The standard is mandatory for the financial periods beginning on or after 1 January 2019. At this stage, the Target Group does not intend to adopt the standard before its effective date.

The Target Group will apply the standard from its mandatory adoption date of 1 January 2019. The Target Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. All right-of-use assets will be measured at the amount of the lease liability on adoption.

- II-15 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

2.2 Changes in accounting policies

This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Target Group's consolidated financial statements and also discloses the new accounting policies that have been applied from 1 September 2018.

(a) Impact on the financial statements

IFRS 9 and IFRS 15 were adopted using the modified retrospective approach that prior information was not restated. The reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the restated balance sheet as at 31 August 2018, but are recognised in the opening balance sheet on 1 September 2018.

The following tables show the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. The adjustments are explained in more detail by standard below.

								1 September
							2018
Balance sheet (extract)	31 August 2018		IFRS 15	IFRS 9		Restated
		RMB'000		RMB'000		RMB'000		RMB'000
Non-current assets
FVOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-		-	4,241	4,241
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . .	4,241		-	(4,241)		-
Current assets
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39,547		-	(142)	39,405
Current liabilities
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-	186,111		-	186,111
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	186,111	(186,111)	-		-
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	322,597		-	(142)	322,455
(b) IFRS 9 Financial Instruments

IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets.

The adoption of IFRS 9 Financial Instruments from 1 September 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in Notes 2.10 below. In accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), prior financial figures have not been restated.

The total impact on the Target Group's retained earnings as at 1 September 2018 is as follows:

	2018
	RMB'000
Closing retained earnings 31 August - IAS 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	322,597
Increase in provision for debt investments at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(142)

Adjustment to retained earnings from adoption of IFRS 9 on 1 September 2018 . . . . . . . . . . . . . . . . . . .	(142)
Opening retained earnings 1 September - IFRS 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
322,455

- II-16 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Classification and measurement

On 1 September 2018 (the date of initial application of IFRS 9), the Target Group's management has assessed which business models apply to the financial assets held by the Target Group and has classified its financial instruments into the appropriate IFRS 9 categories. The majority of the Target Group's financial assets include:

trade and other receivables previously measured at amortised cost which meet the conditions for classification at amortised cost under IFRS 9
non-tradingequities reclassified from available for sale financial assets measured as at fair value through other comprehensive income ("FVOCI") as a whole under IFRS 9

The impact of these changes on the Target Group's equity is as follows:

	Effect on	Effect on
	AFS reserve	FVOCI reserve
	RMB'000		RMB'000
Opening balance 31 August 2018 - IAS 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,241			-
Reclassify non-trading equities from available-for-sale to FVOCI . . . . . . . . . . . . . . .	(1,241)		1,241
Total impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	-	1,241
Opening retained earnings 1 September - IFRS 9 . . . . . . . . . . . . . . . . . . . . . . . . . .
	-	1,241

The Target Group elected to present in OCI changes in the fair value of all its equity investments previously classified as available-for-sale, because these investments are held as long-term strategic investments that are not expected to be sold in the short to medium term. As a result, assets with a fair value of RMB 4,241,000 were reclassified from available-for-sale financial assets to financial assets at FVOCI and accumulated fair value gains of RMB 1,241,000 were reclassified from the available-for-sale financial assets reserve to the FVOCI reserve on 1 September 2018.

Impairment of financial assets

The Target Group has two types of financial instruments that are subject to IFRS 9's new expected credit loss model:

trade receivables for provision of services; and
other receivables carried at amortised cost.

The Target Group was required to revise its impairment methodology under IFRS 9 for each of these classes of assets. The impact of the change in impairment methodology on the Target Group's retained earnings and equity is disclosed in the table in Note 16.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, no impairment loss was identified.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Trade receivables

The Target Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The increase of the loss allowance of trade receivables on 1 September 2018 was not material.

Other receivables carried at amortised cost

The Target Group assesses on a forward looking basis the expected credit losses associated with its other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Impairment on other receivables is measured as either 12-month expected credit losses or lifetime expected credit loss, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit losses. The increase of the loss allowance of other receivables on 1 September 2018 was not material.

The Target Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 September 2018 replacing IAS 18 Revenue which covers contracts for goods and services and IAS 11 Construction Contract which covers construction contract. The Target Group has adopted the modified retrospective approach and the comparatives were not restated. The impact of the adoption of IFRS 15 was immaterial and there was no adjustments in retained earnings as of 1 September 2018.

Management has assessed the effects of applying the new standard on the Target Group's financial statements and has identified the following areas that has been affected:

The Target Group has changed the presentation of certain amounts in the balance sheet to reflect the terminology of IFRS 15. Contract liabilities in relation to advanced tuition and boarding fees were previously presented as deferred revenue.

2.3 Subsidiaries

(a) Consolidation

A subsidiary is an entity (including a structured entity) over which the Target Group has control. The Target Group controls an entity when the Target Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Target Group. They are deconsolidated from the date that control ceases.

Business combination

The Target Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Target Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The Target Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at either fair value or the present ownership interests' proportionate share in the recognised amounts of the acquiree's identifiable net assets. All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by IFRS.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Target Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Target Group's accounting policies.

(ii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with the owners of the subsidiary in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(iii) Disposal of subsidiaries

When the Target Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Target Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

2.4 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Target Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee's net assets including goodwill.

2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (the "CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior executive management team that make strategic decisions.

2.6 Property, plant and equipment

Property, plant and equipment mainly comprise buildings, motor vehicles, furniture and fixtures, electronic equipment and building decoration stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:

- Buildings	25-50 years
- Motor vehicles	5-8 years
- Furniture and fixtures	5-8 years
- Electronic equipment	4-8 years
- Building decoration	Shorter of lease terms and estimated useful lives

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each of financial period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'Other gains - net' in the consolidated statements of profit or loss.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Construction-in-progress ("CIP") represents buildings, plant and machinery under construction or pending installation and is stated at cost. Cost includes the costs of construction and acquisition and capitalised borrowing costs. No provision for depreciation is made on CIP until such time as the relevant assets are completed and ready for intended use. When the assets concerned are available for use, the costs are transferred to the respective categories of property, plant and equipment and depreciated in accordance with the policy as stated above.

2.7 Prepaid land lease payments

Prepaid land lease payments are up-front payments to acquire long-term interest in the usage of land, which are stated at cost less accumulated amortisation. Cost represents consideration paid for the rights to use the land and other direct related costs from the date when the respective rights were granted. Amortisation of prepaid land lease payments is calculated on a straight-line basis over the lease terms as stated in the relevant land use right certificates granted for usage by the Target Group in the PRC or the best estimate based on the normal terms in the PRC and is recognised in the consolidated statements of profit or loss.

2.8 Intangible assets Software

Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring the specific software into use. These costs are amortised using the straight-line method over their estimated useful lives 5 years. Costs associated with maintaining software programmes are recognised as an expense as incurred.

2.9 Impairment of non-financial assets

Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (CGUs). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each of financial period.

2.10 Investments and other financial assets

Classification
From 1 September 2018, the Target Group classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss), and
- those to be measured at amortised cost.

The classification depends on the Target Group's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the Target Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Target Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Target Group has transferred substantially all the risks and rewards of ownership.

At initial recognition, the Target Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Equity instruments

The Target Group subsequently measures all equity investments at fair value. Where the Target Group's management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Target Group's right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

(d) Impairment

From 1 September 2018, the Target Group assesses on a forward looking basis the expected credit losses associated with FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Target Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see Note 16 for further details.

(e) Accounting policies applied until 31 August 2018

The Target Group has applied IFRS 9 retrospectively, but has elected not to restate prior financial information. As a result, the prior financial information provided continues to be accounted for in accordance with IAS 39.

Until 31 August 2018 the Target Group classifies its financial assets in the following categories:

financial assets at fair value through profit or loss,
loans and receivables, and
available-for-salefinancial assets.

- II-22 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The classification determined on the purpose for which the investments were acquired. Management determined the classification of its investments at initial recognition. See Note 18 for details about each type of financial asset.

Reclassification

Reclassifications were made at fair value as of the reclassification date. Fair value became the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date were subsequently made.

(ii) Subsequent measurement

The measurement at initial recognition did not change an adoption of IFRS 9, see description above.

Subsequent to the initial recognition loans and receivables were subsequently carried at amortised cost using the effective interest method.

Available-for-sale financial assets were subsequently carried at fair value. Gains or losses arising from changes in the fair value are recognised as follows:

for 'financial assets at FVPL' - in profit or loss within other gains/(loss)
for other monetary and non-monetary securities classified as available-for-sale - in other comprehensive income.

Details on how the fair value of financial instruments is determined are disclosed in Note 3.3(a).

When securities classified as available-for-sale were sold, the accumulated fair value adjustments recognised in other comprehensive income were reclassified to profit or loss as gains and other losses from investment securities.

(iii) Impairment

The Target Group assessed at the end of each reporting period whether there was objective evidence that a financial asset or group of financial assets was impaired. A financial asset or a group of financial assets was impaired and impairment losses were incurred only if there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) had an impact on the estimated future cash flows of the financial asset or group of financial assets that could be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost was considered an indicator that the assets are impaired.

Assets carried at amortised cost

For loans and receivables, the amount of the loss was measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that had not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognised in profit or loss. If a loan had a variable interest rate, the discount rate for measuring any impairment loss was the current effective interest rate determined under the contract. As a practical expedient, the Target Group could measure impairment on the basis of an instrument's fair value using an observable market price.

- II-23 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of profit or loss.

Impairment testing of trade receivables is described in Note 3.1(b).

Assets classified as available-for-sale

If there was objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - was removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss were not reversed through profit or loss in a subsequent period.

2.11 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Target Company or the counterparty.

2.12 Trade receivables

Trade receivables are amounts due from students of university for services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Target Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. See Note 16 for further information about the Target Group's accounting for trade receivables and Note 3.1 for a description of the Target Group's impairment policies.

2.13 Cash and cash equivalents

In the consolidated statements of cash flows, cash and cash equivalents include cash at bank and on hand and short-term bank deposits with original maturities of three months or less.

2.14 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

2.15 Trade and other payables

These amounts represent liabilities for goods and services provided to the Target Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

2.16 Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Target Group has an unconditional right to defer settlement of the liability for at least 12 months after each year end of the Track Record Period.

2.17 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are expensed in the period in which they are incurred.

2.18 Current and deferred income tax

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Target Company's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

2.19 Employee benefits

(a) Liabilities for wages and salaries

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current liabilities in the balance sheet.

(b) Pension obligations

The entities within the Target Group registered in the PRC make employee benefit contributions based on certain percentage of the salaries of the employees to a defined contribution retirement benefit plan and medical benefit plan organised by relevant government authorities in the PRC on a monthly basis. The government authorities undertake to assume the retirement benefit obligations payable to the existing and future retired employees under these plans and the Target Group has no further obligation for post-retirement benefits beyond the contributions made. Contributions to these plans are expensed as incurred. Assets of the plans are held and managed by government authorities and are separate from those of the Target Group.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The PRC employees of the Target Group are also entitled to participate in various government-sponsored housing funds. The Target Group contributes on a monthly basis to those funds based on a certain percentage of the employee's salaries. The Target Group's liabilities in respect of these funds is limited to the contributions payable in each period.

2.20 Provisions

Provisions are recognised when the Target Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation discounted at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation at the end of the Track Record Period. The increase in the provision due to passage of time is recognised as interest expense.

2.21 Revenue recognition

(a) Accounting policies applied since 1 September 2018

Revenues are recognised when, or as, the control of the goods or services is transferred to the customer. Depending on the business model, terms of the contract and the laws applicable, control of the goods and services may be transferred over time or at a point in time. If control of the goods and services transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation.

The Target Group's revenue is mainly generated from providing private university education services.

Tuition and boarding fees are generally received in advance prior to the beginning of each academic year, and are initially recorded as contract liabilities. Tuition and boarding fees are recognised proportionately over the terms of the applicable program. The portion of tuition and boarding payments received from students but not earned is recorded as contract liabilities. Amounts which will be earned within one year is reflected as a current liability, and those which will be earned beyond one year is reflected as a non-current liability.

Revenue from training programs is recognised proportionately over the terms of the applicable projects or programs, where applicable as other education services.

Revenue from school hospital service and other service are recognised when the control of the services have transferred, being when the services are accepted by the customers.

(b) Accounting policies applied until 31 August 2018

Revenue is measured at the fair value of the amounts received or receivable for the services provided in the normal course of business, net of cash discounts, financial assistance and refunded tuitions.

- II-27 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Service income includes tuition fees and boarding fees from providing private university education services of the Target Group.

Tuition and boarding fees received from university are generally received in advance prior to the beginning of each school year, and are initially recorded as deferred revenue. Tuition and boarding fees are recognised proportionately over the relevant period of the applicable programme. The portion of tuition and boarding payments received from students but not earned is recorded as deferred revenue. Amounts which will be earned within one year is reflected as a current liability, and which will be earned beyond one year is reflected as a non-current liability.

Revenue from training programs is recognised proportionately over the terms of the applicable projects or programs, where applicable as other education services.

Revenue from school hospital service and other service are recognised when the control of the services have transferred, being when the services are accepted by the customers.

2.22 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Target Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the consolidated statements of comprehensive income over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the consolidated statements of comprehensive income on a straight-line basis over the expected lives of the related assets.

Financial risk management
3.1 Financial risk factors

This note explains the Target Group's exposure to financial risks and how these risks could affect the Target Group's future financial performance. Track record period profit and loss information has been included where relevant to add further context.

Risk

Market risk - interest rate Credit risk

Liquidity risk

Exposure arising from		Measurement
Borrowings carried at floating rates		Sensitivity analysis
Cash and cash equivalents, restricted
cash, term deposits with initial term
of over three months, and trade and
other receivables		Ageing analysis
Borrowings and other liabilities		Maturity analysis

The Target Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Target Group's financial performance. The Target Group regularly monitors its exposure and currently has not used any derivative financial instruments to hedge any of these financial risks.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Market risk
1. Interest rate risk

The Target Group's income and operating cash flows are substantially independent from changes in market interest rate. Borrowings carried at floating rates expose the Target Group to cash flow interest-rate risk, which is partially offset by cash held at variable rates, whereas borrowings carried at fixed rates expose the Target Group to fair value interest-rate risk.

The exposure of the Target Group's borrowings to interest rate changes at the end of the Track Record Period is as follows:

	As at 31 August
	2017	2018			2019

	RMB'000
Variable rate borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79,860		-	-
% of total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10%	0%			0%

An analysis by maturities is provided in Note 3.1(c). The percentage of total loans shows the proportion of borrowings that are currently at variable rates in relation to the total amount of borrowings.

At 31 August 2017, 2018 and 2019, if the interest rates on bank borrowings and cash and cash equivalents had been 50 basis points higher/lower than the prevailing rate announced by People's Bank of China, with all other variables held constant, the Target Group's profit for the year would have been RMB 186,000 lower/higher, nil and nil, respectively.

(b) Credit risk

Risk management

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and credit exposures to customers, including outstanding trade and other receivables.

As at 31 August 2017, 2018 and 2019, 81%, 86% and 59% of the Target Group's cash and cash equivalents were held in state-owned financial institutions, which management believes are of high credit quality. The rest are deposited in local banks or financial institutions with good reputation. Management does not expect any losses from non-performance by these counterparties.

(ii) Impairment of financial assets

Accounting policy applied since 1 September 2018, the Target Group has two types of financial assets that are subject to the expected credit loss model:

trade receivables; and
other receivables carried at amortised cost.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, no impairment loss was identified.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Trade receivables

The Target Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. Based on historical experience, majority of the trade receivables were settled within credit term, hence the expected loss rate of current trade receivables are assessed to be low. The loss allowance provision for these balances was not material during the year ended 31 August 2019.

Other receivables at amortised cost

Other receivables at amortised cost include loans to related parties and key management personnel and other receivables.

The loss allowance for other receivables at amortised cost as at 31 August 2018 reconciles to the opening loss allowance on 1 September 2018 and to the closing loss allowance as at 31 August 2019 as follows:

	2019
	RMB'000
31 August 2018 - calculated under IAS 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-
Amounts restated through opening retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	142
Opening loss allowance as at 1 September 2018 - calculated under IFRS 9 . . . . . . . . . . . . . . . . . . . . . .	142
Decrease in loan loss allowance recognised in profit or loss during the year . . . . . . . . . . . . . . . . . . . . . .	(24)
Closing loss allowance as at 31 August 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	118

Previous accounting policy for impairment before 1 September 2018 under IAS 39

Before 1 September 2018, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which were known to be uncollectible were written off by reducing the carrying amount directly. The other receivables were assessed collectively to determine whether there was objective evidence that an impairment had been incurred but not yet been identified. For these receivables the estimated impairment losses were recognised in a separate provision for impairment. The Target Group considered that there was evidence of impairment if any of the following indicators were present:

significant financial difficulties of the debtor
probability that the debtor will enter bankruptcy or financial reorganisation, and
default or late payments (more than 30 days overdue).

Receivables for which an impairment provision was recognised were written off against the provision when there was no expectation of recovering additional cash.

To manage the liquidity risk, the Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group's operation and mitigate the effects of fluctuations cash flows. The Target Group expects to fund its future cash flow needs through internally generated cash flows from operations.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The maturity analysis of borrowings that shows the remaining contractual maturities is disclosed in Note 23. Generally there is no specific credit period granted by the suppliers but the related payables are normally expected to be settled within one year after receipt of goods or services.

As at 31 August 2017, 2018 and 2019, the Target Group has cash and cash equivalents of RMB 38,383,000, RMB 98,026,000 and RMB 256,600,000 respectively (Note 17) and trade receivables of RMB 2,873,000, RMB 3,645,000 and RMB 2,486,000 respectively (Note 16) that are expected to generate cash inflows for managing liquidity risk.

As described in Note 2.1.1, the directors of the Target Company closely monitors the Target Group's cash flow projections, which cover a period of not less than twelve months from 31 August 2019 to enable it to meet its liabilities and obligations.

The table below analyses the Target Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows during the Track Record Period.

							Between	Between
		Less than	1 and 2		2 and 5		Over
Contractual maturities of financial liabilities	1 year			years			years	5 years			Total
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
At 31 August 2017
Trade and other payables (excluding
non-financial liabilities) . . . . . . . . . . . . . . . . . . . . . . . . .	180,902					-					-			-	180,902
Borrowings with interests . . . . . . . . . . . . . . . . . . . . . . . . .	654,825			140,954					93,339								-	889,118

		835,727			140,954					93,339								-	1,070,020


									Between			Between
			Less than			1 and 2				2 and 5			Over
Contractual maturities of financial liabilities			1 year			years					years		5 years			Total
			RMB'000			RMB'000				RMB'000			RMB'000			RMB'000
At 31 August 2018
Trade and other payables (excluding non-financial
liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	149,143				-					-				-	149,143
Borrowings with interests . . . . . . . . . . . . . . . . . . . . . . . . . . .	320,289		318,728			6,448							-	645,465

		469,432		318,728			6,448							-	794,608

									Between			Between
			Less than			1 and 2				2 and 5			Over
Contractual maturities of financial liabilities			1 year			years					years		5 years			Total
			RMB'000			RMB'000				RMB'000			RMB'000			RMB'000
At 31 August 2019
Trade and other payables (excluding non-financial
liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	175,145				-					-				-	175,145
Borrowings with interests . . . . . . . . . . . . . . . . . . . . . . . . . . .	391,135		43,124			22,611						-	456,870

		566,280		43,124			22,611						-	632,015

3.2 Capital management

The Target Group's primary objectives when managing capital are to safeguard the Target Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

maintain an optimal capital structure to reduce the cost of capital. The Target Group's strategy remains constant throughout the Track Record Period.

The directors review the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Target Group will balance its overall capital structure through raising new debts as well as redemption of the existing debts.

The Target Group monitors its capital structure on the basis of liability-to-asset ratio, which is calculated as total liabilities divided by total assets. The liability-to-asset ratio of the Target Group as at 31 August 2017, 2018 and 2019 was as follows:

		As at 31 August
	2017		2018		2019
	RMB'000		RMB'000	RMB'000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,135,575	988,376		1,040,337
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,400,038	1,332,714		1,479,921
The liability-to-asset ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81%	74%		70%

3.3 Fair value estimation

(a) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Target Group has classified its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table.

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Target Group is the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

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APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
Recurring fair value measurements		Level 1		Level 2			Level 3			Total

			RMB'000		RMB'000		RMB'000		RMB'000
At 31 August 2017
Assets
Available-for-sale financial assets . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .		-			-	3,956	3,956
Financial assets at fair value through profit or loss .	. . . . . . . . . . . . . . .		-				-		129,000	129,000

				-				-		132,956	132,956
At 31 August 2018

Assets
Available-for-sale financial assets . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .		-			-	4,241	4,241
At 31 August 2019

Assets
Financial assets at fair value through other comprehensive income . . .		-			-	3,323	3,323

(b) Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the years ended 31 August 2017, 2018 and 2019:

	Year ended 31 August
	2017		2018		2019

	RMB'000	RMB'000	RMB'000
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13,835		132,956		4,241
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	388,000		142,895		289,219
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(270,561)	(273,422)	(294,018)
Gains on disposal of financial assets at fair value through profit or loss . . . . . . .	1,161		1,527		4,799
Gains and losses recognised in other comprehensive income . . . . . . . . . . . . . . .	521		285		(918)
At end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
132,956		4,241		3,323

The fair value of the financial assets at fair value through profit or loss is estimated by discounting the future cash flows at the current market interest rate available for similar financial instruments.

For the financial assets, including level 3 fair values, the Target Group's finance department performs the valuations. The finance department reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and finance department annually, in line with the Target Group's annual reporting dates.

The valuation technique is discounted cash flows. Future cash flows are estimated and discounted using the expected yield rate with reference to the benchmark yield rate of the financial investment products of banks.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Target Group makes estimates and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a

- II-33 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Current and deferred income tax

Significant judgement is required in interpreting the relevant tax rules and regulation so as to determine whether the Target Group is subject to corporate income tax. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Target Group to change its judgement regarding the adequacy of the tax liabilities. Such changes to tax liabilities will impact tax expense in the period that such determination is made.

The Target Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(b) Useful lives and residual values of property, plant and equipment

The Target Group management determines the estimated useful lives, residual values and related depreciation charges for its property, plant and equipment, and reviews the useful lives and residual values periodically to ensure that the method and rates of depreciation are consistent with the expected pattern of realisation of economic benefits from property, plant and equipment. This estimate is based on the historical experience of the actual residual values and useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. If there are significant changes from previously estimated useful lives and residual values, the amount of depreciation expenses may change.

Segment information
The Target Group provides private university education services in Shandong Province, the PRC.

The CODM has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance.

The CODM considers the business from the service perspective. When the Target Group companies have similar economic characteristics, and the segments are similar in each of the following respects: (i) the nature of the services; (ii) the type or class of students for their services; (iii) the methods used to provide their services; and (iv) if applicable, the nature of the regulatory environment, the Target Group's operating segments are aggregated. In the view of CODM, the Target Group is principally engaged in one segment - education services.

The accounting policies of the operating segments are described in Note 2.5.

For the purposes of monitoring segment performances and allocating resources between segments, segment results represent the profit after tax earned by each segment. This is the measure reported to the CODM for the purposes of resource allocation and assessment of segment performance.

Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and liabilities.

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APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

The Target Group's principal market is Shandong Province, the PRC, all of the Target Group's revenue and operating profit are derived within Shandong Province, the PRC, and all of the Target Group's operations and non-current assets are located in Shandong Province, the PRC. Due to the similar risks and returns, the CODM considers the Target Group's business in one geographic location. Accordingly, no geographical segment information is presented.

The Target Group has a large number of customers, no single customer accounted for more than 10% of the Target Group's total revenue for the years ended 31 August 2017, 2018 and 2019.

The segment information provided to the CODM for the reportable segments for the Track Record Period is as follows:

	Education
	Services			Others		Total
	RMB'000	RMB'000	RMB'000
For the year ended 31 August 2017
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	420,240			-	420,240
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(224,501)		-	(224,501)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195,739			-	195,739
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(10,497)		-	(10,497)
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(98,980)	(3)	(98,983)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16,038			-	16,038
Other gains - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,719			-	6,719
Operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
109,019		(3)	109,016
Finance (expenses)/income - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(53,850)	17			(53,833)
Profit before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,169		14			55,183
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-		-	-
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,169		14			55,183
As at 31 August 2017


Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,379,524		20,514			1,400,038
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,115,575		20,000			1,135,575
Other segment information
Additions to non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72,950			-	72,950
Depreciation and amortisation (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45,754			-	45,754
Loss on disposal of property, plant and equipment and intangible assets
(Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(407)		-	(407)
For the year ended 31 August 2018
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	450,155			-	450,155
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(223,243)		-	(223,243)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,912			-	226,912
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(11,300)		-	(11,300)
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(97,896)	(4,184)	(102,080)
Net impairment losses on financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(281)		-	(281)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,698			-	6,698
Other gains - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4,567			-	4,567

- II-35 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
		Education
		Services			Others		Total
		RMB'000	RMB'000		RMB'000
Operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	128,700		(4,184)	124,516
Finance (expenses)/income - net . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(45,194)	16		(45,178)
Profit/(loss) before income tax . . . . .
. . . . . . . . . . . . . . . . . . . . .	83,506		(4,168)	79,338
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(127)		-	(127)
Profit/(loss) for the year . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .	83,379			(4,168)	79,211
As at 31 August 2018


Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	1,332,098		616		1,332,714
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	986,655		1,721		988,376
Other segment information
Additions to non-current assets . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	69,564			-	69,564
Depreciation and amortisation (Note 8) . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	51,889			-	51,889
Loss on disposal of property, plant and equipment and intangible assets
(Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(2,198)		-	(2,198)
For the year ended 31 August 2019
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	488,928			-	488,928
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(241,818)		-	(241,818)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	247,110			-	247,110
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(12,144)		-	(12,144)
Administrative expenses . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(100,169)	(724)	(100,893)
Net impairment losses on financial and contract assets . . . . . . . . . . . . . . . . . . .	(1,526)		-	(1,526)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	8,252			-	8,252
Other gains/(losses) - net . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	5,037			-	5,037
Operating profit/(loss) . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	146,560		(724)	145,836
Finance expenses - net . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(49,530)		-	(49,530)
Profit/(loss) before income tax . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	97,030		(724)	96,306
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	-		-		-
Profit/(loss) for the year . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	97,030		(724)	96,306
As at 31 August 2019


Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	1,479,602		319		1,479,921
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	1,040,337			-	1,040,337
Other segment information
Additions to non-current assets . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	53,397			-	53,397
Depreciation and amortisation (Note 8) . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	54,935			-	54,935
Loss on disposal of property, plant and equipment and intangible assets
(Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	(858)		-	(858)

- II-36 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
(a) Revenue by category
		Year ended August 31

		2017	2018	2019

		RMB'000		RMB'000	RMB'000
Tuition fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	355,780	381,724	426,501
Boarding fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	32,017	33,244	36,835
Other education services . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	32,443	35,187	25,592
Total . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .	420,240	450,155	488,928
(b) Timing of revenue recognition


		Year ended August 31

		2017	2018	2019

		RMB'000		RMB'000	RMB'000
Recognised over time
- Tuition fees . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	355,780	381,724	426,501
- Boarding fees . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	32,017	33,244	36,835
- Training programs and other education services . . . . . . . . . . . . . . . . . . . . .	26,083	29,171	19,232
Recognised at a point at time
- Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	6,360	6,016	6,360

		420,240	450,155	488,928

Contract liabilities
The Target Group has recognised the following revenue-related contract liabilities:

	1 September	31 August
	2018		2019
	RMB'000	RMB'000
Contract liabilities related to tuition and boarding fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .	185,260		346,123
Contract liabilities related to other education services . . . . . . . . . . . . . . . . . . . . . . . . . . . .		851		1,791
	186,111		347,914

The Target Group didn't have any contract assets as at 1 September 2018 and 31 August 2019.

(d) Revenue recognised in relation to contract liabilities

The following table shows revenue recognised in relation to contract liabilities in the year ended 31 August

2019 related to carried forward contract liabilities as at 1 September 2018.

	Year ended
	31 August 2019
	RMB'000
Revenue recognised in relation to contract liabilities at 1 September 2018 . . . . . . . . . . . . . . . . . . .	186,111

The contract liability as at 31 August 2019 were expected to be recognised within one year. As the contract terms with customers usually within 12 months, the Target Group applied the practical expedient as permitted under IFRS 15 not to disclose the transaction price allocated to unsatisfied performance obligations as at 31 August 2019.

- II-37 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Other income

Year ended 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Government grants and subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16,038	6,698	8,252

The government grants and subsidies received or released from deferred income are in connection with supporting the education service and environment protection equipment.

7	Other gains - net
			Year ended 31 August

		2017		2018		2019

		RMB'000		RMB'000		RMB'000
Donation income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,701		5,944		1,638
Donation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(816)	(532)	(541)
Loss on disposal of property, plant and equipment and intangible assets . . . . . . .	(407)	(2,198)	(858)
Gains on disposal of financial assets at fair value through profit or loss . . . . . . . .	1,161		1,527		4,799
Loss on disposal of a subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-	(168)			-
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		80			(6)	(1)
			6,719			4,567	5,037

8	Expenses by nature
		Year ended 31 August
		2017	2018	2019
		RMB'000		RMB'000		RMB'000
Employee benefit expenses (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135,030	135,962	147,775
Office expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49,692	48,182	50,468
Depreciation of property, plant and equipment (Note 13) . . . . . . . . . . . . . . . . . . .	40,196	44,076	46,075
Students training and scholarship expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29,800	25,777	32,957
Utilities expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18,627	13,869	19,711
Maintenance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15,782	17,374	13,074
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9,598	9,650	10,363
Consultancy and professional fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	993	10,235	516
School consumables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14,392	9,586	8,169
Travel and entertainment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7,243	7,225	7,245
Amortisation of intangible assets (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,806	4,053	5,100
Amortisation of prepaid land lease payments (Note 12) . . . . . . . . . . . . . . . . . . . . .	3,752	3,760	3,760
Auditors' remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-	1,750	820
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7,070		5,124		8,822
		333,981	336,623	354,855

- II-38 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Employee benefit expense

	Year ended 31 August
	2017	2018	2019

	RMB'000		RMB'000	RMB'000
Wages, salaries and bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93,923	93,540	99,709
Contributions to pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34,399	33,594	37,146
Welfare and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,708	8,828	10,920

	135,030	135,962	147,775

Employee benefit expenses were charged in the following categories in the consolidated statements of profit or loss:

	Year ended 31 August
	2017	2018	2019
	RMB'000		RMB'000	RMB'000
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	97,061	97,027	106,460
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	900	1,650	1,781
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37,069	37,285	39,534

	135,030	135,962	147,775

(a) Contributions to pension plan

For defined contribution plans, the Target Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Target Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

(b) Five highest paid individuals

The five individuals whose remunerations were the highest in the Target Group for the Track Record Period include one director, none of directors and one director for the year ended 31 August 2017, 2018 and 2019, respectively, whose remuneration are included in the analysis presented in Note 29. Details of the remunerations

of the highest paid non-director individuals during the Track Record Period are set out as below:

					Year ended 31 August
	2017			2018		2019

		RMB'000			RMB'000		RMB'000
Wages and salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,175			1,672		992
Contributions to pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80			85		85
Welfare and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22			23		42

	1,277			1,780		1,119
The remunerations fell within the following band:


					Year ended 31 August

	2017			2018		2019

		No. of			No. of			No. of
	employees		employees		employees
Emolument band
Nil to HK$ 1,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4				5			4

- II-39 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
10 Finance expenses - net
			Year ended 31 August
		2017			2018			2019
		RMB'000	RMB'000	RMB'000
Finance income:
Interest from deposits . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . (827)	(114)	(182)
Finance expenses:
Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 54,660			45,292			49,712
Finance expenses - net . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 53,833			45,178			49,530

11 Income tax expense

Year ended 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	-	127		-

The taxation on the Target Group's profit before income tax differs from the theoretical amount that would arise using the taxation rate of PRC, the principal place of the Target Group's operations, as follows:

		Year ended 31 August
	2017			2018		2019

	RMB'000	RMB'000	RMB'000
Profit before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55,183			79,338		96,306
Tax calculated at a taxation rate of 25% or relevant domestic tax rate . . . . . . . . .	13,796			19,835		24,077
Tuition profit not subject to tax (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(13,796)	(19,708)	(24,077)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	-	127			-

(a) PRC corporate income tax ("CIT")

CIT is provided on assessable profits of entities incorporated in the PRC. Pursuant to the Corporate Income Tax Law of the PRC (the "CIT Law"), which was effective from 1 January 2008, the applicable CIT rate was 25% during the Track Record Period.

According to the Implementation Rules for the Law for Promoting Private Education, private schools for which the sponsors do not require reasonable returns are eligible to enjoy the same preferential tax treatment as public schools. As a result, private schools providing academic qualification education are eligible to enjoy income tax exemption treatment if the sponsors of such schools do not require reasonable returns. All schools of the Target Group have not elected to require reasonable returns. Thus, all schools of the Target Group have enjoyed corporate income tax exemption for the tuition income.

- II-40 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
12 Prepaid land lease payments
				As at 31 August
		2017		2018		2019
		RMB'000	RMB'000	RMB'000
At beginning of the year
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 187,537		187,537		187,537
Accumulated amortisation . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . (29,853)	(33,605)	(37,365)
Net book amount . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 157,684		153,932		150,172
Opening net book amount . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . 157,684		153,932		150,172
Amortisation charge (Note 8) . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . (3,752)	(3,760)	(3,760)
Closing net book amount . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 153,932		150,172		146,412
At end of the year

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 187,537		187,537		187,537
Accumulated amortisation . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . (33,605)	(37,365)	(41,125)
Net book amount . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 153,932		150,172		146,412

The Target Group's land use rights was purchased from the government.
Amortisation was charged to cost of revenue and administrative expenses in the consolidated statements of profit or loss. For the years ended 31 August 2017, 2018 and 2019, the amortisation of prepaid land lease payments charged to cost of revenue was RMB 3,340,000, RMB 3,346,000, and RMB 3,346,000, charged to administrative expenses was RMB 412,000, RMB 414,000, and RMB 414,000, respectively.
As at 31 August 2017, 2018 and 2019, the carrying amount of prepaid land lease payments pledged as the security for borrowing was RMB18,331,000, nil and nil (Note 23).

13 Property, plant and equipment

			Building		Motor	Electronic	Furniture and		Construction
	Buildings		Decoration	Vehicles	Equipment		fixtures		in Progress	Total
	RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
At 1 September 2016
Cost . . . . . . . . . . . . . . . . . . . . . .	968,739		1,020			14,921			139,498			38,425		36,978		1,199,581
Accumulated depreciation . . . . .	(100,701)	(339)		(7,958)	(82,703)	(21,975)			-	(213,676)
Net book amount . . . . . . . . . . .	868,038			681				6,963				56,795			16,450		36,978	985,905
Year ended 31 August 2017

Opening net book amount . . . . .	868,038		681			6,963			56,795			16,450		36,978		985,905
Additions . . . . . . . . . . . . . . . . . .	6,550		419				-	15,275			4,984		35,386		62,614
Transfers upon completion . . . .	58,609			-		-		-		-	(58,609)		-
Disposals . . . . . . . . . . . . . . . . . .	-		-	(318)	(623)	(124)			-	(1,065)
Depreciation charge (Note 8) . . .	(21,364)	(234)		(1,476)	(13,418)	(3,704)			-	(40,196)
Closing net book amount . . . . .	911,833			866				5,169				58,029			17,606		13,755	1,007,258

- II-41 -

APPENDIX II				ACCOUNTANT'S REPORT OF THE TARGET GROUP
			Building		Motor		Electronic	Furniture and		Construction
	Buildings		Decoration		Vehicles	Equipment		fixtures		in Progress	Total
	RMB'000		RMB'000		RMB'000			RMB'000		RMB'000		RMB'000		RMB'000
At 31 August 2017
Cost . . . . . . . . . . . . . . . . . . . . .	1,033,898		1,439			14,584			149,099			41,565		13,755		1,254,340
Accumulated depreciation . . . .	(122,065)	(573)		(9,415)	(91,070)	(23,959)			-	(247,082)
Net book amount . . . . . . . . . .	911,833			866				5,169				58,029			17,606		13,755	1,007,258
Year ended 31 August 2018

Opening net book amount . . . .	911,833		866			5,169			58,029			17,606		13,755		1,007,258
Additions . . . . . . . . . . . . . . . . .	-	4,755			10			22,835			8,176		24,680		60,456
Transfers upon completion . . . .	26,789			-		-		-		-	(26,789)		-
Disposals . . . . . . . . . . . . . . . . .	-	(684)		(41)	(1,973)	(194)			-	(2,892)
Depreciation charge
(Note 8) . . . . . . . . . . . . . . . .	(22,097)	(816)		(1,357)	(15,436)	(4,370)			-	(44,076)
Closing net book amount . . . .
916,525		4,121			3,781			63,455			21,218		11,646		1,020,746
At 31 August 2018


Cost . . . . . . . . . . . . . . . . . . . . .	1,060,687		4,755			14,384			166,437			48,756		11,646		1,306,665
Accumulated depreciation . . . .	(144,162)	(634)		(10,603) (102,982)	(27,538)			-	(285,919)
Net book amount . . . . . . . . . .
916,525		4,121			3,781			63,455			21,218		11,646		1,020,746
Year ended 31 August 2019


Opening net book amount . . . .	916,525		4,121			3,781			63,455			21,218		11,646		1,020,746
Additions . . . . . . . . . . . . . . . . .	-	7,864			1,888			19,939			2,918		15,631		48,240
Transfers upon completion . . . .	15,247			-		-		-		-	(15,247)		-
Disposals . . . . . . . . . . . . . . . . .	-		-	(9)	(838)	(180)			-	(1,027)
Depreciation charge
(Note 8) . . . . . . . . . . . . . . . .	(22,191)	(1,712)		(1,210)	(16,650)	(4,312)			-	(46,075)
Closing net book amount . . . .
909,581		10,273			4,450			65,906			19,644		12,030		1,021,884
At 31 August 2019


Cost . . . . . . . . . . . . . . . . . . . . .	1,075,934		12,619			16,169			184,558			50,243		12,030		1,351,553
Accumulated depreciation . . . .	(166,353)	(2,346)		(11,719) (118,652)	(30,599)			-	(329,669)
Net book amount . . . . . . . . . .
909,581		10,273			4,450			65,906			19,644		12,030		1,021,884

Depreciation charges were charged to the consolidated statements of profit or loss as follows:

		Year ended 31 August
	2017		2018	2019

	RMB'000		RMB'000	RMB'000
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22,883		23,869	23,769
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17,313		20,207	22,306

	40,196		44,076	46,075

Construction-in-progressas at 31 August 2017, 2018 and 2019 mainly comprised of buildings being constructed in the PRC.

- II-42 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

As at 31 August 2017, 2018 and 2019, the carrying amount of buildings without building ownership certificates were RMB274,101,000, RMB277,294,000 and RMB284,099,000, respectively.
Buildings without the building ownership certificates:

Year ended 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Buildings

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,041 296,386 308,380 Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,940) (19,092) (24,281)

Net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	274,101 277,294 284,099

14 Intangible assets

	Software
	RMB'000
At 1 September 2016
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4,561
Accumulated impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Accumulated amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(1,858)
Net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,703
Year ended 31 August 2017


Opening net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2,703
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10,336
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Amortisation charge (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(1,806)
Closing net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,233
At 31 August 2017


Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14,875
Accumulated impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Accumulated amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(3,642)
Net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,233
Year ended 31 August 2018


Opening net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11,233
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9,108
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(10)
Amortisation charge (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(4,053)
Closing net book amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,278

- II-43 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
			Software

		RMB'000
At 31 August 2018
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,868
Accumulated impairment . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Accumulated amortisation . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,590)
Net book amount . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,278
Year ended 31 August 2019

Opening net book amount . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,278
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,157
Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Amortisation charge (Note 8) . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,100)
Closing net book amount . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,335
At 31 August 2019


Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,025
Accumulated impairment . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Accumulated amortisation . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,690)
Net book amount . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,335

Amortisation of the Target Group' s intangible assets were charged in the following categories in the consolidated statement of profit or loss as follows:

		Year ended 31 August
	2017		2018		2019

	RMB'000		RMB'000		RMB'000
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,420		3,407		4,241
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	386		646		859

	1,806		4,053		5,100
15 Other non-current assets


			As at 31 August

	2017		2018		2019

	RMB'000		RMB'000		RMB'000
Prepayments for equipment and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3,835		3,704		1,668
16 Trade and other receivables

			As at 31 August

	2017		2018		2019

	RMB'000		RMB'000		RMB'000
Included in current assets:
Trade receivables
Due from students (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,196		1,404		2,355
Due from other customers (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,677		2,448		649
Provision for impairment (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-	(207)	(518)

	2,873		3,645		2,486

- II-44 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
				As at 31 August

	2017		2018		2019

		RMB'000		RMB'000		RMB'000
Other receivables
Amounts due from related parties (Note 27) . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 200		334				-
Deposit for borrowings . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 13,651		14,002		14,002
In-school store advance . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 6,615				-			-
Staff advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 2,884		3,064		2,584
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 400		659		1,063
Provision for impairment . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .		-				-		(118)
		23,750			18,059			17,531
Prepayments
Prepaid expenses for students enrolment . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 4,577		4,382		4,841
Prepayments for daily operation . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . 19,241		13,461		8,841

	23,818		17,843		13,682

	50,441		39,547		33,699

As at 31 August 2017, 2018 and 2019, the Target Group's trade and other receivables were denominated in RMB and the carrying amounts of the balances approximated their fair values.
The Target Group's students are required to pay tuition fees and boarding fees in advance for upcoming school years, which normally commence in September. The outstanding receivables represent amounts related to students who have applied for the delayed payment of tuition fees and boarding fees with no fixed credit item.

As at 31 August 2017, 2018 and 2019, the ageing analysis of trade receivables based on the invoice date is as follows:

As at 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Up to 1 year 1 to 2 years 2 to 3 years Over 3 years

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,690	3,510	1,676
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153	196	1,019
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -	125	168
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30	21	141

2,873	3,852	3,004

Movements in the provision for impairment of trade receivables that are assessed for impairment collectively are as follows:

			As at 31 August
	2017	2018		2019
	RMB'000		RMB'000		RMB'000
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-			-	(207)
Provision for impairment recognised during the year . . . . . . . . . . . . . . . . . . . . . . .		-	(281)	(311)
Receivables written off during the year as uncollectible . . . . . . . . . . . . . . . . . . . .		-	74				-
At end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	-	(207)	(518)

- II-45 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

17 Cash and cash equivalents

As at 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Cash at bank and other financial institutions and cash on hand (a) . . . . . . . . . . . .	38,383	98,026 256,600

Cash at bank and other financial institutions can be redeemed by the Target Company within a short-term.
The carrying amounts of the Target Group's cash and cash equivalents are denominated in RMB.

18 Financial instruments by category

The Target Group holds the following financial instruments:

				As at 31 August
	Note	2017	2018	2019
			RMB'000		RMB'000		RMB'000
Financial assets
Financial assets at amortised cost
Trade and other receivables excluding prepayments . . . . . . . . . . . . . .	16		26,623	21,704	20,017
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17		38,383	98,026	256,600

			65,006	119,730	276,617
Financial assets at fair value

FVOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			-			-	3,323
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .			3,956	4,241			-
FVPL (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			129,000			-		-

			132,956	4,241	3,323

			197,962	123,971	279,940
Financial liabilities


Financial liabilities at amortised cost
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23		786,889	610,696	456,870
Trade and other payables (excluding non-financial liabilities) . . . . . .	21		180,902	149,143	175,145

			967,791	759,839	632,015

FVPL were investments in wealth management products purchased from banks. As at 31 August 2017, the investments in wealth management products were denominated in RMB. The interest rate was 3.10% and the investments in wealth management products were redeemed in January 2018.

19 Share capital

	Share capital
	RMB'000
At 1 September 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-
Capital contribution from the Transferors (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20,500
At 31 August 2017, 2018 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,500

- II-46 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

On October 26, 2016, Jinan Shuangsheng was established by the Transferors at an aggregate cash capital contribution of RMB 20,500,000.

On 31 August 2017, the Target Company acquired the entire sponsorship interest in Shandong Yingcai University held by Mr. Xia Jiting at a cash consideration of RMB 20,000,000 and the Target Company became the sponsor of the Shandong Yingcai University. The acquisition was regarded as capital reorganisation of the business controlled by the Transferors. The consideration paid was accounted for as deemed distribution to the Transferors.

20 Reserves

		Available-
			for-sale
		financial						Capital
			assets		FVOCI			reserve			Total
	Note	RMB'000	RMB'000		RMB'000	RMB'000
At 1 September 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		435				-	20,000			20,435
Changes in the fair value of available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3.3	521				-			-	521
Deemed distribution to the Transferors . . . . . . . . . . . . . . . . . .	19 (a)		-		-	(20,000)	(20,000)
At 31 August 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	956				-			-	956
Changes in the fair value of available-for-sale financial


assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3.3	285				-			-	285
At 31 August 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	1,241				-			-	1,241


Change in accounting policy . . . . . . . . . . . . . . . . . . . . . . . . . .	2.2	(1,241)		1,241				-		-
At 1 September 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
		-	1,241				-	1,241
Changes in the fair value of equity investments at fair value


through other comprehensive income . . . . . . . . . . . . . . . . .			-	(918)			-	(918)
At 31 August 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
		-	323				-	323
21 Trade and other payables


									As at 31 August
						2017			2018			2019
						RMB'000		RMB'000	RMB'000
Salary and welfare payables . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		26,448	36,498			54,719
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		36,025	46,144			45,893
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		42,378	36,552			34,964
Amount due to related parties (Note 27) . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		23,791	1,791			20,000
Miscellaneous expenses received from students (a) . . . . . . . . . .	. . . . . . . . . . . . .	.		34,875	22,614			35,738
Miscellaneous expenses received from colleges . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		27,008	25,832			22,198
Payables for operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		5,340	4,870			3,710
Deposits from students . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		11,485	11,340			12,642
Tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	.		189	178			148

						207,539	185,819			230,012

The amounts represent the miscellaneous expenses received from students which will be mainly used for purchases of text books and dormitory supplies, and payments of examination registration fees on behalf of students.
- II-47-

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

As at 31 August 2017, 2018 and 2019, the ageing analysis of trade payables based on the invoice date is as follows:

			As at 31 August
	2017		2018	2019

	RMB'000		RMB'000	RMB'000
Up to 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24,691		39,983	35,093
1 to 2 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11,334		2,400	7,630
Over 2 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-	3,761	3,170

	36,025		46,144	45,893

22 Deferred income

			As at 31 August
	2017			2018	2019

	RMB'000	RMB'000		RMB'000
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3,000			6,349	5,749
Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10,824			2,939	4,000
Released to profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(7,475)	(3,538)	(4,208)

	6,349			5,750	5,541

Deferred income represents the government grants received for subsidies in connection with supporting the education service and environment protection equipment. These government grants are released to profit or loss over the expected useful lives of the relevant assets or match with the costs that they are intended to compensate.

23 Borrowings

		As at 31 August
	2017	2018	2019

	RMB'000		RMB'000		RMB'000
Included in non-current liabilities:
Loans from other financial institutions
- Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73,074	124,448	65,735
Loans from other third parties
- Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	105,932	172,531			-

	179,006	296,979	65,735
Included in current liabilities:


Bank loans
- Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79,860			-		-
Loans from other financial institutions
- Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	181,207	45,856	58,957
Loans from other third parties
- Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	346,816	267,861	332,178

	607,883	313,717	391,135
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

786,889	610,696	456,870

- II-48 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

(a) Secured borrowings of the Target Group which are secured are set out below:

		As at 31 August
	2017	2018	2019
	RMB'000		RMB'000		RMB'000
Secured
- Pledged with the right to tuition fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79,860			-		-
- Pledged with prepaid land lease payments (Note 12(c)) . . . . . . . . . . . . . . .	21,000			-		-
- Pledged with property, plant and equipment (Note 26) . . . . . . . . . . . . . . . .	233,281	170,304	124,692

	334,141	170,304	124,692

(b) The weighted average effective interest rates (per annum) at the balance sheet dates are set out as follows:

		As at 31 August
	2017		2018	2019

	RMB'000	RMB'000		RMB'000
Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5.70%	-			-
Loans from other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11.13%	10.72%	10.94%
Loans from other third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7.41%	7.38%	7.65%
(c) The maturity date of the borrowing was analysed as follows:
		As at 31 August
	2017		2018		2019
	RMB'000	RMB'000		RMB'000
Bank loans
Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79,860		-			-
Loans from other financial institutions

Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	181,207		45,856	58,957
Between 1 and 2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11,702		118,000	43,124
Between 2 and 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61,372		6,448	22,611

	254,281		170,304	124,692
Borrowings from other parties


Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	346,817		267,861	332,178
Between 1 and 2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	97,108		172,531			-
Between 2 and 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8,823		-			-

	452,748		440,392	332,178

The fair values of the Target Group's borrowings are not materially different to their carrying amounts, since the interest payable on those borrowings is either close to current market rates or the borrowings are of a short-term nature.
The Target Group has no undrawn borrowing facilities as at 31 August 2017, 2018 and 2019.

- II-49 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
24	Cash flow information
(a)	Cash generated from operations
				Year ended 31 August

			2017			2018		2019

			RMB'000	RMB'000	RMB'000
Profit before income tax . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	55,183			79,338		96,306
Adjustments for:
	Impairment loss . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .		-	281		1,526
	Depreciation and amortisation . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	45,754			51,889		54,935
	Non-monetary donation income . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	(6,452)	(5,000)
	Net loss on disposal of non-current assets (Note 7) . . . . . . . . . . . . . . . . . . . .	407			2,198		858
	Profit from disposal of investment in financial assets at fair value through
	profit or loss (Note 7) . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	(1,161)	(1,527)	(4,799)
Loss on disposal of a subsidiary . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .					168
	Government grants . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	(7,475)	(3,538)	(4,208)
	Finance costs - net . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	53,833			45,178		49,530
Changes in working capital:
	Decrease in trade and other receivable . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	17,870			10,894		5,848
	(Decrease)/Increase in trade and other payables . . . . . . . . . . . . . . . . . . . . . . .	(17,116)	494		29,043
	(Decrease)/Increase in deferred revenue/ contract liabilities . . . . . . . . . . . . .		(57,488)	51,313		161,803
. . . . . . . . . . . . .Cash generated from operations	. . . . . . . . . . . . . . . . . . . . . . . .		83,355			231,688		390,842
(b)	Non-cash investing and financing activities

				Year ended 31 August
			2017			2018		2019
			RMB'000	RMB'000	RMB'000
Receiving donation of non-current assets . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	6,452			5,000		-
Unpaid interest payables converted to loan principal upon maturity . . . . . . . . . . .	42,451			31,994		3,508

- II-50 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

Year ended 31 August

2017 2018 2019

RMB'000 RMB'000 RMB'000

Net (debt)/assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38,383		98,026
Liquid investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	129,000		-
Borrowings - repayable within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(607,883)	(313,717)
Borrowings - repayable after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(179,006)	(296,979)
Net (debt)/assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(619,506)	(512,670)


Cash and liquid investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	167,383		98,026
Gross debt - fixed interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(707,029)	(610,696)
Gross debt - variable interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(79,860)	-
Net (debt)/assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(619,506)	(512,670)

		Cash and
		cash		Liquid	Borrowings - due		Borrowings - due
	equivalents	investments	within one year		after one year
		RMB'000			RMB'000			RMB'000			RMB'000
Net (debt)/assets as at 1 September
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .	187,054			10,000			(471,165)	(319,034)
Cash flows . . . . . . . . . . . . . . . . . . . . . . . . .	(148,671)	119,000			270,037		(224,276)
Unpaid interest payables converted to
loan principal upon maturity . . . . . . . . .		-		-		-	(42,451)
Reclassification . . . . . . . . . . . . . . . . . . . . .		-		-	(406,755)	406,755
Net (debt)/assets as at 31 August

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . .		38,383				129,000				(607,883)	(179,006)

Cash flows . . . . . . . . . . . . . . . . . . . . . . . . .	59,643			(129,000)	309,061		(100,874)
Unpaid interest payables converted to
loan principal upon maturity . . . . . . . . .		-		-		-	(31,994)
Reclassification . . . . . . . . . . . . . . . . . . . . .		-		-	(14,895)	14,895
Net (debt)/assets as at 31 August

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .		98,026				-			(313,717)	(296,979)

Cash flows . . . . . . . . . . . . . . . . . . . . . . . . .	158,574				-	157,334				-
Unpaid interest payables converted to
loan principal upon maturity . . . . . . . . .		-		-		-	(3,508)
Reclassification . . . . . . . . . . . . . . . . . . . . .		-		-	(234,752)	234,752
Net (debt)/assets as at 31 August

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .	256,600				-	(391,135)	(65,735)

256,600

(391,135)

(65,735)

(200,270)

256,600

(456,870)

(200,270)

Total

RMB'000

(593,145)

16,090

(42,451)

(619,506)

138,830

(31,994)

(512,670)

315,908

(3,508)

(200,270)

- II-51 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

25 Commitments

(a) Operating lease commitments

The Target Group leases certain land under non-cancellable operating lease agreements. The Target Group had future aggregate minimum lease payments in respect of land under non-cancellable operating leases are as follows.

		As at 31 August
	2017	2018	2019

	RMB'000	RMB'000	RMB'000
No later than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98	98	98
Later than 1 year and no later than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	392	392	392
Later than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3,425	3,327	3,229

	3,915	3,817	3,719

26 Assets pledged as securities

The carrying amounts of assets pledged as security for borrowings are:

Year ended 31 August

	2017	2018	2019
	RMB'000		RMB'000	RMB'000
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	229,625	291,931	248,769

27 Significant related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or joint control.

The Controlling Shareholder, members of key management and their close family members of the Target Group are also considered as related parties. In the opinion of the Directors, the related party transactions were carried out in the normal course of business and at terms negotiated between the Target Group and the respective related parties.

(a) Names of the related parties

Names of the related parties

Mr. Xia Jiting

Ms. Yang Wen

Shandong Happy Elderly Co., Ltd.

(山東幸福老年有限公司)

Zhengzhou Technology and Business University

(鄭州工商學院)

Laiwu Yingcai Education Consulting Co., Ltd

(萊蕪英才教育諮詢有限公司) ("Laiwu Yingcai")

Nature of relationship

The controlling shareholder of the Target Group before the Yuhua Acquisition and the director of the Target Company after the Yuhua Acquisition

A major shareholder of the Target Group before the Yuhua Acquisition, also the spouse of Mr. Xia Jiting

Associate of the Target Group

Under common control by China Yuhua Education Corporation Limited from 2 August 2019

Controlled by the Transferors

- II-52 -

APPENDIX II	ACCOUNTANT'S REPORT OF THE TARGET GROUP
(b)	Transactions with related parties
	The following transactions occurred with related parties:
				Year ended 31 August

			2017		2018			2019

			RMB'000		RMB'000		RMB'000
Purchase of sponsor of the Shandong Yingcai University from:
	- Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	20,000					-			-
Disposal of a subsidiary to:


	- Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .		-	485				-
Disposal of investment to:


	- Laiwu Yingcai . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	400					-			-
Advance from/(to):

	- Shandong Happy Elderly Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32		(2,000)	(1,791)
	- Zhengzhou Technology and Business University . . . . . . . . . . . . . . . . . . . .		-				-	20,000
	- Ms. Yang Wen . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .		-	(334)	334

			32		(2,334)	18,543
(c)	Balance with related parties:


					As at 31 August

			2017		2018			2019

			RMB'000		RMB'000		RMB'000
Amounts due to related parties
	- Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	20,000					-			-
	- Shandong Happy Elderly Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3,791		1,791					-
	- Zhengzhou Technology and Business University . . . . . . . . . . . . . . . . . . . .		-					-			20,000
			23,791		1,791			20,000
Amounts due from related parties

	- Laiwu Yingcai . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .	200					-			-
	- Ms. Yang Wen . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . .		-			334					-
			200		334					-

As at 31 August 2017, 2018 and 2019, all balances with the Controlling Shareholder and related companies are non-interest bearing. All balances due from and due to the Controlling Shareholder and related parties are unsecured and repayable on demand.

- II-53 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

(d) Key management compensation

Key management includes directors and senior managements. The compensation paid or payable to key management for employee services is shown below.

			Year ended 31 August
	2017		2018		2019
	RMB'000		RMB'000		RMB'000
Wages, salaries and bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	371			326			506
Contributions to pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36			36			38
Welfare and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3			3			3

	410			365			547
28 Reserve movements of the Target Company


		Share		Retained			Total
		capital		earnings			equity
	RMB'000		RMB'000		RMB'000
At 1 September 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			-				-			-
Capital contribution from the Transferors (Note 19(a)) . . . . . . . . . . . . . . . . . . . . .	20,500					-	20,500
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			-			14			14
At 31 August 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20,500			14			20,514
At 1 September 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,500		14		20,514
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			-	(4,168)	(4,168)
At 31 August 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,500		(4,154)	16,346
At 1 September 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,500		(4,154)	16,346
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			-	(725)	(725)
At 31 August 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,500		(4,879)	15,621

- II-54 -

APPENDIX II

ACCOUNTANT'S REPORT OF THE TARGET GROUP

29 Benefits and interests of Directors

Directors' emoluments
The remuneration of each Director for the years ended 31 August 2017, 2018 and 2019 are set out below:

						Contribution
						to pension
						plan,
						welfare and
						other
Name of executive director	Salary		expenses	Total
		RMB'000		RMB'000		RMB'000
For the year ended 31 August 2017
Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	176		38			214
For the year ended 31 August 2018

Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	143		38			181
For the year ended 31 August 2019


Mr. Xia Jiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	245		40			285
Ms. Li Hua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-			-		-
Mr. Liu Tiemin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		-				-		-
		245		40			285
III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Group or any of its subsidiaries in respect of any period subsequent to 31 August 2019 and up to the date of this report. No dividend or distribution has been declared or made by the Target Group or any of its subsidiaries in respect of any period subsequent to 31 August 2019.

- II-55 -

APPENDIX III

PROPERTY VALUATION REPORT

The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this circular received from Asia-Pacific Consulting and Appraisal Limited, an independent valuer, in connection with its valuation as at 30 September 2019 of the property interests of the Target University.

Asia-Pacific Consulting and Appraisal Limited

Flat/Rm A, 12/F, Kiu Fu Commercial Building

300 Lockhart Road

Wan Chai

Hong Kong

2 December 2019

The Board of Directors

China Yuhua Education Corporation Limited

36/F, Tower Two

Times Square

1 Matheson Street

Hong Kong

Dear Sirs,

Instructions, Purpose and Date of Valuation

Asia-Pacific Consulting and Appraisal Limited ("APA" or "we") is instructed by China Yuhua Education Corporation Limited (the "Company") to provide valuation service on the property interests held by Shandong Yingcai University (the "Target University"), a private higher education institution in China for disclosure purpose. We confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the property interests as at 30 September 2019 (the "valuation date").

Basis of Valuation

Our valuation was carried out on a market value basis. Market value is defined as "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion".

Methods of Valuation

Due to the nature of the buildings and structures of the properties and the particular location in which they are situated, there are unlikely to be relevant market comparable sales comparables readily available, the buildings and structures of the properties have been valued by the cost approach with reference to their depreciated replacement costs.

- III-1 -

APPENDIX III

PROPERTY VALUATION REPORT

Depreciated replacement cost is defined as "the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimization." It is based on an estimate of the market value for the existing use of the land, plus the current cost of replacement of the improvements, less deduction for physical deterioration and all relevant forms of obsolescence and optimization. In arriving at the value of the land portion, reference has been made to the sales evidence as available in the locality. The depreciated replacement cost of the property interest is subject to adequate potential profitability of the concerned business. In our valuation, it applies to the whole of the complex or development as a unique interest, and no piecemeal transaction of the complex or development is assumed.

Valuation Assumptions

Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale or a tenancy. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

Valuation Standards

In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; the RICS Valuation - Professional Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards issued by the International Valuation Standards Council.

Source of Information

We have relied to a very considerable extent on the information given by the Target University and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters. Dimensions and measurements are based on the copies of documents collected from the Target University and are therefore only approximations.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Target University. We have also sought confirmation from the Target University that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

Document and Title Investigation

We have been shown copies of various title documents including State-owned Land Use Rights Certificates, Real Estate Title Certificates, Building Ownership Certificates and other official permits relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company's PRC legal adviser - Tian Yuan Law Firm, concerning the validity of the property interests in the PRC.

- III-2 -

APPENDIX III

PROPERTY VALUATION REPORT

Area Measurement and Inspection

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

The site inspection was carried out on 25 to 27 September 2019 by Mr. David Cheng who is a member of Royal Institution of Chartered Surveyor and has over 19 years' experience in the valuation of properties in the PRC; and Ms. Judy Zheng who has 2 years' experience in the property valuation in the PRC.

Currency

All monetary figures stated in this report are in Renminbi (RMB).

Our summary of values and valuation certificates are attached below for your attention.

Yours faithfully, for and on behalf of

Asia-Pacific Consulting and Appraisal Limited

David G.D. Cheng

MRICS

Executive Director

Note: David G.D. Cheng is a Chartered Surveyor who has 19 years' experience in the valuation of assets in the Greater China Region and the Asia-Pacific region.

- III-3 -

APPENDIX III	PROPERTY VALUATION REPORT
			SUMMARY OF VALUES
Property interests occupied by the Target University in the PRC
				Market value
				in existing state as at
No.		Property		the valuation date
		RMB
1.		South Campus of	975,780,000(1)
		Shandong Yingcai
		University located at
		No. 2 Yingcai Road
		Licheng District
		Jinan City
		Shandong Province
		The PRC
2.		North Campus of	670,848,000(2)
		Shandong Yingcai
		University located at
		Sundazhuang Village
		Cuizhai Subdistrict
		Jiyang County
		Jinan City
		Shandong Province
		The PRC
		Total:	1,646,628,000

Notes:

For the portions without proper title certificates, we have not attributed commercial value to them. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB208,714,000 assuming all relevant title certificates have been obtained and they could be freely transferred.
For the portions without proper title certificates, we have not attributed commercial value to them. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB9,557,000 assuming all relevant title certificates have been obtained and they could be freely transferred.

- III-4 -

APPENDIX III

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Property interests occupied by the Target University in the PRC

Market value

in existing state as at

No.

Property

Description and tenure

Particulars of occupancy

the valuation date

RMB

South Campus of

The property comprises 3 parcels

The

property

975,780,000

Shandong Yingcai

of land with a total site area of

currently occupied by

(note 8)

University located at

approximately

398,488

sq.m., 45

the Target University

No. 2 Yingcai Road

buildings

and

various

structures

for

education

and

Licheng District

erected

thereon which

were

ancillary purposes.

Jinan City

completed

various

stages

Shandong Province

between 2002 and 2016.

The PRC

The 45 buildings have a total gross floor area of approximately 314,339.39 sq.m., mainly include teaching buildings, training buildings, dormitories, dining halls, a library and ancillary buildings.

The structures mainly include ancillary facilities, sports ground, water house, gate house.

The land use rights of the property have been granted for terms expiring on 13 December 2051, 5 July 2057 and 16 December 2059 respectively for science and education uses.

Notes:

Pursuant to a State-owned Land Use Rights Certificate - Gao Xin Guo Yong (2014) Di No. 0500014, the land use rights of a parcel of land with a site area of approximately 160,487 sq.m. have been granted to Target University for a term expiring on 13 December 2051 for educational use.
Pursuant to a State-owned Land Use Rights Certificate - Gao Xin Guo Yong (2010) Di No. 0500014, the land use rights of a parcel of land with a site area of approximately 126,211 sq.m. have been granted to Target University for a term expiring on 16 December 2059 for science and educational uses.
Pursuant to a State-owned Land Use Rights Certificate - Lu (2018) Ji Nan Shi Real Estate Di No. 0500040, the land use rights of a parcel of land with a site area of approximately 111,790 sq.m. have been granted to Shandong Yingcai Vocational and Technical College (山東英才職業技術學院, the former name of Target University) for a term expiring on 5 July 2057 for science and educational uses.

- III-5 -

APPENDIX III

PROPERTY VALUATION REPORT

4. Pursuant to 32 Building Ownership Certificates, 32 buildings of the property with a total gross floor area of approximately 226,915.94 sq.m. are owned by Target University. The details are set out as follows:

					Gross
					Floor
No.	Certificate No.	Building Name		Area (sq.m.)
1.	Ji Fang Quan Zheng Gao Zi Di No. 075621	#1 Student dormitory	6,550.44
2.	Ji Fang Quan Zheng Gao Zi Di No. 075635	Student Innovation Studio	2,036.52
3.	Ji Fang Quan Zheng Gao Zi Di No. 075622	Student Innovation Studio	2,183.22
4.	Ji Fang Quan Zheng Gao Zi Di No. 075609	Student Innovation Studio	2,036.52
5.	Ji Fang Quan Zheng Gao Zi Di No. 075625	#12 Student dormitory	2,577.01
6.	Ji Fang Quan Zheng Gao Zi Di No. 075628	#11 Student dormitory	2,577.01
7.	Ji Fang Quan Zheng Gao Zi Di No. 075651	#10 Student dormitory	2,577.01
8.	Ji Fang Quan Zheng Gao Zi Di No. 075612	#2 Student dormitory	2,577.01
9.	Ji Fang Quan Zheng Gao Zi Di No. 075638	#3 Student dormitory	2,577.01
10.	Ji Fang Quan Zheng Gao Zi Di No. 075624	#4 Student dormitory	2,577.01
11.	Ji Fang Quan Zheng Gao Zi Di No. 075610	#5 Student dormitory	2,577.01
12.	Ji Fang Quan Zheng Gao Zi Di No. 075644	#6 Student dormitory	9,051.78
13.	Ji Fang Quan Zheng Gao Zi Di No. 075614	#7 Student dormitory	10,562.87
14.	Ji Fang Quan Zheng Gao Zi Di No. 075615	#8 Student dormitory	6,550.44
15.	Ji Fang Quan Zheng Gao Zi Di No. 075616	#9 Student dormitory	2,577.01
16.	Ji Fang Quan Zheng Gao Zi Di No. 075620	Architectural institute building	4,872.18
17.	Ji Fang Quan Zheng Gao Zi Di No. 075630	Office building	11,310.63
18.	Ji Fang Quan Zheng Gao Zi Di No. 075626	Logistics department building	2,036.52
19.	Ji Fang Quan Zheng Gao Zi Di No. 075619	#13 Student dormitory	23,117.46
20.	Ji Fang Quan Zheng Gao Zi Di No. 075617	IE institute teaching building	16,103.12
21.	Ji Fang Quan Zheng Gao Zi Di No. 075618	Teaching building	10,147.43
22.	Ji Fang Quan Zheng Gao Zi Di No. 075629	Comprehensive building	5,695.30
23.	Ji Fang Quan Zheng Gao Zi Di No. 075613	Logistics department building	2,036.52
24.	Ji Fang Quan Zheng Gao Zi Di No. 075608	Training building	2,993.38
25.	Ji Fang Quan Zheng Gao Zi Di No. 075642	Boiler room	915.24
26.	Ji Fang Quan Zheng Gao Zi Di No. 075611	Dining hall	3,829.08
27.	Ji Fang Quan Zheng Gao Zi Di No. 075649	Teacher dormitory	5,532.60
28.	Lu (2018) Jinan Shi Bu Dong Chan Quan Di No. 0028922	Library	35,159.73
29.	Lu (2018) Jinan Shi Bu Dong Chan Quan Di No. 0065371	Training building	13,576.14
30.	Lu (2018) Jinan Shi Bu Dong Chan Quan Di No. 0029470	#14 Student dormitory	10,000.94
31.	Lu (2018) Jinan Shi Bu Dong Chan Quan Di No. 0029519	#15 Student dormitory	10,000.90
32.	Lu (2018) Jinan Shi Bu Dong Chan Quan Di No. 0029493	#16 Student dormitory	10,000.90

	Total:		226,915.94

For 9 buildings of the property with a total gross floor area of approximately 70,095.62 sq.m., we have not been provided with any title certificates except for the following documents:
1. Pursuant to a Construction Work Planning Permit - Jian Zi Di 370101201300001 in favour of Target University, the 9 buildings of the property have been approved for construction.
2. Pursuant to 4 Construction Work Commencement Permits - (2013) Ji Gao Jian Shi Zi Di No. 13-60, (2013) Ji Gao Jian Shi Zi Di No. 13-61, (2013) Ji Gao Jian Shi Zi Di No. 13-62 and (2015) Ji Gao Jian Shi Zi Di No. 15-22 in favour of Target University, permission by the relevant local authority was given to commence the construction of the 9 buildings of the property.
3. Pursuant to a Construction Work Completion and Inspection Certificate - He Zi Di 370101201700- 029 in favour of Target University, the construction of the 9 buildings of the property has been completed and passed the acceptance inspection.
For the remaining 4 buildings of the property with a total gross floor area of approximately 17,327.83 sq.m., we have not been provided with any title certificates.
We have been provided with a legal opinion regarding the property interest by the Company's PRC legal advisers, which contains, inter alia, the following:
1. for the land mentioned in notes 1 to 3, (i) Target University has obtained the effective State-owned Land Use Rights Certificates or Real Estate Title Certificates. (ii) Target University has the right to legally use the land according to the legal usage of the land and has the right to transfer, lease and mortgage the land. (iii) as the usage of the land is for education, the land use rights of the property cannot be mortgaged under the PRC laws;
2. for the buildings in note 4, (i) Target University has obtained the effective Building Ownership Certificates and Real Estate Title Certificates. (ii) Target University has the right to transfer, lease and mortgage the buildings. (iii) as the usage of the buildings are for education, the buildings cannot be mortgaged under the PRC laws;

- III-6 -

APPENDIX III

PROPERTY VALUATION REPORT

for the buildings mentioned in note 6 which have not been provided with Construction Land Planning Permit, the relevant institution will be confronted to return the illegally occupied land, demolish or confiscated the buildings and facilities which erected on the land and impose a fine;
for the buildings mentioned in note 6 which have not been provided with Construction Work Planning Permit, the relevant institution will be confronted to demolish or confiscated the buildings and facilities and impose a fine;
for the buildings mentioned in note 6 which have not been provided with Construction Work Commencement Permit, the relevant institution will be confronted to stop or rectify the construction in limited time and impose a fine; and
for the buildings mentioned in note 6 which have not been provided with Construction Work Completion and Inspection Certificates, the relevant institution will be confronted to amend actions and impose a fine.

8. In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the buildings of the property mentioned in notes 5, 6 which have not been obtained any proper title certificates. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB208,714,000 assuming all relevant title certificates have been obtained and they could be freely transferred.

- III-7 -

APPENDIX III

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Market value

in existing state as at

No.

Property

Description and tenure

Particulars of occupancy

the valuation date

RMB

North Campus of

The property comprises 4 parcels

The

property

670,848,000

Shandong Yingcai

of land with a total site area of

currently occupied by

(note 6)

University located at

approximately 366,245.52

sq.m.,

Target

University

for

Sundazhuang Village

23 buildings and various structures

education

and

Cuizhai Subdistrict

erected

thereon

which

were

ancillary purposes.

Jiyang County

completed

various

stages

Jinan City

between 2010 and 2015.

Shandong Province

The PRC

The 23 buildings have a total gross floor area of approximately 133,417.33 sq.m., mainly include teaching buildings, training buildings, dormitories, dining halls, a library and ancillary buildings.

The structures mainly include ancillary facilities, sports ground, storage house, gate house and greenhouse.

The land use rights of the property have been granted for terms expiring on 27 May 2059, 11 April 2060 and 6 May 2060 respectively for science and education, and industrial uses.

Notes:

Pursuant to 3 State-owned Land Use Rights Certificates - Ji Yang Guo Yong (2014) Di No. 069, Ji Yang Guo Yong (2010) Di No. 080 and Lu 2017 Ji Yang Xian Bu Dong Chan Quan Di No. 0011330, the land use rights of 3 parcels of land with a total site area of approximately 289,406 sq.m. have been granted to Shandong Yingcai University for terms expiring on 11 April 2060, 6 May 2060 and 27 May 2059 respectively for science and education uses. As advised by the Company, portion of the land with a site area of 3,660.48 sq.m. is excluded from this report.
Pursuant to a State-owned Land Use Rights Certificate - Ji Yang Guo Yong (2014) Di No. 070, the land use rights of a parcel of land with a site area of approximately 80,500 sq.m. have been granted to Shandong Yingcai University for a term expiring on 11 April 2060 for industrial use.

- III-8 -

APPENDIX III

PROPERTY VALUATION REPORT

3. Pursuant to 18 Building Ownership Certificates, 18 buildings with a total gross floor area of approximately 129,151.73 sq.m. are owned by Shandong Yingcai University. The details are set out as follows:

					Gross
					Floor
No.	Certificate No.	Building Name		Area (sq.m.)
1.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000102	#1 Student dormitory	9,744.12
2.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000103	#2 Student dormitory	8,043.12
3.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000104	#3 Student dormitory	7,689.40
4.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000105	#4 Student dormitory	7,335.32
5.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000238	#5 Student dormitory	7,605.53
6.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000239	#6 Student dormitory	7,252.33
7.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 017189	Corridor	552.43
8.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000106	Student service center	2,050.04
9.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000107	Student service center	1,582.46
10.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 017909	Dining Hall	7,901.65
11.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000241	#1 Teacher dormitory	3,419.10
12.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000242	#2 Teacher dormitory	3,230.97
13.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000388	Library	14,743.12
14.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000377	Comprehensive building	4,891.25
15.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000376	Art building	9,768.12
16.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000240	Training building	9,419.25
17.	Ji Yang Fang Quan Zheng Cui Zhai Zi Di No. 000115	Teaching building	15,378.52
18.	Lu 2017 Ji Yang Xian Bu Dong Chan Quan Di No. 0011330	#7 Student dormitory	8,545.00

	Total:		129,151.73

For the remaining 5 buildings with a total gross floor area of approximately 4,265.60 sq.m., we have not been provided with any title certificates.
We have been provided with a legal opinion regarding the property interest by the Company's PRC legal advisers, which contains, inter alia, the following:
1. for the land mentioned in note 1, (i) Target University has obtained the effective State-owned Land Use Rights Certificates or Real Estate Title Certificates. (ii) Target University has the right to legally use the land according to the legal usage of the land and has the right to transfer, lease and mortgage the land. (iii) as the usage of the land is for education, the land use rights of the land cannot be mortgaged under the PRC laws;
2. for the land mentioned in note 2, the legal usage of the land is for industrial but its actual usage is for education, the relevant institution does not use the land in accordance with the approved use, the relevant administration department shall order the land users to return the illegally occupied land and impose a fine;
3. for the buildings in note 3, (i) Target University has obtained the effective Building Ownership Certificates rights and Real Estate Title Certificates. (ii) Target University has the right to transfer, lease and mortgage the buildings. (iii) as the usage of the buildings are for education, the buildings cannot be mortgaged under the PRC laws;
4. for the buildings mentioned in note 4 which have not been provided with Construction Land Planning Permit, the relevant institution will be confronted to return the illegally occupied land, demolish or confiscated the buildings and facilities which erected on the land and impose a fine;
5. for the buildings mentioned in note 4 which have not been provided with Construction Work Planning Permit, the relevant institution will be confronted to demolish or confiscated the buildings and facilities and impose a fine;
6. for the buildings mentioned in note 4 which have not been provided with Construction Work Commencement Permit, the relevant institution will be confronted to stop or rectify the construction in limited time and impose a fine; and
7. for the buildings mentioned in note 4 which have not been provided with Construction Work Completion and Inspection Certificates, the relevant institution will be confronted to amend actions and impose a fine.
In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the 5 buildings mentioned in note 4 which have not been obtained any proper title certificates. However, for reference purpose, we are of the opinion that the depreciated replacement cost of them (excluding land element) as at the valuation date would be RMB9,557,000 assuming all relevant title certificates have been obtained and they could be freely transferred.

- III-9 -

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(A) Directors' and chief executive's interests in the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to Model Code are as follows:

Interest in the Company

Approximate

Percentage of

Shareholding

				in the		Long position/
				Company		Short position/
Name of Director	Capacity/Nature of Interest	Number of Shares	(%)(1)		Lending pool

Mr. Li . . . . . . . . . . . . . . . Beneficial owner / Founder of a discretionary trust

Ms. Li . . . . . . . . . . . . . . Beneficiary of a discretionary trust / Beneficial owner / Interest

of spouse

Qiu Hongjun . . . . . . . . . Beneficial owner

Notes:

2,157,249,000(2)(3)	65.61	Long positon
2,162,152,000(2)(4)(5)	65.76	Long positon
3,261,000(6)	0.10	Long position

The calculation is based on the total number of 3,287,873,474 Shares in issue as at the Latest Practicable Date.
The entire share capital of GuangYu Investment Holdings Limited is wholly-owned by Baikal Lake Investment Holdings Limited, as the nominee of TMF (Cayman) Ltd., the trustee of Nan Hai Trust, which was established by Mr. Li (as the settlor) on 6 September 2016 as a discretionary trust for the benefit of among others, Mr. Li and Ms. Li. Each of Mr. Li (as the founder of Nan Hai Trust) and Ms. Li (as a beneficiary of Nan Hai Trust) is taken to be interested in 2,137,500,000 Shares held by GuangYu Investment.
Includes Mr. Li's entitlement to receive up to 13,824,300 Shares pursuant to the exercise of options granted to him under the Pre-IPO Share Option Scheme, subject to the conditions (including vesting conditions) of those options.
Includes Ms. Li's entitlement to receive up to 17,028,200 Shares pursuant to the exercise of options granted to her under the Pre-IPO Share Option Scheme, subject to the conditions (including vesting conditions) of those options.
Ms. Li's spouse, Ge Cong, is interested in 326,000 Shares and therefore, Ms. Li is deemed to be interested in 326,000 Shares held by Ge Cong.

- IV-1 -

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

Includes Qiu Hongjun's entitlement to receive up to 2,934,900 Shares pursuant to the exercise of options granted to her under the Pre-IPO Share Option Scheme, subject to the conditions (including vesting conditions) of those options.

(ii) Interest in Associated Corporations

				% of
				interest in	Long position/
	Name of associated	Capacity/Nature of	Amount of	the	Short position/
Name of Director	corporation	Interest	registered capital	corporation	Lending pool

Mr. Li . . . . . . . . . . . . . . . YuHua Investment	Beneficial owner RMB40,000,000	80%	Long positon
Management Co., Ltd.
(宇華投資管理有限公司)
Zhengzhou YuHua	Beneficial owner RMB18,000,000	36%	Long positon
Education Investments
Co., Ltd. (鄭州宇華教育
投資有限公司)
Zhengzhou Zhongmei	Beneficial owner RMB30,000,000	60%	Long positon
Education Investments
Co., Ltd. (鄭州中美教育
投資有限公司)
Zhengzhou Qinfeng	Beneficial owner RMB400,000	40%	Long positon
Education Technology
Co., Ltd. (鄭州秦風教育
科技有限公司)
Zhengzhou Hanchen	Beneficial owner RMB400,000	40%	Long positon
Education Technology
Co., Ltd. (鄭州漢晨教育
科技有限公司)
Ms. Li . . . . . . . . . . . . . . . YuHua Investment	Beneficial owner RMB10,000,000	20%	Long positon
Management Co., Ltd.
Zhengzhou YuHua	Beneficial owner RMB32,000,000	64%	Long positon
Education Investments
Co., Ltd.
Zhengzhou Zhongmei	Beneficial owner RMB20,000,000	40%	Long positon
Education Investments
Co., Ltd.
Zhengzhou Qinfeng	Beneficial owner RMB600,000	60%	Long positon
Education Technology
Co., Ltd.
Zhengzhou Hanchen	Beneficial owner RMB600,000	60%	Long positon
Education Technology
Co., Ltd.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required to be recorded in the register to be kept by the Company pursuant to section

- IV-2 -

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

352 of the SFO, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

(B) Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares

As at the Latest Practicable Date, within the knowledge of the Directors, the following persons (other than the Directors or chief executive of the Company) had an interest or a short position in the Shares or underlying Shares of the Company which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

						Approximate
						Percentage of	Long position/
						Shareholding	Short position/
Name of Shareholder	Capacity/Nature of Interest		Number of Shares	(%)(1)		Lending pool

Mr. Li(2) . . . . . . . . . . . . . . . . . . .	Beneficial owner / Founder	2,157,249,000(4)	65.61		Long positon
		of a discretionary trust
Ms. Li(2) . . . . . . . . . . . . . . . . . . .	Beneficiary of a discretionary	2,162,152,000(5)(6)	65.76		Long positon
		trust / Beneficial owner /
		Interest of spouse
Baikal Lake Investment	Interest in controlled	2,137,500,000		65.01		Long positon
Holdings Limited(2) . . . . . . . .	corporation / Other
GuangYu Investment(2) . . . . . . .	Beneficial owner / Other	2,137,500,000		65.01		Long positon
TMF (Cayman) Ltd.(3) . . . . . . . .	Trustee / Other	2,137,500,000		65.01		Long positon
Bank of America	Interest in controlled	420,670,163		12.79		Long positon
Corporation . . . . . . . . . . . . . .	corporation
		Interest in controlled	420,669,298		12.79		Short positon
		corporation
Credit Suisse Group AG . . . . . .	Interest in controlled	168,410,617		5.12		Long position
		corporation
		Interest in controlled	145,155,617		4.41		Short position
		corporation / Investment
		manager

Notes:

The calculation is based on the total number of 3,287,873,474 Shares in issue as at the Latest Practicable Date.
The entire share capital of GuangYu Investment Holdings Limited is held by Baikal Lake Investment Holdings Limited, as the nominee of TMF (Cayman) Ltd., the trustee of Nan Hai Trust. Nan Hai Trust was established by Mr. Li (as the settlor) on 6 September 2016 as a discretionary trust for the benefit of, among others, Mr. Li and Ms. Li.
TMF (Cayman) Ltd. is the trustee of Nan Hai Trust.
Includes Mr. Li's entitlement to receive up to 13,824,300 Shares pursuant to the exercise of options granted to him under the Pre-IPO Share Option Scheme, subject to the conditions (including vesting conditions) of those options.
Includes Ms. Li's entitlement to receive up to 17,028,200 Shares pursuant to the exercise of options granted to her under the Pre-IPO Share Option Scheme, subject to the conditions (including vesting conditions) of those options.
Ms. Li's spouse, Ge Cong, is interested in 326,000 Shares and therefore, Ms. Li is taken to be interested in 326,000 Shares held by Ge Cong.

Save as disclosed above, the Directors are not aware of any other person (other than the Directors or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the

- IV-3 -

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

Company as at the Latest Practicable Date as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

3. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Enlarged Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. OTHER ARRANGEMENTS INVOLVING DIRECTORS

As at the Latest Practicable Date:

none of the Directors had any direct or indirect interest in any assets which have since 31 August 2019, being the date to which the latest published audited consolidated financial statements of the Enlarged Group were made up, been acquired or disposed of by, or leased to any member of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group; and
none of the Directors were materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Enlarged Group which was significant in relation to the business of the Enlarged Group.

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates was interested in any business, apart from the business of the Group, which competed or was likely to compete, either directly or indirectly, with that of the Enlarged Group.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirm that there has been no material adverse change in the financial or trading position of the Enlarged Group since 31 August 2019, being the date to which the latest published audited accounts of the Company are made up.

7. VARIATION IN REMUNERATION OF DIRECTORS OF THE TRANSFEREE

The aggregate of the remuneration payable to and benefits in kind receivable by the directors of the Transferee will be not varied in consequence of the Transaction.

8. LITIGATION

Save for those described in the Company's circular dated 29 June 2018 in relation to the acquisition of LEI Lie Ying Limited, as at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against the members of the Enlarged Group.

As advised by Henan Ming Tian Law Firm, the Company's PRC legal adviser as to litigation proceedings and disputes relating to the LEI Lie Ying Limited, as at the Latest Practicable Date, Hunan Lie Ying Industry Co., Ltd. (湖南獵鷹實業有限公司) had not received any notice of hearing in relation to the appeal filed by Chen Zhengxian on 21 January 2018.

- IV-4 -

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

9. MATERIAL CONTRACTS

The following contracts, not being contracts entered into in ordinary course of business of the Enlarged Group, have been entered into by the members of the Enlarged Group within two years preceding the date of this circular and up to the Latest Practicable Date and which are, or maybe, material:

the share purchase agreement dated 27 December 2017 entered into between LEI China Limited and BVI YuHua and supplemented by a letter agreement of the same date and a letter agreement dated 9 February 2018 between the same parties, pursuant to which BVI YuHua agreed to purchase and LEI China Limited agreed to sell the entire issued share capital of LEI Lie Ying Limited for a total consideration of RMB1,430 million;
an exclusive management consultancy and business cooperation agreement dated 1 September 2018 between (i) WFOE, (ii) Zhengzhou Qinfeng Education Technology Co., Ltd. (鄭州秦風教育科技有限公司) ("Zhengzhou Qinfeng"), (iii) Kaifeng City Yubohui Education Information Technology Consulting Co., Ltd. (開封市宇博慧教育信息諮詢有限公司) ("Yubohui Education"), (iv) Kaifeng City Xiangfu District Bowang High School (開封市祥福區博望高中) ("Bowang High School") and (v) the Registered Shareholders, pursuant to which Zhengzhou Qinfeng, Yubohui Education, Bowang High School and the Registered Shareholders agreed to engage WFOE as the exclusive service provider to provide Zhengzhou Qinfeng, Yubohui Education and Bowang High School with corporate management consultancy services, education management consultancy services, intellectual property licensing services as well as technical and business support services in return for service fees;
an exclusive call option agreement dated 1 September 2018 between (i) WFOE, (ii) Zhengzhou Qinfeng and
1. the Registered Shareholders, pursuant to which the Registered Shareholders granted WFOE an exclusive, unconditional and irrevocable option to purchase from the Registered Shareholders all or part of the equity interests in Zhengzhou Qinfeng;
an equity pledge agreement dated 1 September 2018 between (i) WFOE, (ii) Zhengzhou Qinfeng and
1. the Registered Shareholders, pursuant to which the Registered Shareholders unconditionally and irrevocably pledged all of his or her equity interest in Zhengzhou Qinfeng to WFOE;
the share purchase agreement dated 12 February 2019 entered into by the Company, BVI YuHua, LEI Singapore Holdings Pte. Ltd. and Laureate 1 B.V., pursuant to which BVI YuHua agreed to purchase and LEI Singapore Holdings Pte. Ltd. agreed to sell (a) 15,907 ordinary shares in the issued and outstanding share capital of Thai Education Holdings Co., Ltd. and (b) 285,001 ordinary shares in the issued and outstanding share capital of Fareast Stamford International Co., Ltd. for a total consideration of US$27.87 million;
an exclusive management consultancy and business cooperation agreement dated 1 July 2019 between
1. WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Transferee and the Registered Shareholders agreed to engage WFOE as the exclusive service provider to provide the Transferee (and its subsidiaries from time to time) with corporate management consultancy services, education management consultancy services, intellectual property licensing services as well as technical and business support services in return for service fees;
an exclusive call option agreement dated 1 July 2019 between (i) WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Registered Shareholders granted WFOE an exclusive,
- IV-5-

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

unconditional and irrevocable option to purchase from the Registered Shareholders all or part of the equity interests in the Transferee;

an equity pledge agreement dated 1 July 2019 between (i) WFOE, (ii) the Transferee and (iii) the Registered Shareholders, pursuant to which the Registered Shareholders unconditionally and irrevocably pledged all of his or her equity interest in the Transferee to WFOE; and
the Agreement.

10. EXPERT'S QUALIFICATION AND CONSENT

The following are the qualifications of the experts who have been named in this circular or have given opinion or letter, which is contained in this circular:

Name

Qualifications

Asia-Pacific Consulting and Appraisal Limited ("APA") . . . . . . . . . . . . Independent Property Valuer PricewaterhouseCoopers ("PwC") . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certified Public Accountants Tian Yuan Law Firm ("Tian Yuan") . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualified PRC Lawyers

As at the Latest Practicable Date, APA, PwC and Tian Yuan had given and had not withdrawn their written consent to the issue of this circular with the inclusion of their report letters and all references to their names in the form and context in which they are included.

As at the Latest Practicable Date, APA, PwC and Tian Yuan had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any direct or indirect interests in any assets which had been, since 31 August 2019 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

11. CORPORATE INFORMATION

The registered office of the Company is at The offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
The corporate headquarters of the Company is at No. 21, 4/F, Block 10, 3 Mazhuang Street, Zhengdong New District, Zhengzhou, PRC.
The principal place of business of the Company in Hong Kong is located at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
The joint company secretaries of the Company are Mr. Xu Bin and Ms. Leung Suet Wing. Ms. Leung is an assistant manager of TMF Hong Kong Limited and has over 8 years of professional experience in the company secretarial field. She is a member of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in the United Kingdom.
The branch share registrar of the Company is Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong.
- IV-6-

APPENDIX IV

GENERAL INFORMATION OF THE GROUP

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the Company's principal place of business in Hong Kong at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong during normal business hours on any weekdays, except public holidays, from the date of this circular up to and including

18 December 2019:

the memorandum of association of the Company;
the annual report of the Company for the year ended 31 August 2018;
the annual results announcement of the Company for the year ended 31 August 2019;
the accountant's report on the Target Group, the text of which is set out in Appendix II to this circular;
the property valuation report of the property interests of the Target Group, the text of which is set out in Appendix III to this circular;
the material contracts as referred to in the section headed "Material Contracts" of this appendix;
the written consent of the experts as referred to in the section headed "Expert's Qualification and Consent" in this appendix; and
this circular.

- IV-7 -

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China Yuhua Education Corp. Ltd. published this content on 02 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 December 2019 23:37:04 UTC

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CHINA YUHUA EDUCATION CORPORATION LIMITED is an investment holding company. The Company, along with its subsidiaries, is principally engaged in the provision of private formal education from kindergarten to university non-vocational education services in Henan Province of Peopleâs Republic of China. The Company operates in three segments: Kindergartens segment, Grade One to Grade 12 (Grade 1-12) segment and University segment. Its subsidiaries include China YuHua Education Investment Limited, China HongKong Yuhua Education Limited, Xizang Yuanpei Information Technology Management Company Limited and Henan Hantang Education Management Company Limited, among others.

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School, College & University

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2024-04-29 - Q2 2024 Earnings Release

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B-

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BUY

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0.6016 CNY

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1.215 CNY

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+101.92%

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Sector Universities

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China YuHua Education Corporation Limited

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6169

KYG2120K1094

School, College & University

China Yuhua Education : MAJOR TRANSACTION - ACQUISITION OF JINAN SHUANGSHENG EDUCATION CONSULTING CO., LTD.*

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